Analysts Debate: Is Vodafone a Top Stock?

The Motley Fool has been making successful stock picks for many years, but we don't always agree on what a great stock looks like. That's what makes us "motley," and it's one of our core values. We can disagree respectfully, as we often do. Investors do better when they share their knowledge.

In that spirit, we three Fools have banded together to find the market's best and worst stocks, which we'll rate on The Motley Fool's CAPS system as outperformers or underperformers. We'll be accountable for every pick based on the sum of our knowledge and the balance of our decisions. Today, we'll be discussing Vodafone (Nasdaq: VOD  ) , the international wireless provider.

Vodafone by the numbers
Here's a quick snapshot of the company's most important numbers:

Statistic	Result -- Fiscal 2012
Revenue	$74.2 billion
Net Income	$11.2 billion
Market Cap	$142.5 billion
P/E Ratio	13.1 trailing, 11.0 forward
Dividend Yield	6.8%
Mobile Customers	446.5 million
Key Competitors	AT&T (NYSE: T  ) , T-Mobile, �Airtel�

Sources: Company filings.

Travis' take
Vodafone is an international mobile network operator with access to some of the most desirable locations in the world. Vodafone and Verizon (NYSE: VZ  ) are equity partners in Verizon Wireless, with Vodafone owning 45% of the wireless giant. The company also owns the second largest network (by subscribers) in India, the largest network in Germany, and the largest network in Egypt.

European business has been hurt by the financial crisis playing out there, but emerging markets are continuing to grow. If Europe's economy stabilizes and returns to "normal," the company should grow along with it. But I want to focus on Verizon Wireless, which generated 42.2% of the company's adjusted operating profit last quarter�.

When Apple (Nasdaq: AAPL  ) released the iPhone 5, I took a step back to consider who the big winners were. The more I thought about it, the more I thought that Verizon Wireless was a clear winner in the U.S. because of its superior network and ability to charge a premium as a result.

Over the past two years I've personally tested every major wireless network by accident. I'm an AT&T user for my current iPhone and have never been impressed by the network. I also bought a MiFi device from Virgin Mobile over a year ago, which works on Sprint's network. It was OK, but when I lost the device I went in search of a better experience. For some reason I chose a 4G device from T-Mobile, the biggest mistake I've ever made in electronic devices. Since I use my MiFi for work, I can justify spending a few extra dollars for something that's going to work when I need it, so I sucked it up and spent the money on a Verizon Wireless MiFi. They're expensive, but the performance puts the other networks to shame.

I think many consumers will go through the same thought process when picking their next smartphone devices for a few reasons. First, coverage has always been important and Verizon Wireless has the best network in the U.S. But the big change in newer devices is the ability to use them as hot spots. This is a huge bonus for the average user, and if you're connecting multiple devices it will be worth considering the network, more so than when phone calls were the most important thing.

For carriers, this has a few implications. 4G will increase data usage and so will the ability to connect other devices. As a 3G user, I may have used 250 MB of my mobile plan, but 4G will likely push that closer to 1 GB. Add in the hot spot ability and I may push 3 GB to 4 GB. The tiered pricing plan will make this usage more lucrative for carriers.

Vodafone is in prime position to benefit from emerging markets, a European comeback, and Verizon Wireless' dominance in the U.S. The stock is reasonably valued at 13.1 times trailing earnings and while the high dividend may fluctuate with Verizon Wireless' special dividend, I think it will still be a strong payout. I'm comfortable with an outperform call at the current price.

Sean's take
As should come as no shock to anyone who has followed my mode of thinking before, I'm not exactly in agreement with Travis or my cohorts. I know, I know... it's hard to believe, but compose yourselves!

Let's start with the highly touted Verizon Wireless. Speaking not as a loyal AT&T customer, but as an unbiased and objective investor, while the iPhone 5 will undoubtedly bring in numerous new customers since its 4G LTE is light-years ahead of its peers, the iPhone 5 is also a margin killer and could actually have an even larger negative impact on both Verizon's and Vodafone's bottom lines than previous versions did. Here's a quick glance at what gross margins have done over the past seven years at Vodafone -- and it isn't pretty!

Year	2006	2007	2008	2009	2010	2011	2012
Gross Margin	41.8%	39.8%	38.3%	37%	33.8%	32.8%	32%

Source: Morningstar.�

With consumer spending growth slowing dramatically in recent months, I'm expecting data upgrades, where Verizon Wireless makes its bread-and-butter profits, to be moot at best.

Then there's the case for European growth -- or should I say the lack thereof. In previous quarters, growth from emerging markets has been strong enough to cancel out weakness in its European operations, but that finally caught up with the company when it reported its results in July. India is showing signs of promise, but looking at things realistically, the EU's extraordinarily high levels of unemployment and its debt issues are years, perhaps even a decade, from being fully addressed. It's going to be a long time before spending picks up, and a good chunk of Vodafone's business is still tied to Europe.

On a valuation call I can't say that I'm overly excited about Vodafone either. Let's be clear that I'm not ready to bet against Vodafone right here, right now, but I feel there are certainly better alternatives. I would personally avoid the EU altogether, but if I were forced to choose, I'd prefer to own France Telecom (NYSE: FTE  ) . Even knowing that France Telecom is planning a dividend cut, it should ultimately still be yielding more than Vodafone, and has more upside to offer at seven times forward earnings as opposed to Vodafone at 11.

To me this appears to be an easy stock to avoid. I understand it's difficult to pass up a high yield and the lucrative Verizon Wireless-Apple pact, but the gross margin figures and weakness in Europe spell out a scenario that I'd rather not have any part of.

Alex's take
Sean's table of compressing gross margins got me thinking about Vodafone's free cash flow, which should be a better way to depict the company's progress over time than its highly variable (and more easily gamed) net income line. Vodafone was tremendously unprofitable for several years last decade, but its free cash flow held up. How has its free cash flow margin (free cash flow as a percent of revenue) held up as Vodafone's expanded its reach? Not particularly well. Its dividend payments have become larger than seems prudent as a percentage of cash flow in the past two years:

Year	Free Cash Flow	FCF Margin	FCF Dividend Payout Ratio
2006	$6.69 billion	22.7%	41.2%
2007	$5.82 billion	18.6%	118.1%
2008	$5.76 billion	16.3%	63.3%
2009	$5.25 billion	12.8%	79.6%
2010	$6.09 billion	13.7%	68.9%
2011	$3.36 billion	7.3%	142.7%
2012	$4.90 billion	10.6%	141.6%

Source: Morningstar.

When you look at Vodafone's dividend payments over the last few years, you'll notice that this period of high payout ratios corresponds to the point when management decided to keep payments consistently high. Rather than goose the stock, all it's done is keep it tracking the S&P 500:

VOD Dividend data by YCharts.

And this is happening during a time of moderate declines in free cash flow and marked declines in the company's free cash flow as a percentage of its revenue. Investing in Vodafone with the expectation that its dividend will stay this high would be short-sighted, to say the least.

According to Vodafone's own filings, its customer base has expanded from 171 million customers�in 2006 to 404 million in 2012, with 150 million of those in India. Each customer contributed $39 to Vodafone's free cash flow in 2006, but only $12 in 2012. This seems like a great strategy if your goal is to become a less-efficient company. As an investment, it's less appealing. I'm going to pass on this one. I wouldn't short Vodafone, but I don't see it as a long-term outperformer based on these numbers.

The final call
Outside of a bullish view from Travis, we have a very apathetic view of Vodafone right now. The potential value and high dividend are enough to keep us from making an underperform call, so we'll stick on the sidelines on this one.

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This Week in Sirius XM Radio

Things never get dull for the country's lone satellite-radio provider. Shares of Sirius XM Radio (NASDAQ: SIRI  ) revisited the prior week's high of $3.19 -- a four-year high -- as investors continue to warm up to the media giant's potential.

The biggest news of the week was that Liberty Media (NASDAQ: LMCAD  ) finally gained majority control of Sirius XM, though a few other things happened that investors should notice:

• Pandora (NYSE: P  ) struck a deal with a music publisher for higher royalty rates.
• Sirius XM announced the time and date for its next quarterly earnings call.
• The end of the NHL lockout earlier this month means Sirius XM is resuming its coverage of live pro hockey, starting with this weekend's busy slate of season openers.

Let's take a closer look.

Liberty for all
Ever since the FCC gave its blessings in Liberty Media's plan to take majority control of Sirius XM earlier this month, it was merely a matter of time before John Malone's odd media empire would boost its share of the satellite-radio behemoth from its effective 49.8% stake.

Well, that happened on Tuesday, when Liberty Media spent an average of $3.156 a share to buy 50 million more shares of Sirius XM. The move pushes its ownership stake to roughly 50.5%.

There was little reason for Liberty Media to wait. Time is money, especially when it comes to Sirius XM as an investment. The stock has climbed sharply higher for four consecutive years. Once regulators gave Liberty Media the clearance to assume control of the company, the smart move was to buy now instead of waiting to pay more later.

There's still plenty of speculation as to exactly what Malone and Liberty Media CEO Greg Maffei will do here, though the most popular theory is that Liberty Media will now spin off its stake in Sirius XM to stakeholders -- just as Liberty Media spun off its premium movie service provider Starz (NASDAQ: STRZA  ) to investors earlier this month -- in a tax-advantaged transaction. Since Liberty Media acquired its original 40% preferred-share stake in Sirius XM four years ago for free, arranging for a tax-advantaged distribution is huge, given the company's ridiculously low cost basis.

There are other possibilities. Liberty Media can just enjoy its position of control, and that starts right now with deciding whether it wants to keep interim CEO James Meyer or look for somebody else. There doesn't seem to be a good reason to replace Meyer. Sirius XM continues to be a well-oiled machine.

Liberty Media can also acquire the rest of Sirius XM, but that may prove to be costly. It already has majority control, so it's not as if the company has to pay much of a premium, but why buy all of the cow when it already has secured all of the milking rights?

Panned aura
Remember when Pandora was testifying before Congress last year, trying to lower the music royalties that it pays out to major label and artists by backing the Internet Radio Fairness Act?

Well, Pandora's royalties will actually be going higher, not lower, on one front. Pandora struck a royalty deal with Sony/ATV -- the joint-venture between Sony (NYSE: SNE  ) and the estate of Michael Jackson -- that will increase publisher royalties by 25% for Pandora.

Pandora's stock took a hit on the news.

Is this good news or bad news for Sirius XM? Well, it's a mixed bag. On one hand, ad-supported streaming music services will have a harder time staying in business. If Pandora's struggling to remain consistently profitable with 67.1 million active accounts, what hope do smaller players have?

The bad news is that Sirius XM does want to be a bigger player in streaming audio. As a premium service, it's in a great position to absorb the higher royalties, but this is not an ideal situation.

Circle Feb. 5 on your calendar
Sirius XM will report its fourth-quarter results on Feb. 5. The report will go out shortly before a morning conference call, and there probably won't be too many surprises. Sirius XM already announced that it closed out the year with 23.9 million subscribers.

Sirius XM has even already initiated its guidance for 2013. Just in case you've forgotten, let's go over the figures again.

• Revenue will top $3.7 billion.
• Adjusted EBITDA should be more than $1.1 billion.
• Free cash flow will approach $900 million.
• Sirius XM is targeting 1.4 million net subscriber additions this year.

The outlook calls for modest growth, but just remember how Sirius XM kept revising its conservative outlook higher as 2012 played out. As long as auto sales remain strong and churn stays in check, the media giant is in a great position to build on those metrics as the year plays on.

These are interesting times for Sirius XM. They always are.

Rock on
Even though Sirius XM has been one of the market's biggest winners since bottoming out three years ago, there's still some healthy upside to be had if things go right for it -- and plenty of room for it to fall if things don't. Read all about Sirius in our brand-new premium report. To get started, just click here now.

Microsoft Slides As Goldman Downgrades To Neutral, Trims Ests

Goldman Sachs analyst Sarah Friar this morning cut her rating on Microsoft (MSFT) to Neutral from Buy, trimming her target on the stock to $28, from $32, and reducing her EPS estimates for the company.

For the June 2011 fiscal year, she goes to $2.30, from $2.39; for FY 2012, she now sees $2.65, down from $2.73; for FY 2013, her new estimate is $2.90, down from $3.02.

“We believe the intrinsic value of shares cannot be unlocked if the status quo remains, and we have increased caution near-term on a more elongated PC refresh cycle, combined with the newer threat of notebook cannibalization from tablets, where Windows does not yet have a presence,” she writes in a research note. Friar notes that since she added the stock to the firm’s Buy list on August 12, 2008, the stock is down 13%, while the S&P 500 is down 11%. (Not the best call, obviously.)

She notes that MSFT has suffered significant multiple compression this year despite an 11% rise in consensus calendar 2011 EPS estimates. “Concerns over the longer-term sustainability of the� Windows/Office franchise have clearly weighed on the stock,” she writes. “However, this is not just a 2010 phenomenon: since 2002 Microsoft has had a -8% return on a dividends-reinvested basis, the second-worst of the largest dividend paying tech stocks. For the shares to unlock value, we believe a call to action is in order.”

Friar’s suggestions:

• A material boost to the dividend beyond the recent 23% rise – enough to put Microsoft among the top 20 dividend paying companies in the S&P 500 in terms of yield.
• A “coherent consumer strategy” that could involve paring back investments or divesting more peripheral assets like gaming.
• Market leadership in cloud computing.

MSFT this morning is down 41 cents, or 1.7%, to $23.97.

Profit from the Megatrend of the Next Decade: Scarcity

Technical and fundamental investors are fond of using indicators to divine which direction stocks may be headed. These cues can come from almost anywhere: interest-rate yield curves, put/call ratios, manufacturing surveys... you name it.

Some even use the Super Bowl as a prognosticating tool.

Personally, I monitor a wide variety of indicators, but only to keep my finger on the pulse of the global economy. There's no silver bullet that accurately tells us when to buy and sell. If there were, someone would have uncovered it a long time ago.

 

That being said, if I were forced to pick a single barometer that could predict the weather for all types of assets, it would be China's inflation rate.

It's no secret that China has become the world's growth engine. And the bullish outlook for natural resources in particular is predicated on the assumption that China's booming economic expansion is fueling huge demand for coal, copper and just about every other commodity you can think of.

Any serious signs of deceleration (like we saw in 2008) could trigger a swift selloff. And inflation is the one roadblock that could prompt Beijing to deliberately step on the brakes.

Thanks in part to bold stimulus initiatives (and the stubborn refusal to let the yuan appreciate), prices have been on the rise, particularly in overheated real estate markets such as Shanghai. But we're not just talking about property. Overall consumer inflation rates have remained above the government's safety zone for nine straight months, touching 5.2% in March and 5.4% for the first quarter.

In response, the central bank has cut off the loose credit spigot. Bank reserve requirements have been tightened six times during the past six months, and interest rates were just hiked for the fourth time.

Those moves won't automatically bring this locomotive to a screeching halt -- gross domestic product (GDP) still surged 9.7% this quarter. But any cool-down will be met with a hostile reception from investors. With that in mind, I'll be watching diligently for signs that China's inflation-fighting tactics are blunting growth, but the train still seems to be chugging down the tracks.

And as long as China remains growing and hungry for natural resources, there are profits to be made. Especially in copper, a key building block for any rapidly growing economy. Copper wiring, for example, is essential in plumbing, power transmission, electrical circuitry and endless other applications. There's no arguing that demand is on the rise. Prices on the London Metal Exchange recently touched $10,100 per ton -- a new all-time peak.

And I think copper prices will move higher...

A few weeks ago, about 500 delegates representing mining companies near and far gathered in Santiago, Chile, for the 10th annual World Copper Conference came to the same conclusion: They won't be able to meet the world's demand for copper this year.

> I expect copper inventories to dwindle and prices to ascend further into record territory, possibly breaching $11,000 per ton. One of my top pick to tap into this supply/demand imbalance in Scarcity & Real Wealth is Freeport-McMoRan Copper & Gold (NYSE: FCX). The company (which mines 4 billion pounds annually) rakes in $260 million in incremental operating cash flows for every $0.10 increase in copper prices.

GTSI: U.S. Suspends Contract Awards; Eyak Drops Bid; Stk Off

Eyak Technology this morning said it has withdrawn its $7.50 a share bid for government IT services provider GTSI (GTSI).

Eyak indicated in a statement that GTSI said in a letter that it was not interested in pursuing the proposal; the company also noted that late Friday GTSI announced that the U.S. Small Business Administration has suspended GTSI from any future contract awards with the federal government.

Eyaksaid it is “withdrawing its proposal to acquire GTSI in order to carefully evaluate the effect of the SBA’s action upon GTSI.”

GTSI this morning is down $2.90, or 40%, to $4.35.

Forget Citi & BofA, Some Banks Are Rising Post-Earnings

Much of today’s focus is — understandably — on the disappointing fourth-quarter earnings of Bank of America (BAC) and Citigroup (C); investors haven’t taken too kindly to either and both banks’ shares are down about 3%.

But the sector saw other quarterly results today, and those told a different tale:

PNC Financial Services (PNC) saw its fourth-quarter profit jump 51%, albeit its per-share figure came in below analysts estimates. But the bank reported a 6% (annualized) loan growth, and a 15% rise in total revenue. PNC’s stock is up about 3.5% today and 7% this month.

Fifth Third Bancorp (FITB) also reported a steep rise in profits, up 27%, and beat consensus estimates as revenue rose 21% thanks in part to growth in its commercial and industrial loan business.�Shares are up more than 4.5% today and 10% this month.

Huntingdon Bancshares (HBAN) stock is up about 3.7% after it also beat the average of Wall Street estimates, reporting a 32% growth in earnings thanks to improved net interest margins and lower loan loss provisions. Revenue at the Columbus, Ohio, bank rose 14%, and it also reported improving net charge-offs. Huntingdon’s stock is up 3.8% at the latest, and has risen 10.6% in January.

Good Jobless, Housing Data, But A Long Way To Go

BloombergHow good, really?

Stocks are enjoying a fairly good day so far, and reports are attributing much of that to positive economic news that came out today. Particularly good are the 12.1% jump in housing starts last month and the largest weekly drop in seasonally-adjusted new jobless claims since February 2010.

In both cases, the figures are multi-year highs, with the seasonally adjusted annual rate of housing starts at 954,000, its highest level since July 2008, and the initial claims of 335,000 the lowest level since January 2008.

That fits with the broader sense of an improving economy, which in turn should feed into a better picture for the stock market — particularly as Standard & Poor’s 500 index companies increasingly need higher revenues to achieve earnings growth.

But as with many things about our stuttering economic recovery, the picture isn’t entirely rosy and certainly suggests we’re well off what one could call a healthy economy.

To start with jobless claims, while the data is heartening, the chart below shows that we’ve had sizable one-week drops in recent months only to see the number rise again in the following week(s).

(Click on the image for a larger version.)

And there’s another reason to not pop the champagne just yet:

While last week’s decline ended four straight weeks of increases, it may not signal a material shift in labor market conditions as claims tend to be very volatile around this time of the year.

This is because of large swings in the model used by the department to iron out seasonal fluctuations.

As for housing, the growth rates are impressive — and likely helping particular stocks such as PulteGroup (PHM), up 6% today — but big picture is depressing, as Sarah Portlock and Alan Zibel at WSJ explain:

Compared with a year ago, new-home construction was up 36.9%. For all of 2012, 780,000 new homes were started, the most since 2008.

Nevertheless, housing starts are still below historical levels. Builders have started construction on an average of 1.5 million new homes a year since 1959.

So even with a big jump, last year’s level was only about half the average seen over the past 50-plus years — and as John Shipman notes, last year’s figure was 23% lower than the worst pre-financial crisis year, 1991, since 1959.

QLogic: J.P. Morgan Boosts Rating; Downgrades Emulex

J.P. Morgan analyst Mark Moskowitz this morning flip-flopped his ratings on the host-bus adapter plays, moving to Neutral from Underweight on QLogic (QLGC), while shifting Emulex (ELX) to Underweight from Neutral.

“While consensus estimates on both stocks likely face one more downward reset, we think the stocks have adjusted for more bad news,” he writes in a research note. But he adds that comparing the two, there is less execution and market risk at QLGC than ELX over the next 12 months.� “While we are cautious on HBAs, if investors seek exposure to the group, then we recommend QLogic,” he writes.

He cut estimates today for both companies.

In today’s trading:

• QLGC is down 26 cents, or 1.5%, to $17.38.
• ELX is down 28 cents, or 2.7%, to $10.16.

Schlumberger Gains 4% – Time to Cash Out?

Shares of oil service company Schlumberger (SLB) are up 4% this afternoon, after it reported fourth-quarter earnings that did better than expected after the gloomy guidance it provided just one month ago.

At least one analyst liked what he saw, with James Crandell at Dahlman Rose reiterating his Buy rating and $92 target for the stock:

We believe that the SLB earnings release has modestly positive implications for the stock. In a challenging quarter for oil service companies, once again Schlumberger is clearly differentiating itself…We think the most important takeaway from the results is the outperformance of the Gulf of Mexico, which was able to offset weakness elsewhere in North America.

On a technical level Schlumberger’s stock is attractive, even after it outperformed its sector by registering an 8% gain in the past year (versus 4% for its industry) — it’s trading at 16.4 times forward earnings, well below its 10-year median level of 21.2. (All data from Thomson Reuters, as of yesterday’s close.) And yesterday it announced a hike in its quarterly dividend, to 31.25 cents a share, the largest increase in two years.

But could it be time to take a profit? Michael Purves, chief global strategist at Weeden & Co. this morning told investors to cash out of the stock “and wait for re-entry points.” His logic? This chart:

(Click on image for larger version.)

That of course is for the traders among you, rather than the more buy-and-hold inclined investor. But the chart above does illustrate how volatile Schlumberger’s stock, which trend to track with swings in oil prices, has been — it was at about $60 as recently as June. If nothing else, it could be a stock that’s useful for both long- and short-term investors.

Stock Futures Slip as Euro Pressured

The Euro slipped on Wednesday after a Fitch Ratings official said the European Central bank has to do more to help Italy and other countries. Weakness in Europe spread to U.S. markets early, and futures slipped. Investors are also waiting for the Fed to release its Beige Book outlining the economy’s strengths and weaknesses. The Euro fell near its 16-month low against the dollar.

Dow futures fell 30 points to 12,360; S&P 500 futures fell 3.7 points to 1,282.

Supermarket chain Supervalu (SVU) fell 6.7% in pre-market trading on disappointing earnings. Urban Outfitters (URBN) fell 17% after its CEO resigned. Crocs (CROX) rose 5.8% as the company raised its fourth quarter revenue estimate.

Improving Consumer Spending Offers Upside For Williams-Sonoma

Early last decade, you couldn't change the channel on TV without coming across a design show. Credit was easy, unemployment was low and everyone was eager to update the look and feel of their homes. But recession changed our attitudes, and millions of Americans hunkered down, deciding to make do with their furniture and linens.

The trend toward domestic austerity hasn't faded. But, there are signs spending on the home is on the rise. In November, furniture imports increased 5%, driving containerized imports to their highest year over year gain since May. In the same month, consumer credit ramped by $20 billion from October, marking the single largest monthly gain since the end of 2001. In all, holiday spending increased by 3.5% from 2010.

In short, people started spending again, albeit timidly. This is good news for home decor stocks including Ethan Allen (ETH), Pier One (PIR) and Williams-Sonoma (WSM), which make their money selling to design-conscious shoppers.

At Williams-Sonoma, spending growth on home items offers opportunity, particularly if it kick-starts its namesake kitchenware brand, which grew an unimpressive 0.1% in Q3 year-over-year. This segment has been weighing down growth at its West Elm and Pottery Barn Teen brands. Results for the brands were nothing less than impressive in the third quarter, when West Elm comparable sales rose 27%, and PBteen's comparable sales increased 18.1%. If Williams-Sonoma can remove the overhang from its kitchenware segment, earnings will grow handsomely.

Williams-Sonoma successfully navigated the downturn by aggressively shifting sales to higher-margin e-commerce and away from costly retail storefronts. The move paid off with 9-month direct-to-consumer segment sales hitting $1.01 billion in 2011, up from $986 million in 2010. It's e-commerce sales were particularly strong, increasing 14.6% in Q3. For comparison, U.S. non store retail sales increased 12.5% in the three months ending November.

This online growth increased e-commerce to 87% of Williams-Sonoma's direct sales. This shift allowed the company to cut costly catalog circulation, adding additional margin support. In Q3, Williams-Sonoma shipped 7.7% fewer catalogs and 3.3% less catalogs year to date. The company also shrank the size of its catalogs, with pages circulated dropping 8.8% and 3.5% for those same periods, respectively. This helped cost of goods drop to 61.8% from 62.4% year-to-date and SG&A fall to 30.7% from 31.6%.

Exiting the recession, the company took the painful and necessary step of shuttering non-performing stores. As a result, its leased square footage fell 4% from 2010. While a drop in square footage typically acts as a growth headwind, the company's retail comparable brand sales still climbed 6.3% and retail revenue rose 3.6% year-over-year in Q3. This suggests the company closed the right stores and succeeded in shifting affected customers to its direct channel.

If housing starts continue to improve and unemployment continues to drop, look for consumers to unlock some of their pent-up demand for updating homes. Given a leaner cost structure thanks to its online stores, a solid balance sheet and improving spending trends, the company offers shareholders an opportunity for upside.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in ETH, PIR, WSM over the next 72 hours.

Microsoft: Windows Likely Weak For Full Fiscal Year, Says Goldman

Goldman Sachs’s Heather Bellini tries this morning to “piece together the Windows puzzle” for Microsoft’s (MSFT) fiscal Q2 that ended in December, which is now expected to be not as good as anyone had hoped as a result of the company’s disclosure on Tuesday evening that PC growth was weak in December.

Microsoft reports results a week from today, and Bellini is modeling $20.8 billion in revenue and 75 cents EPS, and she had warned yesterday that estimates might at this point be too high.

Today, Bellini opines that the full-year results for Windows sales are going to be weaker for Microsoft than she’d previously thought.

For Q3 fiscal 2012 and for fiscal 2012 (ending June) we remain below consensus. We see Street expectations pulling back based on December quarter results combined with our checks that point to soft demand throughout Europe (ex-Germany) and conservative corporate budgets for 2012. Continued weakness in PC shipments arising from the Thailand floods would also impact Windows results in the March 2012 quarter.

Bellini maintains a Neutral rating on shares of Microsoft and a $29 price target.

Microsoft stock today is up 9 cents at $27.81.

Top Stocks To Buy For 1/17/2013-4

Credicorp Ltd. (USA) (NYSE:BAP) witnessed volume of 5.18 million shares during last trade however it holds an average trading capacity of 745,637.00 shares. BAP last trade opened at $89.33 reached intraday low of $81.76 and went -18.81% down to close at $82.55.

BAP has a market capitalization $6.55 billion and an enterprise value at $6.82 billion. Trailing twelve months price to sales ratio of the stock was 4.14 while price to book ratio in most recent quarter was 2.88. In profitability ratios, net profit margin in past twelve months appeared at 31.92% whereas operating profit margin for the same period at 42.76%.

The company made a return on asset of 2.46% in past twelve months and return on equity of 24.42% for similar period. In the period of trailing 12 months it generated revenue amounted to $1.95 billion gaining $24.54 revenue per share. Its year over year, quarterly growth of revenue was 28.60% holding 41.30% quarterly earnings growth.

According to preceding quarter balance sheet results, the company had $7.16 billion cash in hand making cash per share at 90.23. The total of $5.91 billion debt was there putting and book value per share was 35.31.

Looking at the trading information, the stock price history displayed that its S&P500 52 Week Change illustrated 22.44% where the stock price exhibited down beat from its 50 day moving average with $98.55 and remained below from its 200 Day Moving Average with $107.39.

BAP holds 79.33 million outstanding shares with 46.97 million floating shares where insider possessed 23.53% and institutions kept 44.00%.

AAPL: Production Cuts About Move to IGZO, Not Demand, Says Global Equities

Trip Chowdhry of Global Equities Research today writes that the worries about rumored supply-chain cuts in Apple‘s (AAPL) iPhone production are overdone because the cuts pertain to a change of technology, not a change in demand patterns, in his opinion.

Chowdry, reiterating an Overweight rating on Apple shares and a $650 price target, argues Apple has been shifting from using traditional displays to instead use the emerging technology “IGZO,” a compound semiconductor made up of indium, gallium, and zinc-oxide.

Sharp Electronics (6753JP), the pioneer in the technology, talked about it extensively last week at the Consumer Electronics Show in Las Vegas. At its booth at the convention center, the company showed off some first IGZO-based smartphones, which are selling solely in Japan at the moment. They did, indeed, have lovely displays, based on my casual examination of the phones. Sharp reps suggest such devices get days of standby despite greater brightness and resolution, thanks to lower battery use.

Chowdhry is convinced by what he saw at CES, and other trade-show events, that Apple is in fact moving to IGZO:

We attended various display conferences last year and the Consumer Electronics Show (CES) 2013 last week. Based on our discussions with technologists at these conferences, here is the converged view we got: Apple cut LCD orders by 40% to 80% not because the demand has declined by 40% to 80% but probably because Apple is shifting to IGZO (Indium Gallium Zinc Oxide) display techology; IGZO is ideal for large TV panels; IGZO is also ideal for flexible displays such as in the new iPhones, iPads and MacBooks; IGZO has 40 times faster response time than today’s LCD TVs.

Apple, notes Chowdhry, had already switched its devices from traditional “amorphous-silicon” technology used in conventional displays of the organic LED (OLED) and LED-backlit type, to something called “low-temperature poly-silicon,” or LTPS, which has much higher “carrier mobility” of electrons, making feasible sharper, faster displays. However, “LTPS is very expensive because it requires additional manufacturing steps, it is difficult to achieve film uniformity in large panels (hence, sizes of LTPS panels do not exceed 3 square meters), and also the manufacturing yields are low.”

IGZO, writes Chowdhry, will solve all that for Apple, most importantly because it’s simpler to make, but it will also allow Apple to produce devices with “flexible,” meaning bendable, displays, as “the deposition happens at room temperature” in the IGZO manufacturing process.

Chowdhry opines that along with benefits to Apple, use of IGZO will help Sharp itself, and also Applied Materials (AMAT) and Corning (GLW).

Apple shares today are up $23.15, or almost 5%, at $509.07.

Facebook Privacy: 3 Features You Can Use to Avoid Oversharing

If last month's notorious Instagram privacy brouhahashould have taught us anything, it was this: People who subscribe to free social media services aren't the customers. They're the products.

Social media companies such as Instagram, and its parent, Facebook (FB), have to make their money somewhere -- and their strategy often involves collecting as much user data as possible so they can provide the targeted advertising that businesses covet. In effect, they sell businesses access to you.

To succeed, these companies must maintain a critical mass of users, which in turn requires them to offer user settings that meet the privacy standards held by most target users. Still, while Facebook users can chose their settings to maintain a measure of privacy, these options only benefit those who periodically review the site's policies, and adjust their privacy settings to suit themselves.

With that in mind, let's take a look at three Facebook privacy features you should know about, as well as tips for adjusting your settings to retain as much privacy as possible.

1. "Like" Discreetly: How to Stop Companies from Using You to Spread Ads

Suppose you "like" Target (TGT) on Facebook. Now that the company has your endorsement, it can bolster advertisements posted on your friends' Facebook pages by pairing them with the announcement that you "like" Target. This personal endorsement is one of the best ways to get your friends to buy there.

If you don't want businesses to use your endorsements when advertising to friends, edit your social ads setting:

Navigate to "Privacy Settings," found by clicking on the gear icon in the top right corner of your Facebook page

Click on "Ads," found in the left-hand column of the privacy settings page.

Click the edit link next to "Ads & Friends."

At the bottom of the page, click on the box located next to the words "Pair my social actions with ads for," select "No One," and save your changes.

2. Tag! You're It: How to Prevent Friends from Oversharing About You

Suppose a Facebook friend posts an embarrassing photo of you and links it to your profile by tagging you in it. While you can decide whether that photo appears in your timeline, this embarrassing photo is now viewable to all of your Facebook friends, the friends of the person who posted it, and the friends of everyone else tagged in the photo through the News Feed and search function.

If you're not happy with what your "friends" are linking to your profile, your options are limited. In such cases, Facebook recommends that you "reach out" to your friends and ask them not to tag you. If that doesn't work, Facebook provides you with the option of blocking problematic individuals to prevent them from tagging you in the future.

3. Just a Suggestion: Turn Off Facebook "Suggestions"

Not only does Facebook allow your friends to tag you in embarrassing photos, they sometimes also recommend that they do so through the "tag suggestion" feature. This feature detects photos that look like you and uses this information to generate suggestions about which photos your friends should tag you in.

You can disable this feature by clicking on the "Timeline and Tagging" link found in the left-hand column of the privacy settings page. Near the bottom of the page, you can click on the edit button next to the question, "Who sees tag suggestions when photos that look like you are uploaded?" and select "No One."

Monitor Your Account
If you're not sure whether you can trust your Facebook friends to avoid oversharing, closely monitor your account so you can catch and respond to problematic friend activity early.

One monitoring strategy includes adjusting your notification settings so you receive a text message whenever your friends tag you in a photo or post something on your wall. To do this, click on the "Notifications" link found in the left-hand column of the privacy settings page. Once there, you can decide what notifications you get and how you're notified, and edit accordingly.

The bottom line is that users should exercise common sense. It's important to remember that once your information is out there -- especially in the digital world -- it's hard to control where it goes. The safest route is to avoid posting any information that you're uncomfortable making public, and to only "friend" people you can trust to respect your boundaries. Barring that, users would do well to select conservative privacy settings and keep a close eye on their accounts.


Related Articles

• Looking Back at 2012's Big Tech Predictions: Is Privacy Dead?
• Facebook's Instagram Backpedals. Is the Damage Already Done?
• Want to Protect Your Online Privacy? Too Late

Motley Fool Contributor M. Joy Hayes is the Principal at ethics consulting firm Courageous Ethics. Joy has no position in any stocks mentioned. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook.


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Dow Up 2% on Q1 Beat; Volume and Price Rebound

Shares of Dow Chemical (DOW) are up 78 cents, or 2.5%, at $30.83 after the company this morning beat Q1 revenue estimates by half a billion dollars and blew away on the bottom.

Q1 revenue rose almost 49%, year over ear, to $13.42 billion versus the $12.93 billion estimate, yielding profit per share of 43 cents versus the 30-cent average estimate and a big improvement over a 3-cent profit a year earlier.

Sales included a 27% rise in North America and a 35% rise in Europe, the Middle East, and Africa. Volume was up 16%, but the company also achieved a 17% rise in price worldwide.

North America saw volume growth of 11%, which paled in comparison to 46% growth in China.

Sales of basic plastics led the rise with a 49% increase, while performance prducts, such as epoxies and solvents, rose 41%. Electronic and specialty materials saw a 30% increase, while coatings and infrastructure business was up 21% and health and agriculture products declined.

Demand has returned to developed markets, said chair and CEO Andrew Liveris.

The company did not offer a forecast, but it will hold a conference call at 10 am, which you can listen to here.

Top Stocks For 1/17/2013-5

 

Host Hotels & Resorts Inc. (NYSE:HST) announced that its board of directors authorized a regular quarterly cash dividend of $0.01 per share on the Company�s common stock. The dividend is payable on January 18, 2011 to stockholders of record on December 31, 2010. Host Hotels & Resorts, Inc. is an S&P 500 and Fortune 500 company and is the largest lodging real estate investment trust and one of the largest owners of luxury and upper upscale hotels. The Company currently owns 104 properties in the United States and nine international properties totaling approximately 62,000 rooms. The Company also holds a non-controlling interest in a joint venture that owns 11 hotels in Europe with approximately 3,500 rooms and a second joint venture in Asia that is developing seven properties in India with approximately 1,750 rooms. Guided by a disciplined approach to capital allocation and aggressive asset management, the Company partners with premium brands such as Marriott�, Ritz-Carlton�, Westin�, Sheraton�, W�, St.

Host Hotels & Resorts, Inc. is a publicly owned real estate investment trust (REIT). The firm primarily engages in the ownership and operation of hotel properties. It invests in the real estate markets of United States. It also invests in Canada, Mexico, Chile, the United Kingdom, Italy, Spain, and Poland.

Weyerhaeuser Co. (NYSE:WY) announced the dividend guidance its board of directors is providing for 2011. Weyerhaeuser anticipates paying a quarterly dividend of 15 cents per share, or 60 cents per share on an annualized basis, with the first dividend payment expected to occur in March 2011. The board will determine and declare the actual dividend on a quarterly basis. �This action establishes a dividend that is attractive to shareholders � one that is sustainable and those we expect to grow over time,� said Dan Fulton, president and chief executive officer. �We do not anticipate significant improvement in the housing market in 2011,� Fulton said. �While there is significant near term uncertainty, the longer-term outlook remains positive as we expect improved macroeconomic conditions and housing starts to return to trend levels.

Weyerhaeuser Company grows and harvests trees, builds homes, and manufactures forest products worldwide. The company manages approximately 6.6 million acres of private commercial forestland; and has renewable long-term licenses on 15.2 million acres of forestland.

Collective Brands, Inc. (NYSE:PSS) announced a three-year endorsement agreement with former football great Herschel Walker. Recognized as the performance category pioneer in both MMA and amateur wrestling, Clinch Gear is also represented by established MMA superstars Dan Henderson, Fedor Emelianenko and Cung Le, among others.�Herschel Walker is an ideal partner for our brand,� commented CEO Bruce Pettet, CEO of Collective Licensing International, which owns the Clinch Gear brand. �His dedication, hard work and incredible accomplishments have clearly established him as one of America�s ultimate performance athletes.

Collective Brands, Inc. primarily engages in the wholesale and retail of footwear and related accessories worldwide. Its Payless ShoeSource stores offer footwear, including athletic, casual and dress shoes, sandals, work and fashion boots, slippers, and accessories, such as handbags, jewelry, and hosiery for women, children, and men.

Earnings Season: Gloom and Doom, or Not?

Chris Burritt writes that this earnings season is shaping up to be, well, not so good:

Intel (INTC), the world�s largest semiconductor maker, is poised to report its biggest quarterly earnings drop in 3 1/2 years this week, based on analysts� estimates compiled by Bloomberg. General Electric (GE), the maker of jet engines and electrical generation equipment, may post its slowest profit growth in three quarters.

The results would contribute to a predicted 2.5 percent increase in fourth-quarter earnings for the Standard & Poor�s 500 Index (SPY), the second-worst showing since 2009. Without a bump from financial companies that have cut jobs, the gain would be lower at 0.4 percent.

Those are pretty poor figures — but how important are they?

We’ve seen other bits of good economic news recently, from car sales to consumer spending, and the unemployment picture is improving, albeit slowly.

My colleague Kopin Tan penned a smart piece in this week’s Barron’s in which he argues that even a poor earnings season won’t be enough to derail the stock market. He notes the broad nature of stocks’ recent climb (which I wrote about in more detail yesterday), relief over a clearer fiscal picture and the continuing aggression of central banks as reasons to think investors won’t baulk if quarterly earnings disappoint.

It’s not easy to say if the seemingly new-found confidence in stocks would survive a weak earnings season, but it’s at least worth realizing that bad results won’t necessarily mean a market drop.

SAP Sags on Q4 Preview; Investment in Cloud the Question, Says Nomura

Shares of SAP AG (SAP) are down $3.54, or 4.3%, at $78.34, after the company this morning reported preliminary Q4 results that surpassed its own projections but missed consensus estimates.

Revenue in the three months ending in December is estimated to have been �5.02 billion, up 9% on an IFRS basis (the equivalent of U.S. GAAP), and �5.06 billion on a non-IFRS basis. Operating profit came in at �1.59 billion, or �1.96 billion on a non-IFRS basis.

Analysts had been estimating �5.13 billion and �1.95 billion, in non-IFRS terms, respectively.

Nomura Equity Research’s Rick Sherlund, who has a Buy rating on the ordinary shares, and a �68 price target, this morning points out that software license revenue of �1.94 billion was better than the �1.92 billion he had been projecting, while “software and software-related services” revenue of �4.27 billion was below his �4.3 billion estimate.

Sherlund notes, too, that the company’s “Hana” in-memory database product had a “good quarter,” with revenue of �194 million, a lot more than the �140 million he had been projecting. SAP has been selling the database to some accounts in competition with�Oracle�(ORCL).

Growth was good in Asia Pacific, he notes, at 22%, but an “incrementally challenging environment in the U.S.”

Sherlund expects the company to issue its outlook when it reports full results on January 23rd. He thinks the main issue at the moment is how much the company can invest in its products for cloud computing and hosted applications:

We believe that there may be some conflict internally over the appropriate level of investment in the newly acquires SaaS businesses, having to balance its own margin targets against the desire to spend aggressively from its SaaS properties. We have modeled 50bps of margin expansion in 2103, below the Street at 80bps, to try and reflect what may be a desire to spend more heavily near term. SAP has an easy year-over-year comparison upcoming in Q1 and more challenging comparison for Q2 and Q3.

Germany Is Bringing Home the Gold: 1,950 Tons of It

(Updated: 3:58 p.m.)
By JUERGEN BAETZ

BERLIN -- Germany's central bank will repatriate some of its massive gold reserves stored in vaults in the United States and in France, a business daily reported Tuesday.

The Bundesbank's overall reserves of 3,400 tons are worth about $200 billion at current market rates.

The central bank now plans to bring back to Germany some of the 1,500 tons of gold stored in the vaults of the Federal Reserve in New York, and all of the 450 tons currently stashed with the Bank of France in Paris, according to Handelsblatt.

The central bank declined to comment on the report but on Wednesday will present a new plan to manage the gold reserves of 270,000 gold bars, the world's second-largest stockpile, trailing only the U.S. reserves.

Most of Germany's reserves have been stored abroad since the Cold War over fears of a Soviet invasion.

But the central bank came under pressure last year when Germany's independent Federal Auditors' Office last year concluded it failed to properly oversee its gold reserves. The auditor suggested the central bank should carry out regular inspections of the gold held abroad to verify its book value or change the reserves' management.

The auditors' report stunned Germany, where the Bundesbank routinely tops polls of the nation's most trusted institutions. The central bank was taken aback and maintained it didn't see the need for more scrutiny in overseeing the reserves, saying "there is no doubt about the integrity of the foreign storage sites."

But the debate on the gold reserves, most of which are held by foreign authorities, caused some inevitable conspiracy theories questioning their very existence. Several politicians then jumped on the issue and called for some of the reserves to be repatriated.

Since the postwar days, when Germany worried about a possible land war with the Soviet bloc, most of the reserves have been kept in the vaults abroad. Just under half of them are now stored in New York, a little more than 10 percent each in London and Paris, with the remaining third kept in vaults at the Bundesbank's headquarters in Frankfurt.

Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Sexy Matador Fights Pork Chops in New Target Ad

Target is promoting its grocery offerings with a new series of TV ads featuring, among other oddities, a sexy matador dueling with various packaged meats.

The commercials evoke the world of high fashion, showing models using grocery items in strange ways. In one of the ads, a pregnant woman tears open snack-food packages in a craving-induced fury, at one point showering herself with pickle juice. In another, a stiletto-wearing model strides among exploding boxes of cake mix, imploring viewers to "dominate that PTA bake sale."

Here's one of the Target ads:



Target (TGT) isn't running these ads just to make you feel weird feelings about pork chops and laundry detergent. Rather, it's part of a marketing push by the discount retailer to turn customers' focus to its grocery aisle -- and in so doing challenge Walmart (WMT), which has significantly expanded its grocery and fresh food business.

Target says that the campaign will ultimately encompass eight TV spots, three radio ads and digital short films that will run as banner ads. You can see the four ads released so far over at Target's YouTube page.

[UPDATE: Target has released four more TV spots, including one featuring a baby wipe-slinging cowgirl. You can check them out at AdWeek's AdFreak blog.]

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.

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Four leading indicators of a market top

MARKETWATCH FRONT PAGE

The bull market is on shaky ground, according to four leading indicators of major market tops. See full story.

How to channel your inner Warren Buffett

Imagine getting a phone call from a CEO you know casually, offering to sell you his publicly traded company at what seems like a low price. Thinking like Warren Buffett, what would you say? Hedge fund manager Soo Chuen Tan has some suggestions. See full story.

The rising cost of travel-card rewards

Travel rewards are getting more generous � but with strings attached See full story.

Why you can�t avoid dumb 401(k) mistakes

The folks responsible for picking the mutual funds for your 401(k) are apparently making the same dumb mistakes that average investors make�they�re chasing hot funds, too. See full story.

U.S. stocks drop as big banks report results

U.S. stocks mostly on the decline, as Wall Street considers corporate results handed in by J.P. Morgan Chase and Goldman Sachs, among others. See full story.

MARKETWATCH PERSONAL FINANCE

The site�s new search engine is tailor made for matchmaking. See full story.

Why The Market Is Still Wrong About RIM

Looking at the chart below, you could probably conclude at least one of two things: either Research in Motion (RIMM) is in complete disarray, or the market’s irrational exuberance of late 2008 is currently being complemented by a period of investor apathy.

Click to enlarge images

Source: Bloomberg

I would argue that there is truth to both theories, but in the end, RIM is a solid buy at current market prices because of the usually cited and sometimes ignored reasons, mainly:

• Solid earnings
• New QNX software coming to market
• Smartphone of choice for the business professional
• Smartphone market is growing
• Potential takeover target

But that is not enough for most investors. For several years now, there has existed an inverse relationship between the street’s valuation of RIM and reality. Since August 2008, RIM’s stock price has crashed, recovered somewhat, traded sideways, and crashed again – with seemingly no end in sight. The reality has been an altogether different matter, however, as RIM’s earnings have grown every year for the past 10 years. On a cash basis, the story is similar as there has been steady growth in the firm’s annual cash flow over that same period. RIM’s financial statements are so clean and easy to understand that it does not require a sophisticated investor to read them. Every dollar of revenue follows straight through to the bottom line. In the fiscal year 2011, RIM posted its biggest year to date with earnings of $3.4 billion, or $6.36 per share. Yet even as the company continued to perform and grow, there appeared to be a disconnect between those results and the stock price.

Source: Research in Motion

So what’s the problem? The Smartphone market has exploded, which in turn has attracted new entrants to the industry. Apple’s (AAPL) iphone has proven to be an exceptional product and has turned that company into the world’s largest. New Android devices are also becoming extremely popular and RIM is being squeezed. Revenue from last quarter (second quarter of fiscal 2012) [see transcript] was $4.2 billion, down 17% from the quarter previous and 9% from the same quarter in 2010. The reason for this decrease is twofold. First, sales for RIM’s hardware devices significantly fell off pace; and second, the hardware devices that were sold tended to be lower end models.

There is a saying in sports that you’re only as good as your last game. For RIM, it would appear you’re only as good as your last fiscal quarter. The company has not been able to match the growth it enjoyed during the mid 2000s, which has resulted in missed targets. The demise of RIM, however, started well before RIM’s recent faltering when the company was performing admirably. No investor wants to own the next Nokia (NOK), and many are quick to draw comparisons between the two companies. But RIM is not Nokia, and it is not the growth stock it once was. But that does not mean it’s not worth owning at current market prices.

RIM will continue to generate large amounts of cash into the foreseeable future. Even if the company continues to lose market share to the iPhone and other Android devices, the size of the market is growing. RIM is currently trading at about 4 times earnings which is unprecedented in the company's history. There is value in this company, and the reasons noted above for owning RIM are all true. The market was wrong when it valued RIM at $150 per share in June of 2008, and it is wrong now valuing it at $22 per share.

Disclosure: I am long RIMM.

News Corp. Stock Faces Uncertainty as More Scandals Emerge

By Rani Chopra

In light of the recent phone hacking scandal and the subsequent shutdown of UK's News of the World, Rupert Murdoch’s News Corp (NWS) has faced a whirlwind of criticism and outrage over the past few weeks.

As the details of the scandal got murkier the stock began to tumble and within a matter of days, News Corp. lost more than $8 billion of market cap. The company also faces a potential credit downgrade from S&P, which has placed News Corp on its CreditWatch list. The number of civil litigation suits that News Corp. faces is steadily on the rise since the phone hacking scandal.

As investors began selling the stock, News Corp shares lost 15% of their value since the scandal broke. Adding to the damage was news that the company withdrew its bid to acquire the remaining shares of British Sky Broadcasting (BSYBY.PK). In an attempt to stabilize share prices the company announced a share repurchase program.

(Click charts to enlarge)



The company has some tough times ahead as management has to testify before the British Parliament and face interrogation over misconduct and unlawful phone taps. As advertisers shunned the paper, Murdoch had no choice but to shut down the 168-year-old News of the World.

The phone hacking scandal is not something that will fade away anytime soon, in fact it is spreading as more and more secrets are coming to the forefront. The media conglomerate is worth a lot less on paper since the scandal became front page news.

Shareholders have raised concerns over the company’s direction when News Corp sold My Space for $35 million earlier this year; an acquisition that cost the company $580 million in 2005.

A scandal like this that comes out of nowhere can severely impact an investor’s portfolio. Corporate governance is questioned and the need for an independent board is critical. However, steps taken to avoid such scandals cannot return shareholder wealth that gets wiped out in a matter of days.

Investors who invest in equities need to mitigate risks and manage their portfolios in order to diversify their investments to get maximum returns at the lowest level of risk. Holders of NWS shares saw a major drop in their holdings as the stock began a downward slide since July 11.

SmartStops users received an exit trigger on July 8, and once again on July 11, indicating that the stock had abnormal risk and were advised to review their investment and take the necessary action to protect their portfolio. The reentry value was set to $18.28 wherein the equity would have normal risk profile.



This is critical for investors who have a large amount invested in NWS as price drops of 15% can seriously impact an investor’s position. Investors who may have followed our risk alert and used it to balance their investments would have gone on to save $1.32 per share in the current scenario as shares continued to decline over the last two weeks and are nowhere near their pre-scandal value.

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

9 Key Points About PowerShares Active AlphaQ Fund

ETF: PowerShares Active AlphaQ Fund

Date Launched: April 11, 2008

Links: Website, Factsheet, Prospectus

Investment Strategy

PQY is an actively-managed ETF that invests at least 95% of its assets in 50 Nasdaq-listed securities based on a methodology which involves rating companies with market caps greater than $500 million and ranking them using AER Advisors’ proprietary “NOW” ranking system based on earnings growth, valuations and money flow. The portfolio managers then narrow their universe down to the 100 largest Nasdaq-listed Global Market Securities and then go on to hold 50 of those stocks. The goal of the fund is to achieve long-term capital appreciation and outperform the Nasdaq 100 Index.

Portfolio Managers

David O’Leary, AER Advisors Inc.: Mr. O’Leary has served as Chairman and Chief Executive Officer of Alpha Equity Research for the past 14 years, as well as the Chairman and Chief Investment Officer of AER Advisors. David has been in the investment business for more than 35 years.

The Numbers

Expense Ratio: 0.75%

Average Bid-Ask Ratio: 0.24%

Average Volume: 2,087 shares

What’s special about it?

1. PQY was one of the four Active ETFs launched by PowerShares on April 11, 2008 that were the first Active ETFs on the market, that still live on. (The very first launch was by Bear Stearns, but that fund went down with the company)

2. PQY is essentially a quant-driven equity fund, and portfolio decisions made by the managers are dependent on the factors that go into the “NOW” model. The fund tries to remain equally weighted, holding 2% in each stock and rebalancing when a position exceeds 3%.

3. While AER performs the ranking methodology process on a weekly basis, the advisors have discretion on when they can perform trades or how frequently they want to refresh the model.

4. You can expect ETF returns to stick very closely to those of the Nasdaq 100 Index, as the correlation between the two is 0.95.

Positives

1. If you believe in quantitative strategies, then this is a good choice, as the fund basically follows quantitative screens.

2. Following its strategy, PQY sticks largely to mid-large cap names, with more than 80% of the fund allocated to large-cap growth and mid-cap growth stocks.

Negatives

1. After its 22-month existence, PQY's market cap is still only a paltry $4.36 million. The lack of investor interest after being on the market for so long is definitely a negative; if it continues, PowerShares may well have to pull PQY off the market. The low daily trading volume doesn’t help it’s cause.

2. Restricting the investment universe to Nasdaq-listed securities will limit the spectrum of opportunities available to the portfolio managers as they exclude stocks trading on other markets.

3. Investing in individual stocks does bring stock-specific risk into play, though holding a portfolio of 50 stocks should reduce that risk significantly.

Performance since inception vs. Nasdaq 100:

Disclosure: No positions

Top Stocks For 12/15/2012-12

Pepco Holdings, Inc. (NYSE:POM) decreased 0.22% to close at $18.18. POM traded 1.98 million shares for the day and its earnings per share remained $0.74. Pepco Holdings, Inc. operates as a diversified energy company. It operates in two divisions, Power Delivery and Competitive Energy. The Power Delivery division engages in the transmission, distribution, and supply of electricity; and the delivery and supply of natural gas. This division owns and operates a network of transmission or distribution facilities comprising wires, substations, and other equipment.

Pinnacle West Capital Corporation (NYSE:PNW) increased 0.19% to close at $41.46. PNW traded 1.96 million shares for the day and its earnings per share remained $2.97. Pinnacle West Capital Corporation, through its subsidiaries, provides retail and wholesale electric services in the State of Arizona. The company involves in the generation, transmission, and distribution of electricity through coal, nuclear, gas and oil, and renewable resources. It also offers energy-related products and services, such as energy master planning, energy use consultation and facility audits, cogeneration analysis and installation.

Edison International (NYSE:EIX) increased 0.21% to close at $38.50. EIX traded 1.79 million shares for the day and its earnings per share remained $3.97. Edison International, through its subsidiaries, engages in the supply of electric energy in central, coastal, and southern California. It involves in developing, acquiring, owning or leasing, operating, and selling energy and capacity from independent power production facilities, as well as conducts hedging and energy trading activities in power markets. The company also invests in energy and infrastructure projects, including power generation, electric transmission and distribution.

EMC Q1 Revs, EPS Beat; Full Year Guidance Raised

EMC (EMC) this morning posted Q1 revenue of $3.9 billion, up 23% from a year ago, and ahead of the Street at $3.71 billion. Non-GAAP EPS of 26 cents a share beat the Street� by two cents.

For the full year, the storage and software giant now sees revenue of $16.5 billion and non-GAAP EPS of $1.18 a share, up from previous guidance of $16 billion and $1.12. The Street has been forecasting $16.04 billion and $1.14.

In a statement, EMC CFO said that the company in the quarter “saw customers move forward with increased confidence, focusing not only on cost cutting initiatives, but beginning new innovative projects in their traditional and virtual data center infrastructures.”

EMC this morning is up 46 cents, or 2.4%, to $19.87.

Note: Item corrected to fix reference to Street EPS expectations.

Your Smartest Money Move for 2012

It's rare that the financial markets give you multiple chances to save money. But as dire as conditions in the housing market have been, the silver lining for many creditworthy borrowers is that refinancing your mortgage can give you fixed rates among the lowest in history -- producing low monthly payments that aren't going to get pulled out from under you down the road.

Big winners, big losers
Unprecedented low interest rates have had a huge impact on borrowers, savers, and financial institutions. For savers, low rates have cut off a major source of income, forcing them to make desperate moves to higher-yielding alternatives like dividend-paying stocks. And for banks, low rates have helped boost net interest income over the longer term, with Wells Fargo (NYSE: WFC  ) , US Bancorp (NYSE: USB  ) , and Canadian/U.S. hybrid Toronto-Dominion (NYSE: TD  ) all posting double-digit percentage gains in net interest income over the past three years.

But for borrowers, the news has been mixed. Some borrowers who are underwater on their mortgages have essentially gotten locked out of the refinancing market, as doing so would require them to pay back tens of thousands of dollars in negative home equity that they don't have. But for others who aren't dealing with owing more than their homes are worth, low interest rates have allowed them to consider either refinancing to create huge savings or trading up to better homes whose prices are at attractively depressed levels.

Just how good are rates?
For the past few years, we've seen mortgage rates repeatedly hit new record lows. Currently, though, 30-year fixed mortgages are under 4% -- meaning that a $200,000 loan would cost just over $950 per month to repay. To put that in perspective, it wasn't that long ago that 30-year mortgages carried rates of 6%, which had homeowners making $1,200 monthly payments.

Those rates may finally be having the impact on the housing market that the Federal Reserve hoped they would have when it cut rates to such low levels. Both PulteGroup (NYSE: PHM  ) and Hovnanian (NYSE: HOV  ) saw their losses narrow in the third quarter, and Beazer Homes (NYSE: BZH  ) and Standard Pacific (NYSE: SPF  ) had huge rises both in new orders and in backlog units. Admittedly, those comparisons come from unusually weak levels, but it's still an encouraging sign.

Weighing the refinancing decision
If refinancing were as simple as just getting your bank to let you make lower interest payments, then everyone would do it. But unfortunately, refinancing often comes with huge closing costs. For instance, you may have to pay mortgage origination fees, typically around 1%, to get a new mortgage. In addition, your bank may require a new appraisal of your home, new title insurance, and another round of other costs such as escrow fees and loan application charges. And if you want the best rates out there, you may have to pay points upfront.

Add up all those costs and they can end up being several thousand dollars. Even if you'd save $250 a month by refinancing, it can take you years to recoup those costs and break even on the deal.

In addition, refinancing involves having to go through the same long, involved process to get a mortgage. And if you originally got your loan during the go-go days of the mid-2000s, you may find that the mortgage process is far more onerous than what you went through back then, because many banks have tightened up on credit standards, and some have upped their standards on the amount and type of documentation you need to get a mortgage.

Make your move
Don't let the hassle of refinancing be an excuse not to do it, though. If the numbers work out to make refinancing a smart option, make it one of your New Year's resolutions to get it done soon. So far, you've been rewarded for waiting, but rates can only go so low before you'll have missed out on the deal of a lifetime.

Dealing with your home is a big part of figuring out how to have a successful financial plan. But you also need to know about one shocking can't-miss truth about your retirement -- and what you can do to address it. Our latest special free report has all the answers, so grab a copy today and find out everything you need to know.

Top Stocks For 2011-12-21-12

KVH Industries Inc. (Nasdaq:KVHI) will announce its financial results for the third quarter that ended September 30, 2011, on Wednesday, October 26, 2011. In conjunction with the release, the company will conduct its investor conference call at 10:30 a.m. ET, hosted by Mr. Martin Kits van Heyningen, chief executive officer, and Mr. Patrick Spratt, chief financial officer.

KVH Industries, Inc. engages in the development, manufacture, and marketing of mobile communication products for the marine, land mobile, and aeronautical markets primarily in North America, Europe, and Asia.

MAJESTIC GOLD CORP (MJGCF.PK)

MAJESTIC GOLD CORP (MJGCF.PK) engages in the exploration and development of mineral properties in China. The company focuses on its gold project located in the prolific gold region of Song Jiagou in eastern Shandong Province. Majestic Gold Corp. is headquartered in Vancouver, Canada.

MAJESTIC GOLD CORP (MJGCF.PK) has arranged a $10,000,000 loan to advance its Song Jiagou project in China. Nine million dollars ($9,000,000) from the proceeds from the loan will be used by the Company to in connection with its Song Jiagou project and the balance of one million dollars ($1,000,000) for general working capital purposes.

The loan will have a one year term and loan principal will be convertible at the option of the lender in whole or in part into common shares (”Shares”) of the Company until twelve months from the date of the loan advance at the price of $0.205 per Share. The loan will bear interest at the rate of 7.5% per annum, payable on maturity, and accrued and unpaid interest will be convertible at the option of the lender in whole or in part into shares of the Company until twelve months from the date of the loan advance at Market Price at the time of conversion.

The lender is at arm’s length from the Company and will not become an insider as a result of any conversion of principal and interest. All shares issued on any conversion of loan principal or interest will be subject to a four month hold period from the date of advance of loan proceeds. The loan is subject to acceptance by the TSX Venture Exchange.

As additional consideration for the loan, the Company has agreed to forward at least $9 million to Majestic Yantai Gold Ltd., a British Virgin Islands company owned 94% by the Company to be used to further advance its Song Jiagou project. The Borrower has also agreed to a 90 day period for reciprocal due diligence reviews and discussions for the possible further involvement of the Lender in the Song Jiagou project.

In the event that no further agreement is reached between the Lender and the Company during the 90 day period, then the loan and a minimum of seven (7) months interest will automatically convert to shares in the Company at a price of $0.205 per share and the interest at Market Price respectively. In addition the Company is pleased to announce that it has arranged a non-brokered private placement of up to 15,000,000 shares to be issued at the price of $0.20 per share for gross proceeds of $3,000,000.

Gold has a lot of great features: it is soft and is easy to shape, it reflects light, and resists rust, and is an excellent conductor of heat and electricity. All these mean it can be used in a lot of different ways.
Gold is so popular for use in electronics because it is highly resistant to corrosion, is easy to work with, and is great for conducting heat and electricity … only silver and copper conduct electricity better, but don’t resist rust or tarnish well. Because it can withstand the effects of time so well, gold is vital in the modern electronics industry, making products we rely on-from mobile phones to credit cards-more reliable.

For more information about MAJESTIC GOLD CORP. visit its website: http://www.majesticgold.net

Lacrosse Footwear Inc. (Nasdaq:BOOT) reported results for the third quarter ended September 24, 2011. For the third quarter of 2011, LaCrosse reported net sales of $35.3 million, compared to $37.7 million in the third quarter of 2010. For the first three quarters of 2011, net sales were $87.5 million, compared to $98.5 million in the same period of 2010. The Company recently announced a new $15.4 million delivery order for the United States Marine Corps which it anticipates fulfilling during the fourth quarter of 2011 and the first quarter of 2012.

LaCrosse Footwear, Inc. engages in the design, development, manufacture, and marketing of footwear for the work and outdoor markets.

Overstock.com Inc. (Nasdaq:OSTK) announced victory in its two-year patent infringement lawsuit with behemoth Alcatel-Lucent USA, Inc. The East Texas jury deliberated for less than two hours before returning a defense verdict.

Overstock.com, Inc. operates as an online retailer offering discount brand, non-brand, and closeout merchandise in the United States.

Pitfalls in Acquiring Mexican Property Via Fideicomiso

A fideicomiso is a legal entity in which prospective foreign land purchasers can acquire an interest in Mexican property that is within a certain distance of a coastline, because direct ownership is prohibited. Buyers need to be aware, however, that U.S. tax laws pertaining to land acquired in this way can be confusing and that claiming and paying for it are paramount in vouchsafing rights to the property and avoiding significant penalties. Since purchasing through a fideicomiso often requires the opening of a Mexican bank account, it is also important that the buyer disclose the holdings in this account for tax purposes in the U.S. For more on this continue reading the following article from JDSupra.

Every time I’m presented with a contract, I’m quickly transported to a small room in which Willy Wonka, played by Gene Wilder, is vehemently scolding the good natured Charlie Bucket and the poor, protective Grandpa Joe:

“Under section 37B of the contract signed by him, it states quite clearly that all offers shall become null and void if — and you can read it for yourself in this photostatic copy — ‘I, the undersigned, shall forfeit all rights, privileges, and licenses herein and herein contained,’ et cetera, et cetera... ‘Fax mentis incendium gloria cultum,’ et cetera, et cetera...

‘Memo bis punitor delicatum’!!! It’s all there, black and white, clear as crystal!! You stole fizzy lifting drinks! You bumped into the ceiling which now has to be washed and sterilized, so you get nothing! You lose! Good day sir!”

I wish all U.S. persons looking to purchase Mexican property through a fideicomiso would remember that scene before doing so, because failing to pay attention to the applicable rules could result in being on the receiving end of a similar rant from someone much less playful than Mr. Wonka.

This article is not intended to discourage U.S. individuals from investing in Mexican property through a fideicomiso. Instead, we wish to provide U.S. individuals a general “heads up” regarding certain issues to consider when owning Mexican property through a fideicomiso. Although the article unavoidably addresses U.S. tax matters, it is directed toward individuals who do not have a tax background. In addition, any U.S. person seeking to own Mexican property through a fideicomiso should consult with their U.S. attorney who will need to either (i) be licensed to practice law in Mexico, or (ii) coordinate the transaction through Mexican legal counsel.

I. General

As many of you already know, Mexican law prohibits U.S. individuals and entities from owning a direct interest in Mexican residential land located within 30 miles of Mexico’s coastline, or within 60 miles of Mexico’s international borders. However, a U.S. individual or entity can own such property indirectly through a Mexican real estate trust known as a fideicomiso.

II. What is a Fideicomiso and Why You Should Care?

Although no one can say with certainty, a fideicomiso has oftentimes been treated by the IRS as a trust for U.S. tax purposes and almost always as a grantor trust. This conclusion stems from the facts that:

• a fideicomiso must have a Mexican person who holds powers and obligations similar to those of a trustee, and
• usually a U.S. individual (i) funds the acquisition of the Mexican property held in the fideicomiso, (ii) has the right to cause the sale of such property, and (iii) is entitled to receive the proceeds from such sale.

However, to date, the IRS has not made a definitive statement on the U.S. tax treatment of fideicomisos. Because the treatment of a fideicomiso as a foreign grantor trust is not well settled, this article also provides food for thought for those readers who believe that a fideicomiso should be treated simply as a foreign trust (but not a foreign grantor trust).[1] Once you label the fideicomiso — whether as a foreign trust or a foreign grantor trust — you can start to consider the applicable U.S. rules.

A. Assuming the Fideicomiso is Treated as a Foreign Grantor Trust

A fideicomiso treated as a foreign grantor trust results in the U.S. individual being treated as the owner of the assets held in the fideicomiso for U.S. tax purposes. As such, the U.S. individual’s use of the property held in the fideicomiso would be treated the same as if the individual was using his or her own property, and so there would be no U.S. income tax implications whatsoever.

Notwithstanding the federal income tax treatment discussed above, if a fideicomiso is treated as a foreign grantor trust, then the U.S. grantor must make sure that both IRS Forms 3520 and 3520-A are filed, generally on an annual basis. These forms are generally required upon the transfer of property to, and the use of property held by, a fideicomiso. The penalties for failing to file these forms can be significant (e.g., the greater of 35% of the gross value of the property transferred to the fideicomiso and 5% of the gross value of the fideicomiso’s assets). If you already have a fideicomiso and have not filed these forms, all is not lost. These penalties may be avoided if the grantor can demonstrate that the grantor’s failure to file the forms was due to reasonable cause. You should consult with your tax advisor about whether you should file these forms right away.

Additionally, from a U.S. estate tax perspective, if a fideicomiso is treated as a foreign grantor trust, then all of the property held in the fideicomiso will be included in the grantor’s estate upon his or her death. In addition, and surprising to many, any appreciation in the Mexican property occurring between the acquisition of the property by the fideicomiso and the U.S. grantor’s death may be subject to U.S. income tax at the time of death.

B. Assuming the Fideicomiso is Treated as a Foreign Trust (but not a Foreign Grantor Trust)

For those readers who believe a fideicomiso is not a foreign grantor trust, the question of whether a U.S. grantor should file IRS Forms 3520 and 3520-A can be considered along the following lines. One available option is to file these forms on a “protective” basis. Under this approach, if it turns out that the forms are not required, then there is a risk that the grantor would have over-disclosed to the IRS the ownership and activities of the fideicomiso. However, there appears to be no significant downside arising from such over-disclosure.[2] Alternatively, you could choose not to file these forms. Under this approach, if it turns out that the forms are required, then the risks for failing to file these forms are relatively large and may never go away.[3] In light of the IRS’ heightened and continued scrutiny of foreign holdings by U.S. persons, it appears imprudent to not file these forms.

One of the issues with treating a fideicomiso as a foreign non-grantor trust is that the U.S. tax consequences are simply not clear and present many unanswered questions and potential traps. For example, it is unclear how to treat payments (e.g., mortgage or maintenance payments) by a U.S. person to or for the benefit of the non-grantor foreign trust fideicomiso. Such payments may be considered as taxable gifts, rent or as some other type of payment depending upon the overall facts and circumstances. In addition, as discussed immediately below, the uncompensated use by a U.S. person of the property held in a non-grantor trust fideicomiso presents additional questions.

1. New Information Reporting Requirements When a Beneficiary Uses Property Held in a Fideicomiso

If a U.S. individual (i) is a beneficiary of a fideicomiso, and (ii) uses the Mexican property held in the fideicomiso without actually paying fair value for such use, then the IRS will treat that use as a distribution from the fideicomiso to the beneficiary. [4] Clearly the use of property is not an actual distribution of cash to the beneficiary. However, recent law treats such use as a payment or distribution in kind to the beneficiary of the right to use the property held in the fideicomiso.

Presumably, the value of the distribution would be calculated as the fair rental value of the property used. And if the value of the underlying property is considerable — as is the case with many ocean-front properties — then the property’s fair rental value would be calculated accordingly.

For example, if a beneficiary pays fair rental value of $20,000 to use property held in a fideicomiso, then there would be no distribution from the fideicomiso to the beneficiary. Alternatively, if the beneficiary did not pay anything for the use of such property, then the fair rental value is treated as having been distributed to the beneficiary. In such a case, in connection with a distribution from the fideicomiso, Forms 3520 and 3520-A must be filed, and in certain instances the value distributed may be taxable to the recipient. Failure to file these forms could result in significant penalties (e.g., the greater of $10,000 or 35% of the gross value of the distribution received from the fideicomiso). In this case the penalty for failing to file either form would be $10,000.[5]

2. New Information Reporting Requirements When a Third Party Uses Property Held in a Fideicomiso

If a U.S. individual is not a beneficiary of the fideicomiso, then things get even more complicated. In such a case, one should look to the relationship between (i) the individual using the property held in the fideicomiso, and (ii) the beneficiary of the fideicomiso. Use of the property would then be analyzed in two steps.

“Step 1” of the arrangement could be characterized as an in-kind distribution from the fideicomiso to the beneficiary. This in-kind distribution would be subject to reporting and potential tax implications discussed above, the same as if the beneficiary used the property directly (e.g., Forms 3520 and 3520-A must be filed).

“Step 2” of the transaction could be characterized as a transfer of the in-kind distribution from the beneficiary to the individual using the property. If a business relationship exists between the individual using the property and the beneficiary, then the use of the property may be treated as compensation to the individual using the property. Again, the value of the compensation would be calculated as the fair rental value of the property used. If it’s not a business relationship, then the transaction arising from this “Step 2” could be treated as a gift by the beneficiary to the individual, the tax implications of which should be considered after consulting with your advisor.

Finally, from a U.S. estate tax perspective, even if the fideicomiso is determined to be a foreign non-grantor trust, it is likely that the U.S. grantor will have retained powers and rights sufficient to cause inclusion of the property in their U.S. estate.

III. Additional Disclosure Requirements
A. Mexican Bank Accounts

If, in connection with owning Mexican property through a fideicomiso, you open up a Mexican bank account (e.g., to pay property-related expenses), then you may be required to disclose to the IRS the existence of that account. In general, U.S. individuals are required annually to report a direct or indirect financial interest in, or signature authority over, a financial account maintained in a foreign country if the aggregate value of all such accounts exceeds $10,000 at any time during the year. Such reporting is disclosed on Form TD F 90-22.1, also known as an “FBAR.”

The general civil penalty for failing to file an FBAR depends upon whether the failure is “willful.” If the failure is willful, the penalty for failing to file the FBAR is generally the greater of $100,000 or 50% of the highest aggregate balance of all foreign accounts during the year, per annual violation. For example, if a Mexican bank account maintains a $100,000 balance for three years and you willfully fail to disclose the account to the IRS in each of those years, then the penalty could be $150,000 (i.e., $50,000 for each year). Additionally, and perhaps more importantly, the failure to report such accounts also carries the risk of criminal prosecution.

If the violation is not willful, then the penalty is reduced to no more than $10,000 per violation. Note that the penalty for failing to file an FBAR is in addition to the penalties and interest that apply to any underreporting of income for federal income tax purposes.[6]

B. Mexican Property Worth More than $50,000

In general, for tax years 2011 and beyond, U.S. taxpayers must annually disclose foreign financial assets if those assets exceed $50,000 in value.

Assets held in a foreign trust, presumably including a fideicomiso, are included as assets required to be disclosed. This disclosure must be made on IRS Form 8938. Failure to timely file a Form 8938 may result in a $10,000 penalty. In addition, if you underpay your tax as a result of a transaction involving an undisclosed specified foreign financial asset, then you may have to pay a penalty equal to 40% of that underpayment.[7]

IV. Conclusion

Although these rules are complicated, the issues addressed throughout this article are manageable at every level if properly and timely addressed. If you own or are considering owning Mexican property by way of a fideicomiso, you should discuss these issues with your legal and tax advisors in both the U.S. and Mexico. Failure to follow applicable law may not lead to the same fate as those who broke the rules in Willy Wonka’s Chocolate Factory, but the penalties could still be significant.

To ensure compliance with Treasury Regulations governing written tax advice, please be advised that any tax advice included in this communication, including any attachments, is not intended, and cannot beused, for the purpose of  (i) avoiding any federal tax penalty or (ii) promoting, marketing, or recommending any transaction or matter to another person.

Notes:

[1] Other alternatives respecting the U.S. tax treatment of a fideicomiso (e.g., as an agency relationship) are not discussed in this article. [back]

[2] If you have failed to file in the past, then you should consult with your tax advisor the implications that such a protective filing may have on your treatment in prior years. [back]

[3] If the forms are required to be filed, but are not timely filed, then the statute of limitations does not begin. [back]

[4] See, Code §643(i) (addressing uncompensated use of property held by a foreign non-grantor trust). [back]

[5] The penalty is the greater of (i) 35% of the fair rental value deemed distributed (i.e., 35% x $20,000, which is $7,000), or (ii) $10,000. In addition, separate penalties apply for each failure to file a Form 3520 and each failure to file a Form 3520-A, and each penalty could arise for each year that the applicable forms are not filed. [back]

[6] The IRS recently announced an offshore voluntary disclosure program (the “2012 OVDP”) to bring people back into compliance who failed to report an interest in, or signature authority over, one or more offshore financial accounts. The penalties otherwise applicable for failing to file FBARs may be reduced under the 2012 OVDP. See our January 10, 2012 Legal Alert. [back]

[7] In certain circumstances additional penalties, including criminal prosecution, may apply. [back]

Snell & Wilmer

©2012 All rights reserved. The purpose of this legal alert is to provide readers with information on current topics of general interest and nothing herein shall be construed to create, offer or memorialize the existence of an attorney-client relationship. The content should not be considered legal advice or opinion, because it may not apply to the specific facts of a particular matter. Please contact a Snell & Wilmer attorney with any questions.

Trading Broker – The Middleman Who Trades Forex, Stocks, Options, Futures And Commodities For You

A trading broker is a middleman to trade stocks, options, forex, futures and commodities. Trading brokers share the unwanted reputation of accountants, bankers and lawyers. They make their earnings by selectively sharing what they know which the general public cannot simply access. However, whether you like it or not, they’re individual investor’s direct connection to Wall Street or the Forex Markets. Even though the internet and technology have made it simpler for an individual investor to organize their portfolios, the fundamental rule, which is that you require some sort of broker if you wish to trade forex, options, commodities, currencies, bonds and stocks, is still applicable.

In any career, you may find individuals who take the best out of those who are not well-informed. Whenever you purchase something, there’s always the chance of being deceived. Even with a trading broker wherein you buy advice, the price is hard to identify. However, not all brokers are in the fraud stereotype. As a matter of fact, there are a lot of brokers who perform an exceptional job of protecting the interests of their clients. There are also a lot of discount brokerages which offer terrific services for a sensible cost.

It is up to you to choose the right trading broker that satisfies your needs. If you are a beginner to the stock market or forex trading and do not have a firm understanding of the different securities, then you should look out for tutorials on Forex, Commodities, Mutual Funds, Bond Basics and Stock Basics. Also check out if there is any demo account or “practice account” available before you start on a live trading account.

Trading brokers are the individuals who deal with client orders to purchase and trade securities. Just like how a grocery shop acts as the link between the shoppers and the corporations that manufacture the food, brokers act as middlemen between the securities which trade on the stock market and investors who purchase them. Take note that the term broker may be used in a range of circumstances. It might mean a brokerage company such as Merrill Lynch or Charles Schwab, or it may refer to an individual person you confer with.

The most essential thing to understand is the fact that trading brokers are salespeople, which means that they receive a profit whenever you trade. For them it doesn’t matter if you buy or sell nor if the price goes up or down. For you to make profits, you have to understand the market conditions, discern opportunities and weight the potential profits against the high risks involved in any trade.

It is important for you to understand the value and structure of your overall assets. Never invest more than you can afford to lose in any high risk trading activity. As a rule of thumb you should not deposit more than 5 to 10% of your net worth in any trading account. 10% of your available cash at hand might even be a safer value at the beginning.

For opening an account, each brokerage firm has varying terms and conditions. There is a broad range of lowest deposits, ranging anywhere from 500 to 2500 dollars. Be certain that you check the fine print before anything else. There is nothing as frustrating as spending too much time filling out registration forms and discovering that you do not have adequate funds in order to open the account. If you do not have enough money, you do not have to worry because more and more online brokers are not requiring a minimum deposit.

Another alternative for those who have small bank accounts is the DRIP or dividend reinvestment plan. The DRIP permits you to avoid trading brokers by directly purchasing stocks from the corporations which offer them.

Each trading brokerage has a different price charge to sell. Typically, the price is suggestive of the service. Thus, cheaper is not always better. There are cheap brokers who charge 5 to 15 dollars for every trade yet get the job done. However, do not expect amazing perks or support.

For more information visit the website below. You can find there: