Fear Dominating The Broadcom Story

A lot of what has worried Broadcom (Nasdaq:BRCM) analysts and investors appeared to come home to roost with the company's latest earnings report. Weak guidance has investors fearing that the company is losing more and more share to Qualcomm (Nasdaq:QCOM), with an overall stagnation in high-end devices leading to fears that ASPs and margins are in danger.

I can understand these fears, but I think there are still some positives to this story. The company's NFC business appears to be doing pretty well, and the higher-margin broadband and networking businesses are likewise more than just afterthoughts. I'd be nervous making a long-term commitment to any mobile chip company right now, but Broadcom could work as a rebound trade for aggressive investors.

Q2's Results Weren't That Bad...
Broadcom reported revenue growth of 6% (year-on-year) and 4% (sequential) for the June quarter, slightly below the average sell-side estimate. While broadband (up 5% and 6%) and infrastructure (up 7% and 19%) were stronger than expected, the mobile/wireless business (up 7% and down 3%) was almost 10% below expectations.

While the growth (or lack thereof) of the mobile business pretty much dominates the discussion around Broadcom, the company's other units are actually more profitable, and the company benefited from that mix shift. Gross margin declined 40bp from last year and rose 20bp sequentially. Operating income was up 3% and 10%, though, which was slightly better than expected despite very weak margins in the wireless business.

SEE: Analyzing Operating Margins

… But Guidance Was That Bad
Broadcom shares almost certainly weren't going to outperform on the basis of the reported results, but management's guidance and comments on the call seriously spooked the market. Management gave a range of revenue estimates for the third quarter with the midpoint about 5% below the prior sell-side estimate. Even worse, they pushed back the commercialization target for the LTE products by about six months – a significant delay in what many analysts have marked as a key driver of the company's near-term growth prospects.

What's Really Going On With Sockets And Shares?
A lot has been made of Broadcom losing connectivity slots in recent Samsung devices to Qualcomm as proof that Broadcom's mobile business is about to face serious trouble. To be sure, I do see some risk that Samsung shifts more business to Qualcomm or Marvell (Nasdaq: MRVL) in the future and/or leverages its purchase of assets from CSR to cut Broadcom out of future designs. Likewise, the announcement of Texas Instruments (NYSE: TXN) selling its connectivity assets to an unnamed buyer (speculation has centered on Apple (Nasdaq: AAPL)) has bears projecting significant share, ASP, and margin losses into the future.

That may be premature. It is true that Qualcomm has been winning sockets that were formerly Broadcom's, but it's also true that Broadcom has been winning baseband business elsewhere and this can actually be more lucrative. What's more, Broadcom has been beating NXP Semiconductors (Nasdaq: NXPI) and gaining some share in the NFC chip market.

It's also worth noting that Broadcom's non-mobile/wireless businesses aren't exactly chopped liver. Although the company wrote down the NetLogic deal by $501 million, the new Trident II networking chip is ramping with customers like Cisco (Nasdaq: CSCO) and Huawei, and these business can still drive worthwhile higher-margin growth.

The Bottom Line
At today's price, I think there's a great deal of bearishness on the company's future in wireless baked into the shares, bearishness that may well overlook the company's strong IP position in system-on-a-chip technologies. While I would not be cavalier about the threat of competition from Qualcomm or Intel (Nasdaq:INTC), nor the risk of "home-grown" solutions from Samsung and/or Apple, I think a lot of the downside may already be in the market.

Just 2% long-term annual free cash flow growth would suggest that Broadcom shares should trade closer to $33 or $34, while I think a worst-case scenario would fall around $27 or $28 per share. There are certainly risks tied to shrinking market growth, shrinking margins, and increasing competition, and these are not shares for investors who don't like or tolerate risk. Even so, while I don't think its appropriate to approach Broadcom with a buy-and-forget mentality, I do believe the shares are too cheap below $28.

Disclosure – At the time of writing, the author owned no shares of companies mentioned in this article.

4 Stocks to Buy to Hedge Against Higher Gas Prices

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That sucking sound you hear is more money going directly from your wallet and into your gas tank. That's right: Gas prices are once again on the move upward — just in time for your summer vacation plans.

Source: Flickr

According to AAA, a gallon of unleaded fuel hit an average of $3.67 this past Monday. That's about a 7-cent increase from last week and up from the $3.52 a gallon recorded last month. The automobile club predicts that gas prices per gallon will hit $3.75 by early summer before rising further during peak driving times.

The culprit? Lower supply here at home.

While energy companies aren't allowed to export crude oil, they can export finished and refined petroleum products. And that means gasoline. Recent data from the Energy Information Administration showed that energy firms in the U.S. exported about 3.6 million barrels worth of gasoline a day last week, according to the Wall Street Journal. That's an increase of about 25% for the same period last year. All in all, that's crimped domestic supplies of gasoline down to their lowest point for this time of year since 2011.

Lower supply due to exports plus rising demand equal higher gas prices for you and me. Yet, you don't have to take higher gas prices in stride. There are ways investors can hedge and profit from the upcoming pain at the pump. Here's four ways to do just that.

Valero (VLO)

As one of the nation's largest independent downstream players, Valero (VLO) is in a prime position to profit from exporting refined petroleum products and rising gas prices. In fact, VLO has made sending gasoline and diesel overseas one of its main pillars of profit.

Valero is responsible for about 20$ to 25% of all refined fuel exports from the U.S. and exports around 20% of all the diesel fuel and 8% of all the gasoline in produces.

During its last earnings report, VLO reported that it sent 193,000 barrels of diesel fuel and 91,000 barrels of gasoline overseas every day during the third quarter. More importantly, Valero has been working to increase that capacity even further and recently beefed up its terminal assets on the Gulf Coast.

Valero has also spent a hefty penny reconfiguring its refineries to run on more light sweet crude oil — the kind produced in the Bakken and Eagle Ford — rather than heavier, sour crude. That gives VLO higher profit margins since gas prices are tied to Brent-benchmarked crude.

VLO trades at just 9 times next year’s expected earnings, so it’s a cheap choice to hedge rising gas prices, and it also offers a 1.8% dividend yield for a little backside protection.

Phillips 66 (PSX)

As if ConocoPhillips (COP) spinoff Phillips 66 (PSX) needed any more positives. PSX is already becoming a major player in liquefied petroleum gas (LPG) and propane exports. Meanwhile, it's a major midstream and natural gas processor as well. All of these refining activities are boosting the firm's bottom line.

You can add gasoline exporter to that list of achievements.

Like Valero, PSX has continued to see the benefits of exporting gasoline and diesel — especially to a hungry South American market.

Phillips 66 currently has the capacity to export around 320,000 barrels of gasoline a day from its facilities in the Gulf. As of the fourth quarter of 2013, PSX was using that capacity to send around 190,000 barrels per day. While that was the fourth quarter in a row of rising export volumes, it still leaves plenty of room to raise it more. Also like Valero, PSX has been able to use light sweet crude to its advantage and profit from the rich crack spread.

Meanwhile, Phillips 66 shares, while not as cheap as VLO, still are decently valued at 10.5 times next year’s earnings on anticipated long-term growth of almost 10%. It also yields just less than 2% in dividends.

Enterprise Products Partners, LP (EPD)

It shouldn't come as a shock that midstream giant Enterprise Products Partners, LP (EPD) is one of the best ways to play rising gas prices. When you're one of the largest midstream master limited partnerships (MLPs) in the country, you have your hands in a variety of different energy commodities. That includes pipelines that transport refined gasoline to export terminals.

EPD owns three different pipelines that carry refined crude oil to two different Gulf Coast export terminals. Those terminals are within a short tanker trip to the rich Central and South American markets. At the same time, Enterprise is expanding those terminals to begin exporting more gasoline. The terminals will be able to tap into nearly 12 million barrels worth of storage capacity and be able to export 360,000 barrels per day of gasoline, diesel and other products when fully completed by the end of this year.

All in all, these moves should help EPD continue with its rich tradition of rising cash flows and dividends. EPD currently yields a very healthy 3.9%.

United States Gasoline Fund (UGA)

One of the best ways to hedge against rising gas prices is to directly bet on that happening. The exchange-traded fund boom has made it easy for anyone with a brokerage account to hedge their gasoline consumption.

The United States Gasoline Fund (UGA) is the way to do it.

UGA attempts to track the changes, in percentage terms, of spot gas prices. It does this by using RBOB gasoline futures contracts and other gasoline-related forwards/swaps traded on the NYMEX exchange. Essentially, UGA avoids investors the hassle of opening and owning a futures account and dealing with the resulting headaches.

UGA is proven to be pretty effective at tracking rising gasoline prices as well.

Over the last five years as gasoline has surged from recessionary lows, UGA has managed to tack on an impressive 208% gain. That gain has certainly made up for the rise in gas prices in that time. Expenses for UGA run 0.6% — or $60 per $10,000 invested — and investors will get a K-1 statement from the fund come tax time.

As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.

Is Facebook a Bargain Here?

With shares of Facebook (NASDAQ:FB) trading at around $27.16, is FB an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock's Movement

Since Facebook Home is the biggest recent news related to the Facebook story, let's get that news out of the way first. For those who aren't familiar with Facebook Home, this is its description on Google (NASDAQ:GOOG) Play: “Facebook Home puts your friends at the heart of your phone. Replace your standard home screen with a steady stream of friends’ posts and photos. Get to apps with one swipe — just drag your profile picture up to open the app launcher. And when you download Facebook Messenger, you can keep chatting with friends when you’re using other apps.”

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Facebook Home currently has a rating of 2.2 of 5 on Google Play, which is poor. Here's a breakdown of those ratings:

5 Stars: 3,060

4 Stars: 1,221

3 Stars: 1,575

2 Stars: 2,187

1 Star: 8,956

It's definitely not a good sign that almost 9,000 people have given Facebook Home the lowest rating possible. All that said, Facebook Home isn't going to make or break the company. It's simply a miss (so far). This is okay, and it even fits with the company philosophy.

Mark Zuckerberg has created an atmosphere where ideas should be shared, and risks should be taken. He doesn't want his employees to fear failure. If someone has an idea, it gets to the top for review within one week. This, in addition to the work/play environment, has led to a strong company culture. This doesn't mean employees play half the day. It means that breaks are allowed at the employee's convenience as long as that employee is productive. Has this approach worked?

Facebook is rated as the #1 place to work by Glassdoor.com. Yes, it has worked. Employees have rated their employer a 4.6 of 5. An incredible 95 percent of employees would recommend the company to a friend. And 98 percent of employees approve of CEO Mark Zuckerberg.

A strong company culture definitely improves the odds of a company's success, but it doesn't guarantee success. This has been evidenced by Facebook Home. Facebook also has other challenges at the moment, which include increased expenses mostly due to infrastructure expense and increased headcount.

Facebook intends to increase spending by as much as 50 percent in 2013. When a company wants to revolutionize online advertising, there is going to be a great deal of risk-taking. While many people don't like Mark Zuckerberg, his innovation, risk-taking, and ability to create a strong company culture must be admired, or at least respected.

As far as results go, revenues have been on the rise for the most part. It's the bottom line that needs to strengthen. In regards to users, results have been strong. On a year-over-year basis in Q1, there was a 26 percent increase in daily active users, a 23 percent increase in monthly active users, and a 54 percent increase in mobile monthly active users. However, according to Alexa.com, traffic hasn't been great over the past three months. Over that time frame, pageviews-per-user have declined 3.46 percent and time-on-site has declined 2 percent. At least the bounce rate has declined 2 percent. And it should be noted that Facebook's traffic stats are ridiculous (that's meant in a good way). The pageviews-per-user average is 17.56, the time-on-site average is 27:45, and the bounce rate is 20.40 percent. Those numbers are lightyears ahead of the average website.

This article might sound positive so far, but let's keep in mind that margins are razor thin, and that the stock is trading at 591 times earnings. Therefore, if any company-specific or broader-market devastating news should come out, the stock is going to get slammed.

The chart below compares fundamentals for Facebook, Google Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT).

	FB	GOOG	MSFT
Trailing P/E	589.67	26.55	17.19
Forward P/E	35.23	16.69	10.85
Profit Margin	1.22%	20.92%	21.58%
ROE	0.77%	16.36%	22.58%
Operating Cash Flow	1.89B	16.56B	30.61B
Dividend Yield	N/A	N/A	2.80%
Short Position	1.70%	1.50%	1.30%

Let's take a look at some more important numbers prior to forming an opinion on this stock.

T = Technicals Are Mixed

Facebook hasn’t done much year-to-date. This is better than a loss, but it has greatly unperformed its peers as well as the market.

	1 Month	Year-To-Date	1 Year	3 Year
FB	-1.26%	1.64%	N/A	N/A
GOOG	12.11%	25.21%	46.34%	73.37%
MSFT	15.40%	25.42%	9.83%	22.88%

At $27.16, Facebook is trading above its averages.

50-Day SMA	26.69
200-Day SMA	26.91

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E = Equity to Debt Ratio Is Normal

The debt-to-equity ratio for Facebook is slightly weaker than the industry average of 0.10. However, debt isn’t a concern at the moment. It could be a concern if Facebook were to make a large acquisition, but a large acquisition would also have the potential to lead to improved growth. It would be a tough call in this economic environment.

	Debt-To-Equity	Cash	Long-Term Debt
FB	0.19	9.47B	2.26B
GOOG	0.10	50.10B	7.38B
MSFT	0.19	73.79B	14.76B

E = Earnings Are Decent

We don’t have much information on annual earnings yet. Stay tuned. Annual revenue growth has been impressive.

Fiscal Year	2010	2011	2012
Revenue ($) in billions	1.97	3.71	5.09
Diluted EPS ($)		0.46	0.01

When we look at the last quarter on a year-over-year basis, we see an increase in revenue and flat earnings.

Quarter	Mar. 31, 2012	Jun. 30, 2012	Sep. 30, 2012	Dec. 31, 2012	Mar. 31, 2013
Revenue ($) in billions	1.06	1.18	1.26	1.59	1.46
Diluted EPS ($)	0.09	-0.08	-0.02	0.0143	0.09

 

Now let's take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

T = Trends Might Support the Industry

There are many new websites gaining momentum and stealing traffic from the old guard. Yes, Facebook now qualifies as the old guard. For instance, Twitter has stolen a great deal of traffic from Facebook. This has a lot to do with the younger generation not thinking Facebook is cool. Remember, the kids who were obsessed with Facebook several years ago are now older. The kids who are now teenagers want something of their own to embrace – they want something new. Perhaps Facebook won't target that market, but that would limit growth potential. It basically comes down to this: Is Facebook cool? What's your opinion? What are your kids' opinions? The answers to these questions might be the most important information available.

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Conclusion

At the moment, Facebook is a tradable stock. This column often focuses on solid and proven companies. Facebook is different. It's a proven website, but it's not a proven company. It has also traded between $20 and $30 for a long time. Bulls haven't had a strong enough argument for a sustainable move above $30, and bears haven't had a strong enough argument for a sustainable move below $20. This pattern is likely to continue. Facebook will have to be very creative to be able to find new revenue streams and fight off old and new competition. Perhaps the most dangerous competitor hasn't even arrived yet.

What Does Apple Have to Do With Nike?

With shares of Nike (NYSE:NKE) trading at around $61.76, is NKE an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock's Movement

You have most likely read about Apple's (NASDAQ:AAPL) iWatch. Many questions and rumors have been swirling around about its release date, its price, and its features. In regards to the latter, there have been many reports that this device will be fitness-friendly. The iWatch might be capable of monitoring your vitals and indicating whether or not you have gotten enough exercise for the day. In a world where health and fitness consciousness is increasing daily, these features have a lot of potential when it comes to popularity. So, you might be wondering, "What does this have to do with Nike?"

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Two important points needs to be made:

One, if the iWatch takes off as many expect, and if the health and fitness-related features are big parts of the device's popularity, then more people will join the fitness craze. Can you see where this is going? If not, Nike rules the global sports apparel market. If more people are into fitness thanks to the iWatch, then more people will want fitness apparel. This, in turn, would be a big plus for Nike.

Two, Apple CEO Tim Cook is on the Nike board of directors. A possibility exists that there will be some form of partnership between Apple and Nike with the iWatch. Perhaps it will relate to an app, but this is simply speculation.

Looking at Nike on an individual basis, it's a strong cash flow generator that doesn't require much leverage. Innovation is constant, management is strong, and rising incomes in emerging markets mean increased international growth potential. That said, Europe has been weak, and China has been inconsistent.

On a fundamental basis, Nike is trading at 20 times forward earnings and sports a profit margin of 9.22 percent. Under Armour (NYSE:UA) has been a thorn in Nike's side for a long time. It has outperformed Nike by a wide margin over a three-year time frame. And this column has been bullish on Under Armour since December. While the long-term outlook for Under Armour is still good, the stock is beginning to get expensive. Its trading at 32 times forward earnings. For comparative purposes, it has a profit margin of 6.34 percent (not as high as Nike). Nike also has an ROE of 21.89 percent whereas Under Armour has an ROE of 16.07 percent. Furthermore, Nike currently yields 1.40 percent whereas Under Armour doesn't offer any yield. And perhaps most important of all, Under Armour doesn't have a relationship with Apple.

Let's take a look at some more important numbers prior to forming an opinion on this stock.

T = Technicals Are Mixed

Nike has been a consistent performer for decades. However, the last month has been subpar.

	1 Month	Year-To-Date	1 Year	3 Year
NKE	-4.15%	20.56%	22.69%	78.41%
UA	-0.07%	22.38%	17.69%	245.9%
LULU	-15.30%	-11.61%	8.82%	222.7%

At $61.76, Nike is trading below its 50-day SMA, but still above its 200-day SMA.

50-Day SMA	63.43
200-Day SMA	56.63

E = Equity to Debt Ratio Is Strong

The debt-to-equity ratio for Nike is stronger than the industry average of 0.20.

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	Debt-To-Equity	Cash	Long-Term Debt
NKE	0.03	4.04B	321.00M
UA	0.07	255.72M	60.44M
LULU	0.00	588.42M	0.00

E = Earnings Have Been Strong

Earnings and revenue have consistently improved since 2010.

Fiscal Year	2009	2010	2011	2012
Revenue ($) in millions	19,176	19,014	20,862	24,128
Diluted EPS ($)	1.51	1.93	2.19	2.37

Quarter	May. 31, 2012	Aug. 31, 2012	Nov. 30, 2012	Feb. 28, 2013
Revenue ($) in millions	6,470	6,669	5,955	6,187
Diluted EPS ($)	0.58	0.62	0.42	0.95

Now let's take a look at the next page for the Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

Conclusion

Many analysts are stating that Nike is too expensive at the moment. It might be expensive, but if you're looking for a winning long-term investment, then Nike is never too expensive. Nike always finds a way to grow. Current potential catalysts for growth include emerging markets, increasing interest in female sports apparel, and the iWatch impact.

Here's How FleetCor Technologies Is Making You So Much Cash

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

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

Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on FleetCor Technologies (NYSE: FLT  ) , whose recent revenue and earnings are plotted below.

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

Over the past 12 months, FleetCor Technologies generated $215.4 million cash while it booked net income of $238.8 million. That means it turned 28.5% of its revenue into FCF. That sounds pretty impressive. However, FCF is less than net income. Ideally, we'd like to see the opposite.

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

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

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

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

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

With 16.9% of operating cash flow coming from questionable sources, FleetCor Technologies investors should take a closer look at the underlying numbers. Within the questionable cash flow figure plotted in the TTM period above, stock-based compensation and related tax benefits provided the biggest boost, at 8.3% of cash flow from operations. Overall, the biggest drag on FCF came from changes in accounts receivable, which represented 33.8% of cash from operations.

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

Is FleetCor Technologies playing the right part in the new technology revolution? Computers, mobile devices, and related services are creating huge amounts of valuable data, but only for companies that can crunch the numbers and make sense of it. Meet the leader in this field in "The Only Stock You Need To Profit From the NEW Technology Revolution." Click here for instant access to this free report.

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The 4 Rules of Earnings Season, Plus Tips: Buy Under Armour Next Week, Dump Amazon A.S.A.P.

"Every battle is won before it's ever fought." -- Sun Tzu

NEW YORK (TheStreet) -- The hyper-active and borderline desperate Twitter (TWTR) feeds for Under Armour (UA) and Amazon (AMZN) illustrate the gap between what many shareholders think is a positive earnings report and what actually is.

Immediately after reporting earnings on Thursday, shares in Under Armour, Amazon and Microsoft (MSFT) popped higher, but only Microsoft continued higher. All three increased revenue. From an operational point of view, they all executed extremely well. But their performance diverged.

Let's examine the differences and how investors can empower their portfolios with other holdings and profit from future earnings releases. The first rule of earnings season is to never chase a stock unless you're taking a stop loss. If your trading desk doesn't include a Bloomberg terminal or another equally fast wire subscription in unison with computer-directed trading, you're fighting a losing battle. The second rule is that only the uninformed focus exclusively on if the company beat or missed earnings expectations. Earnings results are just that, results that report what happened BEFORE. But the market focuses on what WILL happen. Big-money Wall Street fund managers -- the whales that move a stock price -- review last quarter's results only up to the point the data aids in predicting future expectations. While many are satisfied if Under Armour, Amazon and Microsoft outperform their previous quarter, fund managers closely scrutinize margin trends, forward guidance, growth rates (or lack thereof), competitive influences, management changes, cash flow, dilution and other factors. They are painting a picture of the next quarter, the next year and beyond. The third rule is that one quarter doesn't matter. That's a hard one for many to understand in the heat of battle. Patterns can't be found in sample sizes of one. Fund managers plug a given company's results into spreadsheets and compare the results with previous quarters to find hidden patterns and trends.

Stock quotes in this article: TWTR, UA, AMZN, MSFT 

"Every battle is won before it's ever fought," said Sun Tzu, and we all know it. But do we live it?

Are you reading the SEC filings and taking the time to understand what's happening below the surface level? Keep in mind that a company and its stock are two decidedly different things. For example, Under Armour and Amazon increased revenue, demonstrating strong demand for their offerings, and yet the stock fell.

For investors, it's more pertinent to understand the stock than the company. It may appear counter-intuitive at first, but investment decisions should focus on the stock first and company second. Understanding the stock requires a full comprehension of the company filings.

Reading Qs and Ks (quarterly and annual reports) may be an insomnia cure for people who don't respond to strong medication -- a hat tip to Robin Williams -- but they're gold mines of information. Anyone can read the reports. But understanding what to look for, and how to read past a presentation that is sometimes more useful to management goals than investors, separates those in the know and others playing a guessing game. If you want to know what to look for, I suggest picking up Wiley's Financial Statement Analysis: A Practitioner's Guide, by Martin Fridson and Fernando Alvarez. It's a great read for non-finance majors. Plus it will be worth its weight in gold the first time and every time it helps you find information buried within an earnings report. The fourth rule, and this one is broken on a daily basis for reasons I don't understand, is that if it's common knowledge, it's priced in and doesn't matter. Using Amazon for even one moment, everyone knows that the company has an advantage over small bookstores. Amazon has invested heavily into its logistics system and is able to move books and other products from supplier to your home at a lower cost than most others can. Every bit of public information is already priced into the stock. Unless you know something almost everyone else doesn't, the information isn't valuable. In fact, relying on common information is often detrimental. Under Armour's earnings release demonstrated enormous growth, but everyone and their brother already expected it. As a result, when the company didn't crush the already mile-high expectations, the stock quickly sold off, causing an avalanche of sellers rushing for the exits. As an independent investor, your greatest advantage is focusing on industries you already know about. If you're in the sportswear industry and can see trends before they show up on analysts' spreadsheets, you have an edge over money managers. I don't mean inside information that regulations prohibit insiders from trading on. If you work in a medical office and notice a new product or an improvement to an old product that you like and others like, it's probably worth your time to investigate the company that produces it. Now let's go full circle and examine the chart patterns for our three earnings-related stocks.

Stock quotes in this article: TWTR, UA, AMZN, MSFT 

If you're stuck in Under Armour, I think your prospects are much brighter than with Amazon. But don't expect the price decline to bottom before Monday. It normally takes two or three days for an earnings disappointment similar to Under Armour's to become fully discounted. The sweet spot to buy on the dip is late Monday or Tuesday for a more conservative entry.

Amazon's problem is it doesn't generate a return on investment. I've written many articles about the perils of buying momentum stocks lacking a meaningful return on investment. The only thing keeping the shares above $200 right now is a belief that someday it will monetize its revenue. Everyone worth their salt knows that it's easy to generate lots of revenue in retail if you're willing to sell at the lowest cost. But the moment a retailer tries to increase margins, sales fall off a cliff.

I suggest taking advantage of up days as an opportunity to scale back or exit.

At the time of publication, Weinstein had no positions in any of the securities mentioned. Follow @RobertWeinstein This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Stock quotes in this article: TWTR, UA, AMZN, MSFT 

Catch 120% Upside With This Pharma Stock's Rally

Momentum is an important attribute when picking stocks to trade, and the strength of the price movement is something you want to embrace, not fight against.

One of the strongest market sectors this year has been pharmaceuticals. The SPDR S&P Pharmaceuticals (NYSE: XPH) has gained more than 30% year to date, double the gains of the S&P 500.

Not all pharma stocks have fared so well, though. Pfizer (NYSE: PFE) is only up 11% year to date, lagging behind the broader market and sharply behind its peers. 

On the chart below, we can see that the January breakout above $27 held on the June and July pullbacks, forming a key support level. The $4 range between the $27 breakout level and the $31 yearly highs targets a breakout move to $35.

The $35 target is about 22% higher than current prices, but traders who use a capital-preserving stock-substitution strategy could more than double their money on a move to that level.

One major advantage of using long call options rather than buying a stock outright is putting up much less capital to control 100 shares -- that's the power of leverage. But with all of the potential strike and expiration combinations, choosing an option can be a daunting task.

Simply put, you want to buy a high-probability option that has enough time to be right, so there are two rules traders should follow:

Rule One: Choose an option with a delta of 70 or above.
An option's strike price is the level at which the options buyer has the right to purchase the underlying stock or ETF without any obligation to do so. (In reality, you rarely convert the option into shares, but rather simply sell back the option you bought to exit the trade for a gain or loss.)

 

It is important to buy options that pay off from a modest price move in the underlying stock or ETF (exchange-traded fund) rather than those that only make money on the infrequent price explosion. In-the-money options are more expensive, but they're worth it, as your chances of success are mathematically superior to buying cheap, out-of-the-money options that rarely pay off.

An option's delta approximates the odds that the option will be in the money at expiration. It is a measurement of how well an option follows the movement in the underlying security. You can find an option's delta using an options calculator, such as the one offered by the CBOE. 

With PFE trading at about $28.80, an in-the-money $25 strike call option currently has $3.80 in real or intrinsic value. The remainder of the premium is the time value of the option. And this call option currently has a delta of about 76.

Rule Two: Buy more time until expiration than you may need -- at least three to six months -- for the trade to develop.
Time is an investor's greatest asset when you have completely limited the exposure risks. Traders often do not buy enough time for the trade to achieve profitable results. Nothing is more frustrating than being right about a move only after the option has expired.

With these rules in mind, I would recommend the PFE Jan 2015 25 Calls at $4.50 or less.

A close below $27 in PFE on a weekly basis or the loss of half of the option's premium would trigger an exit. If you do not use a stop, the maximum loss is still limited to the $450 or less paid per option contract. The upside, on the other hand, is unlimited. And the January 2015 options give the bull trend a year and a half to develop. (The January 2014 $25 calls are currently trading for about $4, which means we're only paying 50 cents more for an extra year's worth of time.)

This trade breaks even at $29.50 ($25 strike plus $4.50 options premium). That is less than $1 above PFE's current price. If shares hit the breakout target of $35, then the call options would have $10 of intrinsic value and deliver a gain of more than 100%.

Action to Take -->

-- Buy PFE Jan 2015 25 Calls at $4.50 or less

-- Set stop-loss at $2.25

-- Set initial price target at $10 for a potential 122% gain in 18 months

This article originally published at ProfitableTrading.com
Pharma Stock Could Make Traders 122% on a Catch-up Rally

P.S. -- I just finished reading a special report by my colleague, Amber Hestla-Barnhart, about how investors can consistently and reliably pull income from the options market. And you don't have to be a sophisticated trader to do it. Go here to learn more.

What Long-Term Care Costs Now

How much does care in a nursing home cost? Does home care cost less?

Long-term-care insurer Genworth just came out with its annual cost of care study, which found that the national median rate for a private room in a nursing home is $240 per day ($87,600 per year). That's a 4.35% increase over 2013. But the cost varies a lot by location. For example, it's $91,615 per year in Florida and $104,025 in California, but $65,700 in Texas and $59,860 in Missouri. If you're estimating costs for your future – or looking for care for a parent –compare costs for all the cities where you (or your parent) would consider living. See Genworth's interactive map to compare costs across the country.

SEE ALSO: How to Make Long-Term Care More Affordable

Home care costs more per hour than a nursing home, but if you don't need round-the-clock care, it could cost less overall. The national median rate for a home-health aide is $20 per hour, which is a 1.59% increase from last year. If you needed, say, 44 hours of care per week, the median cost would be more than $45,000 per year. Assisted living has a median cost of $3,500 per month ($42,000 per year), which is a 1.45% increase over last year, according to Genworth.

Long-term-care insurance can cover all of these types of care, but the policies have been getting a lot more expensive. Many people now buy policies that fill in the gap between the estimated cost of care (a typical long-term-care claim is about three years) and the amount they can afford to pay out of savings. For more information about calculating how much coverage to get and which policy features to choose, see Options for Covering Long-Term-Care Costs. Also see our Long-Term-Care Special Report.

For help finding a nursing home or assisted living facility, see Choose the Right Long-Term-Care Facility for Your Parents.

Got a question? Ask Kim at askkim@kiplinger.com.

Mariner Wealth Buys New Jersey RIA With $817M in AUM

Mariner Wealth Advisors, the Leawood, Kansas-based advisory firm, continued its acquisitive ways Monday by announcing that it had bought a majority interest in Housen Financial Group, based in the New Jersey Shore town of Manasquan, adding Housen’s $817 million in client assets under management and 13 professionals to its growing network.  

Mariner Wealth Advisors now has $9.5 billion in total AUM, including $2.4 billion in the Northeast; in late 2012, it acquired another New Jersey firm, Brinton Eaton, and its $700 million in client assets under management.

Why Housen? Marty Bicknell, CEO of Mariner Wealth, said in an interview Tuesday that buying a majority stake in RIA firms was standard procedure for Mariner. “We left relatively significant ownership in the hands of local leadership,” he said, referring to Housen but also to Mariner’s typical acquisitions. “With only two exceptions, we maintain the local existing brand and management team.” Bicknell declined to provide the acquisition price for Housen, though he said Housen will keep its name.

So are the Housen acquisition and Mariner’s others a succession planning strategy for the owners? “In the last couple of acquisitions, the founders have been relatively young, so it’s not a short-term succession plan” for them, but rather the Mariner acquisition helps provide “fuel for growth and strategies for growth” with the acquired firms’ “partners and lead people.” As part of their acquisitions, Bicknell says Mariner likes to provide more junior employees with small ownership stakes as well.

Is Bicknell happy with Mariner being called a ‘rollup firm?’ “The name doesn’t bother me,” he says, but adds that there is a difference between Mariner and other firms that acquire RIA practices.

“We don’t have an exit strategy” or plan on going public within the next three, five or seven years, he said. “We want to be the partner for a firm that wants a second chance” for growth.

Within the RIA universe, Bicknell says there’s a “large portion of the firms where the principals start out as practitioners, then wake up one day to find that they’re running a business, and it takes them away from serving the clients.” Mariner’s proposition is to “take that away from them,” meaning running the business, and “support them with hiring business development people” and other resources so those founding advisors can focus on client service. “Our departments [at Mariner] are larger” than what the advisory firm will have, he points out, in areas like human resources, technology or compliance, so the acquired firm benefits from that scale as well.

Will Mariner continue to acquire more RIA firms? “Yes,” Bicknell says. “There are lots of firms in that $500 to $750 million (in AUM) range that are looking to bust through” that hurdle and achieve significant new growth, and that’s where Mariner comes in. “We want firms and advisors who put their clients first, their associates second and the firm third. That’s easy to say, not easy to find,” he says. In addition to buying firms — Bicknell says Mariner has bought six in the past two years but visited 200 potential acquisitions — Mariner has also launched two initiatives lately. One is establishing Mariner Trust Co., providing trust and estate planning services to Mariner clients. The other is First Point Financial, launched in October to provide the “same type of services Mariner offers” but for mass affluent clients.

“We founded Mariner Wealth in May 2006,” Bicknell says, and while the firm “focused on the HNW individual … contrary to a lot of firms that focus on HNW individuals, we’ve never had an account minimum.” Bicknell says that “if someone wants our help, I’ve felt it to be my responsibility to help them, so over the past seven years, we’ve amassed a bunch of mass affluent clients.”

First Point was founded “because of our belief that that market is dramatically underserved.” While the Trust Company and the standard HNW client at Mariner is provided with investment, tax and estate planning services, and insurance resources, for the mass affluent, he says that with First Point “we’re making a conscious effort to bring financial planning, not just investment advice, to the mass affluent, to achieve their planning goals.”

First Point has actual advisors, but Bicknell says that “the type of advisor and the experience of an advisor” necessary to serve a “$350,000 relationship is different than the type of advisor and the experience of an advisor you need to serve a $20 million relationship.” First Point doesn’t “need to hire estate planning attorneys” to serve its clients, but rather “CFPs who understand the basic nuances of financial planning.” Those advisors are compensated “for retention and retention only” of clients, as part of Mariner’s strategy to “separate business development from advice.” After all, he says, “in the wirehouses the best advice giver is rarely the same person as the biggest producer.”

Sprint Wants to Make a Lifer Out of You

With the combination of SoftBank, Sprint (NYSE: S  ) , and Clearwire now complete, the No. 3 domestic carrier is cementing its strategic position with consumers. The company has been aggressively pitching its unlimited data plans over the past few years as a key point of differentiation from its rivals. Sprint is now guaranteeing its new unlimited data plans for life, hoping you stick around for the long haul.

CEO Dan Hesse notes, " While other wireless providers are moving away from unlimited service, Sprint champions it." The unlimited guarantee extends through the life of the line of service. The rate isn't guaranteed, so Sprint could change pricing in the future.

Larger carriers AT&T and Verizon Wireless have already switched to tiered pricing for data plans, while smaller "Un-carrier" T-Mobile offers unlimited data but throttles data back to 2G speeds after a certain threshold. Truly unlimited data on the magenta carrier costs quite a bit extra.

Sprint's big bet on unlimited data isn't without downsides. Mobile data usage continues to skyrocket to unprecedented levels. Strategy Analytics estimates that worldwide smartphone data usage will jump from 5.3 exabytes last year to over 21.5 exabytes in 2017. For reference, 1 exabyte is over 1 billion gigabytes.

That precipitous rise will put a strain on global networks, and carriers will need to beef up capacity along the way. That's precisely why most carriers have tried to transition to tiered pricing -- in order to foot the bill for those costly infrastructure investments. Rising mobile data usage is also an opportunity for revenue upside for carriers with tiered pricing. By sticking with unlimited, Sprint's primary way of growing average revenue per user will be just simply raising rates.

Since the guarantee is valid for new and existing lines of service right now, it could still potentially shift away from unlimited data plans eventually and just leave grandfathered all-you-can-eat customers.

Want to get in on the smartphone phenomenon? Truth be told, one company sits at the crossroads of smartphone technology as we know it. It's not your typical household name, either. In fact, you've probably never even heard of it! But it stands to reap massive profits NO MATTER WHO ultimately wins the smartphone war. To find out what it is, click here to access The Motley Fool's latest free report: "One Stock You Must Buy Before the iPhone-Android War Escalates Any Further..."

How Grocery Delivery Can Save You Time and Money

Mario Tama/Getty Images

When my husband and I lived in New York City, we became spoiled. Every two weeks, a truck would show up to our second-floor walkup, and a strapping young man would deliver fresh groceries to our door. How did we get sucked into such a luxury? FirstDirect, the city's top grocery deliverer, was offering a promo for first-time customers, and Johnny and I decided to give it a try. We found that promo or not, having our groceries delivered was comparable and often cheaper than shopping at our local grocers. No more carrying groceries five blocks as each of our fingers slowly lost circulation? Yes, please. While grocery delivery may currently only be the norm in metro areas, soon it may be an option for you. And you. And you. Amazon.com (AMZN) and Walmart Stores (WMT) have recently joined the grocery delivery industry. While AmazonFresh was only available in Seattle just a year ago, it has now expanded to San Francisco and Los Angeles. Before you shrug this off as a modern-day fairytale (delivery by drone?) or just an unnecessary extravagance, consider the following reasons grocery delivery could save you money -- and most definitely time: No More Impulse or Distracted Purchases Oreos on a screen are much less tempting than an actual package in a grocery store. Marketers spend millions of dollars figuring out the most effective ways of tempting you while you browse the aisles. By shopping online, you can stay focused on the shopping list. And you won't have a toddler screaming and grabbing items off the shelf as you struggle to compare prices on salad dressing.

Comparable Prices However unbelievable it may seem, prices for delivered groceries tend to be comparable to local grocers. And just like local grocers, delivery services offer coupons, weekly specials and price matching. Some companies even waive the delivery fee once your total reaches a certain amount. My husband and I made a habit of only ordering if we had a coupon for free delivery, which happened regularly. No Travel Expenses Grocery delivery eliminates the costs incurred for traveling to and from the grocery store, which means no more money spent on gasoline or a cab fare. And the opportunity cost of avoiding the grocery store means you can do your shopping while watching Jimmy Fallon at night. Knowing the Total Before You Buy I try to add up how much my groceries are going to cost as I shop in brick-and-mortar stores, but inevitably I lose count or get distracted. With online grocery shopping, you can see the total before you confirm your order. And that means you can check and double check whether each item is really necessary. It's both more difficult and less likely to go back on purchases that have already been rung up by a cashier. While currently only a handful of cities have grocery delivery, within the next 10 years, it might be an option for most of the country. And when that day comes, you can bet that my wallet and I will be first in virtual line to have groceries delivered to our door, drone and all.

Google Inc. (GOOGL) Q1 Earnings Preview: Simply A Bullish Surprise

Google Inc. (NASDAQ:GOOGL) will hold its quarterly conference call to discuss first quarter 2014 financial results on Wednesday, April 16th at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). The live webcast of Google's earnings conference call can be accessed at investor.google.com/webcast.html. A replay of the webcast will be available through the same link following the conference call. Google will release earnings prior to the conference call.

Wall Street anticipates that the internet information provider will earn $6.39 per share for the quarter, which is $0.60 more than last year's profit of $5.79 per share. iStock expects GOOGL  to beat Wall Street's consensus number. The iEstimate is $6.45, six cents more than expected.

Sales, like earnings, are expected to grow, rising a healthy 11.10% year-over-year (YoY). Google's consensus revenue estimate for Q1 is $15.52 billion, more than last year's $13.97 billion.

Google is a global technology company. The Company's business is primarily focused around key areas, such as search, advertising, operating systems and platforms, enterprise and hardware products. The Company generates revenue primarily by delivering online advertising. The Company also generates revenues from Motorola by selling hardware products. The Company provides its products and services in more than 100 languages and in more than 50 countries, regions, and territories.

We don't know how to write it in 100 diffident languages, but Google's business is fairly straightforward. As the description says, "The Company generates revenue primarily by delivering online advertising." In fact, online advertising accounted for 92.8% of the search giant's revenue.

To find the money and get a sense of what GOOGL's earnings per share might look like, all you have to do is focus on search trends and spends.

Fortunately, there are companies whose business it is to keep track for such things. One such resource is Kenshoo. The firm reports that advertiser revenue increased 12% year-over-year in the first quarter of 2014.

Last year, Google's Q1 advertising revenue was $12.951 billion. Increase that by 12% and we get ad revenue for Q1 2014 of $14.505 billion. The remaining chunk of Google's sales comes from Motorola Mobile, which we expect will generate about $1.16 billion in sales for the quarter, add 'em up and iStock projects Q1's top line to be $15.668 billion, which would be a mild upside surprise.

If Google hits Wall Street's forecasted net-margin of 13.68% for the first quarter, then EPS would come in at $6.45 on a non-diluted basis and $6.39 on a diluted basis. We think margins could be a little higher as Kenshoo cost-per-click was up 2% to $0.59, plus Google's net-margin is usually much higher than 13.68%.

Overall: Google Inc. (NASDAQ:GOOGL) revenue should be a little hotter than Wall Street expects based on Kenshoo's analysis. While the iEstimate and our non-diluted calculation suggest EPS of $6.45 (just a coincidence), we think there is plenty of wiggle room for net-margin to be higher than projected, which could make $6.45 the worst case scenario?

Stocks Hitting 52-Week Highs

Related CBEY Morning Market Movers Birch Communications to Acquire Cbeyond for $323M in Cash Related LSI LSI Shareholders Approve Merger with Avago - Analyst Blog UPDATE: LSI Corporation Stockholders Approve Acquisition by Avago Technologies, LSI Shareholders to Receive $11.15/Share Cash

Cbeyond (NASDAQ: CBEY) shares gained 38.56% to touch a new 52-week high of $9.81 after the company agreed to be acquired by Birch Communications in all-cash transaction valued at $323 million.

LSI (NASDAQ: LSI) shares gained 0.36% to reach a new 52-week high of $11.13. LSI's PEG ratio is 0.87.

Halliburton Company (NYSE: HAL) shares touched a new 52-week high of $63.43 after the company posted a profit in the first quarter.

Pioneer Energy Services (NYSE: PES) shares reached a new 52-week high of $14.15. Pioneer Energy shares have jumped 96.60% over the past 52 weeks, while the S&P 500 index has gained 20.97% in the same period.

Posted-In: 52-Week HighsNews Intraday Update Markets Movers

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

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Nike Stock: The Numbers Just Don't Add Up

"Fiscal 2013 was a great year for Nike (NYSE: NKE  ) , driven by our innovative products and the power of our brands," said Nike CEO Mark Parker in the company's fourth-quarter and full-year earnings release. But don't let his optimism fool you. Management will need to step up their game if they want to live up to investors' expectations for Nike stock.

Good, but not good enough
For the 12 months ending May 31, Nike's EPS from continuing operations were up 11%. Going forward, analysts (on average) expect EPS to grow by about 11.4% per annum. All of this sounds terrific, right? Not when we take into consideration Nike's premium valuation at 25 times earnings.

Let's do the math.

First, let's identify long-term growth rates that could help us establish Nike's growth trajectory as a business. The company's five-year average EPS growth rate is 10%. What about its free cash flow (arguably a better measure of underlying value)? A five-year compound growth rate stands at just 6.3%. Finally, there are those bullish estimates from the analysts covering Nike stock, with expectations for 11.4% EPS growth per annum for the next five years.

Given these historical growth rates, combined with analysts' bullish estimates, I'd say that estimating Nike's free cash flow to grow on a 10-year trajectory that looked like this would be optimistic:

Year

Growth Rate

1	11.4%
2	10.8%
3	10.3%
4	9.8%
5	9.3%
6	8.8%
7	8.4%
8	8%
9	7.6%
10	7.2%

Based on a discounted cash flow valuation using these assumed growth rates and a 10% discount rate, the fair value of Nike stock is about $58.

That's a problem. Nike shares are trading above $58, around $62.

Nike would need to perform even better than these optimistic estimates in order for us to earn 10% per year (equal to the discount rate) or more.

What am I missing?
Is there a growth opportunity I overlooked? Could emerging markets be the magic variable?

Nike's emerging markets revenue was up 16% in fiscal 2013 from last year. That's great, but the division unfortunately accounted for only 14.6% of Nike's 2012 revenues. And adding another weak point, once currency changes are taken into account -- the division's revenues were up only 9% in 2012.

What about China? Nike's Greater China segment isn't looking so hot. Revenue in the trailing 12 months was down 3%, including currency changes, from the year before.

Japan? The picture's even worse.

Even if we did identify a growth opportunity, it's going to have to be pretty significant to justify the company's current valuation. I don't want to buy Nike even at fair value; a margin of safety of at least 10% would be nice. At today's price, Nike shares aren't even close to a bargain.

Competition
Though Nike does boast impressive gross margins compared to its footwear competitors, three of them, Adidas, Puma, and Under Armour (NYSE: UA  ) , are large enough to cause some disruption in some of Nike's markets.

Under Armour, in particular, is on fire, with a three-year average revenue growth rate of 29%. The company is still growing with strong momentum. In its most recent quarterly results, the company raised its full-year outlook, estimating 23% to 24% revenue growth as opposed to a previous estimate of 21% to 22%. With revenue at about 8% of Nike's, Under Armour is getting large enough to put a dent in Nike's armor.

Price matters
Nike may be a great business, but high expectations seem to have taken the price too far. Does this mean it's time to sell Nike shares? Not necessarily. The business is still doing excellent. Plus, my estimates could be too conservative. But Nike stock is looking a bit pricey to buy at $62.

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

Either This Commodity Goes Higher... or the Lights Go Out

I just talked to one of my most trusted insiders in the natural-resource space about what he calls "the ultimate contrarian investment."   Nobody on Wall Street is paying attention to this commodity.   Longtime readers are familiar with the story here... But I'm not sure you understand the scope of the opportunity...   This insider – Casey Research Chief Investment Strategist Marin Katusa – appeared on a recent episode of my S&A Investor Radio podcast. We discussed a sector he considers a "must buy" today – uranium.   As we've showed you before, the Fukushima nuclear disaster in Japan destroyed the uranium market in 2011. The spot price of uranium is still down around 45%. As a result, shares of uranium producers – like Cameco – have yet to recover.   As you can see in the chart below, URA – an exchange-traded fund that holds several uranium stocks – has sold off 65% since the disaster...     Today, most uranium producers are losing money.   Marin says African uranium producers need prices to hit $75 per pound for them to make money. For most of Europe, it's over $65 per pound. And in the U.S., you need between $45 and $50.   The current spot price of uranium is just $40 a pound.   And as Marin put it, if uranium prices don't head higher from here, most companies will have to turn the lights off.   Then Marin explained another shocking statistic...   "If you want to get delivery of uranium five years out, you have to pay $68 [per pound] today."   Marin's talking about the "futures" market. Sectors like trucking, airlines, and utilities use the futures market to lock in prices for years down the road. They do that so they don't have to worry about big fluctuations in energy prices.   In other words... right now, companies that need to secure uranium supplies for the future are willing to pay $68 a pound – a 70% premium to spot prices ­– because they believe prices are going to be even higher than that five years from now.   If that was the setup in gold or silver today, people would be buying hand over fist. But that's the great thing about buying uranium stocks here. That is the situation... and nobody's paying any attention.   I've never seen this setup before in my investing lifetime.   Cameco (NYSE: CCJ) is the biggest uranium producer in the world and a good trade on a recovery for the sector. However, if uranium producers do rebound from these depressed levels, the biggest returns will come from the more speculative names.   Now, I don't suggest rushing out and buying every small uranium stock you can get your hands on. You need to do your research. And the No. 1 priority in considering a uranium investment is the people who run it.   "Do you trust them? Are they focused on the company... or do they have five other companies?" Marin asks. "If there's a management team that has no money in the company, they're paid a high salary, they do consulting for other companies, and the only interest they have in this company is their salary and their options... Do you want to invest in that? No."   That factor takes away a huge percentage of small uranium miners. But do your research. If you invest in the right companies, you could be sitting on big gains a few years from now when the rest of the market finally catches on.   Good investing,   Frank Curzio

Up in Smoke: Altria Enters E-Cig Market

It was simply too big of a market to ignore. A few months back, I noted Goldman Sachs estimates that electronic cigarettes would become a $1 billion industry in a few years and Altria (NYSE: MO  ) was the only major tobacco company that did have an electronic loosey to call its own. I thought it was simply too lucrative an opportunity for the Marlboro Man to pass up and yesterday the tobacco giant confirmed it was indeed launching its MarkTen brand of e-cig in August through its NuMark subsidiary.

While the FDA wants to get its fingers into regulating them, saying their ability to help users quit smoking are unproven, I don't think that's the attraction of an e-cig from a smoker's point of view.

The government has caused smokers to be treated like pariahs and has taxed the bejesus out of tobacco such that a pack of smokes these days costs on average $5.51. In some states like New York, the price can run as high as $12 a pack, and as my Foolish colleague Selena Maranjian noted, that means some folks can spend a quarter of their annual income on cigarettes.

In comparison, an e-cig costs about $10 and a refill pack from Njoy, one of the product's first manufacturers, runs about $22, but is equivalent to a carton of cigarettes. That's a significant savings for a smoker, along with the added benefit that you don't get the 4,000 or so chemicals that are found in a regular cigarette, but, more importantly, none of the tar associated with them. It's the tar that kills you.

Designed to look and feel like a real cigarette, e-cigs produce a vapor, not smoke. Though there's a cigarette-like taste for the smoker, there's no cigarette smell.

With tobacco sales falling, all of Altria's major rivals have an e-cig product on the market already or have one coming to market soon. Lorillard (NYSE: LO  ) is now one of the leading e-cig manufacturers, having gotten into the business last year after acquiring blu eCigs for $135 million. It generated $57 million in sales in the first quarter and has more than 40% market share.

Because President Obama wants to hike cigarette taxes yet again, almost doubling the excise tax paid to $1.95 per pack, it's clear cigarette makers need to find an alternative source of income. Reynolds American (NYSE: RAI  ) , also late to the game, will launch its Vuse brand next month.

Wells Fargo says it's possible e-cig sales could surpass those of regular cigarettes over the next decade, which makes it understandable why Altria wants in. It also explains why the FDA wants to control the market since government coffers at all levels rely heavily on the taxes they levy on tobacco. Anything that diminishes their take causes them to tremble with fear.

Whatever regulation does ultimately get imposed, one big change is that it won't be hammered out in some smoke-filled back room. Rather, it may be one that's filled with vapor.

 

Altria has been the best-performing stock of the past 50 years, but as the number of smokers in the U.S. continues to steadily decline, is Altria still a buy today? To find out whether everyone's love-to-hate dividend stock is a savvy investment choice or a hazard to your portfolio, simply click here now for access to The Motley Fool's premium research report on the company.

Morgan Stanley Profits Rise As Makeover Takes Hold

Coming out of the financial crisis, Morgan Stanley Morgan Stanley made a crucial pivot that is bearing fruit as the bank gets further away from its darkest days and helped deliver first-quarter results that blew past Wall Street's estimates.

The firm's decision to double down on wealth management — buying Smith Barney from Citigroup Citigroup — has paid off, most recently in the first quarter when the segment accounted for $3.6 billion of Morgan Stanley's $8.8 billion in net revenue.

Overall, revenue was up 3.5% from a year earlier and excluding an accounting adjustment related to debt valuation, income from continuing operations came in at $1.4 billion or 68 cents per share, ahead of the consensus estimate of 61 cents according to FactSet.

Chairman and CEO James Gorman touted improved revenues in each of the firm's three business segments and said the firm continues to "execute on our multi-year strategy to deliver consistent returns for our shareholders through revenue growth and strong expense discipline." He also touted Morgan Stanley's plan to repurchase another $1 billion of its shares and double its dividend, after winning Federal Reserve approval for its capital plan last month.

Weibo (WB) Stock Rises After IPO

NEW YORK (TheStreet) -- Weibo  (WB), the Chinese social media company that has been described as the country's equivalent to Twitter  (TWTR), rose on Thursday, its first day of trading after its IPO.

The company raised $286 million by pricing its initial public offering of 16.8 million shares, 16% fewer than expected, at $17 a share. That price was at the low end of the expected $17 to $19 range.

The stock opened at $16.27 at noon, but quickly recovered and rose more than 10% to a high of $19.46 as of 12:25 p.m., by which point more than 12 million shares had changed hands.

Must Read: Warren Buffett's 10 Favorite Growth Stocks STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

WB data by YCharts STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Stock quotes in this article: WB, TWTR 

AvWorks Aviation - aka Vapor Group - Is Pumped and Primed (SPLI)

It's admittedly scary to try and catch a falling knife, but sometimes it's worth the risk. Case in point? AvWorks Aviation Corp. (OTCMKTS:SPLI) .... better known as Vapor Group. Without knowing more about the stock, the sheer fact that SPLI has fallen nearly 90% since March 26th - with about a third of that coming today alone - the stock would be best left avoided by nearly any trader. For the small group of savvy traders that know the tell-tale signs and know how the market really works, however, AvWorks Aviation, or Vapor Group, may be in a prime buying situation today.... yes, even in the midst of this bloodbath.

For those only vaguely familiar with it, SPLI is an electronic cigarette maker. For those intimately familiar with the company though, they'll know it better as something of a fringe marijuana play. The company manufactures e-cigarette vaporizers and e-liquids in a wide variety of flavors. It also makes what it calls a "Vapor Box TBH" that can vaporize, among other things, dry herbs. The connection to the marijuana trade isn't an official one for Vapor Group - still officially AvWorks Aviation - but the tie-in is clear.

Of course, anyone who's been following the marijuana industry's stocks also knows they've been all over the map, controlled by traders and emotions more than based on value or prospects. And, SPLI hasn't exactly been immune to that insanity, rallying more than 2000% between early February and late March when the company's TBH product was recognized as a way to inhale a herb-based, well, possibly anything.

That insanity worked the other way too, driving the stock all the way from a peak of $0.45 to the current price of $0.05 per share of AvWorks Aviation... almost a complete erasure of the runup. However, today's drubbing to new multi-week lows also looks like it's the final blow - the move that flushes out the last of the sellers and only leaves the buyers behind, starting a rebound rally that could be just as big as the February/March runup.

How do we know Tuesday is the pivot? One of the clues is the sheer size and speed of the selloff. The other (and perhaps more important) clue that Vapor Group/AvWorks Aviation shares are ready to rebound is the fact that today's volume is wildly high. Most pivots occur on volume spikes at the end of long runs, and that's exactly what we have here with SPLI.

With all of that being said, it's critical to bear in mind that this is still just a short-term call on AvWorks Aviation, or Vapor Group, or whatever you want to call it. There's still a lot of uncertainty surrounding the company's long-term potential. For the foreseeable future, however, as of today SPLI is a falling knife worth trying to catch.

By the way, if you're wondering why Vapor Group is still technically called AvWorks Aviation, it was the result of a reverse merger that transpired last quarter. As of the next quarter, the name change should be in effect.

For more trading ideas and insights like these, be sure to sign up for the free SmallCap Network newsletter. You'll get stock picks, market calls, and more, every day. Here's what you've missed recently.

Alibaba growth fuels surge in Yahoo shares

Alibaba to Yahoo's rescue — again.

Shares of Yahoo jumped more than 11% in after-hours trading off big revenue gains from Chinese e-commerce company Alibaba.

For the first quarter, Yahoo's net revenue, excluding traffic acquisition costs (TAC), reached $1.09 billion, up 1% compared with the same quarter last year. Earnings per share finished flat compared with last year, at 38 cents.

The company was forecast to generate first-quarter revenue of $1.08 billion and finish with earnings per share of 37 cents.

But it was Alibaba's 66% surge in revenue that dazzled investors. Macquarie's Ben Schachter says Alibaba's "phenomenal" growth is surprising, since the company — of which Yahoo owns a 24% stake — had shown signs of a slowdown.

"Basically, they had a pretty massive acceleration," says Schachter. Yahoo reports Alibaba also more than doubled its net income.

Last month, Alibaba announced plans to file an initial public offering in the U.S., trading on the New York Stock Exchange.

Schachter says Yahoo's search business "continues to perform well," pulling in $445 million for the quarter, a 5% boost from last year.

Despite the modest results, Yahoo CEO Marissa Mayer said in a statement that she is "really pleased" with Yahoo's first quarter, noting their revenue figures were the best first-quarter results since 2010.

"While the growth we'd like to see will take multiple years, our modest growth is a good start," said Mayer during Yahoo's earnings conference call.

On mobile, Mayer says the company boasts 430 million monthly active users of its products, a 30% jump year over year.

Follow Brett Molina on Twitter: @bam923.

In Review

Today I would like t provide a handy strategy review. Helping to translate your market vision into a hedged option strategy. Note that I say hedged. I do not believe in buying or selling stocks and futures naked, ie with no protection. The same goes with buying options outright. Always spread, is my motto.

Mega Bullish? Buy stock with puts. Just plain Bullish? Buy vertical call spread, sell vertical put spread.

Bullish at lower level with an eye to dividend yield or short term cash generation? Sell cash covered put. Bullish on current dividend yield? Buy stock with Collar.

Particular price target? Do Butterfly with short strike at target.

Neutral to range bound?  Condor, Iron Condor, Iron Butterfly.

First down, then up? Buy call calender spread. First up then down? Buy put calender spread.

Mega Bearish? Sell stock or deep ITM call short with long protective call above it. Just plain  Bearish? Buy vertical put spread, sell vertical call spread.

If any of these strategies are unfamiliar or strange to you, please fell free to contact me at any time. Click the Contact heading above.

Finally, do note that with the possible exception of the short cash covered put, all these strategies are hedged with a well defined maximum loss. I hope this review has been helpful and Happy Trading!


......

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Markets Trading Ideas

Originally posted here...

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Sears Just Doesn't Look Like It Wants Our Business

Annalisa Linder A glorious Saturday afternoon, and Sears is virtually empty. Merchandise is all jumbled; aisles are blocked; it looks dispirited. After a spate of photo stories on the disarray at Sears, I wanted to look for myself. The sadder side of Sears, indeed. J.C. Penney (JCP) and Macy's (M) in the same mall in suburban Maryland were busier, neater and drawing younger customers. Annalisa Linder If you remember the slogan, "the softer side of Sears," then you're the typical Sears age demographic, and if you never heard it, you are the younger shopper it desires but can't attract. Sears Holdings' (SHLD) sales have declined for years as it loses customers to Kohl's (KSS) and J.C. Penney and younger customers throng to Macy's. Most mall anchor stores are struggling. A recent Piper Jaffray survey found that teens aren't hanging out at the mall anymore and prefer a social "experience," preferably at a restaurant. Sears and Sears Holdings' Kmart stores have been hit particularly hard. CEO Eddie Lampert noted on the most recent earnings call that shoppers only visit three stores per mall trip now, compared to five in 2007. The Sadder Side of Sears

Rieder: Another digital operation puts its money…

Last summer, when Amazon founder and CEO Jeff Bezos bought The Washington Post and Boston Red Sox owner John Henry snapped up The Boston Globe, a couple of key figures in Alaska journalism took notice.

Alice Rogoff, majority owner and publisher of Alaska Dispatch, and Tony Hopfinger, executive editor and co-founder of the local news website, had been looking for ways to expand their reach. An idea was born: Maybe they could collaborate with, or even take over, the state's largest newspaper, the Anchorage Daily News.

So they made the pilgrimage to Sacramento, home base of McClatchy, one of the nation's largest newspaper companies and owner of the Anchorage daily. When the dust settled last week, the six-year-old start-up had gobbled up the Pulitzer-winning, 68-year-old legacy news outlet for $34 million. Alaska Dispatch takes over the paper, which has a circulation of 58,000 on weekdays and 72,000 on Sunday, on May 3.

It's a vivid sign of the new order of things in journalism. Yet it raises a big question: Why would people running a hip, happening digital operation want on take on the challenge of running an old-school newspaper, with all the printing and delivery costs that go with it and print advertising plummeting pretty much everywhere?

Hopfinger, a former Daily News reporter, isn't underestimating the degree of difficulty of what lies ahead. "It's definitely a big task," he says. "We hope our agility and our start-up culture will translate into breathing new life and taking the paper in a new direction."

Alice Rogoff and Tony Hopfinger.(Photo: handout)

It's generally agreed that competition is good for journalism, and this takes a major independent player out of the ga! me. But Hopfinger says he believes the takeover will mean better content.

Combining the two staffs, each with 10 to 12 reporters, will result in more firepower, in his view. No longer will two reporters have to cover the daily meat-and-potatoes, courts, cops and schools. That will free up more journalists to pursue the enterprise stories and accountability journalism the Dispatch was created to pursue.

"The point is not to take news out of the market," says Rogoff, a former CFO of U.S. News & World Report and onetime assistant to Donald Graham when Graham was publisher of The Washington Post. "The point is to put more news in the market."

Hopfinger sees another way to bring about more ambitious local coverage. He anticipates a Daily News of the future with far less national and international news. By saving on the cost of syndicated material and eliminating the need for editors to focus on it, maybe that allows the paper and website to put a couple more reporters on the street.

The Daily News is in the black, Hopfinger says, and the new owners hope to increase circulation by distributing once again in areas of the far-flung state the Daily News has abandoned. He says the Dispatch would be profitable as well if it didn't keep reinvesting in the news operation, as Rogoff insists.

The first task is merging the two websites, which Hopfinger hopes to achieve within two months.

Alaska Dispatch was launched on a shoestring in 2008 by Hopfinger and his then-wife Amanda Coyne, both freelancers at the time. It gained serious traction after Hopfinger's fortuitous meeting a year later with Rogoff, who had moved to Alaska in 2001 and rapidly fell in love with the beauty of the place and the people.

Hopfinger desperately needed an angel. Rogoff, who is married to billionaire financier David Rubenstein, co-founder of the Carlyle Group, wanted to better tell what she calls "the greatest untold story of resources and opportunity in the world."

Over buffalo burgers and ! beer, Rog! off agreed to open up the exchequer in what Hopfinger calls a "cocktail napkin deal." Their partnership developed against the backdrop of a steady decline in the news gathering capacity of the Daily News.

Rogoff and Hopfinger, who grew up outside of Chicago, love doing journalism in their adopted home state. Hopfinger says Alaskans seem to be more engaged readers than elsewhere. There are big, meaty issues to cover: the dominant oil industry, the isolated native population, climate change in the Arctic. And the locals seem to eat up the long-form approach that is the Dispatch's metier.

Alaska, he says, "is a very cool place to do journalism."

IRS: File your taxes now, ignore Heartbleed bug

NEW YORK (CNNMoney) Millions of people are filing their taxes just as governments grapple with Heartbleed, the worst privacy-killing Internet bug ever.

Is your information at risk? It depends on where you live.

The IRS said its systems weren't vulnerable to the computer bug, so U.S. folks are instructed to keep filing their taxes. But if you want a look at the potential dangers, just turn your attention to the United States' northern neighbor.

Related story: Change these passwords right now

Canada's taxing authority slammed on the brakes -- taking down its website for a few days -- after realizing its computers were exposed. Sure enough, there was a breach.

On Monday, the Canada Revenue Agency discovered that someone had exploited the Heartbleed bug to tap into its systems for six hours and grab the Social Insurance Number of 900 taxpayers. The agency has since brought its website back online, with Canadian revenue commissioner Andrew Treusch assuring it's now "safe and secure."

There's no sign the same thing has happened at the IRS. But with so many people filing taxes via big tax preparers and local independent accountants, there's cause for concern.

The nation's largest tax preparers say they dodged the bullet. Intuit (INTU), maker of the popular TurboTax software program, said it wasn't affected by Heartbleed. But just in case, the company has taken security measures to make sure no one can trick your computer into visiting a fake TurboTax website.

H&R Block (HRB) said it's still reviewing its computer systems but has "found no risk to client data." It isn't clear whether the H&R Block was ever vulnerable or if it was, then patched it. The tax preparer told CNN its websites weren't using the vulnerable version of OpenSSL, the program that encrypts sensitive information for security purposes.

  Heartbleed: 'Secure' internet wasn't safe

However, there's no way to make sure you weren't spied on while filing your taxes, even if the c! hances were probably slim. The way Heartbleed works -- poking a hole in the way people communicate online -- is complicated. And it affects a lot of the equipment used by websites, big employers and small businesses everywhere. That means online communication might not have been safe at work or at home. It's difficult to be certain you were never exposed.

Small businesses aren't likely to upgrade their systems anytime soon, so it's worth asking your accountant if they've reviewed their computer system. It's not an easy task.

If you filed online, your best bet is to check that the website you use doesn't rely on the vulnerable version of the OpenSSL program -- or at least patched it right away. Some companies are issuing statements online to guide customers.

Related story: Heartbleed 101

Tom Cross is the director of security research at Lancope, which makes hardware that helps companies investigate breaches. He offers this as consolation: Most major websites moved fast to fix this.

But the reality is that the bug left many systems exposed for more than two years now. And the last week has provided a brief window that's especially unsafe because now the vulnerability is known publicly.

There is another option though. You can just file your taxes the old way: slip the check into an envelope, lick it shut and drop it into a mailbox.

That's the advice of Darren Hayes, a cybersecurity researcher. It sounds odd coming from someone who teaches computer science at Pace University. But he said, "The more you know tech, the more tech you shy away from sometimes."