Saturday, February 28, 2015

Don't Let Clients Become the ‘Family Bank,’ Merrill Study Warns

More and more boomers are being too generous to family members, doling out wads of money and jeopardizing their own retirement security, according to a newly released study by Merrill Lynch Wealth Management and Age Wave.

The study, “Family & Retirement: The Elephant in the Room” conducted in August by Merrill in partnership with Ken Dychtwald’s Age Wave, found that during the last five years, three out of five (62%) Americans age 50 and older have provided financial assistance to members of their family, including adult children, parents, grandchildren, siblings or other relatives.

On average, the study found that the financial assistance provided to family members during the last five years was nearly $15,000—and significantly more among the nation’s wealthiest families.

While the support may have gone to help relatives meet a one-time need or provide ongoing assistance over the course of many years, it was often given without expecting anything in return, the study notes. However, the study warns that the vast majority of people age 50+ (88%) have not factored such support for family into their financial planning.

Andy Sieg, head of Global Wealth and Retirement Solutions for Bank of America Merrill Lynch, said in releasing the study that “Such admirable willingness to assist family members should not place one’s own long-term financial security in jeopardy, and can be a hidden risk to retirement that must be considered and planned for.”

The survey included a nationally representative sample of 5,415 respondents age 25+, including 2,104 among the boomer (age 47-67) and silent (age 68-88) generations, 250 millennials (age 25-36), and 252 respondents among Generation X (age 37-48).

But the study also notes the “dangerous absence of proactive discussion” and boundaries among family members as they navigate financial interdependence.

When respondents were asked if one of their relatives was “the family bank,” nearly three in five people (56%) age 50+ said they believe a member of their family is the “family bank”—someone who their extended family is most likely to turn to for financial help. This person, the study said, “is often the one who is most financially responsible, has the most money or is the easiest to approach.”

Nineteen percent of the 50+ age group who are parents also said they are supporting, in some form, at least one “boomerang” adult child who has moved back in with them. More than two-thirds (68%) of parents age 50+ have provided some form of financial support to their adult children during the last five years—among which, 36% did so without knowing how their money was being used, the study says. Those parents who are aware of how their money is being spent say it is given to help adult children with their rent or mortgage (20%), cell phone bills (18%), car payments (17%), health care expenses (15%) and student loans (11%), among other things.

When asked to name their No. 1 retirement concern, 31% of older adults aged 68 to 88 cited both “being a burden on family” and running out of money to live comfortably. Yet, 66% of those older than 50 admitted they have taken no steps to avoid having to live with a family member if unable to live on their own.

Ford to debut Edge crossover at L.A. auto show

LOS ANGELES -- Ford will debut a new Edge crossover utility concept Wednesday that is close to the lighter-weight vehicle that will go on sale next year.

The automaker is spending $700 million at the Oakville assembly plant in Ontario to build the 2015 Edge alongside the Lincoln MKX. Ford will export both models.

Design manager Kevin George said the goal was to transform the Edge from a heavyweight boxer to a sprinter — still muscular, but more nimble.

Ford is not yet revealing details about Edge's engines, but look for a couple of four-cylinder EcoBoost choices and a diesel for Europe. Jim Farley, Ford's global marketing chief, said there are no plans to offer a diesel in North America. He declined to say if a hybrid is planned.

The new Edge also has an automatic start-stop technology that shuts off the engine when the car is idled.

The Edge competes in one of the market's hottest segments.

Farley said crossovers now account for 17% of the market and growth outside North America should be greater than overall industry sales going forward.

In the U.S., Ford expects to sell more than 300,000 Edges, which would be a record.

Farley said the three-row Explorer appeals to families and those who might want to go off-road while the two-row Edge is for new families and those with no children.

The Edge will continue to be exported to China, where Farley said forecasts show crossover sales likely will double by 2017.

Friday, February 27, 2015

5 Stocks Spiking on Unusual Volume

DELAFIELD, Wis. (Stockpickr) -- Professional traders running mutual funds and hedge funds don't just look at a stock's price moves; they also track big changes in volume activity. Often when above-average volume moves into an equity, it precedes a large spike in volatility.

>>5 Stocks With Big Insider Buying

Major moves in volume can signal unusual activity, such as insider buying or selling -- or buying or selling by "superinvestors."

Unusual volume can also be a major signal that hedge funds and momentum traders are piling into a stock ahead of a catalyst. These types of traders like to get in well before a large spike, so it's always a smart move to monitor unusual volume. That said, remember to combine trend and price action with unusual volume. Put them all together to help you decipher the next big trend for any stock.

>>5 Rocket Stocks to Buy This Week

With that in mind, let's take a look at several stocks rising on unusual volume today.

Crocs

Crocs (CROX) is engaged in the design, development, manufacturing, marketing and distribution of consumer products, mainly casual and athletic shoes and shoe charms, from specialty resins referred to as Croslite. This stock closed up 9.7% to $13.89 in Wednesday's trading session.

Wednesday's Volume: 12.85 million

Three-Month Average Volume: 1.31 million

Volume % Change: 857%

>>5 Stocks Set to Soar on Bullish Earnings

From a technical perspective, CROX exploded higher here back above its 50-day moving average of $13.34 with monster upside volume. This move briefly pushed shares of CROX into breakout territory, since the stock flirted with some near-term overhead resistance levels at $13.94 to $14.45. Shares of CROX closed just below those breakout levels at $13.89. Market players should now look for a continuation move higher in the short-term if CROX can manage to take out Wednesday's intraday high of $14.53 and its 200-day moving average at $14.99 with high volume.

Traders should now look for long-biased trades in CROX as long as it's trending above its 50-day at $13.34 or above Wednesday's low of $12.60 and then once it sustains a move or close above $14.53 to $14.99 with volume that hits near or above 1.31 million shares. If we get that move soon, then CROX will set up to re-fill some of its previous gap down zone from July that started near $17.50.

GenMark Diagnostics

GenMark Diagnostics (GNMK), a molecular diagnostics company, develops and commercializes its proprietary eSensor detection technology. This stock closed up 5.7% to $12.70 in Wednesday's trading session.

Wednesday's Volume: 970,000

Three-Month Average Volume: 335,302

Volume % Change: 332%

>>5 Stocks Poised for Breakouts

From a technical perspective, GNMK ripped sharply higher here back above both its 50-day and 200-day moving averages with strong upside volume. This move briefly pushed shares of GNMK into breakout territory, since the stock flirted with some key overhead resistance at $12.84. Shares of GNMK closed just below that breakout level at $12.70. Market players should now look for a continuation move higher for GNMK into the short-term if the stock can manage to take out Wednesday's intraday high of $12.98 with high volume.

Traders should now look for long-biased trades in GNMK as long as it's trending above its 200-day at $12.02 or above Wednesday's low of $11.40 and then once it sustains a move or close above Wednesday's high of $12.98 with volume that hits near or above 335,302 shares. If we get that move soon, then GNMK will set up to re-test or possibly take out its 52-week high at $16.

Pharmacyclics

Pharmacyclics (PCYC) is focused on developing and commercializing innovative small-molecule drugs for the treatment of cancer and immune mediated diseases. This stock closed up 3.4% at $123.82 in Wednesday's trading session.

Wednesday's Volume: 3.08 million

Three-Month Average Volume: 743,305

Volume % Change: 335%

From a technical perspective, PCYC spiked higher here right off some near-term support at $115 with strong upside volume. This move briefly pushed shares of PCYC back above its 50-day moving average of $124.61, before the stock finished the day just below that level at $123.82. Market players should now look for a continuation move higher in the short-term if PCYC can manage to take out Wednesday's intraday high of $129.45 to more resistance at $130 with high volume.

Traders should now look for long-biased trades in PCYC as long as it's trending above $120 or above Wednesday's low of $115 and then once it sustains a move or close above $129.45 to $130 with volume that hits near or above 743,305 shares. If we get that move soon, then PCYC will set up to re-test or possibly take out its next major overhead resistance levels at $136 to its 52-week high at $143.34. Any high-volume moves above its 52-week high will then give PCYC a chance to tag $150.

EnerSys

EnerSys (ENS) manufactures, markets and distributes industrial batteries and related products such as chargers, power equipment and battery accessories. This stock closed up 1.3% to $68.58 in Wednesday's trading session.

Wednesday's Volume: 874,000

Three-Month Average Volume: 274,742

Volume % Change: 251%

From a technical perspective, ENS ripped higher here right above some near-term support at $66 to $64.50 with strong upside volume. This stock has been uptrending strong for the last six months, with shares moving higher from it low of $47.05 to its recent high of $69.32. During that uptrend, shares of ENS have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of ENS within range of triggering a near-term breakout trade. That trade will hit if ENS manages to take out Wednesday's high of $68.81 to its 52-week high at $69.32 with high volume.

Traders should now look for long-biased trades in ENS as long as it's trending above Wednesday's low of $67.11 or above more support at $64.50 and then once it sustains a move or close above those breakout levels with volume that hits near or above 274,742 shares. If that breakout hits soon, then ENS will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $75 to $80.

Insys Therapeutics

Insys Therapeutics (INSY) is a specialty pharmaceutical company that develops and commercializes supportive care products that target the unmet needs of cancer patients, with an initial focus on cancer-supportive care. This stock closed up 8.4% at $44.31 in Wednesday's trading session.

Wednesday's Volume: 640,000

Three-Month Average Volume: 262,182

Volume % Change: 144%

From a technical perspective, INSY spiked sharply higher here right above its 50-day moving average of $38.88 with above-average volume. This move is quickly pushing shares of INSY within range of triggering a near-term breakout trade. That trade will hit if INSY manages to take out Wednesday's high of $45.57 to more near-term overhead resistance at $48 with high volume.

Traders should now look for long-biased trades in INSY as long as it's trending above Wednesday's low of $41.11 or above its 50-day at $38.88 and then once it sustains a move or close above those breakout levels with volume that's near or above 262,182 shares. If that breakout hits soon, then INSY will set up to re-test or possibly take out its all-time high at $53.64. Any high-volume move above that level will then give INSY a chance to tag $55 to $60.

To see more stocks rising on unusual volume, check out the Stocks Rising on Unusual Volume portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.


RELATED LINKS:



>>4 Stocks Under $10 Moving Higher



>>5 Tech Stocks to Trade in November



>>2 Biotech Stocks Under $10 Triggering Breakouts

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including

CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.


Monday, February 16, 2015

Why CoreLogic Shares Climbed Higher

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of CoreLogic (NYSE: CLGX  ) are up more than 15% today after the company came through with a strong earnings report.

So what: The property-information aggregator and analytics company reported third-quarter revenue of $405.5 million, which beat the Street's $398.5 million consensus. Its $0.48 in adjusted earnings also came in ahead of Wall Street's $0.42 consensus. However, CoreLogic's full-year guidance of $1.70-$1.80 in earnings per share is a bit disappointing, as analysts had sought $1.80 in EPS.

Now what: CoreLogic is reaching for all-time highs today after its earnings report. However, its valuation isn't out of line with historical norms, and the company appears to be headed in the right direction. CoreLogic has a history of wild swings in earnings, and its full-year estimate is at the high end of this roller-coaster ride. It might be worth a closer look, but I'd tread cautiously after today's big pop.

Want more news and updates? Add CoreLogic to your Watchlist now.

Put your portfolio in growth mode
Tired of watching your stocks creep up year after year at a glacial pace? Motley Fool co-founder David Gardner, founder of the No. 1 growth stock newsletter in the world, has developed a unique strategy for uncovering truly wealth-changing stock picks. And he wants to share it, along with a few of his favorite growth stock superstars, WITH YOU! It's a special 100% FREE report called "6 Picks for Ultimate Growth." So stop settling for index-hugging gains... and click HERE for instant access to a whole new game plan of stock picks to help power your portfolio.

Saturday, February 14, 2015

Sterne Agee Maintains “Buy” Rating on Las Vegas Sands; Expects Dividend Increase (LVS)

Sterne Agee announced on Monday that it has maintained a “Buy” rating on resort company Las Vegas Sands Corp. (LVS).

The firm has reaffirmed a “Buy” rating and $67 price target on LVS. This price target suggests a 12% upside from the stock’s current price of $59.24.

Sterne Agee analyst David Bain commented: “Based on July and August data channel checks and our September forecast, we believe LVS’ Macau division is trending8% to 10% above the Street’s 3Q13 estimate of ~$670m.”

“Before the end of the year, we believe LVS regular dividend will be increased to $1.60+ per annum from $1.40,” he said. “Further, LVS leverage should be ~1.4x by 4Q13 – underutilized, in our view. At that time, 1 additional turn of leverage could add over $4.6b in cash that could be returned to investors in the form of more significant buybacks or a one-time dividend,” the analyst added.

Las Vegas Sands shares were up 46 cents, or 0.78%, during pre-market trading Monday. The stock is up 28% YTD.

Thursday, February 12, 2015

Rising Rates? Beware of Big Banks

It appears financial stocks have caught a cold, and could be a victim of rising interest rates, says Mike Burnick in Money and Markets.

Until now, financials have been top gainers, up 23.8% this year, and an engine for the stock market's rally. A slump in bank stocks could be a red flag for a drop in the broader market.

If you take them at face value, many pundits will tell you that rising interest rates are good for financial stocks, because higher lending rates enable banks to fatten their profit margins. But don't fall for such a simplistic argument.

Today's mega-banks earn most of their income from more speculative sources, like trading, and capital markets, which can become volatile in an unstable interest-rate environment.

The reality is that traditional commercial and consumer lending is no longer the big money maker that it used to be for banks. Since the 2008 financial crisis, households and businesses have been deleveraging—paying down debt—and demand for loans has been limp.

In recent years, the big banks have fattened their profits mainly from capital-markets businesses: Mergers and acquisitions, stock and bond offerings, and other types of trading. Rising interest rates also make the cost of capital go up for businesses, which can result in less deal making, lowering financing fees for the banks.

Another, even bigger risk to banks' bottom line is an end to the gravy-train of easy-money trading opportunities sponsored by the Federal Reserve.

For the past several years, big banks have padded their profits by playing the carry trade, pocketing the spread between borrowing from the Fed at ultra-low short-term rates and reinvesting the proceeds in longer-term Treasury and mortgage-backed securities.

It was an easy way for the banks to book extra trading profits—as long as rates remained low and stable. But with longer-term interest rates now on the rise, many of the biggest US banks face a multibillion-dollar hit to their capital.

Yields on 10-year US Treasury notes surged to within a whisker of 3% early this week, up from 1.6% in May. That was the highest level in almost two years. The corresponding sell-off in bond markets has been brutal.

Thanks to the easy-money carry trade in recent years, big banks, including JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC) and Citigroup (C) are now holding bloated portfolios of available-for-sale securities, mainly long-term Treasury and mortgage-backed bonds.

These portfolios have taken huge paper losses during the bond market sell-off, and the pain may not be over if interest rates continue to surge.

To put this into context, analysts estimate that the big-four US banks, listed above, would collectively take a $36.1 billion pre-tax hit to their capital from only a one percentage point rise in longer-term bond yields.

Most at risk are the money-center banks that are primary dealers with the Federal Reserve. Those include not only the big four, but also Goldman Sachs (GS) and even foreign banks like Barclays (BCS) and UBS (UBS).

The same firms that have feasted on the Fed's ultra-low interest-rate policy now face the greatest risk, as rates rise again.

Eventually, higher interest rates should enable banks to earn more interest income from traditional lending. But that takes time. Meanwhile, with loan demand still soft and banks sitting on large securities portfolios, the pain could be prolonged.

Bank of America, for example, has a $315 billion securities portfolio, 90% of which is invested in longer-term Treasury and mortgage-backed bonds.

If yields keep rising, the value of those securities will continue to decline. In June, the bank's chief financial officer admitted it will take two and a half to three years to earn enough extra interest income to offset the decline in capital from a one percentage-point increase in rates.

Today, investors are focusing more on the potential upside for banks if faster economic growth follows higher interest rates. They should be paying more attention to the dark side of rising rates: Growing capital losses from their bloated bond holdings.

Subscribe to Money and Markets here…

More from MoneyShow.com:

What Rising Rates Really Mean for Stocks

Bond Basics: Tips for Today's Market

A Floating Rate Fund Favorite

Wednesday, February 11, 2015

Wells Nabs 9 Reps From Morgan Stanley, Merrill and RBC

Wells Fargo Advisors (WFC) said early Friday that it had recruited nine financial advisors from Morgan Stanley (MS), Merrill Lynch (BAC) and RBC Capital Markets over the past six weeks with a total of nearly $1.12 billion in client assets under management at their prior broker-dealers.

This follows Raymond James’ (RJF) announcement on Wednesday that a Morgan Stanley advisor had joined its traditional, employee channel with about $435 million in client assets and more than $1 million in annual fees and commissions.

On Thursday, LPL Financial (LPLA)-affiliated U.S. Wealth Management said it had tapped a new executive who previously was with Pershing Advisor Solutions to lead its recruitment of independent advisor practices.

Wells Fargo says it hired the following five advisors from rival Morgan Stanley:

Joining Wells Fargo from Merrill Lynch in San Francisco is Bruce McMillan; McMillion has spent 28 years in the business and manages about $105 million in client assets. Also moving to Wells from Merrill is Philip Weber in Hyannis, Mass., where he’s been an advisor for 23 years and oversees $129 million in client assets.

The team of Peter Vrooman and Jonathan Sarver are now with Wells Fargo in Kansas City, Mo., after departing from RBC Capital Markets. Their total industry experience is 31 years, while their combined client assets are $125 million.

Raymond James Recruiting

For its part, Raymond James says it recently hired former-Morgan Stanley advisor Cynthia Woodsmall Jones as senior vice president of investments in the Columbus, Ga., branch office of Raymond James & Associates, the firm’s traditional employee broker-dealer.

“We are delighted to have been able to attract such an experienced, successful advisor as Cindy to our Columbus branch,” said branch manager John Martin, in a press release. “She has a phenomenal reputation and exemplifies a deep caring for her clients and their interests, which is totally in line with Raymond James’ values and culture.”

Jones joined the business in 1981 at Robinson-Humphrey and remained with the organization through several mergers and acquisitions. The advisor has managed more than $435 million in client assets and had more than $1 million  in yearly production.

“I chose to join Raymond James because it reminded me of an earlier time in my career, when my firm offered the combination of a client-first focus, a collegial family atmosphere and the highest quality technology and operations support,” she said in a statement. “Since I’ve been at Raymond James, every day has brought a new and wonderful discovery: from the great client statements, to the first-class technology and the friendly staff … to the point where I am ecstatic about my decision to join.”

U.S. Wealth Hiring

U.S. Wealth Management, an independent network of advisors and hybrid RIAs affiliated with LPL, named Christian Widen its managing director and head of corporate development on Tuesday. Widen, who will be based in New York and report to CEO John Napolitano, is set to lead the group’s recruiting efforts that focus on independent advisors with $50 million to $100 million in AUM and who are in need of turnkey asset management capabilities, office support, practice management, marketing support, business coaching and succession planning.

The firm says it should reach at least $1 billion in total advisory/brokerage recruited AUM by the middle of 2014.

Widen has been in the business for 16 years and most recently served as a director at Pershing Advisor Solutions. He also worked for RBC Advisor Services, J.P. Morgan and Fidelity Institutional Wealth Services, and was a branch manager with U.S. Wealth Management’s offices in the greater Boston area.

“We are delighted to welcome Christian back to our firm after his 13 years of building and leading winning advisor recruiting and sales support strategies across top platforms in the industry,” said Napolitano in a news release.

“Christian’s decision to rejoin us validates both our robust growth over the years, as well as the enormous progress we have made in building a platform that combines all of the elements the independent advisor requires in today’s fast-changing marketplace to build a successful practice,” the CEO said. “His unparalleled industry expertise makes him an ideal fit with U.S. Wealth Management as we initiate a new chapter of continued growth for our firm.”

For his part, Widen says he is glad to be back: “I am very excited to bring my 16-year career within the broker-dealer and custodial industry full circle as I rejoin a team that has the right vision, the right resources and the right plan for building the top network of independent financial advisors in the country.”

U.S. Wealth Management includes more than 30 affiliated advisors and more than $600 million in client assets. In addition to LPL, it has relationships with several other top custodial firms, such as TD Ameritrade (AMTD) and Charles Schwab (SCHW).

---

Read New Hire Roundup: Nautilus Group Names Grisham CEO on AdvisorOne.

Tuesday, February 10, 2015

Is Microsoft the Missing Link in the 3-D Printing Revolution?

Microsoft (NASDAQ: MSFT  ) made the maker community jump for joy when it announced that the upcoming version of Windows 8.1 due out later this year will feature out-of-the-box 3-D printing support. For the Windows 8.1 end user, setting up a 3-D printer should be a similar experience to setting up a plug-and-play 2-D printer. This certainly will make life easier for a demographic of entrepreneurs and enthusiasts, but will it be the spark that ignites a consumer-driven 3-D printing revolution?

High hopes
As you can imagine, 3-D printing companies are pretty pumped about Mr. Softy's vote of confidence. At Microsoft's annual Build Conference, 3D Systems (NYSE: DDD  ) demoed a Surface Tablet sending instructions to its consumer-oriented $1,299 Cube printer. Rajeev Kulkarni, general manager and vice president of 3D Systems' consumer solutions, believes that having support from Windows 8.1 gets 3-D printing closer to mainstream. "It makes it seamless to get 3-D printing in your home," he added.

Betting the farm
Last month, Stratasys (NASDAQ: SSYS  ) made quite the splash when it acquired leading consumer-enthusiast 3-D printing company MakerBot for $403 million in stock up front and, potentially, another $201 million of stock or cash if the company hits performance incentives through the end of 2014. I don't know about you, but $604 million for a company that's only earned $11.5 million in the first quarter seems like a lot of money.

Not to mention, the "personal" 3-D printing industry was only estimated to be worth about $38.2 million in 2012, and experienced a significant decline in growth from the previous four years. From 2008 to 2011, the personal 3-D printer segment experienced an average growth rate of 346% each year, whereas in 2012, it grew by 46.3% from 2011. For the time being, it could indicate that aggregate demand for personal 3-D printers is beginning to wane, given the lack of material advancements beyond plastic at the consumer level.

Keep dreaming
Although the consumer-oriented 3-D printing market gets a lot of media attention, it represented less than 2% of the $2.2 billion 3-D printing industry last year. Additionally, the fact that 70% of 3-D printing is already done on Windows tells me that this move is more about pleasing existing users than it is to attract new users. If 3-D printing is really going to take off with consumers, the range of materials that can be printed needs to be expanded greatly. Until then, the 3-D printing revolution will continue taking place in the industrial world.

Industrial Revolution 3.0
Like it or not, 3-D printing will continue to play a greater role in the manufacturing process. In fact, The Economist has coined 3-D printing as the third industrial revolution. To help investors make better sense of what this could mean for their portfolios, The Motley Fool has published a special free report, laying out three companies to own for the third industrial revolution. For those investors savvy enough to get in on the ground floor, click here to get started.

Monday, February 9, 2015

Dow Jumps 100 Points, But Is It Another Head Fake?

Stocks jumped out of the gate this week as two strong economic reports and hopes the market would get what it wanted from the Fed in its interest rate decision on Wednesday had the Dow Jones Industrial Average (DJINDICES: ^DJI  )  more than 1% most of the session. However, it faded late to finish up 110 points, or 0.7%.

This month's Empire State Manufacturing report came in well ahead of expectations, hitting 7.8 on expectations of just 0.8, improving from -1.4 in May. Markets also received a push from the National Association of Home Builders Market Survey, which topped 50 for the first time since April 2006, indicating that a majority of homebuilders view the housing market favorably. That hasn't happened in more than seven years. The index reached 52, way better than expectations at 45, and better than 44 last month.

Still, the market seemed mostly propelled by hopes that the Fed would keep its current bond-buying program in place as its Open Market Committee begins a two-day meeting tomorrow. The Fed will reveal the results Wednesday at 2 p.m., when it announces the benchmark interest rate, which is expected to hold at 0.25%, and provides its current view of the economy.

Cisco Systems (NASDAQ: CSCO  ) led Dow stocks today, finishing up 2.5% to hit a new 52-week high. The networking specialist first announced that it has opened an innovation center in Israel along with local telecom Pelephone to develop new technologies to meet growing demand for mobile data services, and unveiled a project called "Connected Boulevard" in Nice, France. The project is a prototype, which hopes to aid cities in areas such as parking traffic, street lighting, and waste disposal. Cisco also benefited from an overall strong day for tech stocks as Advanced Micro Devices jumped 2.8% and Micron Technology finished up 3.8%.

Not all Dow stocks were winners today, though, as Verizon (NYSE: VZ  ) shares finished down 0.7% after expressing interest in an acquisition north of the border. According to The Globe and Mail, Verizon is looking into purchasing Wind Mobile, a smaller telecom in Canada. Wind has already received offers from other interested, but unidentified, parties. The deal would give Verizon an inroad into the Canadian market of 30 million, but perhaps investors would rather see it buy out Vodafone's 50% stake in its wireless division.

Finally, Netflix (NASDAQ: NFLX  ) shares finished up 7.1% after reporting an agreement with DreamWorks Animation (NASDAQ: DWA  ) . According to the deal, Netflix will offer original programming from the animation house starting in 2014, which it said was the biggest deal it's made for first-run content. The move is the video streamer's latest coup after releasing House of Cards to critical acclaim and more recently resurrecting Arrested Development and seeing its stock price triple this year. Financial terms of the deal were not disclosed.

The tumultuous performance of Netflix shares since the summer of 2011 has caused headaches for many devoted shareholders. While the company's first-mover status is often viewed as a competitive advantage, the opportunities in streaming media have brought some new, deep-pocketed rivals looking for their piece of a growing pie. Can Netflix fend off this burgeoning competition, and will its international growth aspirations really pay off? These are must-know issues for investors, which is why The Motley Fool has released a premium report on Netflix. Inside, you'll learn about the key opportunities and risks facing the company, as well as reasons to buy or sell the stock. The report includes a full year of updates to cover critical new developments, so make sure to click here and claim a copy today.

Sunday, February 8, 2015

How to Win With Stocks

I included the following chart as a part of a longer article two weeks ago, but I think its descriptive power is sufficiently (i.e., extremely) important to discuss on its own. It demonstrates to me one of the most important keys to successful investing.

At first glance, this may look like a lot of gobbledygook, so let me explain. The chart compares the growth of three variables since 1950: gross domestic product, corporate earnings, and the Dow Jones Industrial Average (DJINDICES: ^DJI  ) -- you could include the S&P 500 (SNPINDEX: ^GSPC  ) and the results would be analogous. To normalize for the difference in numbers, I converted the figures into an index, setting the year 1950 equal to 100, and controlled for inflation. By doing so, we can cleanly and meaningfully see the relationship between the figures.

So what does the chart tell us?

It illustrates the indelible correlation among GDP, corporate profits, and the Dow. To many of you, this won't be a surprise, as it makes sense that a higher GDP would result in higher corporate profits and vice versa. And taking it one step further, because stock valuations are a function of earnings (thus, the P/E ratio), the connection between corporate profits and the Dow (and thus GDP and the Dow) should be obvious as well.

Now to the interesting part: While there's a clear long-term relationship between these variables, there are also significant short-term deviations. This is particularly true when you compare the Dow's performance to GDP.

Speaking generally, there are three distinct time periods here. The first is from 1953 until 1972, when the performance of stocks outpaced GDP growth. The second is from 1973 until 1996, when stocks underperformed national output. And the third is from 1996 until the present, when, with the exception of the financial crisis and subsequent recession, stocks again outperformed GDP.

There are innumerable takeaways, but the most obvious is a sort of mean reversion. That is, when the Dow has either under- or overperformed GDP, the relationship is bound to correct itself. Following the "go-go years" of the 1960s came the crash of 1973-74, recession, and stagflation, all of which exerted a downward influence on blue-chip stock prices relative to GDP. This trend reversed itself beginning with the great bull market of 1982, which lasted until the Internet and housing bubbles successively popped.

So what does this mean for investors? To me, this chart reveals the roadmap for a successful investment strategy. Assuming GDP grows at 2% to 3%, your investment portfolio could as well, simply by investing in the SPDR S&P 500 (NYSEMKT: SPY  ) ETF. Want to juice those returns? Go instead for the SPDR S&P Dividend ETF (NYSEMKT: SDY  ) , which tracks the S&P High-Yield Dividend Aristocrats Index. And in purchasing these, to control for the variations, it'd be prudent to use dollar-cost averaging -- that is, buying the same dollar amount of the index each month or year come rain or shine.

At the end of the day, it's nice to think that picking individual stocks is the best way to beat the market. But the reality is that most stock-picking strategies will lead to suboptimal performance relative to the market, if not absolute losses. Over the long run, keeping it simple is the way to win with stocks.

The Motley Fool's top stock for 2013
The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in the brand-new free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.

Why UniPixel Shares Popped Temporarily

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of UniPixel (NASDAQ: UNXL  ) popped temporarily today, up by as much as 11% after the company received a milestone payment for its UniBoss license.

So what: The company received a $5 million payment from its recently announced capacity license with Eastman Kodak, which was inked to facilitate the development, introduction, and production of products using its UniBoss sensor film. The amount will be recorded as deferred revenue in the second quarter and UniPixel will use the funds to build out additional production capacity.

Now what: CEO Reed Killion said the payment marked a major milestone on the company's path toward a worldwide commercial rollout, and that the ramp-up schedule is on track. The news follows a 26% plunge on Friday after a handful of negative rumors, including one that suggested that Apple could become a direct competitor after the Mac maker filed a patent application. Analysts discredit this notion, saying that Apple's patent does not threaten UniPixel. The milestone payment may have sparked a rebound rally, but shares have since given up all gains and then some.

Interested in more info on UniPixel? Add it to your watchlist by clicking here.

It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.

Saturday, February 7, 2015

The Roth IRA Rules!

If you're going through life assuming that there isn't much difference between a traditional IRA and a Roth IRA, you're doing yourself a great disservice -- because the Roth IRA rules.

Roth IRAs and traditional IRAs have some key differences, and offer different benefits. With a traditional IRA, you enjoy tax deferral. If, for example, you make the maximum contribution of $5,500 for 2013 (it's $6,500 for those 50 or older), you'll be able to deduct that sum from your income on your 2013 tax return. So if you would have paid a 25% tax rate on that $5,500, you're saving $1,375 -- now. There is a catch, of course. When it comes time to withdraw money from your traditional IRA, your withdrawals will be taxable, at your income-tax rate at the time. (Remember that in retirement, many people are in lower tax brackets.)

Roth IRA rules
With the Roth, you contribute money that is not tax-deferred. Your contribution does not lower your taxable income. Here's the benefit, though: When you withdraw funds from your Roth IRA in retirement, they're tax-free! Your money grows tax-free. There are some other advantages, too, such as not having to take required minimum distributions once you turn 70 1/2, as is required by traditional IRAs. (There are still Roth rules to observe, though, such as, in most cases, not withdrawing funds before age 59 1/2 or before you've had the account for five years, if you want to avoid a penalty.)

The Roth's tax-free status can be a big deal, especially if you make the most of it by loading it up with certain types of investments. Fast-growing companies, for example, are ideal. If they double, triple, or increase tenfold over your holding period, all that gain will be tax-free in the Roth. Think of Amazon.com (NASDAQ: AMZN  ) , which sports an average annual growth rate of more than 27% over the past 15 years. It's almost always considered overvalued, yet it has kept growing. That growth could stop or slow one of these days, but bulls remain hopeful. Some worry about the company having to collect sales tax as governments level the playing field to help brick-and-mortar retailers -- but even that cloud has a silver lining, possibly leading to more distribution centers for Amazon. Amazon stock has grown more than ninefold over the past decade, turning a $10,000 investment into more than $90,000. If you had held the stock in a Roth and withdrew it per the Roth IRA rules, that $80,000 gain would be tax-free!

Companies that stand a good chance of surging in coming years are also good Roth candidates. Exelixis (NASDAQ: EXEL  ) , for example, is a smallish biotech company tackling various cancers. It even has an approved thyroid cancer drug on the market, and the formula may end up approved to treat other conditions, as well. The downside, though, is that the drug is expensive, and the segment of thyroid-cancer patients who might take it is very small.

Beaten-down companies that you think are likely to recover strongly are also good candidates. Molybdenum miner Thompson Creek Metals (NYSE: TC  ) , for example, sports average annual losses of 35% over the past five years, and carries substantial debt, but molybdenum's long-term outlook is promising, with price increases likely, and the company has a promising gold and copper mine on track to start producing by the end of the year. Freeport-McMoRan Copper & Gold (NYSE: FCX  ) is another major molybdenum player, with considerable operations in other metals, as well -- along with new investments in oil and gas production.

Dividend stocks, too, are great candidates, as dividends are typically taxed at ordinary income tax rates, and in a Roth would accumulate tax-free. Intel (NASDAQ: INTC  ) , for example, recently yielded 4%, and though its recent earnings report was disappointing, it expects profit-margin improvements and is making inroads into the booming mobile market.

Learn the rules
It's important to read up on all the Roth IRA rules and traditional IRA rules, and considerations related to both, before you decide between them. For example, if you expect your tax rate to be significantly higher in retirement, a traditional IRA will seem less attractive. And if you only have $5,000 to contribute toward retirement and your employer will match some or much of that in your 401(k), then perhaps an IRA isn't your best bet.

Keep in mind, too, that tax rules do change over time. Some people are wary because they fear that the appealing Roth IRA rules might be changed in the future. Others think it unlikely that Congress will wipe out the benefits of the Roth for those who have been investing with it and counting on it.

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in the brand-new free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.

link

Friday, February 6, 2015

Dan Nathan Sees Unusual Options Activity In Energy Select Sector SPDR (ETF)

Related XLE Energy ETFs: Bargains Or Falling Knives? Fast Money Picks For October 15

On CNBC's Options Action, Dan Nathan spoke about a bullish options activity in Energy Select Sector SPDR (ETF) (NYSE: XLE). He explained that call options outnumbered put options 3 to 1 on a day when the ETF traded 1.76 percent higher.

Nathan said that he noticed a large trade in XLE and he finds it a little bit speculative. A trader bought the December 90 call for $1.15, sold two December 95 calls for a total of $0.60 and bought the December 100 call for $0.08. The trader bought 10,000 contracts and paid $0.63 for the call butterfly and he will achieve maximal profit of $4.37 if XLE trades at $95 on December expiration.

XLE closed the session on Wednesday at $85.75, which is just above its long-term support of $85, said Nathan. He explained that it is a good idea to use a strategy like a call butterfly because implied volatility is high.

Posted-In: Dan Nathan Options ActionCNBC Options Markets Media

© 2014 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

  Related Articles (XLE) Dan Nathan Sees Unusual Options Activity In Energy Select Sector SPDR (ETF) Energy ETFs: Bargains Or Falling Knives? Fast Money Picks For October 15 Fast Money Picks For October 7 - Exxon Mobil Corporation, EMC Corporation And More Dan Nathan's Energy Select Sector SPDR (ETF) Trade Fast Money Picks For October 6: The Kroger Co., EMC Corporation & Medtronic, Inc. Around the Web, We're Loving... World Cup Championship of Binary Options! Huanity's Last Great Hope: Venture Capitalists Don't Miss The Next Webinar to Advance your Trading Will Apple Redefine How We Shop? What Did Josh Brown Say On Our Morning Show? We're Now Hiri

Wednesday, February 4, 2015

Ford Motor Joins the Recall Bandwagon

The U.S. automaker Ford Motor (F) issued safety recalls on Thursday for nearly 1.4 million cars in North America, mostly in the U.S. to fix potential steering and other problems. Ford said that it was recalling 9,15,200 Ford Escape and Mercury Mariner from model years 2008 through 2011, and 1,96,000 Ford Explorer from 2011 through 2013 because a torque sensor within the steering column may malfunction, resulting in loss of electric power steering assistance.

The Issue in Details In that case, the steering system defaults to the manual steering mode, making vehicles more difficult to steer, especially at lower speed, which would increase the risk of crash. Not all vehicles have the same issue and the fix involves either replacing a pert or software update.

About 7,36,400 models of Ford Escape and Mariners were recalled in the U.S., 1,34,500 in Canada and 39,800 in Mexico. The Detroit automaker made a second recall of Ford Explorer sports utility vehicle that could have a problem with the intermittent electrical connection in the steering gear. This could result in the loss of electric power steering while driving. In such a case however, the drivers will be alerted by a chime and a message in the instrument cluster. Ford, the number two U.S. automaker, feels that both the recalls could affect additional vehicles in the other markets.

The company also issued a recall of about 1,96,600 Taurus vehicles, model years 2010 – 2014, to replace a license plate lamp that could become corroded in a high corrosion environment linked to road salt use. The lamp could short circuit and cause fire. It believes 18 fire problems are connected to the issue. In one such case, the driver tried putting out the fire using hands and was injured. Ford said that the fix would replace the part altogether. The recall applies to vehicles in 20 states and the District of Columbia where road salt is used to treat the roads in winter storms.

The fourth recall involves floor mats that can be improperly installed and come in contact with the accelerator pedal. It includes about 82,500 mats related to the 2006 to 2011 models of Ford Fusion, Mercury Milan , Lincoln Zephyr and MKZ. Two accidents are allegedly connected to the problem, the company said.

Earlier this month, the American carmaker included 692,500 Escapes from model years 2013 and 2014 as a part of the recall for problem with side airbags and door handles.

The Recall Problem – A Recurring Issue Automakers have come under scrutiny since General Motors (GM) announced a safety issue it had not publicly disclosed for 10 years. The ignition switch issue has been connected to at least 13 deaths, and finally this year the largest U.S. auto player has recalled as many as 16 million vehicles. Ford's total for the year is 11 separate recall notices, affecting a total of 2.8 million vehicles.

To date, 2014 has been a big year for automobile recalls, which in the first five months of the year has already surpassed all of 2013. Last year 22 million car safety recalls were issued. This year the number is already more than 24 millions, on a pace to catch the all time set record in 2004, of 30 million recalls.

Parting Words The recalls is being closely watched by the Congress, the Justice Department and the National Highway Traffic Safety Administration. The recall depicts Ford's heightened sense of concern because of its reputation in other markets might be at stake too. This could affect the company's sales of vehicles in the year ahead. But it's good to accept technical glitches and fix them at the earliest, exactly what the Blue Oval has tried to do.

Currently 0.00/512345

Rating: 0.0/5 (0 votes)

Email FeedsSubscribe via Email RSS FeedsSubscribe RSS Comments Please leave your comment:
More GuruFocus Links
Latest Guru Picks Value Strategies
Warren Buffett Portfolio Ben Graham Net-Net
Real Time Picks Buffett-Munger Screener
Aggregated Portfolio Undervalued Predictable
ETFs, Options Low P/S Companies
Insider Trends 10-Year Financials
52-Week Lows Interactive Charts
Model Portfolios DCF Calculator
RSS Feed Monthly Newsletters
The All-In-One Screener Portfolio Tracking Tool
iPhone App MORE GURUFOCUS LINKS
Latest Guru Picks Value Strategies
Warren Buffett Portfolio Ben Graham Net-Net
Real Time Picks Buffett-Munger Screener
Aggregated Portfolio Undervalued Predictable
ETFs, Options Low P/S Companies
Insider Trends 10-Year Financials
52-Week Lows Interactive Charts
Model Portfolios DCF Calculator
RSS Feed Monthly Newsletters
The All-In-One Screener Portfolio Tracking Tool
F STOCK PRICE CHART 17.08 (1y: +9%) $(function(){var seriesOptions=[],yAxisOptions=[],name='F',display='';Highcharts.setOptions({global:{useUTC:true}});var d=new Date();$current_day=d.getDay();if($current_day==5||$current_day==0||$current_day==6){day=4;}else{day=7;} seriesOptions[0]={id:name,animation:false,color:'#4572A7',lineWidth:1,name:name.toUpperCase()+' stock price',threshold:null,data:[[1370840400000,15.71],[1370926800000,15.51],[1371013200000,15.37],[1371099600000,15.58],[1371186000000,15.37],[1371445200000,15.55],[1371531600000,15.65],[1371618000000,15.32],[1371704400000,14.82],[1371790800000,15],[1372050000000,14.67],[1372136400000,14.97],[1372222800000,15.29],[1372309200000,15.65],[1372395600000,15.47],[1372654800000,15.74],[1372741200000,16.18],[1372827600000,16.43],[1373000400000,16.7],[1373259600000,16.81],[1373346000000,16.84],[1373432400000,16.72],[1373518800000,16.98],[1373605200000,17.11],[1373864400000,17.12],[1373950800000,16.6],[1374037200000,16.78],[1374123600000,16.93],[1374210000000,16.76],[1374469200000,17.04],[1374555600000,16.94],[1374642000000,17.37],[1374728400000,16.96],[1374814800000,17.02],[1375074000000,17.08],[1375160400000,17.08],[1375246800000,16.88],[1375333200000,17.19],[1375419600000,17.5],[1375678800000,17.19],[1375765200000,17.03],[1375851600000,16.77],[1375938000000,16.98],[1376024400000,17.02],[1376283600000,17.07],[1376370000000,17.06],[1376456400000,16.89],[1376542800000,16.43],[1376629200000,16.3],[1376888400000,16.12],[1376974800000,16.31],[1377061200000,16.25],[1377147600000,16.41],[1377234000000,16.45],[1377493200000,16.41],[1377579600000,15.88],[1377666000000,16.02],[1377752400000,16.5],[1377838800000,16.19],[1378184400000,16.34],[1378270800000,16.91],[1378357200000,17.3],[1378443600000,17],[1378702800000,17.31],[1378789200000,17.55],[1378875600000,17.54],[1378962000000,17.39],[1379048400000,17.35],[1379307600000,17.35],[1379394000000,17.44],[1379480400000,17.625],[1379566800000,17.66],[1379653200000,17.39],[1379912400000,17.2],[1379998800000,17.26],[1380085200000,17.19],[1380171600000,17.27],[1380258000000,17.05],[1380517200000,16.87],[1380603600000,17.19],[1380690000000,17.21],[1380776400000,16.95],[1380862800000,17.09],[1381122000000,16.81],[1381208400000,16.5],[1381294800000,16.62],[1381381200000,16.93],[1381467! 600000,17.11],[1381726800000,17.18],[1381813200000,16.97],[1381899600000,17.29],[1381986000000,17.46],[1382072400000,17.53],[1382331600000,17.5],[1382418000000,17.6],[1382504400000,17.52],[1382590800000,17.76],[1382677200000,17.6],[1382936400000,17.57],[1383022800000,17.61],[1383109200000,17.34],[1383195600000,17.11],[1383282000000,16.89],[1383544800000,17],[1383631200000,17.09],[1383717600000,16.91],[1383804000000,16.55],[1383890400000,16.85],[1384149600000,16.89],[1384236000000,16.72],[1384322400000,17.1],[1384408800000,17.09],[1384495200000,17.07],[1384754400000,16.98],[1384840800000,16.87],[1384927200000,16.92],[1385013600000,17.09],[1385100000000,17.01],[1385359200000,16.94],[1385445600000,16.87],[1385532000000,17.03],[1385704800000,17.08],[1385964000000,17.06],[1386050400000,16.56],[1386136800000,16.62],[1386223200000,16.74],[1386309600000,16.7],[1386568800000,16.56],[1386655200000,16.53],[1386741600000,16.41],[1386828000000,16.39],[1386914400000,16.59],[1387173600000,16.86],[1387260000000,16.7],[1387346400000,15.65],[1387432800000,15.3],[1387519200000,15.42],[1387778400000,15.15],[1387864800000,15.19],[1388037600000,15.33],[1388124000000,15.3],[1388383200000,15.28],[1388469600000,15.43],[1388642400000,15.44],[1388728800000,15.51],[1388988000000,15.58],[1389074400000,15.38],[1389160800000,15.54],[1389247200000,15.84],[1389333600000,16.07],[1389592800000,16.11],[1389679200000,16.4],[1389765600000,16.7],[1389852000000,16.73],[1389938400000,16.52],[1390284000000,16.41],[1390370400000,16.55],[1390456800000,16.43],[1390543200000,15.83],[1390802400000,15.71],[1390888800000,15.72],[1390975200000,15.26],[1391061600000,15.25],[1391148000000,14.96],[1391407200000,14.55],[1391493600000,14.87],[1391580000000,14.73],[1391666400000,14.85],[1391752800000,14.97],[1392012000000,14.84],[1392098400000,14.96],[1392184800000,15],[1392271200000,15.08],[1392357600000,15.24],[1392703200000,15.39],[1392789600000,15.25],[1392876000000,15.27],[1392962400000,15.16],[1393221600000,15.18],[1393308000000,15.15],[1393394400000,1! 5.26],[13! 93480800000,15.39],[1393567200000,15.39],[1393826400000,15.2],[1393912800000,15.37],[1393999200000,15.63],[1394085600000,15.67],[1394172000000,15.62],[1394427600000,15.51],[1394514000000,15.3],[1394600400000,15.4],[1394686800000,15.18],[1394773200000,15.08],[1395032400000,15.28],[1395118800000,15.49],[1395205200000,15.48],[1395291600000,15.55],[1395378000000,15.47],[1395637200000,15.39],[1395723600000,15.33],[1395810000000,15.25],[1395896400000,15.25],[1395982800000,15.45],[1396242000000,15.6],[1396328400000,16.32],[1396414800000,16.46],[1396501200000,16.39],[1396587600000,16.13],[1396846800000,15.94],[1396933200000,

Tuesday, February 3, 2015

Consumer Sentiment Slips in May on Concern Over Wages

Consumer Sentiment Julio Cortez/AP NEW YORK -- A monthly gauge of U.S. consumer sentiment fell in May as a gloomy view on income growth clouded an otherwise positive economic outlook, a survey released Friday showed. The Thomson Reuters/University of Michigan's preliminary May reading on the overall index on consumer sentiment came in at 81.8, down from 84.1 the month before. It was also below the expectation of 84.5 among economists polled by Reuters. "The main concern behind the small May loss involved dispiriting trends in wages," survey director Richard Curtin said in a statement, as the median gain in household income for the next year was seen below inflation expectations. However, Curtin said, "consumers judged the current state of the economy at the most favorable levels in 10 years." Some 58 percent of consumers reported that the economy had improved, up from 49 percent in April. The May proportion matched two readings from 2013 as the highest going back to 2004. The survey's barometer of current economic conditions fell to 95.1 from 98.7 and below a forecast of 99. The gauge of consumer expectations slipped to 73.2 from 74.7 and fell short of an expected 75. The survey's one-year inflation expectation remained unchanged from last month at 3.2 percent, while the survey's five-to-10-year inflation outlook dipped to 2.8 percent from 2.9 percent.

It’s Time to Double Down on Yum! Brands

Yum! Brands (NYSE: YUM  ) looks poised to increase sales at all three of its brands: KFC is bringing back the Double Down, Taco Bell has a new breakfast menu, and Pizza Hut has WingStreet. Yum! Brands is certainly not afraid to try new ideas, which illustrates management's ability to overcome adversity, especially after the challenges the company faced in China over the last few quarters.

Considering that Yum! Brands has more than 40,000 restaurants globally compared to McDonald's (NYSE: MCD  ) 35,000 locations, can these new menu items help Yum! Brands catch up to McDonald's in total sales?

Solid first-quarter results
In the first quarter, Yum! Brands posted earnings per share of $0.87, $0.02 better than expected and $0.17 higher than last year's first quarter. While total revenue rose 7.1% year over year to $2.7 billion, it was still lower than the $6.7 billion in revenue that McDonald's recorded in the same quarter.

Source: Yum! Brands

In terms of same-store sales growth, the China division led the way with a 9% increase. KFC saw a 1% rise in same-store sales; Pizza Hut recorded a 2% decrease, and Taco Bell saw a 1% decline in same-store sales.

McDonald's first quarter was not that great
For McDonald's, the first quarter was a disappointment. Even though same-store sales rose 0.5% globally, they were down 1.7% in the U.S. First-quarter earnings per share were $0.03 lower than expected and $0.05 lower than last year. Total revenue was just 1% higher than last year.

Source: Wikimedia Commons

McDonald's expects April's global same-store sales to be positive as the weather improves. McDonald's blamed the weather for the sales weakness it experienced in the first quarter. This year, McDonald's plans to open 1,500 new restaurants.

New menu items expected to boost sales for Yum! Brands
Yum! Brands is counting on new menu items from KFC, Taco Bell, and Pizza Hut to boost sales. If the new menu items can drive traffic into its stores, Yum! Brands hopes to capture sales that ordinarily would have gone to a competitor like McDonald's.

For KFC, the company is looking for the KFC Double Down to boost sales like the item did when it was first introduced back in 2010. In its first month, KFC sold more than 10 million Double Downs. The Double Down is certainly a unique menu item. It consists of bacon, Monterey Jack cheese, and the Colonel's sauce between two 100% white meat KFC chicken fillets.

Source: KFC

Pizza Hut is looking for new Garlic Parmesan Pizza and Buffalo wings from WingStreet to increase sales. I think WingStreet has potential for Pizza Hut, and I discussed the possibilities in "Can Pizza Hut's WingStreet Take Down Buffalo Wild Wings? Here's Why It Matters." The new Garlic Parmesan Pizza comes in three distinct flavors for $10 -- Chicken Bacon Tomato, Roasted Veggie, and Five Cheese.

Taco Bell's focus has been on its new breakfast menu and going head-to-head with McDonald's during breakfast hours. The new breakfast items include Cinnabon Delights, Waffle Tacos, Breakfast Burritos, A.M. Crunchwraps, and A.M. Grilled Tacos. Taco Bell has also launched an aggressive marketing campaign to raise awareness. According to Yum! Brands CEO David Novak, Taco Bell's breakfast is "off to a great start."

Source: Taco Bell

What about McDonald's menu?
To fend off the challenge from Taco Bell and its new breakfast menu, McDonald's offered a free small McCafe coffee and advertised the McGriddle to go up against Taco Bell's Waffle Taco. A McGriddle consists of two small pancakes made with maple flavoring; it comes in three varieties -- Bacon, Egg, and Cheese McGriddles, Sausage McGriddles, and Sausage, Egg, and Cheese McGriddles. The big advantages that McDonald's has during the breakfast hours are that the chain has been running its breakfast menu the longest, and McDonald's has become part of the daily routine for most consumers. This is the biggest challenge Taco Bell faces and explains the aggressive advertising push.

How do shares compare?

 

Market Cap

Forward P/E

1-Year Return

Dividend Yield

Yum! Brands

$34.02 B

18.20

14.30%

1.90%

McDonald's

$98.13 B

15.84

(1.87%)

3.20%

Source: Yahoo! Finance

Foolish final thoughts
I like the moves Yum! Brands and its CEO David Novak are making. He knows that innovative menu items are needed to help drive traffic, and he is focused on boosting sales at KFC, Taco Bell, and Pizza Hut. This year, he expects to deliver 20% earnings-per share growth. With shares trading at 18 times next year's earnings, I think shares of Yum! Brands are set to deliver for shareholders.

Will this stock be your next ten-bagger?
Give me five minutes and I'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks 1 stock with amazing potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303%! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.

Sunday, February 1, 2015

Target tech chief resigns amid security overhaul

Target's Chief Information Officer Beth Jacob is resigning as the retailer attempts to rebuild its information security and compliance divisions after suffering a massive data breach.

Target CEO Gregg Steinhafel said in a statement given to USA TODAY that Target will search externally for an interim CIO to "guide Target through this transformation."

Jacob had held the job since 2008.

Target is also looking for a chief compliance officer and chief information security officer as part of the overhaul. In Steinhafel's statement, he said the retailer is working with an outside adviser, Promontory Financial Group, "to help us evaluate our technology, structure, processes and talent as a part of this transformation.

Minneapolis-based Target disclosed in December that the financial records of 40 million customer accounts had been compromised between Nov. 27 and Dec. 15. It revealed in January that personal information for up to an additional 70 million people had also been hacked during the same breach.

Before the overhaul, information security functions were split among a variety of executives. Target's new chief information security officer will centralize those responsibilities, the company said.

The previous duties of chief compliance officer were overseen by Target's current vice president of assurance risk and compliance, who had previous plans to retire at the end of March. Now, Target is separating the responsibility for assurance risk and compliance.

The breach botched the retailer's sales numbers for the fourth quarter as customers grew skeptical of shopping at the stores. Last week's earnings report showed the breach cost Target $61 million in the fourth quarter – $17 million in net expenses, and counting a $44 million insurance receivable. Net income fell 46% to $520 million, or 81 cents a share, from $961 million, or a $1.47 a share, a year earlier. Sales fell 5.3% and revenue at stores open at least a year fell 2.5%.

Target stock is down 1.06% to $! 60.68 a share in afternoon trading.

The incident has renewed data security as a crucial priority for the retail industry. Target last month announced it would speed up a $100 million effort to adopt more secure chip-based cards and payment terminals. It's also pledged $5 million toward a cybersecurity awareness campaign over the next several years as part of the efforts of a coalition it formed with security organizations. Target is also offering free credit monitoring for a year to all customers.

In her resignation letter to Steinhafel, given to USA TODAY by Target, Jacob did not give a reason for leaving and did not mention the data breach. She said, "This is a time of significant transformation for the retail industry and for Target," and said that "this is a good time for change."

Contributing: Associated Press, USA TODAY's Bruce Horovitz