SM: Can High Oil Prices Be Good for...

Buy: Southwest Airlines

Some investors believe high oil prices will continue to hurt Southwest Airlines (LUV) ; its stock is down more than 20 percent over the past year, as oil prices have surged. However, the slowly improving economy -- and the pickup in air travel that often goes along with it -- should provide a good tailwind for the Dallas-based airline, says Matt Collins, an analyst for Edward Jones. Thanks to consolidation in the industry, airlines can pass along some fuel costs through higher airfares, says Collins. Southwest is adding bigger, more-fuel-efficient planes and has kept many consumers happy by not charging fees for up to two checked bags. And in an industry with a reputation for earnings misses and bankruptcies, Southwest has posted a profit for 39 straight years.

Sell: Old Dominion Freight Line

This trucker specializes in "less-than-truckload" freight (it consolidates the shipments of several customers on one truck), and it's one of the strongest in the industry. But the Thomasville, N.C., firm's stock trades at 17 times this year's expected earnings, one of the higher valuations in the industry, says Matthew Young, an equity analyst for Morningstar. Old Dominion (ODFL) has been able to pass along fuel surcharges, but paradoxically, the improving economy might bring more rival trucks back on the road. The company says it works to be efficient when oil prices are high.

Hold: Dollar General

Shares of this Goodlettsville, Tenn., retailer have surged 50 percent in the past year. Sales in 2011 were $14.8 billion, up 14 percent from a year earlier. Rising gas prices could persuade consumers to shop more at Dollar General (DG), says David White, a financial planner in Bloomfield Hills, Mich. Still, investors might wonder why some shareholders sold 25 million shares this spring at $45 a share, just beneath the stock's 52-week high. At the time of the sale, Dollar General said it didn't receive any proceeds from the transactions.

How I Found High Yields Over Lunch

My friend Barbara phoned and invited me to lunch a few weeks ago. When she offered to pay, I knew something was up.

Barbara talked about her workout routine, her daughter's job search, and her upcoming vacation to Panama. After asking me a cursory question or two, she finally got to the point.

"I'm bullish on oil," she said. "Oil stocks have had great recoveries in 2009. But I'm not sure about how much further they'll go up this year." I nodded and waited for the punch line.

"What I want is to find stocks that offer capital gains as oil continues to rise, but also throw off high income while I wait. I can't find oil stocks that offer the kind of yields I want. I've checked."

Barbara is right. Most of the major oil producers like ExxonMobil (NYSE: XOM) offer low yields. BP (NYSE: BP) is the highest-yielding of the bunch, but its yield is still only 6%.

So if you're bullish on crude, where can you also find a high yield?

No doubt about it, the 2010 outlook for crude oil is positive. Not wildly bullish, but constructive enough to make stocks in this sector worth looking at.

According to a panel of 28 analysts polled by Forbes, crude will average an estimated $75.40 per barrel in 2010, up from about $60.90 per barrel in 2009. The analysts are hardly going out on a limb, given that oil for February delivery is currently above $75 per barrel.

But if the analysts are right, oil companies will receive around +24% ($75.40/$60.90) more in 2010 versus 2009 for the same (unhedged) production volumes. Simply by standing still and producing the same volumes, earnings should rise. Companies with rising production should, in general, fare even better.

  But the Forbes consensus figure may be conservative. Earlier in 2009, Morgan Stanley forecasted an average oil price of $85 in 2010 and $95 in 2011. And Sanford C. Bernstein & Co. analysts think we could see triple-digit oil prices by late 2010 or early 2011.

While few expect to see the $147 a barrel peak of July 2008 any time soon, two big tailwinds are behind these bullish projections.

Demand is increasing in emerging markets, like China, as the global economy recovers. In the United States, which together with China consumes an estimated 33% of global oil, demand is also picking up. Worldwide consumption is forecast to rise nearly +2% to 86.2 million barrels a day in 2010, according to a monthly report from the International Energy Agency.

Also, a weak dollar should benefit oil, which is purchased as an inflation hedge. The massive increase in debt issued by the U.S. government has raised the specter of inflation, which could continue to put upward pressure on commodities like gold and oil.

But as my friend Barbara pointed out, you simply can't find high yields by looking at the "majors." Even independent oil and gas companies like Anadarko (NYSE: APC), Devon Energy (NYSE: DVN), or Pioneer Natural Resources (NYSE: PXD) leave much to be desired in the yield category.

But if the majors and larger independents aren't the place to be, what about small and micro-cap stocks -- those with market caps below $2 billion?

When I ran a small-cap screen, I struck pay dirt. I found numerous oil and gas stocks with yields of 8%, 9%, 10% and higher. Barbara's problem was solved. For example, MVO Oil Trust (NYSE: MVO) pays a mouth-watering 9% and is expected to grow earnings per share +20% this year -- not too shabby.

And the exciting thing is there are a number of similar small-cap oil plays that will pay you a strong yield while also benefiting from strong oil prices. In fact, I approached this topic in a recent issue of High-Yield Investing, pinpointing four small-cap oil plays that yielded up to 17%.

WORLD FOREX: Euro Rises On Hopes For ECB Bond-Buying – Wall Street Journal

Globe and Mail

WORLD FOREX: Euro Rises On Hopes For ECB Bond-Buying Wall Street Journal The ECB's buying of euro-zone government debt is "the only instrument that can arrest the hits and runs of the sovereign debt crisis," said Boris Schlossberg, director of currency research at GFT Forex in New York. The prospect of ECB support gave … Forex: EUR/USD ends the week lower despite Friday's bounceNASDAQ EUR/USD Recovering in Low Range Before the NFPBenzinga Forex – Trichet's Communiqu�ForexTV.com Trading Point -FXstreet.com -Seeking Alpha all 1,233 news articles »

{forex} – Google News

Soft U.S. retail sales, manufacturing seen

MARKETWATCH FRONT PAGE

Summer doldrums for the U.S. economy are likely to remain evident this week with a mediocre increase in retail spending and further signs of softening in the manufacturing sector. See full story.

Slowdown in luxury spending may hit Saks

A slowdown in U.S. high-end spending that has hurt retailers from Tiffany & Co. to Macy�s Inc. could be hitting luxury retailer Saks Inc. in the second half as well, an analyst said on Friday. See full story.

Consumer sentiment lowest since December

Consumer sentiment is the lowest since December, with job concerns hitting results, according to data released Friday by the University of Michigan and Thomson Reuters. See full story.

How 2012�s top money ideas have fared so far

As 2012 began, investors were encouraged to stick with defensive, dividend-paying U.S. stocks. Those strategies are paying off so far this year. See full story.

Perils of a corporate profit slowdown

The 2013 fiscal cliff should be a wake-up call. It does not benefit America�s economy to have the highest corporate tax rate in the world, writes Diana Furchtgott-Roth. See full story.

MARKETWATCH COMMENTARY

Why has the New York Times failed to find a successor to the previous CEO in seven months? asks media columnist Jon Friedman See full story.

MARKETWATCH PERSONAL FINANCE

It�s a situation that seems to defy supply-and-demand logic: If there�s more demand in the housing market, wouldn�t the cost of borrowing funds to buy a home be significantly on the rise? See full story.

Up and Down Brownstone

Most New Yorkers see the city's venerable brownstones as architectural portals to the past. Architect Bill Peterson designed his condo in an East Village brownstone to include a folding facade, bringing his historic home into the future.

Brownstone With a Secret Side

View Slideshow

Ramsay de Give for The Wall Street Journal

The moving facade of 224 E. 14th St. creates an open air living room.

The building at 224 E. 14th St. looks like any other on the block, but a section of the brownstone-finished facade folds into Mr. Peterson's apartment to create an open-air living room.

"Originally in an old brownstone there would have been a parlor-floor balcony," Mr. Peterson said of the retractable living-room wall. "This is reimagining it."

To create the mechanics behind the wall, which opens and closes like a garage door, Mr. Peterson worked with McLaren Engineering Group, an engineering team that has done sets for Cirque du Soleil. When the facade opens, "It looks like the building's falling in on itself," he said.

Mr. Peterson said he started working on the East Village building with a business partner in 2005 and came up with the idea for the moving facade. He completed his purchase of the his condo on the first two floors and part of the basement in 2008 for $1.8 million, according to property records.

To ensure the building looked like an old brownstone from the outside, Mr. Peterson took a thin layer of real brownstone and attached it to light aluminum honeycomb. With the technique, the facade looks and feels like a traditional brownstone building, but it is also able to move.

5-Star Stocks Poised to Pop: Five Star Quality Care

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, senior living community operator Five Star Quality Care (NYSE: FVE  ) has earned a coveted five-star ranking.

With that in mind, let's take a closer look at Five Star Quality Care's business and see what CAPS investors are saying about the stock right now.

Five Star Quality Care facts

Headquarters (founded)	Newton, Mass. (2000)
Market Cap	$148.0 million
Industry	Healthcare facilities
Trailing-12-Month Revenue	$1.3 billion
Management	CEO Bruce Mackey, Jr. (since 2008) CFO Paul Hoagland (since 2010)
Return on Equity (average, past 3 years)	20%
Cash / Debt	$30.0 million / $114.8 million
Competitors	Brookdale Senior Living Sun Healthcare Group Sunrise Senior Living

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 96% of the 220 members who have rated Five Star Quality Care believe the stock will outperform the S&P 500 going forward.

A couple of months ago, one of those Fools, LynchJunior1, touched on the strong demographic tailwind working in Five Star Quality Care's favor: "The oldest old (people 85 and over) are the fastest growing portion of the population, with advances in technology people are going to be living longer and longer. This company is positioned to benefit from the on going boom in the [long-term care] industry."

If you want market-thumping returns, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future. Of course, despite its five-star rating, Five Star Quality Care may not be your top choice.

If that's the case, we've compiled a special free report for investors called "Discover the Next Rule-Breaking Multibagger," which uncovers another small-cap growth play with big potential. The report is 100% free, but it won't be around forever, so click here to access it now.

Want to see how well (or not so well) the stocks in this series are performing? Follow the new TrackPoisedTo CAPS account.

Boeing Gets a Lift From Southwest Deal

Southwest Airlines (LUV) ordered 208 737 jets today from Boeing (BA), a deal (worth $19 billion at list prices) that showcases the steady demand for Boeing’s more fuel-efficient jets. The deal puts an exclamation point on a strong year for Boeing, during which the aircraft manufacturer shipped its first Dreamliner, and recorded 677 jet orders, up from 625 in 2010.

Southwest ordered 150 737 MAX jets, and 58 next-generation 737′s. Southwest is the first company to make a finalized 737 MAX order, Boeing said.

Boeing called the firm order “the largest in Boeing history both in dollar value, nearly $19 billion at list prices, and the number of airplanes.” The company is expected to receive the first MAX in 2017.

Boeing shares rose 1.8% in morning trading.

Clothing Retailer Stocks: It’s All About Timing

Clothing retail stocks are a dicey proposition. There are three types of stock behavior. The first are stocks that catch fire, skyrocket then crash back down to earth. Chico�s FAS (NYSE:CHS) is a great example. The second type of stock starts out small, and over many years becomes a ten-bagger like Jos. A. Bank Clothiers (NASDAQ:JOSB). The third doesn�t provide the blockbuster returns of a Jos. A. Bank, but is a solid company with more modest performance.

The TJX Companies (NYSE:TJX) presently seems like a cross between Chico�s and Jos. A. Bank. The company has been around for a long time, and only recently started experiencing some terrific growth. TJX had a great quarter — sales up 11%, comps up 8%, net income up 41%. Operational cash flow was $705 million. TJX sits on twice as much cash as debt and is growing earnings at 20% this year, as well as 12% going forward. The company has a more efficient cost structure than its peers and it has a flexible pricing structure.

J.C. Penney’s Turnaround Turns Ugly

TJX does trade at 17 times earnings, so it�s a tad pricey, but the company is executing so well that it�s worth a look.

Ross Stores (NASDAQ:ROST) is experiencing the same type of growth as TJX. This quarter delivered a 26% increase in net income on a 13.6% revenue rise, and also a fab 9% rise in comps. Ross has an even stronger cash position — $750 million, the same as TJX, but only $150 million in debt. Ross is in the midst of a very aggressive expansion and so far is not missing a beat. Growth rates are about the same as TJX, and the company trades at 18 times estimates. Like TJX, Ross Stores is a discount retailer, so you could go with either of these companies.

There�s quite a difference between these two companies, which are executing perfectly, and our next two stocks.

Tiny Stein Mart (NASDAQ:SMRT) does not have the presence of its competitors and just undertook a risky plan under which it started to eliminate coupons. Its results were materially affected to the downside. Sales were flat and net income fell more than 20%.

While this news was really bad, Stein Mart presents a very interesting opportunity. The company has almost $2 per share in cash and no debt, giving it an effective stock price of $4.43 — 11.5 times this year�s earnings. Stein Mart historically had generated positive free cash flow, and if SMRT can turn its fortunes around, this might prove to be the kind of undiscovered small-cap stock that one day becomes a Jos. A. Bank.

Finally, Dan Burrows has written about J.C. Penney�s (NYSE:JCP)�struggle with its turnaround. The culprit here too was the elimination of coupons, among other things. I think part of the problem is that retailing customers expect coupons, and since J.C. Penney doesn�t have the brand value that Apple (NASDAQ:AAPL) does, people weren�t willing to just go with the program.

It is way too early to tell how this story will turn out, but speculative value players are no doubt banking on Ron Johnson�s genius and hedge fund manager Bill Ackman�s track record (his fund owns 26% of the company). If you buy into these gentlemen, J.C. Penney might prove to be on the low end of a multi-bagger.

Only time will tell.

As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities. He is president of PDL Capital, Inc., which brokers secure high-yield investments to the general public and private equity. You can read his stock market commentary at SeekingAlpha.com. He also has written two books and blogs about public policy, journalistic integrity, popular culture and world affairs.

4 Biotech ETFs for a Healthy Portfolio

Exciting new technology niches always will have their ups and downs, but if you get into the right company in the right niche at precisely the right time, the rewards can be breathtaking. For example, who wouldn�t want to travel back to Dec. 12, 1980 and buy Apple�s (NASDAQ:AAPL) IPO at $22? The stock is soaring near $600 today, and since it has split three times, the adjusted IPO price is somewhere in the neighborhood of $3.

Biotechnology is one of those high-octane sectors that, like personal computers back in 1980, potentially could trigger a paradigm shift in the way we live and work. Simply put, biotech involves using living organisms or their products to improve our health or environment. Major biotech applications include pharmaceutical, agricultural and industrial.

Although the biotech sector took a hit during the recession, it’s beginning to come back strong. An improving global economy, better access to R&D funding, favorable government initiatives and the expanding use of biotech in medical sciences and agriculture will drive the market to more than $320 billion by 2015, according to a report by Global Industry Analysts. Drugs and other health therapies promise blockbuster benefits to an aging population.

But as with all opportunities in new technology markets, the challenge lies in separating the winners from the losers and also-rans. Diversification takes some of the guesswork out of that process, and exchange-traded funds (ETFs) are a good way to gain exposure to the biotech sector without betting the farm on a single company. ETFs trade over a major exchange, just like equities, and expenses tend to be lower than those of actively traded mutual funds.

It’s important to note that biotech ETFs are a good fit for investors with an aggressive growth strategy and a high risk tolerance. Although companies that produce these leading-edge products can generate exciting returns, they can also lose a lot of money quickly, so consider your time horizon carefully.

That said, here are four biotech ETFs for a healthy portfolio:

iShares Nasdaq Biotechnology Index Fund (NYSEArca:IBB). This is the �grand old man� of biotech ETFs � it has been around since 2001. With a market cap of nearly $1.8 billion, it is also the largest biotech ETF. IBB tracks the Nasdaq Biotechnology Index and invests primarily in companies that engage in biomedical research and development of drugs or other treatments for medical conditions. Top holdings are focused on big players like Alexion (NASDAQ:ALXN), Amgen (NASDAQ: AMGN), Regeneron Pharmaceuticals (NASDAQ:REGN), Celgene (NASDAQ:CELG) � the market-cap weighting approach makes the fund potentially less volatile. IBB is trading around $122 and its expense ratio is on par with the rest of the sector at 0.48. IBB�s one-year return is 28.4% and its year-to-date return is nearly 17%.

ProShares Ultra Nasdaq Biotechnology (NYSE:BIB). This is a different play on the same index tracked by IBB. In this case, though, it’s a double-long, leveraged ETF that aims to deliver twice the performance of the Nasdaq Biotechnology Index. This should be considered a short-term investment that bets on capturing impressive returns from bullish performance in the biotech sector. (If you’re bearish on the sector, ProShares has BIS, an Ultra Short biotech ETF that inversely tracks the same index.)

But back to BIB, which is small, with a market cap of just $23 million. BIB is currently trading around $93.50 and has an expense ratio on the higher end of the scale at 0.95. But its one-year return is a whopping 52% and its year-to-date return is nearly 35%.

SPDR S&P Biotech ETF (NYSE:XBI). XBI approaches the biotech sector in a different way. It�s broadly diversified, with 30 biotech companies, large and small, in equal weightings. Larger players include Celgene, Alexion and Regeneron, with Momenta (NASDAQ:MNTA), Spectrum (NASDAQ:SPPI) and InterMune (NASDAQ:ITMN) as some of the fund’s smaller players. The inclusion of so many small companies makes the ETF more aggressive than IBB.

With a market cap of $518 million, XBI is trading around $78.50 and its expense ratio is a very attractive 0.35. XBI�s one-year return is over 26% and its year-to-date return is 18%.

PowerShares Dynamic Biotechnology & Genome Portfolio (NYSE:PBE). While this fund has holdings in the usual large-cap suspects such as Amgen, Alexion and Biogen (NASDAQ:BIIB), it also holds very dynamic small caps such as BioMarin (NASDAQ:BMRN) and Seattle Genetics (NASDAQ:SGEN), which have promising drugs in late-stage testing. It also has genome-focused companies such as Life Technologies (NASDAQ:LIFE).

While the risks are potentially higher than with an ETF like IBB, some of the small-cap components of this fund could be acquired by, or establish partnerships with, larger biotech companies. With a market cap of about $140 million, PBE is trading around $22.50 and its expense ratio is 0.63. It has a one-year return of over 8% and a year-to-date return of 12%.

As of this writing, Susan J. Aluise did not hold a position in any of the stocks named here.

Top Stocks For 2012-1-17-16

 

 

 

GRAFTON, Wis. and BEIJING, Sept. 21, 2011 (CRWENEWSWIRE) — China Wi-Max Communications, Inc. (OTCBB:CHWM.OB) is pleased to announce the signing of two strategic business agreements. Signature of these agreements positions China Wi-Max (CHWM) to utilize its fiber assets and wireless frequencies and has the potential to generate significant revenue streams in the future.

These agreements represent a logical evolution of CHWM’s strategic business plan to be a premier technology and service provider in China. China CTV Television Network (CTVN) has been granted the privilege by the Government to receive a Chinese Bank loan for this project.

First, CHWM has entered into an agreement with China CTV Television Network Center (CTVN) to develop nationwide fiber optical networks for delivering Digital TV and other value added services throughout China.

The companies will initially deliver multimedia “three screen” experience to TV, web and mobile devices with content readily available to CTVN’s Chinese subscriber base of 200,000,000 people via 200 TV stations across China.

Second, CHWM has entered into an agreement with the premier IPTV technology and content provider, 3Screen Group Ltd, Hong Kong, United Kingdom, inclusive with their partner DigiSoft.tv Ltd. Ireland. Together, through CHWM, they will deliver a complete IPTV solution to CTVN’s extensive subscriber market in China.

Coupling 3Screen Group Ltd’s extensive IPTV technology knowledge and content rights for Europe and Asia and CHWM’s relationships in China, builds on all the partners’ strategic strengths and enables telecoms/media companies to get to market rapidly. The market for Video on Demand (VoD) and IP broadcast solutions is growing at an exponential rate in China. This IP broadcast solution, along with VoD capability and content catalogue creates a unique end to end IP video service.

About China Wi-Max Communications, Inc.

China Wi-Max Communications, Inc. is a multinational telecommunications and IP transport company formed to take advantage of the rapidly expanding wireless and broadband communications needs in China and elsewhere. The goal of CHWM is to become the premier provider of broadband technology and allied services in the Chinese market and beyond. Building on technical experience and proven management skills, CHWM is approaching its markets with the tools and experience necessary to achieve success. CHWM has acquired fiber assets in Beijing and Hangzhou, as well as option agreements to purchase fiber in Shanghai and seven additional cities in China. CWHM has also acquired 5.8 GHz wireless frequencies. The Company’s common stock is listed on the OTC Bulletin Board under the symbol “CHWM“. For additional information, please visit the Company’s website at www.chinawi-max.com.

About CTVN

China CTV Television Network Center (CTVN), Beijing, China, is leading the project to develop the Chinese Governments “Policies Regarding Encouragement of Digital TV Industry Development”. The policy promotes TV broadcasting over broadband network with advanced digital delivery technology. CTVN owns fiber optic network infrastructure, licenses for broadcasting, 200 subsidiary TV stations with about 200 million viewers, 32 thousand km of back bone fiber and cross border fiber connecting Hong Kong with mainland China.

About 3Screen Group Ltd

3Screen Group Ltd.. Hong Kong, United Kingdom, offers Hardware, Software and System Integration Services for implementing and deploying products and applications that allow Rights Holders, Aggregators, Telecom Providers and Media Service Organizations offer integrated, bundled and convergent services over IP networks, enabling our clients to securely manage, publish and monetize video across IPTV Set Top Boxes, TVs, PCs and Mobile Devices.

About DigiSoft.tv

Digisoft.tv Ltd, Ireland, is a leading global provider and innovator of carrier class solutions to the IPTV, hybrid and media & entertainment markets. Digisoft’s DigiHost Service Delivery platform combines a state-of-the-art Hybrid DVB/IP EPG in HD with advanced PVR functionality, as well as a host of applications including the world’s first interactive educational TV application and the eRental Movie Download platform. www.digisoft.tv

‘Safe Harbor Statement’

This press release contains forward-looking statements that involve risks and uncertainties. Actual results, events and performances could vary materially from those contemplated by these forward-looking statements. These statements involve known and unknown risks and uncertainties, which may cause the Company’s actual results, expressed or implied, to differ materially from expected results. These risks and uncertainties include, among other things, product demand and market competition. You should independently investigate and fully understand all risks before making an investment decision.

Source: China Wi-Max Communications, Inc.

For Investment Information regarding China Wi-Max Communications, Inc. please contact:

Jim Prange, Investor Relations 920.912.7444
jim.prange@gmail.com
Eric Hager, Executive VP, CHWM 303.517.6026
erichager@chinawi-max.com

 

 

 

THIS IS NOT A RECOMMENDATION TO BUY OR SELL ANY SECURITY!

Citigroup More Undervalued Than Goldman Sachs And Morgan Stanley

As the possibility of a double-dip wanes with each passing day and investors begin to appreciate limitations to Europe's decline, financials are starting to rally somewhat. Over the last twelve months, Goldman Sachs (GS), Citigroup (C), and Morgan Stanley (MS) were tightly correlated to one another and declined by roughly 45% in value. However, the last 3 months have seen a slight recovery in the last two. While analysts rate all of the companies around a weak "buy", I am more bullish. I find that - in agreement with consensus estimates - Citigroup is the most undervalued of the three. Below includes some of the latest information from analysts.

Goldman Sachs

Goldman Sachs is the leading investment bank with key emerging market growth to hedge against domestic volatility. Admittedly, the firm is perhaps the most vulnerable to financial reforms, especially in the area where derivatives trading and leverage is concerned. With that said, the company has strong liquidity with a net cash position of $344B, 7.6x market value. Investor fears about the euro crisis have also been overblown, as GS has limited exposure to GIIPS Sov. Investment banking and asset management may have shrunk in size, but margins are trending upwards.

GS has a beta of 1.4 and trades at a respective 14.4x and 7.1x past and forward earnings while offering a dividend yield of 1.52%. Cash per share stands at $89.71. Consensus estimates for the firm's EPS are that it will decline by 56.9% to $5.68 in 2011 and then grow by 126.8% and 8.8% in the following two years. Of the 11 revisions to estimates, all have gone down for a net change of 7.8%. The target price is $135.83, which implies a 47.6% discount. Assuming a multiple of 9.5x and a conservative 2012 EPS estimate of $12.77, a safer estimate for the rough intrinsic value is $121.32, which implies 31.9% upside.

Citigroup

Citigroup has seen its asset quality and loan growth both improve. The latter has picked up since March and is normalizing around a growth rate of 5%. Fourth quarter results are likely to illustrate the success of commercial banking, but also the challenges in trading. Particularly attracting about the firm is Citi, which trades at only 0.6x tangible book value, despite having great growth opportunities and solid liquidity.

I find that of the three financials highlighted in this article, Citigroup is the most undervalued. Recently, a few activist shareholders have built up a position, including Bill Ackman of Pershing Square. Citigroup has a beta of 2.54 and trades at a respective 7.1x and 6x past and forward earnings while offering a dividend yield of 0.2%. Net cash stands at $135B, 1.8x market value, and cash per share is $9.90 - both of which are the lowest among the three. The company's target price is $42.65, which implies a 63.4%.

Consensus estimates for Citigroup's EPS are that it will grow by 1.6% to $4.08 and then by 7.1% and 14.9% more in the following two years. Of the 15 revisions to estimates, all have gone down. Assuming a multiple of 9x and a conservative 2012 EPS of $4.33, the rough intrinsic value of the stock is $38.97, which implies 49.3% upside. Only if the multiple were 6.5x and 2012 EPS turns out to be 6.9% below the consensus would the current market price be justified.

Morgan Stanley

Morgan Stanley is yet another that has been overly discounted due to sovereign debt concerns. Not only is the firm hedged against Europe, the CDS curve is likely to ease and the Core Tier 1 ratio is anticipated to improve to 13.4 by 2012. The company recently settled with MBIA (MBI) for $1.1B. Overall this will reduce uncertainty and the anticipated decline in Tier 1 Common Ratio under Basel I will be offset by the anticipated growth in Tier 1 Common Ratio under Basel III - a 25 bps differential.

The firm has a beta of 1.5 and trades at a respective 8.8x and 7.3x past and forward earnings while offering a dividend yield of 1.3%. Cash per share is $6.34 and net cash stands at $237.7B, 8.3x market value. The target price is $22.94, which implies a 53.9% discount.

Consensus estimates for Morgan Stanley's EPS are that it will decline by 48.8% to $1.25 in 2011 and then grow by 62.4% and 18.7% in the following two years. Of the 15 revisions to estimates, 13 have gone down for a net change of -21.1%. Assuming a multiple of 9.5x and a conservative 2012 EPS of $1.98, the rough intrinsic value of the stock is $18.81, implying 26.2% upside.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in C, MS, GS over the next 72 hours.

Accounting Flags: Basic Material Stocks With Rapidly Rising Inventories

The following is a list of material sector stocks. All of these companies have seen inventories grow faster than revenues during the most recent quarter, an accounting trend that deserves closer attention.

There are two ways to interpret this trend: When a company's inventories are rising at a faster rate than its sales, it may indicate that the company is having trouble selling its merchandise. In other cases, it can indicate that the company is boosting inventories because they are growing more confident about the economy and seeing demand growth for their products.

The bottom line: Use this list as a starting point for your own analysis. Check out the 10-Q and read management discussions to see if there's a good explanation for this trend.

Accounting data sourced from MSN Money, short float and performance data sourced from Finviz.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.

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The list has been sorted by the difference between revenue and inventory growth rates.

1. Green Plains Renewable Energy, Inc. (GPRE): Specialty Chemicals Industry. Market cap of $415.76M. MRQ revenue grew by 37.21% on a y/y basis, much slower than inventory growth at 149.39%. Inventory, as a percentage of current assets, increased from 25.77% to 29.34% (comparing 3 months ending 09-30-2010 vs. 3 months ending 09-30-2009). Short float at 10.15%, which implies a short ratio of 7.44 days. The stock has lost -31.49% over the last year.

2. Schlumberger Limited (SLB): Oil & Gas Equipment & Services Industry. Market cap of $126.37B. MRQ revenue grew by 56.94% on a y/y basis, much slower than inventory growth at 103.86%. Inventory, as a percentage of current assets, increased from 13.67% to 21.02% (comparing 3 months ending 12-31-2010 vs. 3 months ending 12-31-2009). Short float at 1.02%, which implies a short ratio of 1.82 days. The stock has gained 53.93% over the last year.

3. Tesoro Corporation (TSO): Oil & Gas Refining & Marketing Industry. Market cap of $3.46B. MRQ revenue grew by 12.19% on a y/y basis, much slower than inventory growth at 52.03%. Inventory, as a percentage of current assets, increased from 28.81% to 41.4% (comparing 3 months ending 09-30-2010 vs. 3 months ending 09-30-2009). Short float at 13.48%, which implies a short ratio of 3.23 days. The stock has gained 102.77% over the last year.

4. Carpenter Technology Corp. (CRS): Steel & Iron Industry. Market cap of $1.83B. MRQ revenue grew by 42.38% on a y/y basis, much slower than inventory growth at 74.83%. Inventory, as a percentage of current assets, increased from 24.91% to 40.04% (comparing 3 months ending 12-31-2010 vs. 3 months ending 12-31-2009). Short float at 4.24%, which implies a short ratio of 4.09 days. The stock has gained 41.75% over the last year.

5. NewMarket Corp. (NEU): Specialty Chemicals Industry. Market cap of $1.77B. MRQ revenue grew by 13.95% on a y/y basis, much slower than inventory growth at 41.64%. Inventory, as a percentage of current assets, increased from 31.98% to 45.33% (comparing 3 months ending 12-31-2010 vs. 3 months ending 12-31-2009). Short float at 8.4%, which implies a short ratio of 14 days. The stock has gained 44.89% over the last year.

6. Kraton Performance Polymers Inc. (KRA): Chemicals Industry. Market cap of $1.04B. MRQ revenue grew by 16.26% on a y/y basis, much slower than inventory growth at 32.37%. Inventory, as a percentage of current assets, increased from 57.47% to 58.43% (comparing 3 months ending 09-30-2010 vs. 3 months ending 09-30-2009). Short float at 2.82%, which implies a short ratio of 4.31 days. The stock has gained 146.63% over the last year.

7. Coeur d`Alene Mines Corporation (CDE): Silver Industry. Market cap of $2.47B. MRQ revenue grew by 31.28% on a y/y basis, much slower than inventory growth at 47.17%. Inventory, as a percentage of current assets, increased from 35.92% to 44.53% (comparing 3 months ending 09-30-2010 vs. 3 months ending 09-30-2009). Short float at 7.67%, which implies a short ratio of 2.92 days. The stock has gained 88.74% over the last year.

8. Golden Star Resources, Ltd. (GSS): Gold Industry. Market cap of $806.55M. MRQ revenue dropped -0.14% on a y/y basis, much slower than inventory growth at 12.72%. Inventory, as a percentage of current assets, increased from 42.85% to 21.62% (comparing 3 months ending 09-30-2010 vs. 3 months ending 09-30-2009). Short float at 3.56%, which implies a short ratio of 2.53 days. The stock has lost -0.64% over the last year.

9. Celanese Corp. (CE): Chemicals Industry. Market cap of $6.4B. MRQ revenue grew by 8.57% on a y/y basis, much slower than inventory growth at 16.86%. Inventory, as a percentage of current assets, increased from 18.28% to 22.86% (comparing 3 months ending 12-31-2010 vs. 3 months ending 12-31-2009). Short float at 0.75%, which implies a short ratio of 0.84 days. The stock has gained 32.28% over the last year.

10. Alcoa, Inc. (AA): Aluminum Industry. Market cap of $17.73B. MRQ revenue grew by 4.03% on a y/y basis, much slower than inventory growth at 10.05%. Inventory, as a percentage of current assets, increased from 33.15% to 37.3% (comparing 3 months ending 12-31-2010 vs. 3 months ending 12-31-2009). Short float at 5.96%, which implies a short ratio of 2.19 days. The stock has gained 26.56% over the last year.

11. Delek US Holdings Inc. (DK): Oil & Gas Refining & Marketing Industry. Market cap of $606.56M. MRQ revenue grew by 4.78% on a y/y basis, much slower than inventory growth at 10.74%. Inventory, as a percentage of current assets, increased from 34.2% to 52.2% (comparing 3 months ending 09-30-2010 vs. 3 months ending 09-30-2009). Short float at 12.63%, which implies a short ratio of 9.85 days. The stock has gained 56.6% over the last year.

12. Dynamic Materials Corp. (BOOM): Industrial Metals & Minerals Industry. Market cap of $328.02M. MRQ revenue grew by 5.16% on a y/y basis, much slower than inventory growth at 10.4%. Inventory, as a percentage of current assets, increased from 36.94% to 49.33% (comparing 3 months ending 12-31-2010 vs. 3 months ending 12-31-2009). Short float at 3.91%, which implies a short ratio of 3.81 days. The stock has gained 38.44% over the last year.

13. Martin Midstream Partners LP (MMLP): Independent Oil & Gas Industry. Market cap of $789.78M. MRQ revenue grew by 22.68% on a y/y basis, much slower than inventory growth at 27.25%. Inventory, as a percentage of current assets, increased from 33.05% to 35.68% (comparing 3 months ending 09-30-2010 vs. 3 months ending 09-30-2009). Short float at 0.67%, which implies a short ratio of 0.44 days. The stock has gained 34.53% over the last year.

14. Air Products & Chemicals Inc. (APD): Chemicals Industry. Market cap of $19.65B. MRQ revenue grew by 10.04% on a y/y basis, much slower than inventory growth at 12.74%. Inventory, as a percentage of current assets, increased from 23.53% to 25.72% (comparing 3 months ending 12-31-2010 vs. 3 months ending 12-31-2009). Short float at 0.51%, which implies a short ratio of 0.84 days. The stock has gained 36.69% over the last year.

15. World Fuel Services Corp. (INT): Oil & Gas Refining & Marketing Industry. Market cap of $2.86B. MRQ revenue grew by 64.41% on a y/y basis, much slower than inventory growth at 66.83%. Inventory, as a percentage of current assets, increased from 8.64% to 10.23% (comparing 3 months ending 12-31-2010 vs. 3 months ending 12-31-2009). Short float at 8.68%, which implies a short ratio of 9.15 days. The stock has gained 57.38% over the last year.

16. AK Steel Holding Corporation (AKS): Steel & Iron Industry. Market cap of $1.74B. MRQ revenue grew by 5.36% on a y/y basis, much slower than inventory growth at 7.68%. Inventory, as a percentage of current assets, increased from 25.56% to 31.96% (comparing 3 months ending 12-31-2010 vs. 3 months ending 12-31-2009). Short float at 14.69%, which implies a short ratio of 1.94 days. The stock has lost -25.8% over the last year.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Best Buy: Dividend Dynamo, or Blowup?

Dividend investing is a tried-and-true strategy for generating strong, steady returns in economies both good and bad. But as corporate America's slew of dividend cuts and suspensions over the past few years has demonstrated, it's not enough simply to buy a high yield. You also need to make sure those payouts are sustainable.

Let's examine how Best Buy (NYSE: BBY  ) stacks up. In this series, we consider four critical factors investors should examine in every dividend stock. We�ll then tie it all together to look at whether Best Buy is a dividend dynamo or a disaster in the making.

1. Yield
First and foremost, dividend investors like a large forward yield. But if a yield gets too high, it may reflect investors' doubts about the payout's sustainability. If investors had confidence in the stock, they'd be buying it, driving up the share price and shrinking the yield.

Best Buy yields 2.6%, a bit higher than the S&P 500's 2.1%.

2. Payout ratio
The payout ratio might be the most important metric for judging dividend sustainability. It compares the amount of money a company paid out in dividends last year to the earnings it generated. A ratio that's too high -- say, greater than 80% of earnings -- indicates that the company may be stretching to make payouts it can't afford, even when its dividend yield doesn�t seem particularly high.

Best Buy has a modest payout ratio of only 21%.

3. Balance sheet
The best dividend payers have the financial fortitude to fund growth and respond to whatever the economy and competitors throw at them. The interest coverage ratio indicates whether a company is having trouble meeting its interest payments -- any ratio less than 5 times is a warning sign. Meanwhile, the debt-to-equity ratio is a good measure of a company's total debt burden.

Best Buy has a debt-to-equity ratio of 36% and an interest coverage rate of 17 times.

4. Growth
A large dividend is nice; a large, growing dividend is even better. To support a growing dividend, we also want to see earnings growth.

Over the past five years, Best Buy has grown its earnings per share at an average annual rate of 3%, while its dividend has grown at an 11% rate.

The Foolish bottom line
Best Buy's yield may be a bit too low to consider it a "dividend dynamo" just yet, but the company certainly exhibits a clean dividend bill of health, and its dividend growth is impressive. It has a moderate yield, a reasonable payout ratio, and manageable debt, with growth to boot. While dividend investors will obviously still want to keep an eye on looming competitive threats like Amazon.com, Best Buy's payout ratio is low enough that it should be capable of growing its dividend at a faster rate than earnings for the foreseeable future.

If you�re looking for other great dividend stocks, I suggest you check out �Secure Your Future With 11 Rock-Solid Dividend Stocks,� a special report from the Motley Fool about some serious dividend dynamos. I invite you to grab a free copy to discover everything you need to know about these 11 generous dividend-payers -- simply click here.

Where to Find Investment Articles

Investment articles come in all shapes and sizes. Whether you’re asking, “What is a 401k plan” and are looking to learn more about early retirement planning or delving deeper into the roth ira limits and 401k providers, there is an article written just for you.

The future of middle-aged Americans will depend more on individual contributions, knowledge and economical fluctuations, rather than pension and social security fallbacks. Take the first step toward a supplemental retirement plan today.

Forbes is a fantastic place to discover your inner economist. It may look like a regular news site at first, but if you type “retirement investment” into the website’s search engine, you’ll find a plethora of engaging, easy-to-follow articles with aesthetically-pleasing arrangements.

The letters are bold and colorful, with complimentary charts and pictures that make learning and understanding second nature. You might want to stream video presentations or look at the “lists” section where you can find the 100 best mid-cap stocks or an international investment guide.

The “personal finance” tab is an invaluable resource for anyone looking for investment articles. From guru insights and investing ideas to taxes and mutual funds — finance has never been so much fun! Forbes.com is simply a “must” for anyone considering saving for their financial future.

One website, a “must” for beginners, showcases investment articles on the latest scams, the differences between IRAs and 401ks and how to make the most of your savings.

Read about issues geared toward the aging retiree in an easy-to-read format. Look at charts and polls or simply find a list of 401k providers. No matter what you’re seeking, chances are your needs will be met.

Surely you’ve heard of Fortune or Money Magazine. Part of the CNN family, you can find an article about what to do with your 401k and read an interview with the richest man in the world at Money CNN.

You probably recall their annual “top 100 companies to work for” list and the “highest paid CEOs” list, making this magazine great for research, more than a dummy’s guide to investment articles.

You won’t find so many cut-and-dry explanations, but for the moderately educated and perpetually curious mid-lifer, Fortune and Money covers the hot button issues on Wall Street.

Bloomberg is a practical site that features not only investment articles, but also investment tools. Register and use the portfolio tracker and market monitor to easily keep tabs on your stocks, compare your funds with other top-ranked funds or use the personal calculator to keep your spending under control.

With a quick click, you’ll get Bloomberg radio and TV reports delivered instantly to your computer. Quickly view an economic calendar or check the top stocks, read current news or refer to the glossary to understand unfamiliar terms. This is not for beginners, but rather intermediates.

Investment articles can be informative, entertaining and inspiring. You can find questions to ask your banker or employer with regards to your retirement. You may choose to safeguard your savings by knowing 401k withdrawal rules.

Or perhaps you’ll wow your friends over coffee with some pertinent news tidbit. Being a curious and informed citizen is the only way to get ahead in life, and it seems you’re well on your way!

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MLP Parity Act Could Give a Boost to Renewable Energy, Investors

Looking to make the transition from an economy based on fossil fuels, renewable energy businesses across the value and supply chain have benefited from state and federal government subsidies, support and incentives.

State renewable power/portfolio standards (RPS), which have been enacted in 37 states to date, have been critical to the near-doubling of U.S. renewable energy capacity since 2008, along with the creation of hundreds of thousands of jobs.

13 Ultimate Dividend Stocks

While the Obama administration has set U.S. energy policy firmly on the renewable path, the federal government — more precisely, a bitterly divided Congress — has relied primarily on tax incentives in the form of investment and production tax credits (ITCs and PTCs) to foster growth and development of the U.S. clean-energy economy.

However, key federal ITC and PTC subsidies, such as the Treasury 1603 grant program and wind energy PTC, have either expired or are due to expire shortly, threatening to starve the broad spectrum of renewable-energy industry participants of capital at a time when weak macroeconomic conditions and market microeconomics threaten to stall further growth and development.

In a move that would significantly broaden and deepen the pool of private-sector capital available for investment in solar, wind, geothermal and other forms of renewable energy businesses and projects, Sen. Christopher Coons (D-Del.), along with Senator Jerry Moran (R-Kan.), on June 7 introduced a bill in the Senate that would allow renewable-energy companies to form master limited partnerships, or MLPs.

Fossil fuel industry businesses — predominantly oil & gas pipeline operators and distributors such as Kinder Morgan Energy Partners LP (NYSE:KMP) and Enterprise Products Partners (NYSE:EPD) — have taken advantage of these subsidized, tax-advantaged investment vehicles for decades.

MLPs have become especially popular with investors searching for relative security, stability and high dividend yields in recent years. The following chart shows the five-year performance of the JPMorgan Alerian MLP Index ETN (NYSE:AMJ), an exchange-traded note that tracks a broad group of U.S. exchange-listed MLPs.

Leveling the U.S. Energy Investment Playing Field

It’s clear that the oil & gas industry and investors alike have benefited from MLPs. The thing is, the legislation that opened the door for them to do so specifically excludes renewable-energy companies from doing so. The Master Limited Partnerships Parity Act seeks to level the U.S. energy investment landscape by addressing and correcting that.

“Master limited partnerships have been largely responsible for the tremendous growth in our country�s energy infrastructure,� Senator Moran stated upon the bill’s introduction. �In order to grow our economy and increase our energy security, sound economic tools like the MLP should be expanded to include additional domestic energy sources.”

In addition to gaining the Obama administration’s support, the Coons-Moran MLP Parity Act has gained the support of five Republican co-sponsors.

New Pool of Capital, Lower Capital Costs

Allowing renewable energy industry participants to form MLPs would open up significant new opportunities to raise lower-cost capital at a time when financing options are regressing to the point where renewable-energy financing is increasingly reliant on tapping the relatively small, inadequate market for tax equity financing.

As much as $6 billion in capital that’s currently excluded from renewable-energy projects might be invested in renewable-energy MLPs, according to a study from the Maguire Energy Institute at Southern Methodist University.

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As Coons notes, projects put into an MLP portfolio “get access to capital at a lower cost and are more liquid than traditional financing approaches to energy projects, making them highly effective at attracting private investment. Investors in renewable energy projects, however, have been explicitly prevented from forming MLPs, starving a growing portion of America’s domestic energy sector of the capital it needs to build and grow.”

The Right Legislation at the Right Time

In a June 2 New York Times article, Stanford University’s Dan Reicher and Felix Mormann succinctly explained the boost allowing renewable energy companies to form MLPs would provide to the U.S. renewable energy industry:

“If renewable energy is going to become fully competitive and a significant source of energy in the United States, then further technological innovation must be accompanied by financial innovation so that clean energy sources gain access to the same low-cost capital that traditional energy sources like coal and natural gas enjoy.

“Master limited partnerships carry the fund-raising advantages of a corporation: ownership interests are publicly traded and offer investors the liquidity, limited liability and dividends of classic corporations. Their market capitalization exceeds $350 billion. With average dividends of just 6%, these investment vehicles could substantially reduce the cost of financing renewables.”

If passed, the Coons-Moran MLP Parity Act would allow MLPs to be formed for solar, wind, marine and hydrokinetic, hydropower, combined heat and power, municipal solid waste, geothermal, fuel cells and closed- and open-loop biomass. It also would enable MLPs to be formed for a range of alternative transportation fuels, including cellulosic ethanol, biodiesel and algae fuels.

Renewable energy MLPs, in turn, would offer investors a secure, cost-effective and high-yielding opportunity to contribute to and participate in the success of America’s fast-growing renewable energy markets and companies.

As of this writing, Andrew Burger did not hold a position in any of the aforementioned securities.

Long & short: LinkedIn & OpenTable

Our proprietary investment strategy -- known as Expectational Analysis -- combines three factors: technicals, fundamentals and contrarian-based sentiment indicators.

Based on this approach, I have taken two new positions in our Master Trading Portfolio -- a long position in Linkedin Corp. (LNKD) and a short position in OpenTable (OPEN).

On the long side, Linkedin has shown strong price action year-to-date and is up 62 percent. Over the past 6 months, LNKD is up 47 percent.

On the sentiment front, the Schaeffer's open interest put/call ratio (SOIR), which looks at the front three months' open interest, is currently at 1.18. An unwinding of these options could act as a tailwind toward LNKD.
Additionally, short interest as a percentage of the stock?s float is at nearly 8 percent. Any strength by LNKD could cause an unwinding of these bearish bets and drive the shares even higher.

Finally, of the analysts covering the stock, 11 of the 20 analysts have it rated as a hold, leaving room for further upgrades that could then drive the shares even higher.

On the short side, price action for OpenTable has been weak, with the equity down 50 percent over the past year.

On the sentiment front, the Schaeffer's open interest put/call ratio (SOIR), which looks at the front three months' open interest, is currently at 0.70.

This ratio also ranks in the 28th percentile of all ratios in the past 52 weeks and indicates a relatively high number of bullish bets on the equity. An unwinding of these options could act as a headwind toward LNKD.

Downgrades are a definite possibility in the future, as several analysts currently have it rated as a buy or a strong buy. This could help to drive the shares down even further.



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Futures Slip as Bank of America, Honeywell, Big Techs Report

Stock futures slipped on Tuesday ahead of more congressional testimony from Fed Chairman Ben Bernanke. Bernanke’s testimony on Tuesday helped lift stocks as the Fed chairman sounded particularly gloomy about the economy — as the Fed’s forecast gets worse, the chances of QE3 get better.

European stocks were higher, boosted in part by earnings from some banks. Credit Suisse (CS) rose 2.6% on surprisingly strong results.

Dow futures fell 41 points; S&P 500 futures fell 4.8 points.

Earnings are flooding in from virtually every sector. Bank of America (BAC) beat EPS expectations as the bank’s credit quality improved, allowing it to release more loan loss provisions. Shares were rising 0.4% in pre-market action.

Honeywell (HON) rose 3.1% after beating EPS estimates by three cents with revenue slightly below expectations. It also raised the lower end of its full-year guidance, citing continuing margin expansion.

US Bancorp (USB) slipped 0.4% after beating earnings and revenue expectations.

Bank of NY (BK) fell 2.4% as second quarter profits fell on litigation charges and low rates hurt revenue.

Abbott Labs (ABT) fell 0.4% after beating core earnings expectations. Restructuring costs have been hurting the company’s results as it splits into two companies.

Intel (INTC) dropped 0.7% after issuing disappointing revenue guidance as global economic weakness is cutting into PC demand.

Yahoo (YHOO) rose 0.2% after beating EPS expectations by 4 cents despite a slight revenue miss.

Vivus (VVUS) jumped 17% after the FDA approved its diet pill Qsymia. Rival diet pill drug maker Arena Pharmaceuticals (ARNA) fell 8.7% on the news.

Stanley Black & Decker (SWK) fell 1.8% after cutting its full-year forecast and said it is exploring options, for its hardware and home improvement business. That could include a sale.

St. Jude Medical (STJ) fell 4.2% after it beat EPS expectations by a penny on revenue that missed expectations, slipping to $1.41 billion. The company says it is on track to accelerate growth.

– with reporting from Johanna Bennett

Google Opens PowerMeter as Console Wars Heat Up

Now any smart thermostat can link into PowerMeter.

Google (GOOG) has opened up the application program interface (API) to its household power management tool, a move that will make it much easier for home networking vendors to build links into their products that connect back to PowerMeter. AlertMe from the U.K. and The Energy Detective both make PowerMeter-energized products, and Google has been seeking more partners -- but PowerMeter is hardly a household word yet.

Putting out the APIs is the equivalent of putting PowerMeter on autopilot. The terms are public and straightforward; vendors then choose whether or not to adopt them. And vendors generally adopt the popular APIs. It helps reach a broader audience and the software vendors ultimately often start doling out market development dollars.

Google, Microsoft (MSFT), Intel (INTC) and others have all launched efforts to control how consumers and businesses monitor and analyze their energy consumption. Why the rush? Neither Google nor Microsoft will charge consumers for PowerMeter or Hohm. However, advertisers will likely pay both companies for the opportunity to hawk energy efficiency services and other energy-related products to consumers who use their respective consoles. Both companies will also mine the data (after it has been scrubbed to protect privacy) to utilities. Don't worry about a loss of dignity or privacy: you'll get a coupon for ten percent off on a new set of storm windows.

Intel, meanwhile, wants to sell chips into thermostats. Last year, Intel began to gripe about how homes were largely analog, often a prelude to a product push. Then at CES, CEO Paul Otellini showed off a prototype management console. Intel has already licensed it for free to an Asian contract manufacturer.

But will it work? Intel's strategy makes a lot of sense. These devices will need processors and Intel can pop out chips at a regular pace at low prices. But thermostats and washing machines won't need extremely high levels of programmability. So Intel will have to compete against ARM and others.

Google and Microsoft, however, have created business plans that require at least some level of customer interest and engagement. Can energy efficiency and home management engage the interests of consumers over a sustained period. Put it another way: when was the last time you reset your programmable thermostat? Maybe the companies like Tendril, EcoFactor and Silver Spring Networks that are more focused on systems that will let consumers forget about home management have a better idea.

3 Ways to Soothe Panicked Clients

Steve Rudolph, a financial advisor affiliated with Commonwealth Financial, and his colleagues, along with his clients (of course), didn’t want to see a repeat of 2008 this week. 

“With the last crash, I was responding to everyone calling in and didn’t get to reach out to all my clients as much I wanted to,” said the Cleveland-based Rudolph in an interview.

This week, he set up two conference calls with clients, which each attracted about 50 jittery clients.

“Some clients are hoping to hear from us, and we thought that when panic was getting elevated, we could jump on a call like this. It makes more sense than saying the same thing over and over on a one-on-one basis,” said Rudolph, who works with four other FAs as managing director of HW Financial Advisors, an independent RIA affiliated with Howard, Wershbale & Co., CPAs and Consultants, which trades through Commonwealth Financial.

To reach out to clients, Rudolph (left) sent an email a few days ago. “We understand that recent market events are raising questions and concerns for many of you. To help address some of these, we invite you to join us for a conference call discussion hosted by Steve Rudolph," the email said. "Steve will review recent events, share his thoughts on the implications of the Standard & Poor’s credit downgrade of the U.S., and offer insights on the overall long-term outlook. A question-and-answer session will follow Steve’s commentary.”

Here, then, are Rudolph's three tips for soothing panicked clients during this market turmoil:

1) Take a Proactive Approach

The number of calls coming in from clients over the past week fell “as people anticipated our group call,” the advisor said. “Clients appreciate this approach.”

Rudolph seems to be proactive in most work he does. “We customize portfolios,” he said, “and for some retirees, we took some risk off the table one or two months ago.

“I was uncomfortable with the highs,” Rudolph explained, “so I paired back some holdings for those sensitive to this. I also add back a bit on the down days to pick up some decent buys. This might look foolish in a day or a week, but over the longer term, we feel good about it.”

2) Be the Calm in the Storm

Having the right tone during a volatile market period is important, says the advisor, who has been in the business for about 20 years. “Be a realist and be calming, but don’t be not phony and say that everything’s fine,” shared Rudolph.

The advisor says he likes to be straight with clients about the implications of current market conditions and keep their expectations in as neutral a place as possible. “At the end of the day, no one knows a lot about the outcomes,” said Rudolph. “Meanwhile, you’ve got to make a decision about how to allocate, and nothing’s ultimately guaranteed.”

3) Understand the Uncertainty

“We’re in very uncertain times right now,” the advisor stated at the beginning of his call on Thursday afternoon. “I think it’s ironic, all this panic, when multinationals like Apple are sitting on record cash and profits right now.”

He also acknowledged that the big market movements – four 400-plus-point swings in the Dow in six days – were “no fun to watch.” This can elicit very “emotional responses,” Rudolph said, “and bring on fight or flight responses.”

The advisors then raised the issue of taking advantage of the uncertainty and seeing it as opportunity. “You can be like Warren Buffet and go on a buying spree,” he said.

Several clients asked about that approach, sharing that they couldn’t embrace “buy low” with the volatility today without working with Rudolph and his team.

The bottom line is that “everything is uncertain,” Rudolph concluded. “But for several reasons we’ve discussed [on the call], we don’t advise holding cash.”

Going to cash, he concluded, “gives a false sense of security and signals that we think the market is like it was in ‘08 and may go down 10% to 15% … and going to cash means we know what it will do in the future. The market has dropped 10% about six times in the recent past and then made a tremendous recovery.”

GE Looking Expensive as an Industrial or Financial Stock: Morgan Stanley

General Electric (GE) stock is attractive for numerous reasons — its industrial businesses should see a cyclical rise, and GE Capital Services is in good shape financially and should become a “cash machine” in coming quarters.

GE’s valuation, using standard metrics, does not seem out of the ordinary among its peers. But GE is a curious financial-industrial hybrid, and taking it apart piece by piece yields a different conclusion, writes Morgan Stanley analyst Nigel Coe in downgrading the shares to Equal Weight.

“GE trades at 11.3x 2013 EPS, which is a slight premium to the group at 10.9x on a comparable pension accounting basis. However, when we back out GE Capital (at 1.4x tangible book value), we see that GE�s industrial business trades at a 21% premium to comps. Similarly, if we back out industrial at 10.9x, we find that GECC is at a 40% premium vs. MS Large Cap Banks.”

The company faces other headwinds — pricing competition remains intense for many energy products, and volumes could fall in the Wind business.

Coe values General Electric at $22 a share. It’s trading down 1.1% this afternoon to $19.55 a share.

Euro on the Brink

When the euro became a reality about 15 years ago, investors wondered how a plan to unite more than a dozen European nations using a common currency could help them prosper. Now, investors already worried about the U.S. stock market's recent turn are desperately looking for ways to avoid losing their shirts if the euro falls apart.

Also See

• The Case for European Blue Chips
• Dialing Up Europe's Troubled Telecoms
• How to Invest in Europe

Given the news of the past few months, it's not a stretch to think the euro's end is nigh. What would a worst-case scenario look like? Experts such as Simon Johnson, a professor at the Massachusetts Institute of Technology and a former International Monetary Fund executive, essentially envision a European economic Armageddon: bank failures, a continent-wide recession, trillions of dollars in European debt default, rampant inflation in Europe and, not to be forgotten, the end of the euro. Simply shunning European stocks might not be enough to protect a portfolio, if that disaster comes to pass. If the 2008 financial crisis taught investors anything, it's that global markets are interconnected, says Jeremy Glaser, a market strategist at Morningstar. There's no way to know how markets would react if Greece left the euro, he says, because "we haven't had a currency like the euro before."

Still, market strategists think the likelihood that one country after another will dump the euro remains remote. David Darst, chief investment strategist at Morgan Stanley Smith Barney, says that sort of "economic contagion" is doubtful because, if the euro value starts to go into free fall, central bankers in Europe, the U.S., China and Japan will all step in to support the currency. "All of these authorities would come up with this massive policy response to prevent contagion spreading to Spain, Italy or Portugal," Darst says.

But the once-unthinkable idea that Greece might leave the euro and return to the drachma -- called the Grexit by Wall Street wordsmiths -- has become a real possibility, experts say. Many Greeks have begun taking their savings out of local banks and depositing them in banks in other European countries, notably Germany. Still, some experts say, at this point, the consequences of Greece leaving the euro might not be all that bad for investors. European stocks are down about 7 percent since the Greek election in May, a shift that might already price in a currency switch. If Greece leaves in an orderly way, and the "rest of Europe rings it with a fence" so that investors feel protected against a wider foreign exchange crisis, then the markets can handle it, says Stu Schweitzer, vice chairman and global markets strategist at J.P. Morgan Private Bank.

But after the 2008 financial crisis, many experts are willing to believe that the worst is possible. If a Greek exit inspires a similar move by other countries struggling with debt, such as Portugal and Spain, then the entire European economy will suffer, Schweitzer says. That's when the dominoes could really start to fall. Individual investors have few good options to protect themselves against such a scary scenario. There's always running to the safe haven of U.S. government debt, but with the 10-year Treasury yielding 1.6 percent, near an all-time low, don't expect any great returns. Indeed, even today's low levels of inflation effectively wipe out the value of the interest a Treasury would pay. Also, speculating on the euro's value can be risky. Yes, the euro has fallen almost 20 percent against the dollar in a year, but even the pros can lose money betting against a major currency like the euro, which still has strong support from international investors. Central bankers can't afford for the euro to fail -- they, too, hold the currency.

Of course, there are some who see the European mess as a way to pick up stocks on the cheap. But for many investors, minimizing losses is the first priority. One way to reduce euro risk is to choose foreign stock mutual funds that hedge the currency exposure themselves. A simpler option: Own relatively few shares of companies that either trade on European exchanges or get most of their sales in Europe. J.P. Morgan Private Bank is recommending that clients take roughly half of what they would have invested in European stocks and instead put it in U.S. stocks or, if they're really fearful, cash. Darst says a good way to protect a stock portfolio from the bad economic winds in Europe is to tilt it toward domestic, defensive-style holdings like utilities, telecommunications and real estate investment trusts. If the euro continues to weaken, Darst says, the dollar value of the earnings that U.S. companies make in Europe will be worth less.

The Importance of Staying on Your Own Mat

Charles Kirk had a post up that I thought was particularly useful both for the investment implications but also the philosophical implication too. In the post he answered a reader email who feels that the US equity markets are being manipulated by the US government and the reader believes Charles should comment on this more.

You can get a sense of Charles' reaction from the title of the post which was "Life’s Not Fair – Get Over It!" Charles, taking the trader's viewpoint, believes that devoting a lot of time to the markets being manipulated is likely to come from someone who is not trading well and looking to blame someone or something. Additionally Charles feels it is simply counter productive to dwell on negative energy.

Long time readers will recognize this title of this post from past posts of mine as a yoga reference meaning don't worry about how the person next to you is doing the poses just focus on what you can do with each pose. You can also tell from the title that I generally agree with Charles' take on this although I do come at this as far less of a trader than Charles.

Although I agree with Charles I do come at this issue differently. If you do not believe the market is manipulated then none of this matters. Charles reminds the reader that the market is often/always being manipulated by someone. This has been true before and will be true again. if you agree with Charles about this, then it seems to me that the manipulation is beyond our control.

As a part of my DNA I tend not to worry about things beyond my control and instead focus on things that I can control as a more effective way to solve how something like this might impact me or my clients. As this relates to portfolio management, think about the Quantitative Easing, or more topically QE2. I guess the debate over if is now over and the world has moved on to how big and over what time frame.

That the US is at the point of a second round of QE means we are trying to understand just exactly how bad off the US economy is. QE is an act of policy desperation with very little realistic chance of solving the problem--if nothing else time solves these problems and the government's steps to help solve the problem will either facilitate a faster solution than would naturally occur or serve as an impediment to same (this is a belief of mine).

To the extent that QE is about US economic health then it is also about US economic cyclicality and we know QE2 is an act of desperation to restore normal cyclicality an investor can control the extent to which they are exposed to desperate policy maneuvers. Embedded in this is that part of QE and QE2 is what many people believe is a manipulation of the US markets.

Determining that added all up, the QE2, the manipulation and so forth, US cyclicality is better avoided is a reasonable conclusion and within your control. I think this is different than lamenting over what is wrong or put another way trying to solve the world's problems.

If you are a do-it-yourselfer then you only answer to yourself and can have more regard for solving the world's problems but if you manage other people's money then your job is give your clients' money the best chance possible to grow to the point where they need it to be.

I think it is only logical to avoid or minimize that which relies on QE2 working which is US cyclicality. From the start of this site I've written a lot about the US becoming a less attractive investment destination but current events have exceeded anything I had in mind when this thought first occurred to me. So the task has become finding innovative ways to give whomever you serve (yourself or your clients) the best chance of having what they need when they need it (repeated for emphasis).

While I can appreciate that people may not come at this the same way it is the only conclusion I draw about how to move forward in the portfolio; that is seek out the healthier parts of the world or themes where money will flow (presumably stocks in themes where money will flow would benefit) and avoid countries or market segments relying on desperate measures (also repeated for emphasis).

Disclosure: None

PopCap Is EA’s Ticket to Conquering the Competition

Electronic Arts (NASDAQ: ERTS) is changing as fast as it possibly can. The video game publisher has built an empire on selling $60 games on shelves at stores like GameStop (NYSE: GME) and Best Buy (NYSE: BBY), but the company recognizes there is a fast-approaching point on the horizon when the video game industry will survive solely on games downloaded from the Internet to be played on smartphones or by logging into a network like Facebook. The company has aggressively expanded its mobile, social and digital initiatives in the past 24 months. On Tuesday, EA made what might end up being one of its most profitable acquisitions ever.

PopCap Games, the developer and publisher behind popular iPhone and Facebook games like “Bejeweled”�and “Plants vs. Zombies,”�was acquired by EA for $750 million in cash and stock.�Provided that PopCap reaches certain “performance goals,” the studio will receive an additional $500 million from EA.

The purchase was surprising. PopCap CEO David Roberts told Reuters in April that his company likely would file for an IPO by the fourth quarter of 2011. Where many independent video game companies have struggled in the years since the 2008 crash, PopCap has continued to grow. The company generated $100 million in revenue in 2010, up from $80 million in 2009 and $50 million in 2008. Games like the aforementioned Plants vs. Zombies�consistently rank among the best-sellers on multiple platforms from Apple’s (NASDAQ: AAPL) iPhone and PCs through Valve’s Steam service ��an online gaming network and a digital storefront.

All of the factors that made PopCap a promising independent, publicly traded company also make it an ideal subsidiary for Electronic Arts, especially as EA continues to expand into the mobile and social games markets. PopCap’s games represent more than just a solid new revenue stream for EA, however. The company also will be a way for EA to cut its competition’s business. Activision Blizzard (NASDAQ: ATVI), EA’s chief competitor and the company behind the best-selling Call of Duty franchise, actually has a partnership with PopCap. Versions of PopCap’s games Peggle�and Bejeweled�actually appear in Activision’s hugely successful online game World of Warcraft.�Garth Chouteau, PopCap’s public relations vice-president, told website Kotaku that this partnership and others like it won’t change now that his company is owned by EA.

PopCap’s games also will make for strong exclusives for EA’s Origin, EA’s digital download storefront similar to Valve’s Steam. It’s highly likely EA will lure in customers by offering certain PopCap games exclusively through Origin. The period of exclusivity will likely be timed ��say, a newer version of Bejeweled�will be available on Origin for two weeks before Apple’s App Store.

PopCap, for now, will make up just a portion of EA’s overall revenue. Total revenue in 2010 came to $3.5 billion. Another $100 million is good but not great. As a branding force in new markets, though, PopCap is invaluable for EA, and it will be a large feather in the company’s cap in the months to come.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at�@ajohnagnello and�become a fan of�InvestorPlace on Facebook.

Garmin Catches Analysts Sleeping Again

Garmin (Nasdaq: GRMN  ) reported earnings on Feb. 22. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q4), Garmin beat expectations on revenue and crushed expectations on earnings per share.

Compared to the prior-year quarter, revenue increased and GAAP earnings per share expanded significantly.

Gross margin increased, operating margin was steady, and net margin grew.

Revenue details
Garmin reported revenue of $909.6 million. The 12 analysts polled by S&P Capital IQ anticipated sales of $771.2 million on the same basis. GAAP reported sales were 8.6% higher than the prior-year quarter's $837.7 million.

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

EPS details
EPS came in at $0.85. The 14 earnings estimates compiled by S&P Capital IQ forecast $0.65 per share. GAAP EPS of $0.85 for Q4 were 25% higher than the prior-year quarter's $0.68 per share.

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

Margin details
For the quarter, gross margin was 47.7%, 240 basis points better than the prior-year quarter. Operating margin was 22.0%, about the same as the prior-year quarter. Net margin was 18.2%, 230 basis points better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $576.1 million. On the bottom line, the average EPS estimate is $0.44.

Next year's average estimate for revenue is $2.67 billion. The average EPS estimate is $2.62.

Investor sentiment
The stock has a two-star rating (out of five) at Motley Fool CAPS. Among 1,309 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 1,220 give Garmin a green thumbs-up, and 89 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Garmin is hold, with an average price target of $35.46.

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China North East Petroleum: Investing Made Easy

We live in a period of low expected returns from investing across all asset classes. In this tough environment life is difficult for stock pickers. But life will surely not be tough for recent buyers of NEP.

China North East Petroleum (AMEX: NEP) is a low-cost, high-margin, cash-generative oil producer in northeast China. For more about the company, refer to earlier Seeking Alpha articles here and here.

There are 5 major catalysts in place to drive NEP’s stock price substantially higher:

The Bernanke Put: Ongoing economic lethargy will lead to more QE, with consequential devaluation of the Usd and large quantities of money moving into safer-haven commodities such as oil. Alternatively, if economic activity actually improves, we get higher oil prices via demand. Either way, a win-win for investors in the oil sector.

Acquisition: A significant cash acquisition of new oil properties by NEP is likely to be announced between now and summer 2011. This will be a game-changer for the company. NEP is building cash reserves and will have about $68 million cash at December 2010. The company has already announced its intention to acquire new oil leases and it owns drilling rigs which it can quickly deploy to profitably exploit new acreage. Everything is in place.

Recovery from quote suspension: NEP’s stock quote was suspended for over 3 months in 2010 whilst the company corrected accounting mistakes in 2008 and 2009 SEC filings. The stock had been trading in the $9-10 range in spring 2010 and, not surprisingly, fell hard in the run-up to suspension, finally closing at $5.50. Now, with all filings corrected and up-to-date, with the company’s finance functions and controls improved, and with the 2010 SEC filings confirming that the corrections do not have any material adverse effect on NEP’s expected profits going forward, NEP’s stock price is positioned to recover lost ground. This recovery is likely to be step-like in tandem with NEP proving to investors that good operational progress continues to be made. One such development has already occurred; NEP announced on September 28 that its drilling subsidiary had won a contract to drill 100 wells over a 2-year period with an independent oil producer. Without doubt other positive operational developments will be announced in the near future with corresponding positive effects on the stock price.

CFO position: As a consequence of the discovery of the accounting mistakes in the 2008 and 2009 SEC filings, NEP made changes to its finance function. The old CFO had some of his responsibilities modified, an interim CFO was appointed and, as yet, the company has not appointed a permanent replacement to the CFO position. In time this position will be filled.

Analyst coverage: During the period when the stock quote was suspended, NEP’s sole analyst predictably dropped his recommendation from buy to hold (investors could hardly buy the stock if it wasn’t quoted!). This hold rating remains in place as of today. Over time, when NEP continues to deliver strong operating profits and files pristine SEC reports, it is highly likely that NEP will regain its buy rating, unless the stock price balloons in the meantime of course. So long as NEP’s stock price remains deeply undervalued it is very likely to attract buy coverage.

What makes NEP a particularly attractive investment opportunity is that all 5 of the above major catalysts are likely to occur and that, ahead of these events, the stock price is deeply undervalued.

The following P&L and Balance Sheet summaries are built using conservative oil price assumptions; $70 for Q3 and Q4 2010, $75 for 2011 and $80 for 2012. Yes, these are low-ball estimates, especially considering that oil has recently been trading above $80, but it is always best to base investment decisions on conservative assumptions.

Summary P&Ls	2008	2009	2010	2011	2012
	Actual	Actual	Estimate	Estimate	Estimate
Ave Oil price	$94.29	$55.97	$72.73	$75.00	$80.00
	Usd ‘000	Usd ‘000	Usd ‘000	Usd ‘000	Usd ‘000
Sales – Oil	58,572	51,081	61,086	69,375	63,000
Sales – Drilling	0	13,577	48,099	60,000	60,000
Sales – Total	58,572	64,658	109,185	129,375	123,000
Prod'n & Drill costs	3,848	7,730	23,152	28,400	28,500
Dep'n & Amort	8,621	9,815	10,198	11,400	11,400
Gov't Surcharge	11,105	4,619	9,355	10,638	10,631
Total	23,574	22,164	42,705	50,438	50,531
Gross Profit	34,998	42,494	66,480	78,938	72,469
Gross Profit %	59.8%	65.7%	60.9%	61.0%	58.9%
SGA expenses	16,820	18,105	5,052	4,950	5,600
Operating Income	18,178	24,389	61,428	73,988	66,869
Other, Int, Fin.	5,261	1,920	43	500	500
(G)/L Warrants Reval	(4,464)	27,399	(25,439)	0	0
Debt extinguish loss	0	8,261	0	0	0
Income before Tax	17,381	(13,191)	86,824	73,488	66,369
Income Tax	5,277	6,900	21,706	18,372	16,592
Minority Interest	1,583	2,018	5,052	5,750	5,250
Net Inc Ord Shares	10,521	(22,109)	60,066	49,366	44,527
Reported EPS – basic	$0.53	$(0.99)	$2.04	$1.65	$1.48
Reported EPS – diluted	$0.53	$(0.99)	$1.93	$1.57	$1.41
Earnings excl Warrant Revaluation	7,412	19,622	40,987	49,366	44,527
Normalized EPS – basic	$0.37	$0.88	$1.39	$1.65	$1.48
Normalized EPS – diluted	$0.37	$0.88	$1.32	$1.57	$1.41
Normalized Net Income %	12.7%	30.3%	37.5%	38.2%	36.2%

This very high % of Net Income to Sales is a key factor behind NEP’s ability to be strongly cash generative.

Summary B. Sheets	2008	2009	2010	2011	2012
	Actual	Actual	Estimate	Estimate	Estimate
	Usd ‘000	Usd ‘000	Usd ‘000	Usd ‘000	Usd ‘000
Cash	13,239	28,693	68,000	122,000	160,000
Other Current Assets	5,323	16,909	23,348	27,486	24,762
Property & Equip, net	56,726	62,312	57,705	51,000	45,000
Other Assets	4,640	9,814	10,043	2,145	2,145
Total Assets	79,928	117,728	159,096	202,631	231,907
Current Liabilities	18,210	25,340	26,520	28,500	28,000
Longterm Liabilities	25,527	44,403	13,909	0	0
Minority Shareholders	3,378	7,665	13,679	19,429	4,679
Shareholders Equity	32,813	40,320	104,988	154,702	199,228
Total Liabs & Shareholders Funds	79,928	117,728	159,096	202,631	231,907

Note again the large cash balances. Without cash acquisitions - which of itself would be positive news - cash at y/end 2011 would be $122 million and at y/end 2012 $160 million. Set against NEP’s total market capitalization of $200 million these cash balances are eye popping.

Summary

NEP’s stock closed October 6, 2010 at $6.83. For that price an investor gets a 2011 p/e ratio of 4.35 plus $2 cash per share, this using a conservative oil price assumption of $75 per barrel. At $85 per barrel, NEP would generate fully diluted EPS in 2011 of $1.70, equating to a p/e of 4.0.

There are 5 catalysts that will lift the stock price in the near to medium term. Just 2-3 of these catalysts would normally provide a good boost, but, in this case, all 5 are set to occur.

Against this positive backdrop it would be surprising if the stock price doesn’t trade comfortably into double digits by early 2011, especially as various catalysts kick in. A 2011 p/e ratio of 8 would put the shares at $12 and still leave the $2 per share cash in for free. This is inexpensive, and particularly so in a world of currency devaluations and investors moving funds into safe havens such as oil and other commodities.

A 75% increase on yesterday’s closing price of $6.83 is certainly not too shabby in a world of anemic returns across all asset categories.

Disclosure: Author is long NEP