Sunday, June 28, 2015

The Sweet Smell of Decay

Print FriendlyWhile the MLP space is dominated by the oil and gas sector, in last week’s article we began to explore some of the more exotic master limited partnership offerings. This week we continue our exploration of nontraditional MLPs by looking at the partnerships supplying fertilizer.

Rentech (Nasdaq: RTK) has been around for more than a decade, and it has shifted strategies several times. Full disclosure: Rentech’s Chief Technology Officer Harold Wright is a former manager of mine when we were both at ConocoPhillips, and I have visited Rentech’s facility in Commerce City, Colorado.

For most of Rentech’s existence, the company has sought to commercialize alternative fuels. At one time it had ambitions to build a large coal-to-liquids (CTL) plant, but federal legislation ultimately nudged it instead into the biomass-to-liquids (BTL) space. The company did build a BTL demonstration plant, but ultimately shut it down and has now refocused its efforts on becoming “one of the largest wood processing companies in the world.”

During its interesting journey as a company, Rentech acquired two ammonia nitrogen fertilizer facilities, which turned out to be a profit center that funded the alternative energy research. In November 2011, Rentech spun off this fertilizer business into an MLP called Rentech Nitrogen Partners LP (NYSE: RNF).

In the months leading to the spin-off, RTK’s market capitalization was about $200 million. Rentech maintained 60 percent ownership of RNF, and three months after the spin-off RTK’s market cap had risen to $400 million, while investors had bid RNF up to $1 billion. Interestingly, RTK’s share of RNF was worth more than RTK’s entire market cap, a situation that persists. The market currently values Rentech at $482 million, while the valuation of Rentech Nitrogen Partners makes RTK’s 60 percent stake in RNF worth slightly ! more than $600 million — another illustration of the premium investors have been willing to pay for MLPs.

RNF owns two fertilizer production facilities, one in East Dubuque, Illinois and the other in Pasadena, Texas. The partnership is a pure play on nitrogen fertilizer, which is produced from natural gas and which is therefore subject to natural gas price volatility. The Illinois plant is in the heart of the Corn Belt, and as a result will also be subject to corn price volatility (i.e., high corn prices will mean higher fertilizer demand, and vice versa). Modifications to the Renewable Fuel Standard, which supports corn prices by encouraging the production of ethanol, could significantly affect demand for nitrogen fertilizer.

RNF had a solid 2012 when natural gas prices were lower, but the recovery of natural gas prices this year has eaten into margins. This, as well as some unscheduled outages led RNF to recently reduce its 2013 distribution guidance to $2.05-2.20 per unit from $2.60 previously. The partnership already paid out $0.50 in Q1 2013 and $0.85 in Q2, which leaves $0.70 to $0.85 to be paid for the rest of 2013. At the current price, this implies an annualized yield for the final two quarters between 5.3 percent and 6.4 percent. But fertilizer is a seasonal business, and including the two distributions already paid for 2013 bumps the 2013 yield to roughly 8 percent.

Rentech has two competitors in this space. Terra Nitrogen Company LP (NYSE: TNH) owns and operates a nitrogen fertilizer plant in Oklahoma. The general partner is a wholly owned subsidiary of CF Industries Holdings (NYSE: CF), the second largest nitrogen fertilizer producer in the world.

Terra Nitrogen’s claim to fame is the extraordinary performance of units. Over the last 10 years, the price rose from approximately $5 to the current level above $200. Like RNF, Terra Nitrogen profits from historically low natural gas prices. Thus its most recent distribution, equivalent to 7.9 percent on an annualized basis, might be reduced if the cost of its main input rose dramatically.

One other risk factor for US-based fertilizer manufacturers is the threat of cheap Chinese exports. China produces fertilizer predominantly from coal instead of natural gas, and with natural gas prices increasing in the US and global coal prices declining, Chinese fertilizer has become much more competitive.

Enter CVR Partners LP (NYSE: UAN), the only company in the US to produce fertilizer from petroleum coke (petcoke). Petcoke is a byproduct of petroleum refining, and prices are usually set off coal prices, since these two products compete in the same niche. Thus the same dynamics that currently threaten the distributions of Rentech Nitrogen Partners and Terra Nitrogen Company play in CVR Partners’ favor.

CVR Partners’ fertilizer plant is located in Coffeyville, Kansas, adjacent to the refinery owned by CVR Refining (NYSE: CVRR). CVR Energy (NYSE: CVI), majority-owned by Carl Icahn via Icahn Enterprises (NYSE: IEP), is the general partner and owns most of the units for both CVR Partners and CVR Refining.

CVR Partners’ results are up across the board in 2013. Sales rose 6.6 percent in the first half compared with the first half of 2012, while EBITDA was up 10 percent, and distributable cash flow was up 6.3 percent. But unit prices have been weak, registering a decline of 25 percent year-to-date. This has pushed the yield of CVR Partners up to the range of 9.8 percent to 10.9 percent based on the most recent guidance.

Investing in fertilizer MLPs is not for everyone. There are special risks that must be recognized, and that won’t be acceptable to the more conservative income investors. But a growing global population means growing fertilizer demand, and patient investors who are selective with their entry points may find this sector to be richly rewarding.

(Follow Robert Rapier on Twitter, LinkedIn, or Facebook.)


Thursday, June 18, 2015

Financial Coaching Leads to Higher Credit Scores, More Savings

New research suggests that financial coaching can help low- and middle-income families in a lasting way.

Citi Foundation and NeighborWorks America on Tuesday reported the findings of the Financial Capability Demonstration Project, a $5 million, 2.5-year initiative begun in mid-2010.

The initiative significantly expanded the number of financial capability programs and practitioners that provide low- and moderate-income people with financial education, coaching and planning services needed to allow families nationwide to build savings, pay down debt and better manage their finances throughout their lives.

The report compared clients' financial status at the start of coaching with their status after coaching was under way:

To achieve the project’s goals, NeighborWorks America and the Citi Foundation supported access to training courses for 1,500 practitioners to increase their knowledge in creating and delivering effective financial capability and financial coaching programs.

In addition, over a two-year period, the partners provided grant support and an integrated set of training, technical assistance, peer learning and evaluation services to a learning cohort of 30 nonprofit organizations that were initiating new or scaling existing financial coaching programs.

The report recommended including financial coaching in a broad range of related services to effectively reach and retain clients and build financial security, such as human services, workforce development, foreclosure mitigation programs and individual development accounts.

It also advised strengthening the effect of consumer information mandates by linking information on coaching resources to education materials related to credit reporting, student loan educational materials and other financial issues.

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Check out Median Retirement Balance Is $3,000 for All Working-Age Households on AdvisorOne.

Wednesday, June 17, 2015

Mechel Steel in Russian Helicopters - Analyst Blog

Russian miner Mechel OAO's (MTL) Chelyabinsk Metallurgical Plant has completed the order placed by the Russian Helicopters holding for a new class of steel for helicopter-making. The preliminary technological testing for the high-quality steel produced in Nov 2012 revealed successful results and was thus passed for industrial production.

Chelyabinsk Metallurgical Plant worked along with Urals Stampings Plant for this order. Also, experts from Bardin's Central Research Institute for Ferrous Metals and the All-Russian Aviation Materials Institute worked together with Chelyabinsk Metallurgical Plant's technicians for developing the helicopter steel making technology.

The new class of high-strength steel produced by the Chelyabinsk Metallurgical plant will be used to produce important joints for the modern Ka-226(T) helicopter. This light helicopter is used for corporate or private flights and also for special operations and rescue missions. This ecologically-friendly and safe Ka-226(T) helicopter is equipped with engines that ensure high carrying capacity and flight height (up to 7,500 meters) and also a coaxial rotor system.

The high-strength steel is also used in the production of attack scout helicopter Ka-52 Alligator, which represents the most perfect armed machines among its peers. This helicopter is in serial production after crossing all state level tests and it has been adopted into the Russian Air Force's arsenal. The Russian Helicopters holding also has plans to utilize the new steel for Mi-type helicopters.

Mechel posted a loss in the first quarter of 2013, reported on Jun 18, hurt by the sale of its Romanian steelmaking assets. Revenues dropped by double digits with declines across the board. Sustained weakness was seen in the core mining segment. Mechel announced its decision to buy back shares.

Mechel's high debt and substantial interest burden are matters of concern. Mechel is also faced with weak demand from Europe. However, we are encouraged ! by the incremental opportunities stemming from the Elga mine, which is expected to reinforce the company's position as a metallurgical coal producer through capacity expansion

Mechel retains a Zacks Rank #4 (Sell).

Other companies in the steel industry with favorable Zacks Rank are Kobe Steel Ltd. (KBSTY), Shiloh Industries Inc. (SHLO) and Nippon Steel & Sumitomo Metal Corporation (NSSMY). All of them hold Zacks Rank #1 (Strong Buy).

Sunday, June 14, 2015

Service Sector Growth Jumps in July

Server Lisa Schwartz carries a tray of food at Sarducci's restaurant on Thursday, June 2, 2011 in Montpelier, Vt. A trade group said Friday, June 3, the U.S. economy's service sector grew in May for an 18th straight month, posting slightly faster growth than in April. (AP Photo/Toby Talbot)Toby Talbot/AP WASHINGTON -- U.S. service firms expanded in July at the fastest pace since February, fueled by a brisker month of sales and a jump in new orders. The increase suggests economic growth could be picking up after a weak first half of the year. The Institute for Supply Management said Monday that its index of service-sector growth rose in July to 56.0, up from 52.2 in June. Any reading above 50 indicates expansion. The survey covers businesses that employ 90 percent of the workforce, such as retail, construction, health care and financial services. A measure of business activity, which includes current sales, rose to 60.4. That's the highest since December and was driven in part by faster home construction. And a gauge of new orders, which indicates sales over the next few months, increased to 57.7 -- a five-month high. Jennifer Lee, senior economist at BMO Capital Markets, noted that 16 of the 18 industries surveyed reported growth in July, "encouraging news for the broader U.S. economy." Paul Dales, senior U.S. economist at Capital Economics, said the July gains in the service sector, along with a solid month of manufacturing growth, suggest the economy is growing at an annual rate of 3 percent in the July-September quarter. That's nearly double the rate in the April-June quarter. One concern is that a measure of employment at service companies fell in July. That echoed last week's government employment report that showed hiring has slowed. Employers added 162,000 jobs last month, the Labor Department said Friday. That's down from 188,000 in June. Nearly all of the hiring took place at service firms. And most new jobs were in low-paying industries -- half were at retail business or restaurants and bars. Growth in the service industry depends largely on consumers, whose spending drives roughly 70 percent of economic activity. On Friday, the government said consumers increased their spending in June at the fastest pace in four month. The economy grew at a tepid 1.7 percent annual rate from April through June. That's up only slightly from the 1.1 percent annual rate in the previous quarter and the third straight month of subpar economic growth. Still, the rise in consumer spending and service activity follows other reports that point to stronger growth. Home sales and prices continue to rise, and Americans' confidence in the economy stayed last month close to a 5½-year high. U.S. factories have begun to rebound after slumping at the start of the year. A separate ISM released last week showed manufacturing activity jumped in July to the highest level in two years, reflecting a surge in new orders, increasing hiring and rising factory output.

Wednesday, June 10, 2015

Has Coleman Cable Made You Any Real Money?

Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.

Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.

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 Coleman Cable (Nasdaq: CCIX  ) , whose recent revenue and earnings are plotted below.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.

Over the past 12 months, Coleman Cable generated $45.0 million cash while it booked net income of $25.0 million. That means it turned 4.9% of its revenue into FCF. That sounds OK.

All cash is not equal
Unfortunately, the cash flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash flows are of high quality. What does that mean? To me, it means they need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).

For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable for the short term) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it's ordinary in recessionary times, and you can only increase collections so much. Finally, adding stock-based compensation expense back to cash flows is questionable when a company hands out a lot of equity to employees and uses cash in later periods to buy back those shares.

So how does the cash flow at Coleman Cable look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. TTM = trailing 12 months.

When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.

With questionable cash flows amounting to only 0.8% of operating cash flow, Coleman Cable's cash flows look clean. Within the questionable cash flow figure plotted in the TTM period above, stock-based compensation and related tax benefits provided the biggest boost, at 3.1% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed 30.9% of cash from operations.

A Foolish final thought
Most investors don't keep tabs on their companies' cash flow. I think that's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated home-run stocks that provide the market's best returns.

If you're interested in companies like Coleman Cable, you might want to check out the jaw-dropping technology that's about to put 100 million Chinese factory workers out on the street – and the 3 companies that control it. We'll tell you all about them in "The Future is Made in America." Click here for instant access to this free report.

We can help you keep tabs on your companies with My Watchlist, our free, personalized stock tracking service.

Add Coleman Cable to My Watchlist.

Tuesday, June 9, 2015

Dow Skyrockets on Positive Economic Data

This morning its was reported that consumer confidence rose in May to a five-year high, while home prices rose 11% year over year in March, according to the Case-Shiller index. With housing prices continuing to climb, it's no wonder consumers are more confident about the health of the economy and their livelihood, but the confidence level was much higher than most economist had expected. The index rose to 76.2 in May, leaving both April's reading of 69 and estimates for May of 71 in the dust. 

As of 12:45 a.m. EDT the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is up 159 points, or 1.04%. The S&P 500 has risen 0.91%, while the NASDAQ has gained 1.1%%. These huge gains likely indicate that investors have, at least for today, forgotten about the Federal Reserve and the possibility that it may begin slowing down its bond-buying programs in the coming months. Last week that seemed to be the only things on anyone's mind. How weak the market's short-term memory is.

Today's losers
Despite receiving an increased target share price by analysts at Credit Suisse, shares of Procter & Gamble (NYSE: PG  ) are down by 1%, making P&G the only Dow component trading in the red at this time. The analysts raised the target price to $85 per share due to the return of ex-CEO A. G. Lafley. But despite the boost of confidence in P&G, traders are taking money off the table after the stock spiked 4% on Friday.

Outside the Dow, shares of Netflix (NASDAQ: NFLX  ) are 4% on little news but high volume. The average daily volume for Netflix is 4.3 million shares, but today we have already seen more than 3.7 million shares trade hands. One reason for higher-than-normal volume could be that large institutional shareholders are dumping their positions. Recently, Jana Partners sold its entire position in the company, and after the stock's recent run-up, taking money off the table looks attractive.

Another big loser during this winning session is Exelon (NYSE: EXC  ) , which is down by 7.5% after analysts at Deutsche bank downgraded the stock from buy to hold this morning. The analysts also lowered their price target on the stock to $34 per share. The analysts said the company faces a number of headwinds in the long term.  

More foolish insight
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Monday, June 8, 2015

Millennials: Beware of Financial Advice From Your Parents

Naughty!Getty Images From birth, we're raised thinking mommy and daddy know best. They have our best interests in mind when they scare away tattooed teenage boys, keep the liquor under lock and key, and set our curfews earlier than those of all our other friends. Unfortunately, when it comes to money, mommy and daddy might be leading you astray. Financial literacy rates in the Millennial generation are abysmal. This year the Treasury Department and Department of Education tested the financial literacy of 84,000 high schoolers, who scored an average of 69 percent. With little to no financial literacy taught in our education system, children have no choice but to learn from dear old Mom and Dad. But if Mom and Dad were never taught -- or never bothered to learn -- how to appropriately handle money, they sure aren't the ones who should be giving financial advice. If you've ever heard your parents say, "Don't get a credit card," they were wrong. Credit cards are one of the easiest ways to build your credit score. Granted, establishing new credit only makes up 10 percent of your score, but if you aren't paying off loans yet, it might be the only way for you to establish a line of credit. Length of credit history makes up 15 percent of your score, so the longer you've had a "healthy" history, the higher your score will typically be. Parents are often reluctant to give their college-age children access to plastic, but if you know how to treat your card right, it'll pay off. When you graduate and start looking for an apartment, a respectable credit score is important to your landlord, while a lack of one can prevent you from signing a lease. If you've ever heard your parents say, "Keep a monthly balance on your credit card," they were wrong. Somehow, parents heard a rumor that keeping a monthly balance on your credit card will help your credit score. They spout some nonsense about how paying the minimum shows responsibility and increases your score. False. Carrying a balance does nothing to improve your score and instead costs you more money because you're accumulating interest on the balance. Instead, pay off your credit card in full each month (which means not charging more to the card than you know you can afford). If you've ever heard your parents say, "X,Y or Z college is worth the student loan debt," they were wrong. Millennials are drowning in student loan debt. As a generation, our debt is so horrific it's predicted to delay our retirement age until 73. For many millennials, it's too late to turn back now; the debt has already been accumulated. The only hope is to diligently, or quickly, pay down debt, and simultaneously start figuring out how to save for retirement from the moment you get your first paycheck. The other option is to start a side hustle and increase your influx of cash. For the younger millennials and Generation Z, there's still hope. When considering college, apply to every scholarship you qualify for. Sometimes your GPA doesn't matter as much as your height or your ability to call ducks. It's a good idea to set your pride aside during your college-decision-making process and really evaluate whether the ROI of your major at X, Y or Z school is worth tens of thousands of dollars in debt. If not, consider state schools, smaller liberal-arts colleges, or simply choosing the college that offered you the best financial package. If you've ever heard your parents say, "Don't invest in the stock market; it's just gambling," they were wrong. Yes, 2008 was a tough year, and the market took a tumble. Boomers lost money and some saw their retirement accounts take a hit. Unfortunately, this led to the millennial generation developing a great mistrust of the stock market. While we might be reluctant to get in bed with the stock market, it's certainly still willing to love us. The greatest advantage for an investor is time, and time is exactly what 20- to 30-year-olds possess. If you're not quite ready for index funds, mutual funds or buying individual stocks, you should at least contribute to your company-matched 401(k)s or open a Roth or Traditional IRA. If you've ever heard your parents say, "Have babies," they were wrong. Starting a family is certainly a personal choice, but not one you should be making based on parental pressure. Raising a child is a tremendous financial commitment. In 2012, it cost middle-income parents $286,860 to raise a child from birth to age 17. If you're willing to pay for college in full, then you can tack on an extra $100,000 or more. For many millennials stuck in the red, starting a family could complicate an already stressful financial situation. Parents mean well, but sometimes their advice comes from a negative personal experience or a lack of knowledge. Instead of always trusting their financial advice, be sure to educate yourself and check against credible sources.

Thursday, June 4, 2015

Tesla Motors: 3 Things to Watch

Electric-car start-up Tesla Motors (NASDAQ: TSLA  ) is on the verge of its first profit, a huge milestone for the audacious Silicon Valley start-up. But plenty of potential pitfalls remain. In this video, Fool contributor John Rosevear outlines three things that any Tesla investor should be watching carefully and that any potential Tesla investor should take into account before buying.

Is it too late to buy Tesla?
Near-faultless execution has led Tesla Motors to the brink of success, but the road ahead remains a hard one. Despite progress, a looming question remains: Will Tesla be able to fend off its big-name competitors? The Motley Fool answers this question and more in our most in-depth Tesla research available for smart investors like you. Thousands have already claimed their own premium ticker coverage, and you can gain instant access to your own by clicking here now.

Wednesday, June 3, 2015

Positive Jobs Data Sends Stocks Higher

The rally in stocks is continuing today after a government report estimated that jobless figures were better than expected last week. With roughly an hour left in the trading session, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is higher by 62 points, or 0.42%.

According to the Department of Labor -- click here for the official press release -- the number of people filing for unemployment benefits for the seven days ended April 6 dropped by 42,000 from the previous week to 346,000. Economists had expected the number of applications to come in at 360,000. This was a huge relief after last Friday's dismal report on March unemployment.

Alternatively, a report issued last night by market research firm IDC estimated that personal-computer shipments posted the "steepest decline ever in a single quarter." The company said worldwide PC shipments totaled 76.3 million units for the first three months of the year. That's down 13.9% from the same time period last year and much worse than the estimated decline of 7.7%.

"At this point, unfortunately, it seems clear that the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market," said an IDC executive.

Unsurprisingly, shares of the Dow's technology stocks are plunging on the news. At the time of writing, Hewlett-Packard (NYSE: HPQ  ) is down 6.9%, Microsoft (NASDAQ: MSFT  ) has fallen 4.8%, and Intel (NASDAQ: INTC  ) is off 2.6%. All of these companies look to personal computers for huge portions of their revenue, and as such, they stand to lose more than most if the PC really is dead.

Earnings season is about to get into full swing after Alcoa kicked things off earlier this week. Two of the nation's largest banks by assets, JPMorgan Chase (NYSE: JPM  ) and Wells Fargo, report first-quarter results tomorrow. Despite turmoil in the credit markets courtesy of Greece, which could effect JPMorgan more than most banks given its inordinate reliance on trading revenue, analysts expect these financial institutions to have earned record profits. An analysis by Bloomberg News, for example, predicts that the six largest lenders made a collective $20 billion during the quarter.

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

Tuesday, June 2, 2015

3 Tips to Avoid Getting Sick on the Stock Market Roller Coaster

Image pha106000047  (Royalty-free)Collection:  PhotoAltoCaption:   Teenager with hands on face, scared, frightend, nervous, Getty Images It's that time again -- the time when clients call their financial advisers with panic in their voices asking, "Is this the correction? Should we sell everything?" The stock market's daily gyrations -- up, down and sideways -- have outperformed a salsa dancer's hips. On Thursday, just one day after the market had its best day of 2014, it had its worst day of the year. And on Friday, it fell again, capping its worst week since May 2012. Since the 2008 crash, U.S. stocks have, overall, performed very well. During 2013, you didn't need to be a good stock picker to make big profits. You could close your eyes, put all your money in just one investment -- such as an S&P 500 (^GPSC) index fund -- and end the year with a 30 percent gain. I'm of the opinion those days of easy gains are over. I've been saying so for quite a while and have been managing my clients' brokerage and individual retirement accounts accordingly. Don't get me wrong, I'm still bullish on U.S. stocks over the long term and still think stocks could end the year slightly positive. But for investors who can't bear to see the balance on their monthly statement lower than the previous month's, I offer three strategies to get you to the end of the wild ride without throwing up. 1. Sell Some Stocks You most likely have stocks in your portfolio that have run up in price since you purchased them. Now is as good time as any to turn paper gains into real gains by selling some winners. If you think the market is going to tumble further, you'll want cash on hand to buy more stocks at low prices when the dust settles. That's what I did during 2008 and 2009. Just like I go through my closet once a year and throw out clothes that I'll never wear again, I went through my portfolio and sold stocks that either didn't have growth potential or didn't generate dividends, and used the cash to replace them with high-quality, dividend-paying stocks when they dropped to bargain prices. If you not sure which of your stocks to keep and which to sell, consult a financial adviser. A variation on the selling stocks theme is to place stop-loss orders on your holdings. That way if the market turns around and heads back up, you don't sell your stocks too early. But if the market starts to seriously tank, you're you have an autopilot order in place to get you out of various equities at prices that are still higher than what you paid for them. It takes only a few minutes to set up stop-loss orders in your online account if you manage your own money. 2. Sell Call Options on Your Stock If your savings is invested in mutual funds, the call options strategy isn't available to you. But if you own individual stocks or exchange-traded funds, you can sell call options and generate income. The strategy is referred to as "covered call writing." Let's say I own 100 shares of a popular tech company's stock that is trading at $100 per share. I already have a 30 percent unrealized gain on the stock, which I purchased more than a year ago. I could either sell the stock today for a 30 percent gain or I could sell a call option that expires one month from now. (Shorter and longer periods are available.) By selling that call option, I am obligated to sell my stock at $100 a share anytime between now and when the option expires, should the call option buyer exercise his right to buy my stock from me. In exchange, I receive $360 in my account today. The $360 is real money. I can take it out and spend it or reinvest it. At the end of 30 days, either I will have sold my 100 shares of stock at $100 a share or I will still own my stock should the market price be lower than $100 per share. In either case that $360 is mine to keep. A common practice of covered call writers is to sell call options on the same stock and generate income every month. This strategy is similar to when you buy an investment property and rent it out for monthly income. Landlords understand that the price of the house or apartment may go down before it goes back up, but as long as they are renting it out for income, they can tolerate changes in appraised values. If you already own stocks in your portfolio, this strategy allows you to generate ongoing income from your asset until you sell it. You can learn to write covered calls on your own, but many investors -- due to lack of time or interest -- prefer to outsource this function to a money manager. I'm one of the few female money managers in the country who specializes in this strategy, but a growing number of financial advisers are adding this service to their practice. You just need to find them and make sure they are experienced. 3. Reallocate Your Portfolio and Diversify Among Asset Classes Some analysts believe that relative to other countries, U.S stocks are overvalued. However, there are bargains to be had in international developed and emerging markets. If you want to buy low and sell high, one way to do it is to identify securities that are undervalued. A low-cost and easy way to invest in international stocks is to purchase shares in ETFs that holds stock in many companies in whatever country or region you desire. The prices of many emerging market ETFs have been pummeled by fears of declining global economic growth and the strong U.S. dollar. The same goes with certain developed European country ETFs. Although these investments are risky in the short term as the global economy could weaken and political unrest deepen, over the long term they could benefit many investors. If you are afraid of stocks, I wouldn't suggest sticking all your money in bonds, because when the Federal Reserve Board begins raising interest rates (probably in the first half of 2015), bond prices in your portfolio will likely decrease. If you can't hold the bonds until maturity because you need access to cash, you might end up having to sell them for less than you paid. Before we began working together, many of my clients weren't aware that there are other ways to invest money besides stocks, bonds and real estate. Other frequently-purchased asset classes include commodity ETFs, real estate investment trusts, and master limited partnerships. When you invest in the stock market, you are not limited to investing in only U.S. stocks. A plethora of publicly held security types are available to round out a portfolio, add diversification, and reduce volatility. To generate a return on your investment, you must take risk. For most investors, that means riding out the inevitable ups and down of the market. And if you are patient over the long term, you'll slowly build wealth. But if you want to minimize the impact of the down times to your financial (and emotional) health, consider following one or more of the three strategies above. More from Laurie Itkin
•Alibaba Soared in Its IPO. Should You Buy It Now? •Are You Still Paying Your Babysitter Under the Table? •The 5 Rules That Helped Me Become a Millionaire by 40

Monday, June 1, 2015

4 Energy Services Stocks to Sell Now

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The overall ratings of four energy services stocks are down on Portfolio Grader this week. Each of these rates a “D” (“sell”) or “F” overall (“strong sell”).

Tenaris S.A. Sponsored ADR () is on the decline this week, earning a D (“sell”) after receiving a C (“hold”) last week. Tenaris manufactures and supplies steel pipe products and related services for the world’s energy industry. For Portfolio Grader’s specific subcategory of Sales Growth, TS also gets an F. .

This week, Dril-Quip, Inc. () drops from a C to a D rating. Dril-Quip designs, manufactures, sells, and services offshore drilling and production equipment to be used in deepwater, harsh environment, and severe service applications. The stock currently has a trailing PE Ratio of 25.40. .

Hornbeck Offshore Services, Inc. () ratings are on the decline this week as the company earns an F (“strong sell”). Last week, it received a D (“sell”). Hornbeck Offshore Services provides marine transportation services to the offshore oil and gas industry. The stock gets F’s in Earnings Revisions and Cash Flow. As of June 26, 2014, 14.1% of outstanding Hornbeck Offshore Services, Inc. shares were held short. .

Helix Energy Solutions Group, Inc. () earns an F this week, moving down from last week’s grade of D. Helix Energy Solutions is a marine contractor and operator of offshore oil and gas properties and production facilities. The stock gets F’s in Cash Flow and Margin Growth. .

Louis Navellier’s proprietary Portfolio Grader stock ranking system assesses roughly 5,000 companies every week based on a number of fundamental and quantitative measures. Stocks are given a letter grade based on their results — with A being “strong buy,” and F being “strong sell.” Explore the tool here.