Saturday, May 31, 2014

Rite Aid Shares Surge on Solid Second-Quarter Figures

NEW YORK (TheStreet) -- Rite Aid  (RAD) shares were up an impressive 24% as of 3:35 p.m. EST, due in large part to unexpectedly strong second-quarter figures.

During the second quarter ended Aug. 31, the drugstore chain reported net income of $32.8 million, up $71.6 million on the year-ago quarter. This marks the fourth consecutive quarter in the black. Same-store sales grew 1% across the 4,600-strong store network.

In a conference call to investors, Rite Aid CEO John Standley credited generic medications adding to pharmacy gross margins and strong expense control as key drivers for the positive balance sheet.

Rite Aid revised its 2014 fiscal guidance in light of its better-than-expected second-quarter earnings. It is anticipated adjusted EBITDA will be $1.24 to $1.3 billion, net income $182 to $268 million, and sales $25.1 to $25.3 billion for 2014.

"We believe we have an operational game plan that will succeed in meeting the unique needs of our customers while positing Rite Aid for long-term success," said Kenneth Martindale, Rite Aid President and Chief Operating Officer, during the call.

Major competitors Walgreens (WAG) and CVS Caremark (CVS) will report quarterly earnings in October and November respectively.

Thus far, 102.37 million shares of Rite Aid changed hands compared to its average daily volume of 15.9 million shares. Overall, Rite Aid is leading the S&P 500 which is down 0.16%. 

TheStreet Ratings team rates Rite Aid as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate Rite Aid (RAD) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:
Powered by its strong earnings growth of 400% and other important driving factors, this stock has surged by 170.67% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year. Rite Aid reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, Rite Aid turned its bottom line around by earning 12 cents vs. -42 cents in the prior year. This year, the market expects an improvement in earnings (14 cents vs. 12 cents). Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.1%. Since the same quarter one year prior, revenues slightly dropped by 2.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share. The gross profit margin for Rite Aid is currently lower than what is desirable, coming in at 30.55%. Regardless of Rite Aid's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.42% trails the industry average. Net operating cash flow has decreased to $184.45 million or 49.27% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower. You can view the full analysis from the report here: RAD Ratings Report Written by Keris Alison Lahiff.

Video Chuck Royce Q&A - Absolute Returns with Less Volatility

In stark contrast to last year's virtually correction-free bull market, 2014 has already seen two pullbacks large enough to give investors pause. Chuck Royceand Chris Clark discuss the current environment and how we as a firm have attempted to guard against the market's volatile behavior.View the video here.Chris Clark: Chuck, it seems that there's been a tonal shift in the market over the past sort of 12 to 14 months. What do you see as sort of the evolution of investor preferences in this recent time period?Chuck Royce (Trades, Portfolio): It's been rather dramatic, and it all started around May 1 of last year, May 2, when the ten-year bond reached its yield low of 1.5%. It rallied from there, and went up to almost 3%. There's been a dramatic shift in what the market seems to favor. The market is now favoring more traditional, more higher-quality companies. That's been good for us. We have a quality theme that runs throughout many of our products.CDC: 2013 was a year that was somewhat unusual, given the prior years, in that there was no significant correction. In 2014, we've already had two corrections of roughly 8%. What do you think is going on in the market, and is this a healthy pattern or does this bode poorly for the future for stock returns?CMR: It's a very healthy pattern. Last year was a straight-line market, and markets were up sharply. This year is going to be rockier—I think a more normal environment. We made a high in early March. Markets have come down since, and I think that's been a very positive experience, especially for our style of investing.CDC: One of the things that we've been very excited to see is our ability to preserve capital in this most recent down period, which has been pretty sharp. What do you attribute that to?CMR: It goes back to a premise of our firm. The premise is that we're in the risk management business. We want to deliver returns with less volatility.CDC: And why do you think we might have struggled with that prior to this sort of normalization that's tak! ing place in the yield curve and in interest rates?CMR: It's clear now, with hindsight, although I'm not sure it was clear then, that that kind of market, with its intense monetary stimulation, favored inferior companies. The inferior company did very well.CDC: Chuck, some market commentators have sort of expressed the view that we're seeing shades of the year 2000 in the current market experience. Do you think that there are some legitimate comparisons between now and that time period? And what do you think about some of the speculative influences that clearly have manifested themselves in the first quarter?CMR: I think there is some truth. We've had a speculative market here. We've had a speculative market in inferior companies and in highly speculative specialized areas, internet areas, certainly the social network area in particular, and in biotech. Those have had extraordinary runs, and other companies have lagged.CDC: How have we guarded against the typical experience of the market? These sectors have run very hard, and then they have corrected. So how have we behaved in this time period, and how have we protected our shareholders from this volatility?CMR: Our primary protection was not to get involved in these highly speculative securities. We're always looking at the risk factors around a company. So we're benefiting right now in the kind of "all other" category, where we are protecting shareholders' money in this decline.CDC: Obviously the concept of tapering that was introduced to your point back in May of 2013 is very high on investors' fears in terms of what could derail economic activity, what could derail the stock market, etc. What do you think is the significance of tapering, and how are we approaching our investments as it relates to what inevitably will be a higher interest-rate environment?CMR: I do think it's inevitable. I think it's very healthy. I'm sort of rooting for this to get going again, but I think the pace has been actually a very healthy one, and I think the market respons! e has bee! n minimal. So I do think we're entering into a very strong period for active management, which is going to be encouraged by normal interest rates.Important Disclosure InformationThe thoughts and opinions expressed in the video are solely those of the person speaking and may differ from those of other Royce investment professionals, or the firm as a whole. There can be no assurance with regard to future market movements.Please read the prospectus carefully before investing or sending money. You may obtain aprospectus on our website by clicking here. The prospectus includes investment objectives, risks, fees, charges, expenses, and other information that you should read and carefully consider before investing.Also check out: Chuck Royce Undervalued Stocks Chuck Royce Top Growth Companies Chuck Royce High Yield stocks, and Stocks that Chuck Royce keeps buying

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Thursday, May 29, 2014

Diamond Offshore: If It Can’t Get Worse…

There’s almost no middle ground with the offshore drillers these days–you either love ‘em or hate ‘em. Unless you’re Morgan Stanley, who hates Diamond Offshore Drilling a bit less today.

Bloomberg

Today, Morgan Stanley analysts Ole Slorer and Jacob Ng upgraded shares of Diamond Offshore to Equal Weight from Underweight. They explain why:

Our Underweight thesis based on significant negative earnings revisions has largely played out. We also believe that the cycle is turning and that floater availability has peaked. At this point, Diamond Offshore enjoys attractive yield support coupled with significant upside optionality, in our view…

We expect trading to be driven increasingly by the reduction of floater availability through a pickup in fixtures rather than the confirmation of negative data points on dayrates. We see negative sentiment on the group reversing to the extent that ballooning floater availability is absorbed from upcoming contract announcements.

The upgrade hasn’t just lifted Diamond Offshore Drilling, but has given a boost to offshore drillers like like Transocean (RIG), Atwood Oceanics (ATW), Noble (NE) and Ensco (ESV) as well.

Shares of Diamond Offshore Drilling have jumped 1.3% to $50.85 at 10:29 a.m., while Transocean has advanced 0.7% to $42.32, Atwood Oceanics has risen 0.9% to $48.76, Noble has gained 0.6% to $30.67  and Ensco is up 0.4% at $51.60.

Costco earnings up, but not enough for Wall St.

Costco Wholesale net income rose 3% in the third-quarter as the warehouse club operator's sales and membership fees improved.

A key sales figure rose both in the U.S. and abroad, but its earnings fell short of Wall Street expectations. Its shares slipped in pre-market trading Thursday.

Costco's stores offer members the ability to buy items in bulk at low prices.

Net income for the 12 weeks ended May 11 rose 3% to $473 million, or $1.07 per share. That compares with net income $459 million, or $1.04 per share. Analysts expected $1.09 per share, according to FactSet.

Revenue rose 7% to $25.79 billion from $24.08 billion last year. Analysts expected $25.68 billion.

Revenue in stores open at least one year rose 5% in the U.S. and 3% internationally. Excluding gas prices and foreign currency fluctuation, the figure rose 6% in the U.S. and 8% internationally.

Costco, based in Issaquah, Wash., operates 655 warehouses, including 464 in the United States and Puerto Rico, 87 in Canada, 33 in Mexico, 25 in the United Kingdom, 19 in Japan, 10 in Taiwan, 10 in Korea, six in Australia, and one in Spain.

Its shares were trading between $112.85 and $113.80 ahead of market opening today, down from the previous day's close of $113.87.

Wednesday, May 28, 2014

High Enough: Stocks Slip as Small Caps Dip, No Record For S&P

Stocks couldn’t fly high enough to get over yesterday’s record high*, as shares of McDonald’s (MCD) and Allergan (AGN) and Valeant Pharmaceuticals (VRX) dropped, while St. Jude Medical (STJ) and Stryker (SYK) have gained.

REUTERS

The S&P 500 dipped 0.1% to 1,909.78, while the Dow Jones Industrial Average fell 0.3% to 16,633.18. The Nasdaq Composite dropped 0.3% to 4,225.08, while the small-company Russell 2000 declined 0.5% to 1,136.68.

McDonald’s dropped 1% to $101.30 after the fast-food franchise after it announced that it would return as much as $20 billion to shareholders in the form of dividends and share buybacks during the next three years. Maybe investors really are souring on buybacks when they’re a sign companies lack growth opportunities.

Allergan dropped 5.4% to $156.12 after Valeant’s new bid for the company was deemed not good enough by the market. A BMO Capital Markets’ survey showed that 74% of respondents thought Allergan would be worse off in three years. “With these results—and that 92% of respondents think Allergan has been managed well over the past 10 years—what we have, we believe, is a simple snapshot of respondents trusting Allegan more, and seeing a riskier, less attractive future with Valeant,” BMO’s David Maris says. He put the odds of Valeant’s bid succeeding at less than 50/50. Valeant’s shares fell 2.6% to $123.95.

St. Jude Medical gained 2.5% to $65.76 after said it would buy the portion of CardioMEMS that it did not already own following the approval of the latter’s heart-failure monitor. Stryker rose 2.8% to $82.64 after the company denied that it was planning a bid for Smith & Nephew (SNN). Smith & Nephew has advanced 3.3% to $83.05.

Ned Davis Research’s Ned Davis still wonders what the divergences in the market are trying to say:

[The] DJIA/S&P 500 trend evidence remains bullish, but there are some concerns…that knock overall trend evidence down to a mildly bullish rating. The Russell 2000 relative weakness is a mild concern, but…it is fairly well recognized (discounted?). What concerns me more than the Russell/DJIA divide (or the internet, social media, and biotech stocks that everyone is talking about) is the relative weakness in the broad Financials and Consumer Discretionary sectors…because these two sectors have been leaders for this entire bull market.

Barclays’ Sreekala Kochugovindan wonders if US assets are overvalued:

Investors are increasingly voicing concern over the outlook for US assets. Both investment grade and high yield credit spreads have tightened back to pre-crisis levels while long run equity valuations, such as the US CAPE and the Tobin's Q, stand well above the long run average, with the Tobin's Q in particular now exceeding valuations seen in 2007…In the US, both investment grade and high yield credit currently appear expensive on this metric, and worryingly, credit appears expensive relative to equities, which itself looks expensive. The yield gap between the S&P 500 and investment grade credit has declined following the equity rally over the past year, but even then, the relative yield gap still stands at levels last seen in 2007. This is also true if we measure the yield gap using S&P earnings yield and inflation adjusted credit yield.

I’m cautiously optimistic about the market, but these should serve as a reminder that even as the S&P 500 sits near all-time highs, there’s still plenty to worry about.

*Yes, that was my pathetic attempt to weave Damn Yankee’s “High Enough” into a blog post.

That Shifty S.O.B. Pied Piper Of Bonds

How many red faces in the bond crowd? Long Treasuries were supposed to zip up to a 4.5% yield with 10-year paper at 3.5%. Bunches of "smart" money shorted 30-year Treasuries with impunity. What happened, fellas?

The bull run in fixed income is easy to explain. So far, the economy limps along. Retailers like Wal-Mart post sluggish numbers and capital goods activity doesn't kick in. So, we've got a depressed GDP sector along with negative exports. The Fed still tells everyone who can read that deflation is the serious issue for the country as well as unemployment.

Everyone waits for home starts to recover but they don't, despite attractive terms on 30-year mortgages, below 4.25%. Historically, this is a bargain. Yes, home prices have risen substantively but so have rentals. I find the rental-to-buy ratio for housing a peripheral coincident indicator.

For better or worse, the history of interest rates during the entire postwar period is etched into my brain. There is no normal rate for the country. Treasuries key off budget deficits, inflation, the growth rate for GDP and trade surpluses or deficits.

The bond crowd forever is hypersensitive to any change in these variables. It can riffle into new alignment in a month or two, with volatility equivalent to a 10% move in the S&P 500, up or down. Treasuries with long duration levitated 10% year-to-date.

Does anyone but me remember when Federal agency 5-year notes yielded 15% in 1982? I'm a prisoner of apperceptive mass on Treasuries going back 60 years. The trendline for 10-year and 30-year paper ranges around 5%. For LIBOR we are talking nearly 4%, not next to zero.

I'd chance equities rather than inventory Treasuries so far below historic trendlines. Yield disparity between 10-year Treasuries and BB corporates stands under 300 basis points, down from 500 a couple of years ago.

The high yield bond sector contains all the prisoners of yield starvation who have given in. To hell with all this yield compression. We need income. Let's buy some low rated corporate bank debt packages, too. After all, they yield 4% and are a play on rising LIBOR somewhere lurking in the bushes.

Such rationalization invariably comes home to roost, uncomfortably. I'm inventorying over a dozen preferred stocks selling at or below their $25 call price and yielding 6.5%. The problem is almost all preferred stocks are issued by financial houses – banks, brokers and insurance underwriters. They're all below investment grade.

In the financial meltdown of 2008 – '09, Bank of America's Bank of America's preferreds touched down at $5 a share. They became one decision pieces of paper. If the bank stayed in business the paper was golden, destined to tick at $25, the current quote.

But, anyone who looks at preferred stocks other than pure equity is due for an unpleasant surprise sooner or later. Consider that Fannie Mae Fannie Mae defaulted on its huge issue of preferred stock during the banking crisis. Much of this paper was held by institutions in their pension funds.

If the U.S. Treasury had allowed a default on federal agency paper, losses would have run into trillions, literally decimating institutional portfolios, creating gut wrenching actuarial issues for pension funds in corporate, state and municipal sectors.

Even now, trouble is brewing in New Jersey, New York City and possibly New York State. Governors and mayors all across the country thirst to defer pension fund allocations for years ahead. Governor Cuomo posts IOU's into his state funds. New Jersey is deferring past due funding while Mayor de Blasio has agreed to contract settlements with the teachers union that cost the city billions next couple of years.

The rally in municipal paper, especially New York State and New York City issues, reflects the financial health of the stock market and earnings for Wall Street's banks and brokerage houses, a cyclical phenomenon. How long can the state and city live off capital gains taxes posted by the top 1%? Some AA, 20-year maturities I hold have risen over 20%, past couple of years. Enough is enough!

I never expected the latest surge in yield flattening. Yes, the Fed has disenfranchised savers who earn zilch on money market funds. The flight into the dollar goes on. Where can the Chinese go with their export earnings? If Germany sets the example we could see 10-year Treasuries at a 1% yield. Even poor Greece which was unbankable 4 years ago, floated 5-year paper yielding 4.75%, the deal wildly oversubscribed. Our 5-year paper yields 0.7%, practically confiscatory.

The bull market case for the fixed income sector is too much invested capital still seeks a home there. Pension funds fear putting the lion's share of cash flow into equities. This is understandable considering everyone is using unrealistically high discount rates on pension fund obligations.

5 Best Chemical Stocks To Buy Right Now

Emerging-market stocks posted the biggest drop in eight weeks on mounting concern the U.S. will take military action in Syria. Dubai�� DFM General Index sank the most in the world, while Turkey�� lira fell to a record.

The MSCI Emerging Markets Index retreated 1.9 percent to 915.44. The DFM tumbled 7 percent, the most among 94 gauges tracked by Bloomberg. The Borsa Istanbul National 100 Index slipped 4.7 percent as central bank Governor Erdem Basci ruled out raising the overnight lending rate and the lira dropped past 2 per dollar for the first time. Thai (SET)�� SET Index entered a bear market amid concern foreign outflows will accelerate, while India�� rupee plunged the most since 1996.

Stocks in developing nations joined a global selloff after U.S. Secretary of State John Kerry said yesterday that President Barack Obama believes there must be accountability for the ��oral obscenity��of using chemical weapons in Syria. Oil surged to an 18-month high as Foreign Minister Walid al-Muallem said today Syria�� defenses will ��urprise��the world should the U.S. and its allies decide on military strikes.

5 Best Chemical Stocks To Buy Right Now: Cabot Corp (CBT)

Cabot Corporation (Cabot), incorporated in 1960, is a global specialty chemicals and performance materials company. The Company�� principal products are rubber and specialty grade carbon blacks, fumed metal oxides, inkjet colorants, aerogels and cesium formate drilling fluids. Cabot and its affiliates have manufacturing facilities and operations in the United States and approximately 20 other countries. The Company operates in four business segments: the Core Segment, the Performance Segment, the New Business Segment and the Specialty Fluids Segment. It is organized into three geographic regions: The Americas; Europe, Middle East and Africa, and Asia Pacific. On January 23, 2012, the Company sold its Supermetals Business to Global Advanced Metals Pty Ltd. On August 1, 2012, it acquired Norit.

Core Segment

Carbon black is a form of elemental carbon that is manufactured in a highly controlled process to produce particles and aggregates of varied structure and surface chemistry, resulting in many different performance characteristics for a variety of applications. Its rubber blacks products are used in tires and industrial products. The Company owns, or has a controlling interest in, and operates plants that produce rubber blacks in Argentina, Brazil, Canada, China, Colombia, the Czech Republic, France, Indonesia, Italy, Japan, Malaysia, The Netherlands and the United States.

Performance Segment

The Performance Segment consists of two product lines: specialty grades of carbon black and thermoplastic concentrates; and fumed silica, fumed alumina and dispersions thereof. In each product line, it designs, manufactures and sells materials that deliver performance in a range of customer applications across the automotive, construction and infrastructure, and electronics and consumer products sectors. In addition, Cabot manufactures and sources thermoplastic concentrates and compounds that are marketed to the plastics industry. The Company owns, or has a ! controlling interest in, and operates plants that produce specialty grades of carbon black in China, The Netherlands and the United States. Its products are produced in facilities that it owns, or has a controlling interest in, located in Belgium, China and the United Arab Emirates. The Company also owns, or has a controlling interest in, manufacturing plants that produce fumed metal oxides in the United States, China, the United Kingdom and Germany. During the fiscal year ended September 30, 2011 (fiscal 2011), it closed its masterbatch manufacturing facility in Grigno, Italy.

New Business Segment

The Company�� New Business Segment consists of the Inkjet Colorants, Aerogel, Cabot Superior MicroPowders and Cabot Elastomer Composites Businesses. During fiscal 2011, its Cabot Elastomer Composites Business became part of its New Business Segment. The Company produces and sells aqueous inkjet colorants primarily to the inkjet printing market. Its inkjet colorants are produced for various inkjet printing applications, including small office and home office, corporate office, and commercial and industrial printing, as well as for other applications. Its inkjet colorants are manufactured at its facility in Haverhill, Massachusetts.

Cabot�� aerogel is a hydrophobic, silica-based particle with a high surface area that is used in a variety of thermal insulation and specialty chemical applications. In the construction industry, the product is used in insulative composite building products and translucent skylight, window, wall and roof systems for insulating eco-daylighting applications. In the oil and gas industry, aerogel is used to insulate subsea pipelines. In the specialty chemicals industry, the product is used to provide matte finishing, insulating and thickening properties for use in a variety of applications. It manufactures its aerogel products at its facility in Frankfurt, Germany.

The Company manufactures its aerogel products at its facility in F! rankfurt,! Germany. Finished products for use in the oil and gas industry are fabricated at a facility in Billerica, Massachusetts. The principal area of commercial focus for Cabot Superior MicroPowders Business (CSMP) is in developing covert taggants for a range of anti-counterfeiting security applications. Development and manufacturing activities are conducted primarily at its facilities in Albuquerque, New Mexico and Mountain View, California. In addition to the carbon black the Company makes using conventional carbon black manufacturing methods, it has developed elastomer composite products that are compounds of natural latex rubber and carbon black made by a liquid phase process. Its Cabot Elastomer Composites Business (CEC) products are targeted for tire, defense, mining, automotive and aerospace applications. It manufactures CEC products at its facility in Port Dickson, Malaysia.

Specialty Fluids Segment

The Company�� Specialty Fluids Segment produces and markets cesium formate as a drilling and completion fluid for use primarily in high pressure and high temperature oil and gas well construction. It has a mine and a cesium formate manufacturing facility in Manitoba, Canada, as well as fluid blending and reclamation facilities in Aberdeen, Scotland and in Bergen and Kristiansund, Norway.

The Company competes with Aspen Aerogel, Inc.

Advisors' Opinion:
  • [By Victor Selva]

    The company has a current ratio of 17.8% which is higher than the industry mean of 6.55%. Also, it's higher than the one registered by Akzo Nobel NV (AKZOY), Cabot Corporation (CBT) and Olin Corporation (OLN). For investors looking for a higher ROE, PPG Industries Inc. (PPG) could be the option.

  • [By Eric Volkman]

    Cabot (NYSE: CBT  ) has elected not to shift its dividend policy for the time being. The company declared its latest common stock distribution, which is to be $0.20 per share paid on September 13 to shareholders of record as of August 30.�That amount matches each of the firm's previous five distributions, the most recent of which was handed out in the middle of last month. Prior to that, Cabot paid $0.18 per share.

5 Best Chemical Stocks To Buy Right Now: Naturalnano Inc (NNAN)

NaturalNano, Inc. (NaturalNano), incorporated on February 18, 2000, is engaged in the development and commercialization of material science technologies with an emphasis on additives to polymers and other industrial and consumer products by taking advantage of technology advances developed in-house. During the year ended December 31, 2011,the Company�� activities are directed toward research, development, production and marketing of its technologies relating to the treatment and separation of nanotubes from halloysite clay and the development of related commercial applications for cosmetics, health and beauty products, and polymers, plastics and composites.

The company�� halloysite natural tube (HNT) products involve filling HNTs with active agents for use in the polymer composites, health and beauty, household product, and agrichemical industries. The filled tube product contains a material of interest within the tubes, such as an antimicrobial compound to provide antimicrobial properties to the resulting polymer composite material. The filled-tube products will focus on the utilization of the tubular nature of the halloysite nanotubes, by filling or adsorbing the tubes with active agents for the polymer nanocomposites, household products, cosmetics, agriculture, and pharmaceutical industries. The Company designs, manufactures and sells custom designed error prevention/safety checklist boards.

The Company competes with Air Products and Chemicals, BASF, Dow, E.I. DuPont de Nemours & Company, Applied Minerals, Davis International and Imagexpress.

Advisors' Opinion:
  • [By Peter Graham]

    Small cap stocks Naturalnano Inc (OTCMKTS: NNAN), Global Payout, Inc (OTCMKTS: GOHE) and Blue Water Global Group Inc (OTCBB: BLUU) were either jumping higher or diving lower yesterday. To complicate matters for investors, two of these small cap stocks have been subjects of disclosures about paid promotion or investor relation campaigns. So what will these three small caps do for the rest of this week? Here is a closer look to help you decide on a trading or investing strategy:

Top 10 Up And Coming Stocks To Own For 2015: PetroLogistics LP (PDH)

PetroLogistics LP owns and operates propane dehydrogenation (PDH) facility. The Company is located in the vicinity of the Houston Ship Channel. As of April 23, 2012, the Company had an annual production capacity of approximately 1.45 billion pounds of propylene. Its PDH facility uses a CATOFIN dehydrogenation technology pursuant to a fully-paid license from CB&I Lummus. It derives its sales from three different sources: propylene sales, hydrogen sales, and mixed stream of butane and butylenes (C4 mix stream) and heavier hydrocarbons (C5+ stream) sales.

Contracted Propylene Sales

The Company has propylene sales contracts with The Dow Chemical Company (Dow), Total Petrochemicals USA, Inc. (Total), and INEOS Olefins and Polymers USA (INEOS), each of which use the propylene it supplies in the acrylic acid, polypropylene and acrylonitrile plants. Effective January 1, 2012, it added BASF Corporation (BASF) and LyondellBasell Industries N.V. (LyondellBasell) as additional contracted customers. It delivers propylene to these customers through its integrated pipeline system, which connects its facility to the Dow and Total plants and the LyondellBasell system, and through interconnected third-party pipelines, which connect its facility to INEOS and BASF and to other potential propylene customers.

Spot-Market Propylene Sales

Through the Company�� integrated pipeline system, the Company accesses other consumers of propylene, which it is able to supply on a spot basis with its excess production capacity. It manages its contract and spot portfolio.

Hydrogen Gas Sales

As part of the PDH process, the Company produces commercial quantities of hydrogen. Hydrogen is consumed in refinery processes, including fuel desulphurization.

C4 Mix/C5+ Streams Sales

The Company produces commercial quantities of C4 mix/C5+ streams. It sells the C4 mix stream to specialty chemical consumers or refiners and these customers tran! sport the purchased volumes from its facility by truck. The C5+ stream, which is heavy in aromatics, is transported by its pipeline to a Kinder Morgan terminal, and then sold to Texas Aromatics for use in the chemical or gasoline markets.

The Company competes with Enterprise, Chevron Phillips, ExxonMobil Chemical, Shell Chemical, Flint Hills and the Williams Companies.

Advisors' Opinion:
  • [By Travis Hoium]

    What: Shares of propane company PetroLogistics (NYSE: PDH  ) fell as much as 10% today after reporting earnings.

    So what: Sales dropped 18% from a year ago to $159.4 million but the company swung to a net income of $41.4 million. On an adjusted basis net income fell from $64.4 million a year ago to $37.8 million in the second quarter. �

  • [By Seth Jayson]

    Calling all cash flows
    When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on PetroLogistics (NYSE: PDH  ) , whose recent revenue and earnings are plotted below.

  • [By Seth Jayson]

    PetroLogistics (NYSE: PDH  ) reported earnings on July 24. Here are the numbers you need to know.

    The 10-second takeaway
    For the quarter ended June 30 (Q2), PetroLogistics met expectations on revenues and beat expectations on earnings per share.

5 Best Chemical Stocks To Buy Right Now: Potash Corporation of Saskatchewan Inc.(POT)

Potash Corporation of Saskatchewan Inc. produces and sells fertilizers and related industrial and feed products primarily in the United States and Canada. The company mines and produces potash, which is used as fertilizer. It also offers solid and liquid phosphate fertilizers; animal feed supplements; and industrial acids that are used in food products and industrial processes. In addition, the company produces nitrogen fertilizers, as well as nitrogen feed and industrial products, including ammonia, urea, nitrogen solutions, ammonium nitrate, and nitric acid. Further, it holds the right to mine 785,759 acres of land in Saskatchewan; and 58,263 acres of land in New Brunswick in Canada. The company sells its fertilizers primarily to retailers, dealers, co-operatives, distributors, and other fertilizer producers; industrial products primarily to chemical product manufacturers; and purified phosphoric acid directly to consumers of the product. Potash Corporation was founded i n 1953 and is based in Saskatoon, Canada.

Advisors' Opinion:
  • [By Neha Chamaria]

    After Mosaic's (NYSE: MOS  ) and PotashCorp's (NYSE: POT  ) impressive quarterly numbers, investors' expectations from CF Industries (NYSE: CF  ) and Agrium (NYSE: AGU  ) unsurprisingly ran high. While CF's stock gained 4% in the week prior to its earnings announcement, Agrium's stock tacked on 6% before release. Unfortunately, expectations fell flat on their faces. The result: All four stocks have stopped short in their tracks, leaving investors sulking. The $64,000 question is: What should investors make of the situation and what should they do now?

  • [By Chad Fraser]

    The agriculture ETF is heavily weighted toward the U.S., with 45.8% of its assets there, but it is geographically diverse, with exposure to countries such as Canada (9.9%), Switzerland (8.5%), Japan (6.7%) and Singapore (5.1%).

    Potash Cartel Breakup Has Weighed on This Agriculture ETF

    The ETF’s unit price declined in the first half of 2013, partly because of the breakup of the Belarusian Potash Company (BPC), through which Russia’s Uralkali, the world’s No. 1 potash producer, and Belaruskali of Belarus distribute their potash. The market is dominated by BPC and Canpotex, owned by Potash Corp. of Saskatchewan (NYSE: POT), Mosaic and Agrium Inc. (NYSE: AGU).

    Together, the two cartels control 70% of global potash exports, so the breakup of BPC will result in a more fractured market, which seems likely to push potash prices lower. Shares of major potash producers fell sharply on the news, as did Market Vectors Agribusiness ETF due to its potash stock holdings, which include Agrium, Potash Corp. and Mosaic.

5 Best Chemical Stocks To Buy Right Now: Huntsman Corporation(HUN)

Huntsman Corporation engages in the manufacture and sale of differentiated organic and inorganic chemical products worldwide. The company offers polyurethane chemicals, including methyl diphenyl diisocyanate, propylene oxide, polyols, propylene glycol, thermoplastic polyurethane, aniline, and methyl tertiary-butyl ether products, which are used to produce rigid and flexible foams, as well as coatings, adhesives, sealants, and elastomers; and performance products, such as amines, carbonates, surfactants, linear alkyl benzene, maleic anhydride, performance chemicals, ethylene glycol, olefins, and technology licenses. It also provides advanced materials comprising epoxy resin compounds and formulations; cross-linking, matting agents, and curing agents; and epoxy, acrylic and polyurethane-based adhesives, and tooling resin formulations. In addition, Huntsman Corporation offers textile chemicals, dyes, and titanium dioxide. The company?s products are used in various applicatio ns, including adhesives, aerospace, automotive, construction products, durable and non-durable consumer products, electronics, medical, packaging, paints and coatings, power generation, refining, synthetic fiber, textile chemicals, and dye industries. Huntsman Corporation was founded in 1970 and is based in Salt Lake City, Utah.

Advisors' Opinion:
  • [By Jeff Reeves]

    After dropping precipitously from its 2011 highs, the negativity has been priced in — and even if RIG stock moves sideways for a bit, the hefty 5.6% yield will keep your portfolio strong.

    High Dividend Stocks — Huntsman (HUN)

    Market Cap: $5.7 billion
    Dividend Yield:�2.1%
    Sector: Chemicals

  • [By Neha Chamaria]

    On the same day that DuPont declared its intentions, Tronox (NYSE: TROX  ) , another big TiO2 producer, chipped in with a similar announcement to increase prices effective June 1. These two were among the only major TiO2 companies that were left to jump on the price-hike bandwagon. Others, like Huntsman (NYSE: HUN  ) and Kronos Worldwide, already took the plunge some weeks back.

Tuesday, May 27, 2014

Amazon Now Looking at Wireless Network Offering?

Apparently its forays into hardware devices and cloud computing aren't enough to satisfy Amazon.com Inc.'s (NASDAQ: AMZN) drive for global domination. Well, maybe that's overstating the situation a bit, but a report at Bloomberg discloses that the company has tested a new wireless network at its Cupertino, California, locations that claims to offer higher speeds than existing WiFi networks.

The "terrestrial low-power service" (TLPS) network is being developed by satellite company Globalstar Inc. and that company's president said in a filing with the Federal Communications Commission (FCC) that the testing was done "to help a major technology company assess the significant performance benefits of TLPS for a transformative consumer broadband application." Globalstar is traded over-the-counter under the ticker symbol 'GSAT' and shares are up 8.8% today at $0.655.

The main problem that Globalstar (and Amazon) need to deal with is interference, which torpedoed LightSquared's efforts to build-out a similar network. If the interference issues can be resolved, Globalstar believes its spectrum holdings may be worth more than Clearwire's, for which Sprint Corp. (NYSE: S) just paid $5 a share, valuing the Clearwire at around $14 billion.

Globalstar has a two-year testing period during which to iron out any problems with spectrum interference, so nothing is likely to happen soon. And Amazon's plans are unknown in any case. It could license spectrum from Globalstar, acquire some of the smaller company's spectrum directly, or buy the entire company. A lot depends on what Amazon has in mind — and that may change too as the testing progresses.

Report: EPA power plant rules may aid health

As the Obama administration readies its proposal for limiting carbon dioxide emissions from existing power plants, new research says strong rules could offer health benefits by reducing air pollutants.

Tough carbon rules could reduce the risk of heart attacks, lung cancer, asthma and other health problems by limiting pollutants that contribute to soot, acid rain and ozone, according to a study Tuesday by researchers at Harvard and Syracuse universities.

"They would have significant health and ecosystem benefits," says lead author Charles Driscoll, an engineering professor at Syracuse, noting they could result in less ozone damage to crops and toxic mercury in fish. He says when power plants limit carbon emissions, they release less sulfur dioxide, nitrogen oxide, mercury and particulate matter.

Slated to be announced June 2, the controversial rules will be a key component of President Obama's plan to fight climate change, since power plants account for a hefty share of the nation's heat-trapping carbon emissions.

Opponents, including business groups and Republicans, say the Environmental Protection Agency rules amount to "a war on coal" by making it difficult for coal-fired plants to remain economically competitive. These plants, which supply 39% of U.S electricity, emit more CO2 than do those powered by oil or natural gas.

On Wednesday, the Chamber of Commerce plans to release a report warning that the EPA rules could negatively impact jobs and cause higher electricity prices.

Since the rules' details are not yet available, the Syracuse/Harvard study looks at three possible rule options and compares their likely impact to the status quo. Driscoll says weak rules would yield few health benefits.

In contrast, emission reductions of 27% for sulfur dioxide and mercury and 22% for nitrogen oxide could result from rules proposed by environmentalists. These rules would, compared to current policy, require a 24% cut in carbon emissions from 2005 levels by 2020 but giv! e states flexibility in achieving the reductions.

"This is an opportunity to both mitigate climate change and protect public health," says co-author Jonathan Buonocore of the Harvard School of Public Health. The study says all states would benefit, especially those in and near the Ohio River Valley and the Rocky Mountain region.

In recent public speeches, EPA Administrator Gina McCarthy has said the rules, which will likely encounter legal challenges, will give states and utilities flexibility in how they meet the new limits.

Searching for the Market Boogeyman

With the stock market reaching all-time record highs (S&P 500: 1900), you would think there would be a lot of cheers, high-fiving, and back slapping. Instead, investors are ignoring the sunny, blue skies and taking off their rose-colored glasses. Rather than securely sleeping like a baby (or relaxing during a three-day weekend) with their investment accounts, people are biting their fingernails with clenched teeth, while searching for a market boogeyman in their closets or under their beds.If you don't believe me, all you have to do is pick up the paper, turn on the TV, or walk over to the office water cooler. An avalanche of scary headlines that are spooking investors include geopolitical concerns in Ukraine & Thailand, slowing housing statistics, bearish hedge fund managers (i.e., Tepper Einhorn, Cooperman), declining interest rates, and collapsing internet stocks. In other words, investors are looking for things to worry about, despite record corporate profits and stock prices. Peter Lynch, the manager of the Magellan Fund that posted +2,700% in gains from 1977-1990, put short-term stock price volatility into perspective:"You shouldn't worry about it. You should worry what are stocks going to be 10 years from now, 20 years from now, 30 years from now."Rather than focusing on immediate stock market volatility and other factors out of your control, why not prioritize your time on things you can control. What investors can control is their asset allocation and spending levels (budget), subject to their personal time horizons and risk tolerances. Circumstances always change, but if people spent half the time on investing that they devoted to planning holiday vacations, purchasing a car, or choosing a school for their child, then retirement would be a lot less stressful. After realizing 99% of all the short-term news is nonsensical noise, the next important realization is stocks are volatile securities, which frequently go down -10 to -20%. As much as amateurs and professionals say or t! hink they can profitably predict these corrections, they very rarely can. If your stomach can't handle the roller-coaster swings, then you shouldn't be investing in the stock market.Bear-markets generally coincide with recessions, and since World War II, Americans experience about two economic contractions every decade. And as I pointed out earlier in A Series of Unfortunate Events, even during the current massive bull market, a recession has not been required to suffer significant short-term losses (e.g., Flash Crash, Greece, Arab Spring, Obamacare, Cyprus, etc.). Seasoned veterans understand these volatile periods provide incredible investment opportunities. As Warren Buffett (Trades, Portfolio) states, "Be fearful when others are greedy, and be greedy when others are fearful." Fear and panic may be behind us, but skepticism is still firmly in place. Buying during current skepticism is still not a bad thing, as long as greed hasn't permeated the masses, which remains the case today.Overly emotional people that make investment decisions with their gut do more damage to their savings accounts than conservative, emotional investors who understand their emotional shortcomings. On the other hand, the problem with investing too conservatively, for those that have longer-term time horizons (10+ years), is multi-pronged. For starters, overly conservative investments made while interest rate levels hover near historical lows lead to inflationary pressures gobbling up savings accounts. Secondly, the low total returns associated with excessively conservative investments will result in a later retirement (e.g., part-time Wal-Mart greeter in your 80s), or lower quality standard of living (e.g., macaroni & cheese dinners vs. filet mignon).Most people say they understand the trade-offs of risk and return. Over the long-run, low-risk investments result in lower returns than high risk investments (i.e., bonds vs. stocks). If you look at the following chart and ask anyone what their preferred path would b! e over th! e long-run, almost everyone would select the steep, upward-sloping equity return line.Source: Betterment.com / Stocks for the Long RunSource: Betterment.com / Stocks for the Long RunYet, stock ownership and attitudes towards stocks remain at relatively low and skeptical levels (see Gallup survey in Markets Soar and Investors Snore). It's true that attitudes are changing at a glacial pace and bond outflows accelerated in 2013, but more recently stock inflows remain sporadic and scared money is returning to bonds. Even though it has been over five years, the emotional scars from 2008-2009 apparently still need some time to heal.Investing in stocks can be very scary and hazardous to your health. For those millions of investors who realize they do not hold the emotional fortitude to withstand the ups and downs, leave the worrying responsibilities to the experienced advisors and investment managers like me. That way you can focus on your job and retirement, while the pros can remain responsible for hunting and slaying the boogeyman.www.Sidoxia.comWade W. Slome, CFA, CFP®Plan. Invest. Prosper.DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold long positions in certain exchange traded funds and WMT, but at the time of publishing SCM had no direct position in any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.

Currently 4.00/512345

Rating: 4.0/5 (1 vote)

Voters:

Monday, May 26, 2014

World stocks mostly higher on U.S. optimism

HONG KONG (AP) — World stocks mostly rose Monday on optimism about the U.S. economy, hints from China about further stimulus and hopes for greater stability in Ukraine after its elections.

Trading volumes were low, however, as U.S. and British markets were closed for holidays.

Investor sentiment was boosted after the Standard & Poor's 500 on Friday finished above the 1,900 level for the first time. The gains came after the Commerce Department on Friday reported that new home sales rose 6.4% in April after falling in the previous two months. Demand for new homes has been one of the last missing pieces as the U.S. economy, the world's largest, recovers from the global financial crisis.

Meanwhile, remarks by Chinese Premier Li Keqiang that suggested Beijing is preparing further mini-stimulus measures to support the economy gave a lift to Chinese shares.

Li said appropriate policy tools and timely fine tuning are being prepared as the world's second biggest economy continues to face "relatively big" downward pressure, the state-run China Daily newspaper said Saturday, citing a speech Li gave on Thursday.

"There seems to be a growing view among Western strategists that while Chinese authorities will keep monetary policy steady, they are starting to look at fairly targeted support for the economy," said Chris Weston, chief strategist at IG Markets in Melbourne.

In Europe, Germany's DAX rose 1.3% to close at 9,892.82 and France's CAC 40 gained 0.8% to 4,526.93.

Investors were cheered by the fact that the result of the national election in Ukraine was accepted by both western powers and Russia. The president-elect said he would engage in talks with Moscow and seek to ease the crisis, though new attacks were made on pro-Russian militants in the eastern part of the country.

Meanwhile, results from the European Parliament elections showed parties that are against the European Union and favor stronger national borders — on issues from immigration to business �! � made huge gains. Experts say that while their advance will not affect the European Parliament significantly, as the disparate parties will have trouble creating alliances, their strong showing could push some governments to reassess their policies.

Among the notable exceptions was Italy, where a strong vote for the ruling party was seen to strengthen its mandate to reform the economy. Italy's stock market jumped 3.6 percent.

Earlier, in Asia, Japan's Nikkei 225 benchmark rose 1% to close at 14,602.52 as the dollar strengthened against the yen, rising briefly above 102 yen in early trading before easing to 101.93. A weaker yen means the electronics, cars and other goods made by Japan's exporting giants such as Nikon, Sony and Honda are cheaper for overseas buyers.

The Shanghai Composite Index added 0.3% to close at 2,041.48 while Hong Kong's Hang Seng ended flat 22,963.18. South Korea's Kospi dipped 0.3% to 2,010.35 while Australia's S&P/ASX 200 gained 0.4% to 5,512.80.

The euro rose to $1.3653 from $1.3630.

In energy markets, oil prices rose. Benchmark crude for July delivery was up 44 cents to $104.18 in electronic trading on the New York Mercantile Exchange.

I sold my startup to Cisco. Here's why

dov yoran

Dov Yoran, CEO and co-founder of ThreatGRID, talks about why he sold his company to Cisco Systems.

NEW YORK (CNNMoney) Just four short years after Dov Yoran dreamed up his cyber security startup, one of the biggest names in Silicon Valley came calling with an offer he couldn't turn down.

Yoran had grown accustomed to refusing countless tech companies and investors who wanted a piece of his firm's sophisticated threat intelligence platform.

"We've been saying no to people for years. We didn't build a company just to flip it and move on," said Yoran, who co-founded ThreatGRID with Dean De Beer. "We really wanted to experience the whole thing from a startup and having guys sleep on couches and bootstrapping it."

And then Cisco Systems (CSCO, Fortune 500) entered the picture.

Cisco began informal conversations with New York-based ThreatGRID late last year. The talks quickly accelerated this winter and culminated this week with Cisco announcing a deal to acquire ThreatGRID and pair it with its rapidly expanding security platform.

"They made an incredibly compelling offer -- for not only today but what the vision looks like going forward," said Yoran, who is CEO of ThreatGRID.

Neither Cisco nor ThreatGRID would disclose the value of the deal due to confidentiality agreements.

But Yoran said "it was a fantastic exit for investors, shareholders and employees."

Yoran, who is 38 years old and lives in New York's SoHo neighborhood, said he doesn't plan any major lifestyle changes despite the looming financial windfall.

"It really wasn't about the money. It was about the drive and excitement of what we were building. The money came afterwards, which is pretty cool," said Yoran, who was a pre-med major at Tufts University before changing direction and earning a bachelor's in chemistry. He received his master's at George Washington University.

So why did Yoran decide to sell to Cisco after saying no to many others?

The clincher was the ability of Cisco to help ThreatGRID expand by incorporating the platform with its other products. Cisco plans to marry ThreatGRID with SourceFire, the cyber security company it acquired last year for $2.7 billion. SourceFire and ThreatGRID should be comfortable with each other since they had a previous partnership.

Watch a hacker steal encrypted passwords   Watch a hacker steal encrypted passwords

It also helps that the sale won't rock the boat for ThreatGRID's 25 employees, who will be allowed to continue doing what they do now, including working from home.

ThreatGRID crowdsources massive volumes of malware to provide threat intelligence to its clients, which include security subsidiaries of General Dynamics (GD, Fortune 500) and EMC (EMC, Fortune 500).

"We analyze data that are captured by endpoint and network vendors and we make it readable in a way their products can digest and take action," said Yoran.

Cyber security firms continue to be objects of desire for big tech companies due to the rising threat level.

Consider that the ThreatGRID deal was unveiled during a week headlined by a major hacker crackdown by the FBI, the U.S. accusing Chinese hackers of cyber espionage, eBay (EBAY, Fortune 500) disclosing a cyber attack and Target (TGT, Fortune 500) detailing its struggles to recover from last year's epic breach.

"For cyber attackers, and those who defend against them, the stakes could not be higher than they are right now," said Hilton Romanski, head of business development at Cisco, in a blog post announcing the ThreatGRID acquisition.

ThreatGRID is the first company Yoran co-founded that wound up being acquired, but it's hardly his first rodeo in the merger and acquisitions world.

Over the past two decades, Yoran worked at and invested in companies acquired by Intel's (INTC, Fortune 500) McAfee and Symantec (SYMC, Fortune 500), including a firm co-founded by his two brothers.

He said that experience helped guide him through Cisco's rigorous acquisition process and contemplate other potential options -- such as another round of funding or even an initial public offering.

And he made sure to remember this important lesson.

"You're not se! lling the! company. Someone is buying the company," he said. To top of page

Sunday, May 25, 2014

How celebrity hacker 'Sabu' helped feds thwart 300 cyber-attacks

Watch a hacker steal encrypted passwords   Watch a hacker steal encrypted passwords NEW YORK (CNNMoney) The celebrity hacker "Sabu" helped the FBI imprison his friends and stop more than 300 cyber-attacks in the three years since he betrayed several major hacking groups.

That's according to new U.S. government documents that for the first time provide extensive detail about what they call the "extremely valuable and productive" undercover cooperation of Hector Monsegur.

Monsegur used the Sabu moniker online, where he was a member of the hacking collectives Anonymous and LulzSec.

He pleaded guilty to charges including identity theft and credit card fraud and is set to be sentenced on Tuesday.

He would face up to 26 years in prison for the $2.5 million in losses connected to his hacks, but the government is seeking leniency -- perhaps no additional prison time beyond seven months he already served.

Prosecutors said his work on behalf of the FBI helped thwart attacks on websites belonging to the U.S. military, NASA and media companies, among others. The FBI relocated him and his family because he received threats for his cooperation, the court documents say.

Monsegur was part of a group of hackers that became notorious in 2011 for breaking into or disabling U.S. government and corporate websites. The Anonymous-affiliated groups LulzSec and Internet Feds targeted sites including PBS, Fox Television, Nintendo and Sony Pictures. Their public boasts on Twitter and elsewhere on the Internet drew them instant celebrity as so-called hacktivists, because they often claimed to make a political point in their activities.

The documents show that in June 2011, FBI agents visited Monsegur's apartment in a public housing project in Manhattan's lower east side. They confronted him about his activities and he immediately agreed to become an informant.

He agreed to a guilty plea, returned to his apartment and was back online in hours -- this time, working for the FBI.

His assistance helped the FBI investigate and net LulzSec and Internet Feds members, including the FBI's most-wanted cybercriminal, Jeremy Hammond, who is serving a 10-year prison sentence, prosecutors said in court documents.

"Working sometimes literally around the clock, at the direction of law enforcement, Monsegur engaged his co-conspirators in online chats that were critical to confirming their identities and whereabouts," p! rosecutors said. "During some of the online chats, at the direction of law enforcement, Monsegur convinced LulzSec members to provide him digital evidence of the hacking activities they claimed to have previously engaged in, such as logs regarding particular criminal hacks."

His quick cooperation was key, according to the documents, because LulzSec had established a protocol to destroy computer evidence if any of their members went missing or was arrested.

"Monsegur admitted to engaging in hacking activities about which the government had not previously developed evidence," prosecutors said. He hacked thousands of computers, at first in a bid to build a legitimate computer security company and then to steal and pay his bills, prosecutors said.

Monsegur's cooperation with the FBI became public when he was arrested in 2012 for making unauthorized online postings, violating his cooperation agreement.

Upon the news, Anonymous members hacked a computer-security website and posted an open letter to Sabu. It read: "Sabu snitched on us. As usually happens FBI menaced him to take his sons away. We understand, but we were your family too (remember what you liked to say?) It's sad and we can't imagine how it feels having to look at the mirror each morning and see there the guy who shopped their friends to [the] police." To top of page

Saturday, May 24, 2014

Is Small Cap Robotics Stock iRobot Corporation (IRBT) About to Short Circuit? ADEP & ROBO

Spruce Point Capital Management, LLC has released a research report about small cap robotics stock iRobot Corporation (NASDAQ: IRBT) entitled "About to Short Circuit," meaning investors should take a closer look at the report, the stock and the performance of robotics peer Adept Technology Inc (NASDAQ: ADEP) and the Robo-Stox Global Robotics & Automation ETF (NASDAQ: ROBO). I should mention that we used to have both Adept Technology and iRobot Corporation in our SmallCap Network Elite Opportunity (SCN EO) portfolio because we see the robotics subsector improving as companies aim to reduce overhead and improve efficiencies through machine to machine (M2M) automation.

What is iRobot Corporation?

Founded in 1990 by Massachusetts Institute of Technology roboticists with the vision of making practical robots a reality, small cap iRobot Corporation employs more than 500 of the robotics industry's top professionals - including mechanical, electrical and software engineers and related support staff. iRobot Corporation's home robots help people find smarter ways to clean, its defense & security robots protect those in harm's way and its remote presence robots enable virtual presence from anywhere in the world. These consumer and military robots feature proprietary technologies incorporating advanced concepts in navigation, mobility, manipulation and artificial intelligence.

As for potential robotics performance benchmarks or peers, small cap Adept Technology is the largest US-based manufacturer of industrial robots whose intelligent automation product lines include industrial robots, configurable linear modules, machine controllers for robot mechanisms and other flexible automation equipment, machine vision, and systems and applications software while the Robo-Stox Global Robotics & Automation ETF tracks the ROBO-STOX™ Global Robotics and Automation Index, which is designed to measure the performance of robotics-related and/or automation-related companies, through 78 holdings.

What You Need to Know or Be Warned About iRobot Corporation

To begin with, Spruce Point Capital Management, LLC is a firm that "focuses on value and special situation investment opportunities" according to its website while the founder has the following posted as part of his biography:

Mr. Axler is the founder of Spruce Point Capital Management and co-founded Prescience Point Research Group, a short-focused research firm. Mr. Axler is an activist short-seller, forensic financial researcher, and has exposed over $1.0 billion of alleged frauds on the Nasdaq and the NYSE.

In other words, "About to Short Circuit" is just another hit piece from a short seller who will probably make money if the stock goes down (There is also an article on Seeking Alpha from the group with a rather long winded disclaimer that basically says we should assume they are shorting the stock).

With that said, the research report does raise what could be valid concerns for investors which are summarized below:

iRobot Is The Poster Boy For A Robotics Bubble. Covering Up Weakening Fundamentals and Growth Prospects. Signs of Aggressive Accounting. Insider Selling Intensifying Egregious Rigging of Incentive Compensation. IRBT + Analysts Incorrectly Position The Stock. Price Target: $20 -$25 per share >>>25% –40% Downside

However, I am not so sure what robotics bubble Spruce Point Capital Management is talking about because I can think of a number of other potential bubbles out there (e.g. 3D printing, housing, university tuition etc) that are bound to burn investors even more when they pop; nor what the fuss is about over incentive compensation (probably no more piggish than at other publicly traded companies).

The statement "Milking Shareholders For Bad Performance With Outrageous Cash Comp" seems rather harsh for a company that's trading three times higher than it was at the depths of the financial crisis:

Another statement, "Insider Ownership Down From 60% at IPO to Under 5% Today" is rather odd when you consider that the iRobot Corporation IPO occurred on November 9, 2005. The Yahoo! Finance Insiders Transactions page does list a bit of insider or institutional selling:

Net Share Purchase Activity

 SharesTrans
Insider Purchases - Last 6 Months
Purchases N/A 0
Sales 452,889 27
Net Shares Purchased
(Sold)
(452,889) 27
Total Insider Shares Held 1.61M N/A
% Net Shares Purchased
(Sold)
(21.9%) N/A
 Shares
Net Institutional Purchases - Prior Qtr to Latest Qtr
Net Shares Purchased
(Sold)
(2,094,240)
% Change in Institutional Shares Held (11.21%)

 

But the Yahoo! Finance Major Holders page does show a wide range of institutions remaining as shareholders:

Breakdown

% of Shares Held by All Insider and 5% Owners: 5%
% of Shares Held by Institutional & Mutual Fund Owners: 71%
% of Float Held by Institutional & Mutual Fund Owners: 75%
Number of Institutions Holding Shares: 151

 

Finally and as for aggressive accounting, I should also note that I wrote about the stock after its last earnings report (see: Small Cap Robotics Stock iRobot Corporation (IRBT): A Buy After an Earnings Dip? ADEP & ROBO) where I mentioned post earnings CEO interviews on CNBC and Bloomberg (aggressive accounting was not covered) that would seem to cast doubt on another statement: "Spruce Point Believes IRBT Is No Longer A Robotic Innovator."

Share Performance: iRobot Corporation vs ADEP & ROBO

On Tuesday and despite "About to Short Circuit" already being out there, small cap iRobot Corporation rose 3.37% to $31.88 (IRBT has a 52 week trading range of $28.90 to $48.36 a share) for a market cap of $939.82 million plus the stock is down 9.92% since the start of the year, down 7% over the past year and up 165% over the past five years. Here is a look at the long term performance chart for iRobot Corporation, Adept Technology and Robo-Stox Global Robotics & Automation ETF:

As you can see from the above chart, iRobot Corporation has been a pretty good performer (although its sort of leveled off in recent years) while Adept Technology made a big jump last year and the Robo-Stox Global Robotics & Automation ETF has not been around that long.

Finally, here are the latest technical charts for all three robotics stocks or ETFs:

The Bottom Line. Again, the research report "About to Short Circuit" does come from a firm run by a known short seller – meaning anything they say should be taken with a few grains of salt. Nevertheless, "About to Short Circuit" should be looked over by investors and traders alike who can then form their own opinion about the report's validity. 

SmallCap Network Elite Opportunity (SCN EO) recently had open positions in IRBT and ADEP. To find out what other open positions SCN EO currently has, and to learn why so many traders and investors are relying on this premium subscription service, click here to find out more.

How Shopping American-Style Will Soon Look

Hointer/APA woman demonstrates shopping technology at a store called Hointer in Seattle. NEW YORK -- When it comes to shopping, more Americans are skipping the stores and pulling out their smartphones and tablets. Still, there's more on the horizon for shopping than just point-and-clicking. No one thinks physical stores are going away permanently. But because of the frenetic pace of advances in technology and online shopping, the stores that remain will likely offer amenities and services that are more about experiences and less about selling a product. Think: Apple's (AAPL) stores. Among the things industry watchers are envisioning are holograms in dressing rooms that will allow shoppers to try on clothes without getting undressed. Their homes will be equipped with smart technology that will order light bulbs before they go dark. And they'll be able to print out a full version of coffee cups and other products using 3-D technology in stores. "Physical shopping will become a lot more fun because it's going to have to be," retail futurist Doug Stephens says. More Services Forrester analyst Sucharita Mulpuru says stores of the future will be more about services, like day care, veterinary services and beauty services. Services that connect online and offline shopping could increase as well, with more drive-thru pickup and order-online, pick-up-in-store services. Checkout also will be self-service or with cashiers using computer tablets. Some stores are taking self-service further: A store in Seattle called Hointer displays clothing not in piles or on racks but as one piece hanging at a time, like a gallery. Shoppers just touch their smartphones to a coded tag on the item and then select a color and size on their phone. Technology in the store keeps track of the items, and by the time a shopper is ready to try them on, they're already at the dressing room. If the shopper doesn't like an item, he tosses it down a chute, which automatically removes the item from the shopper's online shopping cart. The shopper keeps the items that he or she wants, which are purchased automatically when leaving the store, no checkout involved. Nadia Shouraboura, Hointer's CEO, says once shoppers get used to the process, they're hooked. On-Demand Coupons Some stores, including British retailer Tesco and drugstore Duane Reade, now are testing beacons, Bluetooth-enabled devices that can communicate directly with your cellphone to offer discounts, direct you to a desired product in a store or enable you to pay remotely. For example, you can walk into a drugstore where you normally buy face cream. The beacon would recognize your smartphone, connect it with past purchasing history and send you a text or email with a coupon for the cream. "The more we know about customers ... you can use promotions on not a macro level but a micro level," says Kasey Lobaugh, chief retail innovation officer at Deloitte Consulting. A store could offer a mother 20 percent off on Mother's Day, for example, or offer frequent buyers of paper towels a discount on bulk purchases. 3-D Printing Within 10 years, 3-D printing could make a major disruption in retail, Deloitte's Lobaugh predicts. Take a simple item like a coffee cup. Instead of producing one in China, transporting it and distributing it to retail stores, you could just download the code for the coffee cup and 3-D print it at a retail outlet or in your own home. "That starts a dramatic change in terms of the structure of retail," Lobaugh said. And while 3-D printing today is primarily plastic, Lobaugh says there are tests at places like MIT Media Lab and elsewhere with other materials, including fabric. Right now a few stores offer rudimentary 3-D-printing services, but they are very limited. He predicts the shift will come in 10 to 20 years. Order Yourself Steve Yankovich, head of innovation for eBay (EBAY), thinks someday buying household supplies won't take any effort at all. He says someday a connected home could be able to use previous customer history and real-time data the house records to sense when a light bulb burns out, for example, and order a new one automatically. Or a washing machine will order more detergent when it runs low. "A box could show up on porch with this disparate set of 10 things the connected home and eBay determined you needed to keep things running smoothly," he says. "It's called zero-effort commerce." Holograms EBay recently bought PhiSix, a company working on creating life-size 3-D models of clothing that can be used in dressing rooms to instantly try on different colors of clothing or different styles. You can see 30 or 40 items of clothing realistically without physically trying them on. EBay's Yankovich says the technology can be used in a virtual dressing room as well, showing what the clothes look like when you are, say, walking down the street or hitting a golf club. Some companies have been testing this already. British digital agency Engage created a Virtual Style Pod that scanned shoppers and created a life-size image onto which luxury clothing from brands like Alexander McQueen and DKNY were projected. The Pod was displayed in shopping centers in Dubai and Abu Dhabi in the United Arab Emirates.

Friday, May 23, 2014

4 Money Challenges Veterans Face - and How to Defeat Them

An F-18 Super Hornet readies to launch from an aircraft carrier at sunset Derek Gordon/Shutterstock

The transition from military to civilian life can be fraught with emotional challenges, but practical things like getting a job, finding a place to live and paying bills can be just as difficult. Many veterans entered the military young, having never received much guidance about money management. If they've never spent much time as adults out of uniform, they are likely to need extra help to learning to handle debt and homeownership issues, and advice on creating a personal financial plan. When Mechel Lashawn Glass returned from her deployment as an Army intelligence analyst in Turkey during the Persian Gulf War in the early 1990s, she moved back in with her parents. Glass had joined the military and left home at 17; she returned home as an adult, but without a job or a home. "There used to be a two-year transition for veterans before they left service so they could put a plan in place and decide where they wanted to live and what they want to do with the rest of their lives as civilians," says Glass. "Now with the drawdown, many veterans are given 30 to 60 days' notice to leave the military and start a new life. The emotional, physical, and behavioral challenges for veterans are unique because so many of them have been overseas for years and don't really know where to begin. They usually go home but find that their families and friends have all changed or even moved away." A Hard Homecoming Glass stayed with her parents for a little while but the emotional trauma of her deployment left her withdrawn and difficult to communicate with, she says, so her mother asked her to leave the house. She eventually pulled herself together, found an entry-level job with IBM, and used her military benefits to go to college and eventually get a better position with the company. Today she is vice president of education for ClearPoint Credit Counseling Solutions. Glass says that the military has a lot of programs in place to help veterans find work and handle financial problems, but not all veterans are aware of them, and some are too proud to ask for help. So she co-authored with Scott Scredon "The Veteran's Money Book: A Step-by-Step Program to Help Military Veterans Build a Personal Financial Action Plan and Map Their Futures to give advice to veterans about paying off debt, repairing their credit and creating a long-term financial plan that can help them overcome some of the challenges of returning to civilian life. Glass says that many veterans face four major challenges.

Finding civilian employment. "Since the drawdown started, more veterans are coming back home to look for employment," says Glass. "The problem they're having is how to equate military experience with private employment."

Wednesday, May 21, 2014

Why Bank of America Is Set to Grow

Bank of America (BAC), inclusive of yesterday's poor trading, has still provided investors a 37.9% return in the last 12 months, and has recently upped its dividend after passing its Federal Stress Test in the last month.

Throughout 2014, the bank has continued to make progress in this regard. It's been settling litigation left and right, and CEO Brian Moynihan appears to continue steering the ship in the right direction. USA Today reported on recent litigation leading up to the bank's earnings:

Bank of America in March agreed to pay $9.3 billion to settle claims it marketed risky mortgages to Fannie Mae and Freddie Mac. At the same time, the bank reached a $15 million settlement with the New York State Attorney General's office over its 2009 purchase of Merrill Lynch.

And on April 9, the bank also agreed to pay $772 million in refunds and fines to settle allegations by the Consumer Financial Protection Bureau and the Office of Comptroller of the Currency that it had bilked millions of customers with deceptive credit card practices. The agreement was "in line with what we expected," bank spokesman Tony Allen said last week.

Although many people seemed to be surprised by Bank of America's earnings, there were some of us that were expecting exactly what we got: good underlying bank performance that was negatively affected by one time legal costs.

When the smoke cleared, the bank had beat on its revenue line, posting a number of $22.76 billion versus analyst estimates of $22.33 billion to $22.4 billion. Ex-items, the bank wound up earning $0.35 per share.

In addition to its legal costs, the bank saw its mortgage business — which it has been trimming over the last couple of years — slowing. Mortgage originations were down 65%.

The bank's balance sheet strength continued to improve. It had $1.4 billion in charge offs, down from $2.5 billion in the same quarter the year prior.

Some of the more important news came later on in the afternoon when it reported the bank was close to settling with the DOJ, a reason which I think is one of the reasons it bolstered its legal reserves in quarter one:

Bank of America (-2.5%) boosted legal reserves by $2.4 billion in the first quarter, and management is playing coy about why, but the WSJ says the bank is near a multi-billion dollar settlement with the DOJ to end civil probes into a number of legacy issues. The talks have been ongoing for months, but intensified, say sources, after JPMorgan late last year settled for $13 billion.

If settled, it'll surely cost the bank a significant amount of money. But, it'll be over, and that's the important part. Putting their heads down and knocking each one of these out of the way until there's none left. It may not look like it, but the bank is making significant progress in this regard.

The bank continues to get leaner and meaner under the watchful eye of Moynihan. The bank's total employees was down to 238,600 from 262,800 in the same quarter a year prior. It's also operating with 5% fewer branch locations. This is all part of a cost-cutting initiative that was put into place a couple of years ago, that is concluding during this year.

Bank of America's banking division posted a profit of $1.66 billion, as compared to $1.45 billion a year earlier. This shows underlying fundamental progress for the bank's "meat and potatoes" business.

As the bank continues to stay on the front line of the automation adoption curve in the banking sector, and continues to keep its head down and make progress, I think better days will be ahead for shareholders.

Moynihan seems to be doing a damn good job in making progress to get the bank over the hump of the '07 to '08 disaster, which was the main item he was tasked with as CEO of the bank.

I contend that BAC is a buy here. There's likely to be a couple more months of legalese headlines that could potentially mire the stock price, but in the long term, the bank's underlying business is performing. Better days are ahead for Bank of America; it just needs to hold on and wait. Moynihan has been doing a brilliant job since he began, and my trust is with him and Buffett that Bank of America will soon rise like a phoenix from the ashes.

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