Below is the verbatim transcript of Rustagi's interview with CNBC-TV18.
Q: What are the parameters via which an investor can assess the performance of an asset class?
A: As an investor everyone wants good performance from a portfolio, but to figure out whether it is happening or not, can be tricky, for example many investors get disillusioned by looking at negative return in their equity portfolio and often equate it with poor performance. However, the fact is that negative performance in equity portfolio does not necessarily mean poor performance even the best of the fund manager will give negative return during significant downturn in the market.
Similarly even a mediocre fund manager will give fantastic return when the market is doing well. So, it is very important for investor to realise that he need to look at long-term performance and not to base investment decision on short-term performance. The right way to assess a performance is to compare it with the benchmark. However, we know that investor has different asset classes in portfolio like gold, equity and debt.
Mutual funds have different options to allow investors to invest in these asset classes and the fact is that each of the mutual fund scheme has a benchmark, for example for equity fund the benchmark could be an index like CNX 50, 100 or 500, for debt funds there are indices like Crisil Composite Bond Index or Crisil Composite Short-Term Bond Index or Isec, Si-Bex. These are the indices which are there for debt funds, in fact for a common investor the benchmark could be the return that they get from fixed deposit, bonds and debentures and for gold savings scheme the benchmark is the price of physical gold.
Apart from comparing the performance with the benchmark it is equally important to compare performance with the peer group, which is funds in the same group, of course one has to be little careful about selecting the funds in the peer group and it is important because many a times as a category, as a group these funds can tend to outperform or underperform a particular benchmark, for example if the benchmark has risen by 6-7 percent and the category average is 10 percent, any fund which has given a return of 6-7 percent has underperformed the peer group. Therefore, it is important to compare the performance with the benchmark as well as the peer group.
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Thursday, August 29, 2013
Citi Trends Held at Underperform - Analyst Blog
Top 5 Cheap Stocks To Buy Right Now
On Jul 8, 2013, we reiterated our long-term recommendation on Citi Trends Inc. (CTRN) at Underperform with a target price of $14.00, based on the sluggish macroeconomic environment.Why the Reiteration?
Operating in the consumer-driven retail industry, we believe Citi Trends remains significantly impacted by the macroeconomic issues, wherein its customers continue to feel the pinch of increased payroll tax, higher fuel prices, high unemployment rate and delayed tax refunds.
Moreover, the seasonal nature of the company's business exposes it to significant risks if the seasons fail to deliver the expected operating performance.
Additionally, the highly fragmented specialty retail sector compels Citi Trends to compete with larger off-price rivals, mass merchants as well as smaller specialty retailers on the basis of fashion, quality and service. To retain its existing market share, the company may have to reduce its sales prices, which could affect its margins.
These have been reflected in Citi Trends' performance as it saw negative earnings surprise for first-quarter fiscal 2013. The company reported first-quarter fiscal 2013 earnings per share of 42 cents, missing the Zacks Consensus Estimate of 57 cents and down 39.1% from 69 cents earned in the year-ago quarter.
Consequently, over the last 60 days, the Zacks Consensus Estimate for fiscal 2013 has moved down to a loss of 3 cents per share from a profit of 6 cents per share. Similarly, the Zacks Consensus Estimate of loss of 47 cents for the second quarter widened by a penny over the same time frame.
However, prudent steps taken by Citi Trends such as store expansion strategy as well as endeavors to reduce inventory shrinkage can steadily improve the operational performance of this Zacks Rank #3 (Hold) stock in the future. Nevertheless, we believe that amid the absence ! of near-term growth catalysts and persistent unsettling economic issues, Citi Trends' performance is likely to remain strained in the near future.
Other Stocks to be Considered
Besides Citi Trends, other retail stocks worth a look include The Gap, Inc. (GPS), Lululemon Athletics Inc. (LULU) and Foot Locker, Inc. (FL). All these carry a Zacks Rank #2 (Buy).
Wednesday, August 28, 2013
Top Clean Energy Stocks For 2014
When it comes to the highly charged biodiesel industry, one company stands above the rest. Way above. Renewable Energy Group (NASDAQ: REGI ) is not only the leader in terms of pure production capacity, but it also displays plenty of desirables that should be on every investor's radar. What makes the company so great? It is no secret. In particular, REG has focused on three areas to become the top biodiesel stock.
1. Focus on infrastructure
A lot of investors get giddy with excitement when talking about the distribution and logistics network of Clean Energy Fuels (NASDAQ: CLNE ) . It may produce compressed natural gas for commercial truck fleets, but it has a lot in common with REG. Don't believe me? Take a look at Clean Energy Fuel's distribution network:
Top Clean Energy Stocks For 2014: Swift Resources Inc (SWR.V)
Swift Resources Inc. engages in the acquisition, exploration, and development of mineral properties in British Columbia, Saskatchewan, and Manitoba, Canada. The company explores for gold, silver, copper, precious metals, and coal deposits. It has a joint venture agreement with Saturn Minerals Inc. for the exploration of the Saskatoba coal project located along the Saskatchewan/Manitoba border. The company was incorporated in 2006 and is based in Vancouver, Canada.
Top Clean Energy Stocks For 2014: Louisiana-Pacific Corp (LPX)
Louisiana-Pacific Corporation, incorporated on July 20, 1972, is a manufacturer of building products. The Company operates in four segments: North America Oriented Strand Board (OSB); Siding; Engineered Wood Products (EWP), and South America. As of December 31, 2012, the Company owned 21 modern located facilities in the United States and Canada, two facilities in Chile and one facility in Brazil. The Company also operates three facilities through joint ventures, for which it is the provider of product distribution for North America and participate in a joint venture operation that produces cellulose insulation in multiple facilities. The Company�� products are used primarily in new home construction, repair and remodeling, and manufactured housing. In May 2013, Canfor Corp announced that it has completed the sale of its 50% interest in the Peace Valley Oriented Strand Board (OSB) joint venture in Fort St. John, B.C., to Louisiana-Pacific Corp (LP).
OSB
The Company�� OSB segment manufactures and distributes OSB structural panel products. OSB is a smart product made from wood strands arranged in layers and bonded with resin. OSB serves many of the same uses as plywood, including roof decking, sidewall sheathing and floor underlayment. During the year ended December 31, 2012, OSB accounted for approximately 58% of the structural panel consumption in North America.
Siding
The Company�� siding offerings are of two categories: SmartSide siding products and related accessories; and CanExel siding and accessory products. Its SmartSide products consist of a line of wood-based sidings, trim, soffit and fascia. Its CanExel siding and accessory product offerings include a number of pre-finished lap and trim products in a variety of patterns and textures. Additionally, minor amounts of commodity OSB are produced and sold in this segment.
Engineered Wood Products
The Company�� Engineered Wood Products (EWP) segment manufactures! and distributes laminated veneer lumber (LVL), I-Joists, laminated strand lumber (LSL) and other related products. This segment also includes the sale of I-Joist produced by its joint venture with Resolute Forest Products (formerly AbitibiBowater) and LVL sold under a contract manufacturing arrangement.
South America
The Company�� South American segment manufactures and distributes OSB and siding products in South America and certain export markets. This segment also distributes and sells related products to augment the transition to wood frame construction.
Other Products
The Company�� other products category includes its decorative moulding and its joint venture that produces cellulose insulation. Additionally, it other products category includes its remaining timber and timberlands, and other minor products, services and closed operations.
5 Best Small Cap Stocks For 2014: Everest Re Group Ltd.(RE)
Everest Re Group, Ltd., together with its subsidiaries, underwrites reinsurance and insurance in the United States (the U.S.), Bermuda, and international markets. The company operates in five segments: U.S. Reinsurance, U.S. Insurance, Specialty Underwriting, International, and Bermuda. The U.S. Reinsurance segment writes property and casualty reinsurance, on both a treaty and facultative basis, through reinsurance brokers, as well as directly with ceding companies within the United States. The U.S. Insurance segment offers property and casualty insurance primarily through general agents, brokers, and surplus lines brokers in the U.S. The Specialty Underwriting segment writes accident and health, marine, aviation, and surety business within the U.S. and worldwide through brokers and directly with ceding companies. The International segment offers non-U.S. property and casualty reinsurance. The Bermuda segment provides reinsurance and insurance to worldwide property and cas ualty markets and reinsurance to life insurers through brokers and directly with ceding companies, as well as offers reinsurance to the United Kingdom and European markets. The company was founded in 1973 and is based in Liberty Corner, New Jersey.
Tuesday, August 27, 2013
Will Boeing Crash or Soar?
With shares of The Boeing Company (NYSE:BA) trading at around $91.18, is BA an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock's Movement
Boeing has been given an OUTPERFORM rating here since December, but has the stock been too hot? Let's take a look at some positives and negatives first. Then we'll get to some important numbers followed by a detailed conclusion.
Positives:
Highly innovative company Increased productivity Strong cash flow 2.10 percent yield (lower than peers) Increased deliveries for 737 and 777 Decreased R&D expenses FY2013 revenue expected to come in between $82 billion and $85 billion 787 given the green light by FAA Analysts love the stock: 19 Buy, 4 Hold, 1 SellNegatives:
Decline in earnings in 2012 Decreased deliveries for 787 Unimpressive performance by Boeing Capital Didn't hold up as well as peers in 2008Now let's take a look at some comparative numbers. The chart below compares fundamentals for Boeing, General Dynamics Corp. (NYSE:GD), and Lockheed Martin Corporation (NYSE:LMT). Boeing has a market cap of $69.42 billion, General Dynamics has a market cap of $26.20 billion, and Lockheed Martin has a market cap of $31.78 billion.
| BA | GD | LMT | |
| Trailing P/E | 17.17 | N/A | 11.54 |
| Forward P/E | 12.85 | 10.52 | 11.08 |
| Profit Margin | 5.03% | -1.04% | 6.04% |
| ROE | 64.43% | -2.56% | 302.40% |
| Operating Cash Flow | $7.20 Billion | $2.77 Billion | $3.19 Billion |
| Dividend Yield | 2.10% | 3.10% | 4.60% |
| Short Position | 1.30% | 1.60% | 3.20% |
Let's take a look at some more important numbers prior to forming an opinion on this stock.
E = Equity to Debt Ratio Is Normal
The debt-to-equity ratio for Boeing is weaker than the industry average of 0.74. However, this isn't a poor debt-to-equity compared to peers, and Boeing would have no problem improving its debt situation if necessary.
| Debt-To-Equity | Cash | Long-Term Debt | |
| BA | 1.21 | $11.81 Billion | $9.17 Billion |
| GD | 0.34 | $3.74 Billion | $3.91 Billion |
| LMT | 20.74 | $3.06 Billion | $6.30 Billion |
T = Technicals Are Strong
Boeing has outperformed its peers for every time frame listed below.
| 1 Month | Year-To-Date | 1 Year | 3 Year | |
| BA | 6.23% | 21.80% | 21.68% | 35.35% |
| GD | 5.46% | 7.35% | 12.71% | 5.23% |
| LMT | 2.93% | 9.09% | 15.19% | 33.23% |
At $91.18, Boeing is trading above all its averages.
| 50-Day SMA | 84.44 |
| 100-Day SMA | 79.94 |
| 200-Day SMA | 76.10 |
E = Earnings Have Steady
Earnings declined in 2012, but Boeing always delivers impressive profits. Boeing even delivered profits in 2008 and 2009, which wasn't an easy feat for most companies throughout the broader market. Revenue has improved for two consecutive years.
| 2008 | 2009 | 2010 | 2011 | 2012 | |
| Revenue ($)in billions | 60.91 | 68.28 | 64.31 | 68.74 | 81.70 |
| Diluted EPS ($) | 3.67 | 1.84 | 4.45 | 5.34 | 5.11 |
When we look at the last quarter on a year-over-year basis, we see a decline in revenue and an increase in earnings.
| 3/2012 | 6/2012 | 9/2012 | 12/2012 | 3/2013 | |
| Revenue ($)in billions | 19.38 | 20.00 | 20.01 | 22.30 | 18.89 |
| Diluted EPS ($) | 1.22 | 1.27 | 1.35 | 1.29 | 1.44 |
Now let's take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?
T = Trends Might Support the Industry
Defense spending is a concern, and the Industrial sector doesn't perform well during weak economic times. However, as far as Boeing is concerned, the demand for its products and services remains strong.
Conclusion
Boeing will likely get hurt if we see a steep market correction. Unlike most blue chips that have performed well for decades, Boeing has had several lengthy clips of poor performance. However, this has always turned out to be an incredible buying opportunity. The year 2008 was the stock's biggest hit, but those losses have been recouped. Whoever had the guts to double down (or simply buy) at that time is feeling wise and wealthy right now. If this type of environment were to present itself again and the stock nosedived, there would be absolutely zero concerns of the company going under. To even think that as a possibility is absurd. Therefore, whoever is willing to buy at lower levels is highly likely to be rewarded at some point down the road. The good news is that Boeing is better situated than it was in 2008. And we don't even know if the market will ever come back down to reality. If the market doesn't come back down to reality and it keeps trading higher, then Boeing is an easy winner.
Saturday, August 24, 2013
How the SEC Stacks the Deck
Are RIAs and other financial professionals guilty until proven innocent? Not quite, but the burden of proof on the part of the SEC against those accused is so low it might appear that way. It could easily result in a lifetime bar from the advisors' main source of income.
Russell Ryan, a former assistant director of the SEC's division of enforcement, exposes the mark regulators must reach to win their case. In a Wall Street Journal op-ed on Monday, Ryan argues the SEC can impose quasi-criminal penalties based on the mere “preponderance of evidence.”
Using the trial of ex-Goldman Sachs vice president Fabrice Tourre, set to begin this week, as a jumping off point, he employs a sports metaphor to indicate just what Tourre will face.
“Envision a one-possession football game with the government team receiving the kickoff,” Ryan writes. “Beyond reasonable doubt requires the government to score a touchdown to win; clear and convincing evidence requires a field goal; and preponderance of evidence requires advancing the ball at least an inch past the 50-yard line.”
It’s the last that the SEC must demonstrate in the Tourre case, with which Ryan takes issue.
“Even in civil cases, however, charges of fraud are often subjected to an intermediate standard that requires proof by ‘clear and convincing evidence.’ Oddly enough the SEC usually isn't held to this standard either, even when it accuses people of fraud.”
Why does the SEC have such a negligible burden of proof?
Once a “sleepy regulator” with relatively little power to punish wrongdoers,” he explains, Congress has now transformed (or is attempting to transform) the agency into an “aggressive punisher.”
Ryan concludes with what he calls “a modest proposal.”
“When a federal law-enforcement agency sets out to punish a private citizen or business based on accusations of fraud or similar wrongdoing, it should have to prove its case by more than just a preponderance of the evidence. While proof beyond reasonable doubt may be too high a hurdle in nominally civil cases that can't result in incarceration, proof by clear and convincing evidence seems the least that due process should demand.”
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Check out Former SEC Compliance Chief Tells White: Stop Suing Compliance Officers on ThinkAdvisor.
Friday, August 23, 2013
Risk versus Returns
re these statements true? Is investing in bonds or deposits completely risk-free? Or investing in blue-chip stocks necessarily very low risk? NO.
Whenever more than one outcome is possible from an investment, there is always some amount of risk. Only the level of risk is different.
Use risk to analyse expected returns
While investing, risk is measured to evaluate the kind of returns you should expect from the investment. Or your return expectations should be based on the level of risk you can bear. In principle, the higher the risk, the higher the returns that should be required.
Empirically returns across various asset classes show that investment in equity shares give the highest level of returns in the long-term, followed by corporate bonds and deposits and lastly bank deposits and government debt. Not surprisingly, the level of risk is also in the same order.
You might be saying - how can debt be risky? It is.
Companies that run into financial trouble could delay your interest payments or even default on paying back your money. Even government debt has some amount of risk. How? Simply put, governments like companies also face the risk of financial problems. However, lack of funds for a company could result in the company defaulting on a loan repayment. But a government can always print more currency and repay its borrowings. So you will get your money back. BUT, there is a hidden cost (risk). Printing more currency is likely to lead to higher inflation and hence lower real returns on your investment (see our article Impact of Inflation to understand about real returns).
Agreed that the chances of governments or well-managed companies getting into serious financial troubles are low. But that is only difference in the level of risk. There is a risk attached, and that cannot be questioned.
Understanding risk vs return essential for good financial planning
You might ask - why is it so important to understand the risk versus return relationship? Becau! se if you don�t, it is quite likely that your investment returns will not match your risk profile and consequently you are not managing your hard-earned money well. A wasted opportunity, as even a small difference in your investment returns (at the same level of risk) can make a BIG difference to your financial wealth (due to the astounding Power of Compounding ).
To understand the importance of managing your money well read Guide To Financial Planning . This article highlights why financial planning is not as difficult as it sounds and how you can easily make your hard-earned money work for you.
Also you can use our Risk Analyser to understand your risk profile (both your risk-taking capacity and your risk tolerance level) and read The Need To Diversify to understand how you can increase your expected returns while not increasing your level of risk.
Sunday, August 18, 2013
Bear of the Day: Park Electrochemical (PKE) - Bear of ...
Analysts revised their estimates meaningfully lower for both 2014 and 2015 following the company's most recent earnings miss on June 26. This sent the stock to a Zacks Rank #5 (Strong Sell) stock.
Despite this, shares currently trade at a premium on a forward P/E basis. Investors may want to avoid PKE until its earnings momentum turns around.
Park Electrochemical Corp. manufactures high-technology digital and RF/microwave printed circuit materials primarily for the telecommunications and internet infrastructure and high-end computing markets and advanced composite materials, parts and assemblies for the aerospace markets. Sales of printed circuit materials products account for approximately 85% of its total revenue.
First Quarter Results
Park Electrochemical reported somewhat disappointing first quarter fiscal 2014 results on June 26. Earnings per share came in at 25 cents, missing the Zacks Consensus Estimate by 4 cents. It was the company's third straight earnings miss.
The company continued to post lethargic top-line results. Net sales declined 6% to $43.4 million, which was well below the consensus of $47.0 million. Despite this, the operating profit margin expanded a solid 190 basis points which led to a 4% increase in net income.
Estimates Fall
Following the Q1 earnings miss, analysts revised their estimates meaningfully lower for both 2014 and 2015. This sent the stock to a Zacks Rank #5 (Strong Sell).
The Zacks Consensus Estimate for 2014 is now $1.17, down from $1.26 before the Q1 release. The 2015 consensus is currently $1.25, down from $1.38 over the same period.
This continues the trend of negative earnings revisions over the last several months, as you can see in the company's 'Price & Consensus' chart:
Premium Valuation
Despite the negative earnings momentum, shares of Park Electrochemical are still trading at a premium valuation on a forward P/E basis. Its 12-month forward P/E ratio of 21 is well above the industry median of 16x and its 10-year historical median of 18x.
Investors with a short-term time horizon that are still interested in the 'Electronics - Miscellaneous Components' industry may want to consider Nidec Corp (NJ) or Stoneridge (SRI) instead, which are both Zacks Rank #1 (Strong Buy) stocks.
The Bottom Line
With a string of negative earnings surprises, falling earnings estimates and premium valuation, investors should consider avoiding this Zacks Rank #5 (Strong Sell) stock until its earnings momentum turns around.
Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.
Friday, August 16, 2013
Helen of Troy Beats Earnings, Lowers View - Analyst Blog
Top 5 Value Stocks To Own For 2014
Helen of Troy Limited (HELE), posted better-than-expected earnings of 82 cents per share in the first quarter of fiscal 2014, breezing past the Zacks Consensus Estimate of 69 cents by 18.8% and the prior-year earnings of 74 cents by 10.8%. The upswing in the results was due to higher sales and product innovation.During the quarter, total sales increased 1.4% year over year to $304.5 million. The increase driven by sales increase in Housewares and Healthcare/Home Environment segments. Total sales, however, lagged the Zacks Consensus Estimate of $310 million.
Gross margin shrank 90 basis points (bps) to 39.5% due to increased promotional expenses, higher product cost across all segments. Operating income climbed 4.9% to $32.7 million backed by tight expense management. Operating margin increased 30 bps to 10.7%, driven by lower selling, general and administrative (SG&A) expenses.
Segment Details
Housewares: Sales in the Housewares category climbed 5.4% to $63.5 million compared with the previous-year period, reflecting double-digit organic sales growth due to the addition of new products under the OXO brand, expanded shelf space at key retailers and new customer distribution.
Personal Care: Sales in this category declined marginally by 1.8% to $115.4 million in the quarter. Soft results in the domestic retail appliance and grooming, skin care and hair care solution product categories offset improvement in professional appliance, brushes, combs and accessory in international markets.
Healthcare Environment: This category witnessed the highest sales growth with an increase of 2.6% to $125.6 million in the reported quarter, reflecting gains in the water filtration category.
Other Financial Details
Cash and cash equivalents at the end of the first quarter of fiscal 2014 stood at $12.1 million compared to $12.8 million i! n the prior quarter. Total debt stood at $224.8 million compared to $324.7 million in the prior quarter.
Outlook
Despite strong first-quarter earnings, Helen of Troy expects higher product costs in the coming quarters. Therefore, the company lowered its earnings guidance for fiscal 2014 to the range of $3.13 to $3.23 from previously announced range of $3.50 to $3.60 per share. The company, however, maintained its fiscal 2014 net sales guidance range of $1.29 billion to $1.32 billion. Helen of Troy holds a Zacks Rank #5 (Strong Sell).
Other Stocks to Consider
Others players in the same industry which look attractive at the current levels include Flower Foods Inc. (FLO) and Restoration Hardware (RH), both carrying a Zacks Rank #1 (Strong Buy) and Fortune Brands Inc. (FBHS) which carries a Zacks Rank #2 (Buy).
Thursday, August 15, 2013
Hot Value Stocks To Watch For 2014
J.C. Penney (NYSE: JCP ) stock skyrocketed last week after news leaked that�Soros Fund Management had taken a big stake in the struggling retailer. And yes, with Penney selling today for close to book value, and a price-to-sales ratio less than half what rivals Kohl's (NYSE: KSS ) and Macy's (NYSE: M ) charge, you can see what might have attracted George Soros' attention.
Problem is, Penney is cheap for a reason. Several reasons, actually. Listen in, as Fool contributor Rich Smith lays them out for you...
The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.
Hot Value Stocks To Watch For 2014: Schlumberger N.V.(SLB)
Schlumberger Limited, together with its subsidiaries, supplies technology, integrated project management, and information solutions to the oil and gas exploration and production industries worldwide. The company?s Oilfield Services segment provides exploration and production services; wireline technology that offers open-hole and cased-hole services; supplies engineering support, directional-drilling, measurement-while-drilling, and logging-while-drilling services; and testing services. This segment also offers well services; supplies well completion services and equipment; artificial lift; data and consulting services; geo services; and information solutions, such as consulting, software, information management system, and IT infrastructure services that support oil and gas industry. Its WesternGeco segment provides reservoir imaging, monitoring, and development services; and operates data processing centers and multiclient seismic library. This segment also offers variou s services include 3D and time-lapse (4D) seismic surveys to multi-component surveys for delineating prospects and reservoir management. The company?s M-I SWACO segment supplies drilling fluid systems to improve drilling performance; fluid systems and specialty tools to optimize wellbore productivity; production technology solutions to maximize production rates; and environmental solutions that manages waste volumes generated in drilling and production operations. Its Smith Oilfield segment designs, manufactures, and markets drill bits and borehole enlargement tools; and supplies drilling tools and services, tubular, completion services, and other related downhole solutions. The company?s Distribution segment markets pipes, valves, and fittings, as well as mill, safety, and other maintenance products. This segment also provides warehouse management, vendor integration, and inventory management services. Schlumberger Limited was founded in 1927 and is based in Houston, Texas.
Advisors' Opinion:- [By Robert Holmes]
Schlumberger has the most potential upside of any stock in this group of 50 that also makes the firm's Best Ideas list. Analyst Ole Slorer says Schlumberger has "what we consider the most advanced technology portfolio in the industry."
"Its fundamentals are impressive, with what we think are some of the best field personnel, a pristine service and performance reputation, and leading market share in most of its product lines," Slorer writes.
Though Slorer's price target is 42% above current levels, his most bullish scenario for Schlumberger over the next year would see shares climb a whopping 116%. On the downside, his most bearish scenario for the company would see shares slide 38% over the next 12 months.
- [By Rebecca Lipman]
Together with its subsidiaries, supplies technology, integrated project management, and information solutions to the oil and gas exploration and production industries worldwide. Market cap of $91.49B. EPS growth (5-year CAGR) at 24%. According to Morgan Stanley: "Thanks to an estimated $1 billion investment per year in R&D, Schlumberger has what we consider the most advanced technology portfolio in the industry."
Hot Value Stocks To Watch For 2014: Caterpillar Inc.(CAT)
Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. It operates through three lines of businesses: Machinery, Engines, and Financial Products. The Machinery business offers construction, mining, and forestry machinery, including track and wheel tractors, track and wheel loaders, pipelayers, motor graders, wheel tractor-scrapers, track and wheel excavators, backhoe loaders, log skidders, log loaders, off-highway trucks, articulated trucks, paving products, skid steer loaders, underground mining equipment, tunnel boring equipment, and related parts. It also manufactures diesel-electric locomotives; and manufactures and services rail-related products and logistics services for other companies. The Engines business provides diesel, heavy fuel, and natural gas reciprocating engines for Caterpillar machinery, electric power generation systems, marine, petrol eum, construction, industrial, agricultural, and other applications. It offers industrial turbines and turbine-related services for oil and gas, and power generation applications. This business also remanufactures Caterpillar engines, machines, and engine components; and offers remanufacturing services for other companies. The Financial Products business provides retail and wholesale financing alternatives for Caterpillar machinery and engines, solar gas turbines, and other equipment and marine vessels, as well as offers loans and various forms of insurance to customers and dealers. It also offers financing for vehicles, power generation facilities, and marine vessels. The company markets its products directly, as well as through its distribution centers, dealers, and distributors. It was formerly known as Caterpillar Tractor Co. and changed its name to Caterpillar Inc. in 1986. Caterpillar Inc. was founded in 1925 and is headquartered in Peoria, Illinois.
Advisors' Opinion:- [By Roberto Pedone]
Caterpillar (CAT) is staging a textbook breakout in May. Shares of heavy equipment maker haven't exactly been kind to investors year-to-date; CAT has barely broken even during a time when the broad market has been in a historic rally. But a textbook breakout should change that.
CAT started forming an inverse head and shoulders pattern back in early April. The inverse head and shoulders is formed by two swing lows that bottom out around the same level (the shoulders), separated by a lower low called the head; the buy signal comes on the breakout above the pattern's "neckline" level, which was just below $86 for CAT. That puts this stock's upside target right around $92.
Even though CAT has nearly hit its upside target already (the post-breakout buying has been very quick), the longer-term implication for investors is a break of the downtrend that had been haranguing shares this year. Now, with that downtrend broken, CAT should have more room to move higher. I'd just expect some consolidation first.
- [By Jim Cramer,TheStreet]
Caterpillar (CAT) could be a monster in 2011, especially with the integration of Bucyrus International (BUCY), which I think will turn out to be a fantastic acquisition.
Current earnings-per-share estimates of about $6 are, I think, way too low. I see this stock going to $120 in the next year. Too gutsy? Ask yourself what happens if the United States comes back as a growth nation? Right now almost all of the growth is overseas.
Still a fantastic mineral play and a terrific call on world growth.
- [By Ben Levisohn]
For one day at least, this CAT is not a dog.
Caterpillar (CAT) has gained 2% to $86.22 today, its largest gain since in a month and the largest gain among the Dow components. The machinery manufacturer has dropped 11% during the past six months, however, as a slowdown in China and cost-cutting at mining companies have hit its shares.
Bloomberg
Susquehanna’s Ted Grace offers reasons for optimism, even as he lowers his 12-month price target to $97 from $104:
CAT remains Positive rated with 15% upside to our $97 price target and upside-downside of 1.2-to-1 (which, like most of our machinery names, is admittedly shy of the 2-to-1 or better ratio we prefer). Despite our 2014-15 EPS being ~6% below consensus, we view our updated estimates as closer to buyside expectations while noting that consensus appears to embed a low tax rate that explains over half of the variance. While there remains plenty of uncertainty on 2014/15, particularly in mining, we believe CAT shares currently discount reasonable top-line expectations while recent meetings with mgmt suggest potential for structural cost savings that could drive better than expected margins/ incrementals. While difficult to identify discernible catalysts, if CAT’s framework for flat-to-better RI revenue growth in 2014 proves correct (admittedly not assumed in our estimates), this would almost certainly debunk the core of the bear thesis and be meaningfully positive for shares.
Investors waiting for the stock to actually, you know, rise can take comfort in Caterpillar’s $2.40 dividend per share and its more than $3 per share in buybacks in 2013, Grace says.
Caterpillar’s 2% gain has trumped the Dow Jones Industrial Average’s 0.04% rise, and United Technology’s (UTX) 0.1% drop, while competitor Deere (DE) has gained 1.9% to $83.22.
10 Best Tech Stocks For 2014: Dollar Tree Inc.(DLTR)
Dollar Tree, Inc. operates discount variety stores in the United States and Canada. Its stores offer merchandise primarily at the fixed price of $1.00. The company operates its stores under the names of Dollar Tree, Deal$, Dollar Tree Deal$, Dollar Giant, and Dollar Bills. Its stores offer consumable merchandise, including candy and food, and health and beauty care, as well as household consumables, such as paper, plastics, household chemicals, in select stores, and frozen and refrigerated food; variety merchandise, which includes toys, durable housewares, gifts, party goods, greeting cards, softlines, and other items; and seasonal goods, such as Easter, Halloween, and Christmas merchandise. As of April 30, 2011, it operated 4,089 stores in 48 states and the District of Columbia, as well as 88 stores in Canada. The company was founded in 1986 and is based in Chesapeake, Virginia.
Advisors' Opinion:- [By Sam Collins]
Dollar Tree (NASDAQ:DLTR) is a leading operator of discount variety stores. The stock has hugged its 50-day moving average since mid-February. But a recent minor revision of earnings for this year by several analysts and the recent market sell-off have resulted in a fall from its high of the year at over $70 to under $66. However, Goldman Sachs (NYSE:GS) increased its price target to $73 from $69.
Technically DLTR is oversold, according to MACD. A break below its 50-day moving average could result in a pullback to $64, but positions could be taken at the current market price. The trading target for DLTR is $72.
Hot Value Stocks To Watch For 2014: Tupperware Corporation(TUP)
Tupperware Brands Corporation operates as a direct seller of various products across a range of brands and categories through an independent sales force. The company engages in the manufacture and sale of kitchen and home products, and beauty and personal care products. It offers preparation, storage, and serving solutions for the kitchen and home, as well as kitchen cookware and tools, children?s educational toys, microwave products, and gifts under the Tupperware brand name primarily in Europe, Africa, the Middle East, the Asia Pacific, and North America. The company provides beauty and personal care products, which include skin care products, cosmetics, bath and body care, toiletries, fragrances, nutritional products, apparel, and related products principally in Mexico, South Africa, the Philippines, Australia, and Uruguay. It offers beauty and personal care products under the Armand Dupree, Avroy Shlain, BeautiControl, Fuller, NaturCare, Nutrimetics, Nuvo, and Swissgar de brand names. The company sells its Tupperware products directly to distributors, directors, managers, and dealers; and beauty products primarily through consultants and directors. As of December 26, 2009, the Tupperware distribution system had approximately 1,800 distributors, 61,300 managers, and 1.3 million dealers; and the sales force representing the Beauty businesses approximately 1.1 million. The company was formerly known as Tupperware Corporation and changed its name to Tupperware Brands Corporation in December 2005. The company was founded in 1996 and is headquartered in Orlando, Florida.
Advisors' Opinion:- [By Sam Collins]
Household name Tupperware Brands Corp. (NYSE:TUP) is a global direct seller of products with multiple brands through an independent sales force of 2.4 million people. Its product line focuses on kitchen storage and serving solutions, as well as personal-care products. Over 60% of sales in 2011 are expected to come from Europe and Asia, and the stock has appeal as an emerging markets story.
S&P estimates that 2011 earnings will increase to $4.54 versus $3.53 in 2010, and it increased its rating to a “five-star strong buy” with a recently revised 12-month target of $81, up from $73. The 2005 purchase of Sara Lee’s (NYSE:SLE) direct-sales business, which has a high growth rate, should be a long-term benefit. TUP’s annual dividend yield is 1.92%.
Technically TUP had a pullback following a new high at over $70 and is currently oversold. Buy TUP at the current market price with a trading target of $70, but longer term a much higher target will likely be attained.
Tuesday, August 13, 2013
Is IBM a Buy Now?
With shares of International Business Machines (NYSE:IBM) trading around $194 after IBM’s earnings, is the stock an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
International Business Machines (NYSE:IBM) is an information technology company that operates in five segments: Global Technology Services, Global Business Services, Software, Systems and Technology, and Global Financing. Global Technology Services provides information technology infrastructure services and business process services. Global Business Services provides professional services and application management services. Software consists of middleware and operating systems software. Systems and Technology provides clients with business solutions requiring advanced computing power and storage capabilities. Global Financing invests in financing assets, leverages with debt and manages the associated risks. Through its segments, IBM is able to provide information technology products and services to a wide variety of companies participating in diversified sectors, worldwide.
For the most part, information technology is an industry with strong growth trends. However, IBM is having some challenges in the hot cloud computing sector.
T = Technicals on the Stock Chart are Weak
IBM stock has seen a consistent uptrend since establishing lows during the Financial Crisis. The stock has been range-bound for most of the last year and is currently trading at the low end of its range. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, IBM is trading below its key averages which signal neutral to bearish price action in the near-term.
Taking a look at the implied volatility (red) and implied volatility skew levels of IBM options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| IBM Options | 16% | 0% | 0% |
What does this mean? This means that investors or traders are buying a very minimal amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| May Options | Steep | Average |
| June Options | Steep | Average |
As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a very minimal amount of call and put option contracts and are leaning neutral to bearish over the next two months.
E = Earnings Are Mixed Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on IBM’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for IBM look like and more importantly, how did the markets like these numbers?
| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | 3.45% | 11.15% | 4.39% | 11.33% |
| Revenue Growth (Y-O-Y) | -5.11% | -0.64% | -5.39% | -3.34% |
| Earnings Reaction | -8.27% | 4.4% | -4.91% | 3.76% |
IBM has seen increasing earnings but declining revenue figures over the last four quarters. From these figures, the markets have had mixed feelings about IBM’s recent earnings announcements.
P = Poor Relative Performance Versus Peers and Sector
How has IBM stock done relative to its peers, Accenture (NYSE:ACN), Hewlett-Packard (NYSE:HPQ), Microsoft (NYSE:MSFT), and sector?
| IBM | Accenture | Hewlett-Packard | Microsoft | Sector | |
| Year-to-Date Return | 1.32% | 18.83% | 39.26% | 22.17% | 4.58% |
IBM has been a relative underperformer, year-to-date.
Conclusion
IBM provides key information technology products to companies participating in a multitude of industries around the world. The stock has done well in recent years and is now consolidating in a range extending back a year. A recent disappointing earnings release sent the stock to the bottom end of its recent range. Earnings, revenue figures, and institutional shareholders have sent mixed signals to investors. Relative to its peers and sector, IBM has underperformed year-to-date. WAIT AND SEE what IBM does this quarter.
Friday, August 9, 2013
Can Mondelez Live Up To The Sell-Side Hype?
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Not unlike the apparent love affair between Wall Street and Kraft (Nasdaq:KRFT), Mondelez (Nasdaq:MDLZ) gets quite a bit of love from the sell-side. Many analysts seem convinced that Mondelez can significantly boost its organic growth over a relatively short time and likewise significantly upgrade margins. While I think Mondelez is basically a good company, I worry that the expectations bar is being set at a level where a failure to perform is going to create a real backlash. Even if I use growth expectations beyond the published estimates of the bulls, I can't really get to a point where Mondelez looks cheap today.
Q2 Comes In Light … If It Matters
I'm not convinced it's going to make much difference, but Mondelez didn't report a particularly strong second quarter for a company where the expectation is for serious improvements.
Revenue rose 2% as reported, which was either in line or slightly below average estimates depending upon which reporting service you use. Organic revenue growth was just under 4%, with all of the growth coming from volume. Biscuits remain strong (up about 8% for the first half), while chocolate accelerated during the quarter (first half sales growth of 6% versus Q1 growth of 5%). Gum and candy continue to weaken (down 2% versus down 1% in Q1), and there is likewise little momentum in beverages/cheese/grocery.
SEE: Wall Street All In On Kraft's Improvement Potential
Margins are a big deal in the Mondelez discussion (as they're not very good relative to many comparables), but Mondelez has yet to show much improvement. Gross margin declined slightly from last year and came in a bit below the sell-side target. Likewise, adjusted operating income dropped 11%, with a nearly two-point drop in margin, and came in a couple of percentage points below expectation.
Throwing Money At The Problem?
Mondelez hasn't exactly lived up to billing in terms of growth or margins in its brief history as an independent company, and that has attracted activist investor attention. I continue to believe that it makes little sense for PepsiCo (NYSE:PEP) to contemplate an acquisition of Mondelez, as PepsiCo really does not need another "problem child" and I'm not convinced that salty snacks and sweet snacks are as synergistic as some assume.
Still All About Margins
There are two major pillars to the Mondelez story – OUS growth and margins. The company's OUS growth doesn't worry me, particularly with emerging market sales up about 10% for the quarter and U.S. rivals like Kellogg (NYSE:K) and Hershey (NYSE:HSY) not nearly so strong overseas.
Margins, though, still concern me. I'm not sold on Mondelez's direct store distribution strategy, and the company's margins are simply not compelling compared to Nestle, Hershey, Kellogg, PepsiCo's snack business, or even Flowers (NYSE:FLO). While management has rolled out a target for 14% to 16% operating margins, setting a goal and reaching a goal are two separate issues. I think 40bp to 90bp annual base margin expansion target is pretty aggressive, and there is absolutely no room for any volume shortfalls along the way.
The Bottom Line
Expectations are already pretty robust for Mondelez. Revenue growth of 5% to 6% would make Mondelez one of (if not the) fastest-growing food companies in the space. Even if Mondelez hits its margin targets and grows free cash flow at a rate above 9%, the fair value excluding debt would be $31.50.
With that, I feel like pretty much all of the good news is in the stock and the Street is already assuming that Mondelez is going to meet all of these targets. I don't like investing on the basis of assuming that everything goes right, and I wouldn't pay this price for Mondelez shares.
Disclosure – At the time of writing, the author did not own shares of any company mentioned in this article.
Thursday, August 8, 2013
Key Steps To Building A Great Financial Planning Practice
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How can fledgling financial planners successfully roll out a financial advisory practice? By planning ahead, and prioritizing five key elements of a solid practice: financing, team-building, technology, sales and marketing.The real risk for financial advisors, however, is accepting the status quo, and doing nothing at all to streamline and improve their practices. Financial planners can't afford that risk, given the growing size of the industry competition.
Consider this - according to the U.S. Bureau of Labor Statistics (BLS) - the number of U.S.-based personal financial advisors will grow 32% from 2010 to 2020, which the BLS says is "much faster than the average for all occupations."
This pending growth is attributed to burgeoning demand from Baby Boomers for retirement advice as they grow closer to their Golden Years. To stand out from all that competition, financial advisors need to consider their businesses as dynamic ones - i.e., businesses that need to grow and improve all the time.
What's the best way to accomplish that imposing task? Try these tips from advisors who have years of experience in the field - and who have learned via trial and error what works and what doesn't in the financial planning industry:
Specialize - and stand out from your competition
Pamela Plick, a financial planner and founder of her own firm, pamelaplick.com, says planners should find a niche and dominate it. "As financial planners, we cannot be all things to all people," she says. "By targeting a niche, you become an expert in the providing solutions for this particular group."
For example, Plick says you can choose to work with female entrepreneurs, widows or dentists, or the niche can also be based on location. "Or, you could target retirees in a certain gated community or country club," she says.
Be a delegator
Plick also advises focusing on what's important and what you are good at - and either delegate or outsource the rest. "Focus on important tasks like marketing, networking and meeting with clients. If you can, outsource the administrative tasks," she advises.
Customize your client's needs - and connect with that client
Leonard Wright, CPA, financial planner and member of the AICPA's National CPA Financial Literacy Commission, says a client has a specific mission, vision, values and goals, and the good planners get to know what these expectations are. "While they may not know them specifically, it is our job to bring them out," he says. "If the planning and advice related to the planning does not connect to the client's mission, vision, values and goals, the client will migrate away. If the client does not understand why the advisor makes recommendations for their benefit, they will wonder why the advisor does what they recommend and have an instinctive emotional reaction to seek someone that understands them."
Get involved with your community
Steven Kolinsky, co-founder of Kolinsky Wealth Management and a 30-year industry veteran, advises getting to know your community and getting involved in your town. "Being generous with your time and talent in your community raises your profile and lets you get to know the people around you," he says. "We recently had a meeting with a young couple who was not ready to invest, but was looking for advice about their financial parameters in buying their first home."
Get to know local professional accountants
Kolinsky says that connecting with local CPAs is a great way to improve your assets under management. "A great deal of business has been referred to us through the genuine relationships we have cultivated with CPAs, showing them how we do business and that they can entrust their clients to us," he says. "These relationships have taken time to build, but have been mutually beneficial."
Aim for younger clients
There's a dramatic shift in assets underway, in the U.S. and across the globe, and it's trending toward younger investors. In fact, the asset management industry can expect to see $28 trillion in total wealth by 2018, according to Deloitte Wealth Management.
"The key takeaway is servicing the younger generation doesn't have to dramatically change an advisor's practice management and recommendations," says Jill Jacques, wealth management and retirement lead director at North Highland, a global consulting company. "Instead, it's all about incorporating engaging online and in-person tools that will create a two-way conversation to stay relevant to evolving audiences." She recommends building a younger audience via highly popular sites such as Facebook, Linked-in, Twitter, and Google+.
Prune your client list
A 2012 survey of "elite" financial advisors by Financial Planning
reveals that most $1 million-plus annual earners tend to serve fewer – not more – clients. With fewer clients, advisors can spend more time working on client relationships and building client satisfaction. That, in turn, creates greater customer loyalty and increases the odds that your clients will refer to you other affluent clients.
The Financial Planning study claims that to access more assets from fewer customers, focus on those affluent investors. The data says that the highest-income advisors tracked by study researchers says that its list of so-called elite advisors work with an average of 83 clients, each of whom has at least $1 million in assets with the advisors. That's compared with nearly 73 clients for each of the advisors earning between $500,000 and $1 million, and 23 clients for the lowest-earning group surveyed by the magazine.
The Bottom Line
As the tips above attest show, building a better financial advisory practice is all about focusing on a few game-changing steps - and doing them well.
"If you are knowledgeable about the products you recommend, continue to educate yourself on the investment industry, and always put your clients needs above your own, that's a great head start," says Kolinsky.
Past that, be creative, get out there in the community and online, and build your own unique financial advisory brand - one that keeps you a step or two ahead of your competition.
Tuesday, August 6, 2013
These Falling Stocks Can't Stop the Soaring Dow
In a pattern we've seen a lot lately, the Dow Jones Industrials (DJINDICES: ^DJI ) has rebounded from early-session losses to head toward new record highs. Hearing relatively benign comments from St. Louis Federal Reserve President James Bullard on the need to continue the current round of quantitative easing, investors felt more comfortable getting back into stocks, and by 12:50 p.m. EDT the Dow was up by 46 points, or 0.3%, while the S&P 500 was up 0.18%.
But a few Dow stocks didn't join in the bullish party. Travelers (NYSE: TRV ) has posted the largest decline, falling more than 2%. In the wake of the tornado that devastated an Oklahoma City suburb yesterday, Travelers and other property and casualty insurance companies will be tallying the financial damage. With past events elsewhere causing substantial losses to property, the Oklahoma tornado will likely spell the end of a nice respite from major catastrophic claims that Travelers has enjoyed over the past several months.
Verizon (NYSE: VZ ) has posted a drop of more than 1% after comments from Verizon Wireless joint-venture partner Vodafone (NASDAQ: VOD ) made it seem less likely that a deal to change their current partnership arrangement would get done. Verizon would benefit from having full control of Verizon Wireless, but with Vodafone's stake valued at $100 billion or more, it would take some complex strategies to pull off a transaction. Meanwhile, Vodafone investors would likely prefer a full-blown buyout of the entire company versus a piecemeal sell-off of the Verizon Wireless stake, further adding to the price tag. Verizon should be able to continue with the partnership as currently structured, but it's unlikely that doing a deal will get any easier in the future.
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Finally, outside the Dow, the iShares Silver Trust (NYSEMKT: SLV ) has fallen more than 2.6% on a poor day for precious metals in general. After yesterday's bounce in metals prices, gold and silver investors had hoped that the big plunge since April had run its course. Yet with the Fed continuing to be an unpredictable variable, investors need to plan for continuing uncertainty that could lead to further bumpiness for precious-metals ETFs in the weeks and months to come.
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Monday, August 5, 2013
SodaStream to Investors: How Does $1 Billion in Sales by 2016 Sound?
Shares of SodaStream (NASDAQ: SODA ) popped more than 13% during intraday trading Tuesday after the company's investor day spurred upgrades from a number of analysts.
All told, the stock is currently up a whopping 20% over the past five trading days since the Israel-based company posted stronger-than-expected results. But why, exactly, is everybody so excited today?
The $1 billion question
To be sure, I was impressed just a few days ago when the folks at SodaStream raised full-year guidance, telling investors they now expect 2013 revenue to grow around 27% to just over $554 million. Meanwhile, 2013 net income should also increase by around 20% to $52.7 million.
Yesterday, however, SodaStream management went even further, telling investors they hope to generate annual sales of at least $1 billion by 2016 -- for those of you keeping track, that would represent a more than 80% increase in sales on top of the company's already-impressive numbers. As a result, analysts at Oppenheimer raised their price target for SodaStream to $68 from $60, and the folks at Citigroup raised their price target on the stock to $66 from $60.
What about now?
As it stands, shares of SodaStream are currently trading around $65 per share and 29.5 times trailing earnings, so I can't help but wonder whether the stock is finally beginning to look a little too rich to buy.
Of course, I thought the same thing about Lumber Liquidators back in February after its epic 200% run over the previous year, but the flooring specialist proceeded to rally another 44% to remind me why it's dangerous to doubt the potential for stocks of admittedly great businesses.
After all, as I noted last week, there are currently more than 130 million households in the United States, of which SodaStream has penetrated less than 1%. Contrast that to SodaStream's more established markets like Sweden, where a full 25% of all households use its products, and its potential becomes that much more enticing.
That's not to say maintaining the growth will be a walk in the park, especially considering beverage behemoths like Coca-Cola (NYSE: KO ) and PepsiCo (NYSE: PEP ) will certainly be loath to release their iron grips on the largest soda market in the world. Heck, even Warren Buffett once stated, "If you gave me $100 billion and said, 'Take away the soft-drink leadership of Coca-Cola in the world,' I'd give it back to you and say it can't be done." It should come as no surprise, then, that Buffett owned 400 million shares of Coca-Cola through Berkshire Hathaway at the end of 2012 -- good for an 8.9% stake currently in the company worth almost $17 billion as of this writing.
However, this also serves to highlight one of the biggest reasons SodaStream should be able to continue growing quickly; even after the recent rally, SodaStream's total market capitalization sits at only $1.35 billion, or more than 140 times smaller than Coca-Cola's and 95 times smaller than PepsiCo's.
Foolish final thoughts
While investors shouldn't expect Coke or Pepsi to fall from grace anytime soon, remember that it'll take much less to move SodaStream's revenue and earnings needles.
In the end, I'm convinced SodaStream represents another one of those truly great businesses, and I wholeheartedly agree with the analysts who say this small company is only just getting started.
Can investors find a revenue stream in SodaStream?
SodaStream's carbonation technology sounds simple, but this razor-and-blade company offers an intriguing opportunity for growth that could very well disrupt the soda industry. The Motley Fool's premium report on SodaStream explains the opportunities as well as the risks in the company. The report comes with a year's worth of updates, so just click here to get started.
Sunday, August 4, 2013
Obesity Drug Demand Still Low
You've got to spend money to make money.
VIVUS (NASDAQ: VVUS ) has the first part down. During the first quarter, the company spent $44.7 million on selling, general, and administrative expenses to sell its obesity drug Qsymia.
The making money part hasn't come to fruition yet. VIVUS only generated $4.1 million in revenue during the quarter. Sales took a hit because VIVUS is offering free trials and reduced-cost medications for patients; if everyone was paying full price, sales would have been 40% higher or so.
Even with a 40% bump -- assuming everyone was willing to pay full price -- Qsymia sales are nowhere near blockbuster status. Demand is so low, the company had to write off $5.8 million worth of inventory that expired.
As Eisai and Arena Pharmaceuticals (NASDAQ: ARNA ) begin to market their competing obesity drug Belviq, it'll be interesting to see if they eat into each others' sales or if they're able to use the increased promotion to drive the overall demand for obesity drugs higher. I'm inclined to guess the latter.
Despite the low demand, there was one interesting number VIVUS shared during the conference call: Qsymia has been prescribed by nearly 15,000 doctors, a 79% increase over the number at the end of the fourth quarter. At least doctors are increasingly willing to give it a try.
Unfortunately "a try" is pretty much all they're interested in at this point. The company said more than 23,000 patients started on the drug in the first quarter. That's about 1.5 patients per doctor.
Sure, there were a lot of prescribers added this quarter, but even if you assume that the approximately 6,600 new prescribers this quarter only prescribed the drug to one patient, then the approximately 8,400 doctors that had experience with the drug before the quarter began prescribed the drug to just two patients during the quarter.
There are a few reasons doctors haven't flocked to prescribe Qsymia in large numbers:
One bitten, twice shy. It's not particularly surprising that doctors might be a little tentative about prescribing an obesity drug, considering how previous obesity drugs have fared. Wyeth's fen-phen, Abbott Labs' (NYSE: ABT ) Meridia, and Sanofi's (NYSE: SNY ) Acomplia were all pulled off the shelves after side effects were discovered. Meridia's heart issues were uncovered in a post-marketing clinical trial. Acomplia never made it to market in the U.S., and European regulators pulled it off the market after real-world usage showed less efficacy and more-common psychiatric side effects.It costs what? There are probably some patients not taking the drug simply because of the cost. Only one third of patients with insurance have coverage for Qsymia, and many of those are at the Tier 3 level, where copays are higher, typically $50 to $100. VIVUS is shooting for having 50% coverage of people on private insurance by end of the year, which should help with sticker shock, as have the free trials and discount drugs for those not covered by insurance.
Not for sale (here). When Qsymia launched last year, the Food and Drug Administration limited its sales to mail-order pharmacies. While it's arguably more convenient to get drugs delivered to your doorstep, ordering through a mail-order pharmacy requires more initial effort than purchasing drugs at a local pharmacy. Fortunately last month, the FDA told VIVUS it could start selling Qsymia in retail pharmacies, which will begin by mid-July.
VIVUS has spent lots of money jumping over hurdles to make the drug more appealing to patients. And it plans to spend more launching a direct-to-consumer print and digital media campaign. With any luck, VIVUS will be able to find a partner to help pay for the investment. It certainly isn't cheap, and there aren't any guarantees of making it back.
Who will win the obesity drug market?
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Saturday, August 3, 2013
Cats Prove to Have Incredible Selling Power for Hasbro
Yesterday, Hasbro (NASDAQ: HAS ) announced that it had managed a 2% increase in revenue, thanks, in part, to a tiny metal cat. Earlier in the quarter, the company launched a campaign to pick one of the classic Monopoly playing pieces to be replaced. As a result, Hasbro generated 2 billion visits to its contest pages and experienced a meaningful increase in Monopoly sales. It ended up getting rid of the iron -- which was never going to be as good as the thimble -- and replaced it with a cat.
The headline was positive, as the company beat analysts' expectations, but the reality was less favorable. Hasbro posted a $6.7 million loss for the quarter, which was a fall even from its $2.6 million loss last year. Much of that was related to the ongoing restructuring of the business, which cost about $29 million in the quarter.
Fixing what's broken
The restructuring of Hasbro has been going on for a while now, and the company is hoping to see results soon. The company has been slimming down the number of products that it offers, and focusing on a few core concepts to drive growth. That cost-cutting exercise should begin to pay off in the next quarter, according to management. That could be a big win for investors, as underlying income -- setting the restructuring aside -- actually increased. The company has said that by 2014 the program will result in $100 million in savings per year.
The problems at Hasbro will almost always stem from its position among competitors. Foremost among those is Mattel (NASDAQ: MAT ) , which stormed its last quarter. The company increased revenue by 7% and earnings per share by $0.09, up to $0.11 per share last quarter. Mattel has been riding the value in its American Girl and Monster High brands.
For its part, Hasbro has been trying to get more out of all its lines, but has had trouble with its boys category. Last quarter, sales were down 20% in boys, due in part to difficult comparisons to a good quarter last year. The company is hoping that the Beyblade and Angry Birds brands continue to perform well, and that it can see some more growth in its Transformers and G.I. Joe brands.
The future of Hasbro
Some of the best options for growth may come from the company's Star Wars merchandise. Now that Disney (NYSE: DIS ) has picked up the brand, it's announced ambitious plans to release one Star Wars movie a year, starting in 2015. The company is going to alternate trilogy material with stand-alone films. That should generate all kinds of good vibes for the brand, and should result in strong sales for Hasbro.
But 2015 is a ways off, and there's a lot of ground to cover between now and then. Hasbro needs to start seeing some of the cost savings that it's planned for, and get its boys category back in the black. If it can manage to get through the next 18 months in strong fashion, then it should be well placed to take advantage of the new films. If all else fails, it could just start making cat toys, I suppose.
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Thursday, August 1, 2013
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San Jose, Calif.-based Symmetricom (NASDAQ: SYMM ) has a new chief executive officer.
On Tuesday, the "precise time" computer announced a series of changes in upper management. Current CEO David G. Cote is leaving the company "to pursue other interests" and has been replaced by new CEO Elizabeth A. Fetter, a current board member. Details on Fetter's compensation have yet to be filed with the SEC.
Additionally, Chairman of the Board Robert T. Clarkson is ceding his chair to new Chairman James Chiddix (although Clarkson will remain on the board, and actually chair the compensation committee). Finally, board members Alfred F. Boschulte and Richard W. Oliver plan to retire from the board when their terms of office expire in October.
Symmetricom shares, which have lagged the broader stock market significantly over the past year and under the past management, responded positively to the change in tack, rising 2.4% in Tuesday trading to closer at $5.20.�
Top 5 Stocks To Buy For 2014: Genus Plc(GNS.L)
Genus plc, together with its subsidiaries, engages in the application of genetics and biotechnology to animal breeding in the bovine and porcine farming sectors worldwide. It offers semen, porcine breeding animals, and veterinary products, as well as provides market research and consultancy services. The company serves farmers and food producers to improve quality, achieve production efficiencies, and increase output. It supplies dairy and beef cattle under the Genus or ABS names, as well as pigs under the PIC name. The company is based in Basingstoke, the United Kingdom.
Top 5 Stocks To Buy For 2014: Cdn Zinc Corp Com Npv (CZN.TO)
Canadian Zinc Corporation engages in the exploration and development of natural resource properties in Canada. It primarily holds a 100% interest in the Prairie Creek property, a zinc/lead/silver property that consists of 2 surface leases covering an area of 132 hectares, 12 mining leases covering an area of 7,355 hectares, and 1 additional mineral claim covering an area of 731 hectares located in the south Mackenzie Mountains of the Northwest Territories, Canada. The company was formerly known as San Andreas Resources Corporation and changed its name to Canadian Zinc Corporation in May 1999. Canadian Zinc Corporation was founded in 1965 and is based in Vancouver, Canada.
Hot Undervalued Companies To Own In Right Now: Daimler AG (DDAIF.PK)
Daimler AG (Daimler), incorporated on May 6, 1998, develops, manufactures, distributes and sells a range of automotive products, mainly passenger cars, trucks, vans and buses. It also provides financial and other services relating to its automotive businesses. The Company offers its automotive products and related financial services primarily in Western Europe and in the North American Free Trade Agreement (NAFTA) region, which consists of the United States, Canada and Mexico. During the year ended December 31, 2009, the Company derived approximately 46% of its revenue from sales in Western Europe and 21% from sales in the United States. It operates in five segments: Mercedes-Benz Cars, Daimler Trucks, Mercedes-Benz Vans, Daimler Buses and Daimler Financial Services. Its other business interests consist primarily of its equity investments in the European Aeronautic Defence and Space Company EADS N.V. (EADS) and in Tognum AG. In October 2009, Deutsche Bank AG completed t he disposal of its interest in the Company. In June 2011, Daimler AG and Rolls-Royce Holdings PLC had secured around 94% interest in Tognum AG-DJ.
Mercedes-Benz Cars
Mercedes-Benz Cars designs, produces and sells Mercedes-Benz passenger cars, Maybach luxury sedans and smart micro compact passenger cars. During 2009, Mercedes-Benz Cars contributed approximately 51% of the Company�� revenue. The Company offers Mercedes-Benz passenger cars with a range of diesel and gasoline engines. Under the AMG brand, it offers versions of Mercedes-Benz vehicles with V8 or V12 engines in all classes, except in the A-, B-, R-, GL- and GLK-Classes. The Mercedes-Benz passenger car product range consists of S-Class, E-Class, C-Class, A-/B-Classes and ML-/R-/G-/GL-/GLK-Classes.
The S-Class is a line of luxury sedans, which are available in short and long wheelbase versions. In June 2009, the Company introduced a new generation of the S-Class sedans, includ ing a hybrid version, the new S 400 BlueHYBRID. The S-Clas! s ! sedans are complemented by the CL, a top-of-the-line two-door coupe, and the SL, a luxury roadster. The E-Class is a line of luxury sedans, coupes, convertibles and station wagons. It also offers the CLS, a four-door coupe based on the E-Class. The C-Class is a line of compact luxury sedans and station wagons. The CLC Sports Coupe and the SLK, a two-seat roadster, complement the C-Class product family.
The A-Class is a front wheel drive compact and the B-Class is a front wheel drive 4-door Compact Sports Tourer (CST). The Company does not offer the A- and B-Classes in the United States. The ML-Class is a line of sport utility vehicles with permanent all-wheel drive. The R-Class is a line of SUV Tourers, which is available in a short and a long wheelbase version. The GL-Class is a line of seven seat luxury sport utility vehicles. The GLK-Class is a line of compact sport utility vehicles. The G-Class is a line of cross country vehicles with permanent four-wheel d rive that come in a short and a long wheelbase version, and as a convertible. Under the Maybach brand, the Company offers a line of luxury sedans with outstanding luxury, comfort, and individuality. Maybach sedans are available in a short and a long wheelbase version, including the Maybach 57S and 62S as sportier variations. The smart brand represents a micro compact car concept. It offers two models, the smart fortwo coupe and the smart fortwo cabrio.
Daimler Trucks
Daimler Trucks manufactures and sells trucks and specialty vehicles under the brand names Mercedes-Benz, Freightliner, Western Star, Thomas Built Buses and Fuso. During 2009, Daimler Trucks contributed approximately 21% of its revenue. During 2009, the Company ceased production of trucks under the Sterling brand name. The Company�� European Mercedes-Benz truck lines consist of the Actros and the Axor in the heavy-duty category, the Atego in the medium-duty category, and the specialt y vehicles Econic and Zetros. The Unimog, a four-wheel! drive! v! ehicle ! for special purpose applications, complements the line-up. In Turkey and Brazil, it manufactures heavy-duty and medium-duty trucks for the respective local and certain export markets. Its Mercedes-Benz trucks range from 6 metric tons gross vehicle weight (GVW) to 41 metric tons GVW.
The Company�� United States subsidiary, Daimler Trucks North America LLC, manufactures trucks and buses (based on truck chassis) in Classes 3 through 8 (from 9,000 lbs. GVW to 160,000 lbs. GVW) and sells them under the Freightliner, Western Star, and Thomas Built Buses brand names, primarily in the NAFTA region. It also manufactures chassis for trucks, buses, walk-in vans and motor homes in Classes 3 through 7 (from 10,000 lbs. GVW to 33,000 lbs. GVW). During 2009, Freightliner introduced a new version of the Coronado, an on-highway truck. It Japan-based subsidiary, Mitsubishi Fuso Truck and Bus Corporation (MFTBC), offers a truck portfolio and several bus lines, primarily for the Japanese and other Asian markets. The line-up includes the Canter trucks (light-duty), the Fighter trucks (medium-duty) and the Super Great trucks (heavy-duty) and also certain bus models (Rosa and Aero). MFTBC also sells trucks in Africa, Australia, Europe, Latin America and the United States.
Mercedes-Benz Vans
Mercedes-Benz Vans designs, manufactures and sells vans under the brand names Mercedes-Benz and Freightliner. During 2009, Mercedes-Benz Vans contributed approximately 8% of its revenue. The Company offers three lines of Mercedes-Benz vans between 1.9 metric tons (t) and 7.5t gross vehicle weight (GVW): the Vario, the Vito/Viano and the Sprinter. In the NAFTA region it sells the Sprinter under the Freightliner brand name and, since January 1, 2010, also under the Mercedes-Benz brand name. As of December 31, 2009, subsidiaries of Chrysler Holding LLC sold the Sprinter in the United States under the Dodge and Freightliner brand names, and i n Canada under the Dodge brand name.
Daimler Buses is a global supplier in the worldwide bus market. During 2009, Daimler Buses contributed approximately 5% of the Company�� revenue. Its product portfolio includes city buses, coaches, intercity buses, midi buses and bus chassis. It sells complete buses under the Mercedes-Benz and Setra brands in Europe, under the Mercedes-Benz brand name in Mexico, and under the Setra and Orion brand names in the United States and Canada. In addition, Daimler Buses produces and sells worldwide a range of bus chassis under the brand name Mercedes-Benz.
Daimler Financial Services
The Company�� financial services activities contributed approximately 15% of its revenue during 2009. It consists principally of financing and leasing services supporting its Mercedes-Benz and other vehicle businesses. The financial services the Company offers consist mainly of customized financing and leasing packages for its retail and wholesale customers in the automotive sector. It also provides financing to its dealers for vehicle inventory and property, plant and equipment purchases, and it offers insurance brokerage and fleet management services, including dealer property and casualty insurance. In Germany, the Company operates a licensed bank, the Mercedes-Benz Bank. The Mercedes-Benz Bank offers financial services to its customers and employees in Germany. These services include leasing and sales financing services, car savings plans, credit cards and demand deposit accounts. In addition, the Mercedes-Benz Bank operates branches in Great Britain and Spain to refinance the local dealer portfolios.
The Company competes with BMW, Volkswagen, Fiat, Ford, General Motors, PSA, Renault, Tata Motors, Toyota, Honda, Nissan, Suzuki, Scania, Iveco, Volvo, DAF, Navistar International, Paccar, Hino, Isuzu, MAN Commercial Vehicles, Irisbus and Agrale.
Top 5 Stocks To Buy For 2014: Sapiens International Corporation N.V.(SPNS)
Sapiens International Corporation N.V. provides software solutions for the insurance industry primarily in North America, Europe, Israel, and the Asia Pacific. The company offers solutions for the property and casualty (P&C)/general insurance, as well as life, pension, and annuity markets. Its products include RapidSure, a component-based software solution used for general, personal, and commercial lines of businesses, including homeowners, fleet insurance, and specialty lines insurance products; IDIT, a component based software solution that addresses the needs of general insurance carriers for traditional insurance, direct insurance, banc assurance, and brokers markets; Insight for Reinsurance, a solution to handle P&C/general reinsurance activities of general insurance carriers and brokers; and Insight for P&C, a software solution for P&C carriers to support legacy solutions. The company?s products also comprise ALIS, a software solution for individual, group, and work site life and pension insurance products; eMerge, a rules-based model-driven architecture that enables the creation of enterprise applications with little or no coding using agile methodologies; and Decision, a business decision management solution developed for the financial services market, including mortgage banks, investment banks, and insurers. In addition, it provides implementation and integration services; custom-made IT solutions that assists organizations to meet its business challenges; and legacy modernization solution, mobile application solution, and application delivery services. Sapiens International Corporation sells its products and services through various distribution channels, which include direct sales force, system integrators, and distributors. The company was founded in 1982 and is headquartered in Rehovot, Israel. As of January 27, 2012, Sapiens International Corp. NV operates as a subsidiary of Formula Systems (1985) Ltd.
Top 5 Stocks To Buy For 2014: Financial Institutions Inc.(FISI)
Financial Institutions, Inc. operates as the holding company for Five Star Bank that provides consumer and commercial banking, and financial services to individuals, municipalities, and businesses in central and western New York. Its deposit accounts consist of noninterest-bearing demand, interest-bearing demand, savings, money market, club, individual retirement, and other qualified plan accounts, as well as certificates of deposit. The company?s loan portfolio comprises commercial loans, commercial real estate loans, one-to-four family residential mortgages, consumer automobile loans, recreational vehicle loans, boat loans, home improvement loans, closed-end home equity loans, home equity lines of credit, collateralized and uncollateralized personal loans, deposit account collateralized loans, commercial and agricultural working capital and revolving lines of credit, commercial and agricultural mortgages, equipment loans, and crop and livestock loans. It operates throug h a network of approximately 51 offices and 70 ATMs in 14 contiguous counties of western and central New York. The company, through its other subsidiary, Five Star Investment Services, Inc., provides brokerage services. Financial Institutions, Inc. was founded in 1931 and is based in Warsaw, New York.