Thursday, May 31, 2012

Competition Heats Up for Solar Installers

For solar power to become a truly affordable option for homeowners and commercial properties around the U.S., an infrastructure of installers needs to be built to provide the services needed. Once that is done, the installation process can be streamlined, paperwork will be reduced, and utilities will be able to handle the new distributed power sources going up around the country.

Progress has been taking place at a slow and steady pace in recent years, but it may begin to accelerate now that module costs have fallen to new record lows.

Compacting a fragmented market
Right now, there are thousands of tiny companies involved in the installation of solar power. According to GTM Research, the largest three residential solar installers control just 44% of the market nationwide. And most of that is condensed in a few states like California and Arizona.

The biggest residential solar installer, Solar City, commands just 14% of the market, but like others has used acquisitions to expand its presence in recent years. As these installers begin to compete on a larger stage the pressure and ability to reduce costs will increase, leading to lower costs for consumers. So will the awareness of solar power as an option for customers.

On the manufacturer side, this will mean larger purchases from installers and a smaller set of preferred suppliers. In Hawaii, where solar has already reached grid parity, some solar installers are touting high-efficiency modules as a way to get the most bang for their solar dollar.

RevoluSun is reportedly the first company to offer SunPower's (Nasdaq: SPWR  ) E20 series 437 solar panels to the North American market, opening a potentially lucrative space to the company. Sunetric is using the Suniva Optimus module to push efficiency to a new level.

Solar leases play a big role
Banks are also beginning to play a big role in the expansion of solar in the U.S. Wells Fargo (NYSE: WFC  ) created another $100 million fund last week, this time for Enfinity NV's North American unit to finance commercial-scale projects. The bank has created other funds for MEMC's (NYSE: WFR  ) SunEdison subsidiary, SunPower, and GCL-Poly.

Solar leases from companies like SunRun and SolarCity are making it easier and more affordable to bring solar to the masses.

What to do about it
Without a national standard for how homeowners and commercial properties will be paid for solar power, the role of the solar installer increases. Expanded residential installations will also put increased importance on efficiency. Since the module is less than half of the cost of a residential installation, the power output becomes more important. That gives an advantage to companies focused on efficiency and cutting balance of system costs, like Canadian Solar (Nasdaq: CSIQ  ) and SunPower.

Stay on top of solar stocks with My Watchlist. My Watchlist will find all of our Foolish analysis on the stocks you pick and if you sign up for My Fool Daily, our articles about your favorite stocks will come straight to your inbox.

  • Add�MEMC�Electronic�Materials�to My Watchlist.
  • Add�SunPower�to My Watchlist.
  • Add�Canadian�Solar�to My Watchlist.

Tellabs Up On Beat-And-Raise Q1

Tellabs (TLAB) shares are trading higher this morning on a strong Q1 report.

For Q1, the networking equipment company posted revenue of $380 million, up 5% from a year ago, and ahead of the Street at $371.5 million. Non-GAAP profits of 11 cents a share beat the Street at 9 cents. GAAP gross margin was 50.7%, up from 44.2% a year ago.

For Q2, the company sees revenue up 10%-12% sequentially, which implies $418 million to $426 million, well ahead of the Street at $388 million. The company sees gross margin in Q2 flat with Q1; for the full year, TLAB sees gross margin in the high 40s.

The company sees non-GAAP operating expenses in Q2 up in dollars from Q1, but down as a percentage of revenue.

TLAB this morning is up 91 cents, or 11.1%, to $9.13.

Top Stocks For 2012-1-31-16

TSPG, TGI Solar Power Group Inc, TSPG.PK

DrStockPick Stock Alert!

 

 

 

Dr Stock Pick HOT News & Alerts!

TGI Solar Power Group Inc, Received $1 Million Credit Line

 

Friday September 4, 2009

TGI Solar Power Group Inc, Received $1 Million Credit Line

TGI Solar Group (Pinksheets:TSPG), a provider of solar energy products and solutions, announced on August 26 that it has received an equity investment and a $1 million revolving line of credit from VNG Invest Sprl, parent company of Prime Solar srl, its new strategic partner, with offices in Brussels, Belgium. The funds will be used for working capital and energy related projects.

“Since our market is forecast for tremendous growth, it is critical that we have capital to keep pace,” said Henry Val, TGI’s CEO. “We are confident that Prime Solar’s understanding of the alternative energy sector and VNG’s wealth of resources will prove beneficial for the long term.”

Prime Solar srl (www.primesolar.com) is a licensed and insured Italian Solar Energy Contractor and Solar General Building Contractor, specializing in the creation and installation of custom-designed residential and commercial solar electric power, solar heating, and wind energy systems. Its turn-key approach includes handling the job from solar system design through installation and final inspection.

About TGI SOLAR POWER GROUP INC.

TGI Solar (TSPG) is provider of manufacturing equipment and turnkey manufacturing solutions to the photovoltaic (PV) industry. The Company’s products and solutions are used for production of solar grade polysilicon, manufacturing of multicrystalline silicon wafers, production of solar cells and assembly of complete modules. The firm provides facility and process design and integration know-how with its equipment. The Company offers its products and services to PV product manufacturers on a worldwide basis, and a substantial percentage of its sales are to customers outside the United States.

Contact:
TGI SOLAR POWER GROUP INC.
Email Contact
1-888-766-6527
David Zazoff
212-505-5976

Top Stocks To Buy For 2012-1-31-3

Norfolk Southern Corp. (NYSE:NSC) achieved its new 52 week high price of $78.40 where it was opened at $76.40 UP +0.57 points or +0.75% by closing at $76.12. NSC transacted shares during the day were over 5.14 million shares however it has an average volume of 2.08 million shares.

NSC has a market capitalization $26.89 billion and an enterprise value at $33.18 billion. Trailing twelve months price to sales ratio of the stock was 2.72 while price to book ratio in most recent quarter was 2.54. In profitability ratios, net profit margin in past twelve months appeared at 15.80% whereas operating profit margin for the same period at 27.59%.

The company made a return on asset of 6.16% in past twelve months and return on equity of 14.78% for similar period. In the period of trailing 12 months it generated revenue amounted to $9.90 billion gaining $27.27 revenue per share. Its year over year, quarterly growth of revenue was 17.10% holding 26.50% quarterly earnings growth.

According to preceding quarter balance sheet results, the company had $488.00 million cash in hand making cash per share at 1.38. The total of $6.75 billion debt was there putting a total debt to equity ratio 63.67. Moreover its current ratio according to same quarter results was 1.17 and book value per share was 30.01.

Looking at the trading information, the stock price history displayed that its S&P500 52 Week Change illustrated 17.97% where the stock current price exhibited up beat from its 50 day moving average price of $73.67 and remained below from its 200 Day Moving Average price of $69.01.

NSC holds 353.22 million outstanding shares with 352.22 million floating shares where insider possessed 0.34% and institutions kept 67.10%.

Top Stocks To Buy For 2012-1-31-4

MI Developments Inc. (USA) (NYSE:MIM) achieved its new 52 week high price of $32.99 where it was opened at $32.89 up 0.57 points or +1.76% by closing at $32.92. MIM transacted shares during the day were over 179,016 shares however it has an average volume of 292,243 shares.

MIM has a market capitalization $1.54 billion and an enterprise value at $1.72 billion. Trailing twelve months price to sales ratio of the stock was 4.19 while price to book ratio in most recent quarter was 1.57. In profitability ratios, net profit margin in past twelve months appeared at 10.39% whereas operating profit margin for the same period at 12.73%.

The company made a return on asset of 1.69% in past twelve months and return on equity of -5.27% for similar period. In the period of trailing 12 months it generated revenue amounted to $361.88 million gaining $7.73 revenue per share. Its year over year, quarterly growth of revenue was 9.60% holding 253.10% quarterly earnings growth.

According to preceding quarter balance sheet results, the company had $90.74 million cash in hand making cash per share at 1.94. The total of $298.72 million debt was there putting a total debt to equity ratio 30.97. Moreover its current ratio according to same quarter results was 1.25 and book value per share was 20.59.

Looking at the trading information, the stock price history displayed that its S&P500 52 Week Change illustrated 3.38% where the stock current price exhibited up beat from its 50 day moving average price of $29.12 and remained above from its 200 Day Moving Average price of $29.27.

MIM holds 46.85 million outstanding shares with 40.12 million floating shares where insider possessed 50.58% and institutions kept 33.00%.

Is Facebook worth $100 billion?

NEW YORK (CNNMoney) -- A long list of tech IPOs captured attention in 2011, but no company has been drooled over like Facebook. And finally, its debut looks to be imminent.

The Wall Street Journal reported Friday that Facebook may file for an initial public offering as early as this Wednesday. It's still not certain if Facebook will actually file this week.

But that hasn't stopped people from speculating about how much Facebook might be worth.

Some experts have suggested that the social network could be worth anywhere between $75 billion and $100 billion once it starts trading. No matter what the valuation Facebook's IPO is undeniably hot, says Max Wolff, chief economist at GreenCrest Capital.

He expects Facebook will be valued at $85 billion to $100 billion, and that the company will sell about 8.5% to 10% of its available shares in the offering. Based on those estimates, Facebook would raise between $7.2 billion and $10 billion from the sale of its stock.

But there's a lot more riding on Facebook's paperwork than wealth creation. The social network has become an entire ecosystem, supporting independent app makers and gaming platforms like Zynga (ZNGA).

Facebook's filing will have implications for companies that depend on it, as well as the social media landscape at large. Until then, analysts are left to speculate about Facebook's revenue streams and profitability -- and whether it really deserves a $100 billion market value.

Michael Pachter, a research analyst at Wedbush Securities, says the rumored valuation range is reasonable -- though he won't cite a specific estimate of his own.

How Facebook makes money -- and could make more: The vast majority of Facebook's revenue comes from advertising: a combination of search and display ads. And the sales growth is incredibly robust.

Research firm eMarketer estimated last September that Facebook's ad revenue would more than double in 2011 to $3.8 billion and increase another 52% to $5.78 billion in 2012.

Facebook has grown by grabbing market share from Google and Yahoo. Last year Facebook comprised 16.3% of the so-called display (i.e. banners and other graphical ads) market, eMarketer estimates -- compared with Yahoo's (YHOO, Fortune 500) 13.1% and Google's (GOOG, Fortune 500) 9.3%.

Martin Pyykkonen, analyst at Wedge Partners, says Facebook is highly appealing to advertisers because about two-thirds of its users fall into the coveted age demographic of 18-49. He thinks Facebook's ad targeting will become even more effective over time.

"The 'Like' button option is a basic example of targeting," Pyykkonen wrote in a note to clients Monday. "[It's] likely that advertisers will be able to even better target their audiences as Facebook goes deeper with integrating apps, games, movies, music."

Facebook's other revenue stream is its payment system for purchases within apps and games: Facebook Credits. Facebook keeps 30% of the revenue from those payments, and passes the remaining 70% on to the app developer.

Facebook Credits now comprises 10% of the company's total revenue, up from 5% in early 2010, Pyykkonen estimates.

Those estimates will soon be backed up -- or refuted -- by hard numbers from Facebook. Once its IPO filing does finally land, it will help answer questions about the overall social media market.

"People are extrapolating outcomes into an environment that's hungry for missing details," said Wolff. "It's like all the guys in the class spreading rumors about the prettiest girl in the school." 

Largest IPO in History? Facebook Won’t Even Crack the Top 10

Ready for the largest IPO in history? Well, you�ll have to keep waiting. Because Facebook won’t be it.

Facebook will file documents for its initial public offering of stock as early as next week, if rumors are true. Reports indicate a Facebook IPO could raise $75 billion to $100 billion.

A report filed in The Wall Street Journal has the details. Morgan Stanley (NYSE:MS) is the top candidate for lead underwriter, a bit of a black eye for Goldman Sachs (NYSE:GS). The Facebook IPO valuation is fluid, but could push into 12 figures. And most importantly, the initial Facebook stock offering will garner about $10 billion in new funds for the social media company to grow.

You may think the Facebook IPO is all about making investors and staff like CEO Mark Zuckerberg filthy rich. After all, Facebook is a dominant force already with Twitter, LinkedIn (NYSE:LNKD) and Google‘s (NASDAQ:GOOG) Google+ obvious laggards in reach and revenue from social media operations. But in theory, IPOs are all about raising capital to do business — despite the fact that there�s a lot of cash sloshing around, making multimillionaires overnight.

But believe it or not, Facebook will not the biggest IPO in history. It actually won’t even be in the top 10 worldwide — and many of the biggest offerings didn�t even take place on American exchanges. As for domestic offerings, Facebook is not even in the top three in U.S. history.

Here�s the list:

#10: Bank of China (PINK:BACHY) isn�t even listed on a major U.S. exchange, but its 2006 IPO topped $11.2 billion. As the name implies, it�s a massive China financial operation.

#9: Deutsche Telekom (PINK:DTEGY) is another pink sheet powerhouse that offered stock elsewhere and not on major U.S. exchanges. Proceeds from the 1996 IPO topped $12.5 billion at the time. If adjusted for inflation, this IPO would be even higher up the list, too.

#8: Nippon Telegraph and Telephone (NYSE:NTT) is now offered as an ADR, or American Depositary Receipt, for domestic investors. But at the time of its 1987 IPO, the company wasn�t available on the NYSE. Nippon raised $13.7 billion (not adjusting for inflation)

#7: Enel (PINK:ENLAY) is a former nationalized energy company in Italy, which has never been listed on U.S. exchanges. Proceeds from the 1999 IPO total $16.6 billion.

#6: NTT DoCoMo (NYSE:DCM) is one of Japan’s leading providers of mobile and data services. Shares went public in Tokyo back in 1998, raising $18.1 billion (not adjusted for inflation). Shares weren�t available as ADRs until years later.

#5: Visa (NYSE:V) finally places an American IPO on the list. The payment processor was the last big IPO before the market for public offerings went into hibernation due to the financial crisis. In 2008, Visa raised $19.7 billion with its IPO.

#4: American International Assurance, or AIA, is a major insurance company based in Hong Kong. It once was a division of bailout target American International Group (NYSE:AIG) but was spun off in part to satisfy debts. The proceeds of the AIA IPO were $20.5 billion in 2010.

#3: Industrial and Commercial Bank of China (PINK:IDCBY) is another big Chinese financial outfit that doesn�t trade on major domestic exchanges. The 2006 IPO of this bank raised $21 billion through simultaneous listings on both the Hong Kong Stock Exchange and Shanghai Stock Exchange to tally the largest IPO in history at the time.

#2: Agricultural Bank of China topped this previous IPO, however, in 2010 with the largest IPO in history … again, at the time anyway. The tally was a total $22.1 billion in proceeds.

#1: General Motors (NYSE:GM) might surprise you as the top IPO in history. The $23.1 billion public offering of GM stock back in 2010 was performed, in part, to pay back the government. At the time, Uncle Sam owned a 61% stake in the automaker. Unfortunately, the feds didn�t recoup as much cash as they had hoped. Ultimately, taxpayers lost money on the automaker bailouts despite GM�s record-breaking IPO.

Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace??.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. Jeff Reeves holds a position in Alcoa, but no other publicly traded stocks.

SM: Miscellaneous Itemized Deductions

THE FIRST THING to know about miscellaneous itemized deductions is that if they're small, you probably won't benefit from them. If all you have in your miscellaneous category is a random work-related magazine subscription, forget about it. The only way you're allowed to deduct miscellaneous items is if they total more than 2% of your adjusted gross income (AGI). You can then deduct anything in excess of that 2%.

Confused? Let's say your AGI is $50,000. Two percent of that is $1,000. So your total miscellaneous itemized deductions must exceed $1,000 in order for you to claim a penny. But if you have miscellaneous expenses of $1,500, you'll only get to deduct $500, or $1,500 minus $1,000.

Next comes the somewhat inexact science of defining what qualifies for a miscellaneous deduction. These include business expenses that you're not reimbursed for, such as dues paid to a union or other professional society, uniforms if they're not appropriate for wear outside of the workplace, courses you take to improve your job skills (but not to get you a job in a new field), and the expense of looking for a new job. Other examples of miscellaneous expenses include some home-office deductions, investment and legal fees if they helped you produce taxable income and the expense of hiring an accountant to help you master your 1040. (See "Writing Off Your Investment Costs" and "Home Office Deductions For a complete list of what qualifies, check out the IRS Web site.

If you're close to meeting the 2% floor one year, try bunching some of next year's expenses into that year. For example, rather than wait until January to enroll in that continuing education class, pay your tuition in December. That way, maybe you can get some tax savings from your miscellaneous deductions at least every other year.

Wednesday, May 30, 2012

Something Spooky About the Way This Rally Is Unfolding

Like all traders who have done it for long enough, I have several habits that I have developed over the years to cope with winning and losing streaks. For example, if I look at a chart and I really think it looks bullish, I will sometimes turn around and look at it upside-down; if in that position I think it really looks bullish too, then I know that what I’m seeing is actually what I want to see. Sometimes, when trading doesn’t seem to be playing out quite like I expect it to – not merely losing money; losing sometimes is a part of trading, but losing in ways that are surprising me – I push my chair back and, as New Age-y as this might sound, I try to listen to my feelings. Really good traders (of which I am not one) can tell when their subconscious is urging a change of action. I have been around some good traders like that, but the classic example is probably George Soros. His son explained in Soros: The Life and Times of a Messianic Billionaire that:

My father will sit down and give you theories to explain why he does this or that. But I remember seeing it as a kid and thinking…at least half of this is bull—-. I mean, you know the reason he changes his position in the market or whatever is because his back starts killing him. It has nothing to do with reason. He literally goes into a spasm, and it’s this early warning sign.

So maybe there’s something to this.

When I lean back now, I feel an uneasiness – a disquiet. This isn’t because the market has been going up and I’m not on board. I am on board, and maybe some of what I feel is that I’m far closer to my neutral policy mix than I should be given valuations. But there is something spooky in the way the rally is unfolding. I don’t feel comfortable in my chair. To be sure, I have felt for a while that the rally didn’t make a lot of sense, but it never made me feel like my posture was off.

Incidentally, I suspect that one reason the market has been doing what it has been doing – a slow, extremely steady march higher on light volumes – may be because one of the more popular trades over the last couple of years has been the covered-call gambit in which calls are written against a portfolio position for a little “extra carry.” It is generally sold as something to do in range-bound markets, which is what many people expected out of 2010 (of course, put-call parity tells us that selling a covered call is functionally equivalent to selling an in-the-money naked put, but I’m not here to harsh on this popular strategy). The problem with it is that if the market rallies through your strike, your stock is called away and you are forced to buy it again, or to buy the option back before expiry, if you want to remain long.

If lots of people were pursuing such a strategy, you would see declining implied volatility despite dicey economic and geopolitical risks. The VIX currently is as low as it has been since July 2007, around the time of the first serious mortgage rumblings. (In the summer of 2007, most people thought the “subprime problem” was contained, and not many people were particularly concerned about it. The market was just about to set a new (nominal) high.) So this fits. It also fits the character of trading, which seems lackadaisical and as has been well-documented, low-volume. People aren’t running to “put money to work” and adding to their positions aggressively. They seem to be buying…reluctantly.

I am not saying that the market is exhibiting a sense of disquiet, though. I am saying that I am feeling uncomfortable in some way. That being said, there are some odd incongruities out there. The headline on Risk.net “ECB overnight lending rockets to 19-month high” (incidentally, if you don’t subscribe to Risk.net a little trick is that you can just put the headline into Google and a link will take you to the full article) caught my attention. It is expensive to borrow from the ECB. It could just be a one-week glitch for some reason, but it is curious. The 3-month Euribor rate hasn’t done anything interesting in the last week, but it is trading above where it was in the middle of Q4 when there was a turn premium included. Maybe someone else is feeling the vague sense of unease that I have.

The behavior of oil, given the striking wave of political unrest in the Middle East, is strange but seems less strange if you look at Brent Crude (over $102 and near a post-2008 high) than if you look at West Texas Intermediate (WTI), which is around $86 and seven bucks off the highs. But that discrepancy in itself is odd. Brent crude oil is deliverable into the NYMEX contract, but not vice-versa, so pure arbitrage isn’t possible, but the ICE Brent contract is cash-settled based on local commercial-size market trades so if Canadian oil is gushing into Cushing, it is surprising that a $15/bbl discrepancy isn’t enough to persuade someone to fill up a tanker and deliver it into that market. In any event, there has been a lot of ink spilled on the difference between the contracts but it doesn’t seem obvious to me that there is a definitive answer. In any event, even the Brent contract hasn’t responded in the usual, spiky fashion to the widening circles of unrest in the Middle East – the rally has been slow and steady. Is there no risk aversion? What is going on here?

I have trouble believing that all of the crosscurrents are simply canceling: gradually-building economic strength in the U.S., widening violence in the Middle East, China’s efforts to slow its economy (on Friday China raised reserve requirements slightly, but unlike when the CCB hiked interest rates a couple of weeks ago the market seemed to ignore it), signs that inflation is starting to rise, continuing debt problems in a number of European countries and uninspiring leadership on our own debt problems in the U.S.. Could it be that everyone is just confused?

Well, count me in that group. I don’t feel right, so one thing I am going to do is to cut my equity positions down. If that doesn’t make me feel less disquieted, maybe I’ll try increasing them.

I’m not happy with this article.

Read the Fed statement

NEW YORK (CNNMoney) -- This is the statement of the minutes of the Federal Open Market Committee meeting released January 25, 2012.

Information received since the Federal Open Market Committee met in December suggests that the economy has been expanding moderately, notwithstanding some slowing in global growth. While indicators point to some further improvement in overall labor market conditions, the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment has slowed, and the housing sector remains depressed. Inflation has been subdued in recent months, and longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth over coming quarters to be modest and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that over coming quarters, inflation will run at levels at or below those consistent with the Committee's dual mandate.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who preferred to omit the description of the time period over which economic conditions are likely to warrant exceptionally low levels of the federal funds rate. 

Energy Stock APC Approaching Buy Point

Anadarko Petroleum Corporation (NYSE:APC) –� This major independent oil and gas exploration and production company, with operations primarily in the United States, the deepwater of the Gulf of Mexico, and Algeria, is in a consolidation that began early last year.

After a $4 billion settlement with BP (NYSE:BP), the focus can now shift to APC�s top-tier exploration and development portfolio. Earnings are estimated to be $2.95 in 2011 and $3.05 in 2012. Recent developments in the supply of natural gas should help the company�s bottom line.

The stock has been consolidating within a massive �V� formation with a bottom at under $60 and a neckline at $84. The 200-day moving average at $75 should hold any pullbacks, and so that is the preferred buy point. A breakout through the neckline at $84 has a target of $110.

Sony CEO Stringer Replaced by Consumer Vet Hirai

Sony named the former head of its computer entertainment division, Kaz Hirai, its new CEO replacing Sir Howard Stringer.

Sony (SNE) this morning said it will replace CEO and President Sir Howard Stringer, 69, with Kazuo Hirai, 50, the head of its consumer products and services, effective April 1st.

Stringer, who was named chairman and CEO in 2005, and added the president title in April of 2009, said he’d recommended Hirai to the board of directors as his replacement. Stringer will retain his chairman title.

The announcement comes just one day before Sony’s Q4 report, expected Thursday morning, and follows a 9% drop in Sony’s revenue in the last quarterly report, a result of weak LCD TV sales, along with a collapse in profit in the quarter.

Stringer said Hirai had distinguished himself in driving the PlayStation game console and software business. (Reporters covering Sony or the game business for some time now know Hirai as the hip, energetic, outgoing face of the game biz at the company, as has been my experience of the man.)

Hirai remarked, “As challenging as times are for Sony now, were it not for the strong leadership of Sir Howard Stringer these past seven years, we would have been in a much more difficult position.”

Hirai laid out something of a mission statement:

The path we must take is clear: to drive the growth of our core electronics businesses – primarily digital imaging, smart mobile and game; to turn around the television business; and to accelerate the innovation that enables us to create new business domains. The foundations are now firmly in place for the new management team and me to fully leverage Sony�s diverse electronics product portfolio, in conjunction with our rich entertainment assets and growing array of networked services, to engage with our customers around the world in new and exciting ways.

Sony’s ordinary shares (6758JP) traded in Japan fell �27, or 2%, to �1,364.

UBS’ Santucci on Training, Recruiting

Paul Santucci is COO of the UBS Wealth Management Advisor Group for the Americas, which includes about 6,900 FAs. He joined UBS in 2003 from Wachovia and in February 2010 was promoted to his current post by Bob McCann.

He says that UBS Americas’ current advisor-training program was in place before ex-Merrill Lynch leader McCann came on board (to head the UBS wealth-management operations) in early 2009, though it was suspended for a period of time.

McCann and other executives have joined UBS over the past two year or so, like Bob Mulholland (another Merrill veteran, who joined UBS in early 2010), have given the training program more of “a common-sense approach.”

“Firms still hire 1,500-2,000 advisors a year hoping that some will stick,” said Santucci. The UBS approach is more successful than that of its peers, he says, because “we’re making sure the best managers have an opportunity to hire [new advisors] on to teams —and it’s working. We do not want to hire the most but the best, and so far we have been lucky.”

 Can you give us some more details about the UBS training program?

We hire up to 200 to 225 new financial advisors [a year], with 90 percent of them going onto teams and helping us create succession plan for our veteran advisors.

We’ve seen vast improvement within this program, and those within it are doing well. In contrast to other firms, we’ve had many — 75 percent — getting into the first- and second-quintiles in terms of performance vs. 15-20 percent at other firms over the past few years.

We believe we have more success through smaller groups. Branch managers can sit down and coach the new financial advisors and other team members.

Trainees are given guidelines … and certain goals of revenues and assets for say, at seven months, and branch managers decide to hang on to the advisors at the seven-month mark. Most are in the first and second quintile at this point.

 What types of people are hired into the training program?

Most individuals entering the program come in without a license and go through that process with us. They’re from all walks of life. Our numbers, in terms of diversity, have improved significantly with about 30-35 percent [in this category], including women.

We don’t have an age-range target but tend to hire those just out of business school and some who are making career changes, such as 45-50 years old who are apt to go on to be sole proprietors of a practice.

Those who are 25-30 are more likely to join teams, and we are really looking at those who want to be hired to join teams. They’re the majority of our [trainee] hires.

 Why is the team approach working for UBS?

Our branch managers realize how important it is for new financial advisors to enter the business and for there to be proper succession planning.

We are only giving new advisor-training tasks to those in branch managers who have done this work successfully in the past, meaning that they are able to help advisors perform at the level of those in the first and second quintiles.

 How are veteran advisors joining FAs as team members?

In terms of experienced advisors who want to come to UBS, our flow from the branch managers is at a peak. We are taking a long hard look at them, and those joining us come with a lengthy list [of clients.]

We do specific due diligence on new recruits. We ask if we are we the right firm for them, because we have to help them move over their business. And we ask if they are right for us — through a letter of understanding. We’re at a record level when it comes to doing this type of due diligence.

Again, the majority of veteran advisors are joining us from our natural competitors.

 Why do you believe the recruiting pipeline is so robust?

It’s my opinion that we have a turnaround story to tell. We are one of the best in wealth management. Our branch managers are out telling the story. They are good business coaches, and those recruiting for our organization are having success.

In any marketplace, like New York or elsewhere, people talk to each other, and they want to build [their practice] at best place, which makes people continue to want to talk to our organization. It’s been a great past two years. •

 

Tuesday, May 29, 2012

Boston Scientific: Struggles Today, Still Hope For Tomorrow?

The seemingly never-ending road to recovery just got a little longer for Boston Scientific (BSX). Although this long-struggling med-tech name has been making some progress in restructuring its businesses and cost structure, fourth quarter earnings highlight that growth and competition are still pressing worries. Though BSX has a fairly deep pipeline, patient investors ought to ask themselves if the company will be able to gain and hold real share in these emerging growth markets.

Q4 Earnings Show Blemishes On The Crown Jewels

Boston Scientific reported that total revenue declined 8% in constant currency terms this quarter, with 5% erosion in the core businesses. Not only was this more than 3% below the average estimate, it was beneath the bottom of the range.

Worse yet, the company was weakest in its largest and most significant businesses. Cardiac rhythm management sales were down 15% (missing estimates by more than 5%) and ICD sales were down 18% - much worse than the recently-reported results at St Jude (STJ) and strongly suggestive that BSX continues to cede share to St Jude and Medtronic (MDT).

The story with stent sales was not substantially better. Total stent revenue was down 7% (missing estimates) and drug-coated stent sales fell 6%. With Abbott's (ABT) worldwide stent sales falling about 1% for the same quarter, BSX was clearly weakening further ahead of its much-anticipated Promus Element launch.

Other businesses were basically okay. Endoscopy, neuromodulation, and peripheral were all in line with expectations and pretty consistent. That said, it looks like rivals like Covidien (COV) and Bard (BCR) are gaining in peripheral and neither are losing quite as much share in soft tissue as feared (and perhaps Johnson & Johnson (JNJ) is gaining).

Not All Bad News

If there's good news in the quarter, it's that BSX did pretty well with its profits despite the revenue shortfall. The company's gross margin of 64.3% and though down from last year, was up sequentially and pretty respectable vis a vis analyst estimates. Operating income did fall 22% on an adjusted basis, and though the adjusted operating margin was perhaps a little light, it wasn't worryingly so. Said differently, the cost structure of BSX is not the company's biggest worry today.

Is That The Cavalry Coming … Or Mister Ed?

Boston Scientific shareholders pretty much have no choice but to hope that the company's pipeline really delivers on its potential. The good news is that the company has several lucrative shots on goal, though investors need to have some concern for the quality of the competition.

Promus Element should help Boston Scientific gain share on Medtronic and Abbott in drug-coated stents, though expect the rivals to heavily market against the concerns about longitudinal stent compression with the Promus. Still, doctors tend to like to check these things out for themselves, so expect the BSX stent to get a fair shot. Although this will be a more profitable product for BSX (no need to split profits with Abbott), the time in sunshine may be limited if Abbott can get its bioabsorbable stent on the market in due course (and assuming the data is good).

Other markets like atrial fibrillation, hypertension, transcatheter heart valves, and left atrial appendage devices could all be worth hundreds of millions. The trouble, though, is in BSX's time to market and product differentiation. Almost everybody (Medtronic, JNJ, St. Jude, and AtriCure (ATRC) has its hat in the a-fib ring and there is also the risk that new drugs from companies like JNJ (Xarelto) or Pfizer (PFE) (Eliquis) will shrink the market (these drugs don't cure a-fib, but do reduce the risks of stroke).

Likewise, the same large four companies are targeting renal denervation as a treatment for hypertension. It's potentially a $10 billion-plus market, but Medtronic already seems to have a leg up. Looking at minimally invasive heart valve replacement, here too there is a large market opportunity that BSX can address with its Sadra acquisition, but it looks like BSX will enter the market (2016) well behind Edwards Lifesciences (EW) and Medtronic, and perhaps St. Jude as well.

Even one of BSX's most promising markets, left atrial appendage closure, won't be exclusive. Boston Scientific got great technology with the Atritech acquisition, but St. Jude and Medtronic are coming as well and BSX will have to split the market - though several hundreds of millions in incremental sale is hardly just a consolation prize.

Going From Buy To Build To Bought Out?

It's worth noting that most of BSX's growth potential is to come from technologies acquired in deals over the past couple of years. Said differently, BSX's internal R&D productivity has not been great. Promus Element is a good stent, but the company risks falling further and further behind St. Jude and Medtronic in CRM due to a lack of exciting new products. Longer term, it's simply not sustainable to keep buying growth.

On the flip side, might someone step up and buy BSX for its own? Medtronic and St. Jude couldn't do it with the antitrust concerns and pipeline redundancies, but JNJ could be interested in the business if they believe there's hope for resuscitating the CRM line. Chances are, though, that if BSX gets a bid it will be one that's off the board right now - a private equity company, perhaps, or a company like General Electric (GE) looking to expand into implantable device-based medicine.

The Bottom Line

Is Boston Scientific stock cheap? If you believe that they can stem the losses in CRM, reignite the stent business, keep the other businesses growing, and develop this pipeline, then the answer is "yes". The problem, though, is that trusting BSX to get its house in order over the past few years has been like entrusting small children to a dingo-run daycare.

There absolutely is a time and place to buy BSX, but I would suggest it's when the company has proven that CRM and stents are under control. Will that mean leaving money on the table? Since analysts are perpetually looking for turnarounds, the answer is probably "yes", but it's a question of risk and reward.

Execute on the existing business opportunities and bring that pipeline to fruition, and BSX is worth something in the high single digits. But if management cannot stabilize CRM and stents, holding BSX will give investors a lot of papercuts over and over again.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The Currency Trading Forex Dilemma

Retail investors are so much usually unfamiliar with the mechanisms of the foreign exchange marketplace or Forex. The Internet has brought the largest publicity to a marketplace that until very just lately used to be the domain of establishment corporations and mega financial institutions. But times amendment and person investors are eager to check out their good fortune at currency buying and selling the Forex market transactions. Here are a few parts that may allow you to define and consider this marketplace ahead of working on it.

There isn’t any regulated exchange for currency. Trading Forex conditions aren’t managed by a central body, there is not any arbitration panel for disputes and the contributors usually work at the basis of credit score agreements. If you might be used to based exchanges, you should omit the whole lot you know; here, you’ve got compete and cooperate along with your competitors at the related time. Currency buying and selling Forex setting in reality represents the most fluid and liquid market of the world.

Many businesses don’t get enthusiastic about currency buying and selling the Forex market transactions directly, however they hire dealers or dealers to intermediate. The broker will get a commission from what the investors buys or sells. Otherwise, there aren’t any other commissions charged on Forex. Dealers think a marketplace possibility together with the firms or folks that they represent. Since there aren’t any fees and commissions charged, each additional cent won represents sheer profit.

The nature of currency buying and selling the Forex market is solely speculative. Nothing sells, nothing will get bought, for the reason that currencies don’t seem to be exchanged physically, however they merely paintings as computer entries. While multinational corporations rely at the alternate of currency for payroll, merger or cost for goods and services, these transactions best constitute 20% of the entire activity on Forex. The closing 80% are simply speculations.

There are seven prime currency pairs traded: euro/dollar, dollar/Japanese yen, British pound/dollar, dollar/Swiss franc, Australian dollar/dollar, dollar/Canadian greenback and New Zealand dollar/dollar. Some retail dealers also paintings with exotic currencies however such cases are pretty rare. The seven main pairs provide the substance for so much currency buying and selling the Forex market speculations. From this point of view, the Forex market is more focused as compared to the common stock markets.

For someone enthusiastic about finding out more at the currency buying and selling the Forex market strategies, there are plenty of guides, manuals and articles available for study. There are even courses that teach other people easy methods to perform at the foreign exchange market, growing the premises for growing long run careers in dealership or brokerage. Whichever be the case, knowledge isn’t at all times enough, as you also want somewhat of good fortune to succeed!

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U.K. stocks rise as financial stocks gain

LONDON (MarketWatch) � Financial-sector stocks rose sharply in London, pushing Britain�s benchmark stock index into positive territory for a second day.

The FTSE 100 UK:UKX �rose 1.9% on Wednesday to 5,790.7. London�s equities benchmark added 0.2% in the prior session to post its first gain in three, after positive earnings data lifted sentiment.

Click to Play Where will Facebook list its IPO?

It's not unusual for Facebook to be coy about where it will list its IPO, but it's a gambit to play the NYSE and the Nasdaq against each other.

Markets received another boost early Wednesday courtesy of manufacturing data from Germany and the euro zone. Germany�s manufacturing PMI rose to 51.0 from 48.8 in December, while a similar survey for the euro zone reached 48.8 from 46.9, topping an earlier estimate of 48.7.

Mark Hodds, head of execution at Oriel Securities, said that for the moment investors are feeling optimistic about the global economy, even though uncertainties remain.

�After a couple of days of retrenchment... [investors are looking at] the U.S. economy ticking up and a soft landing in China,� Hodds said. �Bad news is being discounted.�

Among individual stocks, ICAP PLC UK:IAP �rallied 7.7%.

The financial-services firm issued a trading update. ICAP said that revenue from continuing operations fell 7% in the third quarter compared with the year-earlier figure but that pre-tax profit for the fiscal year ending March 31 would be toward the upper end of analysts� current range of �336 million ($530 million) to �358 million.

ICAP�s results lifted other financial stocks, particularly Schroders PLC UK:SDR , which leapfrogged ICAP to top the index. Schroders gained 8.7%, Man Group PLC UK:EMG �moved up 5.2% and Hargreaves Lansdown PLC UK:HL �rose 2.8%.

/quotes/zigman/3173262 UKX 5,267.62, -70.76, -1.33%

Banks also ended in positive territory, with Barclays PLC UK:BARC �BCS �leading the pack, up 5.4%. Shares of Lloyds Banking Group PLC UK:LLOY ��LYG �climbed 5.2% as HSBC Holdings PLC UK:HSBA �added 2.3%.

Resource stocks pushed higher as well, with heavyweight Rio Tinto PLC UK:RIO �climbing 2.8% and Xstrata PLC UK:XTA �advancing 4.2%. In the oil sector, BP PLC UK:BP �BP �rose 2.6% and BG Group PLC UK:BG �tacked on 1.4%.

Imperial Tobacco Group PLC UK:IMT �also released a trading update and said tobacco net revenue declined by 1%. Imperial Tobacco�s shares added 1.5%.

On the negative side, microchip designer ARM Holdings PLC UK:ARM �dropped to the bottom of the FTSE benchmark, down 2.8%. ARM finished 2% up in the previous session, after reporting record fourth-quarter revenue.

British Sky Broadcasting Group PLC UK:BSY �also declined a day after it posted strong first-half results. BSkyB�s shares fell 1.2%.

Every Investor Should Consider Owning This "Forever" Stock

Investors can very easily get caught up in quarterly earnings reports, rejoicing when their stocks report good results and second-guessing their picks when things go awry. It's important to remember, though, that investing is a long-term endeavor and that quarterly outcomes are far less important than how a stock performs for longer periods -- several years, five years, a decade... and beyond.

Companies that persevere and nicely reward shareholders for many decades are known at StreetAuthority as "Forever Stocks." Sure, these stocks may have their ups and downs, but in my experience, Forever Stocks are usually worth holding, well, forever.

 

3M Co. (NYSE: MMM) is one of my favorite Forever Stocks.

You know 3M, the $61 billion diversified industrial firm that was founded in 1902 and is now famous for its innovations such as Post-It Notes and Scotch Tape. The company's product portfolio includes a wide range of other items, from liquid crystal display (LCD) films, car care products and dental equipment, to adhesives, shampoo and sandpaper.

The firm did have some setbacks in the fourth quarter of 2011, particularly in its display and graphics business, where sales fell 9% from $904 million in 2010 to $823 million. The electro and communications segment did poorly, too, as shown by a 3% decline in revenue from $792 million seen in 2010 to $768 million. Earnings per share (EPS) for 2011 came in at $5.96, a mere 3.7% increase from EPS of $5.75 in the previous year.

But it's important for investors to put such short-term disappointments out of their minds and focus on what makes 3M a Forever Stock.  First of all, there's long-term performance. The stock returned 457% during the past 25 years, which translates to a solid 7% a year.

Plus, as a firm that has increased its dividend 53 straight years (it currently yields 2.5%) and typically holds lots of cash (about $3.8 billion currently), 3M is likely to maintain or even increase its yield in the future. After posting a solid dividend growth rate of 6.5% annually for the past five years, analysts say 3M should be able to push up its dividend at an even faster 10% pace for the next three to five years, bringing it from $2.20 per share in 2011 to $3.54 a share in 2016, good for a 4% yield at today's prices.

Such gains are feasible because 3M is expected to nearly double its annual EPS growth rate, from 6.5% during the past five years to 12% for the next three to five years. This sort of improvement is possible because of 3M's excellent balance sheet: it sports well below-average debt, as shown by a debt-to-equity ratio of 0.3 compared with the industry average of 0.7. In addition, superior financial strength should let 3M easily add some new debt to pay for promising acquisitions -- a strategy management is already pursuing.

On Sept. 26, 2011, for instance, 3M issued $1 billion of five-year bonds with a coupon of 1.375%, and on Jan. 3 it announced the acquisition of the office and consumer products division of Avery Dennison Corp. (NYSE: AVY) for $550 million. This division -- which boasts an array of office products like dividers, labels and binders -- and had $765 million in sales last year, should nicely complement 3M's Post-It and Scotch brands. Management expects the new division to begin paying off quickly, boosting EPS by $0.03 a share once the deal closes in the middle of 2012.

In addition to making profitable acquisitions, I'm confident 3M will continue its long tradition of innovations that bolster the bottom line. In the near-term, innovations may emerge mainly as improvements to existing products and production processes rather than the introduction of a single new blockbuster product like Post-It notes. In March 2010, for example, CEO George Buckley responded to cost-cutting pressure by asking employees to come up with ways to make production of the company's low-cost, high-performance respirator mask four times faster. 3M hasn't specifically publicized the results of this initiative, though I suspect it was successful. That's because it wouldn't be out of the ordinary for 3M. It's what helped earnings per share (EPS) spike more than 27% between 2009 and 2010, from $4.52 to $5.75 a share, as cost-cutting efforts throughout the company helped boost the bottom line.

But investors shouldn't dismiss the possibility of more of the "sexier" innovations 3M is known for, either. The Kind Removal silicone medical tape introduced in June 2011, for instance, is designed so it can be removed as gently as possible from patients' skin, and was named by Popular Science as one of the top 100 most innovative ideas of 2011.

Risks to Consider: CEO Buckley turns 65 on Feb. 23, and he and 3M must agree to extend his contract on that date. Buckley will be at the age when 3M CEOs typically retire, so it's possible he could depart and introduce an element of uncertainty about the company's future, to which the market may not respond well.

> Still, investors shouldn't worry about Buckley departing. 3M was a Forever Stock when he arrived in 2005 and it'll likely continue to be one well after he's gone. At about $87 a share, the stock's a good value. It's worth almost $96 a share when you consider investors have historically paid 4.2 times book value, which is currently $22.82 a share. If you multiply $22.82 by 4.2, you get a share price of $95.84 -- and that's the only price you'd pay for the company's assets, so it would be sort of like getting the dividend for free. It can't get better than this.

What Romney’s Big Win Means For GOP Primary Race

Mitt Romney finally secured a huge win in a major state, winning the Florida Republican primary by an impressive 14 percentage points. His victory speech signaled that he is beginning the all-important pivot to general election politics. As ugly and vicious as this GOP nomination has become, the commentariat has speculated that the negativity will poison the eventual Republican nominee. Romney tried to assure voters that this process �would not divide us, but would prepare us� for the general election. Despite Romney�s large margin of victory, all three of his rivals vowed to soldier on.

Here are three takeaways from the Florida Primary:

Romney’s Win Was Costly

First, although Romney won the Sunshine State handily, it came at a big cost. Romney outspent Newt Gingrich in Florida on television ads by a 5 to 1 margin. The vast majority of his monies were spent on negative advertising. In fact, according to some analyses, this was the most negative campaign ever, with 92% of all ads being negative. Romney was right to try and assure the electorate that the GOP was not self-destructing.

Romney’s Red State Issues

Second, Romney continues to have trouble with the reddest of the red state voters. A review of the exit poll data shows that he won among all groups except among those that �are very conservative,” �strongly support the tea party movement,” �are evangelical Christians,” consider abortion to be �the most important issue,” or believe �abortion should be illegal.”

These categories describe voters in the Deep South, states like South Carolina, where Romney has so far failed to connect with voters. Newt Gingrich won a plurality of the voters in all of those groups and can expect to do well among the southern states on Super Tuesday in March –� except, of course, in Virginia, where he and Rick Santorum did not even manage to get on the ballot. The Virginia primary will be a two-man show between Romney and Ron Paul.

This divide in the Republican Party has serious implications for the general election. If Romney goes on to win — which seems likely — he may face an enthusiasm gap among Republicans in the South. Barack Obama won Virginia, North Carolina and Florida in 2008. He cannot afford to lose the entire south this year. A Romney victory may help Obama in that regard, as many southern Republicans may not turn out to vote for a Romney ticket.

The Choice of Latino Voters

Third, Romney did very well among Latino voters, a group the Obama campaign is counting on in the general election. Fourteen percent of the voters in today�s primary were Latino, compared with 22.5% of the Florida population as a whole. Romney won 54% of the Latino vote in today�s primary. Obama ought to be a little bit worried about the solid majority that Romney won among Latino voters in Florida.

While Mitt Romney seemed to be wrapping things up in his speech to supporters tonight, those of us that love a good horse race can look forward to more drama in the coming months. The next five contests are in caucus states, which tend to respond well to the grassroots enthusiasm of Ron Paul. There is not another debate scheduled until Feb. 22, when the candidates will face-off in Arizona. That gives everyone ample time to hone their round-two debate strategies.

All in all, while Romney rests on his solid Florida win, we can be sure that Gingrich, Santorum and Paul are all working hard to make sure that his path to the Republican nomination takes a few more turns.

The opinions contained in this column are solely those of the writer.

�Want to share your own views on money, politics and the 2012 elections? Drop us a line at letters@investorplace.com and we might reprint your views in our InvestorPolitics blog! Please include your name, city and state of residence. All letters submitted to this address will be considered for publication.

FOREX-Dollar hits 3-mth low vs yen, euro edges up – Reuters

Trading PointFOREX-Dollar hits 3-mth low vs yen, euro edges up
Reuters
* Dollar hits 3-mth low vs yen, sparking intervention worries * Greece, Portugal worries continue to weigh on euro sentiment * US data, bond auctions in Germany, Portugal awaited * Better German PMI lifts euro off lows, stays below key resistance By …
WORLD FOREX: Market On Intervention Watch As Yen Stays StrongWall Street Journal (India)
WORLD FOREX: Euro Weakens As Greek Talks, US Data Spark FlightWall Street Journal
Forex Market Review � Euro weaker as Greek debt in focusTrading Point
DailyForex.com -Forex Rate It!
all 282 news articles »

{forex} – Forex News

Monday, May 28, 2012

7 Names With Yields As High As 15%: A Look At Their Dividend Safety And Hedging Costs

In a recent article ("7 Interesting Plays With Yields As High As 15%"), Seeking Alpha contributor Sol Pahlha analyzed a diverse group of dividend-payers, the highest-yielding of which was Arlington Asset Investment Corporation (AI). AI didn't have any options traded on it, but the other six names did. In this post, we'll look at the VectorVest Dividend Safety scores for all seven names, and the hedging costs for the six that have options traded on them. With respect to Dividend Safety, VectorVest defines it as,

An indicator of the assurance that regular cash dividends will be declared and paid at current or at higher rates for the foreseeable future.

VectorVest ranks Dividend Safety on a scale of 0-99, where 0 is the worst possible score and 99 is the best (scores between 50 and 74 are considered good, and scores of 75 and above are considered excellent). To see the VectorVest's Dividend Safety analysis for any dividend-paying stock, you can enter its symbol and your email address on VectorVest's homepage, and it will email you the analysis of the stock.

It turned out that four out of these seven names had Dividend Safety rankings in the "good" or "excellent" range. One of those four, Ternium, SA (TX), also had the highest hedging costs of this group, by far. Recall that we've observed examples where high optimal hedging costs presaged poor performance. I've included the updated yields and Dividend Safety scores for all seven names in the table below, along with the current costs of hedging six of them against greater-than-27% declines over the next several months, using optimal puts.

A Comparison

For comparison purposes, I've added the SPDR S&P 500 Trust ETF (SPY) to the table below. First, a reminder about what optimal puts are, and an explanation of the 27% decline threshold; then, a screen capture showing the optimal puts to hedge the comparison one of the names below, Linn Energy, LLC (LINE).

About Optimal Puts

Optimal puts are the ones that will give you the level of protection you want at the lowest possible cost. Portfolio Armor uses an algorithm developed by a finance Ph.D. to sort through and analyze all of the available puts for your position, scanning for the optimal ones.

Decline Thresholds

In this context, "threshold" refers to the maximum decline you are willing to risk in the value of your position in a security. You can enter any percentage you like for a decline threshold when scanning for optimal puts (the higher the percentage though, the greater the chance you will find optimal puts for your position). I often use 20% thresholds when hedging, but one of these names, Ternium, SA (TX), was too expensive to hedge using a 20% threshold (i.e., the cost of hedging it against a greater-than-20% decline was itself greater than 20%, so Portfolio Armor indicated no optimal contracts were found for it). The lowest decline threshold it was possible to hedge Ternium against was 27%, so that's the decline threshold I've used here.

The Optimal Puts for LINE

Below is a screen capture showing the optimal put option contract to buy to hedge 100 shares of LINE against a greater-than-27% drop between now and July 20th. A note about these optimal put options and their cost: o be conservative, Portfolio Armor calculated the cost based on the ask price of the optimal puts. In practice, an investor can often purchase puts for a lower price, i.e., some price between the bid and the ask (the same is true for the rest of the names below).

Hedging Costs as of Wednesday's Close

The hedging data in the table below is as of Wednesday's close, and is presented as percentages of position values. The yields and Dividend Safety ratings are as of Wednesday's close as well. Bear in mind that the yields below are annualized, but the hedging costs below aren't.

Symbol

Name

Div. Yield Div. Safety

Hedging Cost

LINE Linn Energy, LLC 7.39% 21 0.94%*
SCCO Southern Copper 2.19% 51 5.75%***
EMR Emerson Electric 3.08% 70 2.70%***
TX Ternium, SA 3.23% 50 25.0%**
NE Noble Corp. 1.69% 77 3.84%***
AI Arlington Asset Investment 15.1% 35 No Options Traded On It
RIG Transocean Ltd 4.92% 11 3.32%**
SPY SPDR S&P 500 2.33% 58 1.41%***

*Based on optimal puts expiring in July

**Based on optimal puts expiring in August

***Based on optimal puts expiring in September

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

2011: Not The Year for Small Caps (So Far)

In an earlier post we highlighted that the Energy sector was the biggest pocket of strength in the S&P 500 so far this year. While Energy stocks have been a bright spot in 2011, one area that hasn't been good to investors is the small cap sector. As shown, while large (S&P 500) and mid cap stocks (S&P 400) have seen modest returns so far in 2011, the S&P 600 small cap index is down 3.73%.

Looking at individual sector returns by market cap shows a similar trend. With the exception of Telecom Services (which across all three indices comprises only 18 out of 1500 stocks) and Energy, small caps have been the worst performing component of each sector. (Click to enlarge)

Top Stocks For 2012-2-1-12

DrStockPick.com Stock Report!

Tuesday September 8, 2009

AvalonBay Communities, Inc. (NYSE:AVB) announced today that it has commenced a cash tender offer (the “Tender Offer”) for up to $300,000,000 in aggregate principal amount (the “Maximum Principal Amount”) of AvalonBay’s outstanding 7.500% Medium-Term Notes due December 15, 2010 (the “7.500% Notes”), 6.625% Medium-Term Notes due September 15, 2011 (the “6.625% Notes”), 5.500% Medium-Term Notes due January 15, 2012 (the “5.500% Notes”) and 6.125% Medium-Term Notes due November 1, 2012 (the “6.125% Notes”) at a purchase price per $1,000 principal amount, in each case, as set forth in the table below and on the terms and conditions set forth in AvalonBay’s Offer to Purchase dated September 8, 2009 (the “Offer to Purchase”) and the related Letter of Transmittal. The 7.500% Notes, the 6.625% Notes, the 5.500% Notes and the 6.125% Notes are referred to herein collectively as the “Notes.”

Cyclone Power Technologies (Pink Sheets: CYPW) has retained the CPA firm of Mallah, Furman & Company P.A. to audit the company’s financial statements for the periods ended December 31, 2008 and 2009, in compliance with GAAP and accounting regulations of the Securities and Exchange Commission.

Adeona Pharmaceuticals, Inc. (AMEX: AEN), a specialty pharmaceutical company dedicated to the awareness, diagnosis, prevention and treatment of zinc deficiency and chronic copper toxicity in the mature population, today announced the initial formation of its sales and marketing team and pre-launch efforts for its CopperProof serum-based copper/zinc diagnostic panel, which will be offered through Adeona’s Hartlab subsidary. The CopperProof panel is a diagnostic test panel intended to provide a comprehensive look at the metabolic serum copper and zinc status of patients with Alzheimer’s disease (AD) and mild cognitive impairment (MCI). Defects in copper metabolism and high free copper levels are increasingly being recognized as significant factors in the progression of neurodegenerative diseases, including AD and MCI. A clinical zinc deficiency in AD patients has also been recognized for the first time in a recent Adeona-sponsored clinical study.

Windstream Corporation (NYSE: WIN) today announced it has entered into a definitive agreement to acquire Lexcom, Inc., based in Lexington, N.C., for approximately $141 million in cash.

CAS Medical Systems, Inc. (Nasdaq:CASM) today announced the recent completion of a multi-year purchase and sale agreement with one of America’s largest not-for-profit health care providers, serving over 8 million members. Under the terms of this agreement, the hospital system will purchase CASMED’s blood pressure cuffs for its network of over 30 hospitals and more than 400 associated physician offices and medical centers. The agreement includes CASMED’s SoftCheck(r) Disposable and UltraCheck(r) Reusable BP Cuffs.

Abraxas Petroleum Corporation (NASDAQ:AXAS) today announced that it has filed a definitive proxy statement with the Securities and Exchange Commission (”SEC”) in connection with the transactions contemplated by the merger with Abraxas Energy Partners, L.P. The proxy statement was first mailed to stockholders on or about September 8, 2009.

Sunday, May 27, 2012

Forex – Chart USD/PHP Updates: Bears pausing within short-term consolidation – Forexrazor

Forex – Chart USD/PHP Updates: Bears pausing within short-term consolidation
Forexrazor
High-Risk Warning Forex, Futures, and Options trading has large potential rewards, but also large potential risks. The high degree of leverage can work against you as well as for you. You must be aware of the risks of investing in forex, futures, …

and more »

{forex} – Forex News

Sector ETFs: The Value of Regional Banking and Biotech

In the sporting world, and in the world of investing, the best offense may be a great defense. Without question, there have been moments when I’ve highlighted the beneficial aspects of lower-risk equity ETFs such as SPDR Select Health Care (XLV) and SPDR Select Utilities (XLU).

In the same spirit, you may also lower risk without the sacrifice of capital appreciation potential; you can pursue low-correlating growth assets that reduce overall portfolio risk through genuine diversification.

For instance, some ETFs may be highly correlated with the S&P 500 SPDR Trust (SPY) such that you are capturing “beta.” Yet if you also add low correlating ETFs that seek ”alpha” (zinging when the market is zanging), both groups may reach the growth/income goal(s) via completely separate paths.

Consider investments that, by themselves, might seem volatile. The iShares Biotech Fund (IBB) must contend with the uncertainty of healthcare legislation as well as the speculative nature of the sub-segment. Market Vectors Gold Miners (GDX) soars or swoons with even mild movements of the underlying commodity as well as currency disruptions. And KBW Regional Banking (KRE)? The exposure to commercial real estate, ongoing bank shutdowns and general unease regarding the extension of credit is enough to create doubt.

Perhaps, then, it’s not so surprising to discover that none of these equity ETFs is highly correlated (0.75-1.0) with the S&P 500 SPDR Trust (SPY). In fact, each of them has a relatively low correlation for stock assets of just 0.5 over the last 6 months.

Yet watch what happens to a portfolio when you couple low correlating ETFs with an equal number of high correlating ETFs. In the example below, I used iShares NYSE 100 (NY), iShares Russell 1000 (IWB) and PowerShares Nasdaq 100 (QQQQ).

An “Alpha-Beta” Stock ETF Portfolio
6 Month % (Approx)
High Correlation With S&P 500 (SPY)
iShares NYSE 100 (NY) 7.3%
iShares Russell 1000 (IWB) 9.8%
PowerShares Nasdaq 100 (QQQQ) 12.7%
Low Correlation With S&P 500 (SPY)
iShares Biotechnology (IBB) 10.1%
Market Vectors Gold Miners (GDX) 12.7%
KBW Regional Banking (KRE) 14.7%
Total Portfolio Return 11.2%
S&P 500 (SPY) Total Return 9.2%

Again, individually, funds like IBB, KRE and GDX may be very scary prospects. However, the fact that these funds haven’t been moving in the exact same fashion as the S&P 500 over 6 months may make them more attractive as part of a well-constructed total portfolio.

Disclosure Statement: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company and/or its clients may hold positions in the ETFs, mutual funds and/or index funds mentioned above. The company does not receive compensation from any of the fund providers covered in this feature. Moreover, the commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities.

5 Stock Picks From Moore Capital Management With 20% Upside

In this installment of my analysis of recent purchases made by renowned investors and funds, I will look at 5 stocks bought by Moore Capital Management using the latest available SEC filings of the fund. Moore Capital Management (MCM) has equity positions worth $2.1 billion. In addition to estimating the price MCM might have paid for the stocks, I have also calculated my preliminary price targets using relative valuation to judge the attractiveness of these companies at current prices. Based on this analysis, I have shortlisted 5 stocks that offer a minimum return of 20% from current levels.

Sectors represented on the list include Basic Materials, Healthcare, Consumer Cyclical, Services, and Energy.

1) Parker-Hannifin Corporation. (PH)

PH is a manufacturer of fluid power systems, electromechanical controls, and related products. The company has a market capitalization of $12.4 billion and has easily outperformed the broader markets during the last 5 years returning 52% to its shareholders compared to the decline of 7% in the S&P500. The company's projected long term earnings growth rate of 6% is double the growth rate of the previous 5 years.

Moore Capital Management initiated a position in PH by acquiring 28,000 shares at an estimated average price of $73 which is 14% below yesterday's closing price of $83 a share. Applying my estimated P/E of 13 to 2013 EPS estimate of $7.8, my initial 12-18 month price target for PH is $102 a share. A return of 22% is possible from current levels.

2) Pfizer Inc. (PFE)

PFE reported fourth-quarter results on Tuesday topping the Wall Street expectations. This was the first quarterly results since PFE lost U.S. patent protection for Lipitor. The U.S. sales fell 42% and worldwide sales were off by 24%. The company also announced that the planned sale of its animal health and nutrition units would take place between July 2012 and July 2013. The sale is expected to bring $15 billion to the PFE coffers.

The company grew its earnings at a 2% rate during the last 5 years and is now expected to increase its earnings at an annual rate of 3%. Moore Capital Management bought 1.92 million shares during the 3rd quarter, an increase of 236%, and now owns a total of 2.74 million shares of PFE stock. Applying a P/E of 11 to 2012 average analyst EPS estimate of $2.3, my 12-month price target of $25 a share is obtained. Including dividends, the stock is expected to return 22% during the next 12-months.

3) Verizon Communications (VZ)

Verizon is a $107 billion communication giant offering communication services in over 150 countries. Like many of its peers, the company pays a healthy dividend of $2 a share yielding in excess of 5%. The company is expected to grow its earnings at an annual rate of 12% during the next 5 years on par with the broader communications industry.

Moore Capital Management practically initiated a new position in VZ by purchasing approximately 1.66 million shares at an estimated average price of $35 a share to its total position in VZ to 1.7 million shares. The stock currently trades at approximately $38 a share. My 12-month price target for VZ is $47 a share obtained by applying a multiple of 19 to 2012 EPS estimate of $2.49.

4) Temper-Pedic International Inc. (TPX)

Temper-Pedic manufactures, markets, and distributes mattresses and pillows in approximately 80 countries worldwide. The Lexington, KY based company has a market capitalization of $4.2 billion. TPX reported fourth-quarter results on January 24 and issued 2012 EPS guidance in the range of $3.8 to $3.95 ahead of mean analyst expectations of $3.77. This would imply a 21% growth rate (at midpoint of the guidance). The revenues are expected to increase by 14% this year.

Moore Capital Management initiated a new position in TPX by acquiring 27,200 shares at an estimated average price of $62 10% below its current price of $68 a share. My target of $82 implies an additional return of 23% from current levels.

5) Petroleo Brasileiro SA (PBR)

PBR is Brazil's state controlled oil producer. It was in the news yesterday (February 1, 2012) when reports emerged that the company planned to sell $7 billion in overseas bonds to help finance $225 billion of investments in an effort to double its oil output by 2020. Analysts expect the company to grow its earnings at an annual rate of 5% compared to the 16% growth of the industry.

Moore Capital Management initiated a new position in PBR by purchasing approximately 290,000 shares at an estimated average price of $29 a share which is modestly below the current price of $31. Applying my P/E estimate of 11 to 2012 EPS estimate of $3.46 a share, my 12-month price target of $38 is obtained. A return of 23% is possible from current levels.

As always, please do not consider this list as a "buy" list, rather use this list as a starting point for your research. Of the companies listed above, I find PH and TPX particularly attractive based on fundamentals and long-term growth prospects.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

U.K. stocks rise as financial stocks gain

LONDON (MarketWatch) � Financial-sector stocks rose sharply in London, pushing Britain�s benchmark stock index into positive territory for a second day.

The FTSE 100 UK:UKX �rose 1.9% on Wednesday to 5,790.7. London�s equities benchmark added 0.2% in the prior session to post its first gain in three, after positive earnings data lifted sentiment.

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Markets received another boost early Wednesday courtesy of manufacturing data from Germany and the euro zone. Germany�s manufacturing PMI rose to 51.0 from 48.8 in December, while a similar survey for the euro zone reached 48.8 from 46.9, topping an earlier estimate of 48.7.

Mark Hodds, head of execution at Oriel Securities, said that for the moment investors are feeling optimistic about the global economy, even though uncertainties remain.

�After a couple of days of retrenchment... [investors are looking at] the U.S. economy ticking up and a soft landing in China,� Hodds said. �Bad news is being discounted.�

Among individual stocks, ICAP PLC UK:IAP �rallied 7.7%.

The financial-services firm issued a trading update. ICAP said that revenue from continuing operations fell 7% in the third quarter compared with the year-earlier figure but that pre-tax profit for the fiscal year ending March 31 would be toward the upper end of analysts� current range of �336 million ($530 million) to �358 million.

ICAP�s results lifted other financial stocks, particularly Schroders PLC UK:SDR , which leapfrogged ICAP to top the index. Schroders gained 8.7%, Man Group PLC UK:EMG �moved up 5.2% and Hargreaves Lansdown PLC UK:HL �rose 2.8%.

/quotes/zigman/3173262 UKX 5,267.62, -70.76, -1.33%

Banks also ended in positive territory, with Barclays PLC UK:BARC �BCS �leading the pack, up 5.4%. Shares of Lloyds Banking Group PLC UK:LLOY ��LYG �climbed 5.2% as HSBC Holdings PLC UK:HSBA �added 2.3%.

Resource stocks pushed higher as well, with heavyweight Rio Tinto PLC UK:RIO �climbing 2.8% and Xstrata PLC UK:XTA �advancing 4.2%. In the oil sector, BP PLC UK:BP �BP �rose 2.6% and BG Group PLC UK:BG �tacked on 1.4%.

Imperial Tobacco Group PLC UK:IMT �also released a trading update and said tobacco net revenue declined by 1%. Imperial Tobacco�s shares added 1.5%.

On the negative side, microchip designer ARM Holdings PLC UK:ARM �dropped to the bottom of the FTSE benchmark, down 2.8%. ARM finished 2% up in the previous session, after reporting record fourth-quarter revenue.

British Sky Broadcasting Group PLC UK:BSY �also declined a day after it posted strong first-half results. BSkyB�s shares fell 1.2%.

ETFs For The Capital Preservationist

When the Federal Reserve announced recently that it plans to keep key interest rates at nearly zero until 2014, it hardly came as a surprise. With the economic recovery still in a very fragile state and inflationary pressures remaining tame, record low interest rates are expected to hang around for quite a while. While stock markets largely cheered the latest announcement, you could almost hear the exasperation of those who rely on generating meaningful current returns from their portfolios. The extension of the low rate environment means extending the challenges for yield hungry investors, such as those who rely on their portfolio to generate cash flows to cover living expenses [see also Six Juicy High Yield Bond ETFs For 2012].

Against this backdrop, more and more advisors have engaged actively in searching out securities that offer meaningful current returns for their clients. Not surprisingly, that objective generally leads to the assumption of greater risk, whether though lower creditworthiness or longer durations.�There are, of course, investors at the opposite end of the spectrum, whose primary objectives focus not on maximizing current yield but on minimizing risk and simply maintaining the value of their investment. And for those looking to do a bit more than stuffing their cash under the mattress, there are some interesting ETF options out there [for more ETF ideas, sign up for the free ETFdb newsletter]:�

PIMCO Enhanced Short Maturity Strategy Fund (MINT)
Ticker30-Day SEC Yield200-Day Volatility
MINT�0.95%�1.19%
PRB�0.37%�4.76%
BIL�-0.11%�0.25%
GSY�0.60%�1.21%
PVI�0.26%�0.61%

This actively managed ETF from PIMCO strives to deliver “greater income and total return potential than money market funds,” but is still a very low risk investment. The portfolio has an effective duration of only about 0.84 years, and the bulk of holdings are rated A or higher. Though some exposure to both risk factors, however, MINT does manage to generate a bit of return for investors; the 30-day SEC yield is currently in the neighborhood of 1.4% [see MINT Fact Sheet].

MINT can be an appealing place to park cash, as this low volatility ETF is one of the safest options out there. MINT has returned about 0.6% over the last year, and has a 200-day volatility of only about 1.2%.

Market Vectors Pre-Refunded Municipal Index ETF (PRB)

This Market Vectors ETF offers exposure to a unique corner of the muni bond market; PRB focuses on debt that is issued by municipalities but refinanced by issuers so that it is backed by the full faith and credit of the U.S. government. So while the list of issuers includes entities such as the Illinois State Toll Highway Authority, the individual holdings are effectively backed by the U.S. government [see PRB Holdings].

With an average modified duration of less than four years, PRB is a relatively safe investment from just about every perspective. PRB has returned about 3.6% over the last year, with a 200-day volatility of only 4.7%.

SPDR Barclays 1-3 Month T-Bill ETF (BIL)

The name of this ETF sums up the investment objective quite nicely; BIL holds obligations of the U.S. government that are at the very short end of the duration spectrum. That combination results in very little risk and a relatively meager return; BIL has a 30-day SEC yield of only about 0.6%. For those looking to preserve capital, BIL can be a very effective destination [see BIL Returns].

This ETF has been flat over the last year, and has a 200-day volatility of just 0.3%.

Guggenheim Enhanced Short Duration Bond ETF (GSY)

This ETF is actively managed and seeks to outperform the benchmark to which BIL is linked, meaning that these two ETFs will have generally similar profiles. The extremely short duration combined with the high quality of the issuers makes GSY a low risk, low return vehicle that can be used for temporary cash allocations [try our Free ETF Head-To-Head Comparison Tool].

GSY also has a 30-day SEC yield of about 0.6%, and has returned about 0.3% over the last year. The 200-day volatility of just 1.2% is remarkably low.

PowerShares VRDO Tax-Free Weekly Portfolio (PVI)

This ETF might not jump out as a safe haven, but the unique features of PVI make this fund extremely appealing to those looking to limit volatility. The underlying index consists of municipal securities issued in the primary market as Variable Rate Demand Obligations (VRDOs) with interest rates that reset weekly. That essentially strips out all interest rate risk, and the focus on bonds rated A or higher limits credit risk as well. As an added bonus, VRDOs generate tax-exempt income [see Bond ETFs That Steer Clear Of Interest Rate Risk].

PVI has a 30-day SEC yield of only about 0.30%. Over the last year this fund is up about 0.5%, and has a 200-day volatility reading of only 0.6%.

Leadership Change, Mixed Messages at Canon

Camera and printer maker Canon (NYSE:CAJ), one of Japan�s principal exporters, is taking a cautious approach to the short term.

Along with its fourth-quarter report, the company announced this week that its current president, 70-year-old Tsuneji Uchida, will step down in March to allow 76-year-old Fujio Mitarai, the current chairman and CEO, and a former company president, to retake the title as president. Uchida will become an adviser to the company.

The move is hardly disruptive, although it�s not clear whether the leadership shift will mean a significant change in business strategy. Mitarai is well-respected in the Japanese business world, having increased Canon revenues 70% during his first run as president. The Wall Street Journal raises concerns, however, that great respect for Mitarai won�t necessarily translate to improved financial performance, since someone regarded as nearly infallible is less likely than a new leader to face constructive criticism.

But it does seem as though Mitarai took the position out of necessity rather than desire; Canon expressed hopes that a younger replacement could be found in coming years while admitting that a suitable candidate could not be found at this time.

Canon emphasized that the power change was Uchida�s decision and not a consequence of misgivings about the company�s fourth-quarter earnings, which fell short of analyst expectations in some places but wasn�t devastating. Losses were largely due to external events that impacted the company in 2011: the earthquake in March, which was quickly followed by massive flooding in Thailand. In addition, the strong yen drove down operating profit. Canon�s primary markets are overseas, where the relatively weak U.S. dollar and Euro hindered competitive pricing and diminished profits returning to Japan.

Operating profit for the fiscal year declined 2.4% to 378.1 billion yen ($4.9 billion) from 387.6 billion yen ($5.1 billion) the previous year. Quarter to quarter, operating profit increased more than 14%, to 94.6 billion yen–2% higher than analyst predictions of 92.4 billion yen.

Net sales were down 4% for the fiscal year and down 9.7% quarter-on-quarter. Net income, however, rose nearly 14% year-over-year, although it climbed only 0.8% over the full fiscal year, from 246.6 to 248.6 billion yen. Revenue was down 9.7%, to 964.76 billion yen, from 1.068 trillion yen.

The company�s outlook is conservative, with 2012 net income expected to increase to 250 billion yen, which would mark the second year of increases below 1% and fall almost 18% short of the 304 billion yen analysts predicted. Operating profit is expected to increase 3.2%, to 390 billion yen, while revenue is expected to increase 5.4%, to 3.75 trillion yen.

Share values have dropped 18% since last year, although that�s not too far behind the current industry average of 14%. It�s likely that Canon will exceed its own estimates for 2012, barring further environmental disasters. The company has several notable projects due for release this year, including the PowerShot G1X, which made a promising debut at the International Consumer Electronics Show earlier this month. Canon this week also announced plans to build a laser printer production facility in the Philippines in response to increasing global demand.

February Auto Sales Data: A Preview

We are slated to receive February's auto sales tomorrow, and it will definitely be a month of two extremes.

On the one hand, we have Ford (F) and General Motors, which are expected to post strong monthly sales. We have modeled for sales of Ford to be up approximately 27%, with sales from GM to be up approximately 22%. These figures should be taken with a grain of salt, as during February of 2009 GM and Chrysler were teetering on the edge of bankruptcy and auto sales continued to tank as Armageddon feelings were all around the auto market.

On the other hand, we have Toyota (TM) and Chrysler. Toyota's past six weeks have been mired by recall after recall, apologies, and what amounted to a public tar and feathering. Due to the sales and production halt of many of the Company's most popular vehicles, sales are expected to decline dramatically. We have modeled for sales to drop below the 100,000 mark for only the second time since 1999, and to fall approximately 10% from last month's figure (98,796). Chrysler is expected to report another decline. Our forecast is for Chrysler's monthly sales to fall more than 10% compared to February of 2009, however we do expect to see a significant sequential improvement.

We have ratcheted our expectations down for the month as the winter storms rocked the nation. The Midwest, Northeast, and even the south were hit with storm after storm, which definitely pressured sales.

Ford and General Motors are going to be two of the biggest winners from this Toyota debacle, but Honda (HMC), Hyundai (HYMLF.PK), Nissan (NSANY), and to a lesser extent Chrysler will also benefit. This jump is only temporary as eventually Toyota will rebound.

Toyota has spent much of the past 50 years growing its market share, and while there have been reports about a massive decline in Toyota's market share, we are not that convinced. We have spoken to a few Toyota dealerships around the country, and most are saying the same thing: customers still love their Toyotas, and maybe even more now as many dealerships are staying open 24-7 to fix all these vehicles. There is no doubt that the news will push some of the fence sitters over to another auto maker, but Toyota's customers are extremely loyal. Additionally, once all these recalls are in the past (i.e. a few months from now), it is shaping up to be one of the best times to purchase a Toyota. Quality is again at the Company's forefront, so you know the models that are produced over the next few months are going to have a quality stamp of approval. Couple that with the expected incentives, and Toyotas could be the best bang for the buck.

General Motors Making a Comeback

There was an interesting article in Barron's over the weekend about a potential IPO for General Motors, and while some of the estimates seem a bit on the high side for me, there is no denying that the once struggling giant is headed in the right direction. The Company was once saddled with billions dollars of debt, a cost structure that didn't allow it to make money in North America and an industry that was moving toward more fuel efficiency. Now GM has shed more than half of its brands - production of Saturn and Pontiac has stopped, the Company sold the Saab brand and until last week had plans to offload its Hummer brand to a Chinese heavy truck maker. That deal has since fallen apart, and GM says it will now wind down the Hummer brand.

Let's take a look at what could possibly fuel a strong IPO for the Company. First, the Company is one of the market leaders in North America with almost a 20% market share. If GM is able to make vehicles profitably in North America, it bodes well for the rest of the world. Brazil and Russia are two emerging markets that GM holds a strong position in, while in China (through its various joint ventures) it is among the market leaders. Volkswagen (VLKAF.PK) holds the number one spot in China, but both Chevy and Buick are in the top 10 in terms of market share in what has become the largest auto market in the world. CEO Ed Whitacre is matching supply with demand (seems like a no-brainer), which is causing inventories to remain low and resale values to improve. Probably the biggest positive the Company has going for it is the fact that it finally has attractive cars that people are looking to buy. The Malibu hasn't been the success story that the Company was hoping for, but it is far from a bust; the Equinox is among the leaders in the crossover segment; the Camaro is beating the Mustang; the new Cadillac SRX SUV was second only behind the Lexus RX 350; and, even though Tiger is no longer its spokesperson, Buick is making a resurgence with its LaCrosse.

Mr. Whitacre hopes to pay back the U.S. and Canadian governments by June and, while no word has been given about a potential IPO, rumors are hopeful for a mid-2010 offering. We have targeted the beginning of 2011 for an IPO, with a beginning market value of approximately $35-$40 billion (below the estimates from Barron's of a $50 billion IPO). That won't pay the American tax payer back, but it definitely is a step in the right direction.

The following is a table of our expectations for the individual companies' monthly auto sales figures. (Click to enlarge)
Disclosure: Long Ford