Wednesday, April 30, 2014

Bank of America Fighting to Keep Dividend Hike After $4 Billion Blunder

Bank of America Corp. (BAC) Chief Executive Officer Brian T. Moynihan won permission last month for the firm's first dividend increase since the financial crisis. Now he's under pressure to salvage the payout after the company mistakenly inflated capital levels by about $4 billion.

One leading option: scrapping a $4 billion share repurchase, said a person briefed on the deliberations. That could allow the Charlotte, North Carolina-based bank to resubmit its request to boost the quarterly dividend to 5 cents, said the person, asking not to be identified because the process is confidential.

Moynihan, 54, has a month to draw up plans that will win Federal Reserve approval after the regulator asked the bank to freeze buybacks and dividend increases. The boost approved in March was heralded as a symbolic victory for Moynihan and the bank, which has had a token penny-a-share payout since 2009.

“This is a step backwards for them, it raises credibility issues for management,” said Jonathan Finger, whose family-owned investment firm, Finger Interests Ltd., owns 900,000 shares of the lender and stands to lose about $144,000 in annual income if Moynihan fails to increase the dividend. “Shareholders have suffered a significant period with no dividends, so some respite from that would be welcomed.”

Bank of America, the nation’s second-largest bank, views the dividend as linked to the company’s ability to generate regular earnings, which was unaffected by the mistake, said the person. The firm isn’t yet certain what payout it will request and may refine the proposal until the due date, the person said.

Outside Review

The predicament arose after the bank found an error in how it valued structured notes inherited in its 2009 acquisition of Merrill Lynch. The Fed responded by asking the firm to resubmit parts of its stress-test capital plan, which is designed to prove that a bank is strong enough to survive an economic shock. Bank of America disclosed the situation yesterday, saying it was hiring an outside firm to review its processes before the resubmission.

The bank’s estimate of Tier 1 capital under coming rules fell to $130.1 billion from $134.2 billion because of the error, the firm said yesterday in a regulatory filing.

The resubmission probably will face closer Fed scrutiny and a higher risk of rejection, said Erik Gordon, a professor at the Ross School of Business at the University of Michigan in Ann Arbor.

Lower Payouts

The bank’s blunder doesn’t necessarily mean the Fed will reject a revised capital plan on qualitative grounds, as the regulator did with Citigroup Inc.’s proposal, said another person with knowledge of the process. Examiners can’t check all the data provided by banks, the person said.

The Fed regards the incident as bolstering the case for the stress tests because the discovery was handled swiftly, said Barbara Hagenbaugh, a spokeswoman for the central bank. Before the stress tests, finding and fixing the error probably would have been a drawn-out process, she said.

The bank said the revised proposal probably will include lower payouts than the earlier plan, which was already modified once to win Fed approval during the stress tests. At stake are $1.68 billion in annual dividend payments for a company that earned more than $10 billion last year. Before the financial crisis, stockholders were getting quarterly payments of 64 cents a share.

Bank of America shares swung to a loss for this year by tumbling 6.3 percent yesterday to $14.95, the biggest drop since November 2012. They were little changed today at 9:35 a.m. in New York.

Raising Doubts

The slide was overdone in light of the firm’s capital levels, wrote Betsy Graseck, a bank analyst at Morgan Stanley. Bank of America probably will forgo buybacks while keeping the dividend increase in the resubmission, Graseck predicted. Mike Mayo, who covers banks at CLSA Ltd., said the mistake raises doubt about controls and reiterated his sell recommendation.

Bank of America discovered the mistake late last week while preparing a quarterly regulatory report and immediately notified the Fed, said a person with direct knowledge of the process. The error had gone undetected since the firm’s acquisition of Merrill Lynch, said the person.

The bank, in its calculation of regulatory capital, erroneously included a credit for structured notes that had matured, said the person. The company had about $30 billion in the securities at the end of 2013, the person said.

Banks create structured notes by packaging debt with derivatives to offer customized bets to retail investors while earning fees and raising money. Derivatives are contracts with values derived from stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.

Citigroup’s Rejection

Even after correcting the mistake, Bank of America has a 9% common equity Tier 1 capital ratio as of March 31, beyond the 8.5% required by 2019 under the latest international rules set by the Basel Committee on Banking Supervision.

The firm, led by Moynihan since 2010, has worked for years to resolve headaches inherited with his predecessor’s decision to buy Merrill Lynch and mortgage-lender Countrywide Financial Corp. during the financial crisis. The company reported a $276 million deficit for the three months ended March 31, its fourth quarterly loss under Moynihan.

Terry Laughlin, Bank of America’s former chief risk officer who last week was named president of strategic initiatives, will help manage the resubmission, according to one of the people. Laughlin will establish the scope of what must be resubmitted and work with Chief Financial Officer Bruce Thompson and Geoffrey Greener, Laughlin’s successor as risk officer.

The Fed rejected Citigroup’s plan last month by faulting the quality of the New York-based firm’s processes. Citigroup, the nation’s third-largest bank, also was seeking its first dividend increase since the crisis as well as a stock buyback.

 

Tuesday, April 29, 2014

Wall Street Happy To Hum La AbbVie En Rose

For a business that seemed to be oft-maligned when it was still part of Abbott Labs (NYSE:ABT), AbbVie (Nasdaq:ABBV) has done pretty well on its own and sports a relatively high valuation amidst its pharma peers. Due in part to the huge influence of one drug (Humira) on AbbVie's results, there's a wider range of outcomes than with many large-cap drugs stocks. Even so, while I think the current valuation is a little steep, I can see numerous ways AbbVie could exceed present expectations and do well for shareholders in the coming years.

Good Margins, Despite A Tiny Shortfall In Humira
Revenue at AbbVie rose 4% as reported this quarter, or about 5% on an "operational" basis. Not surprisingly, performance was once again led by Humira, where sales rose almost 13% in constant currency to over $2.6 billion (about 1% short of estimates). At over 55% of sales, Humira clearly continues to dominate AbbVie's performance, though Niaspan was up 10% and ahead of expectations, and Kaletra was likewise stronger than expected.

SEE: The Ups And Downs Of Biotechnology

Even with the lack of Humira outperformance, AbbVie's gross margin was substantially higher than expectation – growing four and a half points, and surpassing expectations by three and a half points. AbbVie ended up spending a lot of that in SG&A and R&D, though, and while operating income rose 22% and beat estimates by 5%, the operating margin outperformance was less than a point.

Humira Isn't Done Yet
Even though this market-leading biologic continues to grow nicely, the talk on Humira is almost always negative. Not only are analysts worried that oral drugs like Pfizer's (NYSE:PFE) Xeljanz and Celgene's (Nasdaq:CELG) apremilast will chew into its market share, but also that biosimilars from companies like Mylan (NYSE:MYL) and Hospira (NYSE:HSP) will seriously erode the sales.

I think those fears may be a little premature. First, it seems as though biosimilars will in some respects be treated more like new competitors than substitute products, and the pathway to biosimilar approach and market acceptance in the U.S. is still untested. Second, it's worth remembering that Humira has almost twice as many approved indications as rivals like Enbrel (co-markted by Amgen (Nasdaq: AMGN) and Pfizer) and many of its indications are less than 30% penetrated.

A Pipeline That's More Than Hep-C
Given the market's obsession with the emerging hepatitis C (HCV) market, I can appreciate why so much attention is focused on AbbVie's HCV prospects. While Gilead (Nasdaq: GILD) still looks like the leader, it would seem that AbbVie will be a very strong second place in what should be a multi-billion dollar market. But as investors have seen all too many times in this market, most recently with Vertex (Nasdaq: VRTX), safety and long-term efficacy issues can appear relatively suddenly in these drugs and I wouldn't count the revenue until its in hand.

Beyond hep-C, I think AbbVie's pipeline may be underrated. The company's partnership with Galapagos could bear fruit in the form of AbbVie's own oral RA treatment, and the partnership with Neuroscrine Biosciences (Nasdaq: NBIX) could have a potential blockbuster for endometriosis (and later uterine fibroids), Elagolix, on the market in a few years' time. At the same time, AbbVie has partnered with some quality oncology companies (Bristol Myers (NYSE: BMY) and Roche (Nasdaq: RHHBY) to begin its first serious efforts in oncology.

AbbVie also has a very high-reward/high-risk option in neurology. ABT-126 has shown encouraging early efficacy in Alzheimers, and this is a market badly starved of new effective compounds. While it would be unwise to project any future contributions from this drug at this point in time, it could be a multi-billion dollar source of revenue by the end of the decade if AbbVie gets very lucky.

SEE: Amgen Puts Onyx Pharmaceuticals In Play

The Bottom Line
At over 50% of revenue, AbbVie is extremely vulnerable to any disruptions in Humira, and that's a relatively uncommon problem in big pharma, as Amgen, Lilly (NYSE: LLY), and AstraZeneca (NYSE: AZN) have only half as much reliance on any single drug/platform. I consider this to be a fully recognized risk, though, and I see more upside (slower progress with biosimilars, new indications/more market penetration) than downside at this point.

All of that said, AbbVie is not strikingly cheap right now. Even with an above-peer long-term revenue growth forecast of more than 3%, it's hard to generate a fair value beyond the low $40s right now. Bulls can reasonably argue that success with pipeline drugs in HCV, endometriosis, cancer, and Alzheimers could make those estimates look much too conservative, but I'd like to see a bigger discount to fair value before buying with my own money.

Disclosure – At the time of writing, the author owns shares of Neurocrine Biosciences and Roche.


Sunday, April 27, 2014

5 Stocks With Big Insider Buying

 DELAFIELD, Wis. (Stockpickr) -- Corporate insiders sell their own companies' stock for a number of reasons.

They might need the cash for a big personal purchase such as a new house or yacht, or they might need the cash to fund a charity. Sometimes they sell as part of a planned selling program that they have put in place for diversification purposes, which allows them to sell stock in stages instead of selling all at one price.

Other times they sell because they think their stock is overvalued and the risk/reward is no longer attractive. Some even dump their own stock because they have inside knowledge that a competitor is eating their lunch and stealing market share.

But insiders usually buy their own shares for one reason: They think the stock is a bargain and has tremendous upside.

The key word in that last statement is "think." Just because a corporate insider thinks his or her stock is going to trade higher, that doesn't mean it will play out that way. Insiders can have all the conviction in the world that their stock is a buy, but if the market doesn't agree with them, the stock could end up going nowhere. Also, I say "usually" because sometimes insiders are loaned money by the company to buy their own stock. Those loans are often sweetheart deals and shouldn't be viewed as organic insider buying.

At the end of the day, its large institutional money managers running big mutual funds and hedge funds that drive stock prices, not insiders. That said, many of these savvy stock operators will follow insider buying activity when they agree with the insider that the stock is undervalued and has upside potential. This is why it's so important to always be monitoring insider activity, but it's twice as important to make sure the trend of the stock coincides with the insider buying.

Recently, a number of companies' corporate insiders have bought large amounts of stock. These insiders are finding some value in the market, which warrants a closer look at these stocks. Here's a look at five stocks whose insiders have been doing some big buying per SEC filings.

Philip Morris International

One stock that insiders are buying up a large amount of here is Philip Morris International (PM), which manufactures and sells cigarettes and other tobacco products in markets outside the U.S. Insiders are buying this stock into modest strength, since shares are up 5.5% so far in 2013.

Philip Morris International has a market cap of $143 billion and an enterprise value of $168 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 17.25 and a forward price-to-earnings of 14.6. Its estimated growth rate for this year is 4.2%, and for next year it's pegged at 11.8%. This is not a cash-rich company, since the total cash position on its balance sheet is $3.59 billion and its total debt is $25.50 billion. This stock currently sports a dividend yield of 3.8%.

A director just bought 123,500 shares, or about $11.01 million worth of stock, at $89.15 per share.

From a technical perspective, PM is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending over the last two months and change, with shares dropping from its high of $95.38 to its recent low of $85.21 a share. During that move, shares of PM have been mostly making lower highs and lower lows, which is bearish technical price action.

If you're bullish on PM, then I would look for long-biased trades as long as this stock is trending above some near-term support at $87.65 to $87 and then once it takes out its 200-day at $88.72 and its 50-day at $89.25 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 5.10 million shares. If we get that move soon, then PM will set up to re-test or possibly take out its next major overhead resistance levels at $91.40 to $92.26 a share. Any high-volume move above those levels will then put $94 to $95 into range for shares of PM.

 

RadioShack

Another stock that insiders are jumping into here is RadioShack (RSH), which is involved in the retail sale of consumer electronics goods and services through its RadioShack store chain. Insiders are buying this stock into decent strength, since shares are up 17.4% so far in 2013.

RadioShack has a market cap of $250 million and an enterprise value of $536 million. This stock trades at a cheap valuation, with a price-to-sales of 0.06 and a price-to-book of 0.48. Its estimated growth rate for this year is -101.7%, and for next year it's pegged at 44.4%. This is not a cash-rich company, since the total cash position on its balance sheet is $432 million and its total debt is $712.70 million.

A director just bought 100,000 shares, or about $255,000 worth of stock, at $2.55 per share.

From a technical perspective, RSH is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the last three months, with shares dropping from its high of $4.28 to its recent low of $2.18 a share. During that move, shares of RSH have been consistently making lower highs and lower lows, which is bearish technical price action.

If you're in the bull camp on RSH, then look for long-biased trades as long as this stock is trending above some near-term support at $2.46 and then once it breaks out above its 200-day at $2.92 and its 50-day at $3.14 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 3.21 million shares. If that breakout triggers soon, then RSH will set up to re-test or possibly take out its next major overhead resistance levels at $3.30 to $3.60.

Impac Mortgage

Another stock that insiders are active in here is Impac Mortgage (IMH), which offers residential mortgage services in the U.S. Insiders are buying this stock into big time weakness, since shares are off by 27.4% so far in 2013.

Impac Mortgage has a market cap of $89 million and an enterprise value of $6.05 billion. This stock trades at a premium valuation, with a forward price-to-earnings of 124.10. This is not a cash-rich company, since the total cash position on its balance sheet is $14.15 million and its total debt is a whopping $5.98 billion.

A beneficial owner just bought 77,863 shares, or about $782,000 worth of stock, at $10 to $10.05 per share.

From a technical perspective, IMH is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been trending sideways in a consolidation pattern for the last month, with shares moving between $9.80 on the downside and $10.90 on the upside. A high-volume move above the upper-end of its sideways trading chart pattern soon could trigger a big breakout trade for shares of IMH.

 

If you're bullish on IMH, then look for long-biased trades as long as this stock is trending above some key near-term support at $9.80 and then once it breaks out above some near-term overhead resistance levels at $10.50 to $10.90 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average volume of 29,759 shares. If that breakout triggers soon, then IMH will set up to re-test or possibly take out its next major overhead resistance levels at $11.88 to $11.95. Any high-volume move above those levels will then give IMH a chance to tag $14.

Luminex

A health care stock that insiders are jumping into here is Luminex (LMNX), which develops, manufactures and sells proprietary biological testing technologies and products with applications throughout the life sciences and diagnostics industries. Insiders are buying this stock into notable strength, since shares are up 23.2% so far in 2013.

Luminex has a market cap of $859 million and an enterprise value of $784 million. This stock trades at a premium valuation, with a price-to-sales of 119.83 and a price-to-book of 33.63. Its estimated growth rate for this year is 36.7%, and for next year it's pegged at 51.2%. This is a cash-rich company, since the total cash position on its balance sheet is $42.97 million and its total debt is just $1.67 million.

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A director just bought 27,000 shares, or about $540,000 worth of stock, at $20.01 per share.

From a technical perspective, LMNX is currently trending above its 200-day and just below is 50-day moving average, which is neutral trendwise. This stock recently gapped down sharply from $23.50 to $19.75 a share with heavy downside volume flows. Following that move, shares of LMNX have started to rebound off $19.75 and the stock is starting to push within range of triggering a near-term breakout trade.

If you're bullish on LMNX, then look for long-biased trades as long as this stock is trending some key near-term support at $19.75, and then once it breaks out above its 50-day at $21.14 a share and above its gap down day high of $21.83 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average volume of 206,755 shares. If that breakout hits soon, then LMNX will set up to re-test or possibly take out its 52-week high at $24.10. Any high-volume move above that level will then give LMNX a chance to tag $25 to $26.

Theravance

 

One final name with some monster insider buying is Theravance (THRX), which is a biopharmaceutical company with a pipeline of internally discovered product candidates and strategic collaborations with pharmaceutical. Insiders are buying this stock into big time strength, since shares are up 64% so far in 2013.

Theravance has a market cap of $3.56 billion and an enterprise value of $3.71 billion. This stock trades at a premium valuation, with a price-to-sales of 371.87 and a price-to-book of 42.96. Its estimated growth rate for this year is -840%, and for next year it's pegged at 43.6%. This is a cash-rich company, since the total cash position on its balance sheet is $533.33 million and its total debt is $459.96 million.

A beneficial owner just bought 3,064,407 shares, or about $111.85 million worth of stock, at $36.51 per share.

From a technical perspective, THRX is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock recently ran into stiff overhead resistance at $39.60 to $39.73 a share. The stock has subsequently sold off from those resistance levels and it's now moving back below its 50-day moving average of $37.59 a share and back below some key near-term support at $37.20 a share.

If you're bullish on THRX, then look for long-biased trades as long as this stock is trending above its next major support levels at $34 to $33, and then once it breaks out back above its 50-day at $37.59 a share with high volume. Look for a sustained move or close above its 50-day at $37.59 a share with volume that hits near or above its three-month average action of 1.47 million shares. If that breakout triggers soon, then THRX will set up to re-test or possibly take out its next major overhead resistance level at $39.73 a share.

To see more stocks with notable insider buying, check out the Stocks With Big Insider Buying portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

Saturday, April 26, 2014

Natural Gas Supplies Up, Natural Gas Prices Up, Gas Stocks with High Yields

According to the the U.S. Energy Information Administration, natural gas supplies increased by 49 billion cubic feet for the week ended April 18. In addition, natural gas prices increased by 1.5 cents to $4.745 per million BTUs.

So what's going on with natural gas utilities? Atmos Energy Corp (ATO), which distributes natural gas to Louisiana, Texas, Mississippi, Colorado, Kansas, and Kentucky, is one on the stocks on the WallStreetNewsNetwork.com list of natural gas stocks. The stock trades at 18 times trailing earnings, and 16.5 times forward earnings. The stock pays a decent yield of 3.1%. Dividends have increased every year for at least the last ten years. Earnings increased 8.1% for the latest quarter on a 21.4% revenue increase. The company reports earnings on May 7.

Northwest Natural Gas (NWN) pays a generous yield of 4.2%. The company serves over 680,000 customers in Washington and Oregon. Current P/E is 20, with a forward P/E of 18.  For the latest reported quarter, earnings were up 3.1%, with revenues rising 13.6%. The company's next earnings announcement is May 2.

For a free list of natural gas stocks, almost all of which have yields in excess of 2%, go to WallStreetNewsNetwork.com.

Disclosure: Author didn't own any of the above at the time the article was written.

By Stockerblog.com

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Commodities Markets

Originally posted here...

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Friday, April 25, 2014

Report: Oil, Natural Gas Companies Shift Funds Towards Exploration, Away from Property Buys

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Some interesting statistics, released this week by the U.S. Energy Information Administration (IEA), suggest the North American shale oil boom has shifted big energy company funds away from land purchases, and more towards finding and developing new sources of oil and gas.

The EIA examined annual reports from 42 oil and natural gas companies, from giants like Brazil's Petrobras (NYSE: PBR) and ExxonMobil (NYSE: XOM) to smaller firms like Talisman Energy (NYSE: TLM) and Encana (NYSE: ECA) – companies that reportedly made up about 40 percent of non-OPEC production last year, and that had combined market capitalization of over $2.4 trillion.

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The study, which also looked at upstream expenditures over the past 14 years, found spending on oil and natural gas exploration and development increased by five percent, or $18 billion, last year, while property acquisitions fell by $17 billion.

"In the past two years," according to an EIA press statement, "flat oil prices and rising costs have contributed to declining cash flow for this group of companies. Continued declines in cash flow, particularly in the face of rising debt levels, could challenge future exploration and development. However, reduced spending levels could be offset by rising drilling and production efficiency."

The oil and natural gas exploration trend has also been picked up by some national governments. South Korea, according to Platts, is expected to complete a plan by the end of the year to explore oil and gas reserves off its coast.

In Mexico, the state-owned PEMEX says it has discovered seven new deep-water, natural gas fields in the Gulf of Mexico and plans to begin production next year.

Posted-In: energy land purchases Mexico Natural Gas Oil oil and natural gas oil exploration Pemex South KoreaNews Commodities Travel Global Economics Markets General Best of Benzinga

© 2014 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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Thursday, April 24, 2014

SEC opens probe over GM ignition switch recall

The U.S. Securities and Exchange Commission is investigating General Motors over its handling of an ignition switch defect, according to a public filing today.

The disclosure in GM's quarterly SEC filing, marks the latest of several government investigations over the automaker's failure to fix sooner a defect that's now blamed for at least 32 crashes and 13 deaths.

GM's document said the SEC is investigating its handling of the ignition switch defect, which engineers first discovered more than a decade ago but failed to fix despite a change to the component approved in 2005.

The automaker has now recalled 2.6 million small cars mostly Chevrolet Cobalts and Saturn Ions from 2003 through 2007 model years. The ignition key can be jostled from the "on" to the "accessory" position by a driver's knee or the weight of a keychain. That, in turn, can cut power to the engine, air bags and other electrical systems.

A spokeswoman for the SEC declined to comment, saying the agency does not confirm or deny investigations. GM spokesman Jim Cain also declined to comment.

The disclosure also stated that GM is facing at least 55 lawsuits throughout the country, including challenges from shareholders accusing the automaker of securities fraud.

Government investigations include a criminal probe by the U.S. Justice Department, a regulatory investigation by the National Highway Traffic Safety Administration and inquiries by U.S. House and Senate committees.

Analysts expect GM to pay several billion dollars in fines, damages and settlements. But the company is asking U.S. Bankruptcy Court in Manhattan to uphold an immunity against "economic loss" lawsuits that was granted to it as part of its 2009 government-backed bankruptcy.

"We are investigating these matters internally and believe we are cooperating fully with all requests, notwithstanding NHTSA's recent fines for failure to respond," GM said in the SEC filing. "Such investigations could result in the imposition of damages, f! ines or civil and criminal penalties."

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Earlier today, GM CEO Mary Barra said on a conference call that the company would disclose the findings of an internal investigation being conducted by outside lawyer Anton Valukas as soon as his probe is finished.

The company has also hired disaster compensation expert Kenneth Feinberg to explore the options, including a fund to compensate victims of the ignition switch defect.

"The recall team is being thorough, progressive and proactive," Barra said. "When the facts are in, we will be transparent and we will

Wednesday, April 23, 2014

GM may post first quarterly loss since 2009

General Motors could report Thursday its first unprofitable quarter in four years, largely due to the estimated $1.3 billion cost of its ignition switch recall, but it remains profitable in North America aside from one-time accounting provisions.

So far U.S. car buyers aren't fleeing GM dealerships despite the ignition switch defect affecting 2.6 million recalled small cars, mostly from the 2003 through 2007 model years. The defect has been linked to at least 31 crashes and 13 deaths.

But GM sells more vehicles in China, now the world's largest auto market, than in the U.S. Despite the recall the automaker's U.S. sales rose 4% in March from a year ago.

Setting aside one-time accounting charges GM expects "solid core operating performance" for the first three months of 2014. But the $1.3 billion charge for a series of recalls, including the defective ignition switches, and a $400 million charge reflecting a devalued Venezuelan currency could eclipse global operating profits.

Investors will also want to see if GM is experiencing problems in Russia, where a tensions in Ukraine has prolonged an economic downturn already in progress.

The automaker has recalled nearly 7 million vehicles so far in 2014, including its new full-size pickup trucks to fix a transmission oil line.

GM has also hired Kenneth Feinberg to administer a fund the company may create to compensate families who lost loved ones or other people injured in accidents caused by the faulty ignition switches. Eventually GM could pay substantial fines to federal regulators, but those aren't expected to be reflected in Thursday's report.

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Earlier this week the company asked a bankruptcy judge in New York to uphold a provision in GM's 2009 restructuring that protected it from product liability lawsuits. The automaker contends it can't be sued for the declining value of defective! cars covered by the ignition switch recall because those defective parts were purchased by "Old GM," an entity that was left in bankruptcy when "New GM" emerged in July 2009.

With more than $20 billion in cash as of Dec. 31, GM likely can absorb current and future legal and regulatory costs.

Investors have expected a difficult first quarter for several weeks. GM shares have fallen 5% since the beginning of March.

Barclays analyst Brian Johnson said in a research note that he's projecting a "kitchen sink quarter" for GM, meaning the company will pack as much bad news as possible into one report.

"We believe the results of the quarter will be less relevant for investors, with the focus more on what to expect going forward," Johnson said. "It may be in GM's interest to push through additional charges now, which it will not have to face later."

But Cars.com chief analyst Jesse Toprak expects some negative impact from the recall.

"Certainly there is going to be some impact," Toprak said. "Where it usually happens … is for the indecisive consumers. If you have not made up your mind in a crowded segment, like mid-size sedans, you might just take the GM vehicles off your consideration list."

Yet another issue that may impact the first-quarter results is that sales of its profitable fullsize pickup trucks have lagged expectations in recent months. But GM executives have said the pickups profits remain robust because Chevrolet and GMC are not discounting the Silverado and Sierra as some competitors are doing.

Investors will also focus on how much GM has reduced losses in Europe where it has not posted an operating profit since 1999.

4 Stocks Making Moves

The following video is from Thursday's Investor Beat,  in which host Chris Hill, and analysts Jason Moser and Isaac Pino dissect the hardest-hitting investing stories of the day.

Yum! Brands' (NYSE: YUM  )  second-quarter profits fall 16%. Amazon (NASDAQ: AMZN  ) benefits from a rise in e-commerce. Costco's (NASDAQ: COST  ) same-store sales in June rise 6%. And Wal-Mart (NYSE: WMT  ) scraps plans for three new stores in Washington, DC. In this installment of Investor Beat, Motley Fool analysts Jason Moser and Isaac Pino discuss four stocks making moves today.

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The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.

The relevant video segment can be found between 2:30 and 5:41.

Tuesday, April 22, 2014

Why Activision Blizzard Is in a Realm of Its Own

My video game addiction began with an elegantly wrapped box 16 years ago on Christmas morning of 1997. Little did I know that this box would have such a profound impact on my life (and social skills, or lack thereof). Beginning with Nintendo 64, and later Dreamcast, PlayStation 2, Nintendo Wii and currently PlayStation 3, it's safe to say that video games have been a big part of my life. And this doesn't solely pertain to consoles -- Warcraft III and World of Warcraft, both played on PC, once dominated my life as well. It's clear the company that has had the most significant presence in my life is undoubtedly Activision Blizzard  (NASDAQ: ATVI  ) .

Prior to merging 2008, the two companies were completely separate gaming entities. Blizzard represented the dark hole that is PC gaming, where I would submerge myself into the various worlds (Warcraft, Starcraft, and Diablo) for unhealthy periods of time. Activision, on the other hand, represented the more socially acceptable video games I would play when friends came over, including such franchises as Call of Duty, Guitar Hero, and Tony Hawk.

Fast-forward five years later, and this union has become one of the most dominant names in gaming. Its first-quarter earnings indicate a 21% growth in EPS ($0.33 in Q1 2012, $0.40 in Q1 2013) and a 13% increase in net revenue ($1.172 billion in Q1 2012, $1.324 billion in Q1 2013). Arguably the company's most popular franchise, Call of Duty was featured twice among the 10 best-selling games of 2012, with Call of Duty: Black Ops 2 coming in at No. 1, and Call of Duty: Modern Warfare 3 at No. 8.

On the PC side of things, Activision Blizzard owns the online phenomena that is World of Warcraft, or WoW. Although the series has seen membership decrease over the years, this is to be expected with a game that is in its ninth year. Nonetheless, WoW still has 8.3 million subscribers, generating more than $100 million in revenue. Although subscriptions are slowly decreasing, Activision Blizzard has shown efforts to increase members with its most recent release of a WoW expansion pack, Mists of Pandaria, in September 2012, which sold a fairly impressive 2.7 million copies in its first week, aligning with the initial projections.

In terms of mobile presence, Activision Blizzard is actively pursuing the mobile platform in hopes of replicating the success that the company has seen in the console and PC space. The multiplatform franchise Skylanders, a video game that allows the gamer to purchase individual physical toys which can be linked to the virtual video game, can be played on PC, current-generation consoles, and iOS. Skylanders, the No. 1 franchise year to date in North America and Europe according to the Q1 2013 SEC filing, has earned revenue greater than $1 billion through 2012. Activision Blizzard has struck a deal with USAopoly to create a Skylanders-themed Monopoly game, one with Frito-Lay for a three-phase national promotion, and another with McDonald's, which launched a Happy Meal program in April earlier this year, and plans on extending the program to other countries throughout the year. If that wasn't enough, Activision has also secured licensees in the following categories: publishing, apparel, back-to-school, game accessories, costumes, construction sets, bedding, and party goods, according to a recent press release.

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Source: Activision Blizzard.

In addition to developing its Skylanders franchise, Activision Blizzard plans on releasing Hearthstone: Heroes of Warcraft, a cross-platform, free-to-play, digital, collectible card game for PC, Mac and iPad, in late 2013. With a 98% increase in net revenue generated by PC ($93 million in Q1 2013, $47 million in Q1 2012) according to its quarterly report, Activision Blizzard is expressing its continued desire to dominate the PC gaming experience.

Furthermore, Activision Blizzard is exhibiting its desire toward growth and video game progression. With the expected release of Call of Duty: Ghosts on November 5, and Diablo III in September on Playstation 3 and Xbox360 -- with plans for a PlayStation 4 release later --this company clearly has its sights on the future.

A few areas of concern for Activision Blizzard reside in the transition between gaming systems, the development of Call of Duty, and the increasing competition from Electronic Arts (NASDAQ: EA  ) and Disney (NYSE: DIS  ) . Sales of CoD: Ghosts are not expected to be as high as its predecessor due to the transition between systems, from PS3 and Xbox 360 to PS4 and Xbox one, respectively. After E3 in early June, critics claimed that CoD: Ghosts doesn't demonstrate nearly enough advances in the game interface, and could suffer the effects of competing with EA's Battlefield 4, whose predecessor, Battlefield 3, rivaled CoD: Modern Warfare 3 in 2011. However, Modern Warfare 3 has outsold Battlefield 3 nearly 2-to-1, according to VGChartz. VGChartz also showed that Battlefield 4 presale has outsold CoD: Ghosts presale by about 40,000 units as of June 29. Although this appears slightly daunting to the future of CoD, this sales differential can be partially attributed to the CoD faithful who are still exploring new maps in CoD: Black Ops II and haven't decided to preorder the newest release in the series. Although Battlefield may present viable competition, based off the sales of the prior releases in the series, it's safe to say that CoD will continue to control the market.

Disney has developed its very own knock-off of Skylanders that the company plans on releasing in August 2013. Disney Infinity, the rival product, uses physical toys that are then synthesized with the game, similar to Skylanders. The difference between the two, which could affect Skylanders, is that Disney Infinity uses characters from Disney and Pixar movies. This allows the gamer to interact with familiar characters from their favorite movies. A Disney Infinity Starter Pack is listed on gamestop.com for $74.99, the same price as a Skylanders: SWAP Force Starter Pack, clearly a pricing strategy by Disney. The area that investors should be watching this summer -- which positively affects Disney Infinity and, consequently, negatively affects Skylanders -- is the box office. Disney Infinity's potential only increases with the success of Monsters University, which features one of the platform characters of Disney Infinity, Sully. While Disney Infinity shows great potential, the billion-dollar industry that is Skylanders may have already captured too much market share for Disney to have a significant impact. Only time will tell.

Although Disney and Electronic Arts present areas of concern for Activision Blizzard, due to its solid foundation, expansive fan base of lifelong gamers, and growth and expansion plans, this company is one that I see growing and prospering in the subsequent years. Activision's multiplatform business model makes for a company that is dependable and one that I, and Motley Fool One analyst Jason Moser, believe in. Just as my gaming will continue to grow in the subsequent years, so will Activision Blizzard's dominance of the market.

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Monday, April 21, 2014

Here's What You Should Know About Zynga Now

U.S. stocks traded in a narrow range today, ending the day essentially unchanged as the S&P 500 (SNPINDEX: ^GSPC  ) and the narrower, price-weighted Dow Jones Industrial Average (DJINDICES: ^DJI  ) fell 0.05% and 0.28%, respectively.

Consistent with that small loss, the CBOE Volatility Index (VIX) (VOLATILITYINDICES: ^VIX  ) , Wall Street's "fear index," rose just 0.4% to close at 16.44. (The VIX is calculated from S&P 500 option prices and reflects investor expectations for stock market volatility over the coming 30 days.)

Zynga: Don't play this game
The shares of social games developer Zynga (NASDAQ: ZNGA  ) are up by nearly a fifth in two days (see graph) on news that founder Mark Pincus is stepping down as CEO to make way for Don Mattrick, who had been the president of Microsoft's Interactive Entertainment Division. Is that "pop" justified?

ZNGA Chart

ZNGA data by YCharts.

The more I learn about Mattrick, the more I think this hire is a terrific coup for Zynga. For one thing, one would be hard-pressed to find someone with deeper knowledge and experience of the gaming industry. At 17, Mattrick founded games company Distinctive Software, which he sold to Electronic Arts (EA) by the time he was 27. That's where he went on to spend 15 years of his career. At EA, he built two fabulous franchises, the Sims and FIFA Soccer. His record developing the Xbox franchise during the six years he spent at Microsoft is, by all accounts, excellent.

Furthermore, he is certainly being incentivized in a manner that aligns his interests with (suffering) shareholders: The Wall Street Journal reports that roughly 95% of his compensation will be in stock.

All good things, but it might not be enough. As former EA Kristian Segestrale told the Financial Times: "He's the best Zynga could have done -- it's a very courageous move but both for him and for Zynga it will be incredibly challenging." Even ignoring the challenge of a successful transition to mobile devices, the casual gaming market is extraordinarily volatile. According to online tracker AppData, just yesterday, Zynga lost its crown as the top games provider on Facebook to King.com, a position it had held for five years.

Here's the bottom line: If you believe Zynga's stock was properly valued prior to the announcement, then a 18% "Hattrick premium" seems pretty reasonable. If you believe (as I do) that the enormous challenges and uncertainty facing Zynga's aren't fully reflected in the price, the appointment of a new CEO will do little to get you excited. It's impossible to make any forecast of what Zynga will earn five years from now (one can't even be certain the company will still exist), so any intrinsic value estimate on a cash flow basis is meaningless. Make no mistake about it: Buying shares of Zynga today is no different from playing virtual roulette -- with real money, that is.

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Sunday, April 20, 2014

Chart: How Many Homes Does Lennar Sell?

Sometimes the most important data is the hardest to come by. In this case, I'm referring to historic sales figures from homebuilder Lennar Corp. (NYSE: LEN  ) -- for similar figures from D.R. Horton and PulteGroup, click here and here, respectively. As I've noted previously, while this is arguably the single most accurate reflection of a homebuilder's performance, not to mention the overall housing market, a comprehensive data set containing the data is nowhere to be found.

It's for this reason I decided to collect the information and share it in the chart below. While researching the health of the broader economy, I dug through the quarterly filings of the largest homebuilders. My purpose was to gauge how well the market for new homes had recovered. And, at least so far as volume is concerned at Lennar and the other companies noted above, the answer is: not very well.

10 Best Telecom Stocks To Invest In Right Now

Source: Quarterly filings.

There are two reasons to care about this: First, if you own shares of Lennar or another major homebuilder, it goes without saying that the more new homes that are built and sold, the higher that shares in these companies will climb. And second, it's estimated that two to three jobs are created by every home built. As a result, an uptick in this sector could very well trigger a more robust economic recovery overall.

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Saturday, April 19, 2014

Porn Crackdown Gives Weibo More to Cheer

BEIJING (TheStreet) -- China's cyberspace nannies handed Weibo (WB) an unintentional gift in the form of a pornography crackdown Friday, one day after the mainland's Twitter-like (TWTR) service debuted on Nasdaq.

Weibo postings jumped thanks to a thread debating the pros and cons of the latest campaign against online lewdness launched by the government's Ministry of Public Security.

The handle #扫黄打非净网2014# -- which means "eliminate pornography and illegal publications, clean Internet 2014" -- drew so many posts that it was the top trending topic all day and well into the evening. Parents voiced support, romance writers complained.

The forum pointed to a Weibo strength as an authoritative outlet for government, company, police, celebrity and public service announcements. Most seekers of fast access to a nationwide audience use Weibo first, state media second. It also highlighted two weaknesses: Chinese government censorship that's at the heart of the anti-porn campaign, and Weibo's reliance on hot news topics that stir emotions but steer clear of anything that might upset censors. Sina works with police and is not shy about closing Weibo accounts that "spread rumors," a crime that can be subject to case-by-case interpretation. Moreover, Weibo users are invited to rat on suspected violators. Meanwhile, Weibo benefits from compelling but safe topics that spark comments and threads. In a report Friday about Weibo's IPO, the Chinese business magazine Caijing said postings linked to news about a Malaysia Airlines flight's disappearance were a key reason for a 9% month-on-month jump in average daily Weibo users in March. The rise to 67 million users a day was "closely related to Malaysia Airlines (news) and other big events," the report said. News about the airliner search, which is continuing, fueled Weibo activity for weeks after the March 8 disappearance of the flight from Kuala Lumpur to Beijing with 153 mainlanders on board. On top of Weibo's weaknesses, which indeed affect every media business in China, the online service and its parent Sina (SINA) have ample competition in the race for online communicators. Rivals include popular services run by Tencent such as QQ, Tencent Weibo and Weixin, also known as WeChat. Although the government blocks Twitter, some mainlanders use VPNs to access it anyway. Chinese also communicate online through Microsoft (MSFT) services Skype and MSN Messenger, which was killed in other parts of the world but still lives in China, and various smartphone apps. So far, must-have information and compelling forum topics have helped Weibo ride high in this sea of communication options, and amid information restrictions. Now, to keep stock investors happy, it will have to keep the ball rolling. That may be difficult at times, as shown by Friday's Weibo activity. Trending topics ranked below the porn crackdown late Friday were, in descending order, the death of author Gabriel Garcia Marquez, news about the Weibo IPO, and a thread answering the question, "What's your favorite food from your hometown?" At the time of publication, the author held no positions in any of the stocks mentioned. This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Stock quotes in this article: WB, TWTR, SINA, MSFT 

Friday, April 18, 2014

Alfa Romeo returns to America... at last

Alfa Romeo is back with new 4C   Alfa Romeo is back with new 4C NEW YORK (CNNMoney) Following a nearly 20 year absence Alfa Romeo is returning to the United States market with the 4C, an exotic-looking two-seat sports car that made its American debut at the New York Auto Show.

Alfa's return has been seriously discussed ever since the brand's parent company, Fiat, rescued Chrysler from bankruptcy in 2009. Strictly speaking, Alfa did make a minor U.S.-market re-entry with the pricey Alfa Romeo 8C in 2008. Only about 100 of those cars, with prices starting around $260,000, were ever sold in North America.

The 4C is a much more attainable car that Alfa plans to sell in far more serious numbers. When it goes on sale here in June, the 4C will initially be available in a special "Launch Edition" that will come in one of three colors, two shades of red and one white. Only 500 of those will be sold at prices around $70,000.

Gallery - Cool cars from the New York Auto Show

Those who can wait until autumn will get a broader range of color choices and prices that start at about $54,000.

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The 4C is powered by a 237-horsepower turbocharged 4-cylinder engine mounted behind just behind the seats. It has a 6-speed automatic transmission engineered for quick, sporty gear shifts. To save weight, the 4C's body is made from aluminum, carbon fiber and special composite materials. The car has a top speed of 160 miles per hour and can go from zero to 60 in about 4.5 seconds.

The 4C will be sold through specially selected Fiat and Maserati dealers. Like Alfa Romeo, Maserati is also part of the new Fiat Chrysler Automobiles. So far, there's no word if any other Alfa Romeo models might come to the U.S. To top of page

Thursday, April 17, 2014

Who Took All the Jobs, and 4 Other Important Employment Trends

May's jobs report showed 175,000 jobs were created last month. This number has been so boringly consistent for the last three years that it's almost not worth talking about anymore. Each of the last 36 employment reports can be summed up in one line: The economy is creating enough jobs to slowly bring down the unemployment rate over time. That's it.

Instead of picking apart the details of May's unemployment report, let's go over a few important employment trends.

1. Virtually all jobs created over the last decade went to people with a college education
It's the truth:

Source: Bureau of Labor Statistics, author's calculations.

2. Private employment growth is actually doing well. Falling government employment is now the biggest drag on the jobs market.
That isn't a political statement. It's just what the numbers show:

Source: Bureau of Labor Statistics.

3. Those who have a job are working fewer and fewer hours
Part of this is likely due to an increase in female laborforce participation and maternity leave, but the trend sped up during the recession:

Source: Bureau of Labor Statistics.

4. Female employment fared much better during the recession:
Sorry, guys:

5. It's getting better.
The Bureau of Labor Statistics calculates unemployment several different ways. Any way you slice it, the trend is down. It's getting better:

Source: Bureau of Labor Statistics.

For more on the jobs market, check out:

Pay Attention to Housing -- It Could Be Huge for Jobs Want a Job? Go to School. The Coming Boom

Wednesday, April 16, 2014

3 Big Stocks on Traders' Radars

BALTIMORE (Stockpickr) -- Put down the 10-K filings and the stock screeners. It's time to take a break from the traditional methods of generating investment ideas. Instead, let the crowd do it for you.

>>3 Big-Volume Stocks in Breakout Territory

From hedge funds to individual investors, scores of market participants are turning to social media to figure out which stocks are worth watching. It's a concept that's known as "crowdsourcing," and it uses the masses to identify emerging trends in the market.

Crowdsourcing has long been a popular tool for the advertising industry, but it also makes a lot of sense as an investment tool. After all, the market is completely driven by the supply and demand, so it can be valuable to see what names are trending among the crowd.

While some fund managers are already trying to leverage social media resources like Twitter to find algorithmic trading opportunities, for most investors, crowdsourcing works best as a starting point for investors who want a starting point in their analysis. Today, we'll leverage the power of the crowd to take a look at some of the most active stocks on the market today.

>>5 Stocks to Sell Before It's Too Late

These "most active" names are the most heavily-traded names on the market -- and often, uber-active names have some sort of a technical or fundamental catalyst driving investors' attention on shares. And when there's a big catalyst, there's often a trading opportunity.

Without further ado, here's a look at today's stocks.

Yahoo!

Nearest Resistance: $40

Nearest Support: $32

Catalyst: Pre-Earnings Selling

Yahoo! (YHOO) is down 2% a ahead of this afternoon's earnings call, as traders who have been exposed to this volatile, high volume name make their exits before the numbers hit. From a technical standpoint, YHOO has looked pretty ugly since the start of March, as a textbook bearish setup triggered a downside move that's pushed Yahoo down more than 12.7% in the last month. But while there's still downside room on the chart, the event risk from tonight's earnings call makes it more a gamble than a trade.

The recent flight to quality on the Nasdaq could help draw some cash to YHOO following earnings, given this stock's attractive balance sheet and big cash generation. So, despite the abundance of sellers in Yahoo, I wouldn't want to hold this name short over earnings today...

Himax Technologies

Nearest Resistance: $11

Nearest Support: $8

Catalyst: Google Glass Drama

The bigger they are, the harder they fall. At least that's the "rule" that's being proven in Taiwanese micro-display maker Himax Technologies (HIMX) right now. Shares of HIMX are down 4% this afternoon, adding onto a nearly 50% one-month decline as speculation over Google Glass dumps volatility on this small-cap stock.

HIMX is a key supplier for Glass, and the device's one-day sale is the catalyst for the big moves in shares, as investors wonder whether they'll see material sales in 2014. You can buy your own Google Glass today for $1,500.

Technically speaking, HIMX's chart is broken. There's some semblance of support down at $8, but ever since breaking its uptrend in mid-March, this stock has been crashing through stronger support levels with ease. Don't look for a bargain in HIMX this week.

Applied Materials

Nearest Resistance: $21

Nearest Support: $18

Catalyst: Technical Setup

Applied Materials (AMAT) is down 3.3% on high volume today, the result of a broad selloff in tech stocks and an already bearish setup. But zoom out a bit, and things don't look so bad. In fact, it makes a lot of sense to buy the bounce in AMAT. That's because this $23 billion semiconductor manufacturer is still in the midst of a long-term uptrend, with well-defined trend line support sitting below shares. The high probability move is to buy the bounce off of support.

The 200-day moving average has been a good proxy for support since last fall. That makes it a good place to keep a protective stop when the bounce in AMAT happens.

To see these stocks in action, check out the at Most-Active Stocks portfolio on Stockpickr.



-- Written by Jonas Elmerraji in Baltimore.


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Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to

TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

Follow Jonas on Twitter @JonasElmerraji


Tuesday, April 15, 2014

Telecom Giant Keeps Opening Key Doors to Success

As well as a diversified business, having an extensive footprint in many different regions allows companies to avoid leaving their success subject to the economic and political swings of one country. This compelling strategy has been properly understood and carried out by telecommunications leader Orange ADR (ORAN). Based in France, the company has expanded its services onto 32 other countries, serving a total of 236 million customers. Hence, it has become one of the world's largest telecommunications carriers and the third largest wireless operator in Europe.

The firm provides local phone, domestic and international long distance, wireless data communications, Internet access, multimedia, broadcast and cable TV services. Its business arm, Orange Business Services, accounts for 15.9% of the company's sales and is one of the leading providers of communications services to multinational companies.

A Healthy Management

In order to counter the aggressive pricing strategy from wireless new entrant Iliad SA (ILD) in France, Orange was forced to reduce prices. Thus, the firm has continued to add wireless subscribers but at a lower average revenue per user, mainly through its low-end Sosh brand.

Further, its existing contract base keeps rolling into lower priced plans. As a result, the company's revenue has plunged, in spite of which the firm has managed to improve its bottom line year over year in 2013.

Management's efficiency is also evidenced by its decision to reduce its non-core assets in order to concentrate on its most profitable businesses. Consequently, almost nine months after its initial tender, Orange divested its Dominican unit to Luxemburg-based Altice SA (ATC) for $1.4 billion last week.

The news boosted its stock price, which climbed 2.31% on the NYSE last Wednesday. This operation provides the company with significant cash volume to reduce its debt burden and invest in Europe and other emerging markets.

Growth Drivers

The company is accelerating infrastructural developments to drive 4G LTE expansion in order to support wireless growth in France and other key regions across Europe. In 2013, it captured 40% of the French population with 4,200 sites and it also reached 0.5 million customers and 30% of its network coverage in Spain. Noteworthily, LTE network expansion will foster long-term growth in the company's mobile data business.

Apart from its dominant position in France, Orange is also Poland's incumbent telecom operator. Its leadership in both countries has allowed the firm to spread its costs over a larger customer base and also to benefit from greater power to negotiate pricing when buying equipment.

Furthermore, the company is enjoying substantial growth in Africa and the Middle East, where it boasts 106.1 million wireless users, almost one third of its total customer base. In most of these countries the firm is the first or second operator by number of subscribers, thereby benefiting from the same scale advantages it has in France. Put together, all these operations play a significant role in the company's economic moat and in its revenue and cash generation.

Valuation

All the aforementioned traits and strategies support a positive outlook on the firm's prospects and have earned it an Outperform recommendation from Zacks.

1397338247832.png

Orange stock trades at 15.50 its trailing earnings, a discount compared to its peers' average of 16.80. And although its 7.69% return on equity is lower than its competitors' average of 12.39%, it has been following an upward trend since January 2013.

Its dividend yield and payout ratio are higher, delivering 4.04 and 0.62, respectively, against its competitors' 3.76 and 0.58. Investment guru Joel Greenblatt (Trades, Portfolio) recently incorporated Orange to its portfolio in accordance with my bullish feeling about the firm's ability to keep itself on the growth trajectory.

Disclosure: Patricio Kehoe holds no position in any stocks mentioned.

About the author:Patricio KehoeA fundamental analyst at Lone Tree Analytics
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Sunday, April 13, 2014

Global Warming Panel Calls for Dramatic Action to Avoid Catastrophe

NEW YORK (TheStreet) -- The United Nations' Intergovernmental Panel on Climate Change Sunday released the latest part of its Fifth Assessment Report, outlining the dramatic steps that need to be taken to avoid the catastrophic impacts of global warming caused by humans.

Most significantly, the Summary for Policymakers portion of the report emphasizes the need for coordination on a planetary scale.

"Effective mitigation will not be achieved if individual agents advance their own interests independently," the report emphasizes.

Also See: Exxon's Climate Change Report Fails to Satisfy Investors The Summary notes that total anthropogenic greenhouse gas emissions were the highest in human history from 2000 to 2010 and reached approximately 49 gigatonnes of carbon dioxide equivalent per year by 2010. The majority of the increase of such emissions since 1750 was produced in the last 40 years, with the last decade showing the most dramatic escalation. The global economic crisis of 2008 and 2009 temporarily reduced emissions.  The documents are the third of four installments that together comprise the Fifth Assessment Report, being released in stages over the last year. The fourth installment is expected in October. Each installment draws on the opinions of hundreds of the world's leading scientists, summarizing vast amounts of recent scientific research. According to the IPCC press release: "Since the last IPCC assessment report, published in 2007, a wealth of new knowledge about climate change mitigation has emerged. The authors of the new, fifth Working Group III report have included about 10,000 references to scientific literature in 16 chapters." The report pegs the "catastrophic" threshold at an average surface temperature increase of more than 2 degrees Celsius "above pre-industrial levels." To avoid that, the scientific consensus recommends dramatic reduction in carbon emissions from 2010 standards, a global shift to clean energy sources, an emphasis on reforestation to help absorb carbon in the atmosphere and an increase in energy efficiency. Further measures to actively remove carbon from the air may also be required. The report indicates the possible positive contributions of biomass fuels and carbon capture and storage, but notes that alone, those technologies are not yet available at a sufficient scale. In the IPCC press release, German scientist Ottmar Edenhofer, one of the directors of Working Group III, the panel response for the report, said scientists were sending a strong message. "To avoid dangerous interference with the climate system, we need to move away from business as usual," he said. The changes in emissions would affect energy production and use, transport, buildings, industry, land use and "human settlements," the scientists said. The scientists discounted the negative economic effects of such a shift in energy production and reduction in emissions. Edenhofer noted that any scenario that kept global warming below the critical threshold would require "substantial investments." However such investments themselves could yield positive economic benefits. Those benefits, along with the economic benefits from avoiding catastrophic scenarios, are not typically figured in to estimates of mitigation costs. -- Written by Carlton Wilkinson in Asbury Park Follow @CarltonTSC

Saturday, April 12, 2014

Who Wins the Original Content War?

Updated from 8:24 a.m. EST April 8, 2014 to include Sesame Street's new video on-demand service, Sesame GO.

NEW YORK (TheStreet) - I spent the better part of the past weekend on my couch "binge watching" Netflix's (NFLX) House of Cards -- the hugely successful, Emmy-winning original series launched by the streaming service in early 2013. It was one of the reasons I decided to recently pony up for a monthly subscription. I may be late to watching two seasons of House of Cards, but to Netflix, that doesn't matter. At 44 million members and growing, I'm the kind of customer Netflix is looking to appeal to by launching more original series.

The fact that Netflix, among others, has been so successful in creating original content for its subscribers has huge implications in consumers' living rooms, Hollywood, the boardrooms of America's media giants and even in parts of Silicon Valley. The media industry is in a state of flux and it's anybody's guess as to who will be the ultimate winner.

Admittedly, I have not made it through the entire two seasons yet and when I get home tonight, I'll forgo my usual television programming to continue my binge -- again exactly what Netflix wants - where the value of the service is so compelling that I wouldn't dream of cancelling my $8 a month subscription.

Netflix isn't the only company that wants me to binge watch something I can only get through its service. From Amazon (AMZN), Hulu and Yahoo! (YHOO) to even Microsoft's (MSFT) Xbox, a host of companies are getting into the original content game, further rocking the already teetering traditional cable television industry. By answering consumer demand for television programming when they want it (on-demand) and how they want it (via their laptops, tablets, iPhones and yes, even their TVs), streaming services are eyeing the dollar signs whether in subscriptions or advertising, by providing a new way to give consumers what they want. The stakes are incredibly high.

"I think we're headed toward a convergence. The [poster child] of all this is House of Cards on Netflix and the fact that it's gotten consideration and even won some Emmy awards," said Brad Adgate,senior vice president of research at Horizon Media. "The second season became an event for Netflix subscribers and binge viewing. That really set the tone that streaming video is a viable competition to what we would call traditional television. That opened a door for other original series to be streamed online." "That whole broadcast TV model that's been with us for 50-plus years is slowly going away," he added. "You're seeing the impact. Even the networks are ordering shows without a pilot, which is what Netflix did with House of Cards. The model is changing and it's all being driven by cable and now streaming video."

Even Sesame Street is eyeing potential revenue from an on-demand service. Sesame Workshop, the nonprofit educational organization behind the children's long-standing television show launched a subscription video-on-demand service for $3.99 a month or $29.99 annually where viewers can watch Sesame Street episodes, Sesame Street Classic episodes and Pinky Dinky Doo episodes.

Stock quotes in this article: NFLX, AMZN, YHOO, MSFT 

Further fueling the fire is the fact that consumers don't care how they watch shows. For every millennial that's comfortable watching shows via their iPhone, a proportionate number of Baby Boomers prefer to watch on a traditional television. Despite the technological difference, they share one common trait: the content has to be good. In the "golden age of content," there has been no shortage - from AMC Networks' (AMCX) Walking Dead to Amazon's Alpha House. Still, a hit show is a formula that no one can 100% predict, so TV networks are not only competing with themselves and premium channels like Time Warner's (TWX) HBO and CBS' (CBS) Showtime, but the slew of nontraditional Web-only companies eager to get in the game.

"These companies are very, very good at analyzing data and they use it to further their businesses, but when it comes to what's going to be a hit show ... It's a very mysterious thing as to what's going to resonate with people," said Paul Verna, senior analyst at eMarketer.

The consumer may have more choice now when it comes to watching television and can even go so far as to drop their traditional cable TV package, but there are still limitations, specifically different companies gaining exclusive content deals. For instance, I don't have Amazon Prime so that means I can't watch Downton Abbey, which Amazon gained the exclusive rights to recently. But I do have Netflix and HBO, so House of Cards and Game of Thrones is viewable.

Verna says this is still a disadvantage for consumers because they're not likely to buy all the services, they will still have to pick and choose what best suits them. And that means it will be hard for one streaming service to win over them all. "The audience is there, but the audience is very fragmented."

Adgate agrees. "There no real reach vehicle online. You're not reaching a lot of viewers. This is just hyper-fragmented," he says. "There's just more and more choices meaning there is just going to be more and more programs to watch and it's going to get harder and harder for any particular program or advertiser" to dominate. This is where the original content will play an important role. "This is going to be a very competitive landscape in the coming years," Adgate noted.

It will also be "the next hot product category with advertisers. The ones who watch these shows are the ones who advertisers covet -- the 18 to 49 age group," Adgate stated. Indeed it already is. Yahoo! is hoping to woo advertisers by culling four new Web series that would rival shows on Netflix or premium cable channels, according to The Wall Street Journal.

Stock quotes in this article: NFLX, AMZN, YHOO, MSFT 

Last week, just before Amazon announced its new Fire TV set-top box, it also proudly boasted it greenlighted six new original shows for Prime Instant Video and announced that Alpha House, its first foray into original episodic programming starring John Goodman, would return for a second season.

It's also appealing to studios, directors and actors. House of Cards' central character is played by Kevin Spacey, while Amazon's Alpha House stars John Goodman. "They're willing to do it because it's a shorter time commitment that allows them to work on other projects. [If you have] an A-list director or cast behind it, they're not going to put up something that's not going to be good," Adgate said.

"One of the reasons that [House of Cards] ended up going to Netflix in the first place is because the story they wanted to tell did not fit a formula that suited [TV], where you have a pilot," says Adam Mosam, CEO and founder of Pivotshare, a platform that helps small media publishers monetize their online content by creating an online marketplace for the sale and purchase of said content. "They wanted to tell their story. It's more like a 13-hour long movie. In that case it comes down to creative freedom -- that's what Netflix is offering." Pivotshare clients include Jillian Michaels, Kirk Cameron and Jeremy Irons.

Companies are bringing in big time executives to cull and expand their original offerings. Microsoft hired CBS executive Nancy Tellem in 2012 to head up its Xbox Entertainment Studios. Microsoft has recently greenlighted six original series for its new Xbox television, specifically "shows that can be combined with the interactive components to encourage users to engage across consoles, phones and tablets" according to a BloombergBusinessWeek article on Monday. Last week Hulu announced Craig Erwich was joining the Web-based television company as a senior vice president and head of content. Erwich, who began his new job on Monday, was most recently the EVP of Warner Horizon Television, the unit of Warner Bros. (owned by Time Warner), that produces scripted cable and reality television series. There, Erwich oversaw development, production and business operations for the past seven years, which included the creation of hit series including Pretty Little Liars, The Voice, The Bachelorette, House, Prison Break and 24. "Craig is ready to hit the ground running and lead us as we increase our overall content offerings, and continue to invest in original first-run TV programming, last night's TV, and great library TV from the U.S. and other markets," Hulu's CEO Mike Hopkins said in a blog post about the hire. "Craig is the perfect guy for the job - he has been developing shows and programming networks for over 20 years." Hulu is about to launch its latest original series, Deadbeat, on April 9 as well as the second season of The Awesomes this summer. With Erwich coming on board, you can be sure that adding more original content will be a key strategy for Hulu. So does this mean we could see Apple (AAPL) getting into original content?

The company keeps adding channels to its Apple TV set-top box. While it's not in Apple's direct wheelhouse, "the more expertise they gain in things like music and movies the more they are in a position to fund things themselves," eMarketer's Verna says, such as allotting development money for an incubator specifically for studio production. "I would think it's a natural evolution of where Apple has been."

Will consumers be in the cross hairs or the winners as the media industry is recreated? --Written by Laurie Kulikowski in New York. Follow @LKulikowski

Stock quotes in this article: NFLX, AMZN, YHOO, MSFT  Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Friday, April 11, 2014

Fastenal Company Q1 Profits Rise; Declares Dividend (FAST)

Fastenal Company (FAST) reported higher first quarter earnings on Friday, which came in above analysts’ estimates.

FAST’s Earnings in Brief

FAST reported Q1 earnings of $111.93 million, or 38 cents per share, up from $109.05 million, or 37 cents per share, a year ago. Revenues rose to $876.50 million from $806.33 million last year. On average, analysts expected to see 37 cents in earnings and revenue of  $869.99 million. The company noted that the growth in revenue was primarily due to higher unit sales. FAST also reported that although sales were negatively affected by the harsh winter in January and February, the timing of Easter should help March sales.

FAST Announces Dividend

FAST will pay its next quarterly dividend of 25 cents on May 23 to shareholders of record on April 25.

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Stock Performance

Fastenal Company shares were up $1.42, or 2.80% during premarket trading Friday. The stock is up 6.78% YTD.

FAST Dividend Snapshot

As of Market Close on April 10, 2014


FAST upcoming dividend payouts next ex-dividend date

Click here to see the complete history of FAST dividends.

Thursday, April 10, 2014

New Hire Roundup: Global X Names Berruga COO, Lynch Senior Compliance Officer

This week in personnel announcements and new hires, Global X welcomed Luis Berruga and Tom Lynch, David Heroux went to Pensionmark and Joseph Cusick joined MoneyBlock.

Also, Commonfund named Robert Litterman board of trustees chairman, Katy Spangler and Richard Hinz joined the American Benefits Council and Barry Mandinach went to Virtus Investment Partners.

Berruga, Lynch Join Global X

Global X Management Co. LLC has announced that Luis Berruga has been named chief operating officer and Tom Lynch senior compliance officer.

Berruga joins from Jefferies LLC, where he advised on mergers and acquisitions, capital raising and strategic planning for financial institutions. Previously, he spent nine years at Morgan Stanley. His experience includes accounting, finance, marketing, technology, operations, training and strategic planning.

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Lynch, with nearly 30 years of experience in the financial services industry, joins from Van Eck, where he spent six years as chief compliance officer. Prior to that he served as treasurer at Van Eck for two years and earlier spent nine years at TIAA-CREF as second vice president.

Pensionmark Adds Heroux

Pensionmark Retirement has announced that David Heroux has been named managing director of its new Westlake, Calif., office.

Heroux, with 10 years of experience in advisory and financial planning services for corporate retirement plans and high-net-worth individuals, was formerly president and equity partner at 401k Management Group.

MoneyBlock Names Cusick VP of Wealth and Asset Management

MoneyBlock has announced that Joseph Cusick has joined as vice president of wealth and asset management. In this role, he will lead development of MoneyBlock’s wealth management platform.

Cusick was previously senior vice president of education at optionsXpress, where he led development of the firm’s education programs and served as a member of the platform development team. Prior to Charles Schwab’s acquisition of optionsXpress, Cusick helped launch the firm’s brokersXpress subsidiary. Earlier he was a market maker on the Chicago Board Options Exchange.

Litterman Named Commonfund Board Chairman

Commonfund has announced that Dr. Robert Litterman was elected to chair its board of trustees. He succeeds former chairman Brad Gallagher.

Litterman has been a member of the board since 2009 and most recently served as chair of the audit and risk committee. He spent 23 years at Goldman Sachs, where he held research, risk management, investments and thought leadership roles and oversaw the quantitative investment strategies group. American Benefits Council Adds Spangler and Hinz

The American Benefits Council has announced the addition of Katy Spangler as senior vice president, health policy, succeeding Paul Dennett, and Richard Hinz as senior advisor to the council and its affiliate, the American Benefits Institute.

Spangler served as deputy health policy director for the Republican members of the Senate Health, Education, Labor & Pensions Committee during the legislative consideration of the Patient Protection and Affordable Care Act (PPACA). She also has executive branch experience at the Department of Health & Human Services Office of Health Information Technology. Since leaving public service, she has worked both in academia at the University of Michigan Center for Value-Based Insurance Design and in a health policy consulting firm advising employers, health plans and providers.

Hinz spent more than 10 years at what is now the Employee Benefits Security Administration of the Department of Labor as director of policy and research. At the same time, he chaired the Organization for Economic Cooperation and Development’s working party on private pensions. From 2003 to 2013 he was a pension policy advisor and leader of the pensions team at the World Bank and program manager for the Financial Literacy and Education Trust Fund.

Virtus Investment Partners Adds Mandinach

Virtus Investment Partners has announced the addition of Barry Mandinach as executive vice president and head of distribution.

Most recently, Mandinach, a more than 30-year industry veteran, was head of wholesale distribution and chief marketing officer at UBS Global Asset Management (U.S.) and a board member of the PACE Select Funds. He joined UBS from Phoenix Investment Partners (PXP), the predecessor to Virtus, where he was chief sales and marketing officer from 1999 to 2001. Prior to PXP, he was a partner and cofounder, with Martin Zweig and Eugene Glaser, of the Zweig Mutual Funds, which were acquired by PXP in 1999. He began his career in the investment management industry with Drexel Burnham Lambert.

Wednesday, April 9, 2014

Gilead Sciences: Pricing Concerns Just Noise?

Maxim Group’s Jason Kolbert thinks the controversy over the cost of Gilead Sciences’ (GILD) Sovaldi is overblown. He explains:

Getty Images

Gilead was pilloried again yesterday for developing a drug (Sovaldi) with the highest efficacy and fewest side effects, but at a high (but not the highest) price for a new HCV therapy. The cost-benefit ratio suggests it is not the most expensive therapy in the HCV space. While the politics of Washington are not surprising, the fact that a pharmacy distribution company [Express Scripts (ESRX)] would make what we consider to be political statements is damaging to the industry and patients they serve. They, better than us, understand the benefits of Sovaldi. We view these statements as noise and believe that Sovaldi and next-generation Ledipasvir/Sovaldi represent real pharmaco (economic) value in the HCV space.

Shares of Gilead have gained 1.4% to $71.00 at 1o:01 a.m. today, although it should be noted that its main competitors in the hepatitis C space are as well. Shares of Merck (MRK) have risen 1.5% to $55.89 and AbbVie (ABBV) is up 1.6% at $49.87. Express Scripts has ticked up 0.2% to $72.92.