Why You Need Cautious Optimism Here

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This video is part of our "Talking Stocks" series, in which Motley Fool analyst Austin Smith discusses trends across the investing universe.

In today's edition, Austin talks about the impressive retail sales numbers from the Commerce Department. The growth is encouraging for the broad market, as February saw the largest sales jump in five months. Austin is still cautiously optimistic about this sector. While he sees true fundamental strengths in many companies, there is still a bit of volatility in the space, making it that much more difficult to identify the winners. In addition, one major reason for the strong retail numbers is that we're coming off a warm winter, which stokes the coals of consumer spending.

When it comes down to it, Austin is waiting for a more meaningful drop in the unemployment rate before he dedicates a larger part of his portfolio to this space. That's just one great reason to invest in an industry like health care, which is less sensitive to employment pops and drops. If you poke around this space enough, you may Discover the Next Rule-Breaking Multibagger. Or we could just save you all the time and research by just giving you this top health-care pick. You can read about this company your copy of our newest free report by clicking here. Enjoy, and Fool on!

Hedge Fund PR Consultants – Your Key to Growth and development

Many critics and experts have divided opinions on defining the thought of public relations. However, inspite of the not enough consistency in its full definition, there is certainly one which is somehow thought to be the universal description of the concept. Public relations is regarded as a the management of the communication flow between a company and its particular partners. It can be as systematic means of maintaining a harmonious relationship involving the two. With this in your thoughts, it is pretty sure that PR is very important in every kinds of business – and hedge funding most likely is rarely an exemption.

Concerning this kind of industry, the advantage of hedge fund PR is it may be an extremely effective way of attracting more investors. We are all in the know when it comes to that hedge fund managers are the ones offering valuable and substantial information and opinions on a status of the economy for a certain time frame. Through assistance from a public relations consultant, these managers will essentially develop a leader-like image by attending activities for example conferences, symposiums and forums and also publishing their knowledge in publications. All of the activities that will make a hedge fund manager more visible could be a a part of carefully crafted PR strategy.

If after all a hedge fund manager possesses the talents of exemplary oral and verbal communication along with a higher level of awareness within the media, then he or she can perform PR tasks by himself or herself. The mixture of PR skills and communicative capabilities can make her or him discuss about PR itself and other associated topics like private equity public relations, press announcements management and so on. However, it’s still recommended to employ knowledgeable with regards to PR, especially if you’re a little unclear about doing everything alone.

Hiring hedge fund public relations expert can be be extremely advantageous. They are a perfect business partner, because they are quite acquainted with some important strategies and ways regarding how to help their client expand when it comes to influence and visibility. If the customer appears to be much more of an introvert, these consultants can stand in as spokespersons, providing and pitching the best details on your behalf.

Furthermore, hedge fund PR consultants are very skilled in terms of crisis management. If you want to maintain a very clean reputation towards the public, these experts can help you do the magic. They are the ones who have most experience crisis management. So if any malicious rumors surround you, rest assured that your PR friends will clear out the way for you.

hedge fund PR can be a very effective way of attracting more investors. Hire a professional when it comes to PR, especially when doing the task like private equity public relations.

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China in the Midst of a Lewis Turning Point, Coupled With Nasty Inflation

More on the biggest story of the decade (Sini: Spring Festival Shutdown): Workers in China aren't even bothering to wait for the holiday, even with recent wage increases.

• (A) Beijing-based delivery company, which fills orders for Chinese-made products for overseas buyers, has no choice (but to delay orders) since most of its employees have been heading to their hometowns for weeks now. "We have already received dozens of complaints from overseas customers after they learned that we would not be able to ship products for almost the entire month," Zhang said.

Some in the West are throwing in the towel on China. To think they can replicate the Asian cost structure in the U.S. is ludicrous and just whistling by the graveyard.

• The Container Store, a Texas-based retailer that sells storage products such as containers and bookshelves, has been waiting for a shipment for four weeks. One of its suppliers shifted all production back to the U.S. because of the labor shortage in China, according to CNN.

Are the factory workers coming back after New Year's?

• Huang He, vice president of the Jinghua Group, told the Global Times that his factories normally employ 1,500 people, but some 500 of them resigned last month to take a long break. Huang said all workers who take just the minimum seven-day holiday would receive an extra 500 yuan ($75), enabling such workers to earn 2,500 yuan ($379). However, only 200 people accepted his offer. "We cannot afford higher wages since the price of raw materials makes it hard for us to get a profit," Huang told the Global Times.

Clearly China is smack in the middle of a Lewis Turning Point, which marks a time in the development of an economy when the surplus of cheap labor runs dry. In response, (surviving) employers push up wages and benefits, creating demand-push inflation. The nation is losing much of its original low-cost competitive advantage. China will be a much weaker growth story (if at all) under this evolving model. And customers, such the U.S., are facing diminished supply and rapidly rising prices on Chinese goods. From the Sini story:

• It is why many foreign business owners and importers in Europe and the U.S. are being told they have to wait until a month to receive orders - news that some find hard to believe. "We have already received dozens of complaints from overseas customers after they learned that we would not be able to ship products for almost the entire month," Zhang said.

This is now already showing up in prices in the U.S., such asthe MIT billion-price survey, which is developing a steep up trend. This index was 100.46 six months ago, 100.90 three months ago, and 101.92 on Jan. 31. Three-month inflation annualized per this measure is running 4%.

This Lewis Turning Point tendency over time can lead to more of a consumer and service economy in China, but it is not as simple as flipping a switch. The government is pushing through more worker benefits and modern-economy safety nets, but the ability to absorb this for those trying to practice under the old low-margin, cheap-labor model is extremely difficult, if not impossible, especially when there is a speculative capital flow mania layered over it and distorting the economy. One should expect a very high business failure rate unless China can deal with it resource waste and down shift. From Reuters:

• It'll impose tremendous pressure on the manufacturing sector, especially the labor intensive industries," said Clement Chen, an honorary president of the Federation of Hong Kong Industries and a veteran industrialist in the region. "It's not just Hong Kong firms, but Taiwanese, Korean and Japanese firms will all be facing these pressures."

Speculative manias, such as this one in real estate, waste and misallocate resources and distort prices. At this point, inflation in China looks terminal and dangerous. This hamster-on-a-wheel scenario quickly mitigates any benefit Chinese labor is getting from the Turning Point: 20% wage increases against 50% higher rice prices.

Click to enlarge

More info is out on the cost of laborin the service sector and express delivery businesses. This is good for labor, but it completely changes the cost structure of doing business.

• A director with ZTO Express says that in the past, labor costs for private express companies could be as low as 10% of total operational costs. Now, labor costs make up at least 30%. In addition to wage increases for couriers, the salaries for managers have also increased, from 60,000 to 100,000 yuan a year to 200,000 to 500,000 a year. Aside from the shortage of workers, government policies and social security policies have also contributed to rising labor costs. Since Jan. 1, the Beijing government ordered companies to provide insurance for medical treatment and work-related injuries along with pensions, and unemployment insurance, resulting in an average cost increase of 400 yuan or more per worker.

Xilinx: Pacific Crest Upgrades

Pacific Crest analyst Ruben Roy this morning raised his rating on Xilinx (XLNX) to Outperform from Sector Perform, noting that recent checks find the company is seeing increasing design wins for its Virtex 6 family of FPGAs, or field programmable gate arrays.

Xilinx said the company has gamed “meaningful design wins” at a large North American wireless handset company where it previously had not had any traction. He also says the company appears to have recovered lost share in a number of defense segment programs, which he says could benefit gross margins long term.

Roy notes that the stock looks cheap, at 10.7x calendar 2011 EPS estimates, versus 11.5x for Altera and 12.4x for the specialty semi group overall.

Roy sets a $33 target on the stock.

XLNX is up 34 cents, or 1.3%, to $24.12.

Top Stocks For 2012-1-10-9

POINT RICHMOND, Calif., Sept. 27, 2011 (CRWENEWSWIRE) — Transcept Pharmaceuticals, Inc. (Nasdaq:TSPT), a specialty pharmaceutical company focused on the development and commercialization of proprietary products that address important therapeutic needs in the field of neuroscience, announced that the company has resubmitted the New Drug Application for Intermezzo(R) (zolpidem tartrate sublingual tablet) to the U.S. Food and Drug Administration (FDA). The resubmission follows a meeting between Transcept and the FDA on September 14, 2011 to discuss issues raised by the FDA in the July 2011 Complete Response Letter.

About Transcept

Transcept Pharmaceuticals, Inc. is a specialty pharmaceutical company focused on the development and commercialization of proprietary products that address important therapeutic needs in the field of neuroscience. Transcept is developing Intermezzo(R) (zolpidem tartrate sublingual tablet) as a prescription sleep aid for use as needed when a middle of the night awakening is followed by difficulty returning to sleep. Transcept and Purdue Pharmaceutical Products L.P. have entered into a collaboration agreement for the development and commercialization of Intermezzo(R) in the United States. Transcept is also developing TO-2061, a low dose ondansetron augmentation therapy for patients with obsessive compulsive disorder (OCD) who have not adequately responded to treatment with approved first-line pharmacotherapy. For further information, please visit the Transcept website at: www.transcept.com.

Source: Transcept Pharmaceuticals, Inc.

Contact:
Transcept Pharmaceuticals, Inc.
Greg Mann
Director, Corporate Communications
(510) 215-3567
gmann@transcept.com

 

 

 

THIS IS NOT A RECOMMENDATION TO BUY OR SELL ANY SECURITY!

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White Paper on Municipal Bonds

With the turmoil in the markets, a historic shift has been observed in the yield spread on munis, particularly Michigan municipal bonds. Munis are selling at a vast premium to Treasuries on a yield basis. We think this premium is unusual and provides some opportunities. Most notably, we observe:

? There is apparent mispricing of risk in Michigan municipal bonds. The entire market is being painted with one broad brushstroke. Michigan, as I can attest first-hand, is a very diverse state in geography and economy.

? Ratings are helpful, but not determinative. We’re carefully analyzing the issues and the municipalities individually.

? The municipal bond insurers are in turmoil. In fact, many of the insurers are junk rated.

? Tax rates are going up for many investors, and this makes municipal bonds more attractive. Of particular interest is the Health Care Bill, which adds a 3.8% Unearned Income Medicare Contribution tax on dividends, interest and capital gains in 2013. Municipal bond interest is exempt from these taxes also, making the tax-equivalent yield even more attractive to high bracket individuals.

? The current interest rate environment is unique. The yield curve is at a record steepness, and we see opportunity while staying reasonably short as protection against inflation.

? Quality is king. Not all municipal bonds posses the same level of risk, but the market seems to be pricing them that way.

? Liquidity is queen. Municipalities are facing revenue crunches, probably in the magnitude on average of -10- 15% for 2011 and 2012 and possibly longer. They need money and will borrow. We think BABs are a short term solution to the liquidity issue.

? The market is dislocated and somewhat inefficient. We are seeing ‘fire-sale’ prices on some issues. In addition, we see the lack of a central unified market presenting opportunistic buying. We buy on the bid (wholesale) for our portfolios: the spreads tend to be pretty big now.

Leon C. LaBrecque is an attorney, CPA, CFP�, and CFA in Michigan. He is the CEO and chief strategist for the independent wealth management firm, LJPR, LLC headquartered in Troy, Michigan. Together with the firm’s team, he has been analyzing and investing in individual Bonds, particularly Michigan municipal bonds, to the tune of $100 Million.

Please visit http://www.ljpr.com/white-paper-on-michigan-municipal-bonds.html for more information.

Rally Time! Stocks Set to Surge on Euro-Cooperation

Stocks are ready to bust out of the gate with a huge rally this morning after European leaders announced a new plan to recapitalize troubled banks directly, and appoint a single bank supervisor to oversee Europe’s banks. And what’s more, private investors are expected to be held equal to the bailout fund if Spain ends up restructuring its debt — initially, European leaders had given the fund seniority, a serious impediment to getting private investors to bet on European bonds. The Journal and Guardian have more on the details of the plan.

The Euro jumped 1.8% against the dollar to nearly $1.27, Nymex crude oil jumped 5.2% to $81.69 and stocks soared around the world.

The Euro Stoxx 50 was up 4% and France’s CAC 40 rose 3.8%.

Dow futures were up 202 points; S&P 500 futures rose 25.6 points. NYSE has invoked Rule 48 to smooth trading at the open.

Research on Motion (RIMM) plunged 13% on a weak earnings report.

Nike (NKE) dropped 10% on disappointing earnings.

KB Home (KBH) jumped 6.3% as the company said orders are on the upswing.

Constellation Brands (STZ) soared 19% on strong earnings and expectations it will profit from a deal between Inbev (BUD) and Modelo.

The Cheapest Stocks on the Dow: 3M

The following video is part of our "Motley Fool Conversations" series, in which Industrials editor/analyst Isaac Pino discusses topics across the investing world.

In today's edition, Isaac takes a cue from Fool colleague Dan Dzombak, who recently described a time-tested tool for uncovering companies with above average cash flows. Isaac applies this tool to to identify the cheapest Dow components and finds 3M near the top of the list. A diversified manufacturer of everything from Post-it Notes to health care equipment, 3M's approach to beating its competitors is all about innovation.�And the number of business lines keeps on growing. 3M recently acquired Federal Signal for $110 million in cash to venture into hardware and software used in electronic tolling, parking, and law enforcement. At the same time, the company leverages its materials technologies to design a natural gas fuel tank with Chesapeake Energy. For an everyday investor, 3M might be one of the most fail-safe stocks due to its pristine balance sheet and international presence.

With Europe in shambles, many investors may be nervous about investing in a company that's internationally focused, but they shouldn't be. Emerging markets are giving new life to established American companies with deep pockets. As these industry titans look abroad for more sales, they aren't starting with a blank slate -- they're bringing their operational excellence to new markets and thriving. To uncover these picks today, we invite you to read a copy of our free report:�"3 American Companies Set to Dominate the World."�The report won't be available forever, so we invite you to click here to get your copy today!

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Something to Watch With Sherwin-Williams

Sherwin-Williams (NYSE: SHW  ) carries $1.4 billion of goodwill and other intangibles on its balance sheet. Sometimes goodwill, especially when it's excessive, can foreshadow problems down the road. Could this be the case with Sherwin-Williams?

Before we answer that, let's look at what could go wrong.

AOL blows up
In early 2002, AOL Time Warner was trading for $66.27 per share.

It had $209 billion of assets on its balance sheet, and $128 billion of that was in the form of goodwill and other intangible assets. Goodwill is simply the difference between the price paid for a company during an acquisition and the net assets of the acquired company. The $128 billion of goodwill in this case was created when AOL and Time Warner merged in 2000.

The problem with inflating your net assets with goodwill is that it can -- being intangible after all -- go away if the acquisition or merger doesn't create the amount of value that was expected. That's what happened in AOL Time Warner's case. It had to write off most of the goodwill over the next few months, and one year later that line item had shrunk to $37 billion. Investors punished the stock along the way, sending it down to $27.04 -- or nearly a 60% loss.

In his fine book It's Earnings That Count, Hewitt Heiserman explains the AOL situation and how two simple metrics can help minimize your risk of owning a company that may blow up like this. Let's see how Sherwin-Williams holds up using his two metrics.

Intangible assets ratio
This ratio shows us the percentage of total assets made up by goodwill and other intangibles. Heiserman says he views anything over 20% as worrisome, "because management might be overpaying for the acquisition or acquisitions that gave rise to the goodwill."

Sherwin-Williams has an intangible assets ratio of 26%.

This is not so far over Heiserman's threshold as to cause panic, but you'll want to keep an eye on this number over the next few quarters. It's also useful to compare it to tangible book value, which I explain below.

Tangible book value
Tangible book value is simply what remains after subtracting goodwill and other intangibles from shareholders' equity. If this is not a positive value, Heiserman advises you to run away because such companies may "lack the balance sheet muscle to protect themselves in a recession or from better-financed competitors."

Sherwin-Williams' tangible book value is $92.0 million, so no yellow flags here.

Foolish bottom line
If you own Sherwin-Williams, or any other company that fails one of these checks, make sure you understand the business model and management's objectives. You can never base an entire investment thesis on one or two metrics, but there is a yellow flag here. I'll help you keep a close eye on these ratios over the next few quarters by updating them soon after each earnings report.

Keep up with Sherwin-Williams, including news and analysis as it's published, by adding the company to your free, personalized watchlist.

Jan. 18 Webinar to Focus on Key Issues, Strategies for Advisors in Transition

There’s been an interesting series of news events already in the new year that reveal some of the continuing trends in the industry that will affect advisors considering a change in affiliation in 2012. 

The news that Bank of America is raising its Merrill Lynch brokers’ minimums to $250,000 suggests that the wirehouse is moving upstream while lower-net-worth clients will be served by Merrill Edge. LPL Financial is acquiring Fortigent, the alternative investments TAMP-like company, showing that the largest independent broker-dealer is also encouraging its reps to move upstream while hoping to attract more RIAs to its no-longer-fledgling custodial unit. COR Securities’ purchase of the clearing firm Legent is the latest in a string of private equity investments in the IBD space. Then there’s the increased activity in 2011 of the roll-up like firms such as High Tower, United Capital and Focus Financial.

On Wednesday, Jan. 18, at 4 p.m. Eastern time, AdvisorOne will host a free web seminar that will place these moves into context and present their implications for advisors of all kinds, especially those advisors considering moving from one BD to another or those thinking about going totally independent. Featured speakers on the seminar will be Spenser Segal, CEO of ActiFi, and Dave DeVoe (left), founder and managing partner of David DeVoe & Co., in an hour-long presentation moderated by AdvisorOne Editor Jamie Green.

Using data gathered from the more than 1,000 advisors who have used the Business Evaluator tool on AdvisorOne, developed by Segal (left) and his team at ActiFi, combined with their knowledge of the BD and RIA space, in the web seminar the speakers will present their unique insights into transition trends, but also provide actionable strategies that will allow advisors to not only make informed choices on their affiliation, but also to increase their chances of success regardless of their business model.

Topics to be addressed will include:

• The current state of independent BD recruiting, wirehouse movement and RIA M&A;
• The major practice management steps you can take to improve profitability right now;
• How the stock markets and the human capital markets will change in 2012, and how you can react.

To register for this free event, please follow this link. To see our list of recent AdvisorOne webinars, please view this page.

 

More Beta in Leveraged ETFs

release

Michael L. Sapir, chairman and CEO of ProShares' investment advisor, ProShare Advisors LLC, said in the release: "Many savvy investors believe that taking advantage of tactical allocation opportunities will be the key to successful investing in the near term. These new ETFs provide knowledgeable investors with additional tools to act on short-term moves in popular U.S. indexes."

"Knowledgeable investors," is an important concept with this type of ETF. Leveraged ETFs require more attention than an unleveraged directional bet on beta. In fact, levered ETFs have recently drawn media and regulatory scrutiny, in part because longer-term returns have not always tracked with longer-term returns on the underlying indexes. ProShares carries a note in its release explaining that that leveraged ETFs can be more volatile and that this type of ETF, "seeks a return that is a multiple or inverse multiple (e.g., -200%) of the return of an index or other benchmark (target) for a single day." The note advises investors in these types of ETFs to monitor them frequently--daily--and that compounded daily returns "will likely differ in amount and possibly direction from the target return for the same period."

Comments? Please send them to kmcbride@wealthmanagerweb.com. Kate McBride is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.

Related Articles:

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Deutsche Bank PowerShare's leveraged crude oil exchange-traded notes to be redeemed.

Does mortgage principal reduction work?

NEW YORK (CNNMoney) -- The world will only have to wait a few more weeks to find out whether Fannie Mae and Freddie Mac will allow principal reductions on mortgages they back.

The Federal Housing Finance Agency will decide this month whether Fannie and Freddie should allow write downs on the balances of borrowers who owe more than their homes are worth, said Ed DeMarco, acting director for the agency.

Fannie and Freddie have been at the center of a tug-of-war over fixing the housing market. They have long resisted calls to write down the balances on the loans in their portfolio, saying it would be too costly for taxpayers.

But the pressure has been building, especially in the wake of the $26 billion mortgage settlement that will reduce principal for 1 million borrowers whose loans aren't backed by Fannie and Freddie.

The agency, which regulates the government-controlled companies, had decided against allowing principal reduction after internal studies showed that alternatives such as adjusting monthly payments or forbearing principal were more cost effective.

DeMarco has said his agency is charged with protecting taxpayers' interests, and principal reduction would amount to an expensive taxpayer bailout of troubled homeowners.

Since then, however, the Obama administration has sweetened the pot. It tripled the incentives it will pay to Fannie and Freddie for reducing principal under the Home Affordable Mortgage Program, or HAMP. This has prompted the agency and the companies to redo their analysis.

But will it even matter if Fannie and Freddie start allowing principal reduction?

How many are eligible?

Together, Fannie and Freddie have about 3 million loans that are seriously underwater, according to company filings. But three-quarters of these homeowners are current on their payments and may not qualify.

"These borrowers are demonstrating a continued willingness to meet their mortgage obligations," said DeMarco in a recent speech. "This should be recognized and encouraged, not dampened with incentives for people to not continue paying."

In the end, the number of eligible underwater Fannie and Freddie loans could range from a few hundred thousand up to 750,000, according to estimates. That's not that much considering there are 11 million underwater borrowers in the U.S., just over a quarter of whom are behind in their payments.

Is it effective?

"The scheme would still be a useful way to tackle the foreclosure problem," said Paul Diggle, property economist at Capital Economics. "And it certainly wouldn't do any harm to the housing recovery."

But experts still fear that allowing principal reduction will open a new wave of strategic defaults, where homeowners decide to stop paying their mortgages in order to benefit from modification programs. This so-called moral hazard has been one of the main concerns that has kept principal reductions at bay.

"Principal reduction will prevent more foreclosures for some borrowers who are delinquent," said Susan Wachter, real estate professor at the University of Pennsylvania's Wharton School. "But there is a potential for it to undermine borrowers' incentive to keep current on their mortgages."

How much will it cost?

Though part of that would be covered by the Obama administration, it's still ultimately taxpayer money whether it comes from HAMP or from the open line of bailouts Treasury provides to Fannie and Freddie.

Not everyone is convinced that the benefits are worth the price.

"The question is at what cost will it have an effect?" said Ted Gayer, co-director of economic studies at the Brookings Institution. 

The U.S. Dollar Continues to Gain vs. the Yen

The plight of the euro has caused a movement into the USD and produced a breakout versus the yen. For the past 12 days the yen has remained confined to a narrow range between 90.25 and 91. Currently we are trading at 91.93, above a major trendline that extends back to a spike high of Aug. 10 2009. Perhaps some stops will be exposed if the market climbs above the 92.13 high made in February. Resistance until we get to the 93 handle appears slight. There have been two buy signals given by the MACD, first a cross over above the 9 day moving average and again on March 17 when the MACD crossed the zero line.

Several things are perplexing about the yen. First, the total open interest in the yen has been very small, only 97,000 contracts (futures only) this morning. This compared with 153,000 in the C$ and 195,000 in the euro. The COT report also shows that the large specs, probably funds, were long the market and the small specs have been short the yen. Usually the large and small specs are on the same side of the market, but not in the yen. With the break in the yen to the 92 handle the small specs have been on the winning side of the market.

Often there is an inverse correlation between the stock market and the yen, but today a lot of equity markets are lower, as is the yen. It will be interesting to see what the open interest in the futures market is doing today. Yesterday, with the trading range tightly contained, the OI did go down 3831 contracts.

The economic news from Japan has been mixed. Japanese exports for February did increase 45.3% from the previous year, which showcased a 47.7% increase to China. On the negative side, Japan did report a 2.4% drop in supermarket sales which were off for the 15th month in a row. US economic news like that in Japan was inconclusive. Core durable goods orders were a little better than forecast, up 0.9% versus an anticipated 0.6%, but the new home sales were a flop and oil inventory was much larger than expected. Tomorrow will feature US weekly unemployment claims and Consumer Price Index year to year comparisons in Japan.

This week the US Treasury is conducting an auction for $118B 2- , 5-, and 7-year notes. Today's auction was not well received and the 10-year note yield has increased to 3.82%. The frugal Japanese have trillions in saving and many of these investments mature this year. With the Japanese 10-year yielding only 1.35%, there will certainly be yen sold to buy US Treasuries. Also the Bank of Japan has recently loosened the money supply and has given assurance that rates are going to remain low for quite a while. With the yen attractive as the lending currency in the carry trade, this also makes for yen sellers.

We remain bearish of the yen versus the USD and the A$. Once the excitement from today's bullish flurry slows down, a retreat to the previous trendline at around 91.70 to 92 looks to be a level to try the long side of the USD versus the yen. The A$ is currently making a new swing high versus the yen, trading at 83.64. A 50 pip pullback should be bought, as a return to the 86 level is possible. (Click to enlarge)



Disclosure: No positions

12 Stocks That Could Make 30% This Year

By Eli Inkrot

We think all of the names below offer investors the potential for 30% upside this year. See Investment Underground's analysis and commentary on each below. As always, use the list below as a starting point for your own due diligence:

Morningstar (MORN): It can be somewhat unnerving to lookup MORN on the Morningstar website; especially when they use “we” in describing what the company does. But after all, investment information is about 80% of their business. MORN has been climbing from $40 a share in September of 2010 to today’s near 52-week high of $62. This despite either missing or just barely reaching consensus earnings estimates for the last 5 quarters; imagine what a positive upside could bring. This upside might happen sooner rather than later as the company rolls out its credit ratings on stocks the company covers, which would likely be an eventual threat to the S&P McGraw Hill (MHP) and Moody's (MCO) duopoly on credit ratings. With a current price to earnings ratio around 36 and 2012 estimated earnings averaging $2.58 a share, a buy today could represent a 48% 1-year upside. True, the current P/E ratio is above industry standards but it is in line with MORN’s pre-recession ratios.

American Express Company (AXP): This New York-based credit card giant has the largest market-cap amongst competitors Visa (V), Mastercard (MA) and Discover (DFS). Warren Buffett likes the stock as it represents Berkshire Hathaway’s 3rd largest holding behind Coca-Cola (KO) and Wells Fargo (WFC); not to mention it has netted him about $6.6 Billion since his purchase. AXP’s dividend history is steady, having made a payout every year since 1977. True, the income investor is left wanting with a 1.4% current yield but the payout ratio around 15% suggest future increases are well within reach. Given the current P/E ratio around 15, the 2012 consensus earnings of $4.15 a share suggest a 1 year upside of about 20%. Add in debit card legislation (goodbye incentives) and more people might be swooning for American Express plastic.

Freeport-McMoRan Copper & Gold Inc. (FCX): Catch the fever! Gold fever! To be fair, this Phoenix-based mining company also explores copper, silver and cobalt. FCX, established in 1987, controls the world’s largest copper and gold mine placing it well ahead of its competitors. The dividend, which has been up and down since 1995, currently yields 1.8% with a 39% payout ratio. FCX has proven that it can take advantage of the recent demand trend and shows it with solid financials: 44% return on equity, a 2.35 current ratio and a solid streak of beating consensus earnings estimates. Although the P/E ratio around 10 is in line with the last 5 years, some argue that it is much too low. 14 brokers come up with a target 1 year average upside of about 23%. Factor in a 0.58 P/E to growth ratio and FCX looks even more appealing.

Peabody Energy (BTU): This St. Louis-based energy company is riding coal's next wave to higher prices. On the heels of Alpha (ANR) bidding for Massey (MEE), BTU looks ripe to buy out one of its smaller competitors, like Cloud Peak (CLD). Making the case for a 30% upside isn’t too difficult, as the analysts are on our side. 23 brokers like an average 1 year target upside of about 31%.Every one sees a gain whilst the most optimistic of the bunch pegs the 1-year gain at 48%. Looking at the expected 2012 earnings per share of $5.90 and P/E ratio of 19 paints an even brighter picture. Even if BTU’s P/E ratio drops to 13 it would still make 30% on next years earnings. Given that BTU has a recent record of beating earnings estimates this energy play sure looks promising.

Capital One Financial (COF): At first glance this Virginia-based financial company doesn’t appear to merit a spot on this potential 30% plus list: 18 brokers look for an average 1 year upside of just 13%. Further, expected earnings per share for 2012 are just $5.88. Given the current 7.7 price to earnings ratio this would actually mean an unrealized loss for investors in the upcoming year. But hold on to your hat, financials are coming back. If COF can reach its pre-recession P/E of 12 that would mean a 34% increase; seems reasonable given the recent earnings beats. On a value side, COF looks more than appetizing. The current book value per share is $60.52 compared to a share price of $53; as Buffett would say it’s like buying a $1 for 89 cents. The return on equity above 12% and return on assets over 1% would also be Buffett pleasers. Finally, COF is paying out just 3% of profits in the form of dividends suggesting future increases are definitely within reach.

Potash Corporation of Saskatchewan (POT): This corporation is the world’s largest fertilizer company specializing in potash, phosphate and nitrogen, making up about 20% of the world's supply. 22 brokers like an average 1 year upside of about 15%. If you look at 2012 expected earnings of $3.98 a share and the current P/E ratio around 25, you’d be even more optimistic (72%!). Even if the P/E drops to a more reasonable 19 there’s a 30% upside to be had. For income investors the 0.5% current yield is surely lacking, but the 17% payout ratio and consistent payment history is promising. The real drive behind this company isn’t precisely quantifiable. There is an inherent need for fertilizers in the booming future as population increases and land space decreases. Crops need to be both more efficient and plentiful in order to keep up with dwindling available land and a growing middle class.

Qualcomm’s (QCOM) $97 Billion market cap reigns supreme in the communication equipment market as this San Diego-based technology firm more than doubles the combined capitalization of such competitors as Broadcom (BRCM) and Nokia (NOK). 37 brokers like an average 1 year upside of just 12%, as the opinions vary greatly. The most optimistic looks for a 37% gain while the pessimist of the group sees a 44% decline. The estimated 2012 earnings per share coming in at $3.51 might work to clear up some of the debate. QCOM has a current P/E ratio around 25 which, with these earnings estimates, would equate to a 51% upside; reasonable given the recent string of earnings beats. Even with a P/E ratio around 21 you would see a 30% rise. Return on equity around 16% is sound, while the 3.39 current ratio suggest enough cash is on hand. Income investors are surely calling for a beef up in the 1.5% current dividend yield, but with a 33% payout ratio and solid growth since 2003 their calls might be answered.

Raytheon (RTN): This Massachusetts-based aerospace/defense company is quite diversified and is becoming more so. RTN acquired Applied Signal Technology earlier this year for $490 million and we applaud this move. This is the company’s largest acquisition in CEO Swanson’s tenure with the company. RTN has made four acquisitions in the last fourteen months, which should add to growth prospects for the company. 17 broker like a collective 1 year target upside of about 18%. The 2012 estimated earnings per share of $5.55 along with the current P/E ratio around 10 show the same story with a 15% suggested upside. Although to be optimistic, the P/E is about as low as it has been in the last 10 years and RTN beat consensus earnings estimates the last 2 quarters. Additionally, RTN can boast about having the first acceptable dividend yield in the mind of the income investors. The current yield of 3.6% looks enticing, especially considering dividend growth has been strong since 2002 and the company pays out just 31% of its profits.

H.J. Heinz (HNZ): This Pittsburgh-based Food Company is no stranger to the privileges of a strong brand name. But 16 brokers like an average 1 year target upside of just 7%. A look to the 2012 estimated earnings per share of $3.65, given the current P/E around 17, gives a little more optimistic 16% upside, but is still well under the 30% target. Historically, a P/E around 20 doesn’t appear to be unreasonable especially given the brand name and return on equity around 38%. Those willing to wait can add on the impressive 3.6% current dividend yield. The 59% payout ratio is beginning to top out, but dividends have been increasing like clockwork since 2003. HNZ is not the only brand in town though, as we think shares of Kellogg's (K) and General Mills (GIS) offer an equally well-rounded bet in the consumer staples sector.

PNC Financial Services Group (PNC): Also based in Pittsburgh, this finance company is quite similar to COF. At first glance, the 2012 earnings per share of $6.44 coupled with the current P/E ratio around 9 looks for a break even scenario. However, 27 brokers like a collective 1 year target upside of about 22%. Add in that the financial sector is recovering and PNC has had a string of earnings beats and the current P/E might seem low. Put in a historically reasonable P/E ratio around 12 and there’s your 30% upside. Furthering the value outlook, return on assets is over 1% and the price to book ratio comes in at 1.03. The dividend roar has been heard for financials and PNC is no exception. PNC had a very strong record of dividend increases from 1988 to 2009 until a mandated recessionary cut. Today the current yield is up to 2.4%, but still a far cry from the pre-recessionary levels. Given the 6% payout ratio future increases look more than promising. Even if the dividend simply reaches its level in early 2009 your yield on cost would double. To be sure all financials are recovering and we still think Wells Fargo represents a better buy than PNC because of its more disciplined approach with commercials loans. In southern U.S. markets, Suntrust (STI) is a close-second to PNC.

Newmont Mining (NEM): This Colorado-based mining company is primarily concerned with gold and copper. 15 brokers like an average 1 year target upside of about 35%. Unfortunately 2012 estimated earnings per share of $4.50, given the current price to earnings ratio around 12, suggest only minimal gain. Its likely analyst see that the NEM has beat earnings estimates 6 out of the last 7 quarters along with the fact that the current P/E is historically quite low. A reasonable P/E around 16 gives that 30% upside. Financially the return on equity around 20% and current ratio of 2.25 suggest a stronghold. The dividend yield could use some work at 1.5%, but recently increases have been made. With a payout ratio of 12% investors might be calling not just for increases but for large increases in the future.

Abbott Laboratories (ABT): This Illinois-based healthcare company, founded in 1888, has been more than stable. But 18 Brokers are mixed on ABT with the average 1 year target upside coming in at 10%; the most optimistic analyst pegs it at 50% upside. The estimated 2012 earnings per share of $4.96 along with the P/E ratio around 19 show a huge 78% upside. Even if you use a 10-year low P/E ratio of 15 there’s till a 40% upside to be had. Both seem reasonable as ABT has put together a string of earnings beats as of late. Even if you have to wait for the upside, there’s a bountiful dividend to help you along the way. ABT has not only paid but also increased their dividend for the last 39 years. The current yield of 3.6% is more than respectable while the 5-year average growth rate nears 10%. The 61% payout ratio is beginning to reach the ceiling criteria for many income investors, but Abbott Laboratories appears stronger than ever. Additionally, ABT might flex its muscles soon as it could be an acquirer of one of our potential biotech acquisition candidates.

Disclosure: I am long KO.

Daily ETF Roundup: VXX Pops, GDX Drops As Stocks Retreat

Domestic equities gave up gains from Monday’s steep rally today as�disappointing�economic data sparked concerns and profit taking pressures followed. Selling pressures accelerated towards the end of the trading session and major equity indexes finished the day in red territory. The Nasdaq proved most resilient, shedding 0.07% on the day, while the Dow Jones Industrial Average was hit the hardest, losing 0.33% on the day [see ETF Insider: Do Fundamentals Justify The Wall Street Rally?].

Stocks retreated as investors were less than thrilled about the lackluster economic data releases on the home front. The Case-Shiller home prices report was better-than-expected, but still�disappointing; the figure came in at negative 0.8% versus the previous reading of negative 1.1%. U.S. consumer confidence also slipped, which eroded investors’ confidence; this figure came in at 70.2, missing analyst�estimates�of 71.5, and also falling short of last month’s reading of 71.6. With no major news from overseas, Wall Street largely took cues from the day’s less-than-stellar data releases [see aslo�How To Hedge For A Market Correction With ETFs].

The Barclays iPath S&P 500 VIX Short-Term Futures ETN (VXX) was one of the best performers, gaining an impressive 9.76% on the day, bolstered by resurfacing uncertainties and general weakness in the equity markets. Volatility spiked considerably today as investors expressed their concerns for future growth expectations following a down-tick in consumer confidence along with less-than-impressive�U.S. housing market data [see ETF Laggards Struggling In 2012].�

The Van Eck Market Vectors Gold Miners ETF (GDX) was one of the worst performers, shedding 1.42% on the day, as gold prices retreated alongside equities. Gold prices fell throughout Tuesday’s trading session as profit taking prevailed; futures prices for the precious metal settled near $1,680 an ounce, after peaking at $1,696 an ounce in the morning. GDX has lost close to 3% from a year-to-date perspective [see GLD-Free Gold Bug ETFdb Portfolio].�

[For more ETF analysis, make sure to sign up for our�free ETF newsletter�or try a�free seven day trial to ETFdb Pro]

Why Do People Detest Maths? They Never Had A Good Maths Tuition

In most cases, school children snap through a grammar class but detest the maths class. Mathematics, with all the symbols, digits and abstract concepts, appears removed from day-to-day life, especially for children. But as they grow, they realise the opposite is true–maths is in our every day actions.

If you’re a parent who has dreaded maths when you were young, then a shift in perspective may aid your child attain a better experience now. Private maths tuition cultivates a healthy attitude towards the love of maths, and the appreciation of its many realistic applications. Children pick up more if they are having fun or are energized, and so imaginative ways to learn mathematics can help a great deal.

So how can private maths tuition make maths learning fun and not awful? Creativity and putting in play help a great deal. Instead of writing mathematical symbols and numerical units, maths concepts are introduced to a child by utilising practical situations. For instance, in teaching addition and subtraction, maths tuition will make use of bananas. To add, the child is asked to give more bananas to someone who already has. To subtract, a child is asked to eat the banana. Simple, and fun!

The use of coloured flash cards in private maths tuition is also very effective. Flash cards can be used for adding, subtracting, multiplying and dividing. When the children’s attention drift into other things, then the class can also make use of storytelling to incorporate mathematical problems and equations.

Kids enjoy counting money! Not only is this a constructive way to present maths and financial concepts, this is also a sure-fire method of instructing kids about saving, work, and the practical circumstances of living. Maths tuition can have kids count their change after buying gum ball, or teach them how to save a part of their allowance from mom and dad for the bike they desire to buy.

Parents who have feared maths before when they were students can bank on maths tuition to aid their youngster defeat the same. They will be surprised to see how kids can ace maths, and how this is only achievable through a private maths tuition that fosters a good learning atmosphere for maths.

Ace techniques from our maths tuition and our caring and professional maths tutors will help your child ace maths! Talk to us today. Also published at Why Do People Detest Maths? They Never Had A Good Maths Tuition.

Weekly Oil Roundup: Pipeline Price Pressure Reduced

By Brad Zigler

Crude oil continued to fall today, in anticipation of Canadian pipeline operator Enbridge's moves to reopen its biggest US-bound supply line. Yesterday's estimate of a buildup in US crude oil inventories by the American Petroleum Institute also weighed heavily on prices.

Analysts expected that this morning's US Energy Department inventory report would reflect a drop in crude oil stocks between 2.2 million and 2.6 million barrels. In contrast, the API figured that inventories would rise by 3.3 million barrels.

Crude oil stockpiles actually decreased by 2.5 million barrels according to government data.

The API also estimated that gasoline stocks dropped by 963,000 barrels, versus analysts' forecast for a decline between 625,000 and 1.1 million barrels.

The Energy Department's definitive figures — a drawdown of 700,000 barrels — pretty much split expectations down the middle.

Distillate fuel supplies, including heating oil and diesel, were seen falling 1.5 million barrels by the API, against analysts' predictions of a 300,000-barrel gain.

Analysts got the number right, but not the signage. According to government data, distillate fuel inventories decreased, rather than increased, by 300,000 barrels.

Refinery usage, previously at 88.2 percent, was expected to fall to 87.6 percent. Utilization guesses were dead-on. Gasoline production decreased to a daily average of 9.2 million barrels, while distillate fuel output stepped up to 4.4 million barrels.

Gasoline demand, according to the Energy Department, averaged 9.3 million barrels per day, up 0.5 percent from year-ago levels. Average daily consumption of distillate fuels was pegged at 3.8 million barrels, up 11.5 percent from this time last year.

Trading Week

For the week ending Tuesday, NYMEX WTI crude gained 3.7 percent to $76.80 a barrel. Products were more sluggish. Unleaded gasoline rose 1.7 percent and heating oil picked up 2.3 percent. Refining margins were flattened this week as gasoline-heavy operators grossed 10.8 percent, 1.9 points less than last week. Distillate-rich refinery runs, at 12.4 percent, brought in 1.8 points less.

Average daily NYMEX crude volume climbed 17.1 percent to 872,740 contracts. Open interest fell 62,608 contracts to 1.323 million on short covering.

Contango shrank this week, putting to death a three-week carry market. The average cost of a three-month WTI roll fell from $3.99 a barrel to $3.07. At its peak on Sept. 7, a 3.3 percent net return — equivalent to 13.2 percent, annualized — could be earned for a three-month store.

Largely because of pipeline-related supply constraints, WTI's discount to Brent crude shrank from $2.13 a barrel to $1.86.

The Chicago corn/ethanol crush reached a new high at $1.90 a bushel this week, as high corn prices were more than matched by gains in the price of the alcohol fuel. Ethanol is now pricier than unleaded gasoline.

Technical Picture

Crude oil prices had been buoyed by the pipeline outage but are now struggling to break above a 50 percent retracement of August's $12-a-barrel decline.

Bulls' upside objective — and probable resistance — is spot's $78.31 level. Support should be anticipated at $75.42 and further below at spot's 10-day moving average of $74.81.

Nearby NYMEX WTI Crude Oil

(Click to enlarge)

Momentum and relative strength were waning going into the overnight trading session on Wednesday, though MACD and stochastics indicators remained bullish, if not actually overbought. Prices actually softened more than $2 a barrel in electronic trading ahead of this morning's inventory report, but recovered a bit in the early floor session.

Disclosure: No positions

DOL Still Tinkering With Fiduciary Standard on IRAs

Labor Department's headquarters in Washington.

Despite launching a new fact-finding initiative regarding what potential conflicts of interest brokers face when advising individual retirement accounts (IRAs), the Department of Labor told AdvisorOne on Jan. 9 that it plans to release its reproposed rule revising the definition of fiduciary “during the first half of 2012.”

Updating the fiduciary definition under the Employee Retirement Income Security Act (ERISA) is one of the DOL’s Employee Benefits Security Administration’s (EBSA) “most important regulatory projects,” the spokesman told AdvisorOne in an email message. “We are working to complete our cost-benefit analysis and re-issue the rule as soon as possible.” As EBSA has said previously, “we want to take the time to get this rule right, and we are working diligently to do exactly that.”

EBSA’s Office of Policy Research sent a letter to industry trade groups on Dec. 15 asking for each group’s “voluntary assistance” in helping the Administration in its newly expanded regulatory impact analysis that will assess the impact of the reproposed fiduciary rule on ERISA plans and IRAs. Applying a fiduciary standard to IRAs is one of the more controversial aspects of the reproposal.

EBSA asked the groups to provide it with data that will “more rigorously and definitively determine what impact, if any, conflicts of interest faced by brokers or others who advise IRAs have on IRA investors.”

EBSA asked the trade groups to provide such data within 30 days.

Chris Paulitz, a spokesman for the Financial Services Institute, says FSI is “working diligently” to fulfill EBSA’s request despite the fact that it came during the holidays with a very tight deadline. “We will deliver everything we can to the department in our constant effort to be a good resource for the administration,” he said.

Fred Reish (left), partner and chair of the Financial Services ERISA Team at Drinker Biddle & Reath in Los Angeles, predicts that DOL will extend the exemptions of Prohibited Transaction Class Exemption 86-128 to virtually all advice given to the owners of IRAs.

In other words, Reish says, it is likely that both broker-dealers and RIAs will be able to give individualized advice to IRA owners and receive compensation that is not level. That is, the compensation may vary based on the recommendations, which would be more consistent with a broker-dealer business model than with an RIA business model.

5 Dividend Stocks as Bond Substitutes

I retired back in 2000, just as the tech bubble was bursting. My company had prepared the prospective retirees through seminars and I knew just what to do - roll the 401k money into an IRA with 30% bonds and 70% stock funds. I proceeded to do that, but someone forgot to tell the market how this was supposed to work. Thank goodness for the small pension that got me through the first year.

With my feet firmly planted in the sand, I watched the Twin Towers collapse on live TV in 2001 and saw the stock market close. For the first business cycle of the 21st century, I took a 30% hair cut in stock funds, but the bond fund VUSUX provided income and slight capital appreciation. I spent ½ the bond fund. Then came 2007 and the next leg down. I took a 50% hair cut on the stock funds, which had just about recouped the losses from the first crash and spent the rest of the bond fund, by 2009.

click to enlarge

With bond yields on the 30 year bond hovering at 4% yield, I'm looking for an income substitute to replace bonds. I have had dividend growth stocks in my portfolio since 1980, starting with PG. Then I added AT&T (T), Verizon (VZ), Century Link (CTL) and Dominion (D). Finally, in 1996, I invested in health care stocks Johnson & Johnson (JNJ), Abbott (ABT), and others. I believe strong dividend growth stocks with 4% minimum yield will provide my income needs for the next decade.

Although the health care stocks I purchased had good dividend growth, they don't meet the 4% minimum rule. The telecommunications stocks met the yield, but only the strongest, T, could be considered equivalent to a treasury 30 year bond. Due to price appreciation, D has fallen to 4.1% yield, still acceptable.

I looked for diversification similar to SPY and found INTC at $21 to have a 4% yield, and purchased a position in it. Other stocks on my buy list are Raytheon (RTN) at $43 and Nucor NUE at $36.25. Other possibilities include Waste Management (WM) below $30.22, Lockheed Martin (LMT) below $75 and Sysco (SYY) below $26.

Bond Substitutes

• T - Dividend Champion with 27 consecutive years of dividend increases 5.88% yield, 5.4% 5-year annual average dividend growth rate. P/E 12.9

• D - Dividend Challenger with 8 consecutive years of dividend increases, 4.1% yield, 6.4% 5-year annual average dividend growth rate. P/E 14.6

• INTC - Dividend Challenger with 9 consecutive years of dividend increases, 3.76% yield, 14.5% 5-year annual average dividend growth rate. P/E 10.2

• RTN - Dividend Challenger with 7 consecutive years of dividend increases, 3.82% yield, 10.8% 5-year annual average dividend growth rate. P/E 8.1

• NUE - Dividend Champion with 38 consecutive years of dividend increases, 3.73% yield, 36.9% 5-year annual average dividend growth rate. P/E 26.28

Disclosure: I am long T, D, INTC, VZ, CTL, PG, JNJ, ABT.

Rollover Assets a Ripe Opportunity for Advisors, Cogent Says

A recently released report by Cogent Research has found that while nearly half of the 396 advisors polled by the company in 2010 are failing to grasp the opportunity to win rollover assets from their clients, a tier of “highly successful” rollover advisors, representing nearly one-third of the advisors surveyed, each managed to capture $5 million or more in rollover assets in 2009.

On average, the Cogent report states that the high performing advisors have an average of $128 million in assets under management. Moreover, “the highly successful rollover advisors convert more retirement accounts and the size of those accounts is 2.4 times larger, at $344,000, than the advisors who fall into the second tier in terms of rollover success,” the report states.

David Feltman, Managing Director for Syndicated Research at Cogent, said in a release announcing the report’s findings that “it appears that there is a group of highly focused advisors who not only build the biggest books of business, but also put their mind to winning rollover assets. They are firing on all cylinders.”

Cogent says its study “illustrates that there is a significant opportunity for both asset managers and advisory firms to focus heavily on winning both IRA and employer sponsored retirement plans conversions.” While winning these rollover assets will require “a concerted effort,” Cogent continues, “retirement assets tend to be a significant portion of many investors’ portfolios.” Says Feldman: “These assets are available to be won and those who work hardest succeed at winning them. Given the propensity of retirees to move their employer-sponsored account at retirement, these funds are a ripe opportunity.”

Did Tyler Technologies Squander Its Latest Sales Increase?

Margins matter. The more Tyler Technologies (NYSE: TYL  ) keeps of each buck it earns in revenue, the more money it has to invest in growth, fund new strategic plans, or (gasp!) distribute to shareholders. Healthy margins often separate pretenders from the best stocks in the market. That's why we check up on margins at least once a quarter in this series. I'm looking for the absolute numbers, so I can compare them to current and potential competitors, and any trend that may tell me how strong Tyler Technologies's competitive position could be.

Here's the current margin snapshot for Tyler Technologies over the trailing 12 months: Gross margin is 46.0%, while operating margin is 14.6% and net margin is 8.6%.

Unfortunately, a look at the most recent numbers doesn't tell us much about where Tyler Technologies has been, or where it's going. A company with rising gross and operating margins often fuels its growth by increasing demand for its products. If it sells more units while keeping costs in check, its profitability increases. Conversely, a company with gross margins that inch downward over time is often losing out to competition, and possibly engaging in a race to the bottom on prices. If it can't make up for this problem by cutting costs -- and most companies can't -- then both the business and its shares face a decidedly bleak outlook.

Of course, over the short term, the kind of economic shocks we recently experienced can drastically affect a company's profitability. That's why I like to look at five fiscal years' worth of margins, along with the results for the trailing 12 months, the last fiscal year, and last fiscal quarter (LFQ). You can't always reach a hard conclusion about your company's health, but you can better understand what to expect, and what to watch.

Here's the margin picture for Tyler Technologies over the past few years.

Source: S&P Capital IQ. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.

Because of seasonality in some businesses, the numbers for the last period on the right -- the TTM figures -- aren't always comparable to the FY results preceding them. To compare quarterly margins to their prior-year levels, consult this chart.

Source: S&P Capital IQ. Dollar amounts in millions. FQ = fiscal quarter.

Here's how the stats break down:

• Over the past five years, gross margin peaked at 45.9% and averaged 42.9%. Operating margin peaked at 15.4% and averaged 14.2%. Net margin peaked at 9.3% and averaged 8.1%.
• TTM gross margin is 46.0%, 310 basis points better than the five-year average. TTM operating margin is 14.6%, 40 basis points better than the five-year average. TTM net margin is 8.6%, 50 basis points better than the five-year average.

With recent TTM operating margins exceeding historical averages, Tyler Technologies looks like it is doing fine.

Over the decades, small-cap stocks, like Tyler Technologies have provided market-beating returns, provided they're value priced and have solid businesses. Read about a pair of companies with a lock on their markets in "Too Small to Fail: Two Small Caps the Government Won't Let Go Broke." Click here for instant access to this free report.

• Add Tyler Technologies to My Watchlist.

Asia Markets: Chinese stocks slide to lead most of Asia lower

HONG KONG (MarketWatch) � Mainland Chinese shares tumbled on Tuesday to lead most major Asian markets down as investors disappointed by a lack of monetary policy easing sold down stocks across the board.

Australian shares skidded lower after the central bank there surprised markets by leaving its policy rate unchanged against widespread expectations of a reduction, while Japanese stocks were pressured by some weak earnings reports.

China�s Shanghai Composite CN:000001 �dropped 1.7% to 2,291.90 and Japan�s Nikkei Stock Average JP:100000018 slipped 0.1% to 8,917.52.

�There are expectations of an interest cut in China and yet nothing is coming at the moment,� Tom Kaan, director of equity sales at Louis Capital Markets in Hong Kong said. �It�s very difficult to read the official line, and that is what is putting people off trading mainland China stocks.� Read report on possibly hawkish signal from China�s central bank.

Click to Play Indonesia expands at robust pace

Indonesia is shining as one of Asia's strongest emerging markets, given a healthy boost in GDP growth.

The S&P/ASX 200 index AU:XJO erased early gains to finish 0.5% lower at 4,274.2 in Sydney after the Reserve Bank of Australia left its policy rate unchanged at 4.25%, while Hong Kong�s Hang Seng Index HK:HSI �fell 0.1% to 20,699.19.

Bucking the broad trend, South Korea�s Kospi KR:SEU rose 0.4% to 1,981.59 and Taiwan�s Taiex XX:Y9999 �added 0.3% to 7,707.44.

Tight liquidity conditions and the absence of a reduction in bank reserve requirement ratio pressured stocks on mainland bourses.

Air China Ltd. AIRYY �CN:601111 , down 4.1%, Anhui Conch Cement Ltd. CN:600585 , 3.2% lower and Harbin Pharmaceutical Group Co. CN:600664 , off 3.1%, were among the notable decliners in Shanghai, where losses where widespread.

In Hong Kong, Chinese property, coal mining and banking stocks lost ground, with Agile Property Holdings Ltd. HK:3383 AGPYY �slumping 4.7%, China Coal Energy Co. CCOZY �HK:1898 �down 2% and Bank of China Ltd. HK:3988 �BACHY �falling 1.2%.

In Sydney, miners were among those hurt after the RBA�s decision to remain steady on interest rates, with Rio Tinto Ltd. AU:RIO RIO down 1.8% and Fortescue Metals Group Ltd. AU:FMG �down 1.9%.

Shares of National Australia Bank Ltd. AU:NAB NABZY �sank 4% and investment bank Macquarie Group Ltd. AU:MQG �MQBKY gave up 0.8% after issuing updates that fell short of expectations.

National Australia Bank missed analysts expectations with a 7.7% rise in first-quarter cash earnings, and also said it will undertake a strategic review of its U.K. operations given difficult operating conditions faced by the unit. Macquarie shares dropped after the firm forecast a worse-than-expected 25% fall in full-year profit due to tough trading conditions.

Hearing loss device maker Cochlear Ltd. AU:COH CHEOY outperformed, with shares surging 7.6%. The firm delivered a first-half loss of A$20.4 million ($21.87 million), hit by provision costs relating to a recall.

Sentiment in Asia was also bruised by a lack of resolution in Greek debt talks.

Concerns that Greece may be at a rising risk of a messy default drained investor confidence and pushed U.S. markets lower on Monday. Greek political leaders have yet to agree on austerity measures required to secure the next round of bailout funds, with reports saying negotiations will resume Tuesday. Read more about Greek debt negotiations.

�Markets have been hit a little by the Greek bailout negotiations,� said Naomi Fink, equity strategist at Jefferies Japan. �A lot of the recent rally has been on hopes of better overseas demand.�

In Tokyo, earnings reports pressured some firms. Suzuki Motor Corp. JP:7269 SZKMY �lost 1.8% after posting a profit slide of just under 5% during the April-December period.

Also hit by earnings related news, Dainippon Screen Manufacturing Co. JP:7735 �shed 7.1%.

Shipping stocks rose to support the broader market after last year�s hefty losses. Mitsui O.S.K. Lines Ltd. JP:9104 �MSLOF �rose 2.2% and Nippon Yusen K.K. JP:9101 �NYUKF �added 2.4%.

Nippon Telegraph & Telephone Corp. JP:9432 NTT inched up 0.1%, finding buyers after recent losses, despite posting a 56% quarterly profit decline.

In Seoul, shares of Samsung Electronics Co. SSNLF �added 1.8% and Hyundai Heavy Industries Co. HYHZF �climbed 0.7% on foreign buying interest to support the broader market.

Financial Alternative Investment Strategies

Once, you start earning a regular source of income, you need to find out the financial alternative investment strategies wherein you can invest your sum for future benefits. Initially, the good investment strategy in the early 2007 was selling all the stock investments you had. Then gradually in 2009, it changed to putting your portfolio investment into stocks up to hundred percent. The consequence would be no losses in investment in the year 2008 with great gains in the year 2009 as well as 2010, initially. The possibilities for the same would be zero without a crystal ball. However, if you apply or follow a simple, yet effective financial alternative investment strategies, you will indeed make good in any of the market situations.

Good financial alternative investment strategies are not well defined formulas, as you have for science or mathematics, which will inform you to invest into an asset or the time to purchase or keep on hold some others for a short time period. You need to attempt to evaluate the current specifications in the market. You require a good and sound plan for the sake of long term investment with few adjustments to be made timely, if needed. Let us now have a glance at some of the fundamental features to put together good financial alternative investment strategies for the sake of gaining profits for a longer time period associated with few risks.

Risk must be considered at the time of evaluating the outcomes of or applying any strategy of investment for yourself. The crystal ball situation had gone through an allocation of asset of zero to the stock investment up to hundred percent. This approach is not only quite risky, but it is also short sighted. It demands a question as to what could be done in the coming years and so on.

A common investor takes due risk without any planning. However, this is not the sound way of investing your revenue. It is your money and you need to take care that it is being invested precisely. Financial alternative investment strategies suggest you to earn in your neighborhood of ten percent for a long time period with just a small amount of risk. It simply means that one will never go above fifty percent or more annually as there is no crystal ball. It simply states that you have better possibilities to avoid great losses coming in your way which can disintegrate your financial plans for future.

Financial alternative investment strategies emphasize on asset allocation, meaning that money should be allocated by means of diversification and spreading it into different investment options at least three to four. To start with the safer ones are stocks, bonds, cash equivalents going ahead with real estate, international securities, gold, etc. to know more about these strategies, you can anytime contact cash value life insurance for further details or information. Go carefully through this guide for financial alternative investment strategies, and follow it precisely to make a wise investment plan for your secured future.

Did you know that there is a financial alternative outside of the market?

I put together a free video that reveals a 200 year old financial tool that banks and Wall Street have been trying to keep secret from you…Visit my website here to watch now: http://financial-alternative.com/

Maryland towns welcome post office reprieve

WEST FRIENDSHIP, Md. (CNNMoney) -- When the U.S. Postal Service announced a news conference earlier this week, many customers and some workers at rural post offices thought it was to announce a hit list of closings and layoffs to deal with massive red ink at the agency.

So there was surprise and delight in rural Maryland on Wednesday. Word spread that Postmaster General Patrick Donahoe would instead allow local communities to decide between a cutback in hours, merging with a retail merchant or proceeding with a shutdown if their small post office is targeted for cost cutting.

Postal officials believe the most popular choice will be to reduce the operating schedule.

"That would be fine, cutting back the hours," said customer Ellen Jones, collecting her mail from a box at the West Friendship, Md., post office, about 30 miles west of Baltimore. The storefront facility serves a large geographic area that includes many farms.

Jones said she can accept reduced hours more easily than a shutdown, since "it's still convenient for people, especially for those of us that live out this way -- rather than having to take a half-hour trip, because everything's a half hour from here."

"But the post office for me is less than five minutes, actually, so I do utilize it," she added.

The location's postmaster for the past ten years, Shirley A. Barber, has worried she would lose her rural route delivery carriers if they were moved to a bigger facility farther away, and that the Postal Service especially planned to target sites like hers that rent the office space.

So she was surprised at the apparent reprieve that would cut the office's hours.

"You know, they were talking about closing, I was gonna accept whatever they decide to do," Barber said. "But I know keeping them open is truly the greatest thing they could do for us."

Most of her customers agreed when asked what they would choose to do.

"I would much rather adapt to the hour change rather than closing, yes, because this is convenient, this is a rural area and we need it," said Bernadette Evans.

Putting up with less than a full business day is already part of having to deal with the local post office, noted Teddey Jones, who often finds the door closed and locked for an hour in the middle of the day.

"It's already a pain they have the lunch hours now which gets me every time when I come out here to get the mail or drop something off," Jones said. "But I'm happy this is staying open."

About 10 miles away from West Friendship, the Glenwood, Md., post office is in a modern brick building owned by the Postal Service. Yet it fits the profile of a "rural" location that could be combined with others in the area.

Customer Susan Heald said the strategy doesn't make sense.

"I think that if you're in a city you probably have more access to other post offices to go to, but if you're out here, where are you gonna go if they take your post office away?," she asked. "It seems the opposite should be happening."

And other customers believe the Postal Service hasn't done enough to trim fat in its overall operations before even suggesting cutbacks in local post offices.

Ax won't fall on rural post offices

"Too much overhead," Robert Burgess said after dropping off a letter at the Lisbon/Cooksville, Md., post office. "Go to some of the bigger post offices, you see them standing around, doing nothing. I mean clean your own house first."

Back at West Friendship, Ed Surowiec also questioned the cost-cutting strategy. "I'm retired from corporate America and it seems to be that every time they want to save money they go to the lowest rung on the ladder to do it," he said.

Rather that cut hours, which he acknowledged he wouldn't mind, he suggested putting pressure on postal officials to achieve greater efficiency.

"The easy way is just to cut services, and a lot of businesses do that as well," Surowiec said. "They want to save money, they lay people off, and I think that's just a typical way of copping out on the problem." 

AGL Resources Catches Analysts Sleeping Again

AGL Resources (NYSE: GAS  ) reported earnings on Feb. 22. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q4), AGL Resources missed estimates on revenues and missed estimates on earnings per share.

Compared to the prior-year quarter, revenue improved significantly and GAAP earnings per share dropped significantly.

Gross margins expanded, operating margins expanded, net margins dropped.

Revenue details
AGL Resources recorded revenue of $790.0 million. The four analysts polled by S&P Capital IQ expected a top line of $812.2 million on the same basis. GAAP reported sales were 19% higher than the prior-year quarter's $665.0 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
Non-GAAP EPS came in at $0.87. The eight earnings estimates compiled by S&P Capital IQ predicted $0.93 per share on the same basis. GAAP EPS of $0.36 for Q4 were 56% lower than the prior-year quarter's $0.81 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 33.8%, 460 basis points better than the prior-year quarter. Operating margin was 23.5%, 200 basis points better than the prior-year quarter. Net margin was 4.2%, 540 basis points worse than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $1.46 billion. On the bottom line, the average EPS estimate is $1.44.

Next year's average estimate for revenue is $2.53 billion. The average EPS estimate is $3.06.

Investor sentiment
Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on AGL Resources is hold, with an average price target of $41.29.

If you are interested in gas utilities, then you'll want to read about "One Stock to Own Before Nat Gas Act 2011 Becomes Law." Click here for instant access to this free report.

• Add AGL Resources to My Watchlist.

Sell Your mREITs Immediately

I believe that investors should immediately liquidate their mREIT holdings. My opinion is based upon analyzing the current environment background, political landscape, and estimate potential capital losses for readers of my articles. The reason to sell is an action to minimize capital losses to mREIT investors.

On July 15th, my initial concerns were presented in this article: mREITs: Protect Your Investments if Debt Ceiling Unresolved. My “debt ceiling” concerns have escalated to the point where investors have to take swift and decisive action. I feel compelled to write this article because my articles have advised buying mREITs during the current difficult economic background. This is not a scare-tactic article. I am honestly concerned for the readers’ mREIT investments.

Many investors and insiders can state their “opinions” on likelihood outcomes of non-resolution of debt ceiling. Facts can be stated, normal business model scenarios described, and common sense information disseminated to the investing community. What cannot be described by anybody with any authority is the worse case scenario for mREITs if a debt ceiling resolution is not reached. It is for these reasons that I present my rationale for advocating the selling of mREITs and capital preservation.

On July 11th, I wrote an article with my favorite dividend stocks: My Top 10 Must-Own Dividend Stocks. As a blue-blooded American, I assumed our political system would take draconian action to ensure our debt ceiling issues were resolved far before present date. This assumption was incorrect. At this point, capital preservation is my number one goal. Here is my rationale for recommending the sale of your mREITs:

1. Treasury.gov has admitted - in their Debt vs. Myth Report - that if the debt ceiling issue is not resolved, the U.S. will suffer “...catastrophic economic consequences....”. This is reason enough for me to realize that a potential financial crisis could occur if the political parties do not come together. I cannot rest my financial future on political parties agreeing to any agreement in the next week.

2. Moodys.com, on July 18th, has confirmed that the lack of governmental spending constraints can be perceived as a “credit negative". StandardandPoors.com, on July 14th, confirmed the U.S. Federal debt is on “Credit Watch Negative”.

3. The U.S. Government debt can be labeled “default” or “technical default”. If the debt ceiling issue is not resolved, domestic and worldwide credit agencies will downgrade the U.S. Treasury market. The dates when Moody’s or Standard & Poor’s would issue such a downgrade are not provided in the U.S. public news wires or to worldwide investors.

4. I will use American Capital Agency Corp. (AGNC) to discuss repurchase agreements. Per AGNC’s 10k, the following repurchase agreements exist:

• Page 3, “We fund our investments primarily through short-term borrowings structured as repurchase agreements.”
• AGNC Financing Strategy, “As part of our investment strategy, we borrow against our investment portfolio using repurchase agreements. Our borrowings generally have maturities that range from 30 to 90 days, but may have maturities up to 364 days. We expect our leverage will range between five to 10 times the amount of our stockholder's equity...”.
• AGNC relies upon their primary dealers. Lehman Brothers and Bear Stearns were Federal Reserve primary dealers during the 2008 financial meltdown. They were removed when they both collapsed and entered into bankruptcy. If AGNC’s primary dealers require additional collateral, then a worldwide credit de-leveraging could ensue.
• AGNC is long Government Sponsored Entities (GSE) longer-duration debt obligations. These entities include Freddie Mac, Fannie Mae, and Ginnie Mae. If longer term interest rates increase, this would decrease the book value of AGNC’s long holdings. A decrease in credit worthiness for specific long positions on AGNC’s position could also force primary dealers to demand additional AGNC collateral on their hedged portfolio.

5. I will use Hatteras Financial Corp (HTS) for the issue of mREIT leverage. mREITs borrow cheap and lend dear. In other words, mREITs will borrow short-term and lend longer-duration debt instruments. Per HTS’s March 31st, 3011, 10k, page 35, "...As of March 31, 2011, the weighted average haircut under our repurchase facilities was approximately 4.49%, and our leverage (defined as our debt-to-shareholders equity ratio) was approximately 6.1:1...."

• Per HTS’s 10K, their leverage was last stated at 6.1x.
• If a primary dealer increases collateral requirements, this could place pressure on HTS’s ability to raise funds. The use of leverage only accentuates the problem of raising capital in a difficult situation. Longer-term bonds decreasing in value, due to credit risk or rising rates, will suffer in a “...catastrophic economic consequences....” scenario, as quoted earlier by Treasury.gov leadership.

6. I will use AnnalyCapital Management (NLY) to discuss the issue of “primary dealer haircut”. NLY is the largest mREIT market cap with arguably the sharpest management team in the business. Michael A. J. Farrell has been running NLY since 1997. NLY has hedges in place, derivatives in place, a barbell strategy on the balance sheet. How does Mr. Farrell plan for a scenario that has so many unknowns? I don’t know the answer. I trust his judgement but the debt ceiling, interest rate impact, and credit agency downgrades could have unfathomable damage.

• The primary dealer’s haircut percentage is based upon assets’ liquidity and credit worthiness.
• Per the Federal Reserve, “the lendable value of such collateral incorporates a haircut that reflects the liquidity and credit and interest rate risk of the asset...”
• Per NLY’s March 31st, 2011’s 10k, page 35, “....Our debt-to-equity ratio at March 31, 2011 and December 31, 2010 was 6.3:1 and 6.7:1, respectively...”
• Per the Federal Reserve, a “haircut” calculation is based in part on the following data inputs: “...For assets that cannot be marked to market, a haircut is applied to the par value in the case of a security or to the outstanding balance in the case of a loan.The haircuts applied to such non-priced collateral are generally substantially larger than those applied to collateral that can be marked to market to account for reduced liquidity....”

A “haircut” increase could require mREITs to put up additional collateral. Because mREITs are levered as a basic business model, the effects of valuation and haircut terms could have serious negative consequences upon the GSE and mREIT markets.

Conclusion

By my own admission, the recommendation to liquidate one’s mREIT holdings may be an act of unnecessary concern or my assumption(s) of the worst case scenario. Please use your own discretion in deciding to hold, buy, or sell your mREITs. My action plan is to sell all my mREITs today and buy back when our political leadership has resolved the debt ceiling issue.

Hopefully - and I am hopeful - the situation is resolved quickly and financial disaster is diverted. In this case I will repurchase my mREITs. In the worst case scenario, mREIT shareholders should be aware of unforeseen risks. Let’s walk away and fight to play another day.

Disclosure: I am long AGNC, HTS, NLY.

2 Companies Positioned to Lead the Global Auto Industry

Continuing the format of our last commentary, we discuss below our recent purchases of General Motors (GM) and Toyota (TM). FPCM believes that the auto industry will benefit from both cyclical and structural tailwinds, and that both GM and Toyota should be beneficiaries of such positive trends.

Why do you like the auto industry?

The global auto industry based on unit sales is in the early stages of recovery; driven by continued strong growth in developing countries and a return of demand in developed markets. For example, global auto unit sales fell from 66.7 million units in 2007 to 60.4 million units in 2009 of which North America and Western Europe accounted for more than 100% of the contraction, which was offset by growth in developed countries.

As the developed economies recover, auto sales should continue to grow thanks to pent-up demand and an aging fleet. By way of example, normalized US auto sales are roughly 15-16 million units per year. In 2009, unit auto sales in the U.S. were slightly more than 10 million. Outside the developed markets, the rise in GDP and consumer wealth in emerging countries is driving greater demand for autos for both personal and business use. China is the world’s largest auto market by unit sales.

Why GM & Toyota?

Based upon our research, FPCM determined that both GM and Toyota are attractive equity investments. GM and Toyota share several themes: inexpensive valuations; strong brands and product portfolios; leading global market share positions; and both companies are undergoing secular cultural and management transformations.

Toyota’s recent missteps are of a different nature from GM’s, but challenging as well. Toyota has faced multiple product recalls and lawsuits revolving around serious product defects in both its Toyota and Lexus brands. While the company initially responded in an ineffective manner, senior management has repositioned their communications and actions in order to move Toyota forward and to protect the company’s brands.

Recently, Toyota’s U.S. sales have been impacted negatively by both the contraction in the U.S. auto market as well as by the negative publicity regarding the company’s product recalls. Despite the product recalls and negative publicity, FPCM believes that Toyota’s brands, manufacturing skills, and product innovation are durable competitive advantages and that the company’s recent product recall woes are short-term in nature.

What are GM and Toyota worth per share?

Both GM and Toyota trade at sizable discounts to their peers. Appreciating that both companies operate in a very cyclical industry, we attempt to value both companies on a “normalized” or “mid-cycle” basis. In the near-term, both companies should experience attractive sales growth and margin improvement as the companies and peers benefit from resurgence in auto sales in the U.S. and European markets.

Longer-term, both companies are well positioned to continue to lead the global auto industry and generate attractive profit margins. Based upon FPCM’s research and valuation analysis, we believe that GM’s fair value range is from $50 - $70 per share and that Toyota’s ADR fair value range is from $100 - $120 per share. Currently, GM’s share price is roughly $31 and Toyota’s ADR share price is $83.

Disclaimer: Readers are advised that this commentary is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy. The information contained herein has been obtained from sources that we believed to be reliable, but Financial Partners Capital Management (FPCM) does not offer any guarantees as to its accuracy or completeness. Past performance is no guarantee of future results. The opinions expressed herein are those of FPCM, are subject to change without notice. Reproduction without written permission is prohibited. Entities including but not limited to FPCM, its officers, directors or employees may have a position, long or short, in the securities mentioned herein and/or related securities, and from time to time may increase or decrease such position or take a contra position.

TD’s Nally to Head RIA Biz as Bradley Shifts to Retail

TD Ameritrade President Tom Bradley on Thursday speaking at the company's conference in Orlando.

TD Ameritrade (AMTD) said late Monday that Tom Bradley will become the company’s new president of retail distribution. He will be replaced in his role as head of the RIA business, TD Ameritrade Institutional, by Tom Nally.

John Bunch, president of retail distribution, has resigned his position, effective this coming Friday. Bunch, who had been with the company since 2004, will be taking the top leadership role at an investment advisory firm.

In 2011, Bradley was named one of the 25 most influential people by Investment Advisor magazine, an honor he received in 2004, 2006 and 2009 as well, largely for the role he played overseeing TD Ameritrade Institutional’s relationship with more than 4,000 independent RIAs who custody their assets with the unit.

“Tom Bradley has been a strong member of the TD Ameritrade management team for many years,” said Fred Tomczyk, president and CEO of the company, in a press release. “He has grown TD Ameritrade Institutional into a major player in the fastest-growing segment of financial services by expanding technology and product offerings and putting clients first. I am confident that he will put his broad knowledge base and determined management style to good use within our retail client organization.”

Nally, who has been with the company since 1994, is a 12-year veteran of Bradley’s management team and most recently oversaw the business unit’s sales. He and his team were responsible for developing new RIA relationships and delivering practice management solutions that assist RIAs in achieving their strategic business objectives, according to the company.

“My time spent working for independent RIAs, helping them better serve their clients and create successful practices, and supporting the issues that are important to them on a national scale, has been a joy and a privilege,” said Tom Bradley, in a statement.

Nally will also join the company’s senior operating committee, a group of senior executives that reports to Tomczyk and is responsible for the strategic direction and decision making at the company.

“I can’t be more excited about the future of TD Ameritrade Institutional with someone like Tom Nally at the helm,” Bradley continued. “He, too, has dedicated the better part of his career to advisors – building relationships, putting clients first and always asking how we can better help advisors succeed.”