Wednesday, April 30, 2014

Church & Dwight: Will Innovative New Products Drive Earnings Much Higher?

Church & Dwight (NYSE: CHD  ) , the company behind very popular brands such as Arm & Hammer, Trojan, First Response, and Oxi Clean, has watched its stock outperform the overall market in 2014 and earnings have played a key role. Another strong report could add fuel to the rally, and its first-quarter results are due out in a couple of days. Let's take a look at the most recent earnings release, expectations for the upcoming report, and take a quick look at one of its top competitors, Procter & Gamble (NYSE: PG  ) , to determine if we should buy in right now or if we should wait to see what the quarter holds. 

Source: Church & Dwight's LinkedIn

The last announcement 
On Feb. 3, Church & Dwight released its fourth-quarter report to cap off a great fiscal 2013. Here's a breakdown of the results:

Metric Reported Expected
Earnings Per Share $0.65 $0.66
Revenue $822.6 million $823.5 million

Source: Benzinga

Earnings per share increased 14% and revenue increased 1.6% year-over-year, driven by global volume growth of 5.2%. Organic sales rose 2.3% and this exceeded the company's original expectations of 1.5%-2% growth. The company's gross profit increased 3.7% to $371.7 million and the gross margin was very strong, expanding 90 basis points to 45.2%. 

Source: Church & Dwight

Although the statistics listed above are impressive, the highlights of the report came when Church & Dwight made two announcements, a dividend increase and the authorization of a share repurchase program. First off, the quarterly dividend was raised by 11% to $0.31, which gives the stock a yield of roughly 1.8% at current levels. It is also worth noting that this was the 18th consecutive year with a dividend increase. Secondly, the board of directors authorized the repurchase of $500 million worth of its common stock, effective immediately. In case you are not familiar, repurchasing shares reduces the amount of share available in the market. This in turn boosts earnings per share, making the remaining shares more valuable.

In summary, the earnings and revenues for the quarter may have missed expectations, but Church & Dwight more than made up for it with the dividend hike and share repurchase program. The company's stock has reacted by moving more than 11% higher in the months since, setting new highs along the way.

Expectations & what to watch for
First-quarter results are due out before the market opens on May 1. Analyst expectations may seem dim, but there is a positive reason for this. Here's an overview:

Metric Expected Year Ago
Earnings Per Share $0.73 $0.76
Revenue $783.9 million $779.3 million

Source: Estimize

These estimates call for earnings per share to decrease 3.9% and revenue to increase 0.6% as compared to the same period a year ago. This compliments Church & Dwight's expectations because it stated that the majority of its growth would take place in the second-half of the year due to the scheduled release of "innovative new products," which will result in increased expenses related to slotting, couponing, trade promotions, and marketing during the first half. New products may cause one quarter's growth to stall, but could ultimately lead to future success.

Source: FirstResponse.com

With all of this being said and the key metrics aside, there will be three crucial updates and statistics to watch for:

It will be of the utmost importance for Church & Dwight to provide outlook on the second-quarter that is within analyst expectations. The current consensus estimates call for earnings per share of $0.68 and revenue of $811.8 million, representing year-over-year increases of 11.5% and 3.1%, respectively. Also, in terms of guidance, it will be important for the company to reaffirm its full-year guidance, which projects earnings per share in the range of $2.96-$3.07 and organic sales growth of 3%-4%.  Watch for comments on the success or failure to-date of the aforementioned "innovative new products." New products will play a pivotal role in earnings and revenue growth in 2014, so we need to be sure that they have begun to take share of their respective categories. We will also want to make sure that the company feels these products are on pace to bring in more revenue than was spent bringing them to the market and making consumers aware of their presence. In its fourth-quarter report, Church & Dwight stated that it had begun to "aggressively pursue" acquisitions, so investors will want to watch for updates on potential takeover targets. We have not seen a significant acquisition by the company in quite some time, so it would be great if it were to find the right acquisition at the right price. If Church & Dwight can meet or exceed analysts' earnings and revenue expectations and satisfy the three elements listed above, and I think it will, the company's stock will likely continue its run higher in 2014. For these reasons, I would be a long-term buyer going into the report and would add to the position if any weakness were to set in following its release.

A sign of things to come?
Procter & Gamble, one of the largest consumer product manufacturers in the world and the company behind competing brands such as Crest, Tide, Gain, and Old Spice, released its third-quarter results just a few days ago on April 23. Its report will give us a good feel for the condition of the industry and consumer, so here's what the company accomplished:

Metric Reported Expected
Earnings Per Share $1.04 $1.02
Revenue $20.56 billion $20.73 billion

Source: Benzinga

Source: Procter & Gamble

P&G's earnings per share increased 5.1% and revenue decreased 0.2% year-over-year as organic sales increased 3%. Global volume rose 3% during the quarter, and this was led by growth of 6% in the fabric and home care segment. It is also worth noting that none of P&G's five segments reported negative volume growth; this shows that all categories of consumer products saw increasing demand during the quarter.

I believe that P&G's strong quarter is a positive sign for Church & Dwight and adds support to the idea of initiating a long-term position. However, if you are not sold on Church & Dwight, take a closer look at P&G because it represents a great opportunity in itself.

The Foolish bottom line
Church & Dwight is set to release quarterly results in a couple of days, and the current analyst estimates seem well within reach. I believe that Foolish investors should strongly consider initiating a long-term position right now. The potential price appreciation and healthy 1.8% dividend can provide significant returns over time. Take a closer look and see if there's a place in your portfolio for a consumer product giant like Church & Dwight. 

Top dividend stocks for the next decade
The smartest investors know that dividend stocks, like Church & Dwight and Procter & Gamble, simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

 

Tuesday, April 29, 2014

Top 10 Low Price Stocks To Invest In 2015

The most recent data coming out of the Eagle Ford shale play in South Texas indicates record-breaking production. This data is from February, and by all accounts, records will continue to be broken as we continue to get updated numbers. The result is that there are many, many companies hitting it big in the Eagle Ford. In this video, Fool.com contributor Aimee Duffy looks at all the different opportunities investors have in South Texas.

The growing production of natural gas from hydraulic fracturing and horizontal drilling is flooding the North American market and resulting in record-low prices for natural gas. Enterprise Products Partners, with its superior integrated asset base, can profit from the massive bottlenecks in takeaway capacity by taking on large-scale projects. To help investors decide whether Enterprise Products Partners is a buy or a sell today, click here now to check out The Motley Fool's brand new premium research report on the company.

Top 10 Low Price Stocks To Invest In 2015: Magellan Midstream Partners L.P.(MMP)

Magellan Midstream Partners, L.P., together with its subsidiaries, engages in the transportation, storage, and distribution of refined petroleum products and crude oil in the United States. Its pipeline system transports petroleum products and liquefied petroleum gases from the Gulf Coast refining region of Texas through the Midwest to Colorado, North Dakota, Minnesota, Wisconsin, and Illinois. The company owns and operates marine terminals, which store and distribute refined petroleum products, blendstocks, crude oils, heavy oils, and feedstocks, as well as inland terminals that consist of storage tanks connected to third-party interstate pipeline systems to deliver refined petroleum products. Its ammonia pipeline system transports ammonia from production facilities in Texas and Oklahoma to terminals in the Midwest. The company also stores, blends, and distributes biofuels, such as ethanol and biodiesel. As of March 31, 2011, it operated approximately 9, 600 miles of petr oleum products pipeline system and 51 terminals; 6 marine petroleum terminals located along the United States Gulf and East Coasts; a crude oil storage in Cushing, Oklahoma; 27 petroleum products inland terminals located principally in the southeastern United States; and a 1,100-mile ammonia pipeline system and 6 associated terminals. The company also provides ancillary services, such as heating, blending, and mixing of stored petroleum products and additive injection services. Its customers comprise independent and integrated oil companies, wholesalers, retailers, railroads, airlines, and regional farm co-operatives. The company serves various markets, including retail gasoline stations, truck stops, farm co-operatives, railroad fueling depots, and military and commercial jet fuel users. Magellan GP, LLC serves as the general partner of the company. The company was founded in 2000 and is based in Tulsa, Oklahoma.

Advisors' Opinion:
  • [By Dividends4Life]

    Magellan Midstream Partners LP (MMP) is engaged in the transportation, storage and distribution of refined petroleum products primarily through its 9,600-mile pipeline system.
    Yield: 3.9% | Years of Dividend Growth: 12

  • [By Robert Rapier]

    The total market cap of the ANGI is $190 billion, and the one-, three- and five-year total returns are 29 percent, 52 percent and 249 percent. The index yield is 6 percent.

    The Alerian Large Cap MLP Index (ALCI)  is another subset of the AMZ. It’s an equal-weighted basket of the 15 largest energy MLPs by market capitalization, all of which are also in the AMZ. The top performer since the most recent quarterly rebalancing has been Magellan Midstream Partners (NYSE: MMP), which comprises 7.4 percent of the index at present. At the bottom since the latest rebalancing is Enbridge Energy Partners (NYSE: EEP), at 6.47 of the overall index.

    The total market cap of the ALCI is $232 billion, and the one-, three- and five-year total returns are 20 percent, 39 percent, and 167 percent. The index yield is 5.1 percent.

Top 10 Low Price Stocks To Invest In 2015: SLM Corporation(SLM)

SLM Corporation, through its subsidiaries, originates, acquires, finances, and services private education loans in the United States. It offers processing capabilities to educational institutions, 529 college-savings plan program management services, and a consumer savings network. The company also provides servicing, loan default aversion, and defaulted loan collection services for loans owned by the Department of Education (ED), Guarantors of FFELP Loans, and other institutions. In addition, SLM Corporation offers campus solutions, which comprise electronic billing, collection, payment and refund, and tuition payment plan administration services. The company promotes its products through the financial aid offices on campuses, as well as through direct marketing to students and their families. SLM Corporation was founded in 1972 and is headquartered in Newark, Delaware.

Advisors' Opinion:
  • [By John Kell]

    Sallie Mae sa(SLM)id its fourth-quarter profit slid 22% on bigger losses on derivative and hedging actions, masking lower loan-loss provisions and an increase in loan originations. Core earnings for the latest period missed Wall Street’s expectations, sending shares down 4.2% to $26 premarket.

  • [By Jim Jubak]

    Yesterday's villain was a big miss by Citigroup (C) before the open. Today doesn't look a whole lot better for the sector because, after the close on January 16, American Express (AXP), Capital One (COF), and Sallie Mae (SLM) all reported significant earnings misses. American Express came in with fourth quarter earnings of $1.21 a share versus a consensus projection of $1.25. Capital One reported $1.45 a share instead of $1.57. And student loan company Sallie Mae announced 61 cents a share versus the analyst consensus of 73 cents a share.

  • [By Caroline Bennett]

    Sallie Mae (NASDAQ: SLM  ) will be keeping its quarterly dividend steady at $0.15 per share.

    The financial services company has paid this amount to investors since�March 2013, after upping the amount 20% from $0.125. Sallie Mae's latest payout will be paid on Dec. 20 to shareholders of record as of the close of business on Dec. 6.

  • [By Jay Jenkins]

    SLM (NASDAQ: SLM  ) , the nation's largest non-government student loan lender, is considering splitting itself into two entities via an IPO later this year. But a private buyer might get to Sallie Mae first.

Hot Services Stocks To Buy Right Now: Cadus Corp (KDUS)

Cadus Corporation (Cadus), incorporated in January 23, 1992, has a wholly owned subsidiary, Cadus Technologies, Inc. (the Subsidiary), which holds all patents, patent applications, know how, licenses and drug discovery technologies of the Company. The Company maintains all its strains, as well as a biological database that catalogues its collection of cells, cell lines, yeast strains and genetic engineering tools. This database has approximately 30,000 entries, which include the phenotype and the genotype of the cell or yeast strain and its storage site. As of December 31, 2011, the Company had no internal or external drug discovery operations.

Yeast

The Company has developed technologies based on yeast that are useful in identifying drug discovery candidates targeted at G Protein-coupled receptors. Yeast is a single-celled microorganism that is used to make bread, beer and wine. Both yeast and human cells consist of a membrane, an intracellular region and a nucleus containing genes. The genes in yeast express proteins, including cell-surface receptors, such as G Protein-coupled receptors and signaling molecules, such as protein kinases, that are similar to human proteins.

Hybrid Yeast Cells

The Company developed a technology to insert human genes into yeast cells to create hybrid yeast cells. Its scientists created hybrid yeast cells by replacing yeast G Protein-coupled receptor genes and certain signaling molecules with their human equivalents. As a result, these hybrid yeast cells express a human G Protein-coupled receptor and a portion of its signaling pathway. These hybrid yeast cells can be used to identify those compounds that act as agonists or antagonists to that receptor or a molecule that is in its signaling pathway. The Company designed and developed more than 25 thousand genetically different yeast strains that can be used to build hybrid yeast cells (the Yeast System).

The Company competes with Glaxo Smith Kline, Plc.

Advisors' Opinion:
  • [By Geoff Gannon] cash producing business like ADDvantage (AEY) that happens to be overcapitalized. I'd much rather own a business with real earnings rather than wait for something to happen with a pile of cash.

    My question is this: How cheap is cheap enough? Clearly (to me), George Risk (RSKIA) is cheap at or even just above book value. It's a darn good business so I'm getting high quality assets and earnings power. That gets less clear when looking at lower quality businesses.

    For example:

    Solitron (SODI) sells at 74% of NCAV, has decent z- and f-scores, a FCF margin of 5.3% and an ROA of 12%.

Top 10 Low Price Stocks To Invest In 2015: A-Cap Resources Ltd (ACB)

A-Cap Resources Limited is an Australia-based mineral exploration company. The Company�� principal activity during the fiscal year ended June 30, 2012 (fiscal 2012), is exploration of its tenement portfolio in Botswana and the ongoing feasibility studies into the Letlhakane Uranium Project. The Company focuses on investment in Botswana in Southern Africa, where it holds over 5000 square kilometer of exploration licenses. The Company�� projects include Botswana project, Letlhakane project, Mea-Coal project, Bolau-Coal project and Southern Pans project. The Company�� 100% owned Letlhakane Uranium Project is located in northeast Botswana. In July 2012, A-Cap announced the discovery of two new coal projects in Botswana, transforming the Company into a multi-commodity exploration outfit. Advisors' Opinion:
  • [By John Heinzl]

    You'll notice that these numbers don't add up to $1.4988. That's because the 2012 distribution also contained a hefty chunk of return of capital (70.489 cents). ROC isn't taxable immediately; rather, it is subtracted from the adjusted cost base (ACB) of the units, which gives rise to a larger capital gain, or smaller capital loss, when the units are ultimately sold. Many REITs and mutual funds also distribute ROC. ROC can be a bit of a headache for investors. If you hold BIP in a non-registered account, you (or your accountant), will need to track those ROC payments in order to keep your ACB up to date. Knowing the ACB is necessary to calculate your capital gain, or loss, when it comes time to sell.

Top 10 Low Price Stocks To Invest In 2015: Glu Mobile Inc.(GLUU)

Glu Mobile Inc. designs, markets, and sells mobile games worldwide. It develops original games based on its intellectual property comprising Big Time Gangsta?, Blood & Glory, Bug Village, Contract Killer, Contract Killer: Zombies, Eternity Warriors, Frontline Commando, Gun Bros, Men vs. Machines, Stardom: The A-List, Super K.O. Boxing and Toyshop Adventures. The company also develops games based on licensed intellectual property consisting of Build-a-lot, Call of Duty, Deer Hunter, DJ Hero, Guitar Hero, Family Feud, Family Guy, Lord of the Rings, Paperboy, The Price Is Right, Transformers, Who Wants to Be a Millionaire?, and World Series of Poker. It offers a portfolio of action/adventure and casual games to smartphones and tablet devices users through direct-to-consumer digital storefronts, as well as to feature phone users served by wireless carriers and other distributors. The company was formerly known as Sorrent, Inc. and changed its name to Glu Mobile Inc. in May 20 05. Glu Mobile Inc. was incorporated in 2001 and is headquartered in San Francisco, California.

Advisors' Opinion:
  • [By Lisa Levin]

    Glu Mobile (NASDAQ: GLUU) dipped 10.29% to $3.40 on Q3 results.

    Posted-In: PreMarket LosersNews Movers & Shakers Pre-Market Outlook Markets

  • [By Monica Gerson]

    Glu Mobile (NASDAQ: GLUU) surged 2.35% to $3.92 in the pre-market session. Glu Mobile's trailing-twelve-month revenue is $101.46 million.

    Yahoo! (NASDAQ: YHOO) shares gained 1.58% to $32.86 in the pre-market session after Bernstein upgraded the stock from Market Perform to Outperform.

  • [By vinaysingh]

    Mobile gaming is a hit-or-miss business and the past has shown that a few consecutive misses can push a company into a downward spiral. Glu Mobile (GLUU) is a prime example of this. The inability to develop chart-topping games took its toll on Glu, but the company has maneuvered a sensational turnaround in the last few months. However, even after the recent uptick, Glu is still a great long-term buy candidate. Let�� take a look at catalysts which will drive Glu Mobile higher in the foreseeable future.

Top 10 Low Price Stocks To Invest In 2015: American Science and Engineering Inc.(ASEI)

American Science and Engineering, Inc., together with its subsidiaries, develops, manufactures, markets, and sells X-ray inspection and other detection products for detection and security screening solutions in the United States and internationally. It offers cargo inspection systems comprising non-intrusive inspection products, which are primarily used for the screening of trucks, cars, cargo containers, pallets, and air cargo at border crossings, seaports, military bases, airports, and cargo and transportation hubs. The cargo inspection systems include OmniView gantry system, a cargo and vehicle inspection system; Z Portal system, a drive-through inspection system for scanning cargo and vehicles; Z Gantry system, a Z Backscatter inspection system for scanning cars, vans, trucks, and their cargo; Sentry Portal system, a drive through transmission X-ray inspection system; and MobileSearch High-Energy, a mobile inspection system for scanning trucks, cargo containers, and ve hicles. The company also provides Z Backscatter systems, including Z Backscatter Van, a mobile X-ray screening system to produce photo-like images of plastic explosives or other anomalies; and ZBV Military Trailer, a rugged X-ray screening system built on military trailer. In addition, it offers parcel and personnel screening inspection system that comprises Gemini system, a parcel and baggage inspection system; and SmartCheck system, a personnel screening system for screening threats hidden under a person?s clothing. Further, the company provides contract research and development programs for agencies of the United States government; and maintenance, warranty, engineering, and training services. It serves authorities responsible for port and border security, customs agencies, military organizations, high threat commercial and government facilities, aviation security agencies, and law enforcement agencies. The company was founded in 1958 and is headquartered in Billerica, M assachusetts.

Advisors' Opinion:
  • [By James E. Brumley]

    For tech-savvy investors who know which companies make them, when they hear the words "weapons detection" or "body scanners", they tend to think of companies like American Science & Engineering, Inc. (NASDAQ:ASEI) and OSI Systems, Inc. (NASDAQ:OSIS). And well they should. OSIS and ASEI are two of the biggest North American providers of the kind of equipment you might see being used by airport security personnel screening passengers before allowing them to their gate. There's just one challenge in the average school system tapping OSI Systems or American Science & Engineering to help defend their school grounds.... their hardware starts with a six-figure price tag, and rapidly works its way up to higher-capacity and more powerful versions. For a school with multiple doors, it's simply not feasible. View Systems Inc. is a viable alternative.

  • [By James E. Brumley]

    While it's tragic that it took a string of tragedies to make school safety and security a priority in the United States, it can't be denied that the topic has been put front and center - school systems everywhere are asking themselves tough questions, mainly focusing on what can be done quickly and cost-effectively to secure school buildings. Part of that discussion has put companies like OSI Systems, Inc. (NASDAQ:OSIS), American Science & Engineering, Inc. (NASDAQ:ASEI), and View Systems Inc. (OTCBB:VSYM) in the limelight. The three organizations all make security screening and weapons detection systems. If you've flown from anywhere inside the United States anytime since 2003, odds are pretty good you or your luggage passed through equipment made by ASEI or OSIS.

Top 10 Low Price Stocks To Invest In 2015: CHS Inc (CHSCP)

CHS Inc. (CHS) is an integrated agricultural company. As a cooperative, the Company is owned by farmers and ranchers and their member cooperatives (members) across the United States. The Company buys commodities from and provide products and services to patrons (including its members and other non-member customers), both domestic and international. It provides a variety of products and services, from initial agricultural inputs, such as fuels, farm supplies, crop nutrients and crop protection products, to agricultural outputs, which include grains and oilseeds, grain and oilseed processing and food products. A portion of its operations are conducted through equity investments and joint ventures. The Company has three segments: Energy, Ag Business, and Corporate and Other. In February 2012, the Company acquired Solbar. In May 2012, the Company acquired a 51% interest in CZL Ltd. In August 2012, it acquired Atman. Effective July 28, 2013, CHS Inc, a unit of Hamilton Farm Bureau Co-Operative Inc, acquired a 50% interest in AgFarm Pty Ltd, from Ruralco Holdings Ltd.

During the fiscal year ended August 31, 2011 (fiscal 2011), the Company dissolved its United Harvest joint venture, which operated two grain export facilities in Washington that were leased from the joint venture participants. During fiscal 2011, the Company sold its 45% ownership interest in Multigrain to one of its joint venture partners, Mitsui & Co., Ltd. During fiscal 2011, the Company, through its wholly owned subsidiary, CHS Europe, S.A. acquired Agri Point Ltd.

The Company�� Energy segment derives its revenues through refining, wholesaling and retailing of petroleum products. Its Ag Business segment derives its revenues through the origination and marketing of grain, including service activities conducted at export terminals, through the wholesale sales of crop nutrients, from the sales of soybean meal and soybean refined oil and through the retail sales of petroleum and agronomy products, processed sunflow! ers, feed and farm supplies, and records equity income from investments in its grain export joint ventures and other investments. It includes other business operations in Corporate and Other. These businesses primarily include its financing, insurance, hedging and other service activities related to crop production. In addition, the Company�� wheat milling and packaged food operations are included in Corporate and Other.

Energy

The Company is the nation�� cooperative energy company based on revenues and identifiable assets. The Company�� operations include petroleum refining and pipelines; the supply, marketing (including ethanol and biodiesel) and distribution of refined fuels (gasoline, diesel fuel and other energy products); the blending, sale and distribution of lubricants; and the wholesale supply of propane. The Energy segment processes crude oil into refined petroleum products at refineries in Laurel, Montana (wholly owned) and McPherson, Kansas (an entity in which the Company has an approximate 74.5% ownership interest) and sells those products under the Cenex brand to member cooperatives and others through a network of approximately 1,400 independent retail sites, of which 57% are convenience stores marketing Cenex branded fuels.

The Company�� Laurel, Montana refinery processes medium and high sulfur crude oil into refined petroleum products that primarily include gasoline, diesel fuel, petroleum coke and asphalt. Its Laurel refinery sources approximately 85% of its crude oil supply from Canada, with the balance obtained from domestic sources, and the Company has access to Canadian and northwest Montana crude through its wholly owned Front Range Pipeline, LLC and other common carrier pipelines. Its Laurel refinery also has access to Wyoming crude via common carrier pipelines from the south. The Laurel facility processes approximately 55,000 barrels of crude oil per day to produce refined products that consist of approximately 43% gasoline, 37% die! sel fuel ! and other distillates, 5% petroleum coke, and 15% asphalt and other products. Refined fuels produced at Laurel are available via the Yellowstone Pipeline to western Montana terminals and to Spokane and Moses Lake, Washington, south via common carrier pipelines to Wyoming terminals and Denver, Colorado, and east via its wholly owned Cenex Pipeline, LLC to Glendive, Montana, and Minot and Fargo, North Dakota.

The McPherson, Kansas refinery is owned and operated by National Cooperative Refinery Association (NCRA), of which the Company owns approximately 74.5%. The McPherson refinery processes approximately 85% low and medium sulfur crude oil and 15% heavy sulfur crude oil into gasoline, diesel fuel and other distillates, propane and other products. NCRA sources its crude oil through its own pipelines as well as common carrier pipelines. The low and medium sulfur crude oil is sourced from Kansas, Oklahoma and Texas, and the heavy sulfur crude oil is sourced from Canada. The McPherson refinery processes approximately 85,000 barrels of crude oil per day to produce refined products that consist of approximately 49% gasoline, 45% diesel fuel and other distillates, and 6% propane and other products. Approximately 32% of the refined fuels are loaded into trucks at the McPherson refinery or shipped via NCRA�� products pipeline to its terminal in Council Bluffs, Iowa. The remaining refined fuel products are shipped to other markets via common carrier pipelines.

The Company�� renewable fuels marketing business markets and distributes ethanol and biodiesel products throughout the United States and overseas by contracting with ethanol and biodiesel production plants to market and distribute their finished products. It owns and operates a propane terminal, four asphalt terminals, seven refined product terminals and three lubricants blending and packaging facilities. The Company also owns and leases a fleet of liquid and pressure trailers and tractors, which are used to transport refined fu! els, prop! ane, anhydrous ammonia and other products.

The Company�� Energy segment produces and sells (primarily wholesale) gasoline, diesel fuel, propane, asphalt, lubricants and other related products and provides transportation services. It obtains the petroleum products that it sells from its Laurel and McPherson refineries, and from third parties. In fiscal 2011, the Company obtained approximately 55% of the refined products it sold from its Laurel and McPherson refineries, and approximately 45% from third parties.

Ag Business

The Company�� Ag Business segment includes crop nutrients, country operations, grain marketing and oilseed processing. The revenues in its Ag Business segment primarily include grain sales. Its wholesale crop nutrients business sells approximately 5.6 million tons of fertilizer annually. Primary suppliers for the Company�� wholesale crop nutrients business include CF Industries, Potash Corporation of Saskatchewan, Mosaic Company, Koch Industries, Petrochemical Industries Company (PIC) in Kuwait and Belrusian Potash Company. The Company�� wholesale crop nutrients business sells nitrogen, phosphorus, potassium and sulfate based products. During fiscal 2011, the primary crop nutrients products the Company purchased were urea, potash, UAN, phosphates and ammonia. The wholesale crop nutrients business sells product to approximately 2,000 local retailers from New York to the west coast and from the Canadian border to Texas. Its largest customer is its own country operations business, which is also included in its Ag Business segment.

The Company�� country operations business purchases a variety of grains from its producer members and other third parties, and provides cooperative members and customers with access to a range of products, programs and services for production agriculture. Country operations operates 401 locations through 67 business units, the majority of which have local producer boards dispersed throughout Colorado, ! Idaho, Il! linois, Iowa, Kansas, Minnesota, Montana, Nebraska, North Dakota, Oklahoma, Oregon, South Dakota, Texas and Washington. Most of these locations purchase grain from farmers and sell agronomy, energy, feed and seed products to those same producers and others, although not all locations provide every product and service.

The Company is one of the country elevator operators in North America based on revenues. Through a majority of the Company�� locations, its country operations business units purchase grain from member and non-member producers and other elevators and grain dealers. Most of the grain purchased is sold through its grain marketing operations, used for livestock feed production or sold to other processing companies. For the year ended August 31, 2011, country operations purchased approximately 582 million bushels of grain, primarily wheat, corn and soybeans. Of these bushels, 558 million were purchased from members and 417 million were sold through its grain marketing operations. Its country operations business units manufacture and sell other products, both directly and through ownership interests in other entities. These include seed, crop nutrients, crop protection products, energy products, animal feed, animal health products and processed sunflower products.

The Company is the cooperative marketer of grain and oilseed based on grain storage capacity and grain sales, handling over 2.1 billion bushels annually. During fiscal 2011, it purchased approximately 60% of its total grain volumes from individual and cooperative association members and its country operations business, with the balance purchased from third parties. The Company arranges for the transportation of the grains either directly to customers or to its owned or leased grain terminals and elevators awaiting delivery to domestic and foreign purchasers. It primarily conducts its grain marketing operations directly, but do conduct some of its business through joint ventures.

The Company��! grain ma! rketing operations purchases grain directly and indirectly from agricultural producers primarily in the midwestern and western United States. The purchased grain is contracted for sale for future delivery at a specified location, and it is responsible for handling the grain and arranging for its transportation to that location. The Company owns and operates export terminals, river terminals and elevators involved in the handling and transport of grain. Its river terminals are used to load grain onto barges for shipment to both domestic and export customers via the Mississippi River system. These river terminals are located at Savage and Winona, Minnesota and Davenport, Iowa, as well as terminals in which it has put-through agreements located at St. Louis, Missouri and Beardstown and Havana, Illinois.

The Company�� export terminal at Superior, Wisconsin provides access to the Great Lakes and St. Lawrence Seaway, and its export terminal at Myrtle Grove, Louisiana serves the Gulf of Mexico market. In the Pacific Northwest, it conducts its grain marketing operations through TEMCO, LLC (a 50% joint venture with Cargill) which operates an export terminal in Tacoma, Washington, and primarily exports corn and soybeans. The Company owns two 110-car shuttle-receiving elevator facilities in Friona, Texas and Collins, Mississippi that serve large-scale feeder cattle, dairy and poultry producers in those regions.

For sourcing and marketing grains and oilseeds through the Black Sea and Mediterranean Basin regions to customers worldwide it has offices in Geneva, Switzerland; Barcelona, Spain; Kiev, Ukraine; and Vostok, Russia. In addition, it opened grain merchandising offices in fiscal 2011 in Budapest, Hungary; Novi Sad, Serbia; Bucharest, Romania; Sofia, Bulgaria; and a marketing office in Amman, Jordan. The Company has a deep water port in Constanta, Romania, a barge loading facility on the Danube River in Giurgiu, Romania, and an inland grain terminal at Oroshaza, Hungary. In addition! , it has ! an investment in a port facility in Odessa, Ukraine. In the Pacific Rim area, it has offices in Hong Kong and Shanghai, China that serve customers receiving grains and oilseeds from its origination points in North and South America. In South America, the Company has a grain merchandising offices to source grains in Sao Paulo, Brazil and Buenos Aires, Argentina. It sells and markets crop nutrients from its Geneva, Switzerland; Sao Paulo, Brazil; and Buenos Aires, Argentina offices.

The Company�� grain marketing operations purchased approximately 2.1 billion bushels of grain during fiscal 2011, which primarily included corn, soybeans, wheat and distillers dried grains with solubles (DDGS). Of the total grains purchased by its grain marketing operations, 866 million bushels were from its individual and cooperative association members, 417 million bushels were from its country operations business and the remainder was from third parties. The Company�� oilseed processing operations convert soybeans into soybean meal, soyflour, crude soybean oil, refined soybean oil and associated by-products. These operations are conducted at a facility in Mankato, Minnesota that can crush approximately 40 million bushels of soybeans on an annual basis, producing approximately 960 thousand short tons of soybean meal and 460 million pounds of crude soybean oil. The same facility is able to process approximately 1.1 billion pounds of refined soybean oil annually. Another crushing facility in Fairmont, Minnesota has a crushing capacity of over 50 million bushels of soybeans on an annual basis, producing approximately 1.2 million short tons of soybean meal and 575 million pounds of crude soybean oil.

The Company�� oilseed processing operations produce three primary products: refined oils, soybean meal and soyflour. Refined oils are used in processed foods, such as margarine, shortening, salad dressings and baked goods, as well as methyl ester/biodiesel production, and for certain industrial uses, ! such as p! lastics, inks and paints. Soybean meal has high protein content and is used for feeding livestock. Soyflour is used in the baking industry, as a milk replacement in animal feed and in industrial applications. It produces approximately 60 thousand tons of soyflour annually, and approximately 20% is further processed at its manufacturing facility in Hutchinson, Kansas. This facility manufactures unflavored and flavored textured soy proteins used in human and pet food products, and accounted for approximately 2% of its oilseed processing annual sales in fiscal 2011.

The Company�� soy processing facilities are located in areas with a strong production base of soybeans and end-user market for the meal and soyflour. It purchases virtually all of its soybeans from members. The Company�� oilseed crushing operations produce approximately 95% of the crude soybean oil that it refines, and purchases the balance from outside suppliers. Its customers for refined oil are principally large food product companies located throughout the United States. However, over 50% of its customers are located in the midwest. Its largest customer for refined oil products is Ventura Foods, LLC (Ventura Foods), in which it holds a 50% ownership interest. The Company�� sales to Ventura Foods accounted for 27% of its soybean oil sold during fiscal 2011. The Company also sells soymeal to approximately 325 customers, primarily feed lots and feed mills in southern Minnesota. In fiscal 2011, Interstate Commodities accounted for 12% of its soymeal sold. It sells soyflour to customers in the baking industry both domestically and for export.

Corporate and Other

The Company has provided open account financing to approximately 100 of its members that are cooperatives (cooperative association members). These arrangements involve the discretionary extension of credit in the form of a clearing account for settlement of grain purchases and as a cash management tool. CHS Capital, LLC makes seasonal and term! loans to! member cooperatives and individual producers. The Company�� wholly owned subsidiary, Country Hedging, Inc., is a registered Futures Commission Merchant and a clearing member of both the Minneapolis Grain Exchange and the Kansas City Board of Trade. Country Hedging provides full-service commodity risk management brokerage and consulting services to its customers, primarily in the areas of agriculture and energy.

The Company�� wholly owned subsidiary, Ag States Agency, LLC, is a full-service independent insurance agency. It sells insurance, including all lines of insurance including property and casualty, group benefits and surety bonds. Its approximately 2,000 customers are primarily agribusinesses, including cooperatives and independent elevators, energy, agronomy, feed and seed plants, implement dealers and food processors. Impact Risk Solutions, LLC, a wholly owned subsidiary of Ag States Agency, LLC, conducts the insurance brokerage business of Ag States Group.

The Company�� primary focus in the foods area is Ventura Foods, LLC (Ventura Foods) which produces and distributes vegetable oil-based products, such as margarine, salad dressing and other food products. Ventura Foods is 50% owned by the Company. Ventura Foods manufactures, packages, distributes and markets bulk margarine, salad dressings, mayonnaise, salad oils, syrups, soup bases and sauces, many of which utilize soybean oil as a primary ingredient. Ventura Foods has 11 manufacturing and distribution locations across the United States. Ventura Foods sources its raw materials, which consist primarily of soybean oil, canola oil, cottonseed oil, peanut oil and other ingredients and supplies, from various national suppliers, including its oilseed processing operations. Agriliance LLC (Agriliance) is owned and governed by CHS (50%) and Land O��akes, Inc. (50%).

The Company competes with ConocoPhillips, Valero, BP Amoco, Flint Hills Resources, CVR Energy, Western Petroleum Company, Marathon, ExxonMo! bil, Citg! o, Flint Hills Resources, U.S. Oil, Delek US Holdings, HollyFrontier Corporation, Sinclair Oil Corporation, Tesoro, Chevron, Koch Industries, Agrium, Archer Daniels Midland (ADM), Cargill, Incorporated (Cargill), Simplot, Helena, Wilbur Ellis, Land O��akes Purina Feed, Hubbard Milling, Columbia Grain, Gavilon, Bunge, Louis Dreyfus, Ag Processing Inc., Unilever, ConAgra, ACH Food Companies, Smuckers, Kraft and CF Sauer, Ken��, Marzetti and Nestle.

Advisors' Opinion:
  • [By Paul Ausick]

    ConAgra said on Wednesday that it will close two plants in New York by early 2015, cutting more than 400 employees. The company also expects to close its $4 billion flour mill merger in the second calendar quarter of 2014. Privately held Cargill and CHS Inc. (NASDAQ: CHSCP) will hold 44% and 12%, respectively, of Ardent Mills, while ConAgra will hold the other 44%. Combined sales of what will be the country’s largest milling operation total $4.3 billion.

Top 10 Low Price Stocks To Invest In 2015: Abu Dhabi Islamic Bank Egypt SAE (ADIB)

Abu Dhabi Islamic Bank Egypt SAE, formerly National Bank for Development (NBD), is an Egypt-based public shareholding company engaged in the provision of retail, corporate and investment banking services through a network of 69 branches located across Egypt. The Bank�� products and services are structured into four segments: the Personal banking segment includes current and saving account, investment account, club finance, charitable accounts and sukuk, among others; the Microfinance segment includes microfinance program; the Wholesale banking segment includes corporate banking, financial institutions and trade, cash management and corporate finance, and the Treasury segment includes foreign exchange, sharia-compliant products and market analysis/updates. In January 2014, the Company sold 11,619,575 shares representing 77.46% stake in National Company for Glass and Crystal�� share capital to Abu Dhabi Islamic Financial Investments Holding. Advisors' Opinion:
  • [By Gregor Stuart Hunter]

    Tirad Mahmoud, the chief executive of Abu Dhabi Islamic Bank (ADIB), has warned of "irrational exuberance" in the UAE's corporate lending market, saying companies are seeking to lower borrowing costs by so much that banks may no longer find it appealing to lend.

Top 10 Low Price Stocks To Invest In 2015: Connecticut Water Service Inc. (CTWS)

Connecticut Water Service, Inc., through its subsidiaries, operates as a regulated water company in Connecticut. It operates in three segments: Water Activities, Real Estate Transactions, and Services and Rentals. The Water Activities segment supplies drinking water. The Real Estate Transactions segment involves in the sale or donation of its real estate holdings. The Services and Rentals segment provides contracted services to water and wastewater utilities and other clients, which include contract operations of water and wastewater facilities; Linebacker, an optional service line protection program that comprises repairing or replacing leaking or broken water service line, curb box, curb box cover, meter pit, meter pit cover, meter pit valve, and in-home water main shut off valve before the meter; and providing bulk deliveries of emergency drinking water to businesses and residences through tanker trucks. This segment also engages in leasing and renting residential and c ommercial properties. As of December 31, 2009, Connecticut Water Service, Inc. served 88,534 customers in 54 towns in Connecticut. The company was founded in 1956 and is headquartered in Clinton, Connecticut.

Advisors' Opinion:
  • [By David Dittman]

    Answer: Our favorite water utilities–American Water Works, Aqua America Inc (NYSE: WTR), Connecticut Water Service Inc (NSDQ: CTWS)–are solid dividend growers throughout the cycle, and they all have pretty good growth prospects because of the abundance of small-scale municipal water utilities in their footprints.

Top 10 Low Price Stocks To Invest In 2015: Gold Fields Ltd (GFI)

Gold Fields Limited (Gold Fields) is a holding company. Gold Fields is engaged in gold mining and related activities, including exploration, extraction, processing and smelting. Gold Fields is a producer of gold and holder of gold reserves in South Africa, Ghana, Australia and Peru. In Peru, Gold Fields also produces copper. Gold Fields is primarily involved in underground and surface gold and copper mining and related activities. Gold Fields also has an interest in a platinum group metal exploration project in Finland. Gold bullion is its principal product, which is produced in South Africa, Ghana and Australia and sold in South Africa and internationally. In addition, Gold Fields has gold and other precious metal exploration activities and interests in Africa, Eurasia, Australasia and the Americas. The Company holds 34.9% interest in Rand Refinery Limited.

On June 22, 2011, Gold Fields acquired the 18.9% interest of IAMGold Corporation (IAMGold), which increased Gold Fields��interest in each of the Tarkwa and Damang gold mines from 71.1% to 90.0%. On April 15, 2011, it acquired further interest in Gold Fields La Cima S.A.A. (La Cima). During the year ended December 31, 2011, the Company acquired a 21.8% interest in Timpetra Resources Limited.

KDC Operation

The KDC mine is located in the Gauteng Province of South Africa in the Far West Rand mining district, some 60 kilometers southwest of Johannesburg. KDC is consists of the Driefontein and Kloof mines. In 2011, KDC produced 1.1 million ounces of gold. KDC is consists of 13 producing shaft systems that mine different contributions from pillars and open ground, five gold plants of which two process mainly underground ore and three process mainly surface material. The KDC operation is engaged in both underground and rock dump mining. In total, during 2011, there were 13 fatalities at KDC. Of these, five were due to seismic related falls of ground, five resulted from gravity related falls of ground, two related! to tramming operations and one related to a person falling from height.

Beatrix Operation

The Beatrix operation is located in the Free State Province of South Africa, some 240 kilometers southwest of Johannesburg, near Welkom and Virginia, and consists of the Beatrix mine. Beatrix operates under mining rights covering a total area of approximately 16,800 hectares. Beatrix is an underground only operation. Beatrix has four shaft systems, with five ventilation shafts to provide additional up-cast and down-cast ventilation capacity and is serviced by two metallurgical plants. It is a shallow to intermediate-depth mining operation, at depths between 700 meters and 2,200 meters below surface. In 2011, Beatrix produced 0.347 million ounces of gold. Beatrix is managed as three operational sections: the North Section, the South Section and the West Section. The Beatrix mine is engaged in underground and surface mining. It had five fatalities at Beatrix, in 2011.

South Deep Operation

South Deep is situated adjacent to KDC, in the Gauteng Province of South Africa. South Deep is a capital project and remains a developing mine. South Deep is engaged in underground mining and is consists of one metallurgical plant and two operating shaft systems, the older South Shaft complex and the newer Twin Shaft complex. The South Shaft complex includes a main shaft and three sub-vertical (SV) shafts, two of which are operational. The Twin Shaft complex consists of a single-barrel shaft and an adjacent bratticed ventilation shaft, or the Twins Main Ventilation Shaft. While the Twin Shaft complex forms the center of production and capital development activities, opening up, equipping and diamond drilling operations are being conducted in the South Shaft area in order to access new mining areas.

The South Shaft complex operates to a depth of 2,650 meters below surface and the Twin Shaft complex operates to a depth of 2,995 meters below surface. In 2011, South Deep! produced! 0.273 million ounces of gold. During 2011, the South Deep plant treated an average of 0.2 million tons per month (excluding Kloof mine toll treatment) consisted of an average of 167,000 tons per month of underground material and 31,000 tons per month of surface material from South Deep.

Ghana Operations

Gold Fields Ghana Limited (Gold Fields Ghana), which holds the interest in the Tarkwa mine. The Tarkwa mine is located in southwestern Ghana, about 300 kilometers by road west of Accra. The Tarkwa mine consists of several open pit operations on the original Tarkwa property and the adjacent southern portion of the property, together with a heap leach facility, referred to as the North Plant Heap Leach Facility. The capacity of the facility is 3.3 million tons per annum. The total treatment capacity including the North Plant, the High Pressure Grinding Roll Facility and the carbon in leach (CIL) Plant is estimated to be 24 million tons per annum. The Tarkwa mine operates under mining leases with a total area of approximately 20,800 hectares, the entirety of which are surface operations. In 2011, Tarkwa produced 0.717 million ounces of gold, of which 0.576 million ounces were attributable to Gold Fields.

Abosso Goldfields Limited (Abosso), which owns the interest in the Damang mine. The Damang deposits are located in the Wassa West District in southwestern Ghana approximately 330 kilometers by road west of Accra and approximately 30 kilometers by road northeast of the Tarkwa mine. The Damang mine consists of an open pit operation with a semi-autogenous grinding (SAG) mill and CIL processing plant. Damang operates under a mining lease with a total area of approximately 8,100 hectares. In 2011, the Damang mine produced 0.218 million ounces of gold, of which 0.175 million ounces.

Australia Operations

Gold Fields owns the St. Ives and Agnew gold mining operations in Australia. St. Ives is located 80 kilometers south of Kalgoorlie and 20 kilometer! s south o! f Kambalda, straddling Lake Lefroy in Western Australia. It holds exploration licenses, prospecting licenses and mining leases covering a total area of approximately 97,700 hectares. St. Ives is both a surface and underground operation, with a number of open pits, four operating underground mines, a metallurgical carbon in pulp (CIP) plant and a heap leach facility. In 2011, St. Ives produced 0.465 million ounces of gold. St. Ives sources production from a variety of underground and surface operations. Exploration activities are continuing with a view to extending the life of the mine.

Production at the Argo underground mine continued throughout, during 2011. Greater Revenge Complex operation utilizes open pit and lake sediment mining methods. Cutbacks of the Agamemnon and Mars Minotaur Link pits were mined, during 2011. The Belleisle deposit lies in the Greater Revenge Area adjacent to the depleted Mars open pit. The final 20,000 ounces were mined from Belleisle, in 2011 and the mine was closed, in May 2011. Cave Rocks is located approximately six kilometers to the west of the Kambalda West township. The Leviathan open pit is based on the expansion of a pre-existing open pit located approximately two kilometers southeast of the Lefroy processing plant. The mine utilizes conventional truck and shovel mining practices.

Construction at the Athena mine reached commercial levels of production, in July 2011. The first ore extraction from Hamlet occurred, in November 2011. As of December 31, 2011, Athena ahd a life of mine of four years and Hamlet had a life of seven years with prospects of extensions to those lives. Underground mining activities at Belleisle, Cave Rocks and Argo were undertaken under an agreement with Carlowen Proprietary Ltd, which trades as GBF Underground Mining (GBF). Leighton Contractors Proprietary Limited (Leighton) performs the surface mining at St. Ives under an alliance agreement. Leighton provides employees and equipment for mining ore and waste from the! open pit! mines. Agnew is located 23 kilometers west of Leinster, approximately 375 kilometers north of Kalgoorlie and 630 kilometers northwest of Perth, Western Australia.

The Company holds exploration licenses, prospecting licenses and mining leases covering a total area of approximately 54,000 hectares. Agnew operated both an underground and the Songvang open pit, in 2011. Underground mining is conducted from the Waroonga Underground Complex which consists of multiple ore zones. Agnew has one metallurgical plant. Agnew is serviced by sealed road infrastructure to the mine gate. In 2011, the operation produced 0.194 million ounces of gold. The principal production source, in 2011, at Agnew was the Waroonga underground mining complex. The northern cutback of the Songvang open pit commenced, in 2011. The Waroonga Underground Complex includes underground mining of the Kim South, Rajah and Main Lode ore bodies. The mining method involves longhole open stoping with paste filling. Waroonga underground performance averaged 52,000 tons per month, in 2011.

Peru Operation

Gold Fields owns 98.5% economic interest in the Cerro Corona mine through its shareholding in La Cima. Cerro Corona mine forms part of a porphyry copper-gold deposit situated within the Hualgayoc Mining District in northern Peru. It is located in the part of the Western Cordillera of the Andes, in northern Peru, close to the headwaters of the Atlantic continental basin. Cerro Corona is located approximately 80 kilometers by road north of the City of Cajamarca. Cerro Corona holds mining leases covering a total area of approximately 1,600 hectares and the project was developed over an area of 940 hectares. In 2011, the operation produced 0.161 million ounces of gold and 38,641 tons of copper for a total of 0.383 million gold equivalent ounces, of which 0.159 million ounces of gold and 38,061 tons of copper for a total of 0.377 million gold equivalent ounces were attributable to Gold Fields.

Advisors' Opinion:
  • [By Ben Levisohn]

    As a result, Chidley and team upgraded Agnico Eagle Mines (AEM) and�Yamana Gold (AUY) to Neutral from Underweight, and raised Barrick Gold (ABX), Goldcorp (GG) and Iamgold (IAG) to Overweight from Neutral.�Gold Fields (GFI) was downgraded “due to increased risk and also reduced expectations for the South Deep operation,” Chidley says.

  • [By Holly LaFon] Fields is Africa�� second-largest gold producer. It has grown its revenue per share at a rate of 10.3 percent over the last ten years and EBITDA at 15.5 percent, though free cash flow has been negative for most of the decade, and turned positive at $133 million in 2011.

    In January the company announced that it would expect 1.9 percent lower production than expected as a result of power outages in Ghana and slower million in Tarkwa due to due to complications there. In South Africa, production was lowered due to repairs and other issues, and production in Peru was adversely affected by a lower copper price relative to the gold price in the fourth quarter. Actual results were released in February which showed that the company produced a fourth-quarter profit of $336 million. It also produced 883,000 ounces in the quarter, compared to 898,000 ounces the fourth quarter of 2010.

    The company is also in discussions with Ghana�� government over a proposed increase in the tax regime for the country�� mining industry.

    George Soros and PIMCO also increased their exposure to gold in the fourth quarter of 2011.

    See Paulson�� complete portfolio here, or check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of John Paulson.

  • [By Jon C. Ogg]

    Gold Fields Ltd. (NYSE: GFI) was downgraded to Sell from an already cautious Neutral rating at Citigroup after the company is spending $300 million to buy three new mines from Barrick.

  • [By Jonathan Yates]

    And this news now results in dividend-paying gold stocks, such as Yamana Gold (NYSE: AUY), Gold Fields (NYSE: GFI) and Newmont Mining (NYSE: NEM) being attractive as both short-term and long-term investments.

Monday, April 28, 2014

Is NVIDIA Undervalued?

With shares of NVIDIA (NASDAQ:NVDA) trading around $13, is NVDA an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

NVIDIA is a visual computing company that develops graphics chips for use in personal computers, mobile devices, and supercomputers. The company operates through two segments: GPU and Tegra Processors. The GPU segment offers graphic processing unit processors for consumers desktop and notebook PCs, professional workstations, supercomputing servers and workstations, and industry-standard servers. The Tegra segment offers its processors to tablets, smartphones, and gaming devices. Personal computers, mobile devices, supercomputers, and servers are continuously being used and adopted at an increasing rate worldwide. NVIDIA provides essential components for technology products that affect most people’s home or work life so a company like NVIDIA is here to stay.

T = Technicals on the Stock Chart are Strong

NVIDIA stock has not seen too much positive movement in recent years. The stock seems to be struggling to find value as its price has chopped around over the last several years. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, NVIDIA is trading above its rising key averages which signal neutral to bullish price action in the near-term.

NVDA

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(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of NVIDIA options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

NVIDIA Options

34.93%

86%

85%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

May Options

Flat

Average

June Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on NVIDIA’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for NVIDIA look like and more importantly, how did the markets like these numbers?

2012 Q4

2012 Q3

2012 Q2

2012 Q1

Earnings Growth (Y-O-Y)

49.83%

13.79%

-24%

-54.55%

Revenue Growth (Y-O-Y)

16.13%

12.94%

2.73%

-3.86%

Earnings Reaction

2.91%

-3.86%

-0.61%

6.36%

NVIDIA has seen increasing earnings and revenue figures for most of the last four quarters. From these figures, the markets have been mixed on NVIDIA’s recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has NVIDIA stock done relative to its peers, Intel (NASDAQ:INTC), Advanced Micro Devices (NYSE:AMD), Qualcomm (NASDAQ:QCOM), and sector?

NVIDIA

Intel

AMD

Qualcomm

Sector

Year-to-Date Return

12.07%

15.42%

14.38%

-0.18%

13.83%

NVIDIA has been an average performer, year-to-date.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

Conclusion

NVIDIA provides valuable mobile, personal computer, supercomputing, and server products to a multitude of consumers and businesses operating in different industries around the world. The stock has struggled to establish a consensus price in recent years but is now setting up to move higher. Earnings and revenue have increased during most of the last four quarters but investors have not been fully convinced. Relative to its peers and sector, NVIDIA is an average performer, year-to-date. WAIT AND SEE how NVIDIA stock reacts during this coming earnings announcement.

Saturday, April 26, 2014

Sarepta Therapeutics Inc. (SRPT): $54 Approved By JMP Securities

It's not every day that a stock is up 40% but still might have another 50%+ to go. However, that is the case with Sarepta Therapeutics Inc. (NASDAQ:SRPT).

Sarepta Therapeutics Inc., formerly AVI BioPharma, Inc., biopharmaceutical company focused on the discovery and development of ribonucleic acid (RNA)-based therapeutics for the treatment of rare and infectious diseases. Its product candidates include Eteplirsen, AVI-6002, AVI-6003, and AVI-7100.

From what we can gather online:

AVI-6002 is for the Ebola virus AVI-6003 is for Marburg hemorrhagic fever (MHF) AVI-7100 is for H1N1 (swine flu).

[Related -Stock End 1 Pct Higher On Earnings, Gold; Coca-Cola (KO) Jumps]

Al the hubaloo today is due to Eteplirsen. Earlier today, the company announced it plans to submit a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) by the end of 2014 for the approval of eteplirsen for the treatment of Duchenne muscular dystrophy (DMD). Eteplirsen is Sarepta's lead exon-skipping drug candidate in development for the treatment of patients with DMD who have a genotype amenable to skipping of exon 51.

Chris Garabedian, president and chief executive officer says, "As we announce our plan to submit an eteplirsen NDA by the end of 2014, we are very pleased with the detailed guidance that the FDA has provided us on a potential eteplirsen approval pathway and their support of a historically controlled eteplirsen confirmatory study. We also appreciate that the FDA shares our urgency in dosing a broader base of eteplirsen patients and has encouraged us to begin the clinical program with our follow-on exon-skipping drugs as soon as possible."

[Related -Stock Upgrades And Downgrades: CHRW, DWA, ODFL, PXD, S, SRPT, TMO]

As such, management plans to initiate several additional clinical studies with eteplirsen later this year in exon-51 amenable genotypes.

A pair of research firms upped their opinions on SRPT on the FDA news. William Blair and JMP Securities moved to an "outperform" rating from "market perform." JPM put a price tag of $54 – upside potential of 58.82% to target.

According to the CDC, "Duchenne muscular dystrophy (DMD) is a genetic disorder that causes muscles to gradually weaken over time. A person with DMD will eventually lose the ability to walk and will have problems with breathing and his or her heart. It most often affects boys and occurs among all races and cultures. Sometimes this disorder affects other members of a person's family, but in many cases it is new to a family."

The Muscular Dystrophy Associations (MDA) says, "DMD is the most frequently occurring and one of the most rapidly progressive of the childhood neuromuscular disorders. It affects approximately 1 in 3500 live male births throughout the world. DMD affects only boys (with extremely rare exceptions)."

The CDC reports roughly 4 million babies are born in the US per year. Slightly more than half are boys, meaning a little more than 2 million "It's a Boys" annually. Using the MDA's 1 in 3,500 figure, we arrive at about 570 babies born a year with the condition.

At the moment, SRPT has a market cap of $1.28 billion on trailing twelve month (TTM) revenue of $14.22 million – 64.82 times sales is a steep price to pay.

The average biotech trades at 16 times sales. Now, if Sarepta Therapeutics captured 100% of the potential market for the next decade, they would have to charge $14,000 per year to generate enough revenue to meet the current market cap using the average price-to-sales ratio. That doesn't include any revenue sources beyond eteplirsen. At JPM's $54, the cost would have to be $22,314 per year to trade at the peer average P/S ratio.

Overall: In our opinion, Sarepta Therapeutics Inc. (NASDAQ:SRPT) is more likely to get to $54 compliments of a short squeeze as 40% of the float (stock available for trading) is sold, than from eteplirsen driven fundamentals. 

Friday, April 25, 2014

4 Energy Services Stocks to Sell Now

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This week, the overall grades of four energy services stocks are lower, according to the Portfolio Grader database. Each of these rates a “D” (“sell”) or “F” overall (“strong sell”).

Tenaris S.A. Sponsored ADR’s () rating falls to a D (“sell”) this week, down from C (“hold”) the week prior. Tenaris manufactures and supplies steel pipe products and related services for the world’s energy industry. For Portfolio Grader’s specific subcategory of Sales Growth, TS also gets an F. .

Helix Energy Solutions Group, Inc. () earns an F (“strong sell”) this week, moving down from last week’s grade of D (“sell”). Helix Energy Solutions is a marine contractor and operator of offshore oil and gas properties and production facilities. The stock gets F’s in Cash Flow and Margin Growth. Shares of the stock have been exchanging at an usually rapid pace, twice the rate of the week prior. .

The rating of Dril-Quip, Inc. () slips from a C to a D. Dril-Quip designs, manufactures, sells, and services offshore drilling and production equipment to be used in deepwater, harsh environment, and severe service applications. The stock currently has a trailing PE Ratio of 27.20. .

This week, Hornbeck Offshore Services, Inc.’s () rating worsens to an F from the company’s D rating a week ago. Hornbeck Offshore Services provides marine transportation services to the offshore oil and gas industry. The stock gets F’s in Earnings Revisions and Cash Flow. At $39.86, the stock is below the 50-day moving average of $40.76. .

Louis Navellier’s proprietary Portfolio Grader stock ranking system assesses roughly 5,000 companies every week based on a number of fundamental and quantitative measures. Stocks are given a letter grade based on their results — with A being “strong buy,” and F being “strong sell.” Explore the tool here.

Thursday, April 24, 2014

Intuitive Surgical is a Buy…Near $350

Providing disappointing numbers before the fact can be a good strategy as long as a company does a good job of setting the right expectations. Intuitive Surgical (ISRG) clearly didn’t.

Remember, earlier this month Intuitive Surgical warned investors that sales wouldn’t be very good. So why are shares falling today? The details of its earnings report were even worse than many imagined. Cantor Fitzgerald’s Jeremy Feffer explains:

As we suspected when Intuitive preannounced 7% 1Q procedure growth, the company’s previous 9-12% 2014 procedure growth guidance would have to come down, but the new 2-8% range is significantly lower than what we expected. Management again cited the usual suspects—hospitals moving away from benign hysterectomies, continued declines in U.S. prostatectomies, and choppiness in Japan due to lack of broader reimbursement. However, the company also mentioned near-term headwinds related to the FDA’s recent statement of caution regarding power morcellation in gynecological procedures; initially that statement was thought to benefit da Vinci, which does not employ morecellators. But with hospitals approaching these benign procedures more conservatively, we expect further downward pressure on volumes this year and are now modeling 4% procedure growth for 2014.

Canaccord Genuity’s Jason Mills and Jeffrey Chu recommend investors stay far, far away from Intuitive Surgical:

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We would recommend investors remain on the sidelines as the variability in future quarterly results could be volatile, and we suspect consensus estimates may not fully account for the myriad challenges facing the company in the near term, portending further downside revisions to consensus expectations potentiality through the next few quarters until the business anniversaries these tepid results. Based on our future expectations, and guided by our DCF analysis, we would refrain from getting constructive in ISRG unless investors see a pullback in the mid-$300 range near term.

Shares of Intuitive Surgical have dropped 11% to $378 at 1:18 pm.

Tuesday, April 22, 2014

Zynga is Just Gettin' Started (ZNGA)

While the jury may still be out on its long-term longevity, if you're looking for quick trade, then Zynga Inc. (NASDAQ:ZNGA) may be a pretty good bet. Why's that? Though the stock got crushed in March, falling from a peak of $5.89 to a low of $3.79 hit last week, it's all part of a normal pattern for ZNGA, and that pattern suggests the game-software maker's stock is poised for a much bigger pop than what we've seen so far.

Just for the record, yes, this is the same company behind popular online games like Farmville and Words With Friends. Zynga is also the company that former Microsoft executive Don Mattrick is now heading. ZNGA is also the company that hasn't turned an operating profit ever. Yet, Zynga Inc. is the same company that is projected to swing to a profit this year on the heels of a 9.4% improvement in revenue. Next year should be even better on the sales front, by 17%. That should lead to a profit of 5 cents per share of ZNGA.

It's all encouraging, but none of those reasons are the reasons a newcomer might want to buy Zynga today. No, the reason you might want to step into ZNGA here and now is the chart - we've gotten some key clues that a rebound is underway.

The daily chart below tells part of the story. Last Tuesday, ZNGA made a long-tailed dragonfly doji, suggesting the selling effort had fully exhausted itself and we had begun the transition into a bullish mode. Equally telling is that the reversal unfurled right as Zynga shares brushed the key 200-day moving average line (green). The follow-through in the meantime seals the deal.

It wasn't just the short-term pivot on the daily chart that's pointing the stock even higher, however. When we zoom out to a weekly chart of Zynga Inc,. we can see this stock's been bouncing around inside a rising/bullish trading range since mid-2013, and the low from last week touched on the lower edge of that range. Right on cue, Zynga started to rally again, yet there's still a ton of room to tap into before a ceiling is found.

No, it's got nothing to do with the fundamentals. That doesn't mean we can't rent ZNGA for a few weeks and scrape off a solid double-digit gain for the effort, however.
 
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Monday, April 21, 2014

Dentsu to Sell $1.2 Billion in Shares to Pay Aegis Deal Debt

Dentsu Inc. (4324), the Japanese advertising company that bought Aegis Group Plc, will raise as much as 120.1 billion yen ($1.2 billion) in a public share sale to help pay for the deal. The stock slumped the most in a month.

The company will offer as many as 29 million shares it owns and 8 million new shares to investors in Japan and overseas, Tokyo-based Dentsu said in a statement yesterday. The proceeds will be used to repay part of its 200 billion yen short-term debt from the acquisition that was completed in March, it said.

Dentsu paid 3.16 billion pounds ($4.8 billion) for Aegis as Japan's biggest agency competes with global firms including WPP Plc (WPP) and Omnicom Group Inc. (OMC) With Japan's benchmark Topix index on pace for its best result since 2005, the 112-year-old company is tapping an equities boom to fund the deal that added the largest independent buyer of advertising space and reduced its reliance on the domestic market.

"The stock market's recovery trend since last November is helping Dentsu to go for the sale, which will lead to an improvement of its capital base," said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management Co. in Tokyo. "Shares will probably react negatively on dilution concern."

Dentsu fell 9.2 percent, the biggest drop since May 30, to 3,155 yen at the close in Tokyo. The stock has climbed 37 percent this year. The Topix has gained 36 over the same period.

Equity Sales

Companies have raised $26.5 billion in share sales in Japan this year, compared with $22.8 billion for all of 2012, according to data compiled by Bloomberg. This year's figure doesn't include Dentsu's share sale.

Suntory Beverage & Food Ltd., which listed its shares yesterday on the Tokyo Stock Exchange, raised 388 billion yen in an initial public offering, Asia's largest this year. Aeon Mall Co. and Dena Co. (2432) are also among the companies that raised funds through share sales, the data show.

"There probably will be more financing deals using shares by various Japanese companies," said Ichiro Takamatsu, a fund manager at Bayview Asset Management Co. "Companies including Dentsu need funding for expansion overseas as it's hard to look for growth opportunities in Japan."

About 80 percent of Aegis's 2011 revenue of 1.14 billion pounds came from outside the Asia-Pacific region, according to data compiled by Bloomberg. The home market accounted for 86 percent of Dentsu's sales last year, the data show.

Nomura Holdings Inc. and five other firms will help arrange the sale and the offering price will be set between July 22 and 24, according to a separate statement.

Sunday, April 20, 2014

Why GM Won't Buy Peugeot – Yet


Will French cars like this Peugeot RCZ become part of GM's global portfolio? Photo credit: PSA Peugeot Citroën.

Is General Motors (NYSE: GM  ) really thinking about buying distressed French automaker PSA Peugeot Citroën (NASDAQOTH: PEUGY  ) ?

That depends on how you read the tea leaves. And probably on how you define "thinking".

A bombshell report on Thursday suggested that Peugeot's founding family was willing to give up some or all of their controlling stake – if GM, which has a joint-development agreement with Peugeot, would step in with cash to rescue the drowning French carmaker.

That report sparked a variety of reactions, including this one: GM said it has "no current plans" to invest additional funds in Peugeot, in which it took a small stake last year.

But could those plans change? Well, that's an interesting question.

This GM won't buy, at least not yet
It's important to understand that current GM CEO Dan Akerson and his team aren't likely to repeat GM's historic (and unfortunate) tendency to make acquisitions just for the sake of expansion. I expect Akerson and company to stay laser-focused on their prime goal in Europe: turning long-troubled German subsidiary Opel into a fully integrated – and fully profitable – part of GM's global business.

Opel has lost billions, but those losses finally started to narrow last quarter, despite steep recessions that have knocked European new-car sales down to a 20-year low. The improvements came as a result of tough cost-cutting measures and organizational changes put in place last year, GM said. Losses are expected to narrow further over the next several quarters as more cuts take hold and new products get to market. GM now expects to get to breakeven, or close, by the end of 2015.

Put another way, after years of half-hearted measures by prior management teams, GM finally appears to have its money-burning European operation headed in the right direction.

So what does this have to do with Peugeot? This: Don't expect any interest from GM in a deal with Peugeot unless a deal can be structured that furthers the company's overriding goal of making GM Europe profitable.

Is that likely? That depends on how desperate Peugeot – and the French government – get.

Peugeot's situation is dire, and getting worse
Make no mistake, Peugeot is seriously on the ropes. It's burning cash – about 3 billion euros last year – and it only has about 4 billion more to lose before its reserves fall to the point where its operations will be crippled.

Unlike most of its competitors in Europe, Peugeot doesn't have a significant overseas presence or partner to help offset its losses at home, so its survival is dependent on a recovery – or a wrenching transformation – in Europe.

Or a bailout from the French government, which might be the family's real goal here, given that a recovery won't be happening any time soon. One way to interpret the recent reports is that this is Peugeot's way of telling French politicians, "Look, we can't do this. If you want to preserve these French jobs, bail us out. Otherwise, GM will come in and make drastic cuts."

How drastic? Here are the numbers to keep in mind: In 2012, Peugeot's French factories ran at 71% of capacity, according to IHS Automotive. Opel's German factories ran at 66% of capacity. Things haven't improved since, and may actually be worse now. As a general rule of thumb, auto factories break even at about 80% of capacity.

It's not hard to see what would have to happen if the two were combined, and how – under the right circumstances – a deal could be helpful to GM.

When Peugeot and France get truly desperate, GM might deal
It's also not hard to see that France would take a disproportionate share of the cuts. GM has already put one of Opel's four German factories on a path to closure, despite stiff resistance from Opel's powerful union and the German government. Closing a second plant in Germany isn't likely to happen.

In other words, if GM were to absorb Peugeot, it's reasonable to expect that the combined company would quickly make drastic workforce reductions in France. It's also reasonable to assume that GM won't consider moving in unless it's clear that the French government and Peugeot's unions won't stand in the way of those reductions, and won't insist on the massive severance packages that are common in Europe.

As of right now, that's not the case. But as Peugeot continues to drain its cash, and the situation becomes more dire, things might change. Watch this space.

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Saturday, April 19, 2014

Yahoo! Discloses Government Data Requests

Yahoo! (NASDAQ: YHOO  ) CEO Marissa Mayer and general counsel Ron Bell have joined several other Internet company representatives by announcing the number of requests for user data it received from U.S. law enforcement agencies, saying in a Tumblr post Monday that Yahoo! "received between 12,000 and 13,000 requests, inclusive of criminal, Foreign Intelligence Surveillance Act (FISA), and other requests" for the Dec. 1, 2012, to May 31, 2013, time period.

According to the post, the majority of data requests Yahoo! received were related to investigations of fraud, homicides, kidnappings, and "other criminal investigations." As is the case with other companies in the industry that have recently released data transparency figures, Yahoo! says it cannot lawfully disclose figures specific to FISA data requests.

Responding to the FISA data disclosure limitations imposed by the U.S. government, Mayer and Bell said "we strongly urge the federal government to reconsider its stance on this issue." Yahoo! intends to issue its first global "transparency report" later this summer covering the first half of 2013, and will update its report twice annually thereafter.

Apple recently said that between Dec. 1, 2012, and May 31, 2013, it had received between 4,000 and 5,000 requests from U.S. law enforcement for customer data. Meanwhile, for the six-month period ending Dec. 12, 2012, Microsoft received between 6,000 and 7,000 national or criminal security warrants, subpoenas, and orders, and Facebook reported that it received between 9,000 and 10,000 government security requests for data during the six-month period ending Dec. 31, 2012.

link

Friday, April 18, 2014

Higher Sales Drive Honeywell’s Q1, Guidance Raise But Misses Estimates

Honeywell (HON) was another of the many names that reported earnings Thursday.

The conglomerate said first-quarter earnings were $1.02 billion, or $1.28 a share, up from $1.21 a share in the year-ago period and two cents better than the $1.26 analysts had forecast.

Revenue climbed 3.8% to $9.68 billion, just below the $9.74 billion consensus.

As for individual divisions, its transportation systems unit saw the biggest sales jump, at 8.6%, followed by automation and control systems, the biggest contributor to the top line, which saw revenue climb 7.6%. The performance materials and technologies arm logged a 2.2% rise in sales, while the aerospace unit slipped $1.8%.

Honeywell also increased the lower end of its full-year earnings outlook by a nickel, saying it now expects to earn between $5.40 and $5.55 a share.

Citigroup's Deane Dray maintained a Neutral rating on the stock: "The company reported disappointing 1% organic revenue growth vs. 2%-4% expectations that were reiterated in March due to Aerospace and PMT. On the operating line, the company beat our estimates by $0.04 including better than expected operating margin in all four business segments. Despite some headwinds in PMT, the company was able to post consolidated 16.5% margins, up 30 bps Y/Y. Above-plan profitability allowed Honeywell to spend an extra penny on restructuring and proactive environmental remediation, above its $0.10 gain on its sale of BEAV shares. Cash was strong in the seasonally weak quarter with 49% conversion, allowing the company to increase its full year cash guidance. EPS guidance was increased by 5c at the low-end to $5.40-$5.55 with 3%-4% organic rev growth reaffirmed. Guidance for 2Q14 is $1.32-$1.36 vs our $1.37 estimate and consensus."

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Morningstar's Daniel Holland was more optimistic, however, and reiterated a Buy rating and $105 fair value on the stock: "Honeywell's first-quarter performance reflected the benefits of having a diversified business model as weakness in the company's aerospace business, which was down 2% versus the prior year, was offset by strength in automation and controls as well as the aforementioned strength in turbochargers. Importantly, the company delivered margin expansion in three of the four operating segments, including a 30 basis point improvement in aerospace. As the company rolls out more of its operating initiatives linked to Honeywell Operating Systems, we expect meaningful margin expansion of two percentage points over the next five years, consistent with the low end of company's recently released five-year plan."

Thursday, April 17, 2014

First Take: Google gobbles up online ad business

SAN FRANCISCO — Google's latest financial results, released late Wednesday, suggest the Internet search giant is doing to other online ad sellers what it's already done to the print publishing industry: wrestling away an ever-larger share of advertising growth and driving ad rates inexorably lower.

The company's quarterly net income and profit margin show that the nascent-but-exploding trend of so-called programmatic display ad buying is helping to pour cash into Google's coffers like a fire hose.

The company generated a staggering $4.1 billion in operating income and $3.45 billion in net profit for the three months ended March 31, as revenue rose 19% and Google's number of paid search clicks surged 26% from a year earlier.

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NEWS: Google shares plunge after earnings miss

At the same time, its so-called cost-per-click metric, which measures the price trajectory of its search ads, fell 9%, continuing a multi-year trend.

The CPC decline once spooked those on Wall Street who asked how long Google's double-digit revenue growth could last if the price of its core product falls from 5% to 10% every quarter.

John Shinal, technology columnist for USA TODAY.(Photo: USA TODAY)

The answer is that Google can make up with massive volume whatever price efficiency its own algorithm can wring out of the online ad business.

Now, the search-software leader is applying its ad-software expertise to the buying and selling of so-called display ads, including text and video ads shown on Android-powered mobile devices.

The resulting price pressure is ! pinching revenue growth at other Web publishers, even as growth on Google's own sites hums along.

In the first quarter, ad revenue on the company's own Web pages rose 21% from a year earlier, while revenue at its network partners rose a mere 4% on that basis.

It was the third-consecutive quarter in which Google's own year-over-year ad revenue growth was more than 20%, while its network partners' growth was less than 5%.

No surprise, then, that the cost Google pays to acquire Web traffic from others fell to 23.3% of revenue — the lowest percentage in at least three years, according to the company's securities filings.

Meanwhile, Yahoo CEO Marissa Mayer said Tuesday her company's traffic-acquisition costs are expected to rise this year.

It's hard to compete with software that gives online advertisers more clicks per ad and more ads per dollar every year.

Tuesday, April 15, 2014

GM creating new global safety organization

NEW YORK — General Motors is creating a new organization within the company to focus on safety across all of its vehicle lines, CEO Mary Barra said Tuesday.

The Global Product Integrity organization will be modeled on a similar group within GM that is centered on product quality.

"We will mirror this approach to focus on safety performance," Barra told the NADA/J.D. Power Automotive Forum in New York. "Our goal is to ensure the highest levels of execution consistently across all our vehicles."

The new organization will report directly to Mark Reuss, GM's global product development chief, and will incorporate the team under Jeff Boyer, the safety chief recently appointed by Barra.

She says the goal is to "provide the highest levels of safety, quality and customer service … and ensure that a situation like the ignition-switch recall doesn't happen again."

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Her appearance on the eve of the New York Auto Show once again put her center stage on a recall that of 2.6 million small cars worldwide for faulty ignition switches. The switches are blamed for 12 deaths in the U.S. and one in Canada, and GM is the target of multiple government investigations.

In a Q&A after her remarks, Barra was asked about why GM quietly upgraded the switch design in 2006 without assigning a new part number and without a recall of earlier vehicles. She said it is "not good engineering" and that future problems will be dealt with as soon as they are evident. While she talked of putting two switch engineers on paid leave last week "while we seek the truth about what happened," she declined to discuss the departure this week of GM's global public relations chief.

She lamented that the recall has overshadowed progress GM has made on other fronts — from sales growth to positive reviews for its new vehicles. But she said GM is c! ommitted to the recall and lauded efforts of GM dealers to go to extra lengths to fix recalled cars and provide customers with loaners.

Although on the job as CEO only months, the debacle has put Barra in a national — if unfavorable — spotlight and made her a target for late-night comedy.

The most personal, perhaps, was an opening skit on NBC's Saturday Night Live a week ago. Barra, a regular SNL watcher, said that she saw the skit. Asked about it, she said, "I think it's important to maintain your sense of humor." Asked to rate how well actress Kate McKinnon captured her, she replied, "There are probably better people than me to judge."


Monday, April 14, 2014

Where's the Cash Coming From at Marcus?

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 Marcus (NYSE: MCS  ) , 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, Marcus generated $33.8 million cash while it booked net income of $20.7 million. That means it turned 8.1% of its revenue into FCF. That sounds OK.

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 Marcus 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 10.3% of operating cash flow coming from questionable sources, Marcus investors should take a closer look at the underlying numbers. Within the questionable cash flow figure plotted in the TTM period above, other operating activities (which can include deferred income taxes, pension charges, and other one-off items) provided the biggest boost, at 12.0% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed 40.7% 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.

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