Sunday, July 27, 2014

3 Cheap Large-Cap Stocks Under $15

RSS Logo Lawrence Meyers Popular Posts: 3 Cheap Large-Cap Stocks Under $154 Rental REITs to Play the Surge in ApartmentsGrab These 3 Sector ETFs for the Coming Recession Recent Posts: Winners & Losers in the Herbalife PR War 3 Cheap Large-Cap Stocks Under $15 2 Weak Businesses Looking Ripe for Shorting View All Posts 3 Cheap Large-Cap Stocks Under $15

There's no actual difference if a large-cap stock presents a value at a price $15 or $1,500. You decide if you want to buy the stock, then purchase the amount you wish to hold in dollars and cents. Share count is irrelevant. What matters when it comes to cheap stocks isn’t the absolute-dollar basis, but the valuation basis.

five 3 Cheap Large Cap Stocks Under $15Nevertheless, I admit to some attraction regarding large-cap stocks that are cheap on an absolute-dollar basis. It suggests that the stock is so out of favor that you can pick up many shares of it for very little money, then dispose of it in little pieces as the stock rises. (Whereas a large-cap company with a high nominal price would be difficult to dispose of in pieces.)

So, here’s the best of both worlds: three large-cap stocks that are cheap both on a valuation basis and a nominal basis:

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Cheap Large-Cap Stocks to Buy – Royal Bank of Scotland (RBS)

royal bank of scotland rbs 185 3 Cheap Large Cap Stocks Under $15Stock Price as of 7/25: $12.40

Royal Bank of Scotland (RBS) presents an interesting case. It is one of the world's largest financial services companies and banks. You know RBS here in the U.S. as NatWest … so just because it happens to be based in Scotland doesn't mean its reach doesn't extend elsewhere.

I've met bankers from the company, and was impressed with the breadth of its product offerings. There are the standard retail and commercial banking products, but RBS also provides invoice and asset-based financing, which tend to be high-yielding products, as well as private wealth management from which the bank earns high fees. RBS also plays around with debt financing, fixed income investments and currency exchange.

In addition, the bank is going to fill the gap for payday lending in the UK, left open by onerous regulation that it can handle and payday lenders can not.

RBS has been struggling all year, but shot up by double digits Friday on a positive earnings report. This nearly 300-year-old institution isn’t going under anytime soon. The path of least resistance is up.

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Cheap Large-Cap Stocks to Buy – Ericsson (ERIC)

ericcson eric stock 185 2 3 Cheap Large Cap Stocks Under $15Stock Price as of 7/25: $12.75

Ericsson (ERIC) was all the rage among tech’s large-cap stocks 15 years ago when cell phones were a growth industry. The company has struggled, but second-quarter earnings delivered a big operating margins surprise (from 4.5% to 7.3%).

The hidden asset, however, is Ericcson’s balance sheet. It has about $5.25 billion in net cash on its balance sheet, and that's about $5 per share, giving the company an effective stock price of $7.67.

The company turns a profit, generated $2.9 billion of free cash flow in the quarter, and pays a 3.6% dividend (paid annually). While the information and communications tech market is challenging for everyone, I put more faith in Ericsson because of its wealth of experience than I would most other companies.

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Cheap Large-Cap Stocks to Buy – Boston Scientific (BSX)

Boston Scientific 185 3 Cheap Large Cap Stocks Under $15Share Price as of 7/25: $13.00

Boston Scientific (BSX) is one of those stocks I promise myself I will do more research on but never get around to.

I’m changing my tune, though. This legendary medical device company has become a leader in its industry. It is a reliable cash flow generator ($800 million in FY13) because its products so well, and sell repeatedly. Meanwhile, BSX has a brand name that continues to engage in R&D in an industry that continues to grow.

Boston Scientific does have competition, and that has been a struggle. The debt load is significant at $4.2 billion, and it's relatively expensive debt, costing around 7.5% annually.

Nevertheless, there is massive institutional and mutual fund ownership, and that's because it is so reliable with its cash flow. I think, then, the $13 share price probably has a floor near its $9.60 52-week low, and that there is room for more upside than downside.

As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities. He is president of Asymmetrical Media Strategies, a crisis PR firm, and PDL Broker, Inc., which brokers financing, strategic investments and distressed asset purchases between private equity firms and businesses. He also has written two books and blogs about public policy, journalistic integrity, popular culture, and world affairs. Contact him at pdlcapital66@gmail.com and follow his tweets at @ichabodscranium.

Friday, July 25, 2014

FAA Lifts Ban on U.S. Flights to Israel

Mideast Israel Palestinians Dan Balilty/APA departure flight board displays canceled and delayed flights at Ben Gurion International Airport a day after the FAA imposed a ban on flights. WASHINGTON -- The Federal Aviation Administration lifted its ban Wednesday on U.S. flights in and out of Israel, which the agency had imposed out of concern for the risk of planes being hit by Hamas rockets. The decision was effective at 11:45 p.m. Eastern time. "Before making this decision, the FAA worked with its U.S. government counterparts to assess the security situation in Israel and carefully reviewed both significant new information and measures the government of Israel is taking to mitigate potential risks to civil aviation," the FAA said. "The agency will continue to closely monitor the very fluid situation around Ben Gurion Airport and will take additional actions as necessary." The FAA instituted a 24-hour prohibition Tuesday in response to a rocket strike that landed about a mile from the airport. The directive, which was extended Wednesday, applied only to U.S. carriers. The FAA has no authority over foreign airlines operating in Israel. The FAA's flight ban was criticized by the Israeli government and by Republican Sen. Ted Cruz of Texas, who questioned whether President Barack Obama used a federal agency to impose an economic boycott on Israel. Delta Air Lines (DAL), which diverted a jumbo jet away from Tel Aviv before Tuesday's ban by the FAA, won't necessarily resume flights to Israel even if U.S. authorities declare the area safe, the airline's CEO said before the FAA lifted the ban. CEO Richard Anderson said Delta would of course obey FAA orders but would continue to make its own decisions about safety. "We appreciate the advice and consent and the intelligence we get, but we have a duty and an obligation above and beyond that to independently make the right decisions for our employees and passengers," Anderson said on a conference call with reporters. "Even if they lift" the prohibition on flying in and out of Ben-Gurion Airport, "we still may not go in depending on what the facts and circumstances are." Anderson declined to discuss specifically how the airline would make the decision to resume the flights and spoke only in general terms. He said the airline decides whether flights are safe to operate "on an independent basis, so we will evaluate the information we have and we will make the judgment that our passengers and employees rely on us to make for them every day." The CEO of Middle East carrier Emirates said after the shoot-down in Ukraine of a Malaysia Airlines jet last week that global airlines need better risk-assessment from international aviation authorities. Delta, however, seems more inclined to go it alone. "We have a broad and deep security network around the world," Anderson said. "We have security directors that work for Delta in all the regions of the world, and we have a very sophisticated capability and methodology to manage these kinds of risks, whether it's this or a volcano or a hurricane."

Thursday, July 24, 2014

The 3 Keys to Surviving Major Life Transitions

You might think that the most important work a financial advisor can do is related to allocating a client's investment portfolio, or perhaps helping secure a timely insurance policy or drafting the optimal estate plan. In fact, their most important work is done when clients are in the midst of navigating life's major transitions.

I have very recently undergone two of these major life events — a job change and a move — in the span of five months. Crazy, right? Who would willingly subject themself to two of life's most stressful changes within such a small window of time? Fortunately, I had at my disposal three keys to surviving major life transitions, and I'd like to share them with you:

Key #1: Flexibility "Blessed are the hearts that can bend; they shall never be broken." — Albert Camus

In February, I left the company I loved after seven years of life-changing work to lock arms with a national alliance of financial advisory pioneers dedicated to the practice of "building relationships by doing the right thing." But in order to build a new and rewarding relationship with them, I had no choice but to sever some relationships with others.

670px-ts_bremen_life_ring_with_stormy_waves

I had to tell colleagues at my former company — good friends — that I was leaving, knowing that our work was the primary basis for our friendship. I also had to forgo working with some clients whose financial plans I'd helped craft, and in whom I'd invested personally.

I had to impose myself on new colleagues as I fumbled through onboarding. I had to learn new systems, protocols and personalities. I had to wonder if, at the conclusion of a probationary stretch of forgone forgiveness, my new colleagues would still want me on their team!

So much change in so little time.

You've heard that death and taxes are life's only guarantees. But I'm still holding out for an Elijah-style exit, and half of Europe pays taxes little mind. No, it is only change that is a guarantee in this life, and flexibility is its only effective counteragent.

We can and should envision and plan for major life transitions, but we should also expect our path to be diverted by unknown variables. We must be willing to flex our plans in these dynamic times of change.

Key #2: Margin "Everything takes longer than it does." — Ecuadorian proverb

In the  first week of June, my family moved from our beloved Baltimore — leaving behind our close-knit families, community support systems and favorite sports teams — in an experiment to see what life would look like from a different vantage point. We chose Charleston, South Carolina, as the backdrop for our adventure, pinpointed for its promise of a slower pace, higher quality of life and lower cost of living.

Major life transitions, however, are necessarily taxing on our time and money, at least initially. And because of the elements unique to every major life event, it is virtually impossible to accurately forecast the necessary allotment of time and money that will be required.

This can be maddening to me as a financial planner. I strive to forecast every expense one could anticipate, but change invariably costs more money and consumes more time than expected.

The only solution is to plan for the unexpected by leaving a reasonable margin of time and money — a buffer — that can be consumed by the inevitable surprises that arise. Expect that it will take 20% longer and cost 20% more. This is the only defense against heaping more stress on an inherently stressful event.

I'll also add that our move was, in part, an exercise in the creation of margin. Despite Charleston's great reputation as a city that offers  a high quality of life, the cost of housing, especially, is still lower than in the Mid-Atlantic. We were able to reduce our overall monthly housing costs, our biggest single expense, by 20%.

We also added a significant margin of time to our calendars. We effectively wiped clean our slate of commitments, decades in the making, and now we get to choose exactly what, where, when and to whom we're willing to dedicate ourselves.

Key #3: Grace "Failures are finger posts on the road to achievement." — C.S. Lewis

Failure is inevitable, especially in the case of major life events. Grace is unmerited favor in the face of failure. This brand of grace is most often discussed from the pulpit on Sundays, but I raise the topic here more for its practical benefits than its spiritual.

The nature of life's major transitions — specifically the changes and surprises that come with them —are a breeding ground for failure. Some are inconsequential while others come with great risks, but most come as a result of our limitations.

We err, and in order to move forward we must extend grace to ourselves and to the others on our journey.

It must be said that not all major life transitions are equal. The benefit of my recent life events is that each of them, while taxing and stressful, led to something new and exciting. You may be facing another brand of life event — a death, a divorce, an injury or a loss not of your choosing. Your situation is different — it's harder — but that makes the use of these three keys even more vital.

Wednesday, July 23, 2014

Ladenburg Thalmann Financial Services (NYSEMKT:LTS): Heavy, Durable Insider Buying

Insider buying sagged last week with just 46 companies reporting records of buyers. Considering all the worry about trading near a top, it's not surprising to see boardroom buyers back off the buying.

Ahh, but any worries over price levels didn't stop multiple insiders at Ladenburg Thalmann Financial Services (NYSEMKT:LTS) from continuing their buying spree. For the last two years, insiders have been gobbling up shares of the broker.

Ladenburg Thalmann Financial Services provides brokerage and advisory, investment banking, equity research, institutional sales and trading, asset management, and trust services. The company operates through two segments, Independent Brokerage and Advisory Services, and Ladenburg.

[Related -Top Insider Buy Stocks: OPK, LTS, NTS, ZTR]

Since March 2013, LTS insider bought 3.157 million shares of Ladenburg Thalmann, starting at $1.38. They have been buying ever since, despite the price more than doubling.

The latest wave has two directors, Phillip Frost, Md. and Saul Gilinski buy a combined 530,085 shares for a total investment of $1,841,200 (dollar cost average of $3.47) since the start of July.

Both men have been accumulating the stock. Gilinski added 396,474 shares to his portfolio since March 2013, staring at $1.63. Meanwhile, Frost has been at it for almost two years, purchasing a whopping 2.03 million shares since August 2012. He began buying at $1.37.

Apparently, these gentlemen believe in the merits of LTS.

[Related -3 Stocks With Heavy Insider Buying In November]

Perhaps, being undervalued versus its peers is why the pair continues to support Ladenburg Thalmann shares. The average broker trades at 2.41 times sales while LTS' price-to-sales (P/S) ratio stands at 0.91, which is the financial company's five-year average.

For 2015, analysts forecast revenue growth of 5.5% to $909.29 million. If Wall Street values LTS at its half-decade norm of 0.91 sales, then shares would lift by 5.5%. That's easy math right?

However, prior to April 2012, the broker tended to trade between 1 and 1.25 times sales. The current trend line is headed in that direction, again. With a P/S ratio of 1, Ladenburg Thalmann would trade at five bucks on the dot, using 2015's consensus revenue estimate.

Overall: The P/S trend for Ladenburg Thalmann Financial Services (NYSEMKT:LTS) suggests that LTS could get back to trading at one times sales in the next year or so. If that's the case, Frost, Gilinski and shareholders stand to make 42.86% from here should the stock hit $5. 

Tuesday, July 22, 2014

It's 'peanut butter jelly time.' PBJ costs fall

peanut butter jelly Food prices have been rising, but don't fear: Not all groceries are more expensive. All the fixings for peanut butter and jelly are cheaper now than they were a year ago. NEW YORK (CNNMoney) It's peanut butter jelly time.

Food prices have been rising for six months in a row and are up 2.3% from a year ago, according to the Consumer Price Index -- an official inflation measure calculated by the Bureau of Labor Statistics each month. But don't fear: Not all groceries are more expensive.

All the fixings for peanut butter and jelly are cheaper now.

White bread prices have fallen 2.8% over the last year and canned fruit (a category that includes jelly) prices have fallen 0.7%.

Meanwhile, peanut butter costs 3.8% less than it did last year, which is a big relief after producers hiked prices in 2011.

The Bureau of Labor Statistics does not break out price details for crunchy versus creamy peanut butter, unfortunately, but according to the National Peanut Board, a farmer-funded research group, women and children tend to prefer the creamy stuff, whereas men prefer a crunchier spread.

That group also claims the average child will eat 1,500 peanut butter and jelly sandwiches before graduating from high school.

Each month, government data collectors visit or call stores around the country to track the prices of thousands of items, ranging from groceries to used cars. Once combined, that data makes up the Consumer Price Index, a key measure of inflation experienced by average American consumers.

That latest CPI was released Tuesday morning and shows inflation is tame. Consumer prices have risen 2.1% over the last year, a level that's considered normal in a gradually improving economy.

Much of the recent increase comes from energy prices, which have risen amid turmoil in the Middle East and Ukraine. Stripping out both energy and food though, shows other prices that consumers pay for goods and services are up only 1.9% over the last year.

A little inflation is considered a good thing. The Federal Reserve, for example, aims to keep prices rising about 2% a year. Why? If prices fall (aka deflation) consumers have little incentive to spend money, especially on big ticket items like cars, appliances or homes. Why buy now, if you expect prices on those things to be lower six months from now? This phenomenon can slow the economy.

As inflation gradually picks up this year, the big concern now is will ! American wages keep up with price increases?

Wages did rise slightly in June, but not enough to keep up with inflation. In fact, real hourly earnings are down just a hair -- about 0.1% from last year, according to a separate report released by BLS on Tuesday.

Federal Reserve Chair Janet Yellen wants to see wages rise faster than inflation, so American households have more buying power. If this happens, it could boost consumer spending -- the single largest driver of economic activity in the United States.

Some independent economists expect wages to rise more later this year as the job market continues to improve, but for now, workers will have to keep waiting.

Tuesday, July 15, 2014

House Votes to Extend Moratorium on Internet Taxes

Hands of a man using PC tablet, from low angle Getty Images WASHINGTON -- The House has voted to make permanent a moratorium that prevents state and local governments from taxing access to the Internet. Under current law, the moratorium expires Nov. 1, exposing Internet users to the same kind of connection fees that often show up on telephone bills. The moratorium was first enacted in 1998. State and local governments that already had Internet taxes were allowed to keep them under the current moratorium. But under the bill passed Tuesday, those jurisdictions would no longer be able to collect the taxes. The House passed the bill Tuesday by voice vote, which means members didn't record whether they were in favor or against the bill.

Mid-Afternoon Market Update: Harmonic Drops On Weak Forecast; URS Shares Surge

Related BZSUM Harmonic Drops On Weak Forecast; URS Shares Surge Mid-Morning Market Update: Markets Open Higher; Citigroup Profit Beats Street View

In the early parts of the final hour of trading Monday, the Dow traded up 0.71 percent to 17,064.15 while the NASDAQ gained 0.66 percent to 4,444.86. The S&P also rose, gaining 0.53 percent to 1,978.03.

Leading and Lagging Sectors

Telecommunications services shares jumped around 1.19 percent in today’s trading. Top gainers in the sector included NQ Mobile (NYSE: NQ), China Unicom (Hong Kong) (NYSE: CHU), and Partner Communications Company (NASDAQ: PTNR).

In trading on Monday, utilities shares fell by 0.31 percent. Top losers in the sector included Exelon (NYSE: EXC), down 2.34 percent, and NRG Energy (NYSE: NRG), off 2.24 percent.

Top Headline

Citigroup (NYSE: C) reported better-than-expected second-quarter results.

Citigroup’s quarterly net profit fell to $181 million, or $0.03 per share, versus a year-ago profit of $4.18 billion, or $1.34 per share. Its adjusted net profit came in at $3.9 billion, or $1.24 per share. Its revenue slipped 6% to $19.3 billion from $20.48 billion. Excluding CVA/DVA, revenue fell 3% to $19.4 billion. However, analysts were estimating earnings of $1.06 per share on revenue of $18.92 billion.

The bank also announced its plans to pay $7 billion to settle the ongoing investigation of the Residential Mortgage-Backed Securities Working Group.

Equities Trading UP

Exelixis (NASDAQ: EXEL) shares shot up 21.18 percent to $4.03 after the company announced positive phase 3 data for coBRIM.

Shares of Kandi Technolgies Group (NASDAQ: KNDI) got a boost, shooting up 20.24 percent to $17.70 on report of a 238% rise in EV sales.

URS (NYSE: URS) shares were also up, gaining 11.76 percent to $58.14 after Aecom Technology (NYSE: ACM) announced its plans to buy URS for $4 billion in cash and stock.

Equities Trading DOWN

Shares of Harmonic (NASDAQ: HLIT) were down 13.46 percent to $6.18 after the company lowered its Q2 forecast and issued a weak Q3 guidance.

Riverbed Technology (NASDAQ: RVBD) shares tumbled 6.77 percent to $18.97 after the company lowered its Q2 revenue forecast.

GT Advanced Technologies (NASDAQ: GTAT) was down, falling 5.92 percent to $15.10 after cautious comments by CLSA.

Commodities

In commodity news, oil traded down 0.13 percent to $100.70, while gold traded down 2.33 percent to $1,306.30.

Silver traded down 2.47 percent Monday to $20.93, while copper fell 0.50 percent to $3.25.

Euro zone

European shares were higher today. The eurozone’s STOXX 600 rose 0.94 percent, the Spanish IBEX Index surged 0.64 percent, while Italy’s FTSE MIB Index climbed 0.40 percent. Meanwhile, the German DAX rose 1.21 percent and the French CAC 40 climbed 0.78 percent while UK shares gained 0.99 percent.

Economics

The Treasury is set to auction 3-and 6-month bills.

Posted-In: Eurozone Futures Commodities Top Stories Economics Markets Movers

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

  Most Popular Earnings Expectations For The Week Of July 14: Big Banks, Tech Giants And More UPDATE: Barclays Upgrades Apple, Has High Expectations For Near Term GT Advanced Technologies Down Sharply On iPhone Production Concerns Phone Arena Reports Apple's 5.5-inch iPhone 6 Could be Delayed Until 2015 Stocks To Watch For July 14, 2014 #PreMarket Primer: Monday, July 14: Germany Wins World Cup 1-0 Related Articles (ACM + BZSUM) Mid-Day Market Update: Harmonic Drops On Weak Forecast; URS Shares Surge Harmonic Drops On Weak Forecast; URS Shares Surge Top Performing Industries For July 14, 2014 Benzinga's Volume Movers Mid-Morning Market Update: Markets Open Higher; Citigroup Profit Beats Street View Morning Market Movers Around the Web, We're Loving... We're Now Hiring Real-Time Journal

Monday, July 14, 2014

Monday’s Analyst Moves: Apple Inc., Reynolds American, Inc., Johnson & Johnson, More (AAPL, RAI, JNJ, More)

Before Monday’s opening bell, a number of big name dividend stocks were the subject of analyst moves. Below, we highlight the important analyst commentary for investors.

Apple Upgraded to “Overweight”

Apple Inc. (AAPL) has been upgraded from “Equal Weight” to “Overweight” at Barclays. Analysts upgraded the stock since it has exceeded expectations since March due to Samsung’s weakness and increased brand appeal. The firm has a $110 price target on AAPL, suggesting a 15% upside from Friday’s closing price of $95.22. AAPL has a dividend yield of 1.97%.

Reynolds American Upgraded To “Outperform”

Reynolds American, Inc. (RAI) has been upgraded from “Sector Perform” to “Outperform” at RBC Capital Markets as the deal with LO is expected to add to earnings. RAI has a dividend yield of 4.34%.

Barclays Raises PT on Ford

Barclays has raised its price target on Ford Motor Company (F) from $19 to $20 on a valuation call and higher EPS estimates. This new price target suggests a 14% upside from Friday’s closing price of $17.47. F has a dividend yield of 2.86%

Jefferies Raises PT on Johnson & Johnson

Jefferies has raised its price target on Johnson & Johnson (JNJ) to $114, suggesting an 8% increase from Friday’s closing price of $105.10. Analysts have also boosted estimates on JNJ due to strong performance from Olysio. JNJ has a dividend yield of 2.66%.

Jefferies Starts Coverage on Ameritrade

Jefferies has initiated coverage on TD Ameritrade Holding Corp. (AMTD) with a “Hold” rating and a $34 price target. This price target suggests a 10% upside from Friday’s closing price of $31.10. Analysts view AMTD’s core earnings power as understated due to lower interest rates. AMTD has a dividend yield of 1.54%.

Goldman Sachs Downgrades Dana Holding

Goldman Sachs has cut its rating on Dana Holding Corporation (DAN) to “Neutral” on a valuation call due to the company’s exposure to Latin America. DAN has a dividend yield of 0.84%.

JPM Upgrades Brinker

Brinker International, Inc. (EAT) has been upgraded at JP Morgan to “Overweight” as the company has potential for upside. EAT has a dividend yi

Saturday, July 12, 2014

Apple Earnings: Factors to Drive an iPhone Blowout

iPhone 5s. Source: Apple.

Investors are now less than two weeks from Apple's (NASDAQ: AAPL  ) fiscal third-quarter earnings release, which is slated for July 22. Last quarter, Apple reported a bona fide iPhone blowout. The 43.7 million units absolutely crushed the Street consensus of 38 million. For the current June quarter, the Street is expecting around 35 million iPhones sold. Can Apple deliver two blowouts in a row?

Last month, Morgan Stanley analyst Katy Huberty released a research note that suggested Apple could be trending toward 39 million iPhones sold. She based her estimate on her firm's proprietary AlphaWise Smartphone Tracker, which has proved fairly accurate with gauging demand in part by cross-referencing web search trends. Apple has posted figures higher than AlphaWise's models in four out of the past five quarters.

More importantly, what are some of the underlying factors that could help drive an iPhone blowout?

Another BRIC in the wall
Apple continues to make progress in growing its share of emerging markets. Last quarter, Tim Cook said the iPhone's strength was broad-based and that the company established a new all-time record for total iPhone sales in BRIC countries. Finally partnering with China Mobile (NYSE: CHL  ) drove sales to an all-time record in Greater China.

Within China, Apple continues to enjoy the China Mobile tailwind. The iPhone launched on China Mobile on Jan. 17. For the June quarter, the device will have been on sale for a full quarter. Additionally, 4G adoption (which is being driven in large part by the iPhone) is accelerating. China Mobile had 8.1 million 4G customers at the end of May, representing 1% penetration after four months.

Source: China Mobile.

In contrast, when China Mobile launched 3G service back in 2009, it took 14 months to get above 1% penetration, and the carrier's subscriber base was much smaller back then (almost 540 million in March 2010). Smaller rivals have also launched 4G service: China Telecom in February and China Unicom in March. Now that all three of China's carriers began deploying 4G before the June quarter started, Apple will benefit from 4G adoption.

Another carrier headwind
China Mobile isn't the only carrier that could boost results. Apple also inked a partnership with NTT DoCoMo (NYSE: DCM  ) last September. While that was several quarters ago, it takes time to fully meet pent-up demand within large subscriber bases. NTT DoCoMo is Japan's largest, with 63.1 million subscribers at last count.

The iPhone is incredibly popular in Japan. Apple grabbed 55% of the total smartphone market last quarter, as unit sales were up over 50%. NTT DoCoMo is certainly enjoying the iPhone. After bleeding subscribers for years to iPhone-carrying rivals Softbank and KDDI, the company immediately saw subscriber figures skyrocket.

Source: NTT DoCoMo.

Net additions aren't the only thing that NTT DoCoMo is improving on. Mobile network portability, or MNP, performance measures customer churn as customers switch carriers and keep their phone numbers.

Source: NTT DoCoMo.

All of this goes to show that the iPhone is doing extremely well on Japan's largest carrier. As the iPhone continues to proliferate within NTT DoCoMo's subscriber base, which is only just now beginning, Apple further strengthens its lock on the Japanese market.

Making iPhones more affordable
The iPhone 5c has underperformed Apple's internal expectations, as Tim Cook conceded in January when discussing product mix, it still represents Apple's strategic foray into more affordable price points. To that end, Apple launched a discounted 8 GB model in March targeting numerous international markets.

In markets like India, the new model was 11% cheaper. On top of that, Apple even relaunched the aging iPhone 4 in India, also going for low price points with an 8 GB model.

Two in a row?
Overall, Apple still has a lot of tailwinds that can help boost iPhone sales in the June quarter, despite being a relatively slow time seasonally. The March quarter's blowout was a pleasant surprise for investors. Can Apple do it again?

Leaked: Apple's next smart device (warning -- it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee that its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are even claiming that its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts that 485 million of these devices will be sold per year. But one small company makes this gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and to see Apple's newest smart gizmo, just click here!

Friday, July 11, 2014

HPQ vs. IBM: Who Will Win This Clash of the Tech Titans?

Today I'm refereeing a boxing match between two of the biggest tech legends around: International Business Machines Corp. (NYSE: IBM) and Hewlett Packard Co. (NYSE: HPQ).

I'm calling it the Clash of the Tech Titans.

The prize? A big slug of profits for your investment portfolio...

Both of these fighters are big - we're talking market caps in the tens of billions - but these longtime blue chips are more black and blue right now... and are working through major corporate turnarounds. (In fact, both installed new chief executive officers less than three years ago.) They're both trying to raise revenue and income in order to send their stock prices higher.

Now, neither of these heavyweights is a bad investment - both are solid companies, in it for the long haul.

But one of these pugs just might be a stud - more of an inside fighter - that you should add to your portfolio now.

Today, if you agree with my decision and make that investment, you'll soon be watching your wealth grow fast...

The Tale of the Tape IBM

In this corner, "Big Blue" traces its New York roots back more than 100 years. It literally pioneered the dawn of the computer age.

International Business Machines Corp. (NYSE: IBM) weighs in with a market cap of $186.13 billion, 2013 revenue of $99.8 billion, and net income of $18 billion. It's got a price/earnings (P/E) ratio of 12.64 and a 2.38% dividend yield.

And in the other corner, the "Puncher from Palo Alto" was one of the very first firms to set up shop in what became known as Silicon Valley. Founded in 1939 by two graduates of Stanford University, the founding partners started up the company in the proverbial one-car garage.

HPQ

Weighing in with a market cap of $63.63 billion, Hewlett Packard Co. (NYSE: HPQ) reported $112.25 billion in 2013 revenue and a net income of $5.11 billion. Its P/E ratio is at 11.97, and its dividend yield stands at 1.88%.

However, appearances can be deceiving. Those sound like great numbers, but both of these fighters are in turnarounds.

Both have seen declining revenue, income, and stock price over the past few years, and I know that neither of these new CEOs is happy with her stock price.

And that's why I'm refereeing this match. I've been a turnaround investor for almost as long as I've been around the high-tech world.

No doubt, turnarounds are one of my "special situations" that can hand investors huge profits... if you know what to look for.

Let's ring the bell...

The Favorite: IBM

IBM comes into this fight as the favorite. Besides its overall heft and gaudy numbers, it's getting the best press right now.

In fact, if you read mainstream media accounts about IBM back in January, you might have been impressed enough to invest.

The company said it was starting a new business unit focused on its Watson supercomputing system and Big Data - technologies that find profitable patterns out of mountains of unstructured data. Watson, of course, is the computer that became famous in 2011 when it defeated two human contestants on the popular TV game show "Jeopardy!"

With its Watson subunit, IBM will crunch billions of units of data for corporate clients and to support research and development in pharmaceuticals, biotechnology, and publishing. For example, Watson could look at millions of consumer bills and find ways to improve efficiencies, or it could sift through billions of online transactions looking for fraud.

It's already helping the New York Genome Center map the genomic mutations of brain cancer.

CEO Virginia "Ginni" Rometty, who took over in early 2012, says she's investing $1 billion in the Watson unit, and she thinks it could generate $10 billion in annual sales within a decade.

Big Blue also said it was launching a new $100 million venture-capital fund to spur developers to write more apps for Watson.

The researchers at IDC forecast the Big Data market will hit $16.1 billion by the end of this year. IDC says the sector is growing six times faster than the overall market for information technology services.

IBM has also made major moves into cloud computing, the rapidly growing tech market in which customers pay vendors to host data and applications at remote computer centers they can access via the web. This year, IBM is spending $1.2 billion on cloud data centers, and the sector produced $4.4 billion in revenue in 2013 - and Rometty expects that number to grow to $7 billion in 2015.

On the surface, it sounded exciting: a company synonymous with power computing taking steps to cash in on the cloud and Big Data. However, while IBM's newfound prowess in the cloud and Big Data is impressive, I don't believe they make up for weaknesses in other areas.

IBM is no palooka, but Rometty faces some major short-run challenges that you need to understand.

First of all, sales are sketchy at best these days. In this year's first quarter, sales shrank 4% to $22.5 billion. Alone, that's not a big deal. But just as technologists do with Big Data, let's crunch some numbers and see if there's a deeper pattern at play.

Turns out, that marked the eighth straight quarter in which IBM's sales either broke even or declined from the year-ago period. That's a poor record, extending two full years.

Profits also need to improve. IBM's net income fell 21% from the year-ago quarter to $2.38 billion. And profit margins also fell by nearly 20%, declining from a 13% margin a year ago to the current 10.6%.

To aid the restructuring, Rometty recently sold IBM's low-end server business to Lenovo Group Ltd. (OTCMKTS ADR: LNVGY) for $2.3 billion. That's a move I applauded at the time as great for both firms.

But IBM can't escape the fact that nearly every part of its business has disappointed so far this year, causing some wags to dub it "Big Black and Blue."

I, on the other hand, think IBM is still a good stock for the long haul. It can play the rope-a-dope for a while and land its haymaker a few years down the line.

But the question for investors now is which fighter is the better bet over the next couple of years: Big Blue or the Puncher from Palo Alto?

The Contender: HPQ

Again, if you just looked at recent headlines, you'd think there are more dark days ahead for Hewlett-Packard. It recently said it plans to lay off up to 16,000 workers.

That brings the total number of jobs cut to roughly 50,000 as part of its five-year restructuring plan. Yes, that sounds pitiful - like a series of jabs that lead nowhere - but let's put that in context.

When Meg Whitman joined the company as CEO in late 2011, HP was a train wreck. In just six years, it had gone through five chief executives, three of whom were fired.

Sales of PCs and printers were plummeting. The HPQ stock price had fallen from near $55 in early 2010 to the mid-$20s.

And just one year into the job, Whitman faced an accounting scandal over HP's purchase of Autonomy, a British software firm. Though a predecessor led the merger, Whitman was the one who had to tell shareholders HP was writing off some $8.6 billion because of the deal.

By early last year, HPQ stock dipped almost all the way to $10.

For Whitman and HP, that was a major setback, but hardly a knockout punch. In this year's first fiscal quarter ended April 30, sales were nearly breakeven from the year-ago period at $27.3 billion.

But profits were up sharply. They rose roughly 18% from the year-ago fiscal quarter to nearly $1.3 billion.

The quarterly results show the overhaul plan is working so far: Restructuring charges fell 62% to $252 million.

Like IBM, HP is moving away from its dependency on hardware and is focusing more on cloud computing.

Whitman recently announced the firm will invest roughly $1 billion in that growth field. And in mid-June, HP announced it will align with industry leader Workday Inc. (NYSE: WDAY) to deliver human resources apps via the cloud.

Moreover, there's still life in those personal computers - still HP's largest business segment, with $32.07 billion in 2013 revenue. Earlier this year, HP reported an 8% rise in commercial PC revenue, making a 3% drop in consumer personal computers sting a little less.

And I just got word of HP's ProLiant DL580 Gen8 server. According to early reviews, it should clean IBM servers' clock.

In other words, HP may be making big moves into the cloud, but its iron still packs a big punch.

The Decision

It's been a long fight, going 10 rounds, with no knockouts. But HP knocked IBM down a few times and kept Big Black and Blue on the ropes for the last couple of rounds of this Clash of the Tech Titans.

And the judges - market investors - agree. It's a unanimous decision: HP has a lot more momentum than does IBM... and the stock performance shows it.

Trading at $180, over the past two years, IBM's stock has fallen nearly 6%, compared with gains for the Standard & Poor's 500 Index of more than 48%.

By contrast, HPQ trades at nearly $34. And over the last two years, the stock is up more than 73%, beating the broad market by roughly 50%.

And I think HP has a greater chance of outperforming the market over the next two years. It's going in with a solid combination of power punches.

Look at it this way. If IBM just gets back to its five-year closing high of $214.92, set on March 11, 2013, we'd be looking at an upside of about 19%.

But if HPQ just gets back to its five-year closing high of $53.87, reached April 5, 2010, we'd be talking about a gain of 59%.

Thus, as special situations go, Hewlett-Packard seems to be the clear winner over the next two to three years. In fact, HP looks like it will be the best-performing legacy tech stock over the next year.

When it comes to profits for stockholders, Hewlett-Packard is proving itself to be the Comeback Kid.

By the way, the winner of my Clash of the Tech Titans isn't the only investment that I'm watching closely right now.

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