Hot Safest Stocks To Own For 2014

Tuesday, July 9, 2013

This is Mark Vickery, covering for Sheraz Mian while he records an early-morning interview.

Even though we've "unofficially" entered Q2 earnings season with Alcoa's (AA) top-line beat reported after the bell Monday, we're ramping-up to the busy time like an avenue in Chicago. Aside from earnings reports from Yum! Brands (YUM), JPMorgan (JPM) and Wells Fargo (WFC) in the latter half of the week, there is but a small handful of companies posting quarterly results otherwise.

Things pick up next week with many financials following JPMorgan and Wells Fargo this week. And because the financial industry is expected to be the biggest performer in Q2, we'll likely get a fairly articulate view of how the second quarter is coming along within the next two weeks or so��just not right now.

Hot Safest Stocks To Own For 2014: Petroleo Brasileiro S.A.- Petrobras(PBR)

Petroleo Brasileiro S.A. primarily engages in oil and natural gas exploration and production, refining, trade, and transportation businesses. The company?s Exploration and Production segment involves in the exploration, production, development, and production of oil, liquefied natural gas (LNG), and natural gas in Brazil. This segment supplies its products to the refineries in Brazil, as well as sells surplus petroleum and byproducts in domestic and foreign markets. Its Supply segment engages in the refining, logistics, transportation, and trade of oil and oil products; export of ethanol; and extraction and processing of schist, as well as holds interests in companies of the petrochemical sector in Brazil. The Gas and Energy segment involves in the transportation and trade of natural gas produced in or imported into Brazil; transportation and trade of LNG; and generation and trade of electric power. In addition, the segment has interests in natural gas transportation and d istribution companies; and thermoelectric power stations in Brazil, as well engages in fertilizer business. The Distribution segment distributes oil products, ethanol, and compressed natural gas in Brazil. The International segment involves in the exploration and production of oil and gas, as well as in supplying, gas and energy, and distribution operations in the Americas, Africa, Europe, and Asia. Further, the company involves in biofuel production business. Petroleo Brasileiro was founded in 1953 and is based in Rio de Janeiro, Brazil.

Advisors' Opinion:

• [By Dave Friedman]

  Institutional investors bought 78,663,680 shares and sold 101,125,380 shares, for a net of -22,461,700 shares. This net represents 0.23% of common shares outstanding. The number of shares outstanding is 9,872,826,100. The shares recently traded at $27.61 and the company’s market capitalization is $170,178,700,000.00. About the company: Petroleo Brasileiro S.A. – Petrobras explores for and produces oil and natural gas. The Company refines, markets, and supplies oil products. Petrobras operates oil tankers, distribution pipelines, marine, river and lake terminals, thermal power plants, fertilizer plants, and petrochemical units. The Company operates in South America and elsewhere around the world.

Hot Safest Stocks To Own For 2014: Under Armour Inc.(UA)

Under Armour, Inc. develops, markets, and distributes performance apparel, footwear, and accessories for men, women, and youth primarily in the United States, Canada, and internationally. It offers products made from moisture-wicking synthetic fabrics designed to regulate body temperature and enhance performance regardless of weather conditions. The company provides its products in three fit types: compression (tight fitting), fitted (athletic cut), and loose (relaxed) extending across the sporting goods, outdoor, and active lifestyle markets. Its footwear offerings comprise football, baseball, lacrosse, softball, and soccer cleats; slides; performance training footwear; and running footwear. The company also provides baseball batting, football, golf, and running gloves, as well as licenses bags, socks, headwear, custom-molded mouth guards, and eyewear that are designed to be used and worn before, during, and after competition. Under Armour sells its products through retai l stores, as well as directly to consumers through its own retail outlets and specialty stores, Website, and catalogs. The company was founded in 1996 and is headquartered in Baltimore, Maryland.

Advisors' Opinion:

• [By Glenn]  

  Current Price: $27.27 12-month target: $37

  I see potential in opportunities for new product adjacencies, and expanding distribution worldwide. Footwear growth will continue to increase. Revenues for these products have increased over 69% in 2009. Adding to this I still see growth in Under Armour’s apparel sales, which are up 8%. Under Armor had yet to even break into the international market, which offers a plethora of new opportunities for this growing brand. I believe sales will rise drastically in 2010 driven by international sales, new women’s clothing line, and expansion within their own footwear line.
• [By Victor Mora]

  Under Armour provides athletic apparel, footwear, and accessories to a growing health and wellness, athletic, and fitness enthusiast population around the world. The stock has been on a powerful move towards higher prices that has led to it trading at all-time highs. Earnings and revenue figures have increased over most of the last four quarters which has led to excited investors. Relative to its peers and sector, Under Armour has led in year-to-date performance by a wide margin. Look for Under Armour to OUTPERFORM.

Top 5 Medical Companies To Watch In Right Now: Fluor Corporation(FLR)

Fluor Corporation, through its subsidiaries, provides engineering, procurement, construction, maintenance, and project management services worldwide. Its Oil & Gas segment offers design, engineering, procurement, construction, and project management services to upstream oil and gas production, downstream refining, chemicals, and petrochemicals industries. This segment also provides consulting services comprising feasibility studies, process assessment, and project finance structuring and studies. The company?s Industrial & Infrastructure segment offers design, engineering, procurement, and construction services to the transportation, wind power, mining and metals, life sciences, manufacturing, commercial and institutional, telecommunications, microelectronics, and healthcare sectors. Its Government segment provides engineering, construction, logistics support, contingency response, management, and operations services to the United States government focusing on the Departme nt of Energy, the Department of Homeland Security, and the Department of Defense. The company?s Global Services segment offers operations and maintenance, small capital project engineering and execution, site equipment and tool services, industrial fleet services, plant turnaround services, temporary staffing services, and supply chain solutions. Its Power segment provides engineering, procurement, construction, program management, start-up and commissioning, and operations and maintenance services to the gas fueled, solid fueled, plant betterment, renewables, nuclear, and power services markets. The company also offers unionized management and construction services in the United States and Canada. Fluor Corporation was founded in 1912 and is headquartered in Irving, Texas.

Advisors' Opinion:

• [By CRWE]

  Fluor Corporation�� (NYSE:FLR) Chairman and Chief Executive Officer, David Seaton, and Chief Financial Officer, Biggs Porter, will give a presentation to investors at the Credit Suisse 2012 Engineering & Construction Conference in New York on Thursday, June 7 at 9:00 a.m. Eastern Daylight Time.

Hot Safest Stocks To Own For 2014: Goldman Sachs Group Inc.(The)

The Goldman Sachs Group, Inc., together with its subsidiaries, provides investment banking, securities, and investment management services to corporations, financial institutions, governments, and high-net-worth individuals worldwide. Its Investment Banking segment offers financial advisory, including advisory assignments with respect to mergers and acquisitions, divestitures, corporate defense, risk management, restructurings, and spin-offs; and underwriting securities, loans and other financial instruments, and derivative transactions. The company?s Institutional Client Services segment provides client execution activities, such as fixed income, currency, and commodities client execution related to making markets in interest rate products, credit products, mortgages, currencies, and commodities; and equities related to making markets in equity products, as well as commissions and fees from executing and clearing institutional client transactions on stock, options, and fu tures exchanges. This segment also engages in the securities services business providing financing, securities lending, and other prime brokerage services to institutional clients, including hedge funds, mutual funds, pension funds, and foundations. Its Investing and Lending segment invests in debt securities, loans, public and private equity securities, real estate, consolidated investment entities, and power generation facilities. This segment also involves in the origination of loans to provide financing to clients. The company?s Investment Management segment provides investment management services and investment products to institutional and individual clients. This segment also offers wealth advisory services, including portfolio management and financial counseling, and brokerage and other transaction services to high-net-worth individuals and families. In addition, it provides global investment research services. The company was founded in 1869 and is headquartered in New York, New York.

Warren Buffett’s (Modern Day) Margin of Safety

Top 10 Financial Stocks To Own For 2014

Someone who reads my articles sent me this email:

Dear Mr. Gannon,

…in your analysis of Mr. Buffett, I often read you say that his margin of safety isn't always achieved by simply coming up with an intrinsic value for a business and then slapping a discount on it. However, why does he often make reference to what he thinks a business is worth and then compare it to what he bought the stock for (e.g. Washington Post was selling for $100m when he thought it was worth $400-500m, Wells Fargo was worth more than double what Berkshire paid, PetroChina was selling for $30bn when he thought it was worth north of $100bn etc). This seems quite different from the day one return of 15% requirement mentioned in the Mid Continent Tab Card Company example. Do you think this difference arises from the fact that he has a different valuation procedure when investing in stocks to whole businesses (although he says they are essentially the same thing)?

Kind Regards,
Pratham

No. I think Warren Buffett usually thinks in terms of the return he can get on a stock. He has mentioned valuations to students before. He doesn't do it very often. Honestly, he doesn't give precise figures of either returns on investment or valuations very often. But he has many times – even with Bank of America (BAC) recently – talked about the kind of returns he can get in that stock versus everything else. I don't think he comes up with an intrinsic value estimate for something like Bank of America. I think he looks at the earning power. Also, if you look at some of the intrinsic value estimates Buffett has given in the past for companies, they seem to be closely connected to demonstrated earning power.

Someone mentioned a bank Warren Buffett bought for his partnership. If you read what he wrote about that bank it's clear his intrinsic value estimate is merely a rounded! off percentage return. So, if he thought stocks should return 8% a year, he might say that a company earning – on average – about $5 a share is worth $60. In this case, it's reasonable to think he is just multiplying a company's earnings by the inverse of what a decent return would be in securities generally. Since 1 divided by 8% is 12.5. And 8% is a reasonable return. He may round that off to 12 and slap a 12 P/E on a stock for that reason.

I mention this because when Buffett uses the word "conservatively" in a valuation – it tends to be a valuation similar to what I just described. It almost seems as if his idea of conservative is a sort of "no-growth" valuation. This makes sense in context – especially at Berkshire – because Buffett's habit has been pretty much to never buy companies he expects to stagnate or shrink.

He only buys growing companies.

In that case, as long as growth is expected and the return on capital is solid, he just needs the price to average earnings ratio to be reasonable. The one thing I would say there is no evidence for Buffett doing is a discounted cash flow analysis. Whatever valuations he has done – I don't think the idea of projecting earnings into the future and then discounting them back is part of it.

He has – however – mentioned future valuations in static terms. In other words, he's said that if we had to hold the stock it might increase in value from say $60 a share to $140 a share ten years from now. What there is not much support for is a Ben Graham type analysis. He doesn't seem to talk about a stock apart from its normal earning power.

And since Buffett now has held several stocks for a very, very long time the idea of worrying too much about the valuation at the time you buy seems silly. He has to know the price is reasonable and the return on his investment will be good. But no one time discount to current intrinsic value is going to still be supplying great returns in 15 or 30 years. And he has now ow! ned some ! stocks for that long.

Let's use 20 years – about the length of time he's owned Coca-Cola (KO) and Wells Fargo (WFC) – as an example.

If Warren Buffett buys a stock at 33 cents on the dollar in terms of price to intrinsic value and then the stock grows intrinsic value by 6% a year for the next 20 years at which point the stock trades at its new intrinsic value his compound return would be 12% a year. Buying a big cap stock at 1/3 of intrinsic value is a pretty extreme discount. And yet a return of 12% a year – while still quite good – is possible in some stocks that are already trading at a fair P/E as long as they are growing.

My point is just that over a period of 20 years or so, you're not going to get more than maybe 6% a year in your return coming from closing the initial valuation gap. In this sense, I mean a multiple. So, if you pay 5 times earnings for something that is worth 15 times earnings or 1 times book value for something that is worth 3 times book value – that kind of valuation gap will only provide about 6% a year over 20 years if the company itself is compounding book value, EPS, etc. at a leisurely 6% pace. You see how paying a bit more for something that could compound at 10% a year starts to make sense when you have a holding period of 20 years. Thinking you will have 10% growth and then ending up with 3% growth would be a big deal. But this kind of mistake isn't that hard to make outside of companies with good moats, indispensable products, etc.

So my point is just that having a clear idea of the intrinsic valuation as of this moment is more important when buying stocks you intend to hold for 1, 3, 5, or maybe 10 years. Many investors – Ben Graham included – had turnover in their portfolios that meant the average stock might be held for anywhere from 2 to 5 years. In those situations, the discount to intrinsic value – in other words the low price to NCAV, book value, earnings, sales, etc. – can have a very large influence on your a! nnual ret! urn over the full holding period. But as your holding period gets longer – and Buffett's holding periods have gotten very, very long – you need to spend a lot of time thinking about the return on your investment and the return on what the company retains and so on.

IBM (IBM) is an interesting example. I'm not sure Buffett would buy IBM if it weren't for the share buybacks. The company has worked to avoid dilution and reduce the share count over time. He singled this out as a reason for the purchase when he spoke on CNBC. There are other reasons for buying IBM. But I honestly don't believe Buffett would be buying IBM if instead of buying back shares over time IBM was treating its shares the way many tech companies do.

Buying back shares gives Buffett clarity on long-term returns. Basically, some of IBM's earnings can be used to buy more IBM stock. When IBM trades at reasonable prices, the return on these earnings used for buybacks is predictable and acceptable. Combined with decent sales growth in the single digits and strong pricing you have a recipe for good long-term returns in the stock without having to buy it at a super low price to current earnings or expecting a lot of growth. This has been his habit with companies like Wells Fargo, Coke, etc.

Sometimes the prices appeared cheap at the time he bought them. Sometimes they didn't. But in every case he was assuming a certain level of long-term profitable growth. In this sense, you could say he is more of a growth at a reasonable price investor. I don't think Buffett – at this point – spends a lot of time trying to figure out exactly what a company is worth today. I think he starts by finding the perfect company and then waiting for an acceptable price.

And, no, I don't think he has a different approach based on stocks versus owned businesses. There is some difference. I think – historically – he was willing to pay a bit more for a low to no-growth business if he could buy the whole thing because he could ! reinvest ! the cash elsewhere. At times, he has made comments that hint at this.

For example, he said he bought Dairy Queen as a business but wasn't interested in buying it as a stock. You could assume he just was talking size (he didn't want to waste time buying small part of a company that wouldn't move the needle at Berkshire rather than the whole thing).

But I think there may have been more to it than that. A high return on capital business is attractive as part of Berkshire in a way it would not be as a stock. With very high returns on capital, a wide moat, etc. a company's biggest issue will be constantly lower returns on all new investment. They will try to grow, make acquisitions, etc. You can see this as part of the genius of Teledyne, Berkshire, etc.

An oasis of extraordinary economics is worth more inside Berkshire than outside Berkshire, because it won't waste capital. I would say franchising businesses almost always work this way. They throw off more capital than can be reinvested prudently. At some point – this is true of a lot of specialty retail, restaurants, etc. but it's especially true of franchises – you hit super high average returns on capital. Most public companies will continue to invest far beyond that point and bring down the average return to near normal.

Considering how low the return on all investment past the peak average return on capital point was – these companies basically invested chunks of capital year after year at pathetic rates of return just to keep posting growth. Very moderate location growth combined with dividends, stock buybacks, etc. often works better.

You can study a bunch of publicly traded restaurant stocks to see this.

Restaurants are an extreme example.

But there are other businesses like that. Some great businesses have almost no good choices for additional investment within their own circle of competence. The best owner for these kinds of businesses would be someone like Berkshire, Teledyne, Biglari H! oldings (! BH), etc.. Or a private individual who does the same thing by investing in different industries, regions, etc.

So, yes, there is a difference between stocks and wholly owned companies.

Wholly owned companies can't do super stupid things outside of their core business. They can't try to buy up big competitors. They probably won't try to grow aggressively when it isn't economical. Stocks – as public companies – will be eager to maintain at least a modicum of growth even when it makes no economic sense. And some industries have a growth fetish. A tech company for instance will always seek growth even when it can't find anything related to its core competency that offers hope for growth. This is dangerous. And wholly owned companies avoid this problem for Buffett.

On the other hand, negotiated sales are never super cheap.

Wholly owned businesses won't make as much sense as stocks in a market bottom. Today, they are fine. Stocks are not – generally – super cheap right now. But in the 1970s, stocks made more sense. You could buy pieces of businesses for far less – on a pro rata basis – than you could ever negotiate a sale of the whole business for.

That's the only differences I see. By the way, Buffett has – in the past – mentioned pretty similar hurdles for investments in each area. He has sometimes said he "pays 10 times earnings" for a whole business. This was said to a seller – not shareholder – and is obviously not some ironclad rule. In a shareholder letter from the early 2000s – Buffett mentioned the idea of wanting to see 10% plus returns in common stocks. When he didn't see those as reasonably likely, he wouldn't buy the stocks. He said he was usually – but not always – able to find such stocks. Those numbers are pretty close to each other. The 10 times earnings number must have been pre-tax. And the 10% reference to returns in common stocks would be allowing for some growth. You have to squint pretty hard to see how these numbers are t! hat differ! ent from one another. I'd say he's willing to evaluate both stocks and private businesses in the same rough range of return possibilities. There may be some differences in how he sees them. But he values them in an awfully similar way.

Talk to Geoff About Warren Buffett's (Modern Day) Margin of Safety geoff@gurufocus.com

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Nabors Falls on Goldman Downgrade - Analyst Blog

Top 10 Financial Stocks To Buy Right Now

Following Nabors Industries Ltd's (NBR) second quarter profit warning, analysts at investment bank The Goldman Sachs Group Inc. (GS) downgraded the land drilling contractor's stock from Conviction List-Buy to Buy,.

On Jul 9, Nabors stated that it expects operating results for the second quarter of 2013 to miss expectations. This declaration also led Goldman to lower the price target from $22.00 to $19.50

According to Nabors, unsatisfactory performance from its 'Rig Services' and 'Completion and Production Services' units will lead to this lower-than-expected operating return. Decline in sales of capital tools along with decreased rig services and rental activities impair Nabors' Rig Services segment.

On the other hand, the Completion and Production Services unit was affected by a tough competitive environment and severe weather conditions. The company projects its operating income for second-quarter 2013 to be between $88.0 million to $91.0 million.

Following the grim update – issued after the market close on Tuesday, Jul 9 – shares of Nabors fell $1.01, or 6.3%, yesterday, to close at $14.99.

Nabors is about to release its second-quarter earnings result after the closing bell on 23 Jul, 2013. Our estimate for earnings per share for the quarter stands at 15 cents.

Barbados-based Nabors' high natural gas exposure raises its sensitivity to gas price fluctuations. The company remains particularly exposed to this situation since its North American business is heavily dependent on gas drilling.

Nabors currently retains a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next 1 to 3 months.

Meanwhile, two firms in the oil and gas drilling sector with a favorable Zacks Rank are Ocean Rig UDW Inc. (ORIG) and Atwood Oceanics Inc. (ATW)! . Ocean Rig carries a Zacks Rank #1 (Strong Buy), while Atwood sports a Zacks Rank #2 (Buy).

Microsoft Finally Makes the Right Choice: CEO Ballmer Is Done

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Microsoft (NASDAQ: MSFT  ) is finally doing what it should have done years ago. Is this the start of a new era in Redmond, or is it a day late and a dollar short?

The world's largest software company is about to get a new CEO. Longtime leader Steve Ballmer will leave the CEO chair sometime in the next 12 months.

Investors love the very idea of losing Ballmer. Microsoft shares jumped as much as 9.4% on the news. That's good for a cool $28 billion in extra market cap value overnight, and the peak burst of positive energy added 23 points to the Dow Jones Industrial Average (DJINDICES: ^DJI  ) index.

5 Best Undervalued Stocks To Invest In Right Now

The announcement comes just weeks after Ballmer's latest radical reorganization of Microsoft's leadership teams, meant to transform the company into a "devices and services" operation. Ballmer puts a positive spin on the timing of it all, claiming that it's a good idea to bring aboard fresh long-term leadership in the middle of this important transformation. "There is never a perfect time for this type of transition, but now is the right time," Ballmer said in an internal memo.

I'm not sure I buy that argument.

This summer's reorg seemed like a power play that consolidates even more power in the CEO's office. Announcing your retirement right after an audacious power grab doesn't make much sense. I'd argue that the board of directors finally got tired of Ballmer's antics and pushed him out, as graciously as possible.

Feel free to refute my conclusion in the comments box below, but keep in mind that Ballmer isn't part of the team that's looking for a successor. His input on who's to sit in his chair next will be, shall we say, limited.

Instead, the special committee is chaired by Microsoft's lead independent director, John Thompson. Chairman and industry legend Bill Gates is on the team, alongside the chairs of the audit and compensation committees.

And if you thought this crack team would look only at internal promotion candidates, headhunter firm Heidrick & Struggles (NASDAQ: HSII  ) is there to vet the field of outsider candidates. It's a high-profile contract for Heidrick, but the stock fell 0.7% today anyhow. The lack of popping champagne corks in the company's Chicago headquarters is an indication of just how tough this recruitment drive will be.

Many single-day price jumps are destined to fade away, but this one makes sense in a long-term perspective. Ballmer's heavy-handed management style and lack of innovative vision held the company back over the last 13 years. Replacing him won't automagically fix all of Microsoft's problems, such as missing out on the mobile computing trend and botching the Windows 8 release several times over, but it's definitely a step in the right direction.

The tech world has been thrown into chaos as the biggest titans invade one another's turf. At stake is the future of a trillion-dollar revolution: mobile. Microsoft could use a top-tier talent in Ballmer's old office to secure a long-term place in the new era. To find out which of these rivaling giants is set to dominate the next decade, we've created a free report called "Who Will Win the War Between the 5 Biggest Tech Stocks?" Inside, you'll find out which companies are set to dominate and give in-the-know investors an edge. To grab a copy of this report, simply click here -- it's free!

The Winners and Losers From China's Slowdown

Best Insurance Stocks To Invest In 2014

In the throes of global meltdown a few years ago, 10% per year average GDP growth in China acted as a salve for a world in economic pain.

Now that China's double-digit growth is beginning to slow down to a 7.5% annual rate while the developed economies continue to merely sputter ahead, the question is what impact that will have on the world economy, and who will prosper, and who will falter, from China's slower growth.

The Financial Times’ economics editor explores this question in an analysis published this week, offering reassurance on what might at first glance appear to be unmitigated bad news.

First of all, the Financial Times’ economics editor Chris Giles points out that slower growth today is worth more than more rapid growth in the past:

“Slowing and rebalancing in China might hurt some but the effects should not be exaggerated. When China started to grow at 10% a year in the early 1980s, its expansion was as valuable for the world economy as the U.S. growing at 1 per cent. It was nice to have but easy to ignore. Over a quarter century of phenomenal Chinese growth, if its economy expands by 8% today, it is the equivalent of the U.S. growing 4%.”

So at a 7.5% clip, China’s contribution to global demand is second to none, he argues.

Most vulnerable to the slowdown are commodity-exporting countries like Australia. Yet while China’s rapid growth and insatiable demand led to a commodities “supercycle” that saw its share of demand for nickel, for example, rise from 6% to 45% of global demand between 2000 and 2010, slower growth still means supply will have to increase to meet demand.

“So, for example, 5% growth in demand translates to an additional 420,00 tonnes of copper consumption,” Giles points out.

What’s more, not all commodities will face the same slowdown. China’s ambition to boost its people’s consumption away from its previous investment focus should be good news for oil producers (as Chinese buy more cars) and meat suppliers (as the Chinese progress  toward a richer diet).

Indeed, PSA Peugeot Citroen, Ford and GM are among the car companies that are busy opening new auto plants in China, where the country’s 60 cars per 1,000 people remains distant from the EU rate of 500 cars, Giles writes.

Manufacturing is another mixed bag. Giles notes that German exports fell in the year through Q1 2013, but cites a survey of German businesses, a plurality of whom express confidence that conditions will improve in the balance of the year.

The luxury goods market has been hit especially hard, with Swiss watch exports, for example, falling 25% in the beginning of the year. But Giles cites encouraging news in other areas—such as British high end retailer Burberry’s double digit sales growth and estimates that the sector will see a slowdown that, while less than recent glory days, remains at a higher rate than other parts of the world.

Bond yields may fall in coming months: Mecklai

European credit markets remained under severe stress for most parts of last year, being weighed down by intensifying sovereign debt worries across the 17-member area. With banks across Euro area facing severe liquidity crunch, the ECB conducted Long-Term Refinancing Operation (LTRO) on 21st Dec 2011, in which unlimited funding were provided to several EU banks. This in turn led to considerable fall amongst most EU government bond yields, as funds flowed from banks into the credit markets.

With the ECB set to allot funds to EU banks later today via the second round of LTRO, we may see a similar fall in bond yields in the months to come.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click here

Is This The Turn For Check Point?

10 Best Performing Stocks To Watch Right Now

Waiting for the right time to jump into Check Point Software (Nasdaq:CHKP) was a trying exercise as the company's product revenue growth continued to grind lower and then turn negative. And now with the shares up almost one-quarter over the last three months, it looks like Wall Street has already moved on the recovery trade. The one solace for investors who've missed the move (myself included) is that even with exceptionally conservative assumptions, Check Point still does not look like an expensive stock and this company virtually mints money.

Results Still Weak, But Are They Turning?
At the risk of being accused of trying to spin Check Point's results in a positive light, I think this is a case where soft-looking results are actually starting to look better.

Revenue was up 4% this quarter and slightly ahead of expectations (less than 1%). More interesting to me is that the revenue was up 5% sequentially. Likewise in product revenue – year-on-year, Check Point saw another decline (-2%), but revenue grew 13% on a sequential basis.

SEE: 5 Earnings Season Investing Tips

Margin and profit performance was likewise somewhat lackluster, and without the same sequential improvements. Gross margin was basically flat on a year-on-year basis, and down slightly sequentially, while operating income rose 2% from last year and fell 3% sequentially.

Will The Trade-Down Ease Off?
One of the challenges that Check Point has been dealing with, in addition to the generally unappetizing IT spending environment, is that its systems are arguably too good for the company's own good. In many cases, customers have stuck with Check Point products, but taken advantage of the constant improvements to upgrade the performance relative to their existing system, but at a lower price (in other words, the "feature-adjusted" price is now lower).

Hopefully Check Point is largely past that cycle. At the same time, the company has introduced two new attractive appliance lines (the 600 and 1100) that should help perk up revenue later this year, the former (the 600) offering an interesting potential challenge to Fortinet (Nasdaq:FTNT) in the smaller business space. Elsewhere, the company is turning more of its attention to threat emulation (where it will challenge Palo Alto Networks (Nasdaq:PANW) and mobile information protection. Of course, Palo Alto isn't going to take this lying down, and major rivals like Cisco (Nasdaq:CSCO) and smaller contenders like Fortinet and Sourcefire (Nasdaq:FIRE) aren't going to ease up either.

Will The Market Allow For Continued Success?
I do still see some threats to the Check Point story. For starters, I would expect that the weak IT environment has clients/customers increasingly pitting companies against each other in the attempt to force one to cave on price to get the deal. Longer term, I wonder if the trend towards consolidating data centers and shifting more business towards PaaS vendors like Amazon (Nasdaq:AMZN) is going to undermine market growth – although Check Point could actually benefit from that, as they would seem to be better-suited to meet the higher demands of a larger, consolidated data center.

SEE: A Primer On Investing In The Tech Industry

I'm also still concerned with margins and cash flow generation. You just don't see companies regularly convert 60% of revenue to cash flow, and I don't expect Check Point to be able to keep it up. Consider the 600 appliance, for instance. I just don't see how the SMB market will support 50%-plus operating margins, so Check Point is going to have to think about how much margin it is willing to trade for better growth.

The Bottom Line
For as long as I've followed Check Point (and thought the stock was undervalued), missing the roughly 25% move over the past quarter has been aggravating and frustrating. That said, I think this "meet and maintain" quarter will represent the bottom of the cycle, and I believe the company should start reporting better growth in the coming quarter. It won't be the sort of growth that has investors confusing this company with Palo Alto, but any growth will help at this point.

Even very conservative assumptions suggest these shares are still cheap. If I project 5% revenue growth and less than 2% free cash flow growth (assuming a big reduction in margins/free cash flow margin), the resulting fair value is still more than $61. Moreover, with Check Point having so much cash on hand that management could take Scrooge McDuck-style swims through it, the opportunity to add growth through acquisition or continue on with substantial buybacks should help underpin the shares.

Top 5 Warren Buffett Stocks To Own Right Now

Last week, we had started a series on the study of annual letters that legendary investor Warren Buffett wrote every year to the shareholders of his investment vehicle, Berkshire Hathaway. We discussed some key points in the letter for the year 1977 in the previous write up. In this write up, let us see what the master has to say to his shareholders in the 1978 letter:

"The textile industry illustrates in textbook style how producers of relatively undifferentiated goods in capital intensive businesses must earn inadequate returns except under conditions of tight supply or real shortage. As long as excess productive capacity exists, prices tend to reflect direct operating costs rather than capital employed. Such a supply-excess condition appears likely to prevail most of the time in the textile industry, and our expectations are for profits of relatively modest amounts in relation to capital. We hope we don't get into too many more businesses with such tough economic characteristics."

Top 5 Warren Buffett Stocks To Own Right Now: Mph Ventures Corp. (MPS.V)

MPH Ventures Corp., an exploration stage company, engages in the acquisition, exploration, and development of resource properties in Canada. The company primarily explores for molybdenum and gold deposits. It has interests in various properties located throughout northern Ontario, including properties near Timmins, Ontario. The company is based in Vancouver, Canada.

Top 5 Warren Buffett Stocks To Own Right Now: Pci Ltd (P19.SI)

PCI Limited, an investment holding company, provides electronics manufacturing services in the United States, the People�s Republic of China, British Virgin Islands, Singapore, ASEAN, Britain, and Australia. It offers a suite of design services, such as schematic design, board layout, component selection, firmware design, and mechanical design. The company offers various manufacturing supply chain services, including design, manufacturing engineering, material sourcing and procurement, assembly, test, and logistics services. Its manufacturing services include printed circuit board assembly; customer user interface design and manufacture; and turnkey electronics manufacturing services. The company�s project portfolio comprises networking and wireless communications products, mobile digital appliances, liquid crystal modules for mobile communications products, and control panels for computer peripherals, as well as a range of medical, industrial, and automotive products. I t is also involved in the rental of properties; and provision of estate management, and research and development services. The company was founded in 1972 and is headquartered in Singapore. PCI Limited is a subsidiary of Chuan Hup Holdings Limited.

Hot Insurance Companies To Watch In Right Now: Palo Duro Energy Inc (PDE.V)

Palo Duro Energy Inc. engages in the exploration and development of oil and gas properties in the United States. It holds a 27% working interests in the Palo Duro Basin oil and gas fields in northwest Texas; and a 23% working interests in approximately 48,810 acre project located in McLennan County, Texas. The company is based in Vancouver, Canada.

Top 5 Warren Buffett Stocks To Own Right Now: Diana Containerships Inc.(DCIX)

Diana Containerships Inc. owns and operates containerships in Greece. The company engages in the seaborne transportation of semi-finished and finished consumer and industrial products. As of February 23, 2012, its fleet consisted of 8 containerships with a carrying capacity of approximately 32,693 twenty-foot equivalent units. Diana Containerships Inc. was founded in 2010 and is based in Athens, Greece.

Top 5 Warren Buffett Stocks To Own Right Now: LightPath Technologies Inc.(LPTH)

LightPath Technologies, Inc. engages in the design, development, manufacture, and distribution of optical components and assemblies in the United States and internationally. It offers precision molded glass aspheric optics, precision molded infrared molder optics, isolators, proprietary fiber-optic collimators, GRADIUM glass lenses, and other optical materials used to produce products that manipulate light. The company?s products are used for various applications in industries comprising defense products, medical devices, laser aided industrial tools, automotive safety applications, barcode scanners, optical data storage, hybrid fiber coax datacom, telecom, machine vision, and sensors. It sells its products through direct sales force, distributors and channel partners, catalog distributors, and own catalog and Internet site. The company was founded in 1985 and is headquartered in Orlando, Florida.

Mecklai graph: US 10-year bonds, safest heaven

The US 10-year yield approached an eight month high over the same-maturity German bunds on speculation the U.S. economy will grow faster than Europe's in 2013. The spread widened to 41 basis points on Dec. 18, which was the most since April. German bonds advanced this year as Europe's debt crisis drove demand for the relative safety of the nation's securities.

In the recent past, Treasuries lagged as the U.S. unemployment rate fell to 7.7 percent in November, the lowest level since 2008. The economy has recovered pretty well despite looming concerns of fiscal cliff. It is expected to expand 2 percent in 2013 versus 0.8 percent for Germany. All in all, data suggests that traders and investors all over the world are expecting US economy to do better than Europe and uncertainty in the latter will remain for most part of next year as well. Going ahead, German bunds will be the preferred investment destination despite yielding negative returns even as euro leaders mull over ways to get out of maze of euro-crisis.

Below graph compares US ten yields with German ten year yield since Jan 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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Top 5 Growth Companies To Invest In Right Now

LONDON -- If you want to be eligible for a dividend payment, or if you're watching for possible share-price falls, keeping up with ex-dividend dates can prove beneficial. So long as you hold the shares up to and including that day, you'll get your dividend money.

We have a number of companies from the FTSE 100 reaching their crucial dates next week. Here are three that will go ex-dividend next Wednesday, June 19.

Severn Trent (LSE: SVT  )
Severn Trent declared a final dividend of 45.51 pence per share in May to provide a full-year dividend of 75.85 pence per share -- a rise of 8.2% on the previous year. That provides a yield of 4.3% on a share price of 1,760 pence. At the same time, the water company said its full-year dividend would be lifted by a further 6% to 80.4 pence per share, in line with the group's policy of maintaining growth equal to Retail Price Index plus 3%.

Top 5 Growth Companies To Invest In Right Now: Buffalo Wild Wings Inc.(BWLD)

Buffalo Wild Wings, Inc. engages in the ownership, operation, and franchise of restaurants in the United States. The company provides quick casual and casual dining services, as well as serves bottled beers, wines, and liquor. As of July 26, 2011, it had 773 Buffalo Wild Wings locations in 45 states in the United States, as well as in Canada. The company was founded in 1982 and is headquartered in Minneapolis, Minnesota.

Advisors' Opinion:

• [By Fabian]  

  While Chipotle has captured most of the attention among the restaurant stocks, Buffalo Wild Wings (BWLD: 56.62 0.00%) could be 2011’s big winner. Wall Street is expecting 19% earnings growth from Buffalo Wild Wings in 2011 which is only slightly lower than Chipotle’s 20% growth rate. However, BWLD trades at only 18x consensus 2011 estimates while CMG trades at a pricey 40x. On an EBITDA basis, Chipotle trades at over 20x, while Buffalo Wild Wings trades at less than 9x.

Top 5 Growth Companies To Invest In Right Now: MEDIFAST INC(MED)

Medifast, Inc., through its subsidiaries, engages in the production, distribution, and sale of weight management and disease management products, and other consumable health and diet products in the United States. The company?s product lines include weight and disease management, meal replacement, and vitamins. It also operates weight control centers that offer Medifast programs for weight loss and maintenance, customized patient counseling, and inbody composition analysis. The company markets its products under the Medifast and Essential brand names, including shakes, appetite suppression shakes, women?s health shakes, diabetics shakes, joint health shakes, coronary health shakes, calorie burn drinks, calorie burn flavor infusers, antioxidant shakes, antioxidant flavor infusers, bars, crunch bars, soups, chili, oatmeal, pudding, scrambled eggs, hot cocoa, cappuccino, chai latte, iced teas, fruit drinks, pretzels, puffs, brownie, pancakes, soy crisps, crackers, and omega 3 and digestive health products. Medifast Inc. sells its products through various channels of distribution comprising Web, call center, independent health advisors, medical professionals, weight loss clinics, and direct consumer marketing supported via the phone and the Web; Take Shape for Life, a physician led network of independent health coaches; and weight control centers. The company was founded in 1980 and is headquartered in Owings Mills, Maryland.

Advisors' Opinion:

• [By Holly LaFon] Medifast produces, distributes and sells weight and health management products with the brand names Medifast, Take Shape for Life, Hi-Energy Weight Control Centers and Woman�� Wellbeing.
  
  Its return on assets in the third quarter of 2011 was 19.6%, which has been increasing in the past several years. The average return on assets for the specialty retail industry is 10.48% for the trailing 12 months.
  
  
  
  The company�� total assets amounted to $94 million in 2010, which increased from $62.8 million in 2009. Net income also increased to $19.6 million in 2010 from $12 million in 2009.
• [By Mark]

  Revenues are expected to grow 27% next year and yet MEDIFAST (MED: 15.68 0.00%) trades at only 16x consensus 2011 earnings. The company continues to gain market share in the competitive weight management sector and provides investors with the double benefit of both a growth stock and a potential acquisition target.

5 Best Stocks To Buy Right Now: Eastern Insurance Holdings Inc.(EIHI)

Eastern Insurance Holdings, Inc., through its subsidiaries, provides workers compensation insurance and reinsurance products in the United States. The company?s Workers Compensation Insurance segment provides traditional workers compensation insurance coverage products, including guaranteed cost policies, policyholder dividend policies, retrospectively-rated policies, deductible policies, and alternative market products to employers. This segment distributes its workers? compensation products and services through its independent insurance agents primarily in Pennsylvania, Delaware, North Carolina, Maryland, Indiana, and Virginia. Its Segregated Portfolio Cell Reinsurance segment offers alternative market workers compensation solutions comprising program design, fronting, claims administration, risk management, segregated portfolio cell rental, asset management, and segregated portfolio management services to individual companies, groups, and associations. Eastern Insurance Holdings, Inc. is headquartered in Lancaster, Pennsylvania.

Top 5 Growth Companies To Invest In Right Now: Checkpoint Systms Inc.(CKP)

Checkpoint Systems, Inc. manufactures and markets identification, tracking, security, and merchandising solutions for the retail and apparel industry worldwide. The company operates in three segments: Shrink Management Solutions, Apparel Labeling Solutions, and Retail Merchandising Solutions. The Shrink Management Solutions segment provides shrink management and merchandise visibility solutions. It offers electronic article surveillance systems, such as EVOLVE, a suite of RF and RFID-enabled products that act as a deterrent to prevent merchandise theft in retail stores; and electronic article surveillance consumables, including EAS-RF and EAS-EM labels that work in combination with EAS systems to reduce merchandise theft in retail stores. This segment also provides keepers, spider wraps, bottle security, and hard tags, as well as Showsafe, a line alarm system for protecting display merchandise. In addition, it offers physical and electronic store monitoring solutions, incl uding fire alarms, intrusion alarms, and digital video recording systems for retail environments; and RFID tags and labels. The Apparel Labeling Solutions segment provides apparel labeling solutions to apparel retailers, brand owners, and manufacturers. It has Web-enabled apparel labeling solutions platform and network of 28 service bureaus located in 22 countries that supplies customers with customized apparel tags and labels. The Retail Merchandising Solutions segment offers hand-held label applicators and tags, promotional displays, and queuing systems. The company serves retailers in the supermarket, drug store, hypermarket, and mass merchandiser markets through direct distribution and reseller channels. Checkpoint Systems was founded in 1969 and is based in Thorofare, New Jersey.

Advisors' Opinion:

• [By Michael]

  OK, so Checkpoint (CKP: 13.80 0.00%) probably isn’t going to see its stock price double in 2011. However, the stock gained 35% in 2010 with earnings expected to climb 13%. Next year, Wall Street sees earnings growth accelerating to 25%. Despite the impressive growth rate, the stock trades at only 16x next year’s earnings estimates and analysts have a $25 price target for CKP.

Top 5 Growth Companies To Invest In Right Now: Waste Management Inc.(WM)

Waste Management, Inc., through its subsidiaries, provides waste management services to residential, commercial, industrial, and municipal customers in North America. It offers collection, transfer, recycling, and disposal services. The company also owns, develops, and operates waste-to-energy and landfill gas-to-energy facilities in the United States. Its collection services involves in picking up and transporting waste and recyclable materials from where it was generated to a transfer station, material recovery facility, or disposal site; and recycling operations include collection and materials processing, plastics materials recycling, and commodities recycling. In addition, it provides recycling brokerage, which includes managing the marketing of recyclable materials for third parties; and electronic recycling services, such as collection, sorting, and disassembling of discarded computers, communications equipment, and other electronic equipment. Further, the company e ngages in renting and servicing portable restroom facilities to municipalities and commercial customers under the Port-o-Let name; and involves in landfill gas-to-energy operations comprising recovering and processing the methane gas produced naturally by landfills into a renewable energy source, as well as provides street and parking lot sweeping services. Additionally, it offers portable self-storage, fluorescent lamp recycling, and medical waste services for healthcare facilities, pharmacies, and individuals, as well as provides services on behalf of third parties to construct waste facilities. The company was formerly known as USA Waste Services, Inc. and changed its name to Waste Management, Inc. in 1998. Waste Management, Inc. was incorporated in 1987 and is based in Houston, Texas.

Advisors' Opinion:

• [By Tom Konrad]

  The only household name in this year's list, Waste Management is coming back for an encore performance in 2013.  WM is the North American leader in recycling and renewable biogas among waste and environmental services companies.  The industry has been in a cyclical downturn, and WM's well-covered 4.2% dividend makes it a solid anchor for this portfolio of small and micro-cap clean energy stocks.

• [By Sam Collins]

  Houston-based Waste Management Inc. (NYSE: WM) is the largest trash hauling/disposal company in the United States. This company is a model for steady growth with earnings increasing steadily over many years.?

  S&P has a “four-star buy” on WM with a 12-month target of $42. WM pays an annual dividend of $1.36 for a yield of 3.7%.?

  Technically, the stock is in a powerful bull channel with support at $36 and resistance at $39. Buy WM as a long-term growth opportunity.

Will US Airways Climb Higher?

With shares of US Airways (NYSE:LCC) trading around $16, is LCC 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

US Airways operates and owns passenger and freight airline carriers. Consumers and companies across the nation are now looking to travel at an increasing rate. Since air travel is quicker and is becoming less expensive, it is becoming a common transportation method for many. As costs decrease and flights become more efficient, look for business and retail customers to fly more than ever.

Recently, US Airways and American Airlines proposed an $11 billion merger that is coming under scrutiny because of concerns that certain cities will lose hubs or face cutbacks. The deal will also be investigated for its impact on consumers and competition. Companies and consumers worldwide look to travel at increasing rates since air travel is quicker and is becoming less expensive. As costs decrease and flights become more efficient, US Airways stands to see soaring profits as consumers and businesses look to air travel as a viable option.

T = Technicals on the Stock Chart are Mixed

US Airways stock has been flying higher over the last year or so and looks to still have room to go. However, the stock is now digesting gains from a recent run so it will need to form a base before it really gets going. 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, US Airways is trading between its rising key averages which signal neutral price action in the near-term.

(Source: Thinkorswim)

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

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
US Airways Options	49.89%	90%	88%

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
July Options	Flat	Average
August 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 US Airways’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for US Airways look like and more importantly, how did the markets like these numbers?

	2013 Q1	2012 Q4	2012 Q3	2012 Q2
Earnings Growth (Y-O-Y)	-7.14%	63.41%	202.40%	214.30%
Revenue Growth (Y-O-Y)	3.45%	3.90%	2.82%	7.17%
Earnings Reaction	5.02%	1.48%	2.31%	-3.79%

US Airways has seen mostly increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with US Airways’s recent earnings announcements.

P = Weak Relative Performance Versus Peers and Sector

How has US Airways stock done relative to its peers, Southwest Airlines (NYSE:LUV), Delta Air Lines (NYSE:DAL), United Continental (NYSE:UAL), and sector?

	US Airways	Southwest Airlines	Delta Air Lines	United Continental	Sector
Year-to-Date Return	23.26%	25.68%	61.75%	36.57%	33.82%

In a strong sector, US Airways has been a weak relative performer, year-to-date.

Conclusion

US Airways is a passenger and freight airline during a time when consumers and companies are utilizing air travel more than ever. A recent proposed merger with American Airlines is coming under scrutiny which may stall a run in the stock. The stock is now currently digesting gains from a recent move higher so it may need to trade sideways a bit before it gets going. Over the last four quarters, earnings and revenue figures have been on the rise so investors in the company have been pleased. Relative to its strong peers and sector, US Airways has been a weak year-to-date performer. WAIT AND SEE what US Airways does this remaining quarter.

Is Starbucks Stock A Buy At All-Time Highs?

With shares of Starbucks (NASDAQ:SBUX) trading around $62, is SBUX 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

Starbucks is a roaster, marketer ,and retailer of coffee operating worldwide. The company purchases and roasts coffees that it sells, along with handcrafted coffee, tea and, other beverages and a variety of fresh food items, through its stores. It also sells a variety of coffee and tea products and licenses its trademarks through other channels, such as licensed stores and national food service accounts. In addition to its flagship Starbucks brand, the company's portfolio also includes Tazo Tea, Seattle's Best Coffee, Starbucks VIA Ready Brew, Starbucks Refreshers beverages, and the Verismo System by Starbucks. Starbucks has developed an amazing reputation over the last several years, which has generated a lot of buzz for its products. Consumers continue to enjoy Starbucks branded products around the world which will surely lead to rising profits.

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T = Technicals on the Stock Chart are Strong

Starbucks stock has witnessed a powerful bid extending back to early 2009. The stock is now digesting gains slightly below all-time high prices so it may need a little time to breathe here. 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, Starbucks is trading above its rising key averages which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

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

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Starbucks Options	24.59%	90%	88%

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
July Options	Flat	Average
August 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 Starbucks's stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Starbucks look like and more importantly, how did the markets like these numbers?

	Hot Heal Care Stocks To Buy For 2014 2013 Q1	2012 Q4	2012 Q3	2012 Q2
Earnings Growth (Y-O-Y)	27.50%	14%	-0.51%	19.44%
Revenue Growth (Y-O-Y)	11.26%	10.59%	10.96%	12.67%
Earnings Reaction	-0.82%	4.1%	9.05%	-9.4%

Starbucks has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been mixed about Starbucks's recent earnings announcements.

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P = Average Relative Performance Versus Peers and Sector

How has Starbucks stock done relative to its peers, Green Mountain Coffee Roasters (NASDAQ:GMCR), McDonald's (NYSE:MCD), Dunkin' Brands (NASDAQ:DNKN), and sector?

	Starbucks	Green Mountain Coffee Roasters	McDonald's	Dunkin' Brands	Sector
Year-to-Date Return	16.69%	76.12%	9.38%	21.70%	15.29%

Starbucks has been an average relative performer, year-to-date.

Conclusion

Starbucks provides highly demanded food and beverage products, through a variety of mediums, to consumers and companies worldwide. The stock has witnessed a powerful bid which has pushed it to all-time high prices where it is currently taking a breather after a strong run. Over the last four quarters, earnings and revenue figures have risen, however, investors may be expecting a little more from the company. Relative to its peers and sector, Starbucks has been an average year-to-date performer. Look for Starbucks to OUTPERFORM.

Francesca's Holdings: High Quality Retailer, Currently At A Bargain Bin Price

The consumer retail segment is one of my favorite areas to invest in, as it remains a relatively easy business for investors to evaluate and understand. For the most part, all that is necessary for a successful investment in the retail industry is a consistently strong and unique core product line that has the potential for significant expansion. While there are numerous mid-cap companies that I feel offer this kind of aggressive growth, one of which I own in Under Armour Inc. (UA) and another that I'd like to own in Michael Kors Holdings Ltd. (KORS), there are surprisingly not many small-cap companies that meet this criteria.

However, one company that has recently come to my attention seems to fit the mold quite well, Francesca's Holdings Corporation (FRAN). As a specialty retailer with a penchant for creating unusually high demand for its product line, Francesca's Holdings has fostered its image among consumers as an upscale boutique with an independent streak. By introducing new but limited product lines weekly, the company's stores have the rare ability to remain popular and innovative amongst consumers, all while being positioned with few direct competitors outside of local establishments.

When compared to most retail stocks of similar size, Francesca's Holdings offers vastly superior growth prospects at comparable valuation multiples. Currently, FRAN is unloved by the majority of investors and shares are off more than 30% from all time highs. This presents investors with a rare opportunity to own superior retail growth at bargain pricing.

The Company:

Francesca's Holdings Corporation operates primarily as a specialty, boutique retailer in The United States. The company sells clothing apparel, jewelry and accessories to its core target audience of female shoppers, 18-35 years old. According to the company's website, Francesca's store locations are "designed and merchandised to feel like independently owned, upscale boutiques and provide our customers with an invi! ting, intimate and differentiated shopping experience."

Originally founded in 1999, the company's first boutique shop was opened in Houston, Texas. In the past 14 years, the company has rapidly expanded its store count to include over 400 locations, as of June 2013, across 45 states in the US. The Texas-based company also operates a popular website, francescas.com, that ships the retailer's limited supply items throughout the continental United States.

The Stock:

Unfortunately, performance for shares of FRAN has been relatively weak since the company's initial public offering of stock a little over two years ago. FRAN has significantly underperformed many of its peers as well as the general indices by a wide margin. The following is a breakdown of the equity's performance since its IPO on July 21, 2011 compared to the S&P 500 (SPY) index:

Equity/Index	FRAN	SPY
Return Since 7/21/11	-11.3%	31.33%
1-Yr. Return	-20.2%	23.84%
YTD Return	-5.4%	19.85%

(Numbers from YCharts.com, as of 8/07/13, numbers include dividends reinvested where applicable)

On every major comparative basis, FRAN has underperformed the S&P 500 significantly over the last two years, which is especially concerning considering the consumer retail sector as a whole has fared very well in the stated time period. The following is a two-year chart of FRAN (included are 50-day 100-day, 200-day moving averages as well as MACD and slow stoc! hastic in! dicators):

(click to enlarge)

(Chart courtesy of Yahoo! Finance, as of 8/06/13)

The two-year chart of FRAN, which begins a few weeks after the company's IPO, is not strong as an overall uptrend has yet to be established. MACD and stochastic indicators show heavy and extended selling pressure amidst relatively weak buying pressure. Also worth noting is that shares of FRAN are currently trading below all major moving average support and as such remain susceptible to further price declines. From a technical perspective, FRAN's chart is very weak and warrants caution going forward.

Growth and Valuation:

For comparative purposes, alongside Francesca's Holdings I have chosen to include the growth rates of ANN Inc. (ANN), owner and operator of Ann Taylor and LOFT brands, and Chico's FAS Inc. (CHS). Although Francesca's Holdings manages to separate itself from the majority of companies that target similar consumer groups, ANN and CHS are of similar size, in terms of market capitalization, and operate in similar retail segments and therefore serve as reliable comparisons.

7.85%

Company*	ANN	CHS	FRAN
Revenue Growth (2013)	6.4%	5.7%	26%
Revenue Growth (2014)	6.6%	10%	20.9%
Revenue Growth (2-Yr. Avg.)	6.5%	23.45%
EPS Growth (2013)	5.9%	5.5%	23.8%
EPS Growth (2014)	16.4%	16.5%	22.3%
EPS Growth (2-Yr. Avg.)	11.15%	11%	23.05%

(Numbers from Yahoo! Finance, as of 8/07/13)

*All three listed companies' current fiscal years end in January 2014

Even though all three companies are projected to grow revenue and earnings per share at solid rates in 2013-2014, FRAN is expected to experience growth in both areas that is more than double that of ANN and CHS on average. Particularly strong in comparison to peers is FRAN's revenue growth, which is projected to be approximately three times that of both ANN and CHS over the next two years.

Considering the vastly superior growth that is currently projected for FRAN, investors might expect the stock to trade at valuation levels that greatly exceeds those of its peers. Fortunately, that is not the case. The following is a breakdown of all three companies' current and future price/earnings ratios:

Company	ANN	CHS	FRAN
Trailing P/E	16.38	15.34	22.28
! Forwar! d P/E	12.91	12.24	15.28

(Numbers from Yahoo! Finance, as of 8/07/13)

While FRAN is the most expensive out of all listed peers on both a trailing 12-month basis and a future 12-month basis, the stock's valuation appears compelling considering the company's robust growth relative to peers. On a forward-looking basis, FRAN's P/E of 15.28 is not too out of line with ANN's 12.91 and CHS's 12.24 despite the stock being projected to offer nearly triple the revenue growth and more than double the EPS growth of both listed competitors.

Growth Catalysts:

What makes Francesca's Holdings stand out from the majority of large-scale, specialty retail competitors is the company's ability to constantly update its product inventory, which it accomplishes by delivering new items to stores every five days, and the limited availability of the brand's popular wares. With this successful strategy already in place and proven, management has a three-pronged approach to deliver consistent growth going forward.

The three main drivers of growth for the company are expansion via new boutique opening initiatives, growth in the brand's direct to consumer channel and various operational improvements. Of paramount importance, and despite investors' seeming disregard for the fact, is that Francesca's Holdings' recent earnings release and conference call seemed to confirm that the company is making significant progress in all three regards.

In terms of new store openings, Francesca's Holdings is expanding at a blistering pace. The company managed to open 56 new boutiques in the first quarter alone, which is equal to 13.86% growth of the total store count and up significantly from Q1 2012, which saw the company open up 44 new locations. Perhaps even more impressive is that management also raised store growth guidance in the most recent earnings call and now expects to! open a t! otal of 85 new stores in fiscal 2013 instead of the previously anticipated 80. CEO Neill P. Davis explained, "Several new location opportunities have materialized over the course of the first quarter. And as a result, we're expanding our new boutique-opening target for the full year to 85."

This recently depicted growth in store locations for Francesca's Holdings should give investors confidence that management will be able to make good on their stated goal of reaching 900 total locations for The United States in the future. At the end of 2013, management expects the company's store count to be 445, which would be 49% of the long-term goal of 900 domestic locations.

Moving past 2013, management has already begun to send out letters of intent to open at least an additional 60 locations in fiscal 2014. Considering that growth in store openings is slowing, as 2012 saw 26.85% growth, 2013 is projected to see 23.6% growth and 2014 is tentatively projected to see 13.48%, a very conservative approach would be to estimate 10% growth in store openings after 2014. At this rate, Francesca's Holdings would reach management's goal of 900 locations in six and a half years. Of course, management's willingness to capitalize on burgeoning opportunities, as it has this year by planning to open an extra 5 stores, suggests that the goal of 900 domestic locations could happen much sooner.

Secondly, management at Francesca's Holdings has taken strides to improve the company's online experience in what seems like an attempt to make the website more comparable to the unique boutique store experience and this strategy runs parallel with management's plans to improve operating efficiency. Since the beginning of a major overhaul in late 2012, which focused on providing a cleaner and more easily navigable interface, the site has experienced increased user traffic and conversion rates, which has led to a 23% gain in the company's email address database over the prior quarter.

Additionally, the process is sti! ll ongoin! g and management expects to make further progress in terms of increased customer service, personal shopping and improved data collection. Perhaps the largest potential driver of growth, which has remained essentially unmentioned by management, is the opportunity for expansion of the online business into new geographic markets. Currently, francescas.com does not ship to Alaska, Hawaii or any U.S. territories as well as Post Office boxes or Army Post Office boxes. Most importantly, the company does not ship internationally and this could be a potential massive driver of growth, as the company's unique shopping experience should have little trouble translating well overseas.

In summation, Francesca's Holdings' biggest strength is its brand's ability to remain new and fresh in the minds of its target audience. As long as the company can successfully drive demand for its wares through constant new product introduction and limited supply runs, then the growth that comes from new store openings and broader direct to consumer channels will inevitably follow.

Risks:

A primary concern for investors is a potential slowdown in revenue and earnings per share growth, especially because the company's currently above average projected growth is what allows it to carry a higher multiple than peers. This was exemplified in Francesca's Holdings' most recent conference call in which the company's reported net revenue of $79 million fell slightly short of the consensus estimate of $79.56 million.

However, more concerning is that management also provided ranges of revenue and EPS guidance for the rest of fiscal 2013 that were again slightly below the average analyst estimates. Management now expects fiscal 2013 EPS to be in a range of $1.27-$1.30, which is down to flat from the average estimate of $1.30, and revenue to be in a range of $365-$370 million, which is down to flat from the average estimate of $370 million. It is worth noting that fiscal 2013 EPS and revenue could still come in at the highe! r end of ! the company's range, which would be in-line with Wall Street estimates and would make the stock's selloff unwarranted.

Perhaps most important is that the company's recent earnings and guidance, as disappointing as they may be to some investors, still show year-over-year growth in terms of both revenue and earnings per share. In the most recently reported quarter, EPS grew an impressive 30% year-over-year while revenue grew 28.83%. Also, management's guidance still calls for yearly EPS growth of 22%-25% and yearly revenue growth of 23.1%-24.8%.

Conclusion:

Francesca's Holdings is a unique retailer that has an edge in the competitive world of women's retail. With an interesting ability to keep company-owned stores fresh and exciting by way of a constantly updated and limited product inventory, the company will most likely be able to capitalize on rising consumer sentiment and spending in the future. Although there is still significant room for growth in domestic markets, including a store count that could stand to double in six years or less, the as of yet untapped international potential for the Francesca's brand likely remains the largest catalyst for the company's future growth.

As a stock, FRAN offers robust growth that outclasses most of its competitors in terms of both revenue and earnings per share, all while trading at only slightly elevated valuation multiples. Despite the company's most recent earnings/guidance coming in slightly below expectations, the fact remains that the stock is still poised to grow aggressively on a year-over-year basis. Although the stock's current downtrend is disappointing, it is also what is providing investors with the rare opportunity to purchase an above-average retailer at average valuation levels.

Source: Francesca's Holdings: High Quality Retailer, Currently At A Bargain Bin Price

Disclosure: I am long UA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

GBP/USD holding onto the 1.5500 handle

FXstreet.com (Barcelona) - There is little change in the pair from the European shift.

There is also little data on the cards today which the market will pay much attention to in respect of cable other than the Initial Jobless Claims (July 27) that printed 333k vs 336k consensus and 328k previous. There was very little reaction. The market is still digesting the Inflation report and indeed it seems we will have to wait for the BoE minutes next for more clarification in respect to the guidance on interest rates. As a result of the report, markets now understand unemployment at 7% is the target and threshold where base rates might be considered again. Until then, QE could be extended should the economic conditions require it, but for the time being, the UK economy is set to improve without it at the slowest rate in history and rates are expected to remain on hold for an extended period of time. "What we have (a promise to keep rates here at least until unemployment falls to 7%, subject to inflation not being above 2½%) risks being undone by a combination of weak growth, falling unemployment and stubbornly high inflation. What then?" – said Kit Juckes, Global Head of FX Strategy, Societe Generale.

GBP/USD testing 1.5500 handle

GBP/USD has been offered through the 1.5500 handle in London markets. The 20 dma is 1.5288, 50 dma 1.5330, 200 dma 1.5536. RSI (9) reads 66.22. Supports are ascending from 1.5205, 1.5259, 1.5310, 1.5375, and 1.5490. Spot I currently testing the 1.5500 handle and resistances come in at 1.5534, 1.5565, 1.5603 and 1.5680.

Time To Sell Ford Motor Company

Since the near financial collapse of 2008/2009, automobile companies have seen significant rallies in share prices. One of the best performers since January 2009 has been Ford Motor Company (F). Ford shares have appreciated by an astonishing 498%. This is significantly better than the broader market (SPY), which has only appreciated by 93% over that same period. But instead of being excited about that, investors should thank their lucky starts and realize that now is the time to get out. Below are 3 reasons why investors should move rapidly to sell their existing long shares and / or initiate a short position.

Reason #1: Fundamental

On a fundamental basis, Ford simply isn't what it used to be. Ford's last annual statement was a complete disaster and sent the shares plunging. We can start by looking at Ford's balance sheet. The first concern was Ford's cash pile dropping (year over year) by 8.7% to $15.66 billion. At the same time, the company's total debt increased by approximately 5% to $105.06 billion. In addition to the increased debt, Ford's payables and accrued liabilities also increased. So in summary, the company's cash decreased and the amount owed increased. That doesn't sound like a promising combination.

Now if we switch gears and analyze the income statement, we will also see some discouraging signs. For 2012, the company generated $126.6 billion in revenue, a drop of 1.25% from 2011. Additionally, the company's net income fell dramatically from 2011. Below are Ford's annual net income numbers for the past 3 years:

2012: $5.66 billion2011: $20.2 billion2010: $6.56 billion

So as we can see, Ford's net income came in significantly lower than both of the previous years, despite an improving economy.

Most recently, the company reported its first quarter earnings of 2013. While they were certainly an improvement over the 2012 annual report, earnings were still a disappointment. The balance sheet once again showed a trend of decreasing cash and increasing d! ebt. Since the end of 2012, cash available decreased by 11.7% to $13.82 billion. Ford's debt increased by $2.35 billion to $107.35 billion.

The income statement was a little better. Revenues for the first quarter 2013 came in at $33.86 billion, an increase of $3.3 billion from the same period a year ago. The net income also improved by $220 million to $1.61 billion. However, one concern on the statement of cash flows is that the company's operating cash flow was only $211 million, compared to $2.1 billion for the first quarter of 2012.

So while the revenues would appear to give investors hope, the analysts disagree. While the expectation is for a 20% growth rate during the current quarter, the prediction is for a decline of 17.5% in the third quarter and a decline of just under 1% for the fourth quarter. These projections are especially disappointing given that each projection is less than the industry average.

Reason #2: Technical

In addition to the poor fundamentals and analyst estimates, the technical picture presents another compelling reason to sell Ford. Let's take a look at both a 5 year chart, a 1 year chart, and a 2 year chart of Ford.

(click to enlarge)

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(click to enlarge)

Let's start by looking at the first 2 charts, representing the 5 year and 1 year periods. The 5 year chart is what will probably catch investors' attention. Ford shares have appreciated by nearly 500% since the low in early 2009. This rally can be attributed, in part, to the government bailout package for the auto industry. For those lucky investors who ! were able! to buy in at the low, the returns have been impressive. And again, the 1 year chart is also impressive. During the past 52 weeks, Ford shares have appreciated by nearly 40%. Over this same period, the S&P Depository Receipts hasn't even returned 30%. So yes, Ford has had a great run.

Hot Growth Stocks To Watch For 2014

But, and this is a big but, the 2 year chart should give investors pause. If we calculate the return over the past 2 years, Ford has only returned 1.1%. Over this same 2 year period, SPY has returned 24.5%. So essentially, the share price increase over the past 52 weeks was just a recovery to where the shares were trading 2 years ago. Investors could have achieved significantly better returns in almost any other stock over that same 2 year period.

Reason #3: Lack Of Rechargeable Car Sales

One of the hottest areas in automobile sales is electric cars. This is a very competitive area, with Tesla (TSLA) recently demonstrating its supremacy when it reported its first quarter earnings. In the earnings report, Tesla announced that it sold 4,900 of its Model S sedans. This sales figure made the Model S the top selling rechargeable car during the first quarter 2013 in North America. It surpassed the following leading automobile companies:

General Motors (GM) sold 4,421 Volt plug-in hybridsNissan Motor (NSANY.OB) sold 3,695 Leaf vehicles

What's troubling is that the Ford Focus Electric wasn't even mentioned. Even more concerning is that we can go back to total annual sales for 2012 of electric cars and Ford still doesn't make the list. The top 3 selling electric vehicles for 2012 were the Chevrolet Volt (owned by General Motors), the Toyota (TM) Prius Plug-In, and the Nissan Leaf.

With electric cars starting to gain momentum, it's troubling that Ford is well behind the curve. In a recent interview with Bloomberg, Tesla CEO, Elon Musk, revealed that he expects to release a! 3rd gene! ration model of its electric car for half the price in the next 3 to 4 years. Ford is going to have a lot of difficulty trying to compete against that model given that the company is already so far behind.

Conclusion

Given that Ford shares are at their 2 year peak with declining fundamentals and an inability to compete in the increasingly popular electric rechargeable vehicle space, investors may want to think strongly about either exiting their long position or initiating a short. Ford was once a great company but it certainly appears that its glory days are behind it.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

Ford's SUVs Are Hot in Russia

Ford (NYSE: F  ) has recently upped the pace of its expansion in Russia. The first-ever Russian-made Ford Explorer rolled off a St. Petersburg assembly line last month, and now Ford is making plans to bring more of its SUVs to the world's largest country.

In this video, Fool.com contributor John Rosevear looks at the challenges and opportunities facing Ford in Russia -- and at the Blue Oval's long-term vision for the huge potential of this big market.

If you're concerned that Ford's turnaround has run its course, relax -- there's good reason to think that the Blue Oval still has big growth opportunities ahead. We've outlined those opportunities in detail, in the Fool's premium Ford research service. If you're looking for some freshly updated guidance to Ford's prospects in coming years, you've come to the right place -- click here to get started now.

5 of Last Week's Biggest Winners

What's better than momentum? Mo' momentum. Let's take a closer look at five of this past week's biggest scorchers.

Company

May 10

Weekly Gain

Inteliquent (NASDAQ: IQNT  )	$5.68	19%
Cliffs Natural Resources (NYSE: CLF  )	$23.53	18%
MAKO Surgical (NASDAQ: MAKO  )	$4.43	13%
MannKind (NASDAQ: MNKD  )	$4.43	13%
Nokia (NYSE: NOK  )	$3.66	11%

Source: Barron's.

Let's start with Inteliquent. The company saw its shares soar 51% a week earlier after announcing the sale of its global data business. This week it was Morgan Stanley upgrading the voice services provider despite the huge pop the week before. Clearly, Inteliquent's asset sale that will raise cash and improve profitability is resonating with the market.

Cliffs Natural Resources got a boost after FBR Capital upgraded the iron ore miner from "market perform" to "outperform." Cliffs also announced a quarterly dividend at the same $0.15-per-share rate as it did last time out, when it dramatically slashed its yield. Keeping the payout the same comes as a relief.

MAKO Surgical made the cut despite posting mixed quarterly results. The orthopedic robotics leader did post a narrowing deficit, but analysts were holding out for a smaller loss. Revenue grew at a headier clip than forecasted, as MAKO sold five of its RIO systems and generated revenue from 3,000 orthopedic procedures. MAKO reiterated its guidance, and that's a positive after the stock got trounced last year. Good news is all relative.

Top 5 Performing Stocks To Buy For 2014

MannKind took another small step after providing some color on the potential partners for commercializing the upstart's breakthrough inhalable insulin for diabetes sufferers. MannKind is in discussions with multiple potential partners, and others are waiting on clinical trials for Afrezza that are expected this summer.

Finally, Nokia moved higher after introducing a new smartphone on Friday. The Lumia 928 will be sold exclusively through Verizon Wireless. The unveiling was truly a surprise, since investors figured Nokia would be saving any new product announcements for a Lumia-related media event that it has slated for Tuesday.

Keep the good vibes coming
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