Thursday, January 29, 2015

Atwood Oceanics: Waiting for 2015

There’s been a lot of bearish talk about offshore drillers recently–and Atwood Oceanics (ATW) earnings results aren’t likely to dispel those concerns, despite an earnings beat.

Associated Press

Sure, Atwood Oceanics reported a profit of $1.28 a share, well above forecasts for $1.16, according to But really that’s the past, and while the future looks OK, the present looks tough thanks to a weak drilling market. Morgan Stanley’s Ole Slorer explains:

[Atwood] remains positioned to deliver steady earnings growth, in our view, with an execution-and-growth focused management at the helm. We highlight limited contracting risk vs. peers as the floater market enters a soft patch while [Atwood] still appears open to exploring capital return strategies, although this will likely come into greater focus as FCF becomes positive into 2015.

We are expecting more positive market commentary given [Atwood's] more modern fleet mix [(vs. Noble (NE)/Transocean (RIG))]. Beyond well-documented near-term floater market choppiness, we still forecast marketed utilization to pick up in 2015, and we look especially to [Atwood's] outlook for its uncontracted newbuild drillships (Atwood Admiral and Atwood Archer) scheduled for 2015 delivery. We nevertheless believe that [Atwood] could now be less inclined towards exercising its 5th newbuild drillship option at DSME by Mar 31st 2014. [During the conference call, Atwood's CEO said no decision had been made yet. Ed.]

Attention is now on Atwood Hunter (5,000 ft. 3G semi), ATW's next rig to rollover in Equatorial Guinea in Aug 2014 (Ex.2). We are now modeling a rollover at $400kpd, down noticeably vs. the rig's current dayrate of $516kpd (fixed in Jul 2013), as we expect increased competition in securing new work while we note that the rig could also see unpaid time between short-term contracts in West Africa.

Shares of Atwood have dropped 1.9% to $45.45 at 3:38 p.m. and pulled down other offshore players. Noble has fallen 1.4% to $48.68, Transocean has declined 1.9% to $41.60, Rowan (RDC) is off 0.8% at $31.41 and Seadrill (SDRL) has dropped 1.8% to $35.53.

SEC enforcement co-chief Canellos to leave

regulation, regulator, sec, securities and exchange commission, enforcement, canellos, mary jo white Bloomberg News

George S. Canellos, who led several of the Securities and Exchange Commission's recent cases, will step down as co-director of the agency's Division of Enforcement, according to an agency statement Friday.

Mr. Canellos headed insider-trading actions against former McKinsey & Co. executive Rajat Gupta, Galleon Group founder Raj Rajaratnam and several managers at S.A.C. Capital as well as the firm's founder, Steven A. Cohen.

He was instrumental in a $150 million SEC settlement with Bank of America over improper disclosure of employee bonuses and financial losses prior to its 2008 merger with Merrill Lynch and led actions against several large financial firms over the sales of mortgage-backed securities and collateralize debt obligations. He also brought fraud charges against JPMorgan traders for derivatives losses in the “London Whale” case.

He has led the division since April 22, along with the other co-director, Andrew Ceresney. Both Mr. Canellos and Mr. Ceresney worked as federal prosecutors with SEC Chairman Mary Jo White, when she served as the U.S. attorney for the Southern District of New York between 1993 and 2001.

Mr. Canellos will leave the SEC by the end of the month, while Mr. Ceresney will stay on as director of enforcement.

Mr. Canellos “has not yet made future career plans,” according to the SEC.

Under the duo, the division has cut a high profile since Ms. White took over the SEC in April and made enforcement a priority.

The SEC statement credited Mr. Canellos for helping to implement one of Ms. White's signature changes: modifying SEC settlement policy to require defendants in some actions to admit wrongdoing.

Previously, defendants typically settled without admitting or denying the charges.

Prior to being named co-director of enforcement, Mr. Canellos, 49, served as deputy director and acting director of the division in 2012 and last year. He joined the SEC in 2009 as director of the New York Regional Office, coming aboard after the multi-billion Bernard Madoff Ponzi scheme was revealed. In response, he implemented changes in investment advisory firm examinations and integrated the teams examining broker-dealers and investment managers, according to the SEC statement.

For the fiscal year ended in September, the SEC filed 686 enforcement actions and collected $3.4 billion in disgorgements and penalties. The number of cases declined from a record set in fiscal 2011, but the payment amount was 22% higher than that year.

Mr. Canellos “helped to improve coordination between the enforcement and exam programs, streamline procedures to expedite investigations and better integrate our investigative and trial functions,” Ms. White said in a statement.

Wednesday, January 28, 2015

Teva Bids Adieu to CEO, Gives Back October Gains

So Teva Pharmaceuticals (TEVA), how did that work out for you? That, of course, being the decision to part ways with CEO Jeremy Levin.

Teva’s decision to look for a new CEO has had a drastic effect on the maker of generic drugs. At yesterday’s close, Teva had been up 9% in October. After today’s plunge, Teva’s stock is up just 0.3% this month.

Citigroup’s Liav Abraham and team still see value in Teva’s shares. They write:

We acknowledge that the Teva investment thesis will likely be a "show me" story over the near term, as the company and its Board demonstrates to investors that (i) the company's long-term strategy for value creation remains intact; and (ii) Dr. Levin's departure does not prompt the departure of other members of the company's senior leadership team, many of whom joined the company over the past couple of years. Our thesis surrounding the attractive risk-reward profile of the company remains intact; however investors are likely to be skeptical surrounding management's ability to unlock value over the near term.

S&P Capital IQ’s Herman Saftlas, however, sees the resignation as a sign of Teva’s dysfunction. He writes:

We are disappointed by the abrupt departure of Jeremy Levin as CEO of Teva after holding that position for less than 18 months, with Eyal Desheh named interim CEO. We believe the split reflects a fundamental difference between Mr. Levin and Teva’s Board on how to deal will several headwinds facing Teva, most notably impending generic erosion and increased competition in its key Copaxone multiple sclerosis franchise (which we believe accounts for close to one third of Teva’s gross profits).

Teva has dropped 7.7% to $37.85 today at 3:23 p.m. but doesn’t seem to be spreading though the generic drug space. Taro Pharmaceuticals (TARO) ha gained 1.1% to $79, while Actavis (ACT) has gained 1.2% to $156.25 and Dr. Reddy’s Laboratories (RDY) has advanced 1% to $40.24. Mylan (MYL) has dropped 0.7% to $38.40.

How to Beat the $7 Billion Halloween Spending Game

Children in costumes at a Hallowe'en party, holding orange party bagsGetty Images Americans are spending a boatload of cash to celebrate Halloween this year. Business intelligence firm IBISWorld projects about $7.5 billion in total spending on Halloween this year; the National Retail Federation is a bit more conservative, pegging Halloween spending at just under $7 billion. The NRF says that this means the average person celebrating the holiday will spend about $75 on decor, treats and costumes. That's not nearly as much as you're going to spend on Christmas gifts, but it's still a chunk of change. So what can you do to dial things back a bit? Let's take things one at a time. The Costume. Clearly, this is the big expense, accounting for $2.5 billion in spending, according to the NRF. (Included in that figure is $330 million spent on pet costumes, which we find delightful.) As we explained earlier this week, the best way to save on your costume is to skip the costume store altogether. Go to a pop-up shop and you're likely looking at spending $40 to $50 on a costume in a bag; make one from scratch with items from your closet and the thrift store, and you can conceivably keep it under $15. Whether that works for you depends a lot on what you (and you children and pets) want to dress up as. The top two most popular costumes are "witches" and "Batman" characters, with vampires coming in third. A witch costume can come together with an old black dress, some green face paint and a ratty old broom; a vampire is likewise easy to pull of with face paint and dark clothing. Batman (or another member of the Bat-Family) is going to be a bit more tricky; if you don't have the DIY skills to put together a convincing Batsuit, you might need to swallow your pride and hit the costume store for a proper cape and cowl. The Candy. There are two big variables here: How much foot traffic you expect at your house, and how much you want to impress your trick-or-treaters. For the first consideration, you want to buy in bulk as much as possible without overdoing it; the last thing you want is to have to run to the drugstore at 8 p.m. because you're running low on candy. On the other hand, you don't want to overdo it and wind up with an excess of goodies destined to jump-start your winter over-consumption. As for the latter concern, you can't go wrong with basics like Reese's and Snicker's; cheaping out and getting a giant bag of Tootsie Rolls isn't going to impress the neighborhood kids. As far as we're concerned, you might as well spend a few bucks extra to get the good stuff -- candy isn't expensive. (Besides, you know you're going to eat of it yourself. Make it worth the calories.) If you want to switch things up a bit on the candy front, you might consider hitting up your local Asian market and getting some of these strange foreign candies. They're a bit pricier, and you might risk confusing some of your young visitors with offerings like "Matsuya Soft Milk Candy," but hey, Halloween is supposed to be weird. The Decorations. There's really only one decoration you absolutely need, and that's a decently carved Jack-o-Lantern. Last week, we looked at the dos and don'ts of buying a pumpkin, and found that you should be able to get a decent gourd from the supermarket for $10 or less. As for carving it, a jigsaw is ideal; if you don't have one, spending an extra $5 for a decent pumpkin-carving kit might be better than relying on kitchen knives. As for other decorations, you might find some good DIY ideas on sites like Pinterest. Just be warned -- while it's cheaper than buying ready-made decorations, getting too enthusiastic about the homemade spiders and scarecrows could lead you to spend more on decorations than you normally would. "We're projecting decoration expenditures to grow by 6.5%, and we attribute that to the continued prevalence of websites like Pinterest and home decoration blogs." So if you can resist going totally overboard on making your house haunted, the total savings add up: All told, you're looking at around $10 for a pumpkin, $15 for a costume, and maybe another $10 to $15 for a decent-sized stash of candy to give out to trick-or-treaters. That's about half of what the average reveler is going to spend on Halloween this year. Read more on Halloween on AOL: AOL Jobs: Should You Wear A Halloween Costume At Work? Moviefone: Crazy Movie-Inspired Halloween Costumes Trick Out Your Treats with Exotic Candies from the Asian Market

Monday, January 26, 2015

CalPERS’ Investment Beliefs Arouse Skeptics

CalPERS has long been known as a hands-on, activist-oriented pension fund, but its recently minted list of 10 investment beliefs seems to have stirred up some hostility among financial professionals.

Its spokesman calls much of the reaction “uninformed chatter.” After a protracted process, the largest public pension fund in the U.S. said it formally adopted its new beliefs to “provide a basis for strategic management of the investment portfolio, inform organizational priorities and ensure alignment between the Investment Office and CalPERS staff.”

Sounds harmless, right?

Not exactly. The news was greeted by plenty of criticism and even a bit of scorn, as various professionals in the financial field took CalPERS to task for adopting beliefs that were too vague and questioned the very process of determining those beliefs. Critics also said the pension fund was following a course that would move its investments toward an all-passive portfolio and thereby casting financial analysis to the wind.

Keith Paul Bishop, in a blog post on the California Corporate & Securities Law website, was among those with raised eyebrows.

"At a purely analytical level, these beliefs are so general and open-ended that they could be interpreted, like Polycrates’ dream, in a variety of ways," Bishop, a partner in Allen Matkins' corporate and securities practice, wrote.

Matt Levine, a Bloomberg View financial columnist, went so far as to suggest that if CalPERS intended to stop using external active managers (and stop paying their fees), "it’s about the death of public equity markets as a system for allocating capital."

And last but not least, Robert Boslego, managing director of Boslego Risk Services, a consulting firm in Santa Barbara, Calif., blogged that CalPERS' investment principles "have the circular look of a policymakers’ version of a letter of intent about determining an intent that determines policy guidelines."

He also criticized the makeup of the board that came up with the beliefs, referring to it as a "kangaroo committee" because its members are not necessarily financial experts; he singled out one who was "a glazing specialist (as in pottery or glass) in a California school district and questioned why he should have "an apparently equal voice on the dictates of stewardship of $270 billion of assets."

Also read:

California pension payments doubled in 14 years Feeling the pension pain in California Disputing the math in pension obligations

Criticisms aside, the fund’s 10 investment beliefs do, in fact, read more like a series of principles to guide socially responsible investing, including references to such things as “human capital” and directives to “consider the impact of (CalPERS’) actions on future generations” and create “sustainable value.”

In part, that means investments it makes must now consider climate change and natural resource availability, factors that emerge slowly over long time periods, but “could have a material impact on company or portfolio returns.”

The full set of beliefs can be viewed here in detail, but the main principles are as follows:

1. Liabilities must influence the asset structure.

2. A long-time investment horizon is a responsibility and an advantage.

3. CalPERS investment decisions may reflect wider stakeholder views, provided they are consistent with its fiduciary duty to members and beneficiaries.

4. Long-term value creation requires effective management of three forms of capital: financial, physical and human.

5. CalPERS must articulate its investment goals and performance measures and ensure clear accountability for their execution.

6. Strategic asset allocation is the dominant determinant of portfolio risk and return.

7. CalPERS will take risk only where we have a strong belief we will be rewarded for it.

8. Costs matter and need to be effectively managed.

9. Risk to CalPERS is multi-faceted and not fully captured through measures such as volatility or tracking error.

10. Strong processes and teamwork and deep resources are needed to achieve CalPERS goals and objectives.

Offering one of the few in-depth responses to the skeptics, Joe DeAnda, a CalPERS spokesman, told that the principals are “intended … as (a) foundation for everything to do with our investments,” but are not some radical, nebulous plan to override the way business is normally done.

The process to develop the list itself, he said, was not a superficial one imposed by an outside consultant, as one critic suggested, but a lengthy one, driven by CalPERS itself, that sought buy-in from a wide range of stakeholders — not just the people in the CalPERS offices, but the future beneficiaries of the plans and retirees as well.

The idea, he said, was to provide “a continuity of thinking and a philosophy as senior investment staff come on board and leave” and board members, too, change as political appointments or elected offices change. “Having these beliefs will … keep a level of continuity, no matter what personnel changes may happen.”

In addition, said DeAnda, “There (are) no specific deliverables that come out of the adoption of the beliefs; nothing changes about the portfolio, or our operations.”

These principles, which were given preliminary approval in September and should be formally adopted at the October meeting of CalPERS’ investment committee, also were not designed to convert the fund’s entire $265 billion-plus assets to passive management, as some in the industry have suggested.

On that point, DeAnda noted passive management was something CalPERS was already moving toward. “Really the only place where this is a conversation is with the public equities portfolio,” he said, pointing out that that portfolio, which is 50 percent of the fund, is already two-thirds passively managed. “We said we’ll use index tracking strategies where we’re not firmly convinced that active management can add value. (And that’s a belief that’s) already been held.”

Neither are these principals intended to supplant the data-driven process that governs the choice of investments, he said. The principles don’t look at “risk and … performance data; those are things that go on in an ongoing process … that any pension fund, let alone the largest, is doing. (The beliefs aren’t) part of the investment process, and weren’t intended to be.” Instead they were intended to be “a set of principals, philosophical values, in a statement of beliefs,” DeAnda said.

In that sense, CalPERS was breaking ground in coming up with its investment beliefs.

“Very few pension funds — a couple of European funds, and in the U.S. the only other one is, I think, Washington State — may have them, too,” DeAnda said. “But (you’ll be) seeing more and more funds do that, because it’s important to guide the investment office. That’s more groundbreaking, if you will.

“It’s (now) clear where we stand as a fund — what our priorities are and what’s important to us — and that will be set in place.

“There will be no question in the years ahead about what we believe on the investment side.”

And anyone hoping to do business with CalPERS will, no doubt, want to be sure they share in those beliefs.

The march to cash is on

stocks, bonds, cash, equities, fixed income, economy, federal reserve

Investors are running for cover ahead of what is expected to be a hectic fall.

More than $30 billion has been pulled out of bond funds this month, and last week's outflows from stock funds were the biggest since 2008.

“There's a lot of future anxiety,” said Greg Sarian, managing director at Sarian Group, a private wealth team at HighTower Advisors LLC.

The Federal Reserve is widely expected to announce its plan to slow down its asset-purchasing program, or quantitative easing, at its September meeting. There is still a lot of uncertainty over what shape the tapering could take or when it could actually begin.

Add that to concerns over slumping emerging markets, rising interest rates and the upcoming debt ceiling debate, and a strategy of exercising some caution begins to win adherents, experts said.

“People are being a little more cautious going into the fall, and that probably makes sense,” said Russ Koesterich, chief investment officer at BlackRock Inc.

Mr. Sarian started talking to his clients about moving into cash late last month.

“When the market hit new highs in July, we thought it was time to pick the fruit while it's ripe,” he said. “It's been a good year. Clients are much more aware of protecting profits than ever before.”

Now Mr. Sarian is looking to lock in the S&P 500's 15% year-to-date return and provide cash for clients' short-term liquidity needs.

The anxiety over the upcoming events has already translated to spikes in stock market volatility and rates.

The S&P 500 is down almost 3% this month, and rates on the 10-year Treasury have risen to their highest level since 2011.

Nothing in the short term is likely to turn those trends around, strategists say.

“There is a dearth of catalysts right now,” said Jeffrey Saut, chief investment strategist at Raymond James & Associates. “The fact of the matter is, the market's internal energy is gone near term.”

Scott Wren, senior equity strategist at Wells Fargo Advisors LLC, agrees that there isn't a lot to get excited about for stocks over the next few months.

“We'd argue the gains are in for the year,” he said.

Mr. Saut said that the current pullback could run as much as 10% in total, but he doesn't think the Fed's tapering, if it is announced next month, will cause any kind of bear market.

̶! 0;I personally think it's going to be a non-event,” he said. “Usually, when everyone's asking the same question it's the wrong question.”

Mr. Wren is also still bullish about the long term.

He has a target of 1,850 for the S&P 500 at the end of 2014. It closed at 1,656 last Thursday.

With that in mind, Mr. Wren is using this pullback as an opportunity to move clients into stocks.

“We have lots of clients with a lot of cash who have missed a lot of this run,” Mr. Wren said. “We'd love to see the market pull back a little more, and then we'll be in there pounding the table.”

Even though Mr. Sarian is talking to clients about cash, he sees lots of positives in the big picture.

“We're really encouraging clients to not let the short-term volatility affect their long-term planning,” he said.

“The economic data is gradually getting better,” Mr. Sarian said.

Sunday, January 25, 2015

Why There's Blame to Go Around on Consumers' Rising Bank Overdrafts

NEW YORK (TheStreet) -- U.S. consumer bank overdrafts are up, but consumers shouldn't feel they're solely to blame.

Moebs Services, a Lake Bluff, Ill.-based economic research firm, says that the recent increase in overdrafts is tied directly to the Jan. 1 payroll tax hikes engineered by Congress and signed off by the president.

In its latest quarterly study, Moebs says overdrafts rose $200 million from the first quarter to the second quarter of 2013.

On a yearly basis, bank overdrafts remain below last year's levels, standing at $31.3 billion from $32 billion in the fourth quarter of 2012. Also see: Wall Streets' Great Recession Cost Us All $30 Trillion>> The quarterly rise is no coincidence, Moebs says. Consumers simply have less cash to cover purchases and payments. Besides the payroll tax issue, the sequester, which cut government spending and triggered March 1, also fueled uncertainty among consumers. "With the tax increase in Social Security Jan. 1, stemming from government automatic budget increases, consumers net pay was reduced," says Michael Moebs, chief economist and CEO at Moebs Services. "It takes three to six months for economic fiscal changes to fully show up in the marketplace, and the cut in the average pay hit consumers' pocketbooks in the second quarter of this year." Also see: Bank Fees, Higher Account Minimums Get Some Hackles Up>> Moebs says reduced overdraft volume reflects the belt-tightening by the consumer, especially in the all-important back-to-school shopping season -- the second-busiest shopping season of the year, behind Christmas. "The back-to-school season shows parents were conservative in school-supply purchases, and recently released individual income data reflects very small increases so far this year," he says. "The automatic budget cuts, or sequester, have created uncertainty for consumers. Keeping the checkbook balanced and avoiding overdrafts reflect these economic trends." Yet there is some good news in the consumer overdraft data. Moebs says that bank overdrafts declined to just seven per consumer, per year -- the lowest level of consumer usage since 1995-99, he says. Part of the reason overdraft revenues have risen is because banks and credit unions are raising what they cost, to about $30 this year from about $28.

Weekly CFO Sells Highlight

According to GuruFocus Insider Data, the largest CFO sells during the past week were: Boston Scientific, Ruckus Wireless, Micrel, LRAD and Skyworks Solutions.

Boston Scientific (BSX): EVP & CFO Jeffrey Capello Sold 525,000 Shares

EVP & CFO Jeffrey Capello sold 525,000 shares of BSX stock on Aug. 29 at the average price of $10.68. Capello owns at least 147,447 shares after this. The price of the stock has increased by 7.68% since.

Boston Scientific has a market cap of $15.44 billion; its shares were traded at around $11.50 with a P/E ratio of 17.20 and P/S ratio of 2.20.

Boston Scientific has released its second quarter 2013 results ended June 30, 2013. GAAP net income for the second quarter was $130 million, or $0.10 per diluted share.

Ruckus Wireless (RKUS): CFO Seamus Hennessy Sold 50,000 Shares

CFO Seamus Hennessy sold 50,000 shares of RKUS stock on Sept. 6 at the average price of $15.12. The price of the stock has increased by 1.19% since.

Ruckus Wireless Inc has a market cap of $1.18 billion; its shares were traded at around $15.30 with a P/E ratio of 270.27 and P/S ratio of 4.40.

Ruckus Wireless generated second quarter 2013 revenue of $63.9 million, an increase of 30.6% over the same period of 2012. GAAP net income was $0.7 million, compared with net income of $20.6 million the same quarter of the prior year quarter.

Sr. V.P. Barton M. Burstein and Sr. V.P. Steven A. Martin both also sold shares of RKUS stock over the past week.

Micrel (MCRL): CFO/VP Finance/HR Ray Wallin Sold 59,701 Shares

CFO/VP Finance/HR of Micrel, Inc. (MCRL) Ray Wallin sold 59,701 shares during the past week at an average price of $9.56.

Micrel has a market cap of $542.478 million; its shares were traded at around $9.38 with a P/E ratio of 52.08 and P/S ratio of 2.27. The dividend yield of Micrel stocks is 1.89%. Micrel had an annual average earnings growth of 6.7% over the past 10 years.

For its second quarter of 2013, Micrel generated $5! 9.2 million in revenues, flat from the $59.7 million generated the same quarter of last year. GAAP net income was $5 million ($0.09 per share), compared to income of $5.2 million last year. Gross margin was 52.5% compared to 52.0% prior year quarter.

LRAD (LRAD): CFO/Secretary Katherine McDermott Sold 38,204 Shares

CFO/Secretary Katherine McDermott sold 38,204 shares of LRAD stock on Aug. 28 at the average price of $1.57. Katherine H McDermott owns at least 17,800 shares after this. The price of the stock has decreased by 10.19% since.

LRAD Corp has a market cap of $45.8239 million; its shares were traded at around $1.41 with a P/E ratio of 52.80 and P/S ratio of 3.28.

CEO Thomas Brown sold 54,008 shares of LRAD stock on Sept. 4 at the average price of $1.51. Director Dennis Wend and multiple other insiders bought shares of LRAD stock over the week.

Skyworks Solutions (SWKS): V. P., CFO Donald Palette Sold 37,528 Shares

Vice President and CFO Donald Palette sold 37,528 shares of SWKS stock on Aug. 28 at the average price of $25.5. Donald W Palette owns at least 88,767 shares after this. The price of the stock has increased by 0.86% since.

Skyworks Solutions has a market cap of $4.83 billion; its shares were traded at around $25.72 with a P/E ratio of 19.46 and P/S ratio of 2.86. Skyworks Solutions had an annual average earnings growth of 28.8% over the past 5 years.

Skyworks Solutions reported third quarter 2013 revenues up 12% year-over-year to $436.1 million. Non-GAAP EPS were $0.54 and GAAP EPS were $0.34. The company also repurchased 4 million shares this quarter.

President and CEO David J Aldrich sold 27,000 shares of SWKS stock on Sept. 4 at the average price of $25.67.

For the complete list of stocks that Sold by their CFOs, go to: Insider Sells.

Related links:GuruFocus Insider Data

Saturday, January 24, 2015

Ask Matt: Can I get shares of the Twitter IPO?

USA TODAY markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at

Q: Can I get shares of the Twitter IPO?

A: The IPO gold rush is back on, and this time, investors are hoping for a piece of Twitter.

Twitter, the popular online messaging service, is expected to sell shares to the public for the first time this week. Interest is especially high in this deal since Twitter is a service commonly used by many people who tend to also buy stocks. The initial price range set by the company also was set low, making some investors think the stock could pop on its first day.

BOOK REVIEW: Hatching Twitter resulted in wounded birds

MOTLEY FOOL: What's wrong with Twitter IPO?

But that changed Monday. The company boosted its expected price range from $17 to $20 a share to $23 to $25. That gives the company a value of between roughly $13 billion and $17 billion, depending on how investors count the company's shares outstanding. Investors expected the company to be worth $15 billion before the IPO.

With the offering price being moved up, it's now likely that some large institutional investors might take a pass on the shares. And that means more shares will be made available to investors. Traditionally, underwriters might make about 20% of a deal's shares available to regular investors.

TRACK YOUR STOCKS: Get real-time quotes with our free Portfolio Tracker

If you're a customer of the investment banks leading the deal, including Goldman Sachs, you can check with your broker to see if you can buy shares. Otherwise, large online brokers like TD Ameritrade and Fidelity might make shares available. Just be careful, though. IPOs are infamously difficult to time and sometimes the easy money doesn't pan out as planned.

Thursday, January 22, 2015

Redbox Goes Digital with Redbox Instant

The Motley Fool is on the road in Seattle! Recently we visited Coinstar -- now officially renamed Outerwall  (NASDAQ: OUTR  ) -- to speak with CFO-turned-CEO Scott Di Valerio about the 22-year-old company's well-known coin-cashing machines, as well as its more recent acquisition of Redbox, and future initiatives to expand into other aspects of the automated retail market.

Now in public beta, Redbox Instant ushers Coinstar into the streaming video market. In this video segment Scott shares the company's experiences and feedback so far. The full version of the interview can be watched here.

A full transcript follows the video.

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Austin Smith: I wanted to talk a little bit about the progress of Redbox Instant and your partnership with Verizon (NYSE: VZ  ) . I'm wondering if you could maybe just elaborate on that, any progress you guys have going there, or what you're seeing as the early results?

Scott Di Valerio: You bet. Yeah, we're very pleased with our partnership with Verizon, to bring Redbox Instant to the marketplace. We signed that deal in February of 2012, and about 15 months later were able to launch a product through kind of a beta, general availability. We're pleased with it so far.

One of the things we've been really doing is trying to understand from the customer, is there enough content between the around 5,000 titles that you have on the streaming side, as well as getting great new release content from the kiosk?

The surveys from our customers are saying yes, there's enough content, and they're finding great new release content because you get four nights at the kiosk each month on the subscription, as well as the streaming, as we think about the business; that's both from customers who have stayed on and are paid subscribers, as well as ones who churned out of the business, so we're always trying to find the best mix there.

One of the great things about the Redbox Instant business is you basically have the full old brick-and-mortar store available to you.

If you think about it, when you used to go to a brick-and-mortar store you'd walk around the outside walls because that's where the new release content was. We've taken that new release content, and that's Redbox. Basically we've taken those outside walls and put them into 12 square feet. With Redbox Instant, we now have the center of the store available to our customers.

We think it's a great opportunity for our customers, it's a great value for our customers today at $8 for four standard-def rentals a month, plus unlimited streaming, or $9 for Blu-ray, for four nights at the kiosk.

We're really pleased; we think it's a great value for our customers, and as we roll into the third quarter, Redbox Instant will do a lot more work around promoting the service as we've brought on more CE device manufacturers so that people are going to get that 10-foot experience for being able to get it up on the TV in a much broader way.

Wednesday, January 21, 2015

A Week of Nokia Buyout Reports: Does a Microsoft Acquisition Make Sense?

The following video is from The Motley Fool's weekly Tech Review, in which host Chris Hill talks all things tech with Fool analysts Eric Bleeker and Lyons George.

The Wall Street Journal reported this week that though Microsoft (NASDAQ: MSFT  ) and Nokia (NYSE: NOK  ) had reached advanced talks on a possible acquisition of Nokia by Microsoft, the talks have now fallen apart. In this segment, Eric and Lyons discuss which aspects of the acquisition would have made sense as Microsoft continues to struggle in its efforts to break into the smartphone market, as well as who else may be interested in a Nokia acquisition. Finally, Eric talks about why Nokia may prove a difficult acquisition to make, and whether it will still be a standalone company three years down the road.

It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In a new premium report on Microsoft, a Motley Fool analyst explains that while the opportunity is huge, so are the challenges. The report includes regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.

The relevant video segment can be found between 8:40 and 12:35.

For the full video of this edition of the weekly Tech Review, click here .

Humans, Computers and Market Volatility

Humans used to execute all stock trades. Actual people coming together face-to-face. Humans are slow, but they can think. That helped alleviate tension when market panics came up. 

Then computers came along. Computers are lighting fast, but they can only follow programmed rules, without thought. Problems tend to feed on themselves when computers are in charge. That's been a factor in market volatility over the last decade, as more trading at exchanges like the New York Stock Exchange moved from human interaction to computers. 

I recently met up with longtime floor trader Dorren Mogavero at the NYSE. Here's what she had to say about how her job has changed with computer trading (transcript follows):  

Doreen Mogavero: Well, I think the function that we perform is still very similar to the one that we always did perform, and that was to keep our customers involved in the market in a very proactive way, not a reactive way. Electronic markets tend to be very reactive. Markets that have people involved tend to be much more proactive, and that sort of mitigates volatility and it also keeps the flow of information going to the customers back and forth in a very real-time way.

Morgan Housel: So with the amount of trading that is now done by computers instead of people, how has that changed the stability and volatility of markets?

Doreen Mogavero: Well as markets have gotten more electronic, they have gotten more volatile, that's definitely, and our market has gotten more volatile as well, but still remains less volatile than a fully electronic one.

Why New York & Company Shares Jumped

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

What: Shares of New York & Company (NYSE: NWY  ) were looking sharp, gaining as much as 10% two market days after reporting earnings, as Janney Montgomery Scott today reaffirmed its buy rating and upped its price target by 50% to $6.

So what: On a day when the broad markets were up as much as 1.5%, the vote of confidence seemed to be enough to push the women's fashion retailer 6.6% higher at closing. Today's swing also comes one session after the company delivered better-than-expected earnings, sending shares up 6% on Friday when New York & Company posted a surprise profit. The retailer reported earning $0.03 a share when analysts expected a $0.07 loss.

Now what: The recent earnings and revenue beat could indicate that the retailer is pulling out of a funk that's kept it profitless in recent quarters. The economic recovery should also help continue to drive sales higher, though shares have already nearly doubled since last November. I would wait for profits to catch up before jumping in on New York & Company.

Want more on New York & Company? Add it to your Watchlist by clicking right here.

Monday, January 19, 2015

Will Gas Prices Give Tesla a Flat?

Can Tesla Motors (TSLA) survive falling gas prices?

MarketWatch columnist Brett Arends weighs in on the topic today, as the shares of the electric car maker fell 3% in recent trading to $215.78. He writes:

Maybe people are still going to line up to pay $70,000 for one of his fancy new battery-powered Tesla S models. But it was a lot easier to sell the concept when gasoline was $3.70 a gallon than it is at $2.25.

More than a dozen Wall Street analysts rate Tesla a Buy. Yet the stock has dropped 26% since hitting a 52-week intraday high above $291 in early September. According to data compiled by Edmunds, the auto market research company, sales of light trucks are suddenly booming again, while sales of hybrids, electrics and other fuel-efficient vehicles have tanked, falling in May through November from 4.1% of the market to just 3.2%.

As Arends writes:

Whether this is enough to run Tesla off the road is another matter. Personally I'd avoid any stock this popular and universally loved, but that may be just because I'm ornery and I don't like crowds. Car fans seem to like the Tesla vehicles, and Musk knows how to market. (A couple of years ago, while strolling through midtown Manhattan, I came across a crowd of New Yorkers gawking and oohing and aahing over a parked car—an early model Tesla.)

It is an open question whether the recent collapse in oil prices is going to be a short-term thing or part of another long bear market, like the one we saw during the 1980s and 1990s.

But one thing that ought to be bullish for gasoline—and hence for Tesla—is that every time oil prices fall people just go out and waste it some more. Gasoline prices are down over six months, and already U.S. car buyers are shunning fuel-efficient vehicles and buying themselves a new SUV. When enough do that, gasoline consumption goes back up, and so do prices.

What Is Appealing In Microsoft’s Windows 10 Release?

After several months of speculation, Microsoft (MSFT) has finally pulled off the strings to reveal some of the basic features of its new operating system yet to be launched. This OS development may have followed suit after the failure of Windows 8 to entice customers as it had several flaws linked to it. The name of the new OS comes as a surprise- it's to be named as Windows 10instead of Windows 9. While analysts were expecting Microsoft to develop a concrete system after the criticism it faced with Windows 8, there were certain surprises that were unveiled when the company gave the world its first official look of the next upcoming version of Windows on September 30. Let's examine how the reinvented Windows actually tries to combine the best of both worlds and holds appeal in the tech market.

Sure appeal to office workers and the corporate community…

While Microsoft 8 was seriously rejected by the corporate managers, as it was difficult to understand its operation, this time the company has decided to appeal to the office-going crowd by incorporating familiar elements and hiding features that would not be applicable. The new Start menu is a primary example explaining the refinement in features apparent in Windows 10.

While a lot might actually change between now and the final release of Windows 10, the preview indicates a two-column Start menu with old-style icons for pinned or recent programs on the left, and live tiles on the right displaying updates and information. The tiles will be customizable, though at their smallest size they stand comparable to pinned shortcuts.

On the management side, the new operating system offers higher security, easier manageability, and improved capabilities for managing today's security threats. The methods of installation and dealing with volume licenses have been made easier, making the up-gradation process simpler. There is still a huge base of Windows XP machines in office environment, but the company's new features might tempt managers to finally decide for an upgrade to Windows 10.

Scaling from smartphones to giant data centers

This renewed OS will be applicable to future versions of Windows phone as well as Windows on tablets, desktop PCs and hybrid portable devices. The same experience can be carried forward to Microsoft's Xbox One console and potentially other devices.

Users will be able to view an interface that matches their device type, screen size and input methods. For example, the full screen Start UI might not necessarily be a part of the desktop usage experience, but will appear for first touch-tablet users. There would be flexibility offered to users to switch between two modes, especially if they use tablets with detachable or foldable keyboards.

Modern apps and virtual desktops

Desktop users will be able to use modern apps on their screen by downloading from the Windows store. They will be resizable and can be pinned to the taskbar. Also virtual desktops which remain a niche feature on Windows could be present. There would be a new taskbar that will allow the user to view all the running apps and arrange them between desktops.

With Windows 10, a user can quickly tile four apps at one go on the desktop, just as dragging them to the corners of the screen. This is an added attraction to desktop users having large monitors.

Much more to find out

If someone is interested in Windows 10, they can download the preview version which is expected to expire by April next year, when Microsoft would release the consumer preview of Windows 10. Though the company has posted instruction to help users getting accustomed to this new version, users might find the consumer version providing better understanding. So, it's more of a wait and watch exercise at this moment for Windows 10 until the final release in the upcoming year.

Saturday, January 17, 2015

Lululemon: ‘Finding Their Way Om’

RBC’s Howard Tubin and Courtney Willson are feeling a lot better about Lululemon Athletica (LULU) than they were before yesterday’s financial results:


We believe we are starting to see the fruits of Lululemon’s labor with more positive impact to come over the coming quarters and years. With the balance of the assortment skewing more toward new/novel/unique product, we believe Lululemon is on the verge of comp re-acceleration and share price appreciation will likely continue.

Management has been hard at work over the last several months implementing new systems, processes and procedures to improve the merchandise assortment and set the stage for accelerating growth. In the current quarter we’d highlight: 1) the return to positive store traffic, 2) strength at the end of the quarter from the new fall transitional merchandise assortment, 3) new store productivity remaining strong, 4) the need for fewer markdowns, 5) leaner inventory, and 6) strength in the men’s business.

Shares of Lululemon have gained 3% to $45.05 at 2:15 p.m. today. And those pretenders, er, competitors, Gap (GPS) and Under Armour (UA). They’ve dropped 0.1% to $44.27 and 1.3% to $69.01, respectively.

Thursday, January 15, 2015

Sardar Biglari's 2013 Letter To The Shareholders Of Biglari Holdings

<p style=" margin: 12px auto 6px auto; font-family: Helvetica,Arial,Sans-serif; font-style: normal; font-variant: normal; font-weight: normal; font-size: 14px; line-height: normal; font-size-adjust: none; font-stretch: normal; -x-system-font: none; display: block;"> Biglari Holdings 2013 Letter To Shareholders

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Wednesday, January 14, 2015

Crimea economy rattled by Russia takeover

KIEV, Ukraine – Russia's takeover of Crimea is rattling the economy in the province where several foreign companies have pulled out and Ukrainian business-people are being forced out.

Banks such as Hungary's OTP, Russia's Alfa Bank and others are among the businesses that have pulled operations from Crimea. Meanwhile, Ukrainian businesses – PrivatBank, VAB Bank, Bank Kyivska Rus and Imexbank – have had their licenses to operate revoked by the Central Bank of Russia.

"State-owned Russian banks are likely to take the space of the banks that have exited the peninsula in the near future," said Lilit Gevorgyan, senior sovereign risk analyst at IHS Global Insight in London. "It will take a considerable amount of time for private banking to return."

A bank targeted by American sanctions in retaliation for the annexation – Bank Rossiya – was one of the first to open a branch on the peninsula after the Russian invasion.

Russia President Vladimir Putin signed legislation in April declaring the region to be Russian territory following a disputed referendum by locals opting to join its neighbor. Russia had troops move into the province before the vote, which the West said was rigged in favor of pro-Russian Crimeans.

Since the takeover, Crimea seems to resemble the Putin economic policy of rewarding supporters through government actions.

McDonald's closed its three Crimean restaurants "due to the suspension of necessary financial and banking services" a company statement said. And some Ukrainians elsewhere in Ukraine are pulling back from spending money there.

"We don't want to spend our money in Russia," said Olena Zaitseva, a Ukrainian marine biologist who regularly conducts field work in Crimea. This year, she said she would cancel her trip.

The economic impact of Zaitseva's absence is more significant than it might at first appear. Under Ukrainian rule, sunflower seed exports, tourism, shipbuilding and solar energy were the mainstays of the Crimean economy! . But they've never been lucrative industries.

Governments in Kiev have struggled to bring Crimea's economy to the same standard of living as other Ukrainian regions since the former Soviet republic achieved independence in 1991.

Still, the region's per capita earnings are still around one-third lower than the rest of the country, according to a 2011 report by the Razumkov Center, an economic think tank in Kiev.

Ukraine's failure to turn around the peninsula's fortunes hasn't been lost on Putin.

"The Kremlin is keen to showcase the advantages of being part of the Russian economy," Gevorgyan said. "The Russian government has already announced $7 billion worth of spending projects which would also include building a connecting bridge with mainland Russia."

The public investment could signal the cutting of economic ties between Crimea and Ukraine for a long period of time, said Igor Burakovsky, director of the Institute for Economic Research and Policy Consulting in Kiev.

"Businesses have to be registered according to the Russian laws," Burakovsky said. "Definitely there will be some problems in order to work with the continental part of the Ukraine."

The situation is especially dire as the summer vacation season approaches.

People stand outside a closed McDonald's restaurant in Simferopol on April 4, 2014.(Photo: Alexander Polegenko, AP)

Around 4 million Ukrainians and 2 million Russians regularly go on their summer vacations in the Crimea. There have been reports of Russian plans to create a free economic area as well as a gambling zone with casinos to attract more Russian tourists in order to replace Ukrainians who aren't expected to return.

"The annexation of Crimea made me stop being lazy and ! finally f! ile documents for an international passport," said Yuriy Voronkov, a web developer from Kiev who is thinking about vacations in India or Thailand.

Anna Kholodnova, 23, of Kiev said she won't be going to the annual Koktebel Jazz Festival on the Black Sea coast. "It's not appealing to me anymore," she said.

Future developments — including unrest in Ukraine's largely Russian-speaking East — are also likely to create economic problems.

Ukraine has been providing energy and water to the peninsula, for example. It's not clear how long those utilities will remain. Ukrainians who sympathize with Kiev are still living in the region, so officials don't want to leave them in the dark or without water.

Still, the Ukrainian government has curbed the flow of water enough to harm agriculture, Burakovsky said. For Russia, meanwhile, the price tag for assimilating parts of Ukraine is growing.

In April, Standard & Poor's downgraded Russia's credit rating for the first time in more than five years to a notch above "junk" status. In late April, the International Monetary Fund said in a statement that capital outflow from Russia "increased significantly" in the first three months of 2014 to $51 billion. The Fund noted that investment in Russia would further dwindle because of the geopolitical situation.

The U.S. and European Union have also levied sanctions against Russian officials and companies with close links to Putin.

Gevorgyan estimated that pension payments for seniors, public sector wages and paying for half-completed infrastructure projects, including three power stations under development, would cost Moscow around roughly $5 billion annually.

Between the sanctions, investors pulling out and the chaotic business climate that's developed during the ongoing crisis, nobody will be eager to put money into Crimea anytime soon unless its Russian government funding, Gevorgyan said.

"Until the geopolitical crisis is put to rest for some time, it is hard to see i! nvestors ! flocking Crimea, including Russian private capital," she said.

Tuesday, January 13, 2015

Plug Power stock jumps on upbeat order outlook

Fuel cell provider Plug Power's stock jumped more than 16% after it reported earnings on Thursday and said it expected 2014 orders to hit more than $150 million, which is almost four times its total for 2013.

It was trading around $7.94 soon after the market opened.

The company's revenue for the fourth quarter of 2013 was $8.0 million. For the same period 2012, it had revenue of $5.9 million.

Yet, it had a net loss of $28.9 million in the fourth quarter. For the same period 2012, it had a net loss of $8.5 million.

That large loss was mainly because of a charge of $20 million related to a change in the fair value of previously issued common stock warrants, said Bloomberg. Excluding the charge, the loss narrowed to $8 million, or 8 cents a share, from $9.59 million, or 25 cents a share.

Analysts expected the company to lose 8 cents a share in the fourth quarter.

Plug Power, which puts fuel cells into forklifts, said that during the fourth quarter, it received sales and maintenance orders from "significant customers" such as Walmart, Kroger, BMW and Mercedes-Benz.

For the full year 2013, revenue hit $26.6 million.That's slightly down from full-year 2012, when total revenue of $26.1 million.

Full year net loss was $62.8 million. In 2012, that net loss was $31.9 million.

Shipments of its products were down in the fourth quarter 2013 as well as for full-year 2013.

It shipped 279 units during the fourth quarter vs 518 units in the same time 2012. For full year, it shipped 918 units compared to 1,391 in 2012.

Sales orders for the year 2014 already exceeded $60 million, Plug Power said in a statement.

" I am more bullish than ever that Plug Power is moving into a rapid-growth cycle," CEO Andy Marsh said in a statement on Thursday.

Plug Power had a strong surge in the stock market of late, but has been up and down over the last year. It's 52-week price ranged from 15 cents to $11.72.

Contributing: Gary Strauss, John Waggoner!

Monday, January 12, 2015

Market pullback? Yes. End of bull? Unlikely

NEW YORK -- Sure, the stock market is taking back a chunk of the big gains it showered on investors last year, but it's too early to say the nearly five-year-old bull market is dying — at least not yet, says Sam Stovall, chief equity strategist at S&P Capital IQ.

There's fear in the air for sure, after another drubbing Wednesday on Wall Street, which pushed the Standard & Poor's 500 index down 1%, extending its 2014 loss to nearly 4%.

WALL STREET: Grapples with Fed changeover

Stocks again headed south, this time on news of turmoil in emerging markets and the Federal Reserve's decision to continue cutting back on its market-friendly stimulus in the final meeting under Chairman Ben Bernanke before Vice Chair Janet Yellen takes the top post on Friday.

TRACK STOCKS : Get real-time quotes with our free Portfolio Tracker

"Transitions are increasing uncertainty," says Stovall. "From the leadership hand-off at the Fed, to the unwinding of the emerging market carry trade, to the eclipsing of the Lunar New Year from Snake to Horse." Indeed, "global investors are re-evaluating emer-ging market growth projections."

Adding to the angst is that CEOs are bumming Wall Street out with lousy profit forecasts.

"Better-than-estimated fourth-quarter results are being offset by managements' injection of increasingly somber forward guidance," Stovall says. "While these factors add up to a more cautious investment environment, we believe a resulting pullback or correction will not derail this bull market, as we see the ongoing Fed taper pointing to improving growth."

Why the Mortgage Crisis Is Far From Over

The housing market has recovered sharply from its worst levels following the mortgage crisis. But even five years later, millions of homeowners are still struggling under huge amounts of home debt.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at recent data from RealtyTrac noting that 9.3 million homeowners remain underwater on their homes by at least 25%. Dan points out how even a big rise in prices and efforts from JPMorgan Chase (NYSE: JPM  ) , Bank of America (NYSE: BAC  ) , and Wells Fargo (NYSE: WFC  ) to agree to modify customer mortgages haven't made a huge dent in those numbers. Dan notes that big problems exist in hard-hit states like Nevada and Florida, causing potential problems for Hovnanian (NYSE: HOV  ) , PulteGroup (NYSE: PHM  ) , and other homebuilders seeking to recover from the worst of the crisis. 

Get smart about your money
The housing market's gains still emphasize the importance of having money outside your home to invest. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal-finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.

Saturday, January 10, 2015

Intel Corporation (INTC): What To Watch At Analyst Day?

Chip maker Intel Corporation (NASDAQ: INTC) hosts its analyst day on Nov. 21 in Santa Clara. The event would be the first for CEO Brian Krzanich, who took the helm in May of this year, along with President Renee James following the eight-year tenure of Paul Otellini.

The key focus will be on the sustainability of PC trends, especially how the corporate demand is faring. PCs have been sub-seasonal but stable, primarily due to strength in the corporate PC market ahead of an XP license expiration.

Demand trends over the next few quarters are critical to get more conviction on the PC demand trends as enterprise refresh has a significantly positive impact in the near term.

[Related -Intel Corporation (INTC): This Chart Says Intel Is Due For A 16% Pop]

Microsoft Corporation (NASDAQ: MSFT), on its earnings call, said that the PC business is stabilizing given strength in the professional segment but that non-professional revenue (consumer) was down 22 percent sequentially, and the company continues to see volatility in the consumer PC space.

"We believe most of the supply chain continues to see Consumer PC segment weakness. We believe investor focus could revolve around the sustainability of Corporate PC demand post the XP licensing renewal surge, and what could potentially revive consumer PC demand against the tide of tablets," Sterne Agee analyst Vijay Rakesh wrote in a note to clients.

[Related -Sector Detector: Bulls Run With A Temporary Green Flag From Congress]

Investors may look for updates on Intel's process yields on its mature 22nm node and its efficiently designed new system on chip (SoC) namely Haswell (for high productivity client devices) and BayTrail (for low power client devices).

Intel believes PC demand in mature markets (U.S. and Western Europe) have bottomed, and momentum in new 2-in-1 PCs using its Haswell chip priced sub-$349 and new BayTrail chips priced sub-$299 will be a key driver for the stock in 2014. However, the market lacks co! nviction on this thesis and may need more proof through tablet and possible smartphone wins.

In addition, Intel recently said it is three-months behind schedule in its ramp of 14nm chips for high end PCs (was originally scheduled for the fourth quarter 2013) due to manufacturing complexity and defect densities. Intel reported yields have improved significantly, and this could suggest its competitors will have similar challenges at 14/16nm nodes. The market will want updates on this front.

Meanwhile, Intel continues to be bullish on its data center segment, so investors will focus on drivers of data center strength and competition from ARM Servers. Intel's third quarter data center revenues rose 12.2 percent to $2.9 billion.

The Street will be interested in mobile handset objectives for 2014 in an intensely competitive market, mainly from Qualcomm, Inc. (NASDAQ: QCOM). Qualcomm's technology road maps and pricing trends may hurt Intel's prospects in the mobile space.

"We believe that driving an accretive handset segment, versus its very profitable PC segment, will be a challenge for INTC," Rakesh said.

The sustainability of capital returns would also be a key focus on the event as Intel has been returning greater than 100 percent of free cash flow in buybacks and dividends. As of the end of the third quarter, cash and cash equivalents, short-term investments and trading assets were $19.1 billion.

Intel continues to lower its expectations for 2013 as capex went to $10.8 billion from $11 billion on delayed fab spending. Intel has also decelerated its share buybacks in the last seven quarters relative to fiscal 2011.

"With INTC returning more than 100% of FCF in buybacks and dividends, investor focus will be on sustainable cash return strategies and capital allocation objectives for 2014," Rakesh added.

For the fourth quarter, the company may reiterate its guidance given du! ring its ! last quarterly report. It sees revenue of $13.7 billion, plus or minus $500 million and gross margin of 61 percent, plus or minus a couple of percentage points.

Friday, January 9, 2015

Macy’s: ‘Investing to Win’

JPMorgan’s Matthew Boss says Macy’s (M) is “investing to win.” He explains:

Getty Images

Macy’s announced a restructuring across both Macy’s and Bloomingdales outlining $140M of cost reductions equating to $0.26 of EPS accretion (~50bps of SG&A leverage on our math) to be reinvested back into technology, talent/business development and future growth opportunities. Breaking down the cost savings into three key buckets: (1) Merchandising Marketing – hybrid in-store and online buying to support 1 unified merchandising and marketing organization (previously assortments were purchased as marketed by separate teams at M/Bloomy). (2) Localization Optimization – management is optimizing its My Macy's localization effort eliminating district planner positions w/ reinvestment in new regional teams devoted to specific merchandise themes (weather/demographics). (3) Store/Field Organization – deep dive by store location and department to better allocate service and support (ie. instore payroll) to match business opportunity with 2-3 associates per store impacted across the chain (and consolidation to 58 from 60 store districts).

. . . w/ Reinvestment in Growth Drivers Paving Multi-Year Runway. Looking forward, management is laser focused on multi-year sustainable growth, reinvesting the $140M cost savings into technology and online/omni-channel – key primary drivers of the next leg of Macy’s growth trajectory. Four Key Buckets of Investment across merchandising, marketing and stores/field operations: (1) Technology/Omni-channel – investment in systems and IT to support growing omni-channel business, improvements in speed and customer experience of and (w/ growth in San Fran- digital tech organization of 150 people) (2) Increased Fulfillment Capacity to Support DTC Growth – capacity expanded in every store across the Macy’s/Bloomy chain and at 5 dedicated fulfillment centers (w/ new DTC fulfillment center opening in Tulsa, OK in April 2015). (3) New Store Growth – $1B of DTC shipments originated from stores in FY14 with Omni-channel (in-store + fulfillment) key store evaluation metrics (9 new store locations planned through F& w/ 14 closures announced for FY15). (4) Off-Price – creating a team to explore potential opportunities for a Macy's off-price business (noting early stage process). Importantly, with cost savings strategically reinvested we deconstructed our forward looking SSS build with our math pointing to sustainable low-single-digit comps for the next 3 years embedding negative low-single-digit brick & mortar comps (w/ online moving to 20-25% of sales by FY17).

Shares of Macy’s have dropped 2.6% to $66.05 at 3:44 p.m. today.

Time to Graduate to Futures?

Jared Woodard of Condor Options explains how investors can incorporate futures trading into their portfolios. If you've been trading equity index ETFs for a while, it may be time to graduate to futures. Investors who are familiar with popular exchange-traded products like SPDR S&P 500 ETF (SPY), SPDR Dow Jones Industrial Average (DIA), and iShares Russell 2000 Index (IWM) can track the same benchmark indexes by using mini stock index futures. Here are some things to be aware of when choosing between ETFs and futures contracts.

- Size: The contract size of futures is much larger than for ETF shares. With SPY at $164, for example, a buyer of one share controls $164 worth of fund components. With an E-mini S&P 500 Index futures contract (symbol: ES) at $1640, a buyer of one contract controls a much larger amount of value. The contract multiplier for ES is $50, so the notional value of a contract is the index value times fifty. In this example: $1640 x 50 = $82,000. Each futures product has its own specific contract multiplier, and the futures exchanges provide those multipliers as part of the contract specifications.

The larger product size can be helpful. Consider the case of an investor who wants to allocate 30% of a million dollar portfolio to a position that tracks the Russell 2000. With IWM trading at $100, the investor would need to buy 3,000 shares of the ETF to gain that exposure. Alternatively, with Mini Russell 2000 Index futures (symbol: TF) trading at $1,000 and a contract multiplier of 100, the investor would need to buy only three TF contracts to achieve the same exposure. One advantage in favor of trading the futures is that the commission bill to buy three futures contracts may be much lower than to buy 3,000 ETF shares, depending on your brokerage rates; for options, the commission differences may be even greater.

- Dividends: Equity index ETFs typically entitle investors to receive periodic dividends. Holders of futures contracts do not receive dividends. Does that mean futures traders are missing a key source of income? No: futures contracts are discounted to re! flect the lack of dividend payments.

- Tax advantages: For investors who intend to hold positions for less than one year, there may be some tax advantages to trading futures. Gains on ETFs held for less than one year are taxed at the personal income tax rate, which can be much higher than the long-term capital gains rate, depending on your income tax bracket. In comparison, gains or losses on futures contracts are treated according to section 1256 of the tax code, which means that, at the end of the year, 60% of the gains or losses are treated as long-term items, while the remaining 40% are taxed at the short-term rate. Consult your tax advisor for more details.

- Holding period: ETF shares are perpetual instruments, and can be held until an investor is ready to sell them. Futures contracts expire - typically in March, June, September, and December, although some products have expirations in other months as well. To maintain a position in futures, investors must "roll" their positions from one month to the next.

- Regulation: Two important regulatory differences between ETFs and futures are the capital requirements for different assets and the ease of establishing short positions in futures. First, most investors fall under Reg T margin requirements for securities, which means that they must hold capital equal to 50% of the value of the securities in their account, limiting the account to 2:1 margin. For futures, margin requirements vary by contract, but they are generally much lower: initial margin may be 5%-10% of the notional value of the contract or less. Additionally, shorting ETFs requires the broker to find securities to sell, and in 2008 the SEC banned what it called "abusive naked short selling." In futures markets, short positions can be initiated just as easily as long positions.

For more on the differences between equity index ETFs and futures, see "Comparing E-minis and ETFs" from the CME. OptionsProfits can be followed on Twitter at Jared can be followed on Twitter at

Thursday, January 8, 2015

Facebook IPO $100 Billion Valuation Is Not So Overpriced

When it comes to the largest social networking site, everybody things of one name,Facebook, along with the famous young founder, Mark Zuckerberg. Facebook, from the Harvard dormitory room of eight years ago, is taking its first step to become a publicly traded company, the largest Internet initial public offering ever, with the target valuation of $75 billion to $100 billion – surpassing Google's (GOOG) IPO in 2004 or Netscape's in 1995.

Mark Zuckerberg, has detailed the company's mission and vision in his letter. He said that at first, Facebook was created not to be a company; it was built to fulfill the social mission of making the world more open and connected. He wrote: "People sharing more – even if just with their close friends or families – creates a more open culture and leads to a better understanding of the lives and perspectives of others. We believe that this creates a greater number of stronger relationships between people, and that it helps people get exposed to a greater number of diverse perspectives... Simply put: we don't build services to make money; we make money to build better services."

Several years ago, we were often thinking of Facebook's power over private consumers' data, and questioning its ability to monetize the site. So the IPO event gives investors the chance to look closer into its financial details. In its IPO filing with the SEC, it is reported to have 845 million monthly active users, 2.7 billion Likes & Comments per day, 250 million photos uploaded per day and 100 billion friendships. It generates rapidly increasing revenue for the last three years, from $777 million up to more than $3.7 billion. The large part of revenue has come from advertising, where it increased from $764 million up to more than $3.1 billion. For the bottom line, the net income grew very fast in three years, from $230 million to $1 billion for now. In terms of cash generation, as fiscal year of 2011, the cash flow from operations is more than $1.5 billion al! ong with the free cash flow of $940 million.

So in terms of multiple valuation, at $100 billion valuation, Facebook is valued at 100x P/E, 106x free cash flow, 67x operating cash flow and 15.8x its book value. The valuation seems extremely high. But is that so? Then we should try to do the inverse discounted free cash flow for Facebook. The valuation of $100 billion would be equivalent to the assumption of 50% growth in its free cash flow for the next five years, and then 5% growth to infinity afterwards, with the discount rate of 10%. Comparing those assumption with the past operating data, the site has generated the consistent rapid increasing free cash flow over time, with the past three years annualized growth of 97.5%, so the assumption of growth for the next five years is nearly half of the past reality.

Year 2012 2013 2014 2015 2016 Terminal value
FV 1,410 2,115 3,173 4,759 7,138 149,901
PV 1,282 1,748 2,384 3,250 4,432 84,615
Valuation 97,711

And in terms of user valuation, the $100 billion with 845 million users would value each user at the worth of more than $118, including their private data posted in Facebook, their photos and their daily life events/comments as well as private messages. Using common sense, would you trade $118 to own the person private data including everything listed above? I personally do not think it would be the ridiculously high figure.

Nevertheless, in technology field, nobody knows what would happen right in the next day. Before, nobody knew Facebook would come along to successfully compete and surpass MySpace. As long as Facebook kept innovating to make better products to keep users coming back in their al! ready bui! lt strong network background, it would continue to grow, very fast and gradually becoming the larger and larger social network site and owns larger amount of private users' data around the world.

Tuesday, January 6, 2015

Can't Seem to Save? You're Not Following These Simple Rules

#fivemin-widget-blogsmith-image-68382{display:none}.cke_show_borders #fivemin-widget-blogsmith-image-68382,#postcontentcontainer #fivemin-widget-blogsmith-image-68382{width:570px;display:block} Can't Seem to Save? You're Not Following These Simple Rules How's your bank balance? It should be healthier than this time last year. And if it isn't? Only a few explanations exist for this lack of progress: The past 12 months were filled with budget busters such as car trouble, medical co-pays and the need to replace major appliances. You were already living paycheck to paycheck, and the increased costs of food and other essentials sent you into the red. You simply didn't make it your business to save. It's vital to have an emergency fund and, ideally, additional savings for future goals (replacement vehicle, home of your own, college fund). But these accounts don't build themselves. You have to take responsibility for making them happen. Maybe you've had bad luck, as noted above. Or maybe you just haven't figured out how to save. Money Talks News founder Stacy Johnson suggests beginning by talking about goals. Simply saying "I want to save money" is a dream, not a plan. Without a specific destination in mind, you'll probably never get started. Break it down So pick a path. A specific need/want is a good start. Suppose $3,000 would put your kid through an advanced music camp this summer. Maybe you'd like to save enough for a reliable used car. Perhaps you and your spouse want to have at least three months' worth of living expenses in the bank. Do those kinds of numbers make you feel faint? Start smaller: "In the next year, I will save $1,000." Now subdivide that goal: $1,000 divided by 52 is about $19.23 a week, or about $2.74 a day. Thinking in terms of a daily three bucks is a lot more manageable than wondering how you'll come up with a grand. As Johnson notes, the easiest way to start is to figure out ways you might be wasting money. Let a budgeting app do the work for you. He likes a free service called PowerWallet. For example, it might reveal that 40 percent of your total food budget is spent on meals away from home. This kind of wake-up call will help you trim the fat, so to speak. Divert Some Funds If you've been paying extra on certain items (mortgage, student loans), stop doing that for a while. Yes, getting ahead is great, but not at the expense of having no savings to cover that car repair or balky fridge. Suppose you've been putting an extra $100 on your house payment each month. Instead, throw that hundred toward your savings goal. It won't take as long as you think to hit that sweet spot because this won't be the only way you save. Or it shouldn't be. All sorts of ways exist to carve a few dollars here and a few dollars there from your current budget; remember, we're talking fewer than three bucks per day. For some easy everyday tactics, see "15 Simple, Proven Strategies to Save On Everything You'll Ever Buy" and "7 Money-Saving Tips People Often Forget About."

Price Check on High-Flying Utility Stocks

Associated Press

This year has been a blow-out for shares of U.S. utilities, but gains have left the sector with its highest valuation in more than a decade, raising questions about whether that performance can last.

Investors have sought out exposure to utility stocks this year in part because of their higher-than-average dividend payments, making this normally staid sector the best-performing corner of the S&P 500.

The Utilities Select Sector SPDR Fund (XLU) rose 1% on Friday, on pace to close at a record high.

J.P. Morgan notes on Friday that that 31.1% total return for the utilities sector, compared with a 14.9% total return for the S&P 500, is the highest since 2000, when utilities netted investors 57.2%.

It’s logical that strong performance has boosted the sector’s valuations.

Utility stocks on the S&P 500 now trade at a lofty 17.8 price-to-earnings ratio based on analyst expectations for next year. That’s fully a 7% premium over the P/E for the S&P 500. This premium, or distance between the P/E for utilities and the S&P 50, is actually still below its three-year average of 10%, says J.P. Morgan’s Christopher Turnure, because the broader market is also having a solid year.

Turnure notes that utilities have been hiking dividend payments at a rate that meaningfully outpaces earnings growth. Companies including AES (AES) and Edison International (EIX) both hiked dividends this month.

But short-sellers appear to be looking to profit from declines, or at least underperformance, in utilities at a higher rate. Average short interest for the 36 major utilities at the end of last month was 7.5%, up from 5.9% a month earlier, Ternure writes.

Sunday, January 4, 2015

Look Out LeapFrog, Amazon's Got a New Kid-Friendly Tablet

Amazon's Fire HD Kid's Edition is a clear shot at LeapFrog's LeapPad tablet line. Credit:

Look out LeapFrog (NYSE: LF  ) , because  (NASDAQ: AMZN  ) has its eyes on one of your most lucrative revenue streams.

Amazon just unveiled its new Fire HD Kids Edition tablet, which will set parents back $149 for the 6-inch display version, or $189 for the 7-inch model. That's certainly not a bad price, but at first glance it seems LeapFrog might even have the advantage given the $100 price tag on its 5-inch LeapPad3, and the $130 cost of the 7-inch LeapPad Ultra XDi.

LeapFrog's LeapPad Ultra XDi Learning Tablet could face huge competition from Amazon. Credit: LeapFrog

That's also not to mention LeapFrog has gone to great lengths to cater both to kids and parents alike by developing easy-to-use parental controls, an educator-approved library of more than 1,000 apps, LeapPad's own drop-tested design, and a one-year "kid-proof warranty" that covers up to one replacement of the device -- as long as it was purchased from, anyway -- even in the case of accidental damage. .

But that still doesn't explain why Amazon described the Fire HD Kids Edition both as "a real tablet, not a toy," and "the first tablet built from the ground up for kids (and their parents)" -- something to which the folks over at LeapFrog will surely take offense considering the company unveiled the first LeapPad Explorer tablet way back in mid-2011.

Advantage: Fire HD Kids Edition
In this case, however, Amazon might have a point.

First, Amazon points out its device not only has a quad-core processor -- which both the latest LeapPads have as well -- but also Dolby Digital Audio and an HD display protected by Gorilla Glass. In short, Amazon knows kids are aware of the difference between a "toy" and a "real tablet," and this should appear much closer to the latter. 

In addition, Amazon literally one-ups LeapFrog by offering a two-year worry-free guarantee, saying "If they break it, we'll replace it. No questions asked." 

Amazon also incorporates its own slick parental controls and educational goals through Kindle FreeTime -- which, for the record, is technically downloadable on Amazon's other Kindle Fire Tablets as well. But the Fire HD Kids Edition also comes with a year of "FreeTime Unlimited," which Amazon describes as "a hand-curated subscription of over 5,000 kid-friendly books, movies, TV shows, educational apps, and games."

And Amazon isn't talking about little-known names here; FreeTime Unlimited includes apps, shows, and games from the likes of Disney, Nickelodeon, Sesame Street, and PBS -- all at no extra charge for the first year. After that, you can either revert to the regular FreeTime and buy apps individually, or renew the service at $4.99 per month for one child, $9.99 per month for up to four kids, or discounted rates for existing Prime Members of $2.99 and $6.99, respectively.

LeapPad is cheaper upfront, but ...
By contrast, while LeapPad users do have access to that 1,000-plus app library for their devices, the cost of those apps ranges from $2.50 to $10 each for simple games and eBooks. Worse yet, for many of the most popular titles from publishers like Disney, the cost of LeapPad's apps and games can run as high as $25 apiece. With this in mind, suddenly the slightly higher upfront cost for Amazon's tablets seems a whole lot more attractive.

And make no mistake: That's a bad thing for LeapFrog, which already made it painfully clear last month that weakness in its older tablet lineup helped fuel a 43% plunge in consolidated net sales last quarter. What's more, though LeapFrog management told investors it expected stubbornly high retail inventories to hold back the company's financial results in the current quarter, but predicted "solid net sales growth" in the subsequent quarters. For that, the company was counting primarily on sales of new products, including LeapTV, LeapBand, and -- you guessed it -- LeapPad 3, LeapPad Ultra XDi, and related software content.

As if LeapPad didn't already have enough competition from the vast number of affordable apps on traditional tablets, the new efforts from Amazon to take market share in the kid's segment could be the straw that breaks this frog's back.

Apple Watch revealed: The real winner is inside
Apple recently revealed the product of its secret-development "dream team" -- Apple Watch. The secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see where the real money is to be made, just click here!

Michael Kors: Why Investors Sale Could Be Good News

Shares of Michael Kors Holdings (KORS) have fallen 4% to $76.77 at 12:55 p.m. today after a founding investor sold its remaining stake in the company. Wells Fargo’s Paul Lejuez and team think the sale might be good news for Kors:


KORS announced that majority shareholder Sportswear Holdings Ltd (SHL) will be selling their remaining 11.7MM shares or 6% stake in the company. SHL owners Silas Chou and Lawrence Stroll will be retiring from the board. SHL was a founder of KORS and also sold about 20% of their stake in the IPO and another roughly 25% prior to the most recent announcement, so this is not entirely unexpected. While typically viewed as a negative when insiders sell their entire stake, it may also help the company gain more independence on its board (and may avoid conflicts of interest if/when the company repurchases its China business)…

SHL, Michael Kors himself, and CEO John Idol jointly own KORS' license right in greater China (the entity is called Far East Holdings). At some point, it is likely that KORS will buyback this license and operate directly owned stores in China. Although there are formulas in place to help determine a fair price when the time comes, with SHL's owners Chou and Stroll no longer on KORS' board (and replaced by independent directors), there are fewer conflicts of interest, and it seems less likely the price paid will be biased (to be too high).

After today’s drop, shares of Kors have fallen 5.4% in 2014.

Saturday, January 3, 2015

Why Linn Energy LLC's 12% Surge Today Actually Means Something

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

What: Shares of Linn Energy (NASDAQ: LINE  ) and its holding company LinnCo (NASDAQ: LNCO  ) both saw shares jump 12% and 10%, respectively, following the company's announcement that it would slash its capital expenditures for 2015, cut its annual dividend payment from $2.90 to $1.25, and signed a development deal with The Blackstone Group (NYSE: BX  ) for the drilling of several lesser developed acreages owned by Linn.

So what: Unlike all the other pops and drops that Linn has experienced in the past month or so, this one actually has some tangible business decisions behind it rather than pure price speculation. The company announced that its 2015 capital exploration budget would be $730 million, 53% less than last years budget. Most of that budget will be going toward optimizing production from current wells and drilling new natural gas wells in some of its lower decline rate regions. Also, by cutting its dividend by 56%, it will reduce its fiscal obligations for the year by $545 million and giving the company a much more comfortable distribution coverage ratio of 1.18 times for the year.

Now what: For those who bought Linn Energy a while ago and just watched their cost based yield go up in smoke, don't fret too much. By making the cuts now and maintaining a strong distribution coverage ratio through an extremely rough patch for oil prices instead of trying to rough through it by issuing debt or equity or selling assets, management is setting itself up to either come out of this price drop strong -- or betting on a low price environment for longer than many investors may hope for. This is a sign of conservative management, which is very necessary for a company that runs such a tight cash business.

One great stock to buy for 2015 and beyond
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Friday, January 2, 2015

Airlines cancel flights over Ebola fears

ebola west africa Concerns about the spread of Ebola have led a number of airlines to curtail their service in West Africa. LONDON (CNNMoney) Airlines are starting to cancel flights to West Africa over concerns about the deadly Ebola outbreak.

British Airways is the latest major airline to stop all flights to Sierra Leone and Liberia, due to the "deteriorating public health situation."

Sierra Leone, Liberia and Guinea are at the center of the largest Ebola outbreak in history, which has claimed the lives of nearly 900 people.

Nearby Nigeria has also recorded seven Ebola cases.

Emirates this month became the first major international airline to suspend service to Guinea, saying "the safety of our passengers and crew is of the highest priority and will not be compromised."

Other airlines may not have suspended flights altogether, but appear to be reducing their services to the region.

"There have been noticeably fewer international flights to these countries, leading to lower revenues and financial inflows," the World Bank said this week.

Pan-African airline ASKY and smaller regional carrier Arik Air have also restricted flights in the region.

The International Air Transport Association (IATA) said Wednesday there was little risk to people traveling to the affected areas. It has issued industry guidance on how to detect and deal with potentially infected passengers.

The World Bank pledged $200 million this week to try to contain the Ebola outbreak. The World Health Organization and West African nations hit by the outbreak have also committed $100 million to the effort.

Is $200M enough to help Africa fight Ebola?   Is $200M enough to help Africa fight Ebola?

The Ebola virus has hit some of West Africa's most vulnerable economies, and poorest rural areas.

Economic growth in Guinea, where more than 300 people have died from the virus, is now expected to slow to 3.5%, from 4.5%, according to the World Bank and International Monetary Fund.

--CNN's Ivana Kottasova and Jim Boulden contributed to this report.

Saudi Arabia: The next big emerging market?

saudi arabia map Emerging market investors are keen to tap Saudi Arabia's stock market. ABU DHABI (CNNMoney) Get ready for the next big emerging market opportunity: Saudi Arabia.

The oil giant is set to open its stock market to direct foreign investment for the first time, giving outsiders access to the biggest bourse in the region.

The Saudi market -- worth an estimated $530 billion -- is more than double the size of the Tel Aviv stock exchange in Israel.

Full market opening is still some way off but investors are already salivating at the prospect after the Saudi government gave regulators the green light.

"This is a deeply liquid market with lots of sectors to play around with," said Saleem Khokhar, head of equities at the National Bank of Abu Dhabi's asset management group. "It trades $2-3 billion a day, so you can expect a lot of volume coming through from overseas."

Saudi Arabia's Capital Market Authority will begin opening up the market in the first half of 2015.

Direct investment is currently limited to citizens of Saudi Arabia and five neighboring Gulf states.

The move by Saudi Arabia could help diversify its economy and allow it to join the league of major emerging market players such as India and Brazil.

Last month, Qatar and the United Arab Emirates were upgraded to emerging market status by index compiler MSCI, allowing them to tap a capital pool worth about $1.5 trillion worldwide.

An MSCI spokesman told CNNMoney the Saudi announcement was encouraging but the country's classification would depend on how it opens up to foreigners.

"We've seen in the past that when markets open up, they open up gradually," said Rami Sidani, head of frontier markets investments at Schroders, noting that various regulations have to be put in place over the coming months.

The benchmark Tadawul All Share Index has surged by just over 17% since the start of the year. It has more than 150 companies operating in sectors including construction, insurance, energy and banking.

The index jumped by nearly 3% after the government announced its market liberalization plan.

"This will certainly put the region back on international investors' radar and is likely to be transformative for regional equities," said Bassel Khatoun, head of Middle East equities at Franklin Templeton Investments.

The International Monetary Fund called Saudi Arabia one of the best performing G20 economies in recent years. It grew by 4% last year and should do even better in 2014.