Sunday, March 31, 2013

The Perfectly Legal Way to Pay Zero Tax for Generations

Most people think of tax shelters as being available only to massive corporations and the ultra-rich. But if you have a job, you have access to a tool that can help you and your family avoid having to pay any taxes on your investment income not just throughout the rest of your life but for your heirs' lifetimes as well. Best of all, it's never been easier to take advantage of these benefits. All it takes is opening a Roth IRA.

How you can become like a big corporation
Back in 2011, the Institute on Taxation & Economic Policy collaborated with the Citizens for Tax Justice to create a list of what it called "Corporate Taxpayers & Corporate Tax Dodgers" covering the preceding three years. Noting factors like accelerated depreciation, deductions for stock options, offshore tax shelters, and industry-specific tax breaks, the report identified many companies that not only avoided paying income tax over that three-year period but also got net refunds back from the U.S. Treasury. Corning (NYSE: GLW  ) and Honeywell (NYSE: HON  ) were among the 30 companies that had negative tax liability from 2008 to 2010, according to the report, while Wells Fargo (NYSE: WFC  ) and AT&T (NYSE: T  ) received the largest amounts in what the report called "tax subsidies" -- representing the difference between what those companies paid in tax versus what they would have paid under the 35% corporate tax rate. Through perfectly legal means, these companies all managed to hold the IRS at bay.

Roth IRAs don't involve any of the strategies that corporations use to their advantage, but they're equally effective. When you open a Roth IRA, you don't get any upfront tax deduction, which is why so many taxpayers never even think to go beyond the traditional IRAs that they're more familiar with. When you're focused on saving taxes now, the traditional IRA delivers a valuable tax deduction you can use on this year's tax return, while the Roth doesn't give you any current benefits at all.

But what you get in return for giving up those upfront benefits is so much more valuable. Throughout your lifetime, the income and gains that your Roth IRA investments generate are tax-free. Once you retire, you can take money out of your Roth IRA without paying any tax as well.

But how can you protect your heirs?
Those benefits are great for retirees, but the even more valuable aspect of Roth IRAs is that you can hold onto them forever. Unlike traditional IRAs, which force you to start taking distributions from your retirement account when you reach age 70 1/2, Roth IRAs have no minimum required distributions at any age. If you don't need the money in your Roth, you can leave it untouched and let those tax-free earnings continue to build.

Even better, you can pass on your Roth IRA to future generations. They will be required to start taking minimum distributions from their inherited accounts. But under the current rules, most heirs can stretch out their withdrawals from inherited Roth IRAs over the course of their expected lifespan, using life expectancy tables to pull out an appropriate percentage of the account balance every year. And best of all, those distributions are free of income tax for your heirs as well, giving you and your family generations of avoiding tax entirely -- all for the cost of forgoing a small upfront tax deduction.

What about income limits?
Some workers aren't allowed to contribute directly to an IRA because their income is above the appropriate Roth IRA income limits. For single filers earning more than $127,000 and joint filers above $188,000, Roth IRA contributions are completely disallowed.

But there's a back-door way into a Roth IRA. If you have a traditional IRA, you can convert all or part of that account to a Roth IRA without worrying about any income limits at all. The catch is that you have to include the amount you convert as taxable income on your current-year tax return, but again, that tax bill is the last one you'll ever have to pay on that money and the income and capital gains it generates over the rest of your life and beyond.

A truly long-term investment
If you've ever thought about leaving a legacy for your children or grandchildren, think carefully about opening a Roth IRA. With decades of potential tax savings ahead, your loved ones will thank you.

There's more to Corning than just its tax liability. With the explosive growth of smartphones worldwide, many investors thought they would ride Corning's dominant cover glass to massive investment returns. That hasn't played out yet, as mobile growth has failed to offset declines in the company's core business. In this brand-new premium research report on Corning, our analyst walks through the business, as well as the key opportunities and risks facing it today. Click here to claim your copy.

Top Stocks For 3/31/2013-16

DENVER, Nov. 19, 2010 (GLOBE NEWSWIRE) — MusclePharm(R) Corporation (OTCBB:MSLP), one of the fastest growing nutritional supplement companies in the United States, today announced former UFC light heavyweight champion, Lyoto Machida, will be wearing MusclePharm apparel at the main fight which takes place on Saturday, November 20, 2010 in Auburn Hills, Michigan. UFC newcomer Maiquel Jose Falcao Goncalves will also sport MusclePharm’s apparel on the UFC 123 Fight Card that includes his fight shorts, t-shirt, hat, and a banner with the MSLP Ticker Symbol. UFC 123 Event will draw an estimated 850,000 pay per view buys and is watched by an estimated 10 million viewers. “We are very excited to have one of our UFC athletes compete in the main event fight. UFC continues to be a tremendous partner for MusclePharm as we increase our consumer demographic exposure during Saturday night’s fight,” commented Cory Gregory, MusclePharm’s President. “We will continue to focus on opportunities with UFC to further increase MusclePharm’s brand awareness and expand MusclePharm’s supplement and apparel market penetration.” Lyoto “The Dragon” Machida (fighting out of Belem, Brazil / 16-1) is a black belt in Brazilian jiu-jitsu and Machida Karate. The former UFC light heavyweight champion won his first 16 professional fights. Winning five of his first six fights in the UFC, the 32-year-old has finished three bouts, including a submission win over Rameau Sokoudjou and knock out victories against Thiago Silva and Rashad Evans. Maiquel Jose Falcao Goncalves is a Brazilian mixed martial artist. He was signed to make a debut at UFC 123 against Gerald Harris. Prior to his UFC appearance, Maiquel collected a 25-3 record with only one win coming by way of decision and 23 of the wins coming by knockout or TKO. About MusclePharmHeadquartered in Denver, Colorado, MusclePharm is a rapidly expanding healthy life-style company that develops and manufacturers a full line of NSF and scientifically approved, nutritional supplements that are 100% free of any banned substances. Based on years of research, MusclePharm products are created through an advanced six-stage research protocol involving the expertise of top nutritional scientists and field tested by more than 100 elite professional athletes from various sports including the NFL, MMA, and MLB. The Company’s propriety and award winning products address all categories of an active lifestyle including muscle building, weight loss, and maintaining general fitness through a daily nutritional supplement regimen. MusclePharm is sold in over 120 countries and available in over 5,000 US retail outlets that include GNC, and Vitamin Shoppe, as well as over 100 online stores, including bodybuilding.com, Amazon and Vitacost.com. For more information, please visit www.musclepharm.com. Forward-looking StatementsMusclePharm Corporation believes the information set forth in this Press Release may include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. Certain factors that could cause results to differ materially from those projected in the forward-looking statements are set forth in “Risk Factors” in Item 2.02 of the Company’s Form 8-K dated February 18, 2010, which has been filed with the Securities and Exchange Commission. Contact:ICR
Investor Contact:
John Mills, Senior Managing Director
310.954.1105

CRWEnewswire is not liable for the contents of this news, as well as not being liable for any errors or delays in the content, or for any actions taken in reliance thereon.

THIS IS NOT A RECOMMENDATION TO BUY OR SELL ANY SECURITY!

Top Stocks To Buy For 3/31/2013-2

Columbia Laboratories Inc. NASDAQ:CBRX opened at $2.30 and with a fall of 5.29% closed at $2.15. Company’s fifty days average price is $1.53 whereas it has a market capitalization $173.72 million.
The total of 1.06 million shares was transacted over last trading day.


Mattson Technology, Inc. NASDAQ:MTSN opened at $3.05 and with a fall of 4.33% closed at $2.87. Company’s fifty days average price is $2.85 whereas it has a market capitalization $143.80 million.
The total of 1.13 million shares was transacted over last trading day.

Repros Therapeutics Inc. NASDAQ:RPRX opened at $3.12 and with a fall of 4.28% closed at $2.91. Company’s fifty days average price is $1.42 whereas it has a market capitalization $25.99 million.
The total of 1.64 million shares was transacted over last trading day.


Lattice Semiconductor NASDAQ:LSCC opened at $6.11 and with a fall of 3.96% closed at $5.82. Company’s fifty days average price is $4.97 whereas it has a market capitalization $685.80 million.
The total of 3.00 million shares was transacted over last trading day.


MAKO Surgical Corp. NASDAQ:MAKO opened at $14.91 and with a fall of 3.94% closed at $14.62. Company’s fifty days average price is $12.26 whereas it has a market capitalization $497.78 million.
The total of 1.22 million shares was transacted over last trading day.

As the YRCW Turns: Debt Swap Deadline Extended 4th Time — Midnight Tonight

Transportation logistics firm YRC Worldwide (YRCW) announced today that for a fourth time, it has extended the deadline for its proposed debt-for-equity swap, the deadline now being shifted to midnight tonight from what had been a deadline of midnight yesterday. YRCW had last revised the offer on Christmas eve after a sufficient number of creditors failed to agree to exchange their notes for the company’s stock. As with last week, secured creditors holding the company’s 2010 notes seem to be the sticking point, with only 53% of secured debt agreeing to the exchange, the same as last week. That’s below the 70% threshold required for the deal to go through.

YRCW shares were up 2 cents, or 2%, at 97 cents.

1 Reason NXP Semiconductors Looks Attractive

Margins matter. The more NXP Semiconductors (Nasdaq: NXPI  ) keeps of each buck it earns in revenue, the more money it has to invest in growth, fund new strategic plans, or (gasp!) distribute to shareholders. Healthy margins often separate pretenders from the best stocks in the market. That's why we check up on margins at least once a quarter in this series. I'm looking for the absolute numbers, so I can compare them to current and potential competitors, and any trend that may tell me how strong NXP Semiconductors' competitive position could be.

Here's the current margin snapshot for NXP Semiconductors over the trailing 12 months: Gross margin is 46.3%, while operating margin is 10.7% and net margin is 9.3%.

Unfortunately, a look at the most recent numbers doesn't tell us much about where NXP Semiconductors has been, or where it's going. A company with rising gross and operating margins often fuels its growth by increasing demand for its products. If it sells more units while keeping costs in check, its profitability increases. Conversely, a company with gross margins that inch downward over time is often losing out to competition, and possibly engaging in a race to the bottom on prices. If it can't make up for this problem by cutting costs -- and most companies can't -- then both the business and its shares face a decidedly bleak outlook.

Of course, over the short term, the kind of economic shocks we recently experienced can drastically affect a company's profitability. That's why I like to look at five fiscal years' worth of margins, along with the results for the trailing 12 months, the last fiscal year, and last fiscal quarter (LFQ). You can't always reach a hard conclusion about your company's health, but you can better understand what to expect, and what to watch.

Here's the margin picture for NXP Semiconductors over the past few years.

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

Because of seasonality in some businesses, the numbers for the last period on the right -- the TTM figures -- aren't always comparable to the FY results preceding them. Here's how the stats break down:

  • Over the past five years, gross margin peaked at 46.3% and averaged 36.5%. Operating margin peaked at 10.7% and averaged -4.7%. Net margin peaked at 9.3% and averaged -17.2%.
  • TTM gross margin is 46.3%, 980 basis points better than the five-year average. TTM operating margin is 10.7%, 1,540 basis points better than the five-year average. TTM net margin is 9.3%, 2,650 basis points better than the five-year average.

With TTM operating and net margins at a 5-year high, NXP Semiconductors looks like it's doing great.

  • Add NXP Semiconductors to My Watchlist.

Saturday, March 30, 2013

Stock Pick of The Day: Dyax

Everyone has heard of pharmaceutical powerhouses like Pfizer (NYSE:PFE), GlaxoSmithKline (NYSE:GSK) and AstraZeneca (NYSE:AZN), but what about the smaller drug makers?

The fact remains that there are hundreds of companies furiously working to meet 21st Century medical needs, and there is plenty of demand to go around. So, let’s take a moment to highlight Dyax (NASDAQ:DYAX), who is a smaller bio-pharmaceutical player, but still enjoys booming demand for its anti-inflammation treatment.

Recommendation: Hold

Company Overview: Dyax is in the business of �Novel Biotherapeutics�.� Specifically, the company�s flagship treatment, KALBITOR (encallantide), is a prescription treatment for Hereditary angioedema (HAE), which is a rare and serious immune system disorder that causes inflammation. The drug is enjoying a growing base of patients that use this treatment. Dyax is also researching broader applications for this drug so that it could potentially treat other angiodema-related issues. The company currently has 18 products that it is testing through its Licensing and Funded Research Program.� In 2011, the company brought in $23 million in sales.

Industry Breakdown: There are 413 companies in the biotechnology industry, and of those, Dyax is a moderately-sized player (its market cap is ranked at no. 147). The company scores decently in terms of price/earnings to growth ratio (75th). And, even with -8% sales loss, the company still pulls off a good ranking relative to the rest of the industry (56th). Finally, Dyax’s long-term growth rate of 4% is 71st in the industry.

Earnings Buzz: In the most recent quarter, this company posted a hefty loss of (14) cents per share; unfortunately this missed analyst estimates by 40%. Dyax� is scheduled to report earnings on April 26, but this earnings announcement may not be anything to write home about. Currently, Dyax� is expected to narrow its loss from (11) cents per share in Q1 2010 to (9) cents per share. Meanwhile, sales growth is expected to climb 46.7%.

Current Ratings: Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. This stock has gained some modest ground in the past 12 months; this time last year, DYAX was a F-rated strong sell. Since then, the company has slightly firmed up its fundamentals; Dyax Corp.�s earnings momentum is good. Operating marging growth, earnings growth, earnings surprises and return on equity are middle-of-the-road.

However, the remaining three fundamental variables, including sales growth and cash flow, are quite weak. On the fundamental side, there is plenty of room for improvement. What keeps this stock at a hold is a mediocre level of buying pressure�any ground lost on this front would send this stock into sell territory.

Bottom Line: Because it earns a C-rating, Dyax� is a hold.

Sound Off: What do you think about DYAX? Are you a buyer at current prices? Let me know what you think by posting on our wall on Facebook.

Did Bill Gross Just Kill the Mutual Fund?


?Potentially this is monumental. Or it could be a flash in the pan, a bad idea. We are unsure of what will come of this move but what is known is that Bill Gross, the founder and chief investment officer of Pimco, is now officially in the ETF business.

Pacific Investment Management Company LLC, more commonly known as Pimco, is home to the world's largest mutual fund, the Total Return Fund, with assets of $242.7 billion as of June 30, 2011.

And as of Thursday, Pimco launched the ETF version of its Total Return Fund, the Pimco Total Return ETF (TRXT) which aims to mirror the performance of their Total Return Fund (PTTRX).

The headlines are swirling around the news:

Pimco Total Return ETF: A game changer? - CNN Money

Gross' Pimco Total Return ETF: A boon for the nosy - MarketWatch

The Power of PIMCO in an ETF - Fox Business

“It's a giant step for active ETFs. Actively-managed funds are not as popular and it could be an effective way for all well-known managers to move funds around.”

The Day the Mutual Fund Died - The Reformed Broker

“Today marks what I believe will be the shot heard 'round Boston... I will not be investing it nor would I recommend anyone else do so - this is a new vehicle and there is plenty of uncertainty about how closely it will track the mothership in this new format. But if it is successful and can garner AUM - you'll be able to trace back the end of the mutual fund wrapper over the next ten years to this Promethean moment for active ETFs.”

And the buzz across the web is still hot. Pimco has been trending across Twitter, Facebook, and investment forums since the announcement with Bill Gross, obviously, being the focal point of it all.

Gross is the most prominent professional to start an actively managed ETF and the original Total Return Fund which he runs has generated 8.4 percent average annual returns over the past five years, not only making it the world's largest and successful but one of the most consistently growing mutual funds in history. Morningstar Inc. named Gross a fund manager of the decade in 2010.

There is plenty to be excited about for investors as such a popular fund in the PTTRX and Gross' massive value and reputation makes Pimco's newest ETF “a litmus test for the actively-managed ETF space.”

The ETF industry has been desperate for a big move such as this and have been hoping for Pimco's ETF to bring change into the market. Gross says, “The Total Return ETF harnesses Pimco's time-tested investment process and our skills as an active manager, and we believe it signals an important new phase in the development of the ETF marketplace.”

Around 40 actively-managed ETFs represent only 0.5% of the total ETF market and have had difficulty attracting sizable assets and trading volumes. But Gross' new ETF could change all of that.

Earlier today, Gross was quoted with a more defensive tone to the reaction of his new ETF by saying, “Lots of money being printed but very little wealth. Wealth comes from innovation & elbow grease not higher asset prices.”

Gross hopes and expects that the Total Return EFT will mimic the success of his mutual fund to become the largest ETF in the world but others are skeptical.

Echoing Reformed Broker Josh Brown's comments, Standard and Poor's has cautioned all investors from jumping toward the ETF out of the gates. Even though the ETF version is less expensive than its mutual fund counterpart (a gross expense ratio of 0.55% compared to 0.85%) the ETF, is in fact, more expensive than the larger fixed income ETFs in the market.

One analyst, Todd Rosenbluth of S&P Capital IQ ETF, warns that the ETF's holdings are likely to deviate slightly from the mutual fund's holdings since the Securities and Exchange Commission restricts the use of derivatives in new ETFs.

From Pimco's official press release: TRXT is designed to be a diversified portfolio of high quality bonds that is actively managed with the aim of maximizing return and managing risk.

Gross briefly spoke about the new ETF with Bloomberg yesterday (see below) and said it's “really a mom-and-pop type of thing from my standpoint.”

 

The Bigger the January, the Better the Year

If you�re a fan of the January Effect — the assumption that how January goes, so goes the year — then you�re undoubtedly excited by that fact that January 2012 wasn’t just positive, it was the most bullish January we�ve seen since 1999. The S&P 500 gained a whopping 4.3% last month, versus the average January advance of 1%.

Not bad.

If you�re not a fan of the January Effect and consider it just another way for the financial industry to keep you interested … well, you might want to rethink your whole �this is hogwash� stance. As it turns out, there�s actually something to it.

More than that, though, the unusual size of this January�s gain means something special in and of itself.

Color Me Surprised

In the interest of full disclosure, I�m generally not a fan of market theories that strictly follow a calendar and completely ignore underlying results. On the other hand, my loyal adherence to an almost-scientific approach to investing forces me to acknowledge one thing: The January Effect theory has the statistics to support its premise.

That�s right — it works. I won�t review the track record here again, since I already did it Dec. 28.

In the meantime, though, I uncovered something else I wasn’t expecting to find.

We�ve already verified that a positive January means stocks have an 80% chance of posting positive results for that full year. But did you also know that the stronger the January numbers, the greater the odds are (above and beyond that 80%) of a positive return for the whole year? Likewise, the stronger the January return, the stronger the results for that year are likely to be.

Numbers tell the tale. Going back to 1950, the S&P 500 posted returns of 4% or more 19 times. In 18 of those instances, the market made big gains for the year (the oddball was, not surprisingly, 1987). In fact, the average market gain for those “Big January” years was a hefty 15.2%. When the January gain still was positive but less than 4%, the average gain for that year was a tepid 8.7%.

That�s a statistically significant difference, and following this year�s 4.3% January rally, it�s something to feel good about.

Will 2012 Follow Suit? Not Necessarily Right Away

Of course, history is one thing — the present is another. Will this year be an exception to the norm, or are we going to see stocks post solid results thanks to January�s bullish romp?

I�ve made no secret of my bullish stance. I�m a believer in the recent “Golden Cross” buy signal, and I made the point back on Jan. 19 that stocks are greatly undervalued right now. I feel stocks are positioned to go at least moderately higher in 2012, and that expectation hasn�t changed. In fact, it was just bolstered by this year�s red-hot January.

There�s a caveat to that call. though. This is a point I made before, but it bears repeating now: Stocks don�t move in a straight line for very long.

I don�t know if 2012 will be a bullish year because January was bullish, or if 2012 will just be a bullish year in addition to January being bullish. I do know, however, there will be several points in time during 2012 when we all have serious doubts about this year being a gainful one.

The market ebbs and flows. That�s just the way it is. The end of the year is 11 months away, and a bunch of good and bad things can happen in the meantime.

I reiterate that message mainly because I fear we�re all looking back on a great January and expecting perfect bullishness between now and Dec. 31. Sorry, but it�s just not likely to play out that way. I�m almost positive the market�s going to be lower than where it is now at some point between now and then.

That�s OK, though. This is a long-term theory, and you can tweak your entries in the meantime. Just don�t ignore it.

Is Lockheed Martin a Cash King?

As an investor, it pays to follow the cash. If you figure out how a company moves its money, you might eventually find some of that cash flowing into your pockets.

In this series, we'll highlight four companies in an industry and compare their "cash king margins" over time, trying to determine which has the greatest likelihood of putting cash back in your pocket. After all, a company can pay dividends and buy back stock only after it's actually received cash -- not just when it books those accounting figments known as "profits."

Today, let's look at Lockheed Martin (NYSE: LMT  ) and three of its peers.

The cash king margin
Looking at a company's cash flow statement can help you determine whether its free cash flow�backs up its reported profit. Companies that can create 10% or more free cash flow from their revenue can be powerful compounding machines for your portfolio. A sustained high cash king margin can be a good predictor of long-term stock returns.

To find the cash king margin, divide the free cash flow from the cash flow statement by sales:

Cash king margin = Free cash flow / sales

Let's take McDonald's as an example. In the four quarters ending in December, the restaurateur generated $6.97 billion in operating cash flow. It invested about $3.05 billion in property, plant, and equipment. To calculate free cash flow, subtract McDonald's investment from its operating cash flow. That leaves us with $3.92 billion in free cash flow, which the company can save for future expenditures or distribute to shareholders.

Taking McDonald's sales of $25.5 billion over the same period, we can figure that the company has a cash king margin of about 14% -- a nice high number. In other words, for every dollar of sales, McDonald's produces $0.14 in free cash.

Ideally, we'd like to see the cash king margin top 10%. The best blue chips can notch numbers greater than 20%, making them true cash dynamos. But some businesses, including many types of retailing, just can't sustain such margins.

We're also looking for companies that can consistently increase their margins over time, which indicates that their competitive position is improving. Erratic swings in margins could signal a deteriorating business or perhaps some financial skullduggery. You'll have to dig deeper to discover the reason.

Four companies
Here are the cash king margins for four industry peers over a few periods.

Company

Cash King Margin (TTM)

1 Year Ago

3 Years Ago

5 Years Ago

Lockheed Martin

1.3%

7%

6%

7.9%

Raytheon (NYSE: RTN  )

6.6%

7.1%

9.8%

4.2%

General Dynamics (NYSE: GD  )

7.1%

8.4%

7.7%

9%

Northrop Grumman (NYSE: NOC  )

9.2%

6.1%

6%

7.3%

Source: Capital IQ, a division of Standard & Poor's.

None of these companies meets our 10% threshold for attractiveness, but Northrop Grumman comes close, and has shown steady growth over the past three years. General Dynamics has the second-highest cash king margins, but its current margins are lower than they were five years ago. Raytheon's margins are just behind General Dynamics', and Raytheon has managed to grow its margins by nearly 2.5 percentage points from five years ago. However, it has seen reductions of more than three percentage points from three years ago. Lockheed Martin has the lowest cash king margins at 1.3%. Also, its current margins are the lowest they have been over the past five years. However, Lockheed offers a hefty 5% dividend yield while Raytheon's yield is 3.5%, Northrop Grumman's is 3.3%, and General Dynamics' is 2.9%.

Cost-cutting at the Pentagon, along with other buyers, has caused all of these businesses to suffer from declines in their sales�and threats of further defense spending cuts have shareholders spooked. However, investors should keep in mind that, in defense, "spending cuts" is usually code for slowing growth in spending rather than lowering existing spending. However, these conditions still have Lockheed Martin scrambling to minimize costs to avoid significant reductions in its profit margins. Also, if the cuts do happen, heavy exposure to capital-intensive products, including tanks and warships, could put General Dynamics in a tough spot. Raytheon, on the other hand, has managed to maintain some of the highest profit margins in the industry, and has analysts predicting an annual growth rate of approximately 6% per year. Northrop Grumman is expected to see reductions in its sales volume over the next few years, too.

The cash king margin can help you find highly profitable businesses, but it should only be the start of your search. The ratio does have its limits, especially for fast-growing small businesses. Many such companies reinvest all of their cash flow into growing the business, leaving them little or no free cash, but that doesn't necessarily make them poor investments. Conversely, the formula works better for slower-growing blue chips. You'll need to look closer to determine exactly how a company is using its cash.

Still, if you can cut through the earnings headlines to follow the cash instead, you might be on the path toward seriously great investments.

With the U.S. relying on the rest of the world for such a large percentage of our goods, many investors are ready for the end of the "made in China" era. Well, it may be here. Read all about�the biggest industry disrupters since the personal computer�in 3 Stocks to Own for the New Industrial Revolution.�Just�click here to learn more.

Top Stocks To Buy For 3/30/2013-1

Royal Gold, Inc. (NASDAQ:RGLD) achieved its new 52 week high price of $67.29 where it was opened at $66.91 UP -0.52 points or -0.79% by closing at $65.59. RGLD transacted shares during the day were over 488,489 shares however it has an average volume of 584,228.00 shares.

RGLD has a market capitalization $3.63 billion and an enterprise value at $3.78 billion. Trailing twelve months price to sales ratio of the stock was 18.35 while price to book ratio in most recent quarter was 2.50. In profitability ratios, net profit margin in past twelve months appeared at 30.43% whereas operating profit margin for the same period at 50.97%.

The company made a return on asset of 3.60% in past twelve months and return on equity of 5.26% for similar period. In the period of trailing 12 months it generated revenue amounted to $197.87 million gaining $3.70 revenue per share. Its year over year, quarterly growth of revenue was 58.50%.

According to preceding quarter balance sheet results, the company had $125.77 million cash in hand making cash per share at 2.27. The total of $245.00 million debt was there putting a total debt to equity ratio 16.67. Moreover its current ratio according to same quarter results was 5.45 and book value per share was 26.19.

Looking at the trading information, the stock price history displayed that its S&P500 52 Week Change illustrated 19.95% where the stock current price exhibited up beat from its 50 day moving average price of $60.02 and remained above from its 200 Day Moving Average price of $54.67.

RGLD holds 55.34 million outstanding shares with 51.42 million floating shares where insider possessed 5.35% and institutions kept 63.20%.

Entropic Q3 In Line

Entropic Communciations (ENTR) posted Q3 results about in line with the company’s recent guidance.

The company, which makes chips for connected home entertainment systems, posted revenue of $61.3 million, a bit ahead of the company forecast for $60 million to $61 million, with non-GAAP profits of 18 cents a share. The Street has been forecasting $60.48 million and 17 cents.

ENTR, which in the regular session rose 42 cents, or 4.9%, to $9.01, in late trading is down 31 cents, or 3.4%, to $8.70.

Rep. Garrett Sets Hearing in Another Attempt to Roll Back Dodd-Frank

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  • Updating Form ADV and Form U4 When it comes to disclosure on Form ADV, RIAs should assume information would be material to investors.  When in doubt, RIAs should disclose information rather than arguing later with securities regulators that it was not material.
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GOP attempts to roll back the Dodd-Frank Act under the guise of job creation continue.

Rep. Scott Garrett, R-N.J., chairman of the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, plans to hold a hearing on Wednesday, March 16, on “Legislative Proposals to Promote Job Creation, Capital Formation, and Market Certainty,” to examine five draft bills—four of which would amend or repeal provisions of the Dodd-Frank Act.

The four draft bills are: The Small Business Capital Access and Job Preservation Act; The Business Risk Mitigation and Price Stabilization Act of 2011; The Burdensome Data Collection Relief Act; The Asset-Backed Market Stabilization Act of 2011.

The fifth bill to be discussed on Wednesday is The Small Company Formation Act of 2011, which would update an existing Securities and Exchange Commission (SEC) rule “to better promote capital formation.” According to a memorandum distributed to Committee staffers on Tuesday and obtained by AdvisorOne, this draft legislation would increase the offering threshold for companies exempted from SEC registration under SEC Regulation A from $5 million—the threshold set in the early 1990s—to $50 million. The bill also requires the SEC to re-examine the threshold every two years and report to Congress on decisions regarding the adjustment of the threshold. The bill also would provide the SEC with the authority to increase the threshold.  

The first draft bill, the Small Business Capital Access and Job Preservation Act, seeks to halt the registration of private investment funds with the SEC. Dodd-Frank amended the Investment Adviser Act of 1940 to require most advisors to private investment funds to register with the SEC. But the draft legislation argues that because private equity funds “are not a source of systemic risk, subjecting their advisers to [SEC] registration requirements imposes a burden on them while doing nothing to make the financial system more stable or less risky.”

Moreover, the bill says that “given the costs of registration and ongoing compliance, subjecting private equity advisers to these registration requirements diverts capital, time, and effort from activities that result in job creation.”

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The second draft bill, the “Business Risk Mitigation and Price Stabilization Act of 2011” would replace the definitions set forth in the Dodd-Frank Act of “Major Swap Participant” and “Major Security-Based Swap Participant.” The memo to staffers states that those definitions would be replaced by definitions adopted by the House by a vote of 304-122 on Dec. 10, 2009, during its consideration of regulatory reform legislation (H.R. 4173). By replacing these definitions, the memo states, “the bill would ensure that market participants that do not maintain a substantial net position in swaps are exempted from the Dodd-Frank Act’s clearing requirements, the costs of which would affect the ability of end users to effectively hedge legitimate business risks.”

The third draft bill, The Burdensome Data Collection Relief Act, would repeal Section 953(b) of Dodd-Frank requiring publicly traded companies to disclose the median of the annual total compensation of all employees of the company (other than the CEO), the annual total compensation of the CEO, and a ratio comparing those two numbers.

Rep. Nan Hayworth, (R-N.Y.), a member of the House Financial Services Committee, who introduced the draft bill, said in a statement that the “Chief Executive Officer (CEO) Pay Ratio” disclosure requirement “places an unnecessary logistical and cost burden on all publicly traded companies, not just financial institutions.” Repeal of the disclosure requirement, she said, “will enable businesses to direct those resources for investment and job creation.” The Dodd-Frank Act disclosure requirement, she continued, “will be costly and time-consuming for employers, will serve no useful purpose for company shareholders, and will divert resources from job creation.”

The fourth draft bill, The Asset-Backed Market Stabilization Act of 2011, would reinstate SEC Rule 436(g), which was repealed under Section 939G of Dodd-Frank. As the memo to staffers states, as a result of Section 939G of the Dodd-Frank Act repealing SEC Rule 436(g), “if a registration statement includes a rating, the rating agency must file written consent with the SEC to be considered an ‘expert,’ thus subjecting the rating agency to potential liability if the rating turns out to be inaccurate. The rating agencies have refused to consent. As a result, issuers have been unable to include credit ratings in statements and prospectuses.”

Friday, March 29, 2013

Four Stocks Joining the New High Party

It took a while, but the S&P 500 (SNPINDEX: ^GSPC  ) finally broke through its 2007 high. Market watchers like seeing the big indexes breaking to new highs, but it's even more fun when stocks you own join the party. I was lucky enough to have four in my portfolio hit new 52-week highs.� Here's a little haiku fun to celebrate.

McDonald's (NYSE: MCD  )

�� Burgers and coffee.

�� Golden Arches span the world.

�� I'm lovin' it.

Becton, Dickinson (NYSE: BDX  )

�� Medical supplies.

�� New injection for pharma.

�� Still fairly priced.

Magellan Midstream Partners (NYSE: MMP  )

�� Pipelines and storage.

�� Partnerships are on a tear.

�� Good payout with growth.

McCormick (NYSE: MKC  )

�� McCormick simmers.

�� Stock price getting too spicy?

�� Savor the flavor.

A Foolish investor might comment that new highs are nice but want to know if I'd buy the stocks today. Although none of the four is cheap, I'd add to one of them, am comfortable holding two, and am considering either trimming or selling covered calls against the other one.

Becton is the "add to." I'd like to buy it at a lower price. However, about 15 times next year's estimates is a fair price for a steady dividend grower that's still innovating with new products like prefilled injectables.

Like Becton, McDonald's is trading at a fair price for a solid dividend growth stock. The only reason I wouldn't add to my McDonald's position is that it's already one of my top two holdings.

Magellan Midstream has been a very good holding. It's a great partnership with good prospects to continue growing the payout. But it's up nearly 20% this year, the price rise has dropped the yield below 4%, and it looks just a little overpriced, which earns it a hold.

And that leaves McCormick. This is a great company with strong brands, an excellent dividend growth track record, and an effective cost-control program. But at 20 times forward earnings, it's expensive. I don't want to sell the position, but I also don't want to add at today's prices. Two possible paths forward are sell part of the position and wait for a drop to buy it back or sell an out-of-the-money covered call option.

These four stocks are typical of the type of investment that's being driven up in price by the Fed's zero-interest-rate policy and QE3. By pinning rates to zero and bidding up bond prices, the Fed is pushing investors from fixed income to dividend-paying equities. Even when the stocks are expensive, they can look like a bargain compared to cash and bonds with negative real returns. One big risk is what happens to stocks when the Fed pulls the plug.

If you're looking for some long-term investing ideas, you're invited to check out The Motley Fool's brand-new special report, "The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so simply click here now and get your copy today.

Is Obamacare About to Skyrocket Your Health Care Costs?

"If you think health care is expensive now, just wait until you see what it costs when it's free!"
-- P.J. O'Rourke, The Liberty Manifesto (1993).�

I've heard this clever quip about health care reform many times before, but this quote by P.J. O'Rourke was supposed to prove meaningless thanks to the passing of the Affordable Care Act in 2010... right?

Crafted by President Obama and lawmakers, the ACA, also known in shorthand as Obamacare, was to create a competitive pool of insurance companies competing for consumers' premium dollars which would help drive the costs of medical care and premiums lower. In addition to creating these pools, the ACA:

  • Required insurers to spend at least 80% of patient premiums on care or return the difference.
  • Would not allow insurers to turn away patients with pre-existing conditions.
  • Would expand the existing pool of qualifying government-sponsored Medicaid patients.
  • Would establish a medical device excise tax that would collect 2.3% of revenue from all medical device makers to help pay for the Medicaid expansion.
  • Would mandate individuals to carry health insurance.

Remember those savings? Yeah, not so fast...
Despite these sweeping reforms, the Society of Actuaries released a report (link opens PDF) this month showing that the ACA-driven costs associated with non-group members participating in the insurance pools are set to see an average increase of 32% in underlying claims costs by 2017. It's true this report didn't take into account the effects of pool pricing competition and focuses solely on non-group participants (those not covered by employers), but it's still very concerning as actuaries are often conservative in their estimates.

Sure, the SOA's report demonstrated strength in certain states, with five expected to see underlying claims costs drop. However, that means costs are expected to rise in the remaining 45 states, with 37 of those states expecting costs to jump by 20% or more. According to the SOA's report, Ohio and Wisconsin can expect their claims costs to jump by 80% or more.

This leads me to question whether our medical costs are about to soar under Obamacare?

Not an encouraging start
The precursors to Obamacare going into full effect next year haven't been encouraging. Medical device manufacturer Stryker (NYSE: SYK  ) cut its workforce by 5% in direct response to the added costs of the medical device excise tax while the CEO of NuVasive (NASDAQ: NUVA  ) , Alexis Lukianov, threatened to move his research and development operations overseas because of the device tax last June. Similarly Medtronic (NYSE: MDT  ) , the largest medical device maker in the world, has been investing heavily in China in order to take advantage of cheap labor and a more favorable tax situation.

The CEO of insurer Aetna (NYSE: AET  ) , Mark Bertolini, had this to say about the potential for premium price hikes in anticipation of the full implementation of Obamacare in 2014: "We've all done the math, we've shared it with regulators, we've shared it with all the people in Washington that need to see it, and I think it's a big concern."�

That didn't stop Aetna from hiking premiums by as much as 21% in some states last year in anticipation of pricing caps soon to be put in place by Obamacare.�

The negative effects, though, extend far beyond the medical sector. Papa John's (NASDAQ: PZZA  ) CEO John Schnatter heavily criticized the costs associated with Obamacare last year, riling up consumers after parceling out its precise costs to the company at $0.11 to $0.14 per pizza.

Don't get me wrong -- there are some very clear positives derived from health-care reform, including some 32 million people that were previously uninsured gaining insurance under Obamacare. That's progress, as is the fact the quality of coverage should improve in some cases from a bare-bones policy to something more encompassing.

Still, this report from the SOA wasn't an encouraging read and could put the President and the entire health care industry on the defensive until proven otherwise.

What's your take on Obamacare? Is this good for America, a necessary evil, or a failure from the get-go? Share your thoughts in the comments section below.

While paying attention to macro issues like Obamacare is useful, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of.�Click here now�to keep reading.

Top Stocks To Buy For 3/28/2013-1

Alliant Energy Corporation (NYSE:LNT) recently hit 52 week peak price $39.40, opened at $38.81 scored +0.44% closed $38.91. LNT traded on over 00.65 million shares in comparison to average volume of 0.46 million shares.

LNT has earnings of $294.60 million and made $3.44 billion sales for the last 12 months. Its quarter to quarter sales remained 7.66%. The company has 110.86 million of outstanding shares and 110.14 million shares were floated in the market.

LNT has an insider ownership at 0.13% and institutional ownership remained 55.51%. Its return on investment (ROI) for the last 12 month was 3.85% as compare to its return on equity (ROE) of 10.43% for the last 12 months.

The price moved ahead +4.13% from the mean of 20 days, +5.55% from 50 and went up 12.23% from 200 days average price. Company�s performance for the week was 3.59%, +5.59% for month and yearly performance remained 31.41%.

Its price volatility for a month remained 1.14% whereas volatility for a week noted as 1.56% having beta of 0.52. Company�s price to sales ratio for last 12 months was 1.25 while its price to book ratio for the most recent quarter was 1.38 and its earnings before interest, tax, depreciation and amortization (EBITDA) remained 876.10 million for the past twelve months.

Cyprus and Pending Home Sales Plague the Dow

You can tell that investors and the financial media had grown accustomed to the run-up in stocks earlier this month, as any down day now triggers speculation of impending doom. Today, we have the ongoing situation in Cyprus and disappointing pending home sales here in the U.S. to thank for the worry. With roughly an hour left in the trading session, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is down 32 points, or 0.22%.

In order to meet its obligations under an ECB- and IMF-funded bailout, the tiny island nation of Cyprus has agreed to close its second-largest lender and confiscate a purported 40% of all deposits in excess of 100,000 euros. The country has also imposed capital controls meant to stem the outflow of money once its banks reopen for business on Thursday: They've been closed for the last week and a half, pursuant to a government-mandated bank holiday. Suffice it to say that the decision on deposits has rattled the markets over the last few weeks, as it has called into question the sanctity of funds once presumed safe.

Adding to pessimism today was data showing that pending home sales -- a measure based on contract signings -- slipped last month. The National Association of Realtors' pending-home-sales index fell 0.4% in February to 104.8. While this was lower than the previous month's reading of 105.2, it was nevertheless 8.2% higher on a year-over-year basis.

The problem, according to NAR chief economist Lawrence Yun, is that a limited inventory is holding back sales in many areas. "Only new home construction can genuinely help relieve the inventory shortage, and housing starts need to rise at least 50% from current levels," Yun said in a prepared statement. "Most local homebuilders are small businesses and simply don't have access to capital on Wall Street. Clearer regulatory rules, applied to construction loans for smaller community banks and credit unions, could bring many small-sized builders back into the market."

Despite the marginal step backward, it has become increasing clear that housing is truly improving. According to a New York-based fund-manager quoted by Bloomberg, "There's absolutely no question about that if you look at all the data, not just one month. Investment is starting to come back and one of those legs is housing."

In terms of individual stocks, shares of Boeing (NYSE: BA  ) are lower today after aviation experts and government officials predicted that the Federal Aviation Administration would limit the flying times of its beleaguered 787 Dreamliners. The planes were grounded two months ago after battery problems sparked fires on two separate aircraft.

According to an industry analyst quoted by Reuters, "Depending on how long that restriction remains in place, it would completely undermine the business case for the airplane, which was to be able to do these long, thin intercontinental routes."

And shares of JPMorgan Chase (NYSE: JPM  ) , the nation's largest bank by assets, are also suffering following a revelation that prosecutors are looking into its role in the Bernie Madoff scandal. As my colleague Dan Carroll discussed earlier today, the issue concerns whether the bank violated laws by failing to alert authorities to Madoff's fraudulent scheme, which was revealed in 2008 once his sons purportedly learned of the deception.

Want to learn more about JPMorgan?
With big finance firms still trading at deep discounts to their historical norms, investors everywhere are wondering if this is the new normal or if finance stocks are a screaming buy today. The answer depends on the company, so to help you figure out whether JPMorgan is a buy today, I invite you to read our premium research report on the company today. Click here now for instant access!

PRGS FYQ1 Rev Beats, Q2 View Light

Shares of software tools vendor Progress Software (PRGS) are up a penny in late trading at $22.50 after the company this afternoon reported fiscal Q1 revenue that topped analysts’ estimates, missed profit-per-share expectations by a penny, and offered an outlook for revenue this quarter

Revenue in the three months ended in February rose 2%, year over year, to $89.27 million, yielding EPS of 23 cents.

Analysts had been modeling $86.3 million and 24 cents.

CEO Phil Pead remarked,

Our performance in the quarter reflects continued momentum as we execute on our strategic plan. Our initiatives to improve our operating margin are well under way and I am pleased with our early progress. In addition, we have begun to focus on building our foundation for future revenue growth by releasing new and innovative functionality across our solution suites and significantly increasing our customer engagement.

For the current quarter, the company sees revenue essentially flat with a year ago revenue number of $78.4 million. That number reflects the divestiture of some of Progress’s businesses in the intervening time frame, and so it does not match year-ago reported revenue of $114.6 million.

The forecast is below the Street consensus for revenue this quarter of $82.1 million.

Progress management will host a conference call with analysts at 5 pm, Eastern time, this evening, and you can catch the webcast of it on the company’s investor relations page.

Progress shares are unchanged at $22.28 in late trading.

1 Reason Why This Dividend is Safer Than its Peers

Having the highest yield doesn't necessarily mean a company has the best yield. In fact, sometimes a high yield can actually be a sign of weakness. The good news is that the high-yielding upstream MLP segment is actually a pretty safe bet for investors. These oil and gas companies, although structured as an MLP or LLC for tax purposes, are, at their cores, income producing machines.

That being said, not all of these high yields come without risk. As we drill down into some of the top upstream MLPs, you need to consider which distribution is best for your risk tolerance. For me, one company is clearly the safest choice, and that's enough for me to be able to sleep at night, because I know that the company will continue to securely produce the income I expect for years to come.

The yield
If you look at the chart below, you'll see quite a variation in the distribution yield of some of the top upstream MLPs:

Company

Market Capitalization

Distribution Yield

BreitBurn Energy Partners (NASDAQ: BBEP  )

$2.0 Billion

9.40%

QR Energy (NYSE: QRE  )

$1.5 Billion

11.10%

LINN Energy (NASDAQ: LINE  )

$8.5 Billion

8.00%

Vanguard Natural Resources (NYSE: VNR  )

$2.0 Billion

8.50%

At first glance, it would be easy to be drawn into QR Energy's extremely high yield. The question that needs to be answered is, how safe, really, are any of these yields? And, which company would be best for your yield-hungry portfolio? Let's dig a little deeper and see if there's more to the story.

How safe is it?
Many energy companies hedge oil and gas production in order to smooth out cash flows from commodity price volatility. One big difference between a traditional exploration and production company structured as a C-Corp, and those structured like our MLPs, is the percentage of oil and gas production that is hedged, and its duration. The more production that's hedged for the greatest length of time brings more safety to the MLP's payout. Which company has the safest payout? Take a look at the chart below:

Source: Company Website and Author Calculations

Do you see that green bar consistently hitting the top line at 100% hedged? That's LINN Energy, a company that's called its hedging strategy its "secret sauce." Before we declare LINN the clear winner, let's drill down a bit deeper into each company.

BreitBurn at most hedges 78% of its production, and its hedges really fall off after 2015. If you believe commodities are heading higher, that's not a bad thing. However, if you want secure cash flow, the risk is that the company won't be able to deliver it on its unhedged volumes. The other item to note, which you can't see on the above chart, is that a majority of the company's hedges are swaps that are fixed-price contracts. The company uses very few puts or collars to hedge its production. Because the company doesn't spend money to buy puts, it can afford a slightly higher distribution. However, of the companies on this list, BreitBum is the least secure.

While LINN Energy might be the clear hedging leader, the runner-up, with its consistently above average hedging program, is QR Energy. You'll note that QR Energy has hedged 100% of its gas through the end of next year, while its oil hedges are above 80%. That puts the company's remarkable 11% distribution on pretty stable ground.

Also on solid ground is Vanguard's distribution. You'll notice that its gas volume is pretty well hedged though 2016, though, like BreitBurn, it's all fixed-priced swaps, leaving little upside. However, given that 60% of the company's production is natural gas, the company's extra effort in hedging here helps it keep that distribution safe.

That being said, if you want a safe distribution, none is as safe for as long as LINN Energy's. Not only is the distribution secure through 2016, there's a bit more upside to it, thanks to LINN's use of puts to protect that production. Take a look at the chart below:

Source: LINN Energy

As you can see, a great portion of the company's production is protected by puts. While it does cost the company some money to insure its cash flow, it also allows for�additional�upside if commodity prices rise.

My Foolish Take
Despite having the smallest yield, LINN Energy, in my opinion, has the safest distribution of the bunch. Not only does the company hedge 100% of its production through at least 2016, but that production has some upside, thanks to the company's use of puts. Another great thing about LINN is that you can invest in this cash machine without the headaches of a K-1, by choosing instead to invest in its affiliate,�LinnCo (NASDAQ: LNCO  ) . Because LinnCo only owns LINN's units, you're getting the access to LINN's cash flow, but in a structure that sends a 1099, not a Schedule K-1.

That being said, there's nothing wrong with the other distribution; you're just taking on a bit more risk for that higher yield.

However, you still might be thinking that these dividend yields seem too good to be true. If that's the case, and you're on the lookout for some more high-yielding stocks, The Motley Fool has compiled a special free report outlining our nine top dependable dividend-paying stocks. It's called "Secure Your Future With Nine Rock-Solid Dividend Stocks." You can access your copy today at no cost! Just click here.

United Technologies Leads a Sluggish Dow to Record Highs

The markets are setting up for a record close to end this shortened week -- U.S. markets are closed tomorrow. The Dow Jones Industrial Average (DJINDICES: ^DJI  ) has surpassed its previous record high again, climbing 36 points, or 0.25%, as of 2:25 p.m. EDT, with most of its component stocks in the green. Even though economic indicators released today were disappointing to Wall Street, investors have happily looked past them and reaped the rewards of another day in this recent bull run.

Slow growth continues
Fourth-quarter economic growth didn't inspire anybody today, as U.S. GDP grew just 0.4% over the period. That's better than the 0.1% it grew during the third quarter, but it's still a sign that the economy is not nearly out of the shadow of the recession. With consumer confidence still shaky and jobless claims rising last week, investors would have been forgiven for pulling back today.

Yet Wall Street has been happy to keep on buying, and United Technologies (NYSE: UTX  ) has led the Dow higher today. Shares of the conglomerate have risen 0.9% so far after the company completed its sale of the electrical power systems unit of recent acquisition Goodrich to French industrial firm Safran. UTC pulled in $400 million in the deal, which was the second divestment of a Goodrich unit since UTC purchased the company for more than $16 billion last year. The move made sense for UTC, considering the economies of scale that come with size -- and in the industrial sector, size is power.

Fellow industrial stock and aerospace manufacturer Boeing (NYSE: BA  ) is having a different sort of day, however. Shares of the company have fallen 0.7% to rank among the worst Dow laggards as shareholders express caution regarding recent optimism about the 787 Dreamliner's battery fix. The aircraft recently made a successful test flight with the new design, and things are looking up for the company's newest jet. Boeing CEO James McNerney said today that testing of the redesigned batteries will be completed in the near future and that passenger flights will return soon.

Despite the turmoil surrounding the 787 saga, however, Boeing's stock has remained among the best of the Dow year to date. Since the year began, shares have soared more than 15% to rank the stock among the top third of the index. Investors can only hope the optimism over the 787 can keep that momentum going.

Today's hardest-hit sector has been financials. Among the Dow's stocks, JPMorgan (NYSE: JPM  ) and Bank of America (NYSE: BAC  ) rank near the bottom of the index with shares of the stocks losing 0.7% apiece. For Bank of America's stock, 2013 hasn't been anywhere near as good as its Dow-leading 2012: Year to date, the stock has only risen just more than 1%. JPMorgan has done much better, and while the company still faces investigations from numerous regulators over recent trading losses and other issues, ratings agency S&P has confidence in the bank. S&P upgraded JP Morgan from "negative" to "stable" yesterday, saying that pressure over the "London Whale" fiasco has wound down over the recent past.

Is finance the right pick for your portfolio?
With big finance firms still trading at deep discounts to their historical norms, investors everywhere are wondering if this is the new normal or if finance stocks are a screaming buy today. The answer depends on the company, so to help you figure out whether JPMorgan is a buy today, I invite you to read our premium research report on the company today. Click here now for instant access!

Why TUI Travel, EnQuest, and Speedy Hire Should Beat the FTSE 100 Today

LONDON -- The FTSE 100 (FTSEINDICES: ^FTSE  ) is suffering from further discontent spreading across the eurozone after the Cyprus bailout crisis helped depress Italy's latest bond auction. With banks in Cyprus still not open and the punishment to be meted out to savers still undecided, the island's offshore-banking status is looking very much like a Norwegian blue parrot.

As of 10:30 a.m. EDT, the U.K.'s major index is down 0.34% to 6,377 points, and that should be easy to beat today, shouldn't it? Here are three companies likely to do just that.

TUI Travel
"Strong trading continues," said today's pre-close update from TUI Travel, as the share price climbed 3.8%. The key winter period has gone well, with selling prices improving and margins strengthening, and that momentum has continued into the 2013 summer season. Chief executive Peter Long now says full-year performance should be "toward the upper end of our growth targets."

That suggests full-year profit could be around up 10%, putting the shares on a forward P/E of only about 11.

EnQuest (LSE: ENQ  )
EnQuest shares are up 2.1% after the oil and gas producer released full-year results telling us that things are going well. Enquest's production hit the upper half of its earlier guidance, reaching 22,802 barrels of oil equivalent per day, with the firm's major projects progressing on schedule. And at the bottom line, profit after tax almost doubled to $259.7 million.

Speedy Hire (LSE: SDY  )
Equipment rental firm Speedy Hire has seen its shares climb 5.6% today after announcing a new contract with National Grid (LSE: NG  ) (NYSE: NGG  ) . The managed-services agreement will see Speedy Hire providing National Grid with plant and equipment for an initial three-year period and will be worth up to 6 million pounds per year.

Dave Angell of National Grid said, "The contract with Speedy will help National Grid drive further efficiencies across our U.K. business as we implement sustainable, innovative and affordable energy solutions for the future."

If you're looking for investments that should take you all the way to a comfortable retirement, I recommend the Fool's special new report detailing five blue-chip shares. They'll be familiar names to many, and they've already provided investors with decades of profits. But the report will only be available for a limited period, so click here to get your hands on these great ideas -- they could set you on the road to long-term riches.

Top Stocks For 3/29/2013-1

 

Crown Equity Holdings Inc. (OTCBB:CRWE) recently announced its joint venture with Communication Expert Corporation. The cornerstone of Crown Tele Services Inc. strategy is to meet the highest standards when it comes to delivering VoIP communications solutions specifically designed to meet the business and residential market needs.

Crown Equity Holdings Inc. announced in June of this year its 1- 10 forward stock split, as well as in August announcing that the company had surpassed One Million dollars (1,000,000) in sales. The company is utilizing today’s technology to advertise and market public companies globally. CRWE’s proprietary network technology allows their publishing department to get their content to millions of readers daily across the world. CRWE publishes financial content to all the major countries and covers all the accredited stock exchanges.

Orofino Gold Corp. (ORFG.PK) has several Gold development properties in Colombia, a current hot spot of gold production in the world markets. The company recently announced that the Board Of Directors have appointed Mr. Ning Shi Long as Chairman of the Board and Executive Director.

Orofino Gold Corp. engages in acquisition, exploration, and development of gold properties in Mexico and Colombia. The company has an option to acquire properties in the Sur de Bolivar Department of Colombia South America.

Charter Communications, Inc. (NASDAQ:CHTR) recently reported financial and operating results for the three and nine months ended September 30, 2010. Compared with the prior year, third quarter revenues grew 4.6% on a pro forma(1) basis and 4.5% on an actual basis, driven by increases in Internet, phone and commercial customers and growth in advertising sales.

Charter Communications, Inc. provides cable services to residential and commercial customers in the United States.

James River Coal Company (NASDAQ:JRCC), a producer of steam and industrial-grade coal, recently announced that it had net income of $9.2 million or $0.33 per fully diluted share for the third quarter of 2010 and net income of $52.3 million or $1.89 per fully diluted share for the nine months ended September 30, 2010.

James River Coal Company, through its subsidiaries, engages in mining, processing, and selling bituminous, steam- and industrial-grade coal in eastern Kentucky and southern Indiana.

Honeywell (NYSE:HON) Results of the second annual “School Energy and Environment Survey” from Honeywell reveal that almost 90 percent of school leaders see a direct link between the quality and performance of school facilities, and student achievement.

Honeywell International Inc. operates as a diversified technology and manufacturing company worldwide.

 

 

Want to Invest in a Young Warren Buffett? Now You Can

Many investors, particularly retail investors, do not feel comfortable investing in the behemoth Wall Street banks; however, investors who severe all ties with the financial sector may miss out on enormous�opportunities.

While insurance can seem like a dull industry to study, Warren Buffet's Berkshire Hathaway (NYSE: BRK-B  ) has redefined what can make an insurance company a great investment. Following the teachings of Buffett, Markel (NYSE: MKL  ) , a specialty insurer, has positioned itself to grow book value and�shareholder�value for decades to come.�In this video, Fool financial analysts David Hanson and Matt Koppenheffer discuss why Markel could be the next big thing.�

Thanks to the savvy of investing legend Warren Buffett, Berkshire Hathaway's book value per share has grown a mind-blowing 586,817% over the past 48 years. But with Buffett aging and Berkshire rapidly evolving, is this insurance conglomerate still a buy today? In The Motley Fool's premium report on the company, Berkshire expert Joe Magyer provides investors with key reasons to buy as well as important risks to watch out for. Click here now for instant access to Joe's take on Berkshire!

Record Profit at Gold Miner Centamin

LONDON -- Centamin (LSE: CEY  ) this morning released its audited annual results for the year ended Dec. 31, 2012, revealing record EBITDA of $233.3 million, up 10% on 2011.

Full-year production at the Egypt-focused gold-miner was up 30% on the previous year, with the final figure of�262,828 ounces above the guidance of 250,000 ounces. Basic earnings per shares rose 2% to $0.1827, while Centamin has continued to reap the benefits of the high gold price as it remains debt-free and unhedged with cash, bullion on hand, gold sales receivable, and available-for-sale financial assets of $219.4 million as of Dec. 31, 2012.

Centamin's Sukari gold mine -- now in its third year of production -- has been pivotal to�Centamin's fortunes in recent months and had a rollercoaster effect on the share price. First, operations were suspended due to a lack of diesel supplies and the halting of sales by "unforeseen and arbitrary" red tape, which caused a 61% crash in the share price in a single day. The price recovered 25% the following day as the fuel supply resumed and a further 25% a few days later as customs lifted its halt on gold exports from Sukari.

Management "remains confident that a satisfactory outcome will ultimately be achieved" over two separate court cases relating to Sukari. The first concerns a decision by the Egyptian General Petroleum Company to charge international prices, rather than local (subsidized) prices, for the supply of diesel fuel oil. The second involves a judgment by an Egyptian administrative court in relation to the validity of Centamin's 160-square-mile exploitation lease -- though normal operations are able to continue during this process.

Having shed 4.7% of its value as of 10:05 a.m. EDT today, at 54 pence Centamin's share price has yet to regain all of its value prior to the plunge, and whether the potential for recovery makes Centamin a buy remains your decision.

Indeed, you may wish to consult this free Motley Fool report, which explains how betting on battered shares can provide wonderful gains -- if the underlying company recovers. To put a possible turnaround into perspective, Centamin's shares reached a peak of 197 pence before the Egyptian troubles erupted. Anyway, if Centamin is tempting you today, please click here to read the Fool's exclusive "millionaire" report before you hit the buy button.

Curian Capital Launches Processing App for Managed Account Proposals

One-stop shopping with the touch of a finger is “pretty cool,” according to Mark Schoenbeck, and advisors might find it hard to disagree.

Schoenbeck was referring to Curian Capital’s announcement on Monday that it has launched a new app specifically designed for mobile, “on-the-spot” generation of client proposals.

The chief marketing officer of the Denver-based managed account provider said that while most apps in the financial space are more marketing-oriented, Curian’s offers operational and business-processing capabilities.

“To be able to tell the Curian Select story, show the client the different options that are available, process the business and then literally sign with their finger on the screen is something unique,” Schoenbeck explained. “We’re seen similar technology in other industries but it hasn’t been widely adopted in financial services. Certainly e-signature capabilities are growing, but this leverages on a new level.”

Specifically, the company claims the app is designed to help financial advisors increase productivity and efficiency as they generate investment proposals based on their clients’ individual needs and goals. It gives advisors the ability to:

• Create proposals directly from the iPad anywhere, even without Internet access

• Review presentation materials with clients in an attractive and easy-to-understand format

• Select from 25 different account types and six different managed Select Portfolios

• Capture client information and offer clients the option to sign proposals electronically

As to whether the announcement represents “the death of NIGO rates,” Schoenbeck said the more advisors can do online in a digital format, the less not-in-good-order rates will factor in the processing of business.

“The system instructs the user, so that is usually the case,” he added.

While the company does not officially claim to be the first with this type of offering, Shoenbeck said it did a great deal of research and believes it to be the case.

“The short answer,” he said, “is that although we don’t have hard evidence to prove we are the first, we think we’re the first to leverage mobile technology for the purpose of this type of business processing.”

Thursday, March 28, 2013

3 Attractive Acquisition Targets for Oil Majors

For a major oil and gas company to meet its production growth targets, it takes a lot of capital and a little luck. If it can't meet those production goals through exploration, the company may go out and buy a company or two. For example, when ExxonMobil (NYSE: XOM  ) wanted to get in on the shale plays in Alberta last year, it bought Celtic Exploration�for $2.6 billion. The deal bolstered the company's holdings in the area by about 139 million barrels of oil equivalent of proved and probable reserves, a much-needed boost for a company that has struggled to meet its production goals as of late.

Like investors, major oil companies are always looking to get value out of their purchases. Today, let's look at a way to value a company for an acquisition and see if there are any companies that could be on he block for potential buyout.

Getting bang for your buck
While there are�certainly�some very complicated methods for evaluating an energy company, a quick and dirty method is to see how the enterprise value of the company (all equity and debt minus cash) compares to the total proved reserves on the company's books. For example,�Berry Petroleum (NYSE: BRY  ) , which was just acquired by LINN Energy (NASDAQ: LINE  ) for a final price tag of $4.3 billion,�had just over 274 million barrels of oil equivalent in proved reserves. This means that the company paid about $15.33 per barrel of oil equivalent for the company's reserves. Based on an S&P Capital IQ screen of exploration and production companies with a total enterprise value between $4 billion and $45 billion, an average company in this space would have an enterprise value per barrel of oil equivalent of $21.53. So based on this metric, it appears that LINN didn't overpay for this asset.

There is also one thing to consider when using a metric like this. Companies evaluate barrel of oil equivalents based on a BTU equivalency, but gas and oil spot prices trade at very different rates than this basis. For example, a gas-heavy company like Ultra Petroleum (NYSE: UPL  ) would have a value of about $9.69 per barrel of oil equivalent. This is misleading because over 95% of its reserves are in gas. Keep this in mind if you do this kind of calculation on your own.

Using this method for evaluating companies, let's take a look at a couple companies that could be selling at a deep discount.

Devon Energy (NYSE: DVN  )
Some people might see Devon's $11 billion in debt as a little too much bulk for a $28 billion. But with an enterprise value of $8.97 per barrel of oil equivalent, Devon could be a great deal for someone who wants a well-diversified portfolio. Overall, Devon itself is pretty well-diversified, with about 47% of proven reserves in oil and natural gas liquids. One of the possible reasons for the lower price tag may be that the company has 68% of all its proven reserves in the Midcontinent region, mostly in either more mature gas plays like the Barnett Shale or speculative plays like the Anadarko Woodford formation.

While some plays may be speculative, they also may be very promising; the Anadarko Woodford may bethe next great American shale play, so some of the majors who missed the boat on the Bakken or the Eagle Ford might be able to get in on the ground floor on this one. A $28 billion price tag might seem excessive for an acquisition to anyone, but remember that Exxon paid almost $41 billion for XTO Energy back in 2009, so a company at Devon's size, and certainly at this price, is attainable.

Canadian Natural Resources (NYSE: CNQ  )
Considering how much energy investors want to be in oil right now, its rather staggering that Canadian Natural Resources is selling at such a discount. Despite proven reserves that are over 86% liquids, the company is still valued at only $10.47 per barrel of oil equivalent. One of the major reasons for such a low value is that the proven reserves the company has are in crudes that are more expensive to produce, namely in situ oil sands and enhanced oil recovery for heavy oil. Not only are these types of extraction more expensive to produce, but the lack of takeaway capacity has many Canadian tar sands trading at a deep discount to other North American crudes.�

It's possible that this company could be an ideal takeover candidate for a company that wants to get into the oil sands business, but $43.6 billion is a lot of money to fork over. Once Keystone XL comes online and oil sands can easily make it to the Gulf, oil sands prices will probably get up to other local crude prices.

Chesapeake Energy (NYSE: CHK  )
There has been a lot of talk�about�how Chesapeake is undervalued by the market, but there isn't always an exact value for the company associated with that statement. For those curious about how much of a discount it is trading for, perhaps an enterprise value of about $11.34 per barrel of oil equivalent might give you an idea. Granted, about $4.63 of that per-barrel price is debt and only 30% of its total reserves are in�liquids. But for a�company�that is in the top three for land holdings in eight of the United State's top shale plays, there is a lot of upside and pretty decent value despite the $31 billion market value.

What a Fool believes
Several major oil companies are in a precarious position. Overall production growth has been relatively stagnant and cash reserves are filling up. In order to meet their growth projections, they very well may need to look at a company like the ones mentioned above to inorganically bump their numbers. While the enterprise value per barrel of oil equivalent lends a little perspective to the value of these companies, it certainly doesn't tell the whole story, but this metric should at least stoke some interest.

Not only does this kind of information help major oil companies looking to make acquisitions, it also helps investors make better decisions. With Chesapeake in transition following the Aubrey McClendon show, its low value per barrel of oil equivalent may signal a good time to jump in and grab some value. To learn more about Chesapeake and its enormous potential, you're invited to check out The Motley Fool's brand-new premium report on the company. Simply click here now to access your copy.

One Advisor, Two Trials: Does News on One Taint the Other?

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The Securities and Exchange Commission told a judge in Boston on Tuesday that a news release it issued on an advisor accused of a fake hedge fund scheme would not taint the advisor's separate criminal trial on a tax matter.

Reuters reported that U.S. District Judge Mark L. Wolf had ordered SEC attorney Julie Riewe to explain why her comments about the advisor, Gregg Caplitz, did not violate a rule prohibiting lawyers from making “extrajudicial statements” that could taint a jury pool.

As AdvisorOne reported, Caplitz, of Insight Onsite Strategic Management in Wilmington, Mass., has had his assets frozen by the SEC, which alleges he stole client funds by telling them they were investing in a hedge fund. The fund was nonexistent.

As Reuters reported, Caplitz is also a defendant in a separate criminal tax case in the same federal court district; that is slated for trial in September.

In his letter to Riewe, Wolf wrote that she should “address whether she was aware when she made her statement that Gregg D. Caplitz is also a defendant in a pending criminal case ... and whether she or the SEC have communicated or cooperated with government agents,” Reuters reported.

According to Reuters, the SEC told Wolf on Tuesday that the statement “was reviewed and approved by Ms. Riewe’s supervisors” and that it would not violate the court’s rules because “it does not go beyond the public record and therefore cannot impact the defendant’s right to a fair trial.”

The SEC noted that its complaint against Caplitz was public at the time of the press release.

According to the agency, Caplitz and his firm brought in at least $1.1 million that, instead of being invested in a hedge fund, was transferred to the firm’s chief investment officer and other members of her family, who spent it on personal expenses. The firm’s SEC filings indicate that it has $100 million in assets under management; the purported hedge fund has no assets at all.

The asset freeze targets not just Caplitz and his firm, but others who received investor money; they have been named as relief defendants so that investor money in their possession can be recovered.

Legal experts told Reuters that Wolf's effort to enforce the court’s extrajudicial statement rules is rare. “On the few occasions when similar rules are enforced by judges, they tend to involve high-profile criminal matters like the case of Durham County District Attorney Michael Nifong, who was disbarred in 2007 for making improper pretrial statements in the Duke lacrosse rape case,” Reuters wrote.

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Read SEC Enforcement Roundup: CR Intrinsic Slapped With Record Insider Trading Fine on AdvisorOne.

You Should Be Investing in Cloud Computing Stocks -- Here’s Why

When Google's (NASDAQ: GOOG  ) Drive online file system suffered what the company called a "service disruption" last week, users took to Google+ and Twitter to voice their frustration over being unable to use a system they'd come to depend upon.

That's the bad news. The good? That so many voiced their frustrations in the first place, for it reveals just how much we've come to trust cloud services in ways we never would before. Microsoft's (NASDAQ: MSFT  ) hefty, ongoing investment in Office 365 -- the online edition of its productivity suite -- is a testament to how fast cloud computing services have caught on, says Tim Beyers of Motley Fool Rule Breakers and Motley Fool Supernova in the following video.

Please watch and then weigh in using the comments box below. Are you using cloud computing services? If so, which ones and what have they replaced?

For further analysis of Google's efforts in productivity software, try ournewest premium research report, in which we dissect the search king's sprawling empire and assess the risks and opportunities for your portfolio.Access your report now by clicking here.

CDS Not Triggered by Greek Bailout: ISDA

The bailout of Greece involving an exchange of sovereign bonds did not constitute a credit event and therefore need not trigger credit default swaps to pay creditors, according to the International Swaps & Derivatives Association.

Bloomberg reported Thursday that the ISDA, asked to rule on whether a credit event had taken place that would trigger insurance payouts on bonds, said that the European Central Bank’s exchange of Greek bonds for new securities exempt from losses being imposed on private investors did not constitute subordination, which is a requirement for a payout under a restructuring event.

In a statement, ISDA said in part, “The situation in the Hellenic Republic is still evolving” and the decisions it rendered Thursday “do not affect the right or ability to submit further questions.” It added that its decision is not an expression of the committee’s “view as to whether a credit event could occur at a later date.”

CDS could still be triggered if Greece forces other bondholders to accept a haircut under collective action clauses, according to ISDA rules. Another possibility is that Greece may miss a payment; that too would trigger CDS, and in either of those eventualities an auction would likely be arranged to set a recovery value on the bonds. Insurers would then be on the hook for the difference between the bonds’ face value and whatever they brought at auction.

In 2011 a call for Irish swaps to be triggered after its bailout was also rejected, with a ruling by the ISDA determinations committee that the preferential creditor status, in that case of the International Monetary Fund, did not constitute subordination.

Currently the cost of insuring $10 million in Greek debt for a five-year period is $7.3 million in advance and $100,000 per year; that indicates a 95% chance of default within that period.

Facebook Closes Up 0.6% at $38.23; Rises in After-Market

And that’s a wrap: Facebook shares have closed up just 23 cents from the offer price, at $38.23, and way down from the $45 high of the day. In the after-market, the shares are down another 10 cents at $38.10�the shares are now up 7 cents at $38.30.


Shares of�Facebook (FB)�are being quoted at $45 on Nasdaq before the open of trading at 11 am, well above the $38 offer price.

Actually, the indication has bounced around a little, retreating from $45 at first to $43 and then $42. Stand by.

Sterne Agee’s Arvind Bhatia, who has a Buy rating on Facebook’s shares, and a $46 target, tells me this morning “The price seems like a fair price,” with respect to the $38 offer.

“They could have potentially gone higher given the demand that we’re seeing, but they left some room for upside.”

Now the open has been delayed till 11:10, apparently. The indication has dropped to $42.�Playing hard to get. Wedding jitters?

The average price target of 8 analysts surveyed by FactSet is $41.50.

A little light reading while yo wait for a quote: the most recent version of the prospectus.

Bloomberg TV�is reporting Nasdaq says it is experiencing delays in opening trading.

The average Facebook estimate for this year is $5.076 billion in revenue and 59 cents in non-GAAP EPS, according to those eight analysts I mentioned. That would be 37% revenue growth and 36% EPS growth.

Headlines are coming from Dow Jones�saying traders are “experiencing problems, changing, canceling orders.”

We have a winner: The stock has opened at $42.05, now at $42.49 and rising. �That’s an 8% gain, so far. Now backing off to $41 and change.

Down to $40.23�… $40.00. Low so far, according to FactSet, is $38.20.

Video game purveyor Zynga (ZNGA), which has made much off its money off the Facebook game “Farmville,” was halted by Nasdaq because of a circuit breaker. The stock is down $1.10, or 13%, at $7.17.

The stock’s broken through $40 and is $39.06, a 3% rise.

Sterne Agee’s Bhatia remarks, “I’m a little surprise we’re not seeing a bigger pop. I think it signals the pricing was fair, and from my standpoint it makes it a little easier. It’s difficult for an analyst if there’s too much froth. I’m almost glad to see the stock not trade in an irrational matter.”

“Normally underwriters try to leave 15%, 20% upside,” observes Bhatia. “The concern becomes whether or not the retail investor will be disciplined. I guess the retail investor didn’t get carried away.”

Now down to $38.07, up just pennies!�Actually, it went down to $38.00, and is hovering at the $38.01 level.

Now working its way back up at $38.74, now $39.80. It broke through $40, but seems to be having trouble at that level. It’s bounced back and forth above and below $40.

Zynga is still halted. There’s no indication yet from Nasdaq when it will resume.

Actually, Zynga was un-halted, then halted again by another circuit breaker, after rising from its earlier low. It’s frozen at $7.80, down 47 cents, or almost 6%.

There are continuing tidbits this afternoon about the�delays�with the open.�CNBC’s David Faber tweeted a little while ago the�Nasdaq’s�system was “clogged,” causing some traders to “back away.” The Journal’s Jenny Strasburg and Jacbo Bunge report the trade continued to be hampered with technical issues even after the open.

The team over at sister blog�MarketBeat is doing a great job, as usual. Among interesting tidbits, they write that unnamed sources say underwriters stepped in this morning to support the price.

Now holding steady at $41 and change.

My colleague Brendan Conway, who runs our�Focus on Funds�blog has an interesting item from�Ned Davis Research�on the likelihood of Facebook’s inclusion in index funds.

Zynga is now trading again, down 65 cents, almost 8%, at $7.62.

With the stock stable around $41, it must be time for the Taiwanese animated take.

Meantime, it’s not pretty this afternoon for other social networking, or quasi-social stocks:

  • Zynga�is down 99 cents, almost 12%, at $7.28, after twice being halted;
  • Pandora�(P) is down 53 cents, or 5%, at $9.99;
  • LinkedIn (LNKD) is down $4.91, or almost 5%, at $100.04;
  • Yelp (YELP) is down $1.80, or almost 9%, at $19.47.

Facebook shares are on the move again, downward, hitting $38.70�$38.07�or so.

It’s hit $38 again.

The biggest social loser of the day appears to be�Renren (RENN), which some consider the�Facebook of China. Its shares are down $1.29, or 21%, at $4.95.

The�Facebook-owning funds,�GSV Capital�(GSVC) and Firsthand Technology Value Fund (SVVC) have taken a beating today, as Brendan wrote earlier. Brendan on Wednesday advised against owning either one.

Going into the final minutes here.�Is this actually going to happen? Is the thing actually going to close with no gain whatsoever?

Just about:�a mere 0.6% gain from the offer price.

Retail-to-REIT Not Right, Experts Say

JC Penney sent investor whiskers to twitching when it floated the idea of converting its retail store holdings into a REIT with it as the single tenant, but experts soon explained away the notion as something that would likely not work. Analysts say most REIT shareholders don’t want to see a single tenant locking up the bulk of REIT real estate, because it creates an issue of reliability on a sole entity as it spins off its most valuable assets. Finance historians point out it’s not the first time the idea has surfaced, but other ideas for cash generation from retail property holdings seem to offer higher yields and more stability. For more on this continue reading the following article from National Real Estate Investor. 

The idea that J.C. Penney could benefitfrom spinning its real estate holdings into a stand-alone REIT has gotten a lot of media attention this week, but REIT analysts say it’s a dead-end.

While this is certainly not the first time that someone has floated around the idea of turning stores into REITs—hedge fund investor Bill Ackman proposed the strategy to Target in 2008and department store Dillard’s attempted a similar spin-off in 2011—there are fundamental challenges to spearheading a REIT IPO concurrently with operating an ongoing retail concern, according to Rich Moore, a REIT analyst with RBC Capital Markets.

If the retailer in question has no plans to vacate most of the stores, one of the major issues for potential REIT investors would be buying shares of a real estate company that relies on a single tenant for all of its revenue. Typically, REIT shareholders don’t want to see a single tenant account for more than 10 percent of a REIT’s space, Moore points out.

“A captive REIT with a 100 percent of the revenue coming from one tenant is not going to appeal to anyone,” he says. “The conversations I’ve had with some of these retailers [who thought about filing for REIT status], they think they are going to be like apartment REITs, with a 40x cap. They are shocked to find out it’s going to be more like a 10x cap.”

Even if the retailer manages to strike agreements to sublease some of its stores or sections of its stores to other chains, the rent revenue would most likely not be enough to justify a spin-off, according to Howard Davidowitz, chairman of Davidowitz & Associates Inc., a New York City-based retail consulting and investment banking firm. He notes that in mid-20th century, many U.S. department store chains, including K-Mart, would lease out various departments to third-party sellers. But the practice disappeared from the retail industry after these chains realized they were not making enough money and needed the gross margins dollars.

And the strategy would be less viable for J.C. Penney at this point because its lenders likely view its real estate holdings as collateral and would not want to let a struggling retailer spin off its most valuable assets, Davidowitz adds. What’s more, a REIT conversion might take months or years to accomplish and J.C. Penney doesn’t have the time or money to undertake it.

“How will they get from step A to step B and not go into bankruptcy?” Davidowitz asks. “Can you imagine going to the banks and telling them they are going to take new losses? If you are J.C. Penney, you can’t get there.”

Value still exists

That’s not to say that a retailer’s real estate holdings don’t offer other options for cash generation if the stores are owned outright or come with below-market rents.

Cedrik Lachance, managing director with Green Street Advisors, a Newport Beach, Calif.-based consulting firm, points to the deal Sears Holdings Corp. struck with General Growth Properties last year, when it sold 11 anchor pads to the regional mall REIT for $270 million. The deal included both owned and leased stores.

“I think the most likely course of action is to sell boxes directly to landlords,” Lachance says. “The value of these boxes is now entirely dependent on what else can go into [them] and that value is far, far great in class-A malls than in class-B malls. And it’s questionable in how many class-C malls you can replace J.C. Penney with a value-accretive proposition.”

Both Davidowitz and Moore view this strategy as the most profitable and logical one as well.

“Selling real estate is actually a better solution because you’ve got a lot of landlords who’d like to buy it,” Moore says.

The idea of spinning J.C. Penney stores into a REIT, on the other hand, was created by someone “who knows nothing about real estate.”