Tuesday, December 31, 2013

Asian Stocks Outside Japan Fall on Fed Tapering Outlook

Asian stocks fell, with the equity gauge excluding Japan posting its first drop in eight days, as signs the U.S. economy is strengthening fueled speculation that the Federal Reserve will soon start tapering stimulus.

Newcrest Mining Ltd. (NCM), Australia's biggest gold producer, sank 6.7 percent as bullion traded near a five-month low. Hyundai Motor Co., South Korea's top carmaker, lost 4.2 percent as November sales fell. Sekisui Chemical Co. surged 7.5 percent in Tokyo on a report it developed a material that triples the capacity of electric-vehicle batteries.

The MSCI Asia Pacific ex-Japan Index dropped 0.5 percent to 472.12 at 9:16 p.m. in Tokyo. The broader regional gauge lost less than 0.1 percent to 141.63 as seven of its 10 industry groups fell. More than $8 trillion has been added to the value of global equities this year, the most since 2009, as central banks took steps to shore up economies worldwide. U.S. stocks slid yesterday as investors weighed the impact stronger manufacturing data will have on Fed bond buying.

"Economic data over the past few weeks have been progressively coming in better and markets are now in the mood to put good economic news as bad news because that will bring forward any reduction in central-bank support," Matthew Sherwood, head of investment markets research at Perpetual Ltd., which manages about $25 billion, said by telephone. "There might be a little bit of downward pressure this month."

Regional Gauges

Hong Kong's Hang Seng Index retreated 0.5 percent. South Korea's Kospi index dropped 1.1 percent. Australia's S&P/ASX 200 Index lost 0.4 percent, while New Zealand's NZX 50 Index declined 0.2 percent. Taiwan's Taiex index fell 0.3 percent.

Japan's Nikkei 225 Stock Average rose 0.6 percent to its highest level since December 2007, while the Topix index gained 0.3 percent. Shares climbed as the yen fell to a six-month low against the dollar.

The FTSE Bursa Malaysia Index (FBMKLCI) gained 0.3 percent to a record close. Tenaga Nasional Bhd. jumped by the most in 2 1/2 years after the government allowed the electricity producer to raise prices. Singapore's Straits Times Index decreased less than 0.1 percent.

China's Shanghai Composite Index advanced 0.7 percent. The nation's non-manufacturing purchasing managers' index fell to 56 last month from 56.3 in October, according to a report released today by the National Bureau of Statistics and the China Federation of Logistics and Purchasing. A reading above 50 indicates expansion.

Australia retail sales increased 0.5 percent in October from the previous month, beating economists estimates, while the current-account deficit for the third quarter widened more than forecast. The Reserve Bank of Australia kept its benchmark rate at a record-low 2.5 percent today, in line with the consensus view of all 30 economists surveyed by Bloomberg News.

Relative Value

The Asia-Pacific equity index jumped 9.5 percent this year through yesterday amid signs the global economy is recovering.

Futures (SPA) on the Standard & Poor's 500 Index lost 0.3 percent today. The U.S. equities benchmark index dropped 0.3 percent yesterday amid data that showed manufacturing unexpectedly climbed last month and retail spending fell on the weekend after Thanksgiving for the first time since 2009.

The U.S. Institute for Supply Management's manufacturing index rose to 57.3 in November, a report yesterday showed, after economists surveyed by Bloomberg called for a drop to 55.1. Four of five investors surveyed last month saying they expect Federal Reserve policy makers to put off cuts to their $85 billion-a-month in bond purchases until March 2014 or later.

Gold Miners

Gold producers dropped after the bullion fell yesterday to the lowest close since June 27 and headed for for its first annual decline in 13 years. Newcrest dropped 6.7 percent to A$7.25. Zijin Mining Group Co., China's largest producer of the precious metal, dropped 1.7 percent to HK$1.76 in Hong Kong.

Hyundai Motor lost 4.2 percent to 239,000 won in Seoul as falling car sales damped the outlook for fourth-quarter earnings. Hyundai unit Kia Motors Corp. dropped 5.2 percent to 56,500 won.

Sekisui Chemical rose 7.5 percent to 1,298 yen in Tokyo. The Nikkei newspaper reported that the company developed a cheaper and longer-lasting material for lithium-ion batteries used in electric vehicles.

Monday, December 30, 2013

How to get an ‘A’ in your next job performance …

Susan's Take: Performance reviews can be anxiety producing because the stakes are high with pay increases often tied to reviews. With that said, I offer four suggestions to reduce your anxiety and to get you well prepared for your upcoming performance review.

1. Think of it as a gift. A well-executed performance review is a gift from a boss to an employee, yet we often don't think of it that way. Most people are averse to hearing about their weaknesses, which are an inevitably part of a quality performance review.

In fact, if you receive a performance review without hearing what you could do better next year, you've been robbed of your gift. The best way to grow professionally is to have a boss challenge you beyond your current performance.

That is not to say that you should not hear great things about your current performance too, but if the review ends with all accolades and no new growth challenges, you've been short changed.

2. Listen for clues. Your performance review is one of the best indications of how your boss sees you. Does he see you as a top, middle, or low performer in your department? He might not spell it out to you, but if you listen, you'll pick up on the clues.

If you don't get the impression that your boss sees you at the top, chances are he won't give you the high-profile assignments that will propel your career to the next level. It might be time for you to start thinking about changing jobs to find a boss who will be your champion.

RELATED: 3 soft skills employers value and what you can do on campus to get them

3. Delay any rebuttal. It's very hard to sit and listen to feedback without responding — especially if the feedback highlights criticism that you were not expecting to hear. Only a very bad boss blindsides someone with negative feedback during a review, so if you are hearing concern with your performance for the 1st time during a review, then shame on your boss.

Leave the meeting and digest what you've he! ard. Keep in mind that providing evidence to demonstrate that your boss's review was inaccurate is not going to help much, so consider a rebuttal carefully.

Learning to take constructive criticism without getting defensive is a mark of professional maturity, so unless the feedback is way off the mark, thank your boss for the review and move on.

4. Prepare a self-evaluation. Plan ahead by keeping a file of your accomplishments. Then, prior to your review, draft a document reviewing your accomplishments. Use bullet points, making it easy to read with measurable outcomes.

Provide your self-evaluation to your boss prior to your review. Some organizations actually require a self-evaluation, but if yours does not, do one anyway.

FINE TUNE: November: time for your annual career check-up

Be bold about your accomplishments, but not boastful. Research tells us that women understate their performance in self-evaluations compared to men, and tend to give credit to their teams rather to themselves as individuals. So if you are female, think about stating your accomplishments more boldly.

Susan's Bottom Line: A performance review is your time to highlight your accomplishments, hear what your boss thinks about your performance and to listen for the subtle clues.

When executed well, a performance review will provide you with challenges for professional growth beyond what you imagine for yourself and you will accept them as the gift that they are.


Pat's Take:

A gift? I'm all for staying positive, but in 20+ years in corporate America, I never felt like a performance review was a "gift," so I'll need to start with that point of difference relative to Susan's advice.

"Constructive" I can live with, but a "gift" feels a bit over-the-top to me.

That s! aid, I ag! ree in concept with Susan's direction, and would encourage you to take a very proactive approach to this critical process. Here are my thoughts:

1. Take ownership of your review IMMEDIATELY. Susan is right. You should offer input – but you need to do it immediately.

Do it as soon as you can pull together cohesive thoughts in terms of both your accomplishments and your strengths. Why now? Your boss will vet your review with her boss and likely with her contact in the human resources department.

She will need to allow several days for that process, so if the review is a week away, she's very close to starting it. Once the review has been approved, she will not be terribly inclined to make significant changes to it.

It will make her look like she either did not do a thoughtful job in creating the review in the first place, or that she is a weak manager and was bullied into making positive changes during your discussion. Neither reflects well on her — and you want your boss happy (and happy with you).

RELATED: 10 things to never say or do in an interview

2. Be aggressive yet factual in your presentation of your accomplishments. Think hard about how the company has moved forward and the role you played in that process. Provide quantitative metrics when you are able to do so.

Did the organization improve? Did you play a role in that? If so, how?

If you are unsure of what you personally achieved, ask mentors or peers you trust what they think your role was in positive outcomes. Do not stretch the truth or you'll lose all credibility in this process (and look like a selfish employee who wants credit for the work of others).

3. Drill down with questions during the review. Don't necessarily debate points when you hear them (another area where I agree with Susan), but make sure you truly understand them.

Two non-combative ways to get there are by simply saying, "tell me a little more about that," or "help me understand what brought you to ! that pers! pective."

Make sure you understand not only the constructive feedback, but the data points utilized in your manager coming to that point of view. If you have a full understanding of the concern and basis for it, you'll be much better able to address it or refute it (after a 24 hour cooling off period and after you have effectively organized your fact-based thoughts to refute it, if necessary).

4. Remember that nobody is perfect. Every review will have at least a couple of opportunity areas on them. If not, the person giving the review has failed you.

We can all get better. How can you get better?? This insight is the closest thing I can find to a "gift" in this often stressful process. By the way, I appreciate when employers articulate whether a shortfall is a weakness — a serious concern — or an opportunity for improvement, which we all have.

5. Insist on an action plan to improve performance. Get consensus with your boss in terms of how you'll address your opportunity areas or weaknesses. You'll be happy about this when it's time for your next review.

Remember, we're all works-in-progress so have a positive attitude about improving your performance.

Pat's Bottom Line. Take a proactive approach in this process. Stay on offense by giving comprehensive input a week or more prior to the review.

Work to deeply understand the basis for any concerns your boss may have. Push back (respectfully) in a follow up meeting on areas of disagreement. Develop an action plan, and take on opportunities for improvement with a full head of steam.

Patrick O'Brien is a business executive, author of Making College Count and a professor at Miami University. He co-founded a company which has delivered success programs at more than 5000 high schools and colleges nationwide.

Susan Davis-Ali, PhD is the author of How to Become Successful Without Becoming a Man. She is the founder and President of Leadhership1®, and an Executive Education Fellow at the Carlson Scho! ol of Man! agement, University of Minnesota.

Twitter keeps its IPO shares safely locked up

When people send Twitter messages it's all rush, rush, rush. But when it comes to executives cashing out following the company's IPO, it's going to be slow, slow, slow.

Unlike in other recent initial public offerings such as Facebook, where some early investors sold shares right away and officers could start dumping in just three months after the deal, Twitter insiders will need to hold on for a longer period of time.

Some rank-and-file employees can sell 9.9 million shares starting Feb. 15, 2014, to cover income tax expenses from vesting shares. But that's just 1% of the company's shares outstanding. More important, executives, directors and owners of large chunks of Twitter stock have agreed to not sell their shares for at least 181 days after the IPO. That means these shares are locked up for sale until May 6, 2014, saving early investors from this avalanche of supply of stock. The 181-day lockup is a relief to investors, since the release of shares for sale can apply significant pressure on a fledgling stock.

TWITTER MANIA: A market top or rising confidence?

Twitter "really tightened up the lockup," says Francis Gaskins of IPO Desktop Premium. "This is not going to be a problem in the market."

Twitter's decision to go with a 181-day lockup period of its shares post IPO is interesting because it's a:

• Return to past norms. A 181-day lockup on shares had been the norm for a long time with IPOs and is still the most commonly followed practice, says Jay Ritter of the University of Florida. But that standard was being chipped away by high-profile technology companies such as Google and Facebook, which allowed some investors to start selling sooner. Google, for instance, first started releasing shares to be sold by insiders in 15 days following the IPO, with more shares being available for sale at 90 days.

• Reaction to Facebook's troubled IPO. Facebook remains a blueprint for a IPO done incorrectly, ranging from everything from trading problems to the stock ! falling below its IPO price in the first week, Gaskins says. But another aspect Twitter likely wanted to avoid was the constant fear of stock pressure caused by a slate of unlocks. Facebook, for instance, freed up a massive 268 million shares just 91 days following its IPO.

• Reminder of Twitter's business challenges. Rather than worrying about lockups or situations that might affect trading, investors in Twitter are now going to be focused on the company's efforts to turn a profit, Gaskins says. Twitter is going to have to find ways to make a profit if it's going to justify its roughly $30 billion market value.

Holding selling at bay at least might make investors more patient with the company in its earliest days. "The idea of a lock up is to give confidence the insiders are not going to be dumping shares at the first opportunity," Ritter says.

Friday, December 27, 2013

Five Reasons Why The Netflix Juggernaut Could Continue to Roll

Netflix (Nasdaq:NFLX) has emerged as one of Wall Street's "It" stocks.

The Los Gatos, Calif.-based company's shares have climbed 251% so far this year and 417% in the past year, compared with 19% and 17%, respectively, for the benchmark Standard & Poor's 500 Index.

Netflix has achieved something that every consumer-driven company wants: a strong and favorable buzz in the marketplace. Steve Jobs' Apple (Nasdaq:AAPL) sure had a buzz. So did Mark Zuckerberg's Facebook (Nasdaq:FB), pre-IPO, anyway. The buzz means that the public loves the company's product and the company has taken its place in the annals of corporate culture. The bigger the buzz, the more consumers jump on the bandwagon. Netflix got it via producing a couple of original series, "House of Cards" and "Orange is the New Black," and by coming back from its bad-buzz past of 2011 when it hiked prices, asking customers to spend more of their discretionary income on the company's wares.

The key question: Can Netflix keep up the momentum?

Thanks to these five factors, the answer could well be yes.

Social Media

It is no coincidence that Netflix chief Reed Hastings has been a savvy proponent of Facebook (Nasdaq:FB) -- after all, Hastings sits on Mark Zuckerberg's board. In July 2012, Hastings communicated on Facebook an important milestone, which helped boost Netflix' stock: For the first time, in the previous month of June, Netflix' monthly-viewing had surpassed 1 billion hours.

Social-media experts have applauded Hastings for taking the lead on using Facebook to broaden his company's communications skills while increasing its brand awareness.

In a recent article on LinkedIn, Clara Shih, the chief executive of Hearsay Media and the author of "The Facebook Era," said that "It's not surprising to see this innovation in investor relations coming from a technology company. I applaud Netflix for taking what could have been viewed as an accidental social media post -- a mistake! -- last year, and using it now as a launch pad for bringing every aspect of their corporate communications into the social era."

Last July, Netflix continued its smart use of social media when it reported its second quarter results by a live-streamed video question/answer event. CEO Reed Hastings, CFO David Wells and Chief Content Officer Ted Sarandos were asked questions by CNBC reporter Julia Boorstin and BTIG analyst Rich Greenfield.

Hastings said the structure was intended as an informal "fireside chat," in contrast with the usual, structured quarterly audio conference call with Wall Street securities analysts.

Inroads Against Premium Channels

Granted, HBO's "Game of Thrones," for instance, has a larger audience than anything on Netflix, but Netflix's original programs have performed well against the likes of HBO's "Boardwalk Empire" and are comparable to Showtime's highly praised series "Homeland" and Starz' "Spartacus."

Netflix has shrewdly elbowed its way into Hollywood. Netflix was founded as a company that delivered the DVDs of your favorite movies and TV shows. Then, it went on to streaming. Now it is taking the next evolutionary step as a creator of content.

Favorable Un-Subscriber Figures

In the United States, consumers have been executing fewer desktop searches for the expression "Netflix unsubscribe." Interestingly, search volumes for the term had increased year to year through the third quarter of last year, before a reduction in the fourth quarter, Janney Capital analyst Tony Wible pointed out. This may seem like a point worthy of the "inside-baseball" designation, but it also underlines the company's progress in the way that consumers are viewing Netflix.

That Buzz Factor

"Orange Is the New Black," Netflix's drama-comedy depicting a woman's life in prison after she gets incarcerated for drug dealing, has continued Netflix's success in original programming, following "House of Cards." Netflix is gaining eyeballs and critical acclaim by competing with (and, arguably, outwitting) the major cable channels at coming up with edgy, quirky plot lines packed with excellent television writing and vivid, intriguing characters.

"Orange Is the New Black" racked up more viewers and hours watched in its first week, last July, than either of Netflix's other well publicized offerings, "House of Cards" or "Arrested Development," All Things D noted.

The company is establishing a serious brand in this crucial area of original programming and can ultimately draw such benefits as selling syndication rights in the U.S. and abroad for these shows, controlling production costs and keeping the winning streak going by continuing to attract prominent Hollywood talent among actors, directors, writers and producers. That means more hit programs.


As a result of Netflix's success, it has achieved that elusive quality of gravitas.

Hollywood is littered with the deb! ris of TV shows that turned off viewers after an initial burst of terrific critical reviews and substantial ratings prowess. One way to achieve staying power is to gain the accolades of respected industry figures.

When "Breaking Bad" producer Vince Gilligan accepted the Emmy a few weeks ago for Best Drama -- representing the pinnacle of his career to date -- he took pains to thank and acknowledge Netflix' contribution to his show's success. "I think Netflix kept us on the air," he said. "Not only are we standing up here (with the Emmy), I don't think our show would have even lasted beyond season two. It's a new era in television, and we've been very fortunate to reap the benefits."

Bottom Line

In the past two years, Netflix has shaken up its image on Wall Street and Main Street alike by gaining both gravitas and a buzz. It showed itself to be a company capable of innovation -- and continuous innovation leads to sustained growth.

Disclosure - At the time of writing, the author did not own shares of any company mentioned in this article.

4 Stocks in Breakout Territory With Big Volume

DELAFIELD, Wis. (Stockpickr) -- Professional traders running mutual funds and hedge funds don't just look at a stock's price moves; they also track big changes in volume activity. Often when above-average volume moves into an equity, it precedes a large spike in volatility.

>>5 Stocks Poised for Breakouts

Major moves in volume can signal unusual activity, such as insider buying or selling -- or buying or selling by "superinvestors."

Unusual volume can also be a major signal that hedge funds and momentum traders are piling into a stock ahead of a catalyst. These types of traders like to get in well before a large spike, so it's always a smart move to monitor unusual volume. That said, remember to combine trend and price action with unusual volume. Put them all together to help you decipher the next big trend for any stock.

>>5 Stocks Under $10 Set to Soar

With that in mind, let's take a look at several stocks rising on unusual volume today.


Ducommun (DCO) provides engineering and manufacturing services mainly to the aerospace and defense industry through a wide spectrum of electronic and structural applications. This stock closed up 3.9% at $28.68 in Monday's trading session.

Monday's Volume: 229,000

Three-Month Average Volume: 86,853

Volume % Change: 174%

>>5 Stocks With Big Insider Buying

From a technical perspective, DCO jumped higher here right above its 50-day moving average of $26.30 with above-average volume. This stock has been trending sideways inside of a consolidation pattern for the last two months, with shares moving between $25.91 on the downside and $29.37 on the upside. Shares of DCO are now quickly moving within range of triggering a big breakout trade above the upper-end of its recent sideways trading chart pattern. That breakout will hit if DCO manages to take out Monday's high of $29.31 and then once it clears its 52-week high at $29.37 with high volume.

Traders should now look for long-biased trades in DCO as long as it's trending above Monday's low of $27.50 or above its 50-day at $26.30 and then once it sustains a move or close above those breakout levels with volume that this near or above 86,853 shares. If that breakout hits soon, then DCO will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $33 to $35.

KapStone Paper and Packaging

KapStone Paper and Packaging (KS) produces and sells a variety of unbleached kraft paper, linerboard, folding carton board, saturating kraft, inflatable dunnage bags and dimensional lumber. This stock closed up 1.3% at $42.80 in Monday's trading session.

Monday's Volume: 812,000

Three-Month Average Volume: 349,045

Volume % Change: 136%

>>5 Bargain Bin Stocks to Buy This Fall

From a technical perspective, KS spiked modestly higher here right above some near-term support at $40 with above-average volume. This move is quickly pushing shares of KS within range of triggering a near-term breakout trade. That trade will hit if KS manages to take out some near-term overhead resistance levels at its 50-day moving average of $43.73 to more resistance at $44.16 with high volume.

Traders should now look for long-biased trades in KS as long as it's trending above some near-term support at $40 and then once it sustains a move or close above those breakout levels with volume that's near or above 349,045 shares. If that breakout hits soon, then KS will set up to re-test or possibly take out its next major overhead resistance levels at $46 to its 52-week high at $50.10.


Graco (GGG) designs, manufactures and sells equipment that pumps, meters, mixes, dispenses and sprays a wide variety of fluids and semi-solids. This stock closed up 0.9% at $74.06 in Monday's trading session.

Monday's Volume: 281,000

Three-Month Average Volume: 180,217

Volume % Change: 75%

>>5 Big Trades to Take Right Now

From a technical perspective, GGG rose modestly higher here right above its 50-day moving average of $71.66 with above-average volume. This move is quickly pushing shares of GGG within range of triggering a big breakout trade. That trade will hit if GGG manages to take out some near-term overhead resistance levels at $74.57 to its 52-week high at $74.70 with high volume.

Traders should now look for long-biased trades in GGG as long as it's trending above its 50-day at $71.66 and then once it sustains a move or close above those breakout levels with volume that's near or above 180,217 shares. If that breakout hits soon, then GGG will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $80 to $83.

Ceco Environment

Ceco Environment (CECE) provides an array of solutions for industrial ventilation and air quality problems through dust, mist and fume control systems and particle and chemical technologies to industrial and commercial customers. This stock closed up 6.8% to $14.08 in Monday's trading session.

Monday's Volume: 297,000

Three-Month Average Volume: 107,248

Volume % Change: 165%

From a technical perspective, CECE skyrocketed higher here right off its 50-day moving average of $13.03 with strong upside volume. This move pushed shares of CECE into breakout territory, since it took out some near-term overhead resistance levels at $13.45 to $13.73. Shares of CECE are now moving within range of triggering another big breakout trade. That trade will hit if CECE manages to clear some key resistance levels at $14.21 to its 52-week high at $14.32 with high volume.

Traders should now look for long-biased trades in CECE as long as it's trending above its 50-day at $13.03 and then once it sustains a move or close above those breakout levels with volume that hits near or above 107,248 shares. If we get that breakout soon, then CECE will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $17 to $20.

To see more stocks rising on unusual volume, check out the Stocks Rising on Unusual Volume portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.


>>5 Stocks Under $10 Moving Higher

>>5 Toxic Stocks You Should Sell

>>How to Win With the Twitter IPO

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including

CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

Thursday, December 26, 2013

Advisors Brace for More Exams in 2014; DOL ‘Game Changer’ on Horizon

While advisors anticipate — yet again — the arrival of fiduciary advice rules from the Securities and Exchange Commission and Department of Labor in the New Year, they’ll also be bracing for more exams as well as watching how some proposed regs and bills play out. The DOL’s expected proposal requiring plans to project the amount of a participant’s retirement income is likely to be a “game changer” for advisors, one industry watcher says.

The SEC’s rule to put brokers under a fiduciary mandate isn’t expected to arrive until after DOL releases in August its reproposed rule to amend the definition of fiduciary under the Employee Retirement Income Security Act.

However, what advisors can expect from the SEC sooner in the year is a promise from the agency of more advisor exams. Neil Simon, vice president for government relations at the Investment Adviser Association in Washington, says that advisors can indeed expect that the SEC’s Office of Compliance Inspections and Examinations will zero in on more advisors in 2014 via “presence exams” and by “increased examiner productivity” — boosting “the potential for more enforcement cases against IAs.”

Indeed, OCIE chief Andrew Bowden said in October that the agency would take aim at the group of about 4,000 RIAs that have never been examined before. But Duane Thompson, senior policy analyst at fi360, doubts the agency can do much more on the exam front.

The SEC’s examiners “can incrementally increase their exam numbers by mov[ing] around their resources, but I don’t think they have a lot [of resources] to move around,” Thompson says. The agency can take advantage of presence exams, “which are exams where [SEC examiners] work from the office and request a lot of documentation from advisors instead of going onsite.” If the agency focuses “on the vast majority of advisors, the ones where the average is eight to 10 employees who mainly [do] passive investing, with no exotic [activities] where it won’t take as long to go through the books and records, they could bump up their [exam] numbers,” he concedes.  

But, adds Thompson: “Unless Congress gives the [agency] more money or a bill passes” to allow the SEC to collect user fees to fund advisor exams, “I don’t see how the [agency] can increase” the amount of exams.

Industry and consumer trade groups sent a letter in early December to all members of Congress urging them to support H.R. 1627, the Investment Adviser Examination Improvement Act of 2013, which is sponsored by Reps. Maxine Waters, D-Calif., and John Delaney, D-Md. The bill would authorize the SEC to collect an annual user fees from RIAs to increase the frequency of their exams.

Simon says that the late November vote in favor of user fee legislation by the SEC’s Investor Advisory Committee “should encourage new support for the Waters/Delaney bill on Capitol Hill” in the New Year. /* .premium-promo { border: 1px solid #ddd; padding: 10px; margin: 0 10px 10px 0; width: 200px; float: left; } .premium-promo li, .premium-promo ul { list-style-type: none; margin: 0; padding: 0; } .premium-promo li { margin: 0 0 10px; padding: 0 0 10px; border-bottom: 1px dotted #ddd; } .premium-promo h3 { text-transform: uppercase; font-size: 11px; } .premium-promo h4 { font-size: 16px; } .premium-promo a { text-decoration: none !important; } .premium-promo .btn { background: #0069a1; border-radius: 4px; display: inline-block; padding: 5px 10px; clear: both; color: #fff; font-weight: bold; } .premium-promo .btn:hover { background: #034c92; } */ Other bills that passed the House but are unlikely to be taken up by the Senate in 2014 include H.R. 1062, which would require comprehensive cost-benefit analysis of SEC rulemaking; H.R. 2374, introduced by Rep. Ann Wagner, R-Mo., which would require the DOL to wait to repropose its fiduciary rule until 60 days after the SEC issues its fiduciary proposal; and H.R. 1105, which would narrow SEC registration requirements for advisors to private equity funds.

Regulations advisors will be watching include money-market mutual fund reform, which the SEC has projected it will adopt in October, as well as enhanced disclosures in marketing brochures of target-date funds.

DOL has said that a rule to require more disclosures on investments in TDFs will likely come in March.

Also coming from DOL in 2014 will be a proposed regulation requiring plan providers to project a participant’s retirement income based on their account balance, what Fred Reish, partner and chairman of the financial services ERISA team at Drinker Biddle & Reath, says will be a “game changer” for plans and their advisors.

The proposed reg “will change the way plans are seen,” Reish says. “Now, 401(k) and 403(b) account balances are seen as wealth; DOL is changing that to have them seen as sources of monthly income,” which will ultimately result in “more guaranteed insurance product discussions.”

These discussions, Reish adds, will force “RIAs that are primarily in the business of advising on securities to learn about insurance, and [advisors] will have to be able to work with individuals and plans to provide insured products.”

In addition, “there will be more investments, like mutual funds and collective trusts, and more services like managed accounts that will be designed to provide a regular monthly income — all of this will flow out of that DOL regulation.”

DOL will release its proposal on retirement income projections in 2014, with a final regulation to be seen in the next 18 to 24 months, Reish predicts.

In the more distant future, Reish sees a 401(k) landscape with less government involvement and more “individualization” of these plans.

“Everything [in the retirement plan world] now is a mass experience — all the participants in the plan have the same investment options, same communications,” Reish says, but “that is beginning to change.”

In the future, “We’re going to see a more individualized experience — people will join plans and will get information about the amounts of deferrals they need to make based on their age and compensation and anticipated Social Security benefits,” he says. “Along the way they will be given updates — and maybe they’ll have managed accounts designed for them.”

The treatment of participants as a “mass” to the treatment of them as individuals “will roll in over a longer period of time, and will be competition-driven,” Reish adds. “It’s my view of what the future of 401(k) plans has to be.”


Check out more 2014 outlooks on ThinkAdvisor.

Check out Finke: What Do Lifetime Income Projections Achieve? on ThinkAdvisor.

Will the Fed send mortgage rates higher?

30 year fixed mortgage 091713 NEW YORK (CNNMoney) Housing market experts are keeping a close eye on the Federal Reserve as they anxiously await word on whether the agency will start pulling back on its controversial stimulus program, known as quantitative easing.

Since September of last year, the Fed has been buying $85 billion in mortgage-backed securities and Treasury bonds a month to help support the economy. The purchases have been credited for the historically low mortgage rates seen this year, which ultimately helped stimulate home sales and boost prices.

But now the Fed is expected to announce that it will scale back on its bond-buying program -- a move that is expected to cause rates to slowly rise, said Doug Duncan, chief economist for Fannie Mae.

The mortgage market has already factored in a modest cutback in the Fed's purchases. Mortgage rates have risen 1.2 percentage points since May when Fed chairman Ben Bernanke mentioned the possibility of reducing the agency's bond-buying program. In June, he noted that the tapering could begin as early as September, if the economic recovery continued on course.

However, even if the Fed started cutting back on its bond purchases this month, many don't expect the cuts to be sizable. "The recovery has been weaker the past couple of months than what the Fed had been talking about," said Duncan. "It would be a surprise if they act aggressively."

Duncan said initial cuts to the bond-buying program likely won't exceed $10 billion a month and most of those cuts will be in Treasuries.

Those expectations were reinforced in a paper presented by Northwestern University economists Arvind Krishnamurthy and Annette Vissing-Jorgensen at an annual meeting for central bankers in Jackson Hole, Wyo., late last month. The economists found that the purchase of mortgage-backed securities served as a more effective stimulus than the purchase of Treasury bonds.

Should the Fed continue to purchase mortgage-backed securities at current rates, there is a chance mortgage rates could actually head lower, said Keith Gumbinger of HSH.com, a mortgage information provider.

Frank Nothaft, chief economist for Freddie Mac, expects the Fed to act slightly more aggressively. He anticipates that the agency will cut its purchases of Treasuries by about $10 billion a month and reduce its purchases of mortgage-backed securities by $5 billion. He expects the Fed to continu! e to scale back its purchases through mid-2014, when the program would end entirely.

As a result, Nothaft expects mortgage rates to climb to close to 5% by next June. Last week, the 30-year fixed rate averaged 4.6%.

Quiz: How much do you know about mortgages?

Despite higher mortgage rates, only a small number of potential homebuyers -- those who would have to struggle to afford a home in the first place -- would put the brakes on their purchases, said Nothaft.

Remaining buyers would probably welcome a slight cooling off in the housing market. Home prices were up 12.1% in June compared with a year earlier, according to the S&P/Case-Shiller home price index.

That kind of surge has stirred fears of a new housing bubble and many economists -- and homebuyers -- wouldn't mind seeing price gains come back to more normal levels. To top of page

Wednesday, December 25, 2013

Nonprofit Sector Reacts to ‘Worst Charities’ Exposé

The nonprofit sector has responded with a mixture of both alarm and calls for action to the investigation that uncovered unsavory practices by the “50 worst” charities in America.

In the meantime, Oregon has become the first state to crack down on charities that fail to spend enough of their donors’ contributions on mission.

Last month, the Tampa Bay Times and The Center for Investigative Reporting published a report identifying 501(c)(3) charities around the country that gulled donors by adopting popular causes or calling themselves names similar to those of well-known charities.

“The nation’s 50 worst charities have paid their solicitors nearly $1 billion over the past 10 years that could have gone to charitable works,” the report said.

Last week, The Chronicle of Philanthropy reported that only one major nonprofit group, the Association of Fundraising Professionals, had issued a statement about the investigation, and it seemed more critical of the reporters than what they uncovered.

The association said the organizations named in the exposé “are such extreme cases that they are not representative of what a typical charity looks like or how it operates.”

The Chronicle reported that another organization, a startup called Charity Defense Council, had urged the investigative reporters “not to write a story based on overhead and fundraising ratios but to write a story based on impact.”

After the article appeared, the group dismissed it for “clearly using a headline to grab readers,” making it suspect from the start.

The Chronicle said several groups on the “50 worst” list had contested their rankings, while some not on the list had tried to put distance between themselves and the others.

On a more proactive note, Roger Craver, a direct-marketing expert, urged nonprofits to tackle the issue head on, according to the article. Remaining silent, he said, amounted to “nothing more—or less—than the collective turning of our backs on the donor.”

And Doug White, a Columbia University philanthropy-ethics expert, proposed establishing a committee of nonprofit experts to clamp down on unethical practices.

Oregon Cracks Down

The Chronicle article noted that the “50 worst” investigation had shone light on regulatory gaps at the state level that could enable unethical or fraudulent behavior by charitable groups.

Now, Oregon has cracked down on charities that spend too little of their money on the mission.

Last month, the governor signed a bill that will eliminate state and local tax subsidies for nonprofits that spend more than 70% of donations over a three-year period on management and fundraising rather than programs and services, according to the Statesman Journal.

Donors to those charities will not be able to claim a state tax deduction, and the organizations will lose their local property tax exemptions.

The article said that the Oregon Department of Justice has identified a top 20 list of the “worst of the worst.” These included a Michigan-based outfit that spent 2.7% on programs over the past three years.

“These organizations have found the business model of using a nonprofit as a cover for what’s basically a telemarketing for-profit firm,” the head of the Nonprofit Association of Oregon told the Statesman Journal.


Check out 10 Worst Charities in America on AdvisorOne.

Tuesday, December 24, 2013

Is Best Buy’s Comeback For Real?

Best Buy

Best Buy's (NYSE:BBY) stock price has more than doubled since hitting a low of $11.20 in December. The stock has quickly become a darling of Wall Street: Its charismatic new CEO, Hubert Joly, has fueled recent investor optimism. But with the highly competitive dynamic of the consumer electronics retail space and mixed reviews out on Best Buy's first-quarter earnings report, does the stock justify its impressive price climb? Let's use our CHEAT SHEET investing framework to decide whether Best Buy is an OUTPERFORM, WAIT AND SEE, or STAY AWAY?

C = Catalysts for the Stock's Movement

The biggest catalyst for Best Buy's historic price climb has been the marriage between Wall Street analysts and newly appointed Joly. Despite intense competition in the consumer electronics retail industry, Best Buy has outlined a restructuring effort, known as "Renew Blue," which is streamlining its operations by selling off its European division, cutting costs, and introducing a price-matching initiative. So far, the company has seen little material results on this program but investors and analysts are optimistic.

E = Excellent Performance Relative to Peers?

Best Buy is actually trading at a reasonable forward price-to-earnings multiple relative to its main competitors, Walmart (NYSE:WMT), Amazon (NASDAQ:AMZN), and Costco (NASDAQ:COST). A potential reason for this may be because Best Buy does not have high growth potential. On the other hand, the company could still have more room to go up in price and is undervalued at the moment. Currently, Best Buy enjoys a healthy return on assets percentage and operating margin — even though this margin has declined due to its recent price cutting initiative.

Forward P/E 12.41 12.85 21.96 88.76
Operating Margin 2.15% 5.93% 2.91% 1.04%
ROA 4.62% 8.73% 6.59% 1.71%
E = Earnings and Revenues Are Decreasing

To investors who have bought in to Best Buy, the following table should serve as a caveat: The company has not shown year-over-year growth earnings in the past five quarters. Best Buy reported a 1.3 percent decline in comparable store sales in the first quarter of fiscal year 2014. Management attributed the average performance last quarter to the shift in the Super Bowl holiday and to fewer major product launches. Additionally, it wrote down a $200-million loss for its European division and should benefit from having that off the balance sheet in future quarters. A bright spot in its earnings was online sales growth, which increased 16 percent during the quarter. Joly has made good on his cost-cutting promise, but there is certainly a trend in negative year-over-year earnings growth.

2014 Q1 2013 Q4 2013 Q3 2013 Q2 2013 Q1
Qtrly. EPS YoY Growth -88.57% -71.46% -22.22% -21.67% -2.78%
Qtrly. Revenue YoY Growth -19.21% 38.12% -5.23% -3.59% -26.20%

*All data sourced from YCharts.

T = Technicals Are Strong

Best Buy is currently trading at $29.42, above both its 200-day moving average of $20.96 and its 50-day moving average of $27.14. Best Buy has experienced a definitive uptrend since the beginning of the calendar year. The stock is trading right around its 52-week high of $29.91. The last time Best Buy traded at this price? Two years ago, in July 2011. The aftermath was a sharp correction downward followed by a one-and-a-half year downtrend. If the stock's growth is truly driven by fundamentals, rather than speculation, it should not suffer the same fate.


While Best Buy has enjoyed an impressive run over the past six months, there is just not enough solid financial performance to buy the stock right now — especially since it is trading right at its 52-week high. It will probably take a few more quarters of mixed earnings reports for Best Buy to really establish a solid strategy. CEO Joly certainly has a strong vision for the future of the company, and he's the right man for the job to steer the company in the right direction — but the consumer electronics retail space is just too competitive right now. Best Buy is a WAIT AND SEE.

How Kenichi Ohmae Would Fix Japan

For some 30 years, Ohmae Kenichi (known abroad in the Westernized surname-given name inversion) has been among the most important—and most authoritative—thinkers and commentators on Japanese business and political economy.

Ohmae, now 70, is best known for having led McKinsey's Japanese and Asian management consulting business from 1972 to 1995 (before that, graduating from Waseda University, and earning a Ph.D. in nuclear engineering from MIT). In 1995, he ran unsuccessfully for mayor of Tokyo. Since then, he has pursued a number of academic ventures while writing books and serving on Japanese government advisory panels.

In 2011, Ohmae led a panel that produced for the government a report entitled "What Should We Learn from the Severe Accident at the Fukushima Dai-Ichi Nuclear Power Plant." (His view is that there can be no blanket decision to restart the shutdown plants. Each plant must be cleared for restart individually through strict verification of 'failsafe' systems, requiring both redundancy and alternative sources for cooling the reactors upon any accident, malfunction, or disaster.  He also thinks for largely technical reasons the whole nuclear sector must be nationalized.)

Ohmae's latest book (in Japanese) is entitled "Japan's Key Points" (nihon no ronten) but bears a strange English subtitle "Global Perspective and Strategic Thinking." In it, he distills thinking on the many problems bedeviling Japan, narrowing these to 20, and—like a good consultant—offering a strategy for addressing each.  Below is a synopsis of several of Ohmae's "key points."

1. The failure of Keynesian macroeconomics. The most profound lesson from Japan's "lost two decades" is the bankruptcy of Keynesian macroeconomic initiatives.  In the 20 years after the 1989 bursting of Japan's economic "bubble," the Japanese government has disgorged some JPY 300 trillion ($3.1 trillion) in public works spending and monetary stimulus (zero interest rate quantitative easing). The result:  nothing except massive waste and stratospheric debt.

The Keynesian model focusing on "aggregate demand" in a closed system cannot work in the current "borderless" world. "Abenomics" is largely more of the same failed macro policies and will also not work.

Rather than macro approaches, Ohmae prescribes "micro" approaches—like deregulation—that create opportunities for entrepreneurship and are palpable to consumers, especially persons with accumulated wealth.  In Japan, most financial wealth is held by the elderly and is mainly in bank deposits.  To these savers, zero interest rates are dispiriting and suppress, rather than increase, spending, especially on recreation and other enjoyments that could become major growth industries.  Effective policies would focus on inculcating in these seniors a sense of optimism and a desire to enjoy life.

2.  Over-centralized bureaucratic control by Tokyo ministries has sapped local local initiative.  Support for Osaka mayor Hashimoto's "Regional State" Model. The malaise and decline in Japan, particularly evident outside the three or four metropolises, prevailing for much of the past two decades can be attributed to the over-centralization of administrative and financial power in Tokyo's central government ministries, and the disempowerment of local governments and communities.

The disempowerment is as much psychological and practical. Local politicians and governments seem to have lost even the desire to formulate local development initiatives. Their entire approach is appealing to Tokyo for money with which to implement centrally mandates policies and programs.

Ohmae contrasts this situation with China, where local develop initiatives and city-city, province-province competition have been the main driver of development over the past 30 years.  Japan needs to emulate Deng Xiaoping's "one country, two (or many) systems" approach.

Ohmae endorses the model for local autonomy and creation of "regional states" promoted by Osaka mayor Hashimoto Toru. To revive Japan, localities need to acquire and exercise much greater local autonomy and compete with each other (as in China) to attract and nurture competitive new businesses.

3.  Japan's youth have become "herbivores." What has happened to ambition among Japan's youth? Ohmae cites research in which high school and college students are asked their hopes and goals. Compared with American, Chinese and, especially, Korean students, Japanese students seem only to want to join a big company, and then to remain until retirement in a position without great responsibility. Ohmae blames the "noncompetitive" ethos prevailing in Japan's schools and urges reform.

4. Revive Japan's cartelized and "zombified" agriculture through deregulation.  Here Ohmae's views are in line with those of other free market advocates (see my previous post on the views of Canon Canon Institute for Global Studies' Yamashita Kazuhiro.

5. Control hospitalization and other costs of old age health care. In FY 2009 Japan's national health care spending topped JPY 36 trillion, a YoY rise of 3.4%. This for a country where total central tax revenues are some JPY 40 trillion. The most rapid rise has been in costs for persons over 70 years old. Against FY 1997, costs for persons under 65 increased by JPY 700 billion.  For 70-74 year olds, the increase was JPY 3.2 trillion. For those 75 and older it was JPY 4.5 trillion.

Monday, December 23, 2013

IPOs face possible delays if shutdown lingers

The Securities and Exchange Commission's "carryover" funds keeping it open amid the government shutdown may run out in a few weeks, threatening the recovering IPO market and high profile deals like Twitter.

The regulator, in charge of reviewing the plans of companies aiming for initial public offering, is currently staffed as usual due to the fact it has funds left over from last fiscal year. But these funds could be depleted in "a few weeks," according to an SEC statement, which would then put the SEC into shutdown mode around the time of the much-awaited IPO of online messaging service, Twitter.

The timing is horrible for the initial public offering market, which has been staging its busiest run since 2007. Given the flurry of companies that have filed plans to go public, including Twitter, the SEC's staff was already expected to be taxed and slowdowns to ensue, says Kathleen Smith of IPO fund manager Renaissance Capital. "The SEC is already buys with the busy IPO calendar" she says. "We have a vibrant IPO market, it's a shame to have something that would slow things down further," Smith says.

So far this year, 152 companies have successfully started selling shares to the public for the first time, says Renaissance Capital. That's up 54% from the same point last year and on pace of being the busiest year since 2007. During all of 2007, there were 213 IPOs.

If the SEC's carryover funds are depleted, though, the regulatory agency will only be able to keep open units that qualify for exceptions of the "Antideficiency Act," according to the SEC's plan of operations during a shutdown. Those protected functions include basic services including law enforcement connected to the protection of property, keeping computers systems running connected with making securities filings publicly available, market monitoring and surveillance and the operation of key internal systems.

But that leaves swaths of the SEC at risk of shutting down, including the process of approving filings by sec! urities registrants, which includes the initial public offering market.

It's a big question exactly how much of an impact a prolonged shutdown could have on Twitter's IPO. The deal has already been filed in private with the SEC and the public prospectus is expected to be disclosed soon. That process should be well underway already, Smith says. "They have a great deal of the work already done," she says.

Investors hope that deals can be maintained. Investors are also expecting that funding needed to keep the IPO review process alive might be continued, Smith says. "I'm guessing they will find ways to selectively approve the budget to allow vital functions to continue," she says.

Big News for Housing

The data last week on Housing Starts sends an important message to investors, says MoneyShow's Jim Jubak.

The financial market has really great news about housing starts on December 18. They came in about 1.1 million and that was a 22% increase from the October number. This was for November. I think the market basically put two and two together and came up with five, but two and two, in this case, still equals four and that's a reason to take a look at the housing sector. What you really have is greater demand and I think it's going to step down a bit because I don't think this big jump through a 1.1 million is sustainable, so we may go back a little bit in December to, say, a million. That's the two plus two doesn't equal five. On the other hand, a million is a pretty strong rate.

You have the Fed, who has decided to taper, but it hasn't tapered much, so it's still buying mortgage backed securities, which means, I don't think mortgage rates are going to sky rocket. You have a Fed that has basically said, "We're going to keep short-term rates," which are not the same as mortgage rates, but still important. Short-term rates down near zero until sometime in 2015. All those things, plus a real lack of inflation. Inflation is running at 1.75 or something like that. Again, that means there is not a whole lot of upward pressure on mortgage rates.

All that means is that the big, big, sort of, worry that was holding down housing stock prices is gone. That's why you had a big jump, so, if something like Lennar, symbol (LEN) went up like 6.3% on the 18th, all those things, big jumps.

Going forward, I'd be very careful and look at just, the best in the sector. Lennar, for example, is one I'd look at because they've been doing a lot of buying of land, when the land prices were relatively lower, so they have a big amount of real estate in the bank, on which they can build houses, so they're not going to have to worry about buying more real estate at higher prices; that's the stock I would look at right now.

Another one might be Lumber Liquidators, symbol (LL). They've taken a big hit recently, because the FBI is doing an investigation on the sourcing of their lumber, some of which seems to be questionable. I think the company would be insane to be sourcing lumber from illegal countries and illegal operations. There are probably a couple of glitches. There are probably some fires where there is all this smoke, but it doesn't concern the whole spread of their products, so it took a beating on that. It started to recover. It was also up about 6% on the Fed news, but that's a stock that normally trades much higher and has a really good expanding retail sales story. I'd look at those two if I'm going to try to play the housing recovery, if you will, on the housing starts number, rather than looking at the whole sector.

This is Jim Jubak for the MoneyShow.com video network.

More Free ETFs Aren't Always Better

Exchange-traded funds have taken the investing world by storm, and even after the brief swoon in the stock market over the past couple of months, investors remain devoted to using ETFs as an easy and efficient way to invest their money. But as brokerage companies look for ways to capitalize on the ETF craze, some of the moves they're making don't always put investors first.

Back in March, brokerage and mutual-fund giant Fidelity announced that it had expanded its lineup of commission-free ETFs, continuing its partnership with iShares manager BlackRock (NYSE: BLK  ) to offer 65 ETFs. At the time, the move seemed to be a big positive for investors, broadening the array of available investment options beyond the previous selection of largely domestic-stock-focused funds. In particular, more than two dozen bond ETFs, a handful of commodity-oriented funds, and some new international stock funds rounded out the Fidelity ETF menu quite well.

Yet some of the trade-offs that Fidelity made in expanding its lineup have proven more problematic. Let's take a look at a couple of issues that should raise concerns.

1. Large bid-ask spreads
Commissions are only one part of the cost of trading ETFs. Another factor is the bid-ask spread, which measures the distance between what buyers are willing to pay you for your shares and what sellers are willing to accept to let you buy them. For frequent traders, bid-ask spreads are one of the most important aspects of an ETF, but even long-term investors have to deal with the bid-ask spread every time they make a new investment.

Many of Fidelity's core offerings have extremely low bid-ask spreads of just a penny per share. But especially among funds where iShares replaced former offerings with similar new funds, bid-ask spreads are uncomfortably high in some cases. For instance, the iShares Core MSCI EAFE ETF has a much lower expense ratio of 0.14% than the 0.34% of the $41 billion iShares MSCI EAFE ETF (NYSEMKT: EFA  ) , but the newly commission-free fund has an average bid-ask spread of 0.1%, equating to a typical spread of more than a nickel per share. You'll find a similar phenomenon comparing the iShares Core MSCI Emerging Markets ETF with the iShares MSCI Emerging Markets ETF (NYSEMKT: EEM  ) , with lower costs for the former offsetting greater liquidity for the latter. The tiny iShares MSCI Emerging Markets Small-Cap ETF has the highest average bid-ask spread of the lot, at a whopping 1.5%. With a dozen funds sporting bid-ask spreads of more than a quarter-percent, you'll pay a high price for the lack of liquidity in some of the funds iShares and Fidelity have made available.

2. Expense ratios
Another key component of ETF cost is the expense ratio. For the most part, Fidelity did a good job of giving investors inexpensive choices to select from, with 25 of its free ETFs having expense ratios of 0.2% or less. But not all of the broker's options are so thrifty.

In particular, expanding the menu to include more international stock ETFs and niche bond funds necessitated bringing in some higher-expense-ratio offerings into the mix. More than a dozen of the ETFs charge half a percent or more in annual fees, representing a fairly substantial departure from the relatively low-cost alternatives that were among the previous menu of commission-free ETFs.

Look beyond the numbers
Brokerage companies have made much of their commission-free ETF offerings, touting rising numbers of funds eligible for free trading. But those deals are only as good as the quality of the funds available. When ETF companies make strategic decisions that result in bolstering assets among less liquid fund offerings rather than giving customers access to the best products available, you need to be aware of what's going on -- and consider the impact on your results from using those ETFs in your portfolio.

ETFs can be great ways to make money. We've found three that you really should look at, and you can read all about them in the Fool's latest special free report on highly promising ETFs. Just click here to access it now.

Sunday, December 22, 2013

Overcooked Noodles & Co. Plunges on Revenue Miss

What happens when noodles gets overcooked? They turn into a gooey, mushy mess. What happens when Noodles & Co (NDLS), which trades at a 78.5 times forward earnings, releases disappointing results? It too turns into a gooey, mushy mess.

Juergen Teller, Courtesy of the artist

Shares of Noodles & Co. have dropped 8% to $42.92 today at 11:47 a.m. Noodles is also dragging down other high-flying restaurant stocks. Potbelly (PBPB), for instance, has fallen 4.4% to $25.78, while Chipotle Mexican Grill (CMG) has declined 1.9% to $529.18 and Starbucks (SBUX) is off 1.5% at $79.92.

Reuters has the details on Noodles & Co’s disappointing results:

On an adjusted basis, Noodles, which serves pasta and noodle dishes for as little as $8, earned 11 cents per share in the third quarter, in line with the average analyst estimate.

Revenue rose 15.4 percent to $88.9 million. Analysts on average were expecting revenue of $91 million in the quarter ended October 1, according to Thomson Reuters I/B/E/S…

Comparable sales at Noodles’ company-owned restaurants rose 2.4 percent in the third quarter, below the 2.7 percent rise that analysts polled by Consensus Metrix expected.

Wedbush’s Nick Setyan and Colin Radke offer their thoughts:

We are cautious with respect to unit-level margin (currently in-line with growth peers) expansion going forward given low-single digit SSS growth with ~1% annual pricing and AUVs, including tx/store, that are below quick casual peers…We believe NDLS' current premiums on a P/E and EV/EBITDA basis to the restaurant growth group are unwarranted given largely in-line metrics relative to the group.

Even after today’s drop, shares of Noodles are up 138% from their offering price of $18 a share.

Hot Canadian Companies To Own For 2014

Ever since the merger between Canadian Airlines and Air Canada (TSX: AC.B  ) more than a decade ago, Canadians have been limited in their choice of carriers for travel beyond North America. In fact, at one time, the consolidation of Canadian Airlines and Air Canada threatened to control even the domestic market so much that the carrier was developing the title Air Monopoly.

But WestJet Airlines (TSX: WJA  ) has become a formidable competitor to Air Canada on many domestic routes and even some Canada-U.S. routes. As WestJet launches its first-ever scheduled trans-Atlantic flight, I'll look at what this could mean for WestJet, Air Canada, and the traveling public.

To Ireland
The news that WestJet will begin offering flights from St. John's, Newfoundland, to Dublin, Ireland, has attracted the attention of much of the aviation and Canadian mainstream press. Obviously, the aviation reporters see this as another development in the expansion of WestJet, an airline that has seen massive growth over the past decade.

Hot Canadian Companies To Own For 2014: Transdigm Group Incorporated(TDG)

TransDigm Group Incorporated designs, produces, and supplies engineered aircraft components for use on commercial and military aircraft principally in the United States. The company?s products include mechanical/electro-mechanical actuators and controls, ignition systems and engine technology, pumps and valves, power conditioning devices, AC/DC electric motors and generators, NiCad batteries and chargers, engineered latching and locking devices, rods and locking devices, engineered connectors and elastomers, cockpit security components and systems, cockpit displays, aircraft audio systems, lavatory components, engineered interior surfaces, and lighting and control technology. Its customers comprise distributors of aerospace components; commercial airlines, including national and regional airlines; commercial transport and regional and business aircraft original equipment manufacturers (OEMs); various armed forces of the United States and foreign governments; defense OEMs; system suppliers; and various other industrial customers. TransDigm Group Incorporated was founded in 1993 and is based in Cleveland, Ohio.

Advisors' Opinion:
  • [By Eric Volkman]

    TransDigm (NYSE: TDG  ) is rewarding its shareholders mightily with an extraordinary payout. The company has declared a special dividend of $22.00 per share, which will be paid on July 25 to shareholders of record as of July 15.

  • [By Rich Smith]

    Cleveland-based TransDigm Group (NYSE: TDG  ) is buying a piece of GE.

    On Friday, as trading wound down for the week, TransDigm announced a deal to buy the Electromechanical Actuation Division of General Electric (NYSE: GE  ) Aviation for $150 million, cash. The business, which makes proprietary, highly engineered aerospace electromechanical motion control subsystems for civil and military applications, counts all three of the world's biggest airplane manufacturers -- Boeing, Airbus, and Brazil's Embraer -- among its clients, and Sikorsky and General Atomics, as well, on the military side.

  • [By Monica Wolfe]

    TransDigm Group (TDG)

    Fournier maintains his largest position in TransDigm Group where he holds 2,152,710 shares. His position in TransDigm represents 4.30% of the company�� shares outstanding and 6.3% of his total portfolio.

Hot Canadian Companies To Own For 2014: Ritchie Bros. Auctioneers Incorporated(RBA)

Ritchie Bros. Auctioneers Incorporated, an industrial auctioneer, sells various equipment to on-site and online bidders. The company, through unreserved public auctions, sells a range of used and unused industrial assets, including equipment, trucks, and other assets utilized in the construction, transportation, agricultural, material handling, mining, forestry, petroleum, and marine industries. It also provides Internet bidding services, which facilitate customers access to live and online auction participation. The company primarily serves buyers and sellers of equipment, trucks, and other industrial assets; rental companies and brokers; finance companies; and truck and equipment dealers. As of December 31, 2011, it operated approximately 110 locations in approximately 25 countries, including 43 auction sites worldwide. The company was founded in 1963 and is headquartered in Burnaby, Canada.

Advisors' Opinion:
  • [By Canadian Value]

    Australians will remember 2013 in part for the fall of some of our national corporate icons. The Ford Falcon and Holden Commodore are unlikely to be produced domestically going forward, and Qantas has unsuccessfully sought subsidies from the Federal government. Due to elevated cost structures and a high exchange rate, Australia Inc. is increasingly unable to compete in a fiercely competitive global market.High on the Reserve Bank of Australia�� (RBA) Christmas wish-list this year will be a lower exchange rate and a business community more willing to loosen its purse strings in 2014. Unfortunately, the first wish will likely need to be granted before the second can be realized. We expect the RBA will need to keep policy accommodative over the cyclical horizon and 2014 will be a critical transition year for the Australian economy.Over the year through September 2013, real growth in business investment outside the mining sector slowed to almost zero (0.5% to be precise, as shown in Figure 1). Why has Australia Inc. invested so little into its businesses this year? As RBA Deputy Governor Philip Lowe commented in a speech in late October, the lack of business investment in recent years is actually a global phenomenon across the developed world.�Although hard to quantify, this ��nvestment drought,��as Lowe described it, has likely been influenced by a lingering risk aversion after the financial crisis as well as the political uncertainty that has been common in many developed countries over the past few years. But in Australia another variable has also been restraining non-mining capital expenditure, and that is the elevated exchange rate.As Figure 1 shows, changes in the real trade-weighted exchange rate have historically led changes in non-mining business investment. As the real exchange rate appreciates, domestic products and services become less competitive relative to foreign goods and services, both at home and abroad. And of course, the reverse is true w

Top 10 Growth Companies To Invest In Right Now: Assisted Living Concepts Inc. New (ALC)

Assisted Living Concepts, Inc., together with its subsidiaries, operates senior living residences in the United States. It offers general services, such as meals, activities, laundry, and housekeeping; support services, including assistance with medication, monitoring health status, co-ordination of transportation, and co-ordination with physician offices; and personal care services, such as dressing, grooming, and bathing. The company also arranges access to additional services from third-party providers, including physical, occupational, and respiratory therapy; home health; hospice; and pharmacy services. As of December 31, 2011, it operated 211 senior living residences comprising 9,325 units in 20 states. Assisted Living Concepts, Inc. was founded in 1994 and is headquartered in Menomonee Falls, Wisconsin.

Hot Canadian Companies 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.

Hot Canadian Companies To Own For 2014: Primerica Inc.(PRI)

Primerica, Inc., together with its subsidiaries, engages in the distribution of financial products on behalf of third parties to middle income households in the United States and Canada. The company operates in three segments: Term Life Insurance, Investment and Savings Products, and Corporate and Other Distributed Products. The Term Life Insurance segment underwrites term life insurance products. The Investment and Savings Products segment distributes mutual funds, variable annuities, fixed annuities, and segregated funds. The Corporate and Other Distributed Products segment provides mortgage loans, which include debt consolidation or refinance, and purchase money loans; unsecured loans; prepaid legal services that assist subscribers with legal matters, such as drafting wills, living wills and powers of attorney, trial defense, and motor vehicle-related matters; mail-order student life products; short-term disability benefit insurance; and auto and homeowners? insurance products. The company was founded in 1927 and is based in Duluth, Georgia.

Advisors' Opinion:
  • [By Rich Duprey]

    Private equity investor Warburg Pincus has been a shareholder in term life insurance underwriter Primerica� (NYSE: PRI  ) since its IPO in 2010. However, the financial products marketer will be buying back all of the holdings Warburg Pincus owns for $154.7 million. That translates into�almost�2.5 million shares of common stock�and warrants that �are�exercisable for 4.1 million shares.

Saturday, December 21, 2013

Why Amazon Coins Are a Bad Idea

Back in February we found out Amazon.com (NASDAQ: AMZN  ) was launching Amazon Coins, a new way to make purchases from Kindle Fire devices. Yesterday, the new coins system launched, and if the short history of the Internet has anything to say about it, Amazon Coins are already doomed.

Coins don't make cents
First, let's talk about what these coins are and why Amazon is pushing them. Amazon Coins can be used to buy apps, games, virtual gifts for friends and even song collections inside certain apps. Amazon is likely trying to lure more developers to its platform by using the coins to boost in-app purchases. Amazon has said developers still receive 70% when customers make purchases with coins.

Amazon has already given every current and new Kindle Fire owner 500 coins, which is equal to $5. And users who buy coins in bulk will receive 10% off the purchase of those coins. By offering Kindle Fire users a way to buy and earn the coins, it's trying to keep them entwined into the company's Kindle ecosystem. There's no problem with wanting users to stay connected the Kindle device and making purchases -- all companies with a virtual ecosystem should be doing the same. The problem lies in getting users to accept the currency system and believe that it's better than using money.

Keep that in mind, it has to be easier than using money and users need to believe they're getting a better deal than paying with real money.

Been there done that
That's where two tech companies have gone before Amazon -- and mostly failed. Microsoft (NASDAQ: MSFT  ) launched an online currency system called Microsoft Points several years ago. The points were used to buy Xbox games, extra features inside of games, movies and TV shows. Sounds like a good idea, right? But with the launch of Windows 8, Microsoft started phasing out the use of points for the purchase and rental of music and video content.

Microsoft still uses the points for Xbox users, but while beta versions of Windows 8 used the points for video and purchases and rentals, the latest version of the software defaults to regular credit card purchases. Some have noted the conversion rate for the points -- $1 for 80 points -- confused Microsoft users. Therein is one of the major problems of virtual currency, users have a hard time knowing how much they're paying for something, which isn't a great way to make people feel like they can trust the payment system.

Facebook (NASDAQ: FB  ) also tried its hand at virtual currency starting back in 2009 with its Facebook Credits for game purchases and virtual goods. The company even sold physical cards in some stores to redeem the credits. Rumors swirled that Facebook Credits would become the new way for making purchases online. But at the end of last year, the social media giant phased out credits and went back to using local currencies for online purchases. Some have said Facebook didn't market the credits enough, or that developers didn't receive enough compensation when Facebook users made purchases with Credits.

But the reason why Microsoft Points and Facebook Credits didn't work may be much simpler than that.

Just because users are buying content online and in a virtual environment doesn't mean they want a new currency for making those purchases. We all understand how money works. There's no conversion we need to make in our minds when we buy something for $5. The problem comes when you have 13,729 Amazon Coins and an app costs 599 of those coins and a you can't figure out much that's actually costing you or how much dollar amount you'll have left when you make the purchase.

Think of your credit card points and how skewed the numbers feel when you try to redeem those points for a gift card, cash, or flashlight clock radio. They never seem to add up, and it always feels like a scam. I think Kindle Users will eventually feel the same way as Amazon Coin conversions become more complicated than using real money. A simple 1 to 1 conversion between dollars and virtual currency is the most honest and the least confusing. Anything less just doesn't add up.

Despite the cloudy future of Amazon Coins, there's no disputing Amazon is king of the online retail world. The Motley Fool's premium report will tell you what's driving the company's growth, and fill you in on reasons to buy and reasons to sell Amazon. The report also has you covered with a full year of free analyst updates to keep you informed as the company's story changes, so click here now to read more.

Will These Numbers from Apache Be Good Enough for You?

Apache (NYSE: APA  ) is expected to report Q1 earnings on May 9. Here's what Wall Street wants to see:

The 10-second takeaway
Comparing the upcoming quarter to the prior-year quarter, average analyst estimates predict Apache's revenues will wane -5.1% and EPS will wither -26.7%.

The average estimate for revenue is $4.31 billion. On the bottom line, the average EPS estimate is $2.20.

Revenue details
Last quarter, Apache reported revenue of $4.39 billion. GAAP reported sales were 1.6% higher than the prior-year quarter's $4.24 billion.

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

EPS details
Last quarter, non-GAAP EPS came in at $2.27. GAAP EPS of $1.59 for Q4 were 46% lower than the prior-year quarter's $2.97 per share.

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

Recent performance
For the preceding quarter, gross margin was 81.4%, 250 basis points worse than the prior-year quarter. Operating margin was 39.2%, 890 basis points worse than the prior-year quarter. Net margin was 15.5%, much worse than the prior-year quarter.

Looking ahead

The full year's average estimate for revenue is $17.71 billion. The average EPS estimate is $9.07.

Investor sentiment
The stock has a five-star rating (out of five) at Motley Fool CAPS, with 2,131 members out of 2,190 rating the stock outperform, and 59 members rating it underperform. Among 393 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 382 give Apache a green thumbs-up, and 11 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Apache is outperform, with an average price target of $108.09.

Is Apache the right energy stock for you? Read about a handful of timely, profit-producing plays on expensive crude in "3 Stocks for $100 Oil." Click here for instant access to this free report.

Add Apache to My Watchlist.

Stocks rally on GDP; Dow has best week since Sept.

NEW YORK (MarketWatch) — U.S. stocks rallied Friday, lifting the Dow Jones Industrial Average and the S&P 500 to record levels, after a government report showed the economy grew at its fastest pace in two years last quarter.

The U.S. economy expanded at an annual rate of 4.1% in the third quarter due to stronger consumer spending and business investment than previously reported, according to newly revised data. Investors greeted the upward revision to the gross domestic product as a welcome backdrop for future earnings growth.

Reuters Enlarge Image Twitter CEO Dick Costolo is interviewed before the Twitter Inc. IPO on the floor of the New York Stock Exchange in New York, Nov. 7.

The Dow Jones Industrial Average (DJIA)  closed at a record level for the third day in a row. The Dow rose 42.06 points, or 0.3%, to 16,221.14 and gained 3% over the week. That was its best week since September 13. In terms of point gain, it was the best since early January.

The S&P 500 index (SPX) ended the session off its intraday highs but still at a record closing level. The benchmark closed 8.72 points, or 0.5%, higher at 1,818.32 and recorded a 2.4% weekly gain after two straight weeks of losses. The Nasdaq Composite (COMP)  rallied 46.61 points, or 1.2%, to 4,104.74 and added 2.6% over the week.

S&P 500 home-builder stocks gained the most over the past week, rising 6.1%. Industrials and materials sectors added 3.3% and 2.8% in the past five days respectively.

/quotes/zigman/477673/delayed/quotes/nls/xhb XHB 32.14, +0.40, +1.26% SPDR S&P Homebuilders ETF

"Now that all the distractions are behind us — Affordable Care Act and its botched implementation, the budget debate, debt ceiling, and this week the Fed—it seems like the markets can finally focus on fundamentals," said Drew Wilson, investment analyst at Fenimore Asset Management.

"Today's upward revision to GDP along with earlier economic data shows that the economy is recovering and it is a big positive for markets. As multiples are thinly stretched, earnings power will now come from stronger growth," he added.

Thursday saw a mixed trading session, with the Dow average closing at its 46th record of the year, while the two other benchmarks inched lower. Earlier in the week, the U.S. indexes soared as investors interpreted the Federal Reserve's decision to begin tapering bond purchases in January as confidence in the underlying strength of the economy.

The buzz : MarketWatch's Shawn Langlois writes that the end-of-week brought quadruple witching, the last trading day for various options and futures. "So, we might see a pickup in volume and volatility for what would otherwise be a sleepy time of year."

The comment : "If there are any doubts that the Fed made the right decision on Wednesday to begin tapering, let them be laid to rest. The final reading for third quarter U.S. GDP came in much better than expected at 4.1% growth, revised up from 3.6%," Douglas Coté, chief market strategist at ING U.S. Investment Management, wrote in a note. "While the Fed was correct to hand the baton over to the market, it will not be without consequence. The Fed has been managing market volatility, so anticipate an increase to more normal levels. However, the economy is strong enough to stand on its own two feet, and we are winding down 2013 in better shape than when we began," he added.

In corporate news , several companies reported quarterly results before the markets open.

BlackBerry (BBRY)  shares initially dropped after the company reported a bigger a third-quarter loss than expected. However, shares rallied 15.5% after the firm also announced it had entered into a five-year strategic partnership with Foxconn to make phones for Indonesia and other fast-growing markets.

Walgreen Co. (WAG)  shares fell initially but rebounded to end up 3.7% after the drugstore chain's fiscal first-quarter profit met estimates. Earnings rose to $695 million, or 72 cents a share, from $413 million, or 43 cents a share, a year earlier. Chief Executive Greg Wasson said margins were affected by generics.

Shares of CarMax Inc. (KMX)  fell 9.4% after the used-car seller's third-quarter profit missed Wall Street's expectations. Profits rose to $106.5 million, or 47 cents a share, from $94.7 million, or 41 cents a share, in the year-ago period. Revenue rose to $2.9 billion from $2.6 billion.

Red Hat Inc. (RHT)  surged 14% after the software firm on late Thursday said fiscal third-quarter profit rose 50%.

Shares of Carnival Corp. (CCL)   (UK:CCL)  gained 2.1%, adding to gains from Thursday when the cruise-line operator reported fourth-quarter earnings.

In other financial markets

Chinese stocks closed at 17-week low, while the rest of Asia was mixed and European stock markets scored the best week since April.

Gold rebounded from the previous session's losses and reclaimed $1,200-an-ounce level, while most metals prices rose. Oil futures slipped and the dollar fell against most rivals.

More must-reads from MarketWatch:

Witchy volatility, BlackBerry reports and Facebook gets S&P 500′d

U.S. third-quarter growth raised to 4.1%

Lessons from 2013: Stick with your long-term ideas

Friday, December 20, 2013

5 Big Trades for Post-Taper Gains

BALTIMORE (Stockpickr) -- It finally happened. The Fed announced yesterday that it would only be spending $75 billion in stimulus each month, a move that the market reacted to with surprising enthusiasm. The S&P 500 ended the day up more than 1.66% after spending most of the session underwater.

Of course, the Fed's decision to taper wasn't exactly a surprise. The data supported easing off on the throttle a little. And anyway, Bernanke & Co. left plenty of "outs" to resume full-blown QE3 right as the Senate gets ready to vote on letting Janet Yellen take the big desk.

So maybe the market's reaction yesterday wasn't much of a surprise either.

But it is creating some big opportunities in some of Wall Street's biggest names. That's why we're taking a technical look at five post-taper trades to take this week.

If you're new to technical analysis, here's the executive summary.

Technicals are a study of the market itself. Since the market is ultimately the only mechanism that determines a stock's price, technical analysis is a valuable tool even in the roughest of trading conditions. Technical charts are used every day by proprietary trading floors, Wall Street's biggest financial firms, and individual investors to get an edge on the market. And research shows that skilled technical traders can bank gains as much as 90% of the time.

Every week, I take an in-depth look at big names that are telling important technical stories. Here's this week's look at five high-volume stocks to trade this week.


First up is department store retailer Nordstrom (JWN). By and large, Nordstrom has failed to live up to the broad market's impressive rally this year. While the S&P is up more than 25% since the calendar flipped over to January, Nordstrom has only managed to make half that. But if the price action holds, JWN could be in store for a big move higher.

Nordstrom is currently forming a cup-and-handle pattern, a classic bullish price setup that's formed by a cup-shaped rounding bottom and a short-duration channel down. So even though JWN has been trending lower for the last two months, the longer-term prognosis is higher ground. The buy signal comes on a move through the pattern's price ceiling at $63.

The 50-day moving average has been a pretty good proxy for support in the past, so this week's test of that level could be the start of the move back up to $63 resistance. After the breakout, it's also the level when I'd recommend keeping a protective stop.

UnitedHealth Group

2013 has been a bit kinder to shareholders in UnitedHealth Group (UNH) -- or, more accurately, a lot kinder. UNH has rallied more than 33% since the start of the year's trading. But the setup in shares right now means that the rally isn't over yet.

UNH is currently forming an inverse head-and-shoulders pattern, a price setup that indicates exhaustion among sellers. The pattern is formed by two swing lows that bottom out around the same level (the shoulders), separated by a deeper low (the head). The buy signal comes on a move through the neckline, which is right at $74. A breakout above that level is our buy signal.

The inverse head-and-shoulders pattern (and its bearish counterpart) catches a lot of flack because it's so frequently spotted -- and, frankly, because it has a stupid name. But it works: A recent academic study conducted by the Federal Reserve Board of New York found that the results of 10,000 computer-simulated head-and-shoulders trades resulted in "profits [that] would have been both statistically and economically significant."

That's reason enough to keep an eye on the $74 level in UNH this month.

CIT Group


CIT Group (CIT) has been stuck in a trading range since the start of July, churning sideways at the same time that the S&P was broadly pushing higher. But with shares testing a key resistance level this week, CIT could be about to make a big directional move again.

The sideways churn in CIT is caused by a rectangle pattern, a consolidation setup that's formed by a horizontal resistance level above shares at $51 and horizontal support at $47. The rectangle gets its name because it basically "boxes in" shares of a stock -- the break outside of the box is the trade to take. So, if LKQ pushes above $51, then it's time to buy. Upside looks like the more likely outcome from here; since CIT's price action leading up to the rectangle in early 2013 was bullish, it's more likely to break out from the setup to the upside.

Kraft is committing a cardinal sin when it comes to relative strength. With a market that's correcting in December, relative strength is the single most important technical indicator to use with price -- and KRFT's RS line turned bullish months ago with no signs of strength.

This food stock is lagging the market big time, and not just because of a shape on a chart.

Whenever you're looking at any technical price pattern, it's critical to think in terms of buyers and sellers. Triangles and the other setups we've looked at are a good quick way to explain what's going on in a stock, but they're not the reason it's tradable. Instead, it all comes down to supply and demand for shares.

That support level at $52 is a price where there had been an excess of demand of shares; in other words, it's a place where buyers were more eager to step in and buy shares at a lower price than sellers were to sell. That's what makes a breakdown below $52 so significant -- the move would indicate that sellers are finally strong enough to absorb all of the excess demand above that price level. Wait for that trigger before you sell.

Illinois Tool Works

On the bull side, Illinois Tool Works (ITW) is bringing things back to basics. You don't have to be an expert technical analyst to figure out what's going on in this $36 billion manufacturing stock. Here's why.

ITW is currently trading higher in an uptrending channel, a setup formed by a pair of parallel trend lines. When it comes to price channels, up is good and down is bad; it's as simple as that. Shares have bounced higher on each of the last six tests of trend line support, and so, with the most recent bounce just a couple sessions ago, now is a pretty good time to be a buyer.

Buying off a support bounce makes sense for two big reasons: It's the spot where shares have the furthest to move up before they hit resistance, and it's the spot where the risk is the least (because shares have the least room to move lower before you know you're wrong). Remember, all trend lines do eventually break, but by actually waiting for the bounce to happen first, we're ensuring ITW can actually still catch a bid along that line.

Best of all, the relative strength line in ITW is everything Kraft's isn't. If you decide to be a buyer here, the 50-day moving average is a solid place for your stop.

To see this week's trades in action, check out this week's Must-See Charts portfolio on Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.

RELATED LINKS: >>4 Tech Stocks Under $10 to Watch >>5 Commodity Stocks to Trade for Gains >>The Truth About Amazon's Drones

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At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

Follow Jonas on Twitter @JonasElmerraji