Merck Stock Isn't Worth It

Big pharma companies are massive, complicated beasts. Each year, they generate billions in revenue from drugs that target dozens of diseases, spend billions more on R&D budgets, and can have dozens of ongoing trials at various levels of completion and success. Additionally, each company has been or will be challenged by the patent cliff.

One company that is about to face the brunt of its patent cliff exposure is Merck (NYSE: MRK  ) , which is set to lose exclusivity for its former megablockbuster Singulair in its last major worldwide markets this year. There are still some interesting molecules in the pipeline and several major approvals pending. However, I don't think Merck stock is worth owning. Here are a few reasons why.

Safety and efficacy risks for approved therapies
Aside from losing billions of dollars in sales from generic competition to Singulair, Merck should raise several red flags for investors for current products. The company's cholesterol therapy Vytorin, a combination of Zetia and Zocor, is currently being evaluated in a long-term study to determine its safety effectiveness in preventing heart attacks. Although Zetia and Zocor are effective stand-alone treatments, several smaller studies have showed that combining the two yields no significant benefits.

The IMPROVE-IT study I mentioned above began in 2005 and is scheduled for completion in 2014. Despite passing the final safety checkpoint in March, any final results questioning Vytorin's worth could slam sales, which have already been in decline since questions first arose several years ago. A total of $1.7 billion in 2012 sales are still at risk. That could be bad news for investors, but it gets worse.   

A recent study found that GLP-1 atagonists for type 2 diabetes -- such as the company's new best-selling franchise Januvia/Janumet and Bristol-Myers Squibb's Byetta -- double a patient's chances of developing pancreatitis. That could make the growth of the franchise, which brought in $5.75 billion in 2012, a little more uncertain.

It doesn't help that a new therapy from Johnson & Johnson (NYSE: JNJ  ) recently gained approval from the Food and Drug Administration. Invokana works by a completely different mechanism than Januvia. Although it's not without risks itself, Invokana beat Januvia head-to-head in a phase 3 trial. Things could get dicey for Merck in the next few months and quarters as investors get their first glimpse into the effect, if any, on sales.

Investing wildcards
Wielding a first-in-class therapy such as Invokana doesn't always pan out. Merck is learning that the hard way with first-in-class HIV treatment Isentress. Gilead Sciences (NASDAQ: GILD  ) , the leader in HIV and AIDS therapies, recently launched a four-in-one pill named Stribild that many are chalking up to rule the industry. Whereas Stribild only requires one pill per day, Merck's treatment requires two pills per day to remain effective. Convenience is a major factor for patients -- and Merck simply cannot compete on that front with Isentress.

In a patch of good news, Merck does have an exciting next-generation psoriasis treatment in phase 3 development. A unique mechanism of action would make MK-3222 a first-in-class treatment and potential blockbuster should it eventually gain approval from the FDA. The first three biologic therapies approved for psoriasis raked in a combined $19.64 billion in 2012. That includes sales to patients with other inflammatory diseases, but it shows just how successful MK-3222 could be. With several years to go before the conclusion of trials, however, investors may be better off waiting for the story to develop.

Foolish bottom line
Weighing the risks against the potential rewards can be difficult for any investment. However, I think it is pretty clear-cut here. I would not invest in Merck stock right now. Staying afloat with a sinking Singulair may be considered a "win" as numbers come rolling in during subsequent quarters, but I can see a lot more scenarios where even that doesn't happen. Besides, there are too many other established pharmaceutical and biotechnology companies with brighter futures than the company. Do you disagree with me? Let me know in the comments section below and be sure to answer the looming question:

Can Merck beat the patent cliff?
This titan of the pharmaceutical industry stumbled into 2013 and continues to battle patent expirations and pipeline problems. Is Merck stock still a solid dividend play, or should investors be looking elsewhere? In a new premium research report on Merck, The Fool tackles all of the company's moving parts, its major market opportunities, and reasons to both buy and sell. To find out more click here to claim your copy today.

 

Should We Be Worried About China's North American Energy Grab?

As you probably recall, toward the end of February China's oil giant CNOOC (NYSE: CEO  ) closed on its largest purchase ever, a $15.1 billion takeover of Canadian oil and gas company Nexen. With that acquisition, CNOOC has now expanded its presence in Canada and the U.S. -- both onshore and in the Gulf of Mexico -- to go along with operations in the South and East China seas, Indonesia, Iraq, Australia, Africa, South America, and the North Sea.

Should we be concerned about the company's movement into many of the world's major producing areas? After all, while many look to China as the primary engine of global economic growth, there are those who view the giant country as a hotbed of corruption and fraud.

CAT's catastrophe
The powers that be at heavy-equipment manufacturer Caterpillar (NYSE: CAT  ) would probably vote for the later label. The company acquired a Chinese mine safety equipment manufacturer last summer, only to discover before year's end the presence of "deliberate multi-year, coordinated accounting misconduct." The uncovered shenanigans necessitated a write-off of most of the value of the $653.4 million deal and forced a paring away of about half of the Caterpillar's expected earnings for the fourth quarter.

That incident appears to be anything but isolated. One observer maintains that in 2010 a whopping 146,000 corruption cases were initiated in China, about 400 per day. Of the 14 that the country's media chose to discuss, the average amount pilfered was 18 million yuan, or nearly $2.9 million.

None of this is to claim corruption and fraud at CNOOC. But the atmosphere from which it has sprung, along with the scope of China's worldwide energy spread, is enough to inspire both economic and geopolitical concerns. It's a trend that isn't especially new. Back in 2009 I wrote a piece for The Motley Fool titled "Will China Buy All the World's Oil?" In it, I predicted, perhaps too conservatively, that "CNOOC's deep pockets just might leave it operating a stone's throw from U.S. shores."

Partnering with Chesapeake
By the very next year, even a gentle toss of a stone became unnecessary when the Chinese company closed a deal with Chesapeake Energy (NYSE: CHK  ) that gave it a one-third interest in the Oklahoma City company's 600,000 Eagle Ford acres. It also owns an identical stake in Chesapeake's 800,000 acres in the Niobrara play in Colorado and Wyoming. In addition, the company owns several blocks in Alaska. Offshore, the Nexen purchase included acreage in the U.S. Gulf of Mexico.

In Canada, the company owns a 12.39% in MEG Energy, a pure play Canadian company that produces primarily bitumen in Northern Alberta. It also has a 60% interest in Northern Cross, a Calgary-based producer. In 2011 it spent $2 billion to buy Opti Canada. Along with additional properties in Canada, the Gulf, and the Middle East, Nexen also brought with it producing properties in the North Sea and offshore Nigeria.

Heading for cold country
Now, with its hooks in much of the oil-producing hot sports, the Chinese government and its oil industry -- including the likes of CNOOC, PetroChina (NYSE: PTR  ) , and China Petroleum and Chemical Corp., or Sinopec (NYSE: SNP  ) -- is attempting to court tiny Iceland. Why? Because, pun unintended, the Arctic may become the next hot spot for oil, gas, and minerals production.

Indeed, as was stated in a Christian Science Monitor article earlier this week, "In fact, say Chinese Arctic experts and foreign observers, the attention that Beijing is paying to a minnow state with a population 5,000 times smaller than its own is all part of China's bid to stretch its influence into the Arctic as part of a global vision." In the process, Chinese authorities are terming their country a "near Arctic nation." Never mind that the country sits at least 1,000 miles from the Arctic Circle.

China is also lobbying to be dubbed a permanent observer of the Arctic Council, a group that will meet next month in Tromso, Norway. However, the U.S. and Canada are likely to use their veto power to thwart that ploy. But given China's dogged determination to become a progressively bigger energy player, such a roadblock could turn out to be very temporary.

Perhaps even more meaningful will be President Obama's impending decision on whether to approve TransCanada's (NYSE: TRP  ) proposed Keystone XL pipeline. It's likely that, with another negative decision from the president, Canada will seek to become an even closer pal of China's than is already the case.

National Oilwell Varco is an expanding oil-field company with a global reach. Further, it is perhaps the safest investment in the energy sector because of its industry-dominating market share. This company is poised to profit in a big way; its customers are both increasing the number of new drilling rigs and updating aging fleets of offshore rigs. To help determine if it could be a good fit for your portfolio, you're invited to check out The Motley Fool's premium research report featuring in-depth analysis on whether NOV is a buy today. For instant access to this valuable investor's resource, simply click here now to claim your copy.

Pentagon Ends Week With Awards of $7.4 Billion in New Contracts

The Department of Defense closed out last week with a massive $7.4 billion in new contract awards Friday. The bulk of these awards came in the form of a single, multi-recipient contract for the provision of networking equipment to the Air Force -- but it wasn't all IT, all the time. Other notable winners Friday included:

L-3 Communications (NYSE: LLL  ) , which won a firm-fixed-price foreign military sales contract not to exceed $45.2 million in value. L-3 will provide pilots training and logistics support for Iraqi Air Force Cessna C208 transport aircraft and C172 utility aircraft over the next 12 months. Britain's BAE Systems (NASDAQOTH: BAESY  ) , which was awarded a $34.3 million firm-fixed-price contract to supply the U.S. Air Force with 336 AN/APX-125 Mode 5 Advanced Identify Friend/Foe units for installation aboard F-16 fighter jets. BAE is expected to complete work on this contract by May 31, 2015. General Dynamics' (NYSE: GD  ) Electric Boat subsidiary, which won a $20 million cost-plus-fixed-fee modification, extending a previously awarded contract to support U.S. Navy nuclear submarines based at the Naval Submarine Support Facility, Naval Submarine Base in New London, Conn., through March 2014. Reliance Steel & Aluminum (NYSE: RS  ) subsidiary I-Solutions Direct. In the "now for something completely different" category, I-Solutions was granted a second option year extension worth $14.8 million as part of a fixed-price with economic-price-adjustment, indefinite delivery/indefinite quantity contract. Reliance's subsidiary will supply "various metal items" to the U.S. Army, Navy, Air Force, Marine Corps, and federal civilian agencies. This contract runs through April 22, 2014.

More Expert Advice from The Motley Fool

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

1 Number Intuitive Surgical Stock Investors Should Know Ahead of Earnings

Procedures. For Intuitive Surgical (NASDAQ: ISRG  ) investors, nothing matters so much as seeing the da Vinci robotic surgery system used in more procedures, especially general surgery.

Despite reports of errors using the da Vinci system, Intuitive Surgical has put up good numbers so far. Total procedures rose 25% in the fourth quarter and 29% in last year's first quarter. The company sold 175 and 140 da Vinci systems, respectively, during those periods.

For its part, Wall Street is expecting revenue to grow 17.7% to $582.9 million, resulting in $3.99 of profit per share. The company has beat earnings estimates in each of the past four quarters, according to data supplied by Yahoo! Finance. Intuitive Surgical stock is still down nearly 6% over that period.

Would another beat send Intuitive Surgical stock soaring? Tim Beyers of Motley Fool Rule Breakers and Motley Fool Supernova weighs in on this question in the video below. Please watch and then leave a comment to let us know what you whether you would buy, sell, or short Intuitive Surgical stock at current prices.

Are stories of this demise greatly exaggerated?
Recently, some investors have questioned Intuitive Surgical's future. However, Intuitive Surgical expert Karl Thiel believes a visible path to long-term growth persists. Will Intuitive capitalize, or be crushed by unforeseen pitfalls? His report highlights all of the key opportunities and risks facing the company -- and includes a full year of ongoing updates as key new hits -- so be sure to claim your copy by clicking here now.

Will Twitter Follow Facebook Home?

Social networker Facebook  (NASDAQ: FB  ) recently launched its Home suite of software and services, which sits on top of Google  (NASDAQ: GOOG  ) Android as a secondary layer. A Twitter executive recently hinted that the rival social platform has been exploring similar strategies on Android, which could put competitive heat on Facebook.

This level of integration is only possible on Android, since Apple  (NASDAQ: AAPL  ) and Microsoft  (NASDAQ: MSFT  ) exert much more control over their respective mobile platforms.

In the video below, Fool contributor Evan Niu, CFA, discusses the possibility of Twitter following Facebook Home.

After the world's most hyped IPO turned out to be a dunce, most investors probably don't even want to think about shares of Facebook. But there are things every investor needs to know about this company. We've outlined them in our newest premium research report. There's a lot more to Facebook than meets the eye, so read up on whether there is anything to "like" about it today, and we'll tell you whether we think Facebook deserves a place in your portfolio. Access your report by clicking here.

SVB Financial: 9 Critical Numbers

Why Zep's Earnings May Be Less Than Awesome

It takes money to make money. Most investors know that, but with business media so focused on the "how much," very few investors bother to ask, "How fast?"

When judging a company's prospects, how quickly it turns cash outflows into cash inflows can be just as important as how much profit it's booking in the accounting fantasy world we call "earnings." This is one of the first metrics I check when I'm hunting for the market's best stocks. Today, we'll see how it applies to Zep (NYSE: ZEP  ) .

Let's break this down
In this series, we measure how swiftly a company turns cash into goods or services and back into cash. We'll use a quick, relatively foolproof tool known as the cash conversion cycle, or CCC for short.

Why does the CCC matter? The less time it takes a firm to convert outgoing cash into incoming cash, the more powerful and flexible its profit engine is. The less money tied up in inventory and accounts receivable, the more available to grow the company, pay investors, or both.

To calculate the cash conversion cycle, add days inventory outstanding to days sales outstanding, then subtract days payable outstanding. Like golf, the lower your score here, the better. The CCC figure for Zep for the trailing 12 months is 72.9.

For younger, fast-growth companies, the CCC can give you valuable insight into the sustainability of that growth. A company that's taking longer to make cash may need to tap financing to keep its momentum. For older, mature companies, the CCC can tell you how well the company is managed. Firms that begin to lose control of the CCC may be losing their clout with their suppliers (who might be demanding stricter payment terms) and customers (who might be demanding more generous terms). This can sometimes be an important signal of future distress -- one most investors are likely to miss.

In this series, I'm most interested in comparing a company's CCC to its prior performance. Here's where I believe all investors need to become trend-watchers. Sure, there may be legitimate reasons for an increase in the CCC, but all things being equal, I want to see this number stay steady or move downward over time.

Source: S&P Capital IQ. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.

Because of the seasonality in some businesses, the CCC for the TTM period may not be strictly comparable to the fiscal-year periods shown in the chart. Even the steadiest-looking businesses on an annual basis will experience some quarterly fluctuations in the CCC. To get an understanding of the usual ebb and flow at Zep, consult the quarterly-period chart below.

Source: S&P Capital IQ. Dollar amounts in millions. FQ = fiscal quarter.

On a 12-month basis, the trend at Zep looks less than great. At 72.9 days, it is 8.7 days worse than the five-year average of 64.2 days. The biggest contributor to that degradation was DIO, which worsened 11.8 days when compared to the five-year average.

Considering the numbers on a quarterly basis, the CCC trend at Zep looks OK. At 77.8 days, it is 10.6 days worse than the average of the past eight quarters. Investors will want to keep an eye on this for the future to make sure it doesn't stray too far in the wrong direction. With both 12-month and quarterly CCC running worse than average, Zep gets low marks in this cash-conversion checkup.

Though the CCC can take a little work to calculate, it's definitely worth watching every quarter. You'll be better informed about potential problems, and you'll improve your odds of finding underappreciated home run stocks.

Looking for alternatives to Zep? It takes more than great companies to build a fortune for the future. Learn the basic financial habits of millionaires next door and get focused stock ideas in our free report, "3 Stocks That Will Help You Retire Rich." Click here for instant access to this free report.

Add Zep to My Watchlist.

Riches to Rags: Tales of Woe From Those Who Had It and Lost It

1 Mind-Blowing Comparison of Apple and Amazon

A couple months ago when hedge fund celebrity David Einhorn was making a media blitz to sell his "iPref" idea to Apple (NASDAQ: AAPL  ) , he made an interesting comparison to Amazon.com (NASDAQ: AMZN  ) . He noted that Apple had generated over $20 billion in operating cash flow in the fourth quarter, which was "more money than Amazon has made in its entire life."

The fund manager also noted that both companies had similar price-to-sales multiples at the time. Apple has declined further since then and its P/S is currently 2.3, while Amazon trades at two times sales. Their earnings multiples are quite a different story, though, as Amazon has been reinvesting heavily in its infrastructure in recent years. Amazon posted a net loss of $39 million last year, rendering its P/E meaningless. The companies are two of the most dominant tech giants today and shape our digital lives, and are increasingly competing on numerous fronts.

I decided to go back and see if Einhorn's initial claim held up. Jeff Bezos founded Amazon in 1994, and the company went public in 1997. What started off as primarily a bookselling website has since transformed over the past two decades into the largest e-commerce platform in the world.

Like most young businesses, Amazon posted net losses for many years and wouldn't generate black ink until 2003 -- nine years after being incorporated. Net income would soar over the next few years until declining since 2010 amid aforementioned infrastructure investments.

Adding up Amazon's lifetime earnings as a cumulative figure, it doesn't even compare to Apple's profits in its most recent single quarter. Not even close.

Source: SEC filings.

Amazon's lifetime earnings have been $1.9 billion (which is also the amount of its retained earnings currently on the balance sheet), and only recently in 2009 did the company recoup its prior losses. Last quarter, Apple's net income was $13.1 billion, or nearly seven times Amazon's lifetime total.

Einhorn was seemingly referring to Apple's operating cash flow (which was higher than net income at $23.4 billion), but even just using the bottom line, it's clear Apple blows Amazon's lifetime earnings out of the water.

There is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

Giant Interactive Appoints New CEO

Boeing in Line for $300 Million Contract to Support NATO

Obama's Budget Hurts Seniors, Helps Hospitals

President Barack Obama's proposed budget for the next fiscal year was a mixed bag for the health-care sector.

Bad news for Medicare recipients 
At least it's bad news for those seniors rich enough to afford paying a little more for Medicare.

President Obama's budget establishes five new income brackets that would have to pay increasingly higher premiums. Right now, there are four brackets starting with singles making more than $85,000 per year or couples earning more than $170,000. In addition to the new brackets, the proposal would increase the premiums.

The end result is $50 billion in the government's coffers over 10 years, nearly double the estimate of last year's income from premium increases for higher-income seniors. Right now, 1 in 20 Medicare recipients pay a higher premium, which will increase to 1 in 4 as the income tiers kick in. At that point, the tiers will increase, adjusting for inflation.

It's hard to see how this could hurt drugmakers. Even with the increased premiums, Medicare is still a pretty good deal. Most seniors will grin and bear it, keeping coverage.

Health insurers such as Universal American (NYSE: UAM  ) and Humana (NYSE: HUM  ) that offer supplementary Medicare insurance could be hurt if seniors decided to drop the added coverage, but I doubt the increased premiums will put a major dent in seniors' budgets. Retirees making more than $85,000 per year will have to pay about $250 more per year than they do right now. Any losses will be more than be made up for by the Centers for Medicare and Medicaid Services' decision this month to reverse its  previously announced cuts to reimbursement rates.

Good news for hospitals 
Obama's budget proposes to help hospitals such as Health Management Associates (NYSE: HMA  ) , HCA Holdings (NYSE: HCA  ) , and Community Health Systems (NYSE: CYH  ) . Hospitals have routinely been given Disproportionate Share payments from Medicaid to help pay for uninsured patients that the hospitals treat but aren't reimbursed for.

The Patient Protection and Affordable Care Act was expected to make those payments unnecessary through the expansion of Medicaid. The uninsured patients that the federal government was picking up the tab for would now be covered under Medicaid.

But, you'll recall that the Supreme Court said the expansion was optional for states since the federal government doesn't pick up the full payments. Quite a few states have used their new-found power to turn down the expanded Medicaid, leaving hospitals in the same situation they're currently in.

Obama's budget proposes to delay the cuts to the Disproportionate Share program, sending $500 million to hospitals that was scheduled to be cut in 2014. Indirectly, the extra payments are good for insured patients and the companies they have their insurance with since hospitals would surely try to pass some or all of the added burden onto paying customers.

At this point, it's only a temporary fix, though; hospitals are still scheduled to see cuts to Disproportionate Share payments starting in 2015, which culminate in a $4 billion reduction in 2022.

Just a suggestion
Keep in mind that the President's budget is just a proposal to Congress, which ultimately sets the budget. Investors need to keep one eye on Wall Street and the other on Washington D.C., since the latter can have substantial influence on health-care spending.

Not to mention, it has an effect on your ability to retire. Making the right financial decisions today makes a world of difference in your golden years, but with most people chronically under-saving for retirement, it's clear not enough is being done. Don't make the same mistakes as the masses. Learn about The Shocking Can't-Miss Truth About Your Retirement. It won't cost you a thing, but don't wait, because your free report won't be available forever.

Down but Not Out: Why Apple's Still the Best Buy in All of Tech

Apple stock has taken a drubbing over the past year. In this video, Andrew Tonner offers three reasons he thinks Apple is still a great buy:

It trades at ridiculously low valuations, particularly given its cash reserves. It will probably launch a low-cost iPhone to finally penetrate emerging markets, which has been a weak spot for the company.  It's likely to roll out either its iWatch or its iTV next year, in a move that should help boost revenue and profit growth.

Andrew argues that positioning yourself in this company at today's low valuations could pay off this time next year.

There's no doubt that Apple is at the center of technology's largest revolution ever and that longtime shareholders have been handsomely rewarded, with more than 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

Merrill Lynch's "Thundering Herd" Returns to Glory

Union Pacific Will Keep Finding New Ways to Profit

On Thursday, Union Pacific (NYSE: UNP  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Union Pacific has benefited from the cost advantage that railroads have during periods of high energy prices, but the devastation in the commodities markets recently has had a negative impact on shipping volume. Nevertheless, the railroad giant has managed to turn to alternative revenue sources. Let's take an early look at what's been happening with Union Pacific over the past quarter and what we're likely to see in its quarterly report.

Stats on Union Pacific

Analyst EPS Estimate	$1.96
Change From Year-Ago EPS	9.5%
Revenue Estimate	$5.22 billion
Change From Year-Ago Revenue	2.1%
Earnings Beats in Past 4 Quarters	4

Source: Yahoo! Finance.

Can Union Pacific keep on rolling this quarter?
Analysts have reined in their expectations for Union Pacific over the past few months, reducing their earnings-per-share calls for both the first quarter and the full 2013 year by $0.09. The stock hasn't fallen as a result, but its gains of about 7% since early January have been somewhat muted.

In recent years, railroads have lived by commodity demand, and some of them have been slowly dying by commodity demand. In particular, low coal prices have been a big hit to the industry, especially for CSX (NYSE: CSX  ) and Norfolk Southern (NYSE: NSC  ) , whose focus on the coal-rich Appalachian region has given them above-average exposure to the market. Yet yesterday, CSX managed to report record profits despite coal volumes that fell 10%.

Union Pacific, though, has benefited from a couple of points in its favor. First, it has never relied on coal to the same extent as Norfolk or CSX. But more importantly, Union Pacific has also moved aggressively to cash in on the potential in moving oil and other energy products by rail, especially in hard to reach areas like the Bakken Shale play.

But despite Union Pacific's strong competitive position, it has to be prepared for rivals to disrupt the industry. Back in March, Berkshire Hathaway's (NYSE: BRK-A  ) (NYSE: BRK-B  ) Burlington Northern Santa Fe Railway division said it would look at potentially converting its locomotives to use liquefied natural gas rather than diesel fuel. With a potential cost savings of up to 90%, the impact could be huge if BNSF can successfully make the conversion, and Union Pacific would need to respond quickly in order to avoid an income-destroying profit margin squeeze.

In Union Pacific's earnings report, look to see whether the company reports the same strength in chemicals for use by the energy industry that CSX reported yesterday, as well as volumes of fertilizers and phosphates. If Union Pacific can keep its volume of oil high, then it should be able to outperform its peers.

As strong as Union Pacific is, CSX remains a big rival. Still, CSX continues to face difficult obstacles due to a domestic surplus of natural gas and coal's declining popularity. To help investors better understand how CSX can deal with these challenges, The Motley Fool has released a brand-new premium research report authored by Isaac Pino, industrials analyst and transportation expert. Isaac provides an in-depth look at CSX's competitive advantages, risk areas, and prospects for the future. Simply click here now to access your copy of this invaluable investor's resource.

Click here to add Union Pacific to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

U.S. Stocks Advance on Earnings as Housing Starts Jump

You need to enable Javascript to play media on Bloomberg.com

Play

The Top Ten Stocks for April 16

U.S. stocks rallied, with the Standard & Poor's 500 Index rebounding from its biggest drop since November, as housing starts and earnings from Coca-Cola Co. (KO) to Johnson & Johnson topped estimates.

All 10 industry groups advanced as raw-materials and consumer-staples companies gained the most, rising at least 1.7 percent. Coca-Cola jumped 5.7 percent as Latin American sales volume increased. Johnson & Johnson added 2.1 percent as new drugs and the acquisition of Synthes Inc. boosted sales.

The S&P 500 climbed 1.4 percent to 1,574.50 at 4 p.m. in New York, for the largest increase since Jan. 2. The equity benchmark index plunged 2.3 percent yesterday, its biggest tumble since Nov. 7, after China's economy grew at a slower pace than forecast and a slump in gold weighed on commodity shares. The Dow Jones Industrial Average rose 157.58 points, or 1.1 percent, to 14,756.78 today. About 6.4 billion shares traded on U.S. exchanges, in line with the three-month average.

"The almost under-the-radar improvement in housing is one of the most important positive elements in the economy," Stephen Wood, who helps manage about $163 billion as the New York-based chief market strategist for North America at Russell Investments, said by telephone. "It's balancing off the punctuations of volatility," he said. "There is an economy in the U.S. which we don't see going into recession, corporate profitability is in a maturing cycle but continues to come in positive, and the Federal Reserve's accommodative."

Housing Starts

New-home construction in the U.S. jumped more than forecast in March as multifamily projects climbed to the highest level in more than seven years, according to Commerce Department figures. Separate data showed the cost of living declined in March for the first time in four months as cheaper gasoline and clothing kept inflation in check. Factory production unexpectedly dropped, adding to recent signs that manufacturing is ! cooling.

The International Monetary Fund cut its global growth forecast and urged European policy makers to use "aggressive" monetary policy as a second year of contraction leaves the euro area's recovery lagging behind the rest of the world. The global economy will expand 3.3 percent this year, less than the 3.5 percent forecast in January, the Washington-based fund said, trimming its prediction for this year a fourth consecutive time.

U.S. equities rallied last week, sending the S&P 500 to a record, amid optimism that global stimulus efforts and corporate earnings growth will continue to power the four-year bull market. Fed Bank of New York President William C. Dudley said today that a slowdown in the pace of employment growth in March highlights the need to maintain the pace of bond purchases.

'Sweet Spot'

"We're in a little bit of a sweet spot where the economic data is good enough to keep us out of fears of a recession, but not so good that the Federal Reserve is going to start to tighten in the near future," Brad Sorensen, director of market and sector analysis at San Francisco-based Charles Schwab Corp., said by telephone. His firm has $2.08 trillion in client assets. "We saw a lot of tempering of expectations in the pre- announcement season, and that set up the potential for beating expectations when the numbers come in."

Some 12 companies on the S&P 500 (SPX) report earnings today. Of the 43 stocks that have reported their financial results so far this season, 71 percent have beaten estimates for profit and 56 percent have exceeded forecasts for sales.

The Chicago Board Options Exchange Volatility Index, or VIX, fell 19 percent to 13.96. The VIX (VIX), which moves in the opposite direction to the S&P 500 about 80 percent of the time, surged 43 percent yesterday, the most since August 2011, as U.S. stocks tumbled. Stocks extended losses yesterday as bombs killed three people near the finish line of the Boston Marathon, whil! e almost ! all of the day's decline came before the incident.

Cyclical Index

The Morgan Stanley Cyclical Index advanced 1.9 percent while the Dow Jones Transportation Average rallied 2.2 percent. The Russell 2000 Index of small companies climbed 1.8 percent after tumbling 3.8 percent yesterday.

Raw-materials producers in the S&P 500 climbed 1.9 percent, the most among 10 industries. Gold gained 1.9 percent as some investors deemed a 13 percent plunge over two days to be excessive and Central Bank of Sri Lanka Governor Ajith Nivard Cabraal said that policy makers may take the opportunity to buy.

Vulcan (VMC) Materials Co. jumped 6.8 percent to $48.69. The producer of construction aggregates was raised to buy from neutral by Todd Vencil, an analyst at Sterne, Agee & Leach Inc.

International Paper Co. climbed 4.7 percent to $47.47. The world's largest maker of cardboard packaging was rated outperform, an equivalent of buy, in new coverage at Macquarie Group Ltd.

Coca-Cola

Coca-Cola (KO) rose 5.7 percent, the most since February 2009, to $42.37. Excluding some items, profit was 46 cents a share, compared with the 44-cent average of 14 analysts' estimates compiled by Bloomberg. The company also announced a deal to sell some bottling distribution rights in North America.

Johnson & Johnson added 2.1 percent to $83.44. The world's largest maker of health-care products said earnings excluding one-time items were $1.44 a share, topping by 5 cents the average of 11 analysts' estimates compiled by Bloomberg.

The Bloomberg U.S. Airlines Index (BUSAIRL) rallied 5.6 percent, the most since October 2011. All of its 10 members gained. Delta Air Lines Inc. rose 6.4 percent to $15.87 while United Continental Holdings Inc. added 6.1 percent to $30.86.

Alaska Air Group Inc. jumped 7.9 percent to $61.12 after Deutsche Bank AG boosted the stock to buy from hold.

An S&P index of homebuilders climbed 2.8 percent. PulteGroup Inc. increased 4! .2 percen! t to $18..60 while Lennar Corp. added 2.4 percent to $38.70.

Real Estate

J.C. Penney Co. gained 5.6 percent to $15.19. The retailer is exploring ways to borrow against its real estate holdings to help raise cash, two people with knowledge of the situation said. The company and its financial advisers are considering options including spinning off real estate into a new subsidiary that could issue debt, said one of the people, who asked not to be named because the matter is private.

W.W. Grainger Inc. jumped 7.2 percent to a record $241.88. The hardware supply distributor boosted the low end of its full- year profit and sales forecasts as first-quarter earnings beat analysts' estimates.

Goldman Sachs (GS) Group Inc. fell 1.6 percent to $144.10. The Wall Street bank that generates the highest percentage of revenue from trading dropped after revenue from that business fell more than its rivals. First-quarter revenue from trading stocks and fixed-income products fell 12 percent to $5.22 billion, excluding accounting charges. That missed the estimate of $5.48 billion from Oppenheimer & Co.'s Chris Kotowski and $5.25 billion from Credit Suisse Group AG's Howard Chen.

Bank Earnings

Citigroup yesterday reported that fixed-income trading rose 69 percent from the fourth quarter, topping analysts' estimates. JPMorgan, the biggest U.S. bank by assets, reported last week that trading revenue fell 5 percent. Bank of America Corp., the second-largest lender, is set to release results tomorrow. Morgan Stanley, the sixth-biggest bank, is due on April 18.

U.S. Bancorp (USB) slipped 1.8 percent to $32.72. The nation's largest regional lender reported first-quarter revenue that missed analysts' estimates. U.S. Bancorp and Goldman Sachs had the biggest declines in the S&P 500 today.

Yahoo! Inc. dropped 3.7 percent to $22.92 in extended trading as of 4:44 p.m. New York time. After the market close, the biggest U.S. Web portal forecast sales that fell short ! of analyst! s' estimates as it continued to lose advertisers to Google Inc. and Facebook Inc.

Dow Gets Fizzy With It

After its worst day of the year yesterday, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) bounced back today as investors saw buying opportunities and responded to a strong housing report and some bullish earnings reports. The blue chips finished the session up 1.1%.

Housing starts in March topped 1 million for the first time since 2008, hitting an annual rate of 1,036,000. Last month's figure beat expectations by more than 100,000, and was a strong gain from starts in February at 968,000, which was revised up from 917,000. Construction of multifamily units jumped 27%, while single-family homes dropped 4.8%. Building permits, a leading indicator for housing starts, came in below expectations, possibly indicating that last month's spike will be short-lived. The Consumer Price Index also declined slightly in March, essentially in line with expectations, indicating that despite the Fed's continued stimulus, the economy is far away from any inflation concerns.

Three Dow components reported earnings today, with two beating expectations.

Coca-Cola (NYSE: KO  ) jumped 5.7%, to a 15-year high, after reporting earnings this morning and announcing plans to unload some of its bottling assets. Coke delivered an adjusted earnings of $0.46 per share, a penny better than both its results from a year ago and the Wall Street consensus. Revenue declined by1% to $11.04 billion but that also slightly beat estimates as the beverage giant lost two calendar days in the quarter. Overall volume worldwide increased by 4%. Coke's decision to let go of some of its bottling operations comes less than three years after it doled out $12.3 billion to acquire those operations. The deal would give control back to five bottlers in exchange for money, territory, or other assets, but the details of the transactions have not yet been finalized.

Johnson & Johnson (NYSE: JNJ  ) also posted earnings today, gaining 2.1% as a result. The health-care giant beat Wall Street estimates with an adjusted earnings per share of $1.44, up from $1.41 a year ago and better than estimates at $1.40. Revenue jumped 8.5% to $17.50 billion, also above expectations, and increased 9.8% in constant dollars. The growth was led by prescription drugs and over-the-counter medication, improving 10% and 14%, respectively. Medical sales increased 10% but analysts had expected stronger growth in that category.  

Intel (NASDAQ: INTC  ) was up 2.5% during the trading session and another 0.7% after hours once it reported quarterly results, despite forecasting a second-quarter sales decline of as much as 8% on slowing PC demand. The top chip maker remained confident in its full-year outlook, however, saying its new Haswell chips and ultra-thin laptops would reinvigorate sales in the latter half of the year. For the first quarter, Intel delivered sales of $12.58 billion, down 3% from $12.91 billion a year ago but in line with estimates. Earnings for the quarter was $0.40 a share, down from $0.55 a year ago, and a penny worse than analyst expectations.

Coca-Cola's wide moat has helped provide its shareholders with superior gains in the past, but the company faces some new threats to its continued market dominance. The Motley Fool recently compiled a premium research report containing everything you need to know about Coca-Cola. If you own or are considering owning shares in the company, you'll want to click here now and get started.

FDA Makes Obesity Drug Available to More Americans

3 Reasons to Buy General Motors Today

General Motors (NYSE: GM  ) became one of America's most unpopular companies in the wake of its $49.5 billion taxpayer-funded bailout. But there are more and more signs that GM is following in Ford's (NYSE: F  ) footsteps and becoming a great turnaround story. In this video, Motley Fool contributor John Rosevear lists three good reasons to consider buying GM now, and goes into detail about the current state of GM's push to become a top global contender.

Should you really buy GM?
Few companies lead to such strong feelings as General Motors. But ignoring emotions to make good investing decisions is hard. The Fool's premium GM research service can help, by telling you the truth about GM's growth potential in coming years. (Hint: It's even bigger than you think. But it's not a sure thing, and we'll help you understand why.) It might help give you the courage to be greedy while others are still fearful, as well as a better understanding of the real risks facing General Motors. Just click here to get started now.

Better-Than-Expected Jobs Data Can't Save Intel Stock

This morning the Department of Labor released its weekly jobless-claims report, and the numbers were better than analysts had expected. After a big jump to 388,000 claims two weeks ago, only 346,000 individuals sought support last week week, whereas economists were expecting the figure to drop to 365,000. The four-week moving average actually rose by 3,000, to 358,000, and while the report was better than expected, the number of jobless claims remains heightened.

Despite the report, the markets are moving higher today. As of 12:55 p.m. EDT the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is up 64 points, or 0.43%, while the S&P 500 has risen 0.41%. The NASDAQ has struggled today, but it's currently about a point north of breakeven.

The main cause for the NASDAQ's sluggishness is a report by the IDC indicating that in the first quarter of 2013, personal-computer shipments fell by 13.9%. Analysts had forecast a decline of 7.7%, and some had felt even that was too harsh an outlook. The reality, however, makes that forecast look downright rosy. This quarterly decline also marked the fourth consecutive year-over-year decline in shipments, and many believe this trend will continue.

The report has caused a number of PC-related stocks to fall today. Because it is easily the industry leader when it comes to PC chips and receives much of its revenue from PC sales, Intel (NASDAQ: INTC  ) has seen its stock drop 2.7% today.

Shares of Hewlett-Packard (NYSE: HPQ  ) have fallen 6.5% today. The dogged company's turnaround had seemed to be proceeding smoothly, but today's report is a major blow to HP's hopes. HP makes a sizable chunk of its revenue from the sale of PCs, and if that part of its business falls apart, the whole turnaround story may crumble as well.

Lastly, shares of Microsoft (NASDAQ: MSFT  ) have also bombed today, down 4.9%. The IDC report confirms that new PCs are not selling, and therefore Microsoft's newest operating system, Windows 8, is likely performing even worse than thought. Prior to the launch of Windows 8, a number of industry experts believed that new operating system would help move new computers, and many computer manufacturers had pinned their hopes on the success of the software.

More foolish insight
When it comes to dominating markets, it doesn't get much better than Intel's position in the PC microprocessor arena. However, that market is maturing, and Intel must find new avenues for growth. In this premium research report on Intel, our analyst runs through all of the key topics investors should understand about the chip giant. Click here now to learn more.

The "Stealth Dividend" Strategy Is Still Delivering

I'll share a "dumb" strategy with you today... that's delivered "crazy good" performance for decades.

 

How good is "crazy good"? Let me show you...

 

Since 2000, this strategy has crushed the overall market, beating it by an average of 9% per year.

 

Best of all, it's a "dumb" strategy... that requires no special skills to follow... and no expert trading on your part. You can even buy it as a "one click" fund. (I'll tell you what that fund is in a minute.)

 

You can see the "crazy good" outperformance in this bar chart...

 

 

Since 2000, this "dumb" strategy has beaten the stock market by an average of 9% a year – only underperforming the market twice.

 

This strategy has delivered "crazy good" performance over the very long term as well...

 

If you'd followed this strategy starting in 1927, you'd have turned $10,000 into $421,203,905 by 2009. (Yes, that's $421 million.)

 

And since 1965, the numbers are just as good... Stocks in general have returned 11% a year. But this "dumb" strategy has returned 15.7% since 1965. (These numbers are both from the book What Works On Wall Street.)

 

Over any five-year period, this strategy nearly ALWAYS beats the markets... Except for a microscopic blip of underperformance around the year 2000, this strategy never had a five-year period of underperforming the stock market in the last half-century. (Again, this is from What Works On Wall Street.)

 

Strategies like this one – what I call "dumb" – are my favorite...

 

I call them "dumb," but what I really mean is "simple." I love a strategy that makes sense intuitively... that doesn't require complicated formulas... and that has worked for decades.

 

So far in 2013, this strategy is winning again... The fund that tracks this strategy is up 15% year-to-date, while the S&P 500 index is up 11%.

 

Based on the current numbers, I see no reason why this "crazy good" performance should stop. In short, the stocks in this strategy are still cheap. The top 20 stocks in this fund are selling for an average of 11.6 times forward earnings... and are yielding 1.6%. That's all good.

 

The strategy is simple. It's known as "stock buybacks." But I like to call them "stealth dividends."

 

The principle is simple... Let's say you own shares of Company ABC... and Company ABC buys back and retires some of its shares... then you end up owning more of Company ABC.

 

You can think of it like a pizza... If you own two slices of a pizza, and the total number of slices changes from 10 to eight, you now own 5% more of the pizza. You used to own 20% of the pizza, and now you own 25%.

 

Keep in mind, we didn't shrink the pizza. And we didn't remove pieces of the pie. It is just now cut with eight slices instead of 10. Lucky you.

 

I call this added 5% of the pie a "stealth dividend." You own an extra 5% of the pie – but you didn't pay extra for it. And you might not have even noticed it happening.

 

If you'd received that as a 5% dividend, you would have noticed... and the government would certainly have taxed you for it. So share buybacks are like "stealth" dividends. You get them... but you don't see them... and the government doesn't tax you on them.

 

Meanwhile, they make you money!

 

The simplest way to trade the buyback strategy is through the PowerShares Buyback Achievers Fund (NYSE: PKW), a recommendation in my True Wealth newsletter. It holds companies that have bought back at least 5% of their shares over the previous 12 months – names like biotech company Amgen, tech giant Oracle, and one of my favorite insurance companies, Loews.

 

My True Wealth subscribers are already up 35% on this idea. But there is more to come... As I showed you, the strategy this fund follows almost always beats the market.

 

In short, owning a handful of companies that are busy buying back their own shares has proven to be a market-trouncing strategy for decades. Based on the current holdings of PKW, I don't see that changing anytime soon.

 

Buybacks are a "dumb" strategy... that has proven to nearly always beat the markets. Shares of PKW are the simplest way to play it.

 

Good investing,

 

Steve

2 Amazon Numbers to Watch Next Week

The following video is from Monday's MarketFoolery podcast, in which host Chris Hill, along with analysts Jason Moser and Matt Argersinger, discuss the top business and investing stories of the day.

In his annual letter to shareholder, Amazon.com (NASDAQ: AMZN  ) CEO Jeff Bezos defended the company's investments in its Prime and Kindle businesses. In FY 2012, Amazon reported a net loss of $39 million. Will Amazon's investments pay off? Is Amazon's business model superior to Apple's (NASDAQ: AAPL  ) ? What numbers should investors be watching when Amazon reports earnings next week? In this installment of MarketFoolery, our analysts talk about the future of Amazon.

Everyone knows Amazon is the king of the retail world right now, but at its sky-high valuation, most investors are worried it's the company's share price that will get knocked down instead of its competitors'. The Motley Fool's premium report will tell you what's driving the company's growth, and fill you in on reasons to buy and reasons to sell Amazon. The report also has you covered with a full year of free analyst updates to keep you informed as the company's story changes, so click here now to read more.

The relevant video segment can be found between 13:37 and 19:41.

For the full video of today's MarketFoolery, click here.

3 Reasons to Hate the Citigroup Earnings Report

Citigroup's (NYSE: C  ) first-quarter earnings report has hit the streets, and the news is overall good, with the superbank putting up some impressive numbers. But every party has a pooper, and today, that's me. Hate's such a strong word, but here are three things to strongly dislike about Citi's first-quarter earnings report.

1. Rising operating expenses
Citi is reporting operating expenses of $12.4 billion for the first quarter of 2013, a 1% increase year over year. Per the earnings release, this is attributable to "an increase in legal and related costs and repositioning charges." 

An increase in operating costs means either management efficiency has decreased somewhere in the chain from top line to bottom line, or that something outside the ordinary has happened that the company has to pay for. In this case, it looks like the latter. And while no further details were volunteered, it's likely the "legal and related costs" connect to fines and payouts that relate back to the financial crisis.

As most observers know, Bank of America (NYSE: BAC  ) is also dealing with costly legal matters left over from five years ago. Thankfully for Citi investors, their superbank isn't facing near the crisis-related danger B of A still is, but they can only hope that no more big payouts loom, and that the legal liabilities from the crash will completely vanish in the not-too-distant future.

2. Shrinking loan-loss reserves
Citi is reporting it released $375 billion in loan-loss reserves in the first quarter. You can look at this one of two ways.

The optimistic way, which I'm sure is CEO Michael Corbat's way, is to view it as another sign that Citi's assets are performing better. As a consequence, less money needs to be out aside to guard against defaulting loans and the like.

The pessimistic viewpoint sees releasing loan-loss reserves in numbers like this as too much, too soon. Many of the poorly performing assets go back to the financial crisis: toxic mortgage debt. But while we do have a recovering housing market, it's kind of shaky, built on the back of a quantitative easing program that may be winding down sooner than we think.

I'm a Citi investor, and while I want to see a bigger bottom line as much as the next investor, when it comes to loan-loss reserves, better safe than sorry. That being said, Corbat is a smart guy with the long-term interests of the bank at heart, so I hope I'm just being overly cautious, here.

3. Decreasing transaction-services revenues
Citi is reporting that total revenues in Transaction Services are down 4% year over year. At Citi, Transaction Services include Treasury and Trade Solutions and Securities and Fund Services, at which first-quarter revenues declined 5% year over year and 1% year over year, respectively. 

At any bank, transaction services help people and businesses transfer money from one place to another. As the efficient moving around of money is fundamental to the running of an economy, it's critical that banks to be good at it. And if they are good at it, revenue and profit will follow.

Surely, people and businesses aren't moving less money around these days, are they? Citi needs to increase its transaction services business; this is at the heart of any bank, big or small.

Foolish bottom line
Of late, I've become a bit of Citigroup bull, but that doesn't mean challenges don't remain. Citi had a great quarter overall, but management -- and investors -- still have things they need to think about moving forward: three of them, at the very least.

Looking for in-depth analysis on Citi? If so, look no further than our new premium report on the superbank. In it Matt Koppenheffer -- The Motley Fool's senior banking analyst -- will fill you in on both reasons to buy and reasons to sell Citigroup. He'll also clue you in on what areas investors need to watch going forward. For instant access to Matt's personal take on Citi, simply click here now.

How Corporate America Spends Its Cash

Why Herbalife Should Sue KPMG

Herbalife (NYSE: HLF  ) has had a rough time of things so far this year, and things got even rougher when the multilevel marketer got sucked into an insider trading scandal at KPMG last week. When a KPMG partner was caught selling inside information on two clients he was auditing, Skechers (NYSE: SKX  ) and Herbalife, and subsequently "fired" both clients, Skechers shares skated away unscathed -- but Herbalife lost more than $100 million in market cap.

How should Herbalife respond to the situation KPMG has put it in? Click through to the following video, and Fool contributor Rich Smith will lay it out for you.

What macro trend was Warren Buffett referring to when he said "this is the tapeworm that's eating at American competitiveness"? Find out in our free report: "What's Really Eating at America's Competitiveness." You'll also discover an idea to profit as companies work to eradicate this efficiency-sucking tapeworm. Just click here for free, immediate access.

What We Are All Starved For Today Is Time

The following video segment is part of a full interview, in which The Motley Fool's Brendan Byrnes sits down with Irwin Simon, the founder and CEO of Hain Celestial (NASDAQ: HAIN  ) , to take a closer look at the better-for-you food revolution. In this segment, they discuss how the consumer desire for more convenient packaging, while still providing a nutritious item, are shaping future products.

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in the brand-new free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.

Brendan Byrnes: I wanted to ask you about the battle between the single-serve brewers we have. Obviously Green Mountain Coffee Roasters pretty entrenched with their Keurig machine, Starbucks coming in with their Verismo. Your K-Cup teas have been selling very well. How do you see that battle shaking out and how does that impact Hain Celestial? 

Irwin Simon: Well, No. 1 is, listen, our tea business is strong. I think the whole growth in tea and more and more consumers not drinking as much coffee and looking to drink more tea in the afternoon and more soothing. Our herbal teas have really seen growth. Our wellness teas have done well, and we've come out with some other new tea products, whether it's energy shots, like Kombucha, which is a fermented tea with life probiotics and now we just came out with Sleepytime. Sleep apnea is one of the biggest problems with people, consumer and individuals and there are times I have it myself, so we just came out with a Sleepytime shot, Sleepytime Snooze, which is right there. It would help you sleep. So Celestial's done a great job transforming itself from just a teabag into other categories. 

Listen, in regards to the K-Cup and for many, many years, we looked at many ways to transform the teabag into other types of materials, other ways you drink tea, no different than they have with coffee. I think the K-Cup is here to stay. I think there are a lot of new renditions of the K-Cup with the patent coming off and what is recyclable, what's not. I even saw they're advertising for a K-Cup the other day where you could open it up, put your own coffee in and you create your own K-Cup and whatever. And that's the same with tea. 

Is it a better tasting one? I'm not sure, but listen, what are we all starved for today is time. I'll bring you back to the yogurt category. We have seen Greek yogurt, and you mentioned it before, in this country just take off like a rocket. It tastes better, it's healthier. We have seen studies or talked about studies, and we don't have any science behind it for Greek yogurt, because it's a creamier and less whey, reduces inflammation. Inflammation is a cause of diseases or cancer. Americans ate a lot less yogurt than Europeans because I think the taste. But the big thing is we're seeing is listen, who has time to sit down, and you used to go back, and was it Leave It to Beaver, and TV shows where you sat down for breakfast in the morning...

Brendan: Huge breakfast.

Simon: Huge breakfast...

Brendan: Eggs, toast, everything.

Simon: Had a bowl of cereal, poured your milk in. We are on the go and yogurt is just that snack, but the big thing about yogurt today, we're not just eating yogurt. We're adding fruit, we're adding granola, we're adding flaxseed, we're adding chia seed, and we're adding additions to it, and that's what our breakfast is. My breakfast this morning was -- we just came out with some new Greek kefir, which is a phenomenal product, which actually is a drink. 

So the cereal category is going through its challenges, and you see yogurt taking away a lot of that share. No different than if you look at, again, Earth's Best, the pouches replacing the jar and the whole thing is babies that were spoon-fed versus today, here's the pouch. Get the hand-eye coordination, our kids staying on pouches longer today. So packaging and convenience is playing a big, big, big part. 

Soup, cans of soup. I say this here and there's times I'm challenged. In five years, you will not see cans out there because of the BPA and the whole freshness part of it, etc. So there's a lot of change going on in the food category in regards to ingredients. There's a lot of change going on in regards to packaging, consumer behavior. We're time-starved. We want to be driving, texting, emailing, and eating at the same time. 

I mean a perfect example is what I'm holding in my hand right now is juice. So this is BluePrint, which is a company that we're supposed to acquire very shortly. If you come back and look at a lot of the juices out there today, yes, they are pasteurized, and that is heated for safety to kill everything, but it's killing everything. So you think you're drinking juice and getting all these healthy nutrients from there, I'm getting all this vitamin C, etc. You're not. When they heat it up to 600, 700 degrees, you're killing everything in there, so you're just drinking water with sugar in it or colored water, etc. Where here, it's not pasteurized and it goes through a process, that's a pressurized process where yes, it's killing a lot of anything that could be live in here, but you're getting all the nutrients within here. So there are just so many changes happening within food today, from packaging, from process, that will just take us into a whole other next generation of consumers to enjoy.

Big Oil's Back in Washington's Taxation Crosshairs

There's probably not another industry that even begins to match the members of Big Oil for generating antipathy in some quarters of Washington, D.C. Indeed, there are those in our nation's capital whose clear intent it is to force the largest oil and gas producers to pay through the nose for their successes.

In his 2012 State of the Union address, President Obama stated, "The country needs an all-out, all-of-the-above strategy that develops every available source of American energy." Fine, but that statement masked a punitive approach that the president had in mind for the bigger traditional energy companies, especially those that quest for crude oil worldwide.

Indeed, it was only a few minutes later that the president contended:

We have subsidized oil companies for a century. That's long enough. It's time to end the taxpayer giveaways to an industry that's rarely been more profitable and double-down on a clean-energy industry that's never been more promising.

The obvious implication there was that the industry has long received special favors at tax time. Which, of course, it hasn't. Indeed, the latter statement may imply confusion between the treatment accorded to ExxonMobil (NYSE: XOM  ) and that provided to, say, Solyndra.

A targeted nailing
Nevertheless, some members of the president's party are heeding his clarion call. In fact, Chris Van Hollen, a Democratic congressman from Maryland, is attempting to gain support for a bill that would place the industry's companies at a clear disadvantage at tax time. His "Fair Share on High-Income Taxpayers" scheme would alter the way oil and gas operators' taxes are calculated -- especially for the larger companies -- in three key ways:

By limiting oil and gas producers' ability to avail themselves of the Section 199 deduction. That measure was part of the American Jobs Creation Act, which generated bipartisan support at its passage in 2004. It simply provides a 9% reduction from net income for businesses involved in the manufacturing sector. Its purpose was to serve as something of a moat to protect, at least somewhat, against foreign competition.

Is it a measure that solely benefits energy producers? Hardly. In fact, energy companies generally have been limited to 6% deductions, while those involved in a wide range of other manufacturing endeavors receive the full 9%. By limiting the industry's use of the last-in, first-out method of valuing inventory. While a host of companies from all manner of industries have adopted what is commonly referred to as the LIFO method, Van Hollen's bill would render it largely off-limits to oil and gas producers. By limiting the integrated companies' deductions of royalty payments made to foreign governments. American companies operating overseas are generally permitted to deduct from their U.S. levies the taxes imposed by foreign governments -- a method of preventing double taxation on their foreign income. Royalty payments made abroad have typically -- and legally -- been treated as taxes, making them subject to the foreign deduction. But Van Hollen's bill would eliminate that approach, thereby substantially ramping up the domestic taxes required of the integrated companies.

Is this "special" treatment being proposed for the traditional oil and gas companies appropriate? Have they, in fact, been shirking their duty to render unto Caesar that which is Caesar's?

Massive payments already
Absolutely not. Harking back to 2011, of the top 25 corporate-tax payers, we see that ExxonMobil easily had first place locked up. Its $27.3 billion in income tax payments made for an effective tax rate of approximately 42%. Chevron (NYSE: CVX  ) was next with $17.4 billion in income taxes paid, for a 43.3% effective rate. And ConocoPhillips (NYSE: COP  ) was in third place, its 45.6% effective rate making for tax payments of $10.6 billion. But that wasn't all. In addition to its income taxes, Exxon, for instance, recorded another $70 million-plus in sales taxes and other taxes and duties.

For comparison's sake
Compare those tax payments and percentages with those of Apple (NASDAQ: AAPL  ) , which, from a market capitalization perspective, is larger than ExxonMobil. The California technology superstar paid income taxes of about $4 billion in 2011, an effective rate of just 24.6%. And McDonald's (NYSE: MCD  ) , which checked in at 25th place on the list of "elite" taxpayers, forked over $2.1 billion in taxes. Its effective rate: 31.3%.

But maybe profitability -- net income as a percentage of revenues -- is a better way to determine which corporations should be accorded punitive treatment at tax time. Maybe Exxon et al. are simply too profitable. Wrong again. Neither Exxon nor Chevron topped 10% in net profit margins for 2011. Conversely, the margins for technology leaders Apple and Microsoft (NASDAQ: MSFT  ) were 26% and 32%, respectively.

A Foolish takeaway
So the disdain for Big Oil continues uninterrupted. One might think that, given the companies' success in helping to vastly expand U.S. oil and gas reserves in recent years, along with their need to push into inhospitable places such as the Russian Arctic in search of progressively more elusive reserves, they might begin to escape Washington's political crosshairs.

As a a purely domestic operator, Chesapeake Energy would be exempted from much of Van Hollen's punitive energy taxation measures. At the same time, 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. While the debt 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.

What to Watch for From the Dow's Earnings This Week

Earnings season is in full swing, and a full third of the companies on the Dow Jones Industrial Average (DJINDICES: ^DJI  ) are set to report last quarter's data this week. From consumer-goods giants such as Coca-Cola (NYSE: KO  ) to health-care staples such as Johnson & Johnson, seemingly every sector of the blue-chip index is on pace to capture investors' attention in the next few days. Let's look at what you should be watching out for as America's most prominent stocks face their biggest test of 2013.

What should you look out for?
The Dow's week of earnings starts off with Tuesday's slate, as Intel (NASDAQ: INTC  ) , Coke, and J&J report on their most recent quarters. Intel's had a tough time recently with the PC market's decline, and analyst expectations for both the company's revenue and earnings are down from a year ago. The company's done its best to diversify, reaching out to the fast-growing mobile market while advancing into new fields such as Internet TV, but don't expect to see the fruits of Intel's diversification efforts show up this early. For now, this is still a company stuck with its ties to the falling PC industry.

Analysts expect better EPS results from J&J and Coke, however: Projections for the two companies' earnings average year-over-year growth of 2.2% and 2.3%, respectively. Coca-Cola's steadily advanced overseas despite fighting against regulatory hurdles and legislation at home, promoting its iconic brand around the globe in an effort that should help this stalwart company's future. Although analysts project slightly lower revenue from the company, Coca-Cola looks to be on good footing for the long term.

Financials take center stage on Wednesday, as both Bank of America and American Express report earnings. Analysts expect earnings per share from these companies of $0.22 and $1.22, respectively; B of A's projected earnings represent significant year-over-year growth over last year's $0.03 mark. Financial firms have done well recently -- B of A has been one of the Dow's top risers over the past year -- but consumer spending has been shaken by the payroll-tax holiday expiration earlier this year, along with sequestration. On Wednesday, we'll be able to see just how much these events have affected consumer-oriented companies such as American Express. While the company's earnings are expected to grow around 5% over last year, tightening consumer wallets could put a dent in AmEx's results.

Thursday brings three more companies up to bat, with UnitedHealth Group (NYSE: UNH  ) , IBM, and Verizon to the forefront. UnitedHealth provides a particularly interesting report to watch as the company shifts toward the full arrival of Obamacare next year. Analysts expect a drop in the company's earnings to $1.14 per share this quarter, down from $1.31 a year ago. Still, UnitedHealth has done a good job growing its subscription base and advancing internationally, two trends that should bolster its numbers. IBM and Verizon, on the other hand, are both expected to post year-over-year EPS gains for the quarter, to $3.05 and $0.66, respectively.

Finally, General Electric and McDonald's (NYSE: MCD  ) report earnings on Friday, with the companies expected to release EPS results of $0.35 and $1.27, respectively -- each slight gains over a year ago. McDonald's is still looking to recover after monthly restaurant sales fell for the first time in a decade last October. Since then, the company's faced tough competition from rivals as well as the push toward healthier eating in many advanced economies that has hurt its revenue outlook. While analysts are expecting McDonald's to bounce back by beating last year's quarterly figure, a miss wouldn't be shocking considering the firm's recent struggles.

Can McDonald's turn things around?
McDonald's turned in a dismal year in 2012, underperforming the broader market by 25%. Looking ahead, can the Golden Arches reclaim its throne atop the restaurant industry, or will this unsettling trend continue? Our top analyst weighs in on McDonald's future in a recent premium report on the company. Click here now to find out whether a buying opportunity has emerged for this global juggernaut.

The Dow's Top Stocks on a Record-Setting Day

Thanks to a few top stocks, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) managed to once again set a new all-time closing high at 14,865. Today, the index rose 62 points, or 0.42%, after investors received a better-than-expected jobless claims report, despite a few technology stocks plummeting. The Labor Department reported that initial jobless claims for last week fell by 42,000, to 346,000. Economists were only expecting a decline of 23,000 from the 388,000 claims which were reported two weeks ago.  

With the jobless numbers moving in a positive direction, the markets, as a whole, ended the session on a high note. While the Dow was the top index, the S&P 500 managed to rise 0.36%, as the Nasdaq lagged behind, only gaining 0.09%.

The Nasdaq was likely pulled lower by the IDC report, which indicated that PC sales declined 14% during the first quarter of 2013. This report pulled a number of technology stocks lower, but shares of Cisco (NASDAQ: CSCO  ) slipped away from the downward pressure, and managed to become one of the index's top stocks. Shares of the networking giant rose 1% during today's trading session after climbing 2.4% yesterday, and 2% on Tuesday. Today's move came on very little news, but Cisco certainly is gaining momentum. The company also recently announced a joint project with Microsoft, in which the two will work together to provide data center customers with more functionality and lower complexity. In addition, the two will work together to improve and grow data center operations.  

Another top stock today was Chevron (NYSE: CVX  ) , which saw its shares rise 1.09%. One likely catalyst for the rise was the recent Morgan Stanley report that claimed Chevron would outperform its fellow Dow component and competitor ExxonMobil (NYSE: XOM  ) by 55% over the next few years. Morgan Stanley believes Chevron could experience higher production growth and realize better returns in the coming years. The firm also raised Chevron's price target to $135 per share, while reducing Exxon's to $85 per share.  

Not only does Morgan Stanley believe Chevron is cheap, but my Fool Colleague Brian Pacampara also feels that way. To read what Brian has to say about the company, click here.

Shares of Pfizer (NYSE: PFE  ) rose 2.41%, making it the true "top stock" of the Dow today. The increase came after Pfizer announced that its palbociclib, an experimental treatment for breast cancer, received the Breakthrough Therapy designation by the FDA. This is a great development for the company, as it will now have the drug expedited through the regulatory process. Currently, the drug is in the later stages of testing, and this news should help it hit the market sooner rather than later.  

More top stocks

The Motley Fool's chief investment officer has selected his No. 1 stock for this year. Find out which stock it is in the brand-new free report, "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.

Apple Stock: Goodbye, Growth; Hello, Income

When it comes to Apple (NASDAQ: AAPL  ) , its revolutionary products and its iconic founder, Steve Jobs, have usually been the places where the media has shone its spotlight. The curious case of Apple stock itself, however, is almost as interesting. For the past decade, it has defied gravity, climbing up 5,825%. But the most intriguing part of the Apple stock story began with Jobs' death in 2011, and it carries on to the stock's confrontation with the Law of Large Numbers today. A close look at the stock's story reveals just how mad the market really is.

An expectation for perfection
"Apple is a normal company. Why does the public constantly expect them do the impossible?" vented Slashdot commenter "pi radians" more than a decade ago. The quote was buried in a discussion forum titled "Apple releases iPod," dated Oct. 23, 2001. At an invitation-only event, Apple had just released its new MP3 player.

Little did pi radians know that Apple was just getting revved up. The company, and Apple stock, surely went on to do the impossible, blowing away investor expectations. The iPod dominated the MP3 player market and was the driving force in the decline of the CD.

As Apple continued to astound consumers, Apple stock followed suit. The stock rode the waves of one successful product launch after another, including the iPod Mini in 2004, the iPod Touch and iPhone in 2007, and the iPad in 2010. An investor who bought $1,000 in Apple shares 10 years ago would have almost $6 million today.

Two years of Apple stock madness
Then, on Aug. 24, 2011, Jobs resigned from Apple, as his illness made it impossible for him to "meet [his] duties and expectations as Apple's CEO." Less than two months later, Jobs died.

Not long afterward, Apple's stock began to soar as the company's iPhone and iPad line continued to obliterate expectations. "Apple's monstrous quarter" was common earnings-release headline lingo. And now, after a meteoric rise to $700 per share in September 2012, Apple stock now hovers near its 52-week low, around $428.

Apple's 5,825% rise over the past year had little to do with investor optimism. In fact, the company's earnings and free cash flow growth both outpaced the growth in the stock price. But what makes the Apple stock story really interesting is that even at $700 per share, Apple appeared to be fundamentally cheap, trading at about 16 times earnings. As a comparison, Google (NASDAQ: GOOG  ) trades at 24.5 times earnings.

It's all about expectations
When it comes down to it, the iPhone 5 didn't live up to the Street's expectations. Google's free Android mobile OS has empowered an onslaught of competing devices at lower price points. Many consumers aren't as willing to shell out premium dollars for a smartphone when they can find a cheaper alternative elsewhere.

Ultimately, stock prices are all about expectations. Investors expect Google to continue to grow its revenues and earnings and, hence, its business, so the stock trades at a nice premium of 24.5 times earnings. In other words, investors expect Google to grow into its stock price.

If there's any chart that explains why Apple has lost its nice price-to-earnings multiple of 16, when the stock traded at an all time high of $700, it's this one:

AAPL EPS Diluted Quarterly YoY Growth data by YCharts.

Growth rates exceeding 25% no longer seem attainable. In three of the past four quarters, Apple reported decelerating year-over-year growth rates in EPS.

But the tension persists. Analysts, on average, expect Apple earnings to increase at 20% annually for the next five years. At just 10 times earnings, however, this expectation isn't priced into the stock. On Apple's Motley Fool CAPS page, 61 of 61 analysts rank Apple stock as an "outperform." Even so, the market refuses to pay a premium now for an expectation of growth down the line.

Officially an income investment?
Now investors are wondering what's next. Is Apple stock exiled from growth portfolios and reassigned to the income investment community once and for all?

With a very likely dividend boost just around the corner, Apple might morph into a great dividend stock. But will it ever be a growth stock again? Let us know your thoughts.

There's no doubt that Apple is at the center of technology's largest revolution ever and that longtime shareholders have been handsomely rewarded, with more than 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.