Bes Stocks To Buy 2014, Best Stocks For 2014: 3/3/13

Saturday, March 9, 2013

Will J.C. Penney Find Its Feet in 2013?

After a disastrous 2012 performance, J.C. Penney (NYSE: JCP ) is in big trouble. More and more shoppers are avoiding J.C. Penney stores these days, and management needs to reverse that trend quickly. J.C. Penney recently reintroduced discounts and coupons in an attempt to bring old customers back, but the early sales data is not encouraging. In fact, the company posted its worst performance of 2012 in the holiday quarter, despite running several promotions and sales. This news all bodes ill for J.C. Penney in 2013.�

A disappointing year
In early 2012, CEO Ron Johnson's team laid out a plan to "transform" J.C. Penney for long-term success while also improving profit in the near term. The company got rid of most sales and coupons in favor of an "everyday low price" scheme, while working to bring in new brands that would be showcased in individual "shops" within J.C. Penney stores. Among the first shops to be introduced were an Izod (NYSE: PVH ) store and a Levi's denim bar.

A Levi's Denim Bar at J.C. Penney, courtesy of J.C. Penney.

Many of these shops -- including the Izod and Levi's shops -- have been quite successful since they made their debut last summer. But then it's not surprising that clothing sells better when it's presented in a fashionable and appealing way.

On the other hand, the company's decision to do away with coupons and discounts alienated many longtime J.C. Penney customers who loved bargain-hunting. Moreover, the focus on a few shops left other vendors out in the cold. In other words, sales of Levi's may have increased, but sales of Lee jeans plummeted at the same time.

J.C. Penney's management expected the new "no-discounts" policy to cause some revenue losses, but executives believed that strong sales in the "shops" would offset much of the lost revenue elsewhere. Executives also planned to improve gross margin while cutting operating expenses by $900 million over the course of two years, thus leading to higher profits in 2012 and beyond. On the cost side of the ledger, J.C. Penney performed more or less as expected; the company achieved expense savings of more than $600 million last year, putting the company on track to reach $900 million in savings for 2013.

However, customer outrage was far worse than J.C. Penney executives expected, leading to a 25% revenue drop. Meanwhile, a heavy reliance on clearances to sell merchandise damaged margins. The result: J.C. Penney lost more than $1.5 billion before taxes last year, thereby falling short of management's initial earnings target by a whopping $2 billion.

No solution?
It's bad enough that so many customers deserted J.C. Penney last year, leading to the big loss. However, it's even more troubling that none of the company's attempts to fix things worked. For the first half of the year, J.C. Penney's sales dropped by 21.3%, a result that CEO Ron Johnson called "softer than anticipated." However, many investors expected the late summer launch of the "shops" featuring Levi's, Izod, Liz Claiborne, and other major brands to revive sales. Instead, J.C. Penney took a turn for the worse: Revenue declined 26.6% in the following quarter. While many of the shops have done well individually, they have apparently achieved their sales gains at the expense of the rest of the store.

Then the company reintroduced various promotions to try to bring customers back to the stores. J.C. Penney offered free children's haircuts during the back-to-school season, held a big Black Friday sale and a friends-and-family event during the holiday season, and offered customers "free gifts" (essentially $10 coupons) on more than one occasion. These tactics also failed: The company's Q4 performance was the worst of the year, with revenue down more than 28%. By the end of 2012, revenue was down nearly 35% from J.C. Penney's peak.

J.C. Penney 5-Year Revenue Chart. Data by YCharts

Thus far, opening popular brand shops within J.C. Penney stores and reintroducing discounts have not brought J.C. Penney out of its nosedive. That's why I think the planned reintroduction of regular sales events in 2013 may not bring back profits at J.C. Penney.

Transformation on hold?
J.C. Penney has been running through cash at an alarming rate recently. While the company ended 2012 with nearly $1 billion in the bank, it had negative free cash flow of roughly $1.3 billion in the first nine months of 2012. In other words, at last year's rate, J.C. Penney could run out of cash by this fall. To save money, J.C. Penney may be forced to slow or stop the rollout of new brand shops before then. Building out dozens of shops in each of J.C. Penney's 700 largest stores obviously requires a significant upfront investment. Indeed, the company's CFO suggested last fall that the company will stop opening new shops if it's short of cash.

However, that would leave the stores stuck in limbo, with about 30% of the floor broken up into shops, and the rest in a traditional department-store format. A mixed layout like that would probably be confusing to customers, which could further alienate them from the J.C. Penney brand. J.C. Penney thus faces a Catch-22: It needs to be profitable to pay for the continued rollout of new shops, but it needs to complete the shops' rollout to present a clear message to consumers and thereby return to profitability.

Conclusion
Management is unlikely to escape from this dilemma. J.C. Penney is opening several new shops this month, in the hope that (along with a return to discounting) it will be enough to reignite sales growth. Given that similar moves in 2012 failed to bring customers back, this plan does not inspire much confidence. This is shaping up to be another rough year for J.C. Penney.

Learn more
J.C. Penney has been a train wreck whose comeback always seems just around the next earnings corner, but investors are beginning to doubt that CEO Ron Johnson can weave the same magic that he did at Apple. If you're wondering whether J.C. Penney can survive its transformation,�you're invited to claim a copy of The Motley Fool's must-read report on the company. Learn everything you need to know about Penney's turnaround, or lack thereof. Simply click here now for instant access.

Ex-BP Rig Supervisor Testifies at Gulf Spill Trial

NEW ORLEANS (AP) -- A retired BP (NYSE: BP ) employee who supervised drilling operations on the rig that exploded in the Gulf of Mexico testified Wednesday that he never felt pressure to sacrifice safety to save money, even though the project was behind schedule and over budget.

"I don't believe in pushing people to keep schedules. I'm just not going to do it, especially if safety is involved," former BP well site leader Ronnie Sepulvado said at a federal trial designed to assign fault for the deadly disaster to the companies involved in drilling BP's Macondo well.

Sepulvado wasn't on the Deepwater Horizon rig at the time of the April 20, 2010, well blowout. He left four days earlier because his well control certificate was about to expire.

His replacement, Robert Kaluza, and fellow BP well site leader Donald Vidrine are charged with manslaughter in the deaths of 11 rig workers and await a separate trial. An indictment last year accuses Kaluza and Vidrine of disregarding abnormally high pressure readings that should have been glaring signs of trouble just before the blowout.

Sepulvado said the Macondo project was running behind schedule in part because a storm had damaged the rig that was drilling the well before the Deepwater Horizon was brought in to take over. He said the drilling crew also was hampered by a March 2010 "kick," which is an unexpected flow of fluids into the wellbore.

At the start of the trial last week, a Justice Department attorney accused BP of putting profits ahead of safety in a rush to finish a project that was more than $50 million over budget at the time of the blowout.

Sepulvado, however, said he wasn't troubled by the delays.

"Did you ever ask anyone to hurry to finish up this well because you needed to get somewhere else?" BP attorney Hariklia Karis asked.

"No, ma'am," Sepulvado said.

"And at any time did you ever ask anyone to cut any corners to save time or money?" she asked.

"No, ma'am," he said.

Sepulvado said the rig crew reported its drilling costs on a daily basis and adhered to a BP mantra that "every dollar counts," but not at the expense of safety.

"You don't waste money," he said. "To me, it means better planning to try to get equipment in and out."

U.S. District Judge Carl Barbier is hearing testimony without a jury and, barring a settlement, would decide how much more money BP, rig owner Transocean (NYSE: RIG ) , and other companies owe for their roles in the disaster.

3D Systems Does Exactly What Fools Said It Might Do

As 3D Systems (NYSE: DDD ) prepared for this morning's earnings report, we Fools sounded a note of cautious optimism.

Blake Bos explained the long-term value of combining consumer-friendly product prices with high build quality and pleasant design. 3D Systems has plenty of competition, but few can match that magic formula today: "The comparisons were cheaper but, in my opinion, of far lower quality," Blake said. "One looked similar to a Rep Rap project built in someone's garage, and the other was similar, but in a spot-welded sheet metal enclosure. Hardly a compelling choice for the entry-level 3-D printing customer who 3D Systems is targeting with the Cube."

In the end, Blake noted that the stock could use a more appetizing entry point. "Ahead of Monday's earnings, I think what investors should really hope for is a strong pullback," he said. "This is a multi-decade long story that's yet to be told, and I'd like nothing more than to be able to participate at a more reasonable price."

My own earnings preview pointed out that the company often beats earnings targets, but it wouldn't take much of a disappointment to trigger a massive share price drop. "There's no particular reason why it would happen right now, but serious investors must consider the possibility," I said. "For the love of money, don't buy a pack of short-dated call options right now. Give the company some time to grow into its breeches."

You know what happened. 3D Systems beat earnings estimates by a penny, exactly as predicted. But the report wasn't the world-beating success you might expect from a stock rising 38% in the last three months and 135% over the last year.

And so the stock plunged as much as 20% in early morning trades. Direct rival Stratasys (NASDAQ: SSYS ) plunged 10% on no news of its own, and relative newcomer ExOne (NASDAQ: XONE ) suffered a 6% haircut. Stratasys is scheduled to report earnings next week and I'd expect the first report from ExOne as a publicly traded company in April. But nervous investors saw 3D Systems' drop as a warning sign for the entire industry. These are the breaks when you're investing in widely misunderstood growth stocks, where the market is still being defined.

All three of these plunging stocks have recovered nicely as investors started looking past the sudden shock of 3D Systems' terrific growth, but you can still pick up shares of that stock at a 5.4% discount. ExOne even bounced back into positive territory for the day.

Reckless investing is always a bad idea, but doubly so in super-volatile markets like the burgeoning 3-D printing sector. I would urge you to take a long, hard look at this sector and take measured action on sudden discounts like this one. Going all in might work at the poker table, but it's not a winning strategy for growth investors.

3D Systems is at the leading edge of a disruptive technological revolution, with the broadest portfolio of 3-D printers in the industry. However, despite years of earnings growth, 3D Systems' share price has risen even faster, and today the company sports a dizzying valuation. To help investors decide whether the future of additive manufacturing is bright enough to justify the lofty price tag on the company's shares, The Motley Fool has compiled a premium research report on whether 3D Systems is a buy right now. In our report, we take a close look at 3D Systems' opportunities, risks, and critical factors for growth. You'll also find reasons to buy or sell, and receive a full year of analyst updates with the report. To start reading, simply click here now for instant access.

Free calling moves from Messenger to main Facebook iOS app - 04:54 PM

(gigaom.com) -- Want to call up your friends, but don’t have their cell number? Now as long as you both have the updated Facebook app it won’t matter — you’ll be able to talk to each other through Facebook. The social network had previously been testing a feature that would let users place calls to their friends through its Messenger app, and on Friday it updated the main iOS app to support calling functionality.

To access the calling feature, users can tap on the right-hand bar that supports messaging in the iOS app, select a person they want to call, and then check to see if that person has the “free call” feature listed under their profile (that can be found through the “i” information button next to their name).

Top Stocks For 2/23/2013-2

Eline Entertainment Group, Inc. (PINK SHEETS:EEGI) subsidiary Let The Good Times Roll, Inc. is pleased to announce a joint venture with the Hard Rock Hotel and Casino.

This new incentivized agreement with provides LTGTR riders with $25-$35 in gaming chips and a $5 food voucher when booked for the Hard Rock Casino. LTGTR, will experiment and plans to start running shuttles to the Hard Rock, charging $25-30 for round trip services. The deal is conditionally approved and subject to pending insurance verification. The company sees this as a simple administrative task, and to be resolved shortly.

Preliminary research shows strong support with the company running 14 casino runs a week, with each shuttle generating an average of $750 in revenue with 60-70% in gross profit.

“We are looking at creative ways to keep the buses on the road. As they are running not only are they generating revenue but they are advertising. If you are running a bus during the day for Hard Rock shuttles and then booking nightly runs at Gross Profit Margins of 70% you are doing very well.

We are very excited with the Vu365 merger which helps our plans with the college shuttle program and also will introduce the Vu365 to a new gaming audience. We had extremely favorable talks with Vu365 and believe they can help us extensively with our unique programming needs, and we can help them bring Vu365 gaming to an American audience. This is a win/win for LTGTR, Vu365 and the shareholders of EEGI,” Debra Davis President of LTGTR.

PTS, Inc. (OTC.BB:PTSH) announced that through its ThinLine division it has signed a 3 year IT Services deal with United Power.

United Power is acknowledged experts on the resale of products especially suited for medium voltage power distribution, in addition to providing a wide portfolio of products for other aspect of the electrical utility business. United Power has been serving electrical utility Customers within Georgia continuously since 1976. They have developed a reputation for customer sensitivity, fair dealing and exceptional quality during this time.

United Power required an IT solution that would allow them to contact one source for all of their IT needs.

“United Power is a well-established and quality company that has been a leader in their field for decades” stated Raj Kalra CEO of PTS. “They were looking for a one stop shop that would be able to handle their IT, disaster recovery and hardware needs without making more than one phone call. ThinLine’s managed IT solution was designed for this task. We look forward to working with the team at United Power and I am always excited to add a quality client to our growing portfolio of managed It customers,” added Raj Kalra.

Heartland Express, Inc. (Nasdaq:HTLD) announced the declaration of a regular quarterly cash dividend. The $0.02 per share dividend will be paid on December 20, 2010 to shareholders of record at the close of business on December 10, 2010. A total of approximately $1.8 million will be paid on the Company�s 90.7 million outstanding shares of common stock. Heartland Express, Inc. implemented a quarterly cash dividend program in the third quarter of 2003. This is the Company�s thirtieth consecutive quarterly cash dividend. With the payment of this dividend, the Company will have paid a total of $337.5 million in cash dividends, including two special dividends.

Heartland Express, Inc., together with its subsidiaries, operates as a short-to-medium-haul truckload carrier of general commodities in the United States.

Sierra Wireless Inc. (Nasdaq:SWIR) announced that Aisino Corporation, a leading information technology company in China, has selected Sierra Wireless AirPrime� Q2686 intelligent embedded modules with Embedded SIM for integration into its network billing machine. The Aisino network billing machine enables tax payers to immediately feed their tax data to the Taxation Bureau, using the China Mobile network to provide real-time communication with the back-end server.

Sierra Wireless, Inc. provides wireless solutions for the mobile computing and machine-to-machine (M2M) markets.

Liberty Media Interactive (Nasdaq:LINTB) has exchanged its entire equity stake in IAC for a combination of operating assets and cash in a transaction intended to be tax-free to Liberty and IAC. Pursuant to the transaction, completed on December 1, Liberty exchanged approximately 12.8 million shares of IAC stock (consisting of approximately 8.5 million shares of Class B stock and 4.3 million shares of common stock, and representing approximately 60% of the total votes of all classes of IAC stock) for all of the capital stock of a wholly-owned subsidiary of IAC that holds the Evite and Gifts.com businesses, and approximately $220 million in cash. These assets will be attributed to the Liberty Interactive tracking stock group.

Liberty Interactive, Inc. markets and sells various consumer products in the United States and internationally, primarily by means of televised shopping programs on the QVC networks and via the Internet through its domestic and international Web sites.

Friday, March 8, 2013

Should I Buy Tesco for My ISA?

LONDON -- Any company that has increased its dividend continuously for 28 years, and offers a FTSE-beating yield of 4.1%, deserves to be taken seriously.

And when you add in annual sales nearly three times that of its closest London-listed competitor, and a leading presence in the home-delivery market, then things look even better.

I am, of course, talking about�Tesco� (LSE: TSCO ) (NASDAQOTH: TSCDY ) , a share I hold in my own ISA, and one that I think is perfect for this tax-efficient method of saving.

You can find out more about the tax benefits of investing through an ISA�here. Let's now take a look at the particular attractions of Tesco.

Would you bet against Buffett?
Tesco's size and U.K. market dominance are undoubtedly two of the company's strengths, as is its unbroken 28-year record of dividend increases.

When Tesco issued a profit warning in January 2012, billionaire investor Warren Buffett used the share-price dip as a buying opportunity, and topped up his Tesco shareholding, to give him 5% of the company.

Today, Buffett's Tesco shares are worth around �1.5bn, and will provide him a dividend income of about �60m this year.

Although Tesco's share price has risen recently, it still looks like a good value to me, placing the company on a forward price-to-earnings ratio (P/E) of 11.3, well below the FTSE 100 average of 16.6.

Beneath the bonnet
When you look a little more closely at Tesco's financials, things still look good. Tesco's operating margin of 6.2% is higher than both that of�J�Sainsbury�(3.9%), and�Wm�Morrison Supermarkets�(5.5%).

What's more, despite being the biggest of these three, Tesco is also expected to deliver the most growth this year. Analysts' forecasts suggest Tesco's earnings per share will grow by 5.7% in 2013, compared with 4.8% for Sainsbury's, and a stagnant 0.4% for Morrisons.

Never knowingly undersold?
Finally, a recent report in the�Financial Times�suggested that Tesco is about to launch a new price-matching scheme, which will issue customers with money-off vouchers at the till if their shopping would have been cheaper at Morrisons, Sainsbury's, or Asda.

It rarely pays to bet against a giant, and I believe that Tesco will overcome its short-term problems, and will continue to pay a rising stream of tax-free dividends into my ISA for many years to come.

2013's top ISA income stock?
If you like the idea of using an ISA to hold high-yielding income shares, then I would recommend you take a look at The Motley Fool's latest free report, "The Fool's Top ISA Income Stock For 2013".

The company in question currently�offers a yield of 5.7%, and the Fool's expert analysts believe that the current price of 700p could be 20% below the share's true value. To learn more, just�click here to download your free copy�of this special report, while it remains available.

BT Chooses Different Growth Path to Vodafone

LONDON -- While rival�Vodafone�is seeking to expand its footprint in Europe by eyeing up fixed-line ventures to complement its mobile telecommunications operations,�BT Group� (LSE: BT-A ) (NYSE: BT ) is remaining closer to home with its own primary expansion plans, after acquiring�Disney-owned ESPN's U.K. and Ireland television channels to form a serious competitor to�British Sky�Broadcasting.

Under the terms of the deal, ESPN's rights to show the FA Cup, Scottish Premier League, Bundesliga, and Europa League will be among those transferred to BT, while the U.S. sports currently shown on�ESPN�America -- including college basketball, college football, and NASCAR -- will also be shown on BT's new channels. Additionally, at least one of its channels will continue to carry the�ESPN�name.

BT's push into the televised sport market continues, having recently swooped for big-name presenters to front its show already, including Clare Balding and Jake Humphrey from the BBC. The company had previously bought the rights to broadcast 38 Premier League games a season for three years from August 2013, including 18 prestigious "first pick" games, whereby the company will have the option of the weekend's best games.

Indeed, in news mirroring that of the above agreed last year, both BT and Sky have today secured new deals with the Premier League for more than 150 live matches per year -- 38 and 116 games, respectively -- for broadcast in the Republic of Ireland.

Hitting a five-year high of 281 pence last week,�BT Group's shares has been on a roll since 2009's low point of 72 pence, representing an almost fourfold return. They have since fallen slightly to today's price of 268 pence, but on a forecast yield of 3.4%, a strategy that could set the company up for further growth and rival in Vodafone that the market isn't fully backing, this could be a share for both income and growth to carefully monitor in the coming months.

If you're an investor who's more interested in growth than income, you may wish to read�this exclusive in-depth report. The company featured has growth potential not reflected in the share price. Just�click here�to download the report -- it's free.

If income is more important to you, we have another exclusive report, which features�a great dividend share. This company offers a juicy 5.7% yield, and the report is also 100% free -- simply�click here.

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Dell buyout just got (much) more complicated - 12:42 PM

(gigaom.com) -- If Michael Dell and his cohorts at Silverlake Partners thought their $24 billion buyout plan for Dell announced a month ago would be a slam dunk, they have another think coming.

Several other interested parties have surfaced, including billionaire Carl Icahn, and when Icahn gets involved things definitely get more complicated. In a letter to Dell’s board Icahn said the existing offer substantially undervalues Dell’s worth. Icahn put forward his own suggestion that the company remain public and issue a $9 per share special dividend, as reported in Bloomberg. Blackstone Group LP has also reportedly expressed interest in Dell.

Citi Emerges Victorious

All eyes have been on bank stocks this week as investors waited to hear of the results of the Fed's stress test results. While much of the excitement centered on�Bank of America (NYSE: BAC ) and its nicely padded capital cushion, Citigroup (NYSE: C ) , a stress-test loser last year, surfaced as a clear winner, showing up fellow big banks B of A, JPMorgan Chase (NYSE: JPM ) , Goldman Sachs (NYSE: GS ) , Morgan Stanley (NYSE: MS ) , and Wells Fargo (NYSE: WFC ) in the post-test, Tier 1 common capital�category.

Playing it safe
Citi came out of the test -- which required a minimum post-test 5% capital reserve -- with an 8.3% capital ratio, higher than Wells' 7%, B of A's 6.8%, and JPMorgan's 6.3%. Both Goldman and Morgan Stanley emerged with ratios under 6%.

The super-charged stress scenario, reserved for the six largest banks, entailed an economic climate that featured 12% unemployment, a drop in real estate prices of 20%, and a general weakening of GDP�by nearly 5%. In other parts of the world, the toughest scenario envisioned nasty recessions in Europe�and Japan, with stalled economies in developing nations.

Despite going into the test with a Tier 1 ratio of 12.7% -- the highest of any other bank -- Citi choose to be conservative in its capital requests from the Fed. In an early release of this information, the bank revealed that it had asked for a $1.2 billion stock repurchase, and the maintenance of its current $0.01 per share quarterly dividend.

While some analysts�expected Citi to increase its shareholder payout, it appears that new CEO Michael Corbat elected to play it safe. Along with SunTrust� (NYSE: STI ) and Fifth Third Bancorp (NASDAQ: FITB ) , Citi was stung last year by having its capital plan denied by the Fed. Although it submitted a revision that was eventually accepted, this particular incident has been considered key in the downfall of Vikram Pandit�last fall.

What's next for Citi?
Corbat has already announced where he wants to take Citi, underlining the fact that the bank must make it or break it in over 20 markets within the next two years. He plans to improve return on assets from 0.6% in 2012 to at least 0.9% by 2015, as well as a minimum 10% return on tangible common equity by that year, as well.

Much like Bank of America's Project New BAC, Corbat will trim�the bank holding company by selling off much of its Citi Holdings, which has been a drag on the bottom line.

With such a plan in place, Citi should be on its way. Investors are rallying, having pushed the share price to a $45 closing yesterday -- something the bank hasn't seen in a while. Is Corbat the one that will turn Citi around? It's looking good so far.

Citigroup's stock looks tantalizingly cheap, and, despite the progress made and the stress-test triumph, the bank's balance sheet is still in need of more repair, and there's a considerable amount of uncertainty after a shocking management shakeup. Should investors be treading carefully, or jumping on an opportunity to buy? To help figure out whether Citigroup deserves a spot on your watchlist, I invite you to read our premium research report on the bank today.�We'll fill you in on both reasons to buy and reasons to sell Citigroup, and what areas Citigroup�investors need to watch going forward.�Click here now�for instant access to our best expert's take on Citigroup.

1 Reason to Expect Big Things from MKS Instruments

Here at The Motley Fool, I've long cautioned investors to keep a close eye on inventory levels. It's a part of my standard diligence when searching for the market's best stocks. I think a quarterly checkup can help you spot potential problems. For many companies, products that sit on the shelves too long can become big trouble. Stale inventory may be sold for lower prices, hurting profitability. In extreme cases, it may be written off completely and sent to the shredder.

Basic guidelines
In this series, I examine inventory using a simple rule of thumb: Inventory increases ought to roughly parallel revenue increases. If inventory bloats more quickly than sales grow, this might be a sign that expected sales haven't materialized. Is the current inventory situation at MKS Instruments (Nasdaq: MKSI ) out of line? To figure that out, start by comparing the company's inventory growth to sales growth. How is MKS Instruments doing by this quick checkup? At first glance, not so great. Trailing-12-month revenue decreased 21.8%, and inventory decreased 12.4%. Comparing the latest quarter to the prior-year quarter, the story looks potentially problematic. Revenue dropped 22.1%, and inventory shrank 12.4%. Over the sequential quarterly period, the trend looks healthy. Revenue dropped 5.4%, and inventory dropped 7.5%.

Advanced inventory
I don't stop my checkup there, because the type of inventory can matter even more than the overall quantity. There's even one type of inventory bulge we sometimes like to see. You can check for it by examining the quarterly filings to evaluate the different kinds of inventory: raw materials, work-in-progress inventory, and finished goods. (Some companies report the first two types as a single category.)

A company ramping up for increased demand may increase raw materials and work-in-progress inventory at a faster rate when it expects robust future growth. As such, we might consider oversized growth in those categories to offer a clue to a brighter future, and a clue that most other investors will miss. We call it "positive inventory divergence."

On the other hand, if we see a big increase in finished goods, that often means product isn't moving as well as expected, and it's time to hunker down with the filings and conference calls to find out why.

What's going on with the inventory at MKS Instruments? I chart the details below for both quarterly and 12-month periods.

Source: S&P Capital IQ. Data is current as of latest fully reported quarter. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.

Source: S&P Capital IQ. Data is current as of latest fully reported quarter. Dollar amounts in millions. FQ = fiscal quarter.

Let's dig into the inventory specifics. On a trailing-12-month basis, each segment of inventory decreased. On a sequential-quarter basis, each segment of inventory decreased. Although MKS Instruments shows inventory growth that outpaces revenue growth, the company may also display positive inventory divergence, suggesting that management sees increased demand on the horizon.

Foolish bottom line
When you're doing your research, remember that aggregate numbers such as inventory balances often mask situations that are more complex than they appear. Even the detailed numbers don't give us the final word. When in doubt, listen to the conference call, or contact investor relations. What at first looks like a problem may actually signal a stock that will provide great returns. And what might look hunky-dory at first glance could actually be warning you to cut your losses before the rest of the Street wises up.

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Add MKS Instruments �to My Watchlist.

1 Reason to Expect Big Things from Curtiss-Wright

Basic guidelines
In this series, I examine inventory using a simple rule of thumb: Inventory increases ought to roughly parallel revenue increases. If inventory bloats more quickly than sales grow, this might be a sign that expected sales haven't materialized. Is the current inventory situation at Curtiss-Wright (NYSE: CW ) out of line? To figure that out, start by comparing the company's inventory growth to sales growth. How is Curtiss-Wright doing by this quick checkup? At first glance, not so great. Trailing-12-month revenue increased 4.0%, and inventory increased 27.0%. Comparing the latest quarter to the prior-year quarter, the story looks potentially problematic. Revenue grew 7.3%, and inventory increased 27.0%. Over the sequential quarterly period, the trend looks healthy. Revenue grew 23.2%, and inventory grew 11.8%.

What's going on with the inventory at Curtiss-Wright? I chart the details below for both quarterly and 12-month periods.

Source: S&P Capital IQ. Data is current as of latest fully reported quarter. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.

Source: S&P Capital IQ. Data is current as of latest fully reported quarter. Dollar amounts in millions. FQ = fiscal quarter.

Let's dig into the inventory specifics. On a trailing-12-month basis, raw materials inventory was the fastest-growing segment, up 33.2%. On a sequential-quarter basis, finished goods inventory was the fastest-growing segment, up 23.7%. Although Curtiss-Wright shows inventory growth that outpaces revenue growth, the company may also display positive inventory divergence, suggesting that management sees increased demand on the horizon.

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Add Curtiss-Wright �to My Watchlist.

Top Stocks For 2/7/2013-15

DENVER, CO–(CRWENEWSWIRE – 08/23/10) – American Power Corp. (OTC.BB:TGMP) (“American Power” or “the Company”) today announced that it will proceed to kick start the development of its advanced Pace Coal Project in Judith Basin County, Montana.

In April 2010, American Power Corp. acquired roughly 29,000 acres, which make up the Pace Coal Project. In 1979 Mobil Oil Co. (now ExxonMobil) drilled 30 holes over 14,000 of the project’s acreage, and delivered 45 samples which were later sent to an independent laboratory for analysis. It was subsequently determined that both the quality and the quantity of coal on the Pace acreage was high and significant, respectively. Several independent reports were commissioned based on the development work undertaken by Mobil Oil, determining there could be in excess of 410 million tons of high volatility bituminous coal potential on the Pace acreage.

Al Valencia, CEO of American Power Corp. commented: “A tremendous amount of work has already been undertaken on the Pace Coal Project and we continue to work towards our stated goal of proving up a mineable reserve and preparing a mine plan to re-establish coal production on the property as soon as possible.”

Montana’s demonstrated reserve base of 119.1 billion short tons of coal represents over 24% of America’s total demonstrated coal reserve base of 487.7 billion short tons. Of particular importance, the coal at the Pace Coal Project is bituminous B coal, which, due to its higher BTU rating, secures a higher market price than most of Montana’s coal (typically sub-bituminous or lignite).

American Power Corp. has access to a large and experienced workforce in Great Falls, Montana, and the coal project may provide hundreds, if not thousands, of new, high-paying jobs for the local economy (according to the U.S. Bureau of Labor Statistics, the average annual wage in the mining industry in Montana was $70,779 in 2008, or 122 percent higher than the average wage in the state).

Substantial infrastructure is already in place adjacent to and within the acreage, including a federal highway, a BNSF railway line, pipeline, and power lines, all of which would facilitate the economic extraction and transportation of coal to market.

About American Power Corp.

American Power Corp. is a publicly traded, dynamic energy company based in Denver, Colorado. The Company was established with the focus of acquiring near-term, large scale coal projects in close proximity to national transportation links. American Power envisions developing its large coal resources to support electricity generation.

American Power is a member of the Montana Mining Association, and holds approximately 29,000 acres in Judith Basin County, Montana. The estimated resources in place, based on exploration work conducted by Mobil Oil Co. (now ExxonMobil Corp.), and in several independent studies, range from 172 million up to 410+ million tons of high volatile bituminous B coal. All of the studies are available for download in the Projects section of the Company’s website at www.americanpowerco.com

American Power Corp. trades on the NASD OTC BB under ticker symbol TGMP. Shareholders are invited to contact corporate communications toll free at (800) 537-1110 for further information or visit the Company’s website at www.americanpowerco.com to download our Fact Sheet and Corporate Profile.

ON BEHALF OF THE BOARD OF DIRECTORS,
American Power Corp.
Al Valencia, CEO

Forward-Looking Statements

Statements in this news release that are not historical facts are forward-looking statements that are subject to risks and uncertainties. Forward-looking statements in this news release include that American Power Corp.’s 29,000-acre leases in Judith Basin County, Montana, have high volatile bituminous B coal in the range of 172 million and up to 410+ million tons, and that the Company will proceed to kick start the development of its advanced Pace Coal Project in Judith Basin County, Montana. Readers should also refer to the risk disclosures outlined in the Company’s quarterly reports on Form 10-QSB, annual reports on Form 10-KSB, and the Company’s other disclosure documents filed from time-to-time with the Securities and Exchange Commission available at www.sec.gov

Cautionary Note to U.S. Investors

The United States Securities and Exchange Commission (“SEC”) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this document that SEC’s guidelines may prohibit us from including in filings with the SEC.
Contact:

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The Views and Opinions Expressed by the author are his or her opinions only and do not necessarily reflect those of this Web-Site or its agents, affiliates, officers, directors, staff, or contractors. The author at the time of this article did not own any shares or receive any consideration financial or otherwise from any company or person mentioned or referred to in the article.

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Hedge funds flee retailers, Wal-Mart still top dog

At Insider Monkey, we track the equity portfolios of more than 450 hedge funds and other prominent investors. Once a quarter, this data is updated in accordance with SEC 13F filings, allowing us to provide insight into which companies have fallen in and out of the smart money's favor.

Historically, bullish consensus among hedgies has been used to beat the market, but it's important for investors to pay attention to bearish sentiment as well.

The easiest way to measure this phenomenon is by thinking of it as a type of "capital flight," which is the common Econ 101 term used to describe an outflow of assets from a country or region. In this particular case, we've found that at the end of the fourth quarter, a little more than 1,500 stocks saw at least one dollar's worth of hedge fund-style capital flight in comparison to the previous quarter.

Within this group, which represents about 45% of the Smart Money's total equity universe, exists a pretty startling conclusion: nine of the top 20 companies lie within the consumer services sector. The next highest sector is tech with five companies, followed by energy, with four.

Focusing on the nine consumer-service stocks that have experienced a decline in aggregate hedge fund capital, major retailers Sears SHLD , Wal-Mart WMT , Costco COST , Target TGT and J.C. Penney JCP are all present. Listed in order of largest to smallest, this unfortunate quintet saw an average capital flight of $704.1 million among the hedge funds we track, with Sears hitting a high above the $1 billion mark.

In percentage terms, Target was the retailer hit the hardest by this trend, losing nearly 50% of hedgies' capital in the fourth quarter compared to one quarter earlier. J.C. Penney, Costco and Sears, meanwhile, saw capital flight of about 30%, while Wal-Mart saw 9.8% of hedge funds' capital diminish.

While this is a lot of data to take in at once, there are a couple key conclusions we can draw.

The first is that Wal-Mart should still be viewed as the Smart Money's best bet in this space. In addition to the fact that it has seen less capital flight � in percentage terms � than its aforementioned peers, Wal-Mart is the retail industry's only stock that had bullish interest from more than 50 of the hedge funds we track last quarter. The next highest is Dollar General DG with 44, followed by Dollar Tree DLTR and Costco, both in the upper-30s. The remaining members of the "unfortunate quintet" described above all sport an average of just 26 hedge funds invested.

Equally as important, it's worth mentioning that the quality of hedgies devoted to Wal-Mart is top-notch; mega-managers Warren Buffett (see Buffett's top picks), Ken Griffin, Jim Simons and Israel Englander, to name a few, all hold long positions. Prem Watsa and Ray Dalio are also bullish.

Despite the fact that on the whole, the retailer experienced hedge fund capital flight in the fourth quarter, there are reasons to be optimistic about Wal-Mart's future because of how this data favorably stacks up against its key peers.

Disclosure: This article is written by Jake Mann and edited by Meena Krishnamsetty. They don't own shares in any of the stocks mentioned in the article.

Opinion: The Least Interesting Lawyers in the World

Do antitrust lawyers drink beer, or for that matter grocery shop? Those questions come to mind after watching the U.S. Justice Department trot out its traditional pseudo-science to block a brewery merger. Last week the government filed an antitrust suit to prevent Budweiser maker Anheuser-Busch InBev from buying the half of Grupo Modelo that it doesn't already own. Based in Mexico, Modelo brews Corona Extra and other brands.

Antitrust law is allegedly to prevent firms from exercising monopoly power to abuse customers. But antitrust enforcers have difficulty finding actual monopolies. So they end up attacking proposed mergers like the AB-Modelo tie-up, in which the resulting company would serve all of 46% of the U.S. beer market.

For decades, the ingredient that has given the antitrust brew its bitter aftertaste is something called the Herfindahl-Hirschman Index (HHI). By squaring the market shares of each competitor before adding them together, it purports to show how concentrated the market is in the hands of a few large players. Some might wonder why lawyers cannot simply look at the actual market shares as they exist.

In any case, government attorneys present HHI scores as if they express scientific certainty that customers will be abused, while economists are often more skeptical. That's because the scores can be manipulated depending on how the lawyers define the relevant market.

By cherry-picking particular U.S. markets, the current Justice suit suggests that the beer merger would result in unacceptably high HHI scores. It's a strange time to forecast a lack of competition, because this happens to be the golden age for independent U.S. breweries. The U.S. added 442 new brewers last year for an all-time high of 2,751, according to the Beer Institute trade association.

But amid this brewery boom, Justice sees only scarcity. The suit argues that the merger will allow Anheuser to raise prices on its existing Budweiser and Bud Light brands by also raising the price of Corona and Corona Light.

The lawsuit quotes from internal Anheuser communications suggesting that executives are upset that as Bud has been raising prices lately, Corona hasn't followed suit. Bud tends to appeal to a different consumer than the higher-priced Corona. But a shrinking price differential between them has apparently induced some Bud drinkers to trade up to Corona. If one company owns both brands, government lawyers imagine that it will raise prices on both. Bud will stop losing market share, Corona will make even more money and consumers will lose.

But won't this create for the new company the same problem that Justice claims is motivating this deal in the first place? Just as Bud's price hikes today may drive consumers toward Corona, future price increases will drive consumers toward other brewers.

Justice argues that top rival MillerCoors tends to raise its prices along with Anheuser. But if that happens in the future, other competitors can take the opportunity to pick up new customers. There are few barriers to entry in the beer market. Brewing is a mature technology, to say the least.

The biggest barriers are the marketing budgets at Anheuser and Miller. But Heineken also has a marketing budget for its namesake brand, as well as its other brands including Amstel and Dos Equis. Sam Adams and Diageo's Guinness also seem capable of getting the word out to thirsty consumers. At a lower price level and without much advertising, brands like Pabst help keep Bud and Miller honest. And then there are the myriad craft brews.

But even with a supermarket aisle of beers to choose from, there's no law of economics that says consumers have to choose any of them. To demonstrate market concentration, Justice has conveniently identified the relevant market as the beer market, while the brewers are all competing in the larger market of alcoholic beverages. Beer has been losing market share on this wider playing field for a decade or more. Fruity vodkas and tequilas have lately been creating new consumers for hard liquor.

Americans don't always drink beer. But when they do, they'll enjoy plenty of alternatives without any help from the world's least interesting lawyers who populate the Justice Department Antitrust Division.

Top Stocks To Buy For 2/11/2013-1

SM Energy Co. (NYSE:SM) witnessed volume of 2.48 million shares during last trade however it holds an average trading capacity of 1.23 million shares. SM last trade opened at $75.07 reached intraday low of $66.57 and went -11.61% down to close at $69.67.

SM has a market capitalization $4.44 billion and an enterprise value at $5.55 billion. Trailing twelve months price to sales ratio of the stock was 3.94 while price to book ratio in most recent quarter was 3.29. In profitability ratios, net profit margin in past twelve months appeared at 14.06% whereas operating profit margin for the same period at 18.03%.

The company made a return on asset of 4.51% in past twelve months and return on equity of 12.53% for similar period. In the period of trailing 12 months it generated revenue amounted to $1.13 billion gaining $17.82 revenue per share. Its year over year, quarterly growth of revenue was 81.30% holding 589.20% quarterly earnings growth.

According to preceding quarter balance sheet results, the company had $101.08 million cash in hand making cash per share at 1.59. The total of $630.29 million debt was there putting a total debt to equity ratio 46.72. Moreover its current ratio according to same quarter results was 0.72 and book value per share was 21.19.

Looking at the trading information, the stock price history displayed that its S&P500 52 Week Change illustrated -0.74% where the stock current price exhibited down beat from its 50 day moving average price of $74.21 and remained above from its 200 Day Moving Average price of $69.51.

SM holds 63.73 million outstanding shares with 63.17 million floating shares where insider possessed 0.66% and institutions kept 8.10%.

1 Big Surprise about B of A

The conventional wisdom is that Bank of America (NYSE: BAC ) has two problems. First, it's exposed to massive legal liability dating back to the financial crisis. And second, that it still has tens of billions of dollars in losses to absorb from the bad mortgages on its balance sheet.

While the first problem is indeed a concern, as I discussed at length in this recent series, it turns out that the second issue is, as Jamie Dimon might put it, a "tempest in a teapot." Believe it or not, out of the nearly $250 billion in mortgages on B of A's balance sheet, it appears to face only $1.4 billion in losses. Not only is that an extremely digestible number, but it stands in direct contrast to any type of negative opinion of B of A's balance sheet -- at least as far as toxic mortgages are concerned.

To arrive at this number, let's start at the top. B of A's balance sheet contains $2.17 trillion in assets, making it the nation's second largest bank behind only JPMorgan Chase. Loans and leases account for $893 billion of the total, $561 billion of which are consumer loans, and $247 billion relate to residential mortgages specifically. So that's our jumping off point: $247 billion.

It's now necessary to dig into the quality of these loans. There's two somewhat equivalent ways to do this. The first and more arduous way is to work through B of A's delinquent mortgages. At the end of the third quarter, it reported a total of $40.9 billion in loans that are late on payment, the majority of which are more than 90 days past due, a critical benchmark in the banking industry. Of these, however, $25.1 billion are fully insured by either Fannie Mae, Freddie Mac, or the FHA. That leaves only $15.8 billion in uninsured delinquent mortgages that, at least at this point, appear to threaten B of A's capital base.

The second and easier way to arrive at an estimate of the latter figure is to take B of A's own disclosure of nonperforming loans -- for the most part, these are loans that are no longer automatically accruing interest. At the end of the third quarter, the value of mortgages classified as such came in at $15.2 billion. This is only $600 million less than the total amount of uninsured delinquent mortgages from the end of the preceding paragraph.

At first glance, then, it appears that B of A is on the hook for a lot more than the $1.4 billion that I quoted at the beginning of this article. But here's where it gets interesting. Once a mortgage has been delinquent for more than 180 days, B of A charges it off -- or at least the portion of the loan that it expects to lose.

For example, say the bank holds a $200,000 mortgage secured by property that's worth $125,000. If that loan goes unpaid for more than 180 days, B of A charges off the difference between the mortgage amount and the collateral's value less foreclosure costs. Assuming the latter costs are $35,000, between paying a lawyer and getting it in condition to sell, B of A would accordingly record a $110,000 loss on it, or 55% of the mortgage's outstanding value � as a side note, this is the "severity rate" that B of A uses for toxic mortgages it's forced to repurchase from institutional investors.

To get back to the main point, then, a full $9.5 billion of B of A's $15.2 billion in nonperforming mortgages are more than 180 days past due, meaning the bank has already taken the loss of them. That leaves us with $5.7 billion in nonperforming loans that haven't already been charged off. And to add one final twist, according to B of A, $3.1 billion of these are actually still being paid by the borrowers -- they're classified as nonaccrual, and thus nonperforming, simply for regulatory reasons. Once you remove this final chunk, in turn, we get $2.6 billion in mortgages that are noncurrent, nonperforming, and not already charged off. After applying the 55% loss severity rate quoted above, we get ... drum roll ... $1.4 billion.

So there you have it. While B of A has plenty of problems, as I covered in detail in this series, one of them is not a mountain of owned mortgages on its balance sheet.

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Thursday, March 7, 2013

Why VIVUS Is Poised to Keep Plunging

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, biopharmaceutical company VIVUS (NASDAQ: VVUS ) has received a distressing two-star ranking.

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

VIVUS facts

Headquarters (founded)	Mountain View, Calif. (1991)
Market Cap	$1.1 billion
Industry	Pharmaceuticals
Trailing-12-Month Revenue	$2.0 million
Management	CEO Leland Wilson (since 1991) CFO Timothy Morris (since 2004)
Return on Equity (average, past 3 years)	(52.8%)
Cash/Debt	$214.6 million / $0
Competitors	Eli Lilly GlaxoSmithKline Pfizer

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

On CAPS, 16% of the 428 members who have rated VIVUS believe the stock will underperform the S&P 500 going forward.

Earlier this week, one of those Fools, chrispycrunch, cautioned our community about getting too excited over VIVUS' new obesity drug Qsymia:

This is not the company to own. The insiders have been selling. The drug itself has risks, which will turn off many potential subjects even if deemed safe for them to own. There are drug alternatives coming to market (ie [Arena Pharmaceuticals]) which will hurt [VIVUS]. Beware. [VIVUS] also cut prices, because the free trial did not boost sales.

If you want market-topping returns, you need to protect yourself from any undue risk. Luckily, we've found another stock we are incredibly excited about -- excited enough to dub it "The Motley Fool's Top Stock for 2013." We have compiled a special free report for investors to uncover this stock today. The report is 100% free, but it won't be here forever, so click here to access it now.

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

Futures Up; PetSmart Down 8%

Stocks futures are up slightly this morning, ahead of Thursday’s bell. The Standard & Poor’s 500 index and Dow Jones Industrial Average are up both up about 0.3%. Jobless data provided further evidence of a slowly mending economy:

First-time jobless claims unexpectedly fell by 7,000 to 340,000 in the week ended March 2, the lowest since the period ended Jan. 19, according to data today from the Labor Department in Washington. The�median�forecast of 50 economists surveyed by Bloomberg called for an increase to 355,000. The four-week average dropped to a five-year low.

Falling are shares of PetSmart (PETM), down about 8% after it reported good quarterly results but provided full-year outlook below consensus forecasts. In the wake of earnings, Nomura analyst Aram Rubinson reiterated his Reduce call on the stock and $55 price target, well below yesterday’s closing price of $66.55. Piper Jaffray downgraded the stock to Neutral but RBC Capital Markets sees a buying opportunity, reports The Fly on the Wall:

RBC Capital believes the guidance was conservative. The firm notes that the company’s Q1 sales trends are improving sequentially, and it maintains an Outperform rating.

Shares of Boston Scientific (BSX) are up about 5%, perhaps after this news broke last night:

Boston Scientific Corp.�said its study on a novel heart device to prevent strokes will be presented in full at a meeting March 9, after the company surprised investors and organizers earlier this week with plans to release only a limited look at the safety data.

Initial findings from the clinical trial, called�Prevail, will be released at the�American College of Cardiology�meeting in�San Francisco, the Natick, Massachusetts-based company said in a statement. The study tracked the safety of the Watchman device for a week after surgery and examined whether it reduced the risk of stroke, clots or death 18 months after treatment.

J.C. Penney‘s (JCP) desperate slide may be over, at least for now. The stock, which has fallen 32% in the past week, is up 1.25% premarket.

Draghi: Do More to Promote Jobs, Growth

FRANKFURT, Germany (AP) -- European Central Bank President Mario Draghi is urging indebted governments to move beyond spending cuts and tax hikes and introduce reforms that would boost growth and reduce the "tragedy" of unemployment.

Draghi praised the progress made by the 17 European Union countries that use the euro in cutting their average government deficit to 3.5 percent of economic output overall last year. That's down from 4.2 percent the year before.

The reduction was done through spending cuts and more taxes. But these austerity methods have had the knock-on effect of hitting growth and sending the jobless rate to 11.9 percent, highest since the euro was launched in 1999.

Draghi went out of his way to urge steps for growth, by shaking up hiring rules and regulations affecting the products companies make. The goal is to encourage growth and new hires by companies in countries that have left large numbers of 20-somethings on the sidelines of their stagnant economies.

He said it was "of particular importance" to tackle youth joblessness. Unemployment is "a tragedy, and youth unemployment is an even bigger tragedy," Draghi added.

In Greece, the unemployment rate for the under-25s is 59 percent while in Spain it is 55 percent.

The ECB president said that austerity must be followed up with a "comprehensive structural reform agenda to improve the outlook for job creation, economic growth and debt sustainability."

Draghi spoke at a news conference Thursday after the bank left its key rate unchanged at a record low of 0.75 percent, even though the eurozone's economy is in recession. The ECB lowered its forecast for this year, saying the economy would shrink 0.5 percent instead of the 0.3 percent shrinkage projected in December.

Draghi's comments come as eurozone leaders appear to be reconsidering harsh austerity as a way of combating the crisis. While governments are still under pressure to cut deficits, eurozone finance ministers meeting earlier this week indicated they were now willing to give countries more time to close deficits, lessening the impact of cuts on growth.

Do We Still Need Saudi Arabia With Record U.S. Oil Production?

According to recently released data, the U.S. is pumping out more oil than it has in at least two decades, led by rapid production increases in Texas and North Dakota. As a result, Gulf Coast refiners have drastically reduced their reliance on foreign imports of certain grades of crude oil. The question remains, do we still need oil imports from the Middle East?�

The United States does continue to remain uncomfortably dependent on crude imports from the Persian Gulf, which raises important policy questions about America's future role in that region's security.

U.S. oil output soars to record high
According to annual data released last week by the U.S. Department of Energy, U.S. crude production increased by 812,000 barrels per day last�year, which represents the most rapid yearly increase since the first commercially viable oil well was drilled near Titusville, Pa., in 1859.

For the months of November and December, U.S. daily oil production rose above 7 million barrels per day�for the first time in at least two decades. Meanwhile, net crude imports into the U.S. declined by 437,000 barrels per day to 8.5 million barrels per day � the lowest level in 15 years.

Importantly, crude shipments from the Organization of the Petroleum Exporting Counties, or OPEC, fell overall, though imports from some member nations of the cartel, like Saudi Arabia, rose. More on that later.

Texas and North Dakota lead the way
North Dakota and Texas led the output gains, with North Dakota's field production of crude oil coming in at 769,000 barrels�per day in December, while Texas produced more than 2.2 million barrels�per day in the same month. In Texas, the Eagle Ford Shale and the Permian Basin provided the biggest boosts to the state's overall production, while the famous Bakken Shale accounted for the bulk of North Dakota's production gains.

The data underscore a major trend under way in these states. Thanks to new technologies like hydraulic fracturing and horizontal drilling, as well as enhanced oil recovery, that have made it economical to access reserves previously thought unrecoverable, oil companies drilling in these states have seen drastic improvements in the total quantities of oil recovered.

As a result, Texas field production of crude oil has more than doubled in just three years, from 31.4 million barrels in February 2010 to 62.4 million barrels in November�2012. Production growth in North Dakota has been even more staggering, rising threefold over the same time period, from 7.3 million barrels to 21.9 million�barrels.

The majority of this new oil output is light, sweet crude, which has a lower sulfur content and is less viscous than heavy, sour crude. One of the major consequences of this has been the dramatic reduction in Gulf Coast refiners' reliance on foreign imports of this type of oil.

Gulf Coast refiners reduce light oil imports
For years, many refineries, including those along the Gulf Coast, and especially those along the East Coast, have had to import light, sweet crude oil from abroad, mainly from OPEC's two largest West African members, Nigeria and Angola. But with rapid advances in the domestic production of light, sweet crudes over recent years, these countries are being forced to look elsewhere for new export�markets.

According to data from the EIA, the U.S. has reduced its imports of Nigerian crude by about half since July 2010, from over 1 million barrels a day to 543,000 barrels per day as of October 2012. And last year, Nigerian imports plunged by 363,000 barrels per�day. Similarly, Angolan imports have fallen to less than 200,000 barrels per day, down from a 2008 average�of 513,000.

According to Citigroup's head of commodities research, Edward Morse, the U.S. will stop importing West African light, sweet crude into the Gulf Coast by the second quarter of this year. And before mid-2014, he added, the U.S. and Canada will terminate West African crude imports altogether.

The shifting dynamics of U.S. crude oil supply are nowhere more evident than in the recent earnings data for some of the major Gulf Coast refiners. For instance, Valero (NYSE: VLO ) announced that it replaced all imports of light oil with domestic production at its Gulf Coast and Memphis�refineries.

Similarly, Phillips 66 (NYSE: PSX ) recently said that it will be increasing its domestic crude slate by 80%�this year, as the recently spun-off refiner seeks to capitalize on cheap and plentiful supplies of domestic light oil. Going forward, this trend is expected to accelerate, as new pipelines provide additional capacity for crude to be transported from plays like the Eagle Ford and the Permian Basin to Gulf Coast refineries.

Persian Gulf imports remain high
However, imports from Saudi Arabia � which produces heavier grades of oil � increased by 171,000 barrels over the course of last year. In fact, the U.S. was more reliant than ever on the Saudis last year.

Data show than by the end of November, it imported more than 450 million barrels of oil from the Middle East nation, which is more than it imported from them in the three preceding years.

For the first time in nearly a decade, Saudi imports made up more than 15% of total U.S. crude imports, while imports from the Persian Gulf accounted for more than a quarter.

U.S. role in Middle East security and final thoughts
Despite the widely heralded success of America's shale revolution and the consequent reduction in light oil imports from other OPEC nations, these data points highlight America's potential vulnerability to Saudi oil and raise some important questions about its role in the region's security.

At the Munich Security Conference early last month, Carlos Pascual, coordinator for international energy affairs at the U.S. State Department, reaffirmed Washington's commitment to peace, stability, and�security in the Middle East.

While he acknowledged the tremendous benefits brought about by the domestic shale revolution, he highlighted the globally determined nature of oil prices, saying: "We're dealing with global commodities ... When there is instability or insecurity in any part of the world, it drives up the global prices of those commodities, and we pay for it at the pump."

As long as U.S. oil production keeps booming, the midstream companies that transport and store the stuff will keep generating steady streams of income. Kinder Morgan is one such midstream operator, and one that investors should commit to memory due to its sheer size � it's the third-largest energy company in the U.S. � not to mention its enormous potential for profits. In The Motley Fool's new premium research report on Kinder Morgan, our top energy analyst breaks down the company's growing opportunity, as well as the risks to watch out for, in order to uncover whether it's a buy or a sell. To determine whether this dividend giant is right for your portfolio, simply click here now to claim your copy of this invaluable investor's resource. As an added bonus, you'll receive a full year of key updates and guidance as news develops, so don't miss out!

Microsoft Is a Bum Magnet

Microsoft (NASDAQ: MSFT ) has a thing for losers.

Barnes & Noble's (NYSE: BKS ) Leonard Riggio is the latest disgruntled founder to want to privatize his struggling company. In an SEC filing yesterday, Riggio revealed that he aspires to acquire his company's flagship bookstore business.

Riggio wants the retail chain and the related BN.com website. He's the board's chairman and owns 30% of the outstanding stock, so one could reason that he knows the company pretty well. You know what he doesn't want? Riggio has no interest in acquiring the fledgling Nook and meandering campus bookstore business that Microsoft bought into last year.

Yes, Mr. Softy seems to be left holding the bag on the struggling e-book platform and a chain of college bookstores that's growing obsolete as schools turn to digital textbooks.

It's not the first time that Microsoft has shelled out big money for a laggard.

Earlier this month Microsoft agreed to kick in $2 billion in the proposed $24 billion deal to take PC giant Dell (NASDAQ: DELL ) private.

One can always argue that Microsoft's investments were either opportunistic or tactical. Buying into the Nook could've swayed Barnes & Noble to abandon Android for its Nook tablets. It didn't. One can hope that Microsoft's investment in Dell will keep it from cranking out Android tablets and smartphones. It won't.

Previous 10-figure commitments have been tethered to conditions.

Microsoft agreed to reward Yahoo! handsomely in exchange for letting Bing take over the portal's search business. Microsoft has promised Nokia (NYSE: NOK ) "billions" for its support of Windows Phone 8.

However, isn't this a pretty sad lot?

A portfolio of Barnes & Noble, Dell, Yahoo!, and Nokia may have been great in the 1990s, but all four companies have had rough years lately. Yes, some of them have rallied recently, but the four companies still lag their peers.

Why is Microsoft partying like it's 1999? Why is it getting fixed up on DotComBubbleMingle?

Yes, once in a while Microsoft does manage to make an early investment in a fresh market leader, but there are too many lovable losers on its list. The world's largest software giant needs a new matchmaker.

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

Budget Spat Swamps Agenda481 comments

Across-the-board federal spending cuts began Friday, clearing the way for a series of budget battles that will consume much of Congress's energy and threaten to eclipse other items on President Barack Obama's second-term agenda.

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President Obama spoke with reporters Friday after meeting congressional leaders at the White House.

Mr. Obama signed an order late Friday directing $85 billion in cuts to domestic and defense programs, after holding a fruitless meeting with congressional leaders who remained at odds over how to avoid the reductions, known as a sequester.

The president said Friday he wouldn't allow continuing disagreements over spending cuts to derail his broader agenda, but attention now will turn to the next budget deadline�the need to pass a bill extending routine government funding after a stopgap bill expires March 27. Without an extension, a partial government shutdown would occur. The House of Representatives next week is expected to pass a Republican bill that would keep the government operating through September at the spending levels dictated by the sequester.

Earlier

Cuts Roll In as Time Runs Out
Fiscal Pain to Be Parceled Out Unevenly
Politics Counts: Sequester's Odd Politics
McKeon 'Very Concerned' About Military Impact
Sperling: Pain Will Force Action
For Troops, Sequester Seems Far Away
Live: Budget Battle Stream
Video: Sequester 101: What Does It Mean?

Charity assisting African orphans with AIDS a sham: SEC

The Securities and Exchange Commission has accused a Vero Beach, Fla., couple of hoodwinking senior citizens out of $75 million in a charitable-gift-annuity scheme.

The federal agency on Feb. 4 filed suit against Richard K. Olive and Susan L. Olive in the U.S. District Court for the Southern District of Florida, claiming that the husband-and-wife duo took over an inactive charity, slugged We The People Inc. of the United States, and drew millions from more than 400 mostly elderly investors in at least 30 states.

Initially, We The People started out as a nonprofit that promoted nuclear safety. The charity was inactive, however, and held no assets between the late 1990s and early 2008. The SEC claims that the Olives signed an employment agreement in March 2008 with the organization, aiming to raise money via sales of charitable-gift annuities in exchange for commissions.

The pair eventually paid themselves over $1.1 million in salary and commissions, plus hundreds of thousands in unauthorized payments, over the course of four years, the commission alleges. Much of the money coming in went either to the Olives or third-party promoters and consultants, according to the agency. At one point, the group claimed to have donated $21.8 million toward orphans with AIDS in Zambia, but We The People in fact made only a small payment to a third party that was shipping supplies to Africa, the SEC claims.

Elderly investors allegedly were encouraged to exchange stocks, annuities, real estate and cash for a phony charitable-gift annuity that purported to make charitable payments for the remainder of the client's life, the SEC claims. For instance, the group's marketing materials allegedly asked prospects, “Who's going to bail out your annuity at the full accumulated value — and you can receive cash back?” Instead, clients' “annuities” were worth only 65% to 75% of the full value because the organization took a cut of the asset's value and held it as a charitable gift, the SEC said.

Clients also were told falsely that We The People kept its reserve account in a “trust account” and that the products were covered with reinsurance to “minimize the risk,” according to the claim.

The SEC charged the couple with, among other things, fraud, the sale of unregistered securities and with selling securities by an unregistered broker-dealer.

This isn't the first time the Olives have run into trouble with their charitable activities: Mr. Olive is currently facing criminal charges of mail fraud, wire fraud and money laundering in federal court in Tennessee. In that case, he allegedly oversaw the National Foundation of America and obtained some $20 million in another charitable-gift-annuity plan. That case continues.

A related civil suit to wind down NFOA was filed in 2007. Regulators in a number of states, including California, Texas and Florida, either determined that these gift annuities weren't properly registered, or found that NFOA made misleading statements to clients.

Investors in the We The People case were not made aware of Mr. Olive's past, the SEC said.

Contact information for the Olives was not immediately available, and the two are not yet represented by an attorney in the SEC's case.

The SEC separately filed charges against We The People and the firm's in-house counsel, William G. Reeves, and both have agreed to settle the charges without admitting or denying the allegations.

“The SEC’s papers fairly spell out who the major players were in terms of culpability between Mr. and Ms. Oliver versus Mr. Reeves, who is a peripheral player but accepts responsibility,” said William Nortman, the attorney representing We The People and its in-house counsel William G. Reeves.

Darla MercadoEmail Darla@twitterLinkedIn
Darla Mercado covers life insurance, annuities and retirement products for InvestmentNews, and she's looking for advisers' informed opinions, plus chatter on products and other industry developments.

Verizon and the iPhone: Strange Bedfellows

In the following video, Motley Fool senior technology analyst Eric Bleeker takes a look at the strange relationship between telecom carriers such as�Verizon (NYSE: VZ ) and Apple's (NASDAQ: AAPL ) iPhone.

While mobile companies hate paying enormous subsidies on the phones, the method works for attracting customers. In the past 12 months, 53% of Verizon contract subscribers picked the iPhone vs. 44% the year before. Yet, in spite of the iPhone's influence, mobile companies are looking for a way to decrease their dependence on Apple. The problem is that Verizon and its peers must pay a subsidy of approximately $450 per iPhone, higher than many competing devices. If competing platforms could cut into Apple's dominance, that'd present big savings for such companies as Verizon and rival�AT&T.

Yet as Eric notes, in a recent tech conference Verizon CFO Fran Shammo highlighted why subsidies might not be going away. At the conference, a Deutsche Bank analyst asked why Verizon wouldn't simply promote lower-cost phones instead of the iPhone. As Shammo explained, the cost of promoting phones that consumers don't want has high costs in the long run. Once consumers aren't happy, they return those phones at huge costs to Verizon.�

In the end, the most cost-effective move for mobile companies is to promote the phones consumers want. With the iPhone continuing to gain share in America, that's a huge reason to believe that subsides that benefit Apple will be alive and well for years to come.�

Scared by Apple's plunge? We have expert advice for you.
While investors have given up on Apple continuing to grow against threats like Android, the company still has massive opportunities ahead. We've outlined them right here in The Motley Fool's premium Apple research service, and it may�give you the courage�to be greedy when others are fearful. If you're looking for some guidance on Apple's prospects, get started by�clicking here.

Wednesday, March 6, 2013

Devon Energy Hikes Dividend

Devon Energy (NYSE: DVN ) has lifted its quarterly dividend. The company will hand out $0.22 per share of its common stock on June 28 to shareholders of record as of June 14. This amount is 10% higher than the firm's previous disbursement of $0.20, which it paid in each of the preceding five quarters. Prior to that, the dividend was $0.17.

In the press release announcing the move, the company pointed out that it represents the eighth increase since 2004.

The new dividend annualizes to $0.88 per share. That yields 1.6% at Devon Energy's current stock price of $54.32.

PayOne Wages Mobile Wallet War on Home Depot

Privately held mobile payment company PayOne announced today that it has filed a patent infringement lawsuit against The Home Depot (NYSE: HD ) for its use of eBay's (NASDAQ: EBAY ) PayPal technology at its checkout.�

In a statement today, PayOne President and CEO Joe Lynam said:

Since 2000, PayOne has invested significant time and money developing its proprietary mobile payment technologies designed to simplify the checkout process and the PayOne systems have been deployed by digital merchants across the globe. The 'mobile wallet wars' have moved beyond the digital world into point of sale, but now face adoption challenges and substantial friction with consumer setup requirements, security concerns and lack of merchant required NFC infrastructure. PayOne's technology solves these challenges by enabling an 'instant wallet' capability that can be extended to the retail and physical world for billions of consumers worldwide, with no pre-registration or friction at point of sale, and no NFC infrastructure required.

PayOne has accused Home Depot of infringing on two separate patents, including the use of a phone number and PIN to pay, as well as point-of-sale payment. The company is seeking a court-ordered injunction, as well as unspecified damages.

According to PayOne, there are almost 10 billion mobile-connected devices internationally, and the company's Global Carrier Network currently offers payment ability for over 4 billion across 80 countries�.

As of this writing, neither The Home Depot,�nor eBay�have published any official responses to PayOne's suit.

Why Big Lots Shares Bounced

Big Lots (NYSE: BIG ) has had a big 2013.

The closeout merchandise retailer's stock is up more than 20% so far this year, trouncing the market's 8% rise. And the latest bump came after the company reported fourth-quarter earnings that were better than expected.

Here are three key highlights from the report:

Mixed profitability: Big Lots beat analysts' expectations for $1.99 per share in earnings on the quarter. Instead, the company managed to book $2.09 in profits, which was a 19%�jump over last year's tally. Comparable sales fell by 3.5%�in the U.S., but a bigger store base helped push total revenue up by 4.4%.

Still, gross margin dove to 39.6% of sales, which was the lowest quarterly figure the company has reported in years.

BIG Gross Profit Margin Quarterly data by YCharts

Canadian kicker
For the first time since acquiring its Canadian business in 2011, that unit wasn't a drag on Big Lots' earnings. Canadian operations actually kicked in $0.2 million�in net income for the quarter. Sure, that's not enough to even add $0.01 to the company's per-share profits. But it was much better than the $0.08 loss from last year's results.

Just don't plan on that division powering more profits in the near-term, though. Big Lots expects Canada to lose money again in 2013, on the order of between $0.05 and $0.10 a share.

Solid outlook
Investors were probably the most relieved to see the company's updated outlook. Big Lots expects adjusted earnings this year to come in at about $3.15 a share, or 5% better than the $2.99 comparable figure from 2012. Sales are expected to rise by 2% to 3%, or just a bit slower than this year.

If Big Lots can deliver steady sales growth like that, the company should keep earning its way off the discount rack. Valuing shares at less than 14 times trailing earnings -- even after the big run-up -- the market has been too pessimistic about Big Lot's future. The company may have profitability concerns to deal with, but its growth looks set to continue.

The next big idea

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5 Companies Benefiting From Low Feedstock Costs

Listening to Westlake Chemicals' (NYSE: WLK ) earnings call on Tuesday continued to add fuel to the argument that low natural gas prices are a boon for the chemical and agriculture industries. Leveraging the low costs of ethane and propane, Westlake turned a 6.8% slip in revenues into a 209% increase in operating income. Westlake certainly isn't the only company to be experiencing this advantage, and some of the other beneficiaries are putting up a public fight against liquid natural gas exportation from the United States in order to keep current margins as the status quo. What are some other major players enjoying the current market prices? Check out the video below.

Certainly not Chesapeake Energy, a major natural gas producer
Energy investors would be hard-pressed to find another company trading at a deeper discount than Chesapeake Energy. Its share price depreciated after negative news surfaced concerning the company's management and spiraling debt picture. Plummeting natural gas prices have certainly not helped the situation either. While these issues still persist, giant steps have been taken to help mitigate the problems. To learn more about Chesapeake and its enormous potential, you're invited to check out The Motley Fool's brand-new premium report on the company. Simply click here now to access your copy, and as an added bonus, you'll receive a full year of key updates and expert guidance as news continues to develop.

3 Shares the FTSE 100 Should Beat Today

LONDON -- The FTSE 100 (FTSEINDICES: ^FTSE ) has started the week with a moderate fall from last Friday's close, down 0.38% to 6,354 as of 7:40 a.m. EST. Proposed new measures in China aimed at cooling an overheating property market raised fears of a fall in commodities demand, sending the big FTSE 100 miners down in morning trading.

But there are some companies whose shares are falling further than the index today. Here are three of them.

Debenhams (LSE: DEB )
Debenhams added to shareholders' woes today, as the share price has dropped another 11.2% to 84 pence. The price has slumped more than 30% since November highs of more than 120 pence, with today's fall being triggered by a first-half trading update.

Although the stores were performing well after Christmas, with like-for-like sales up 2.9% for the first 18 weeks of the half, the cold weather and snow sent January's like-for-like sales down 10%, and additional promotional events in February have not succeeded in fully recovering the lost trade. Pre-tax profit for the first half is now expected to be about 120 million pounds.

Amlin (LSE: AML )
The morning's response to preliminary results took a little shine off the recent strong run on Amlin shares, taking the price down 2.4% to 421 pence. The specialist insurance firm turned 2011's 193.8 million pound pre-tax loss into a 264.2 million pound profit for 2012, even after 141.6 million pounds in claims stemming from Hurricane Sandy (2011 brought a total of 500 million pounds in catastrophe claims).

The firm managed an investment return of 165.3 million pounds -- equivalent to 4.1% -- and saw net tangible assets rise from 243 pence to 258.5 pence per share. The full-year dividend was lifted by 4.3% to 24 pence per share.

Lamprell (LSE: LAM )
Shares in oil & gas engineering services firm Lamprell fell 2.3% to 128 pence on news that James Moffatt has taken up his role as chief executive and that his acting counterpart, Peter Whitbread, has stood down and will remain on the board.

Lamprell shares crashed by more than 50% last May after the firm issued a shock profit warning, and they haven't really recovered much since -- a positive start to 2013 has pretty much tailed off of late, and there's a pre-tax loss of 67 million pounds expected for the year to December 2012. But today's announcement did also say, "We have made significant progress over the last six months."

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Stoneridge Passes This Key Test

There's no foolproof way to know the future for Stoneridge (NYSE: SRI ) or any other company. However, certain clues may help you see potential stumbles before they happen -- and before your stock craters as a result.

A cloudy crystal ball
In this series, we use accounts receivable and days sales outstanding to judge a company's current health and future prospects. It's an important step in separating the pretenders from the market's best stocks. Alone, AR -- the amount of money owed the company -- and DSO -- the number of days' worth of sales owed to the company -- don't tell you much. However, by considering the trends in AR and DSO, you can sometimes get a window onto the future.

Sometimes, problems with AR or DSO simply indicate a change in the business (like an acquisition), or lax collections. However, AR that grows more quickly than revenue, or ballooning DSO, can, at times, suggest a desperate company that's trying to boost sales by giving its customers overly generous payment terms. Alternately, it can indicate that the company sprinted to book a load of sales at the end of the quarter, like used-car dealers on the 29th of the month. (Sometimes, companies do both.)

Why might an upstanding firm like Stoneridge do this? For the same reason any other company might: to make the numbers. Investors don't like revenue shortfalls, and employees don't like reporting them to their superiors.

Is Stoneridge sending any potential warning signs? Take a look at the chart below, which plots revenue growth against AR growth, and DSO:

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. FQ = fiscal quarter.

The standard way to calculate DSO uses average accounts receivable. I prefer to look at end-of-quarter receivables, but I've plotted both above.

Watching the trends
When that red line (AR growth) crosses above the green line (revenue growth), I know I need to consult the filings. Similarly, a spike in the blue bars indicates a trend worth worrying about. Stoneridge's latest average DSO stands at 60.8 days, and the end-of-quarter figure is 58.4 days. Differences in business models can generate variations in DSO, and business needs can require occasional fluctuations, but all things being equal, I like to see this figure stay steady. So, let's get back to our original question: Based on DSO and sales, does Stoneridge look like it might miss its numbers in the next quarter or two?

I don't think so. AR and DSO look healthy. For the last fully reported fiscal quarter, Stoneridge's year-over-year revenue grew 19.7%, and its AR dropped 12.8%. That looks OK. End-of-quarter DSO decreased 27.2% from the prior-year quarter. It was down 9.0% versus the prior quarter. Still, I'm no fortuneteller, and these are just numbers. Investors putting their money on the line always need to dig into the filings for the root causes and draw their own conclusions.

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Add Stoneridge to My Watchlist.