Undervalued Stocks To Buy For 2014: January 2014

Friday, January 31, 2014

Women face hard retirement choices

Women face a unique set of problems going into retirement, financial planners say. And they need to take some important steps to ensure that they have a successful retirement.

"Women face the reality of longer lives with fewer financial resources to fall back on," says Debra Whitman, AARP executive vice president for policy, strategy and international affairs. "They are paid less than men on average — 77 cents on the dollar, which can add up to half a million dollars over a lifetime."

And, Whitman says, women are more likely than men to move in and out of the labor force to raise children and care for older relatives, which typically reduces any pensions they may qualify for and makes it harder to build up a nest egg. "They need more than men, but have less," she says.

But some say that the retirement industry has been slow to respond to the problems facing women as they prepare for retirement. "Women are hugely in need of good, sound advice," says Lena Haas, senior vice president for retirement, investment and savings at E-Trade. "But women are feeling lost, intimated and frustrated by what they get from full-service advisers and full-service brokers."

Some of the big issues for women in retirement:

• Longevity: Women simply live longer than men. "They are more likely to end up alone in old age, because women have longer life expectancies — two extra years for those who reach age 65 — and married women are often about three years younger than their male spouses," says Whitman.

"The combination of longer lives and limited finances can put older women at risk," she says. "Women need to save as much as possible, starting as early as they can. They should hold off retiring if they are able, in order to maximize their Social Security benefit and build up their nest egg. If they have savings, they should consider buying an annuity to ensure their resources last as long as they do. "

Nancy Coutu, co-founder of Money Managers Financial Group in Oak Brook, Ill! ., said women's biggest fear, no matter what the income group is "they are terrified of being a bag lady, running out of money. How do I get income that I won't outlive."

• Women tend to invest more conservatively than men. "I faced some clients who have all their assets in cash, including their 401(k) accounts," says Derek Gabrielsen, wealth adviser, at Strategic Wealth Partners in Independence, Ohio. It's important to not to be overly invested in cash just because it's safe, he says. "Recently, the market has been strong. It's important as you head towards retirement to capture some of those gains."

"These issues lead to two financial concerns: less savings and less Social Security benefits, when compared to their male counterparts," says Wendy Weaver, portfolio manager at FBB Capital Partners in Bethesda, Md.

• Women are not comfortable with financial advisers. E-Trade's Haas says women rated the financial industry dead last in a list of 60 industries — below used-car salesmen.

"Women have not been served well by the industry," she says.

"Almost 80% of women in a survey say that they wish that financial advisers talked to them and asked them for opinions, and not just their husbands," she said. "Even if she comes along, the woman is just sitting there. Lots of times they don't have the paperwork. They feel like they are being talked down to."

For those and other reasons women end up with lower savings and lower Social Security payments. Weaver says women need to do three things to overcome the obstacles.

• Have a retirement plan, preferably with the help of a financial planner.

• Protect your assets. Have an estate plan; review your health insurance; make sure your investment plan is not too conservative or risky; and consider long-term care insurance.

• Plan for more than the financial aspects of your retirement. "Retirement is so much more than finance," she says. "It is a huge transition, a financial transition, an emotional transi! tion, and! a psychological transition. Even how you introduce yourself and what you do is different. Thinking about those things will help."

5 Best Value Stocks To Buy Right Now

Education is key, says Coutu. "A lot of women think financial planning is just for the wealthy. They don't understand it's for Middle America. They feel intimidated. The way of learning they are most comfortable in is a group. They would much rather go to a forum here there a women and learn, techniques and strategies.

"My mantra is save, save, save," says Whitman. "Also, women (and men) should seek out financial education to help them make good decisions

Thursday, January 30, 2014

Mario Gabelli Does Not Just Look at a Stock's Price Movement

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On Jan. 17, Mario Gabelli (Trades, Portfolio), the chairman and chief executive officer of GAMCO Investors Inc., bought Coleman Cable Inc. (CCIX) at an average price of $23.26 and currently holds 729,100 shares of the stock. He is betting in favor of the Electrical Components & Equipment sub-industry.

Merger Agreement

Coleman Cable is a leading manufacturer and innovator of electrical and electronic wire and cable products for residential and commercial construction, industrial, OEM, and consumer applications, with operations in the U.S., Honduras and Canada. The company produces products across four product lines: industrial wire and cable, electronic wire, thermostat wire and irrigation cable and fabricated bare wire.

Southwire Company will acquire Coleman for $26.25 per share in cash. The transaction, which values Coleman at approximately $786 million, including the assumption of $294 million in net debt, the deal was approved by the board of directors. The parties anticipate the transaction will close in first quarter 2014. This transaction will make a better company with more robust and higher-quality offering of products and services. Also, it expects an improvement in the operational processes and a stronger platform for enhanced product innovation. "We are pleased to announce this transaction, which delivers immediate and certain cash value to our stockholders and supports a strong future for Coleman," said Gary Yetman, president and chief executive officer of Coleman.

Valuation

In terms of valuation, the stock sells at a trailing P/E of 23.1x, trading at a premium compared to an average of 21x for the industry. To use another metric, its price-to-book ratio of 6.5x indicates a premium versus the industry average of 1.53x and the price-to-sales ratio of 0.5x is below the industry average of 0.93x.

Earnings per share (EPS) decreased in the most recent quarter compared to the same quarter a year ago, but it has demonstrated a positive trend in the last three years. We include in the next graph the stock price because EPS often lead the stock price movement.

We have to mention that compared to its closing price of one year ago, the stock price has jumped by 176%, exceeding the performance of the market.

Finally, I always like to see one of the most important financial ratios applying to stockholders, the best measure of performance for a firm's management: the return on equity. The ratio has decreased when compared to its ROE from the same quarter one year prior. Currently, a ROE of 45.9% is higher than all the 1,805 companies in the Diversified Industrials industry. Competitors such General Cable Corp. (BGC) has a very low ROE of 0.3% which is clearly not attractive. An alternative could be Belden Inc. (BDC) with a positive ROE of 24%.

Final Comment

The firm's stock price has increased in an important magnitude compared to a year prior, but we don't think this is bad news for investors entering in a position now. The merger agreement will provide attractiveness to the company, focusing on technology and innovation, as well as building more reputation among customers.

Hedge fund gurus have also been active in the company. Joel Greenblatt (Trades, Portfolio) has also invested in it.

Disclosure: Damian Illia holds no position in any stocks mentioned.

Also check out: Mario Gabelli Undervalued Stocks Mario Gabelli Top Growth Companies Mario Gabelli High Yield stocks, and Stocks that Mario Gabelli keeps buying
About the author:Damian IlliaA fundamental analyst at Lonetreeanalytics.com constantly looking for value and income investments.

Visit Damian Illia's Website

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Saturday, January 25, 2014

Reformed Broker on New Ritholtz Firm: Our Blogging Is Research

Two of the most hypercaffeinated commentators in the financial blogosphere, Barry Ritholtz and Josh Brown, are forming their own investment advisory firm, Ritholtz Wealth Management, but that won’t stop the blog-happy duo from blogging.

ThinkAdvisor asked Brown on Tuesday how their blogging busy-ness jibes with client portfolio management, and he said their absorption in financial news beats cold calling, seminars and similar activities by other financial professionals.

“We choose to spend our days being informed about policy. Blogging is part of our research. I write to find out what I think. I’m not writing ad copy. My clients know exactly what I think about every subject on the market,” he says.

Investors, financial professionals and financial news junkies have long turned to Ritholtz’s Big Picture blog and Brown’s Reformed Broker blog to get their fix of market news and commentary—when they’re not watching them on their frequent TV news appearances. Before giving their take on fast-moving financial markets, both typically offer a string of morning news links, doubtless causing many to wonder whether sleep is part of their daily routine.

Putting their ideas into financial planning practice is not new to Ritholtz (below) and Brown, who were already doing that at New York City-based Fusion Analytics.

Barry Ritholtz Rather, as is common in breakaway situations, the advisor-bloggers wanted to do things their way, according to Brown.

“I had a really good experience at Fusion for the last three years,” Brown says. “We started an advisory firm from scratch. We got many clients and many referrals. But it got to a point where it made more sense to be a standalone firm than a practice within a firm.”

Brown says having their own firm will enable him and his partner to add technological capabilities and new services to their advisory platform.

“When you don’t own your firm, and you’re a practice in your firm, it’s not up to you how your money gets spent.

“We want to bring on more CFPs who can work directly with our clients,” he continues. “We believe the true value for the client is having a personal relationship with their advisor, that the person you work with is intimately involved with your situation. We really feel we want to staff up.”

Ritholtz’ “day job,” according to his blog bio, involved “institutional strength number crunching,” so it is perhaps no surprise that the firm plans on beefing up its technology.

“On the tech side, what used to be acceptable was a client being allowed to log into his advisory account and getting a report quarterly—‘Here’s how you did compared to the S&P,’” Brown says. “But clients want to see their investable assets alongside the rest of their assets. They want context as to how they’re doing compared to every aspect of their life. We also want to have much deeper analytics for those clients of ours who are more sophisticated … that requires an investment in software, investment in education.”

Besides the planned service offering enhancements, Brown argues the timing is ripe for Ritholtz Wealth Management.

“I think the industry has grown fat and happy; household assets are 10% higher than in the 2007 market peak. Retirement plan assets are 75% higher than 2002 level 10 years ago. As a result of that growth there’s been some complacency.”

Specifically, Brown argues that his team can sift through what he sees as a proliferation of investment products that have grown needlessly complex.

“So many people we see have portfolios that are preparing them for the last war,” he says. “Their portfolios are weighted in with put options or a lot of precious metals or black swan funds. They’re a drag on performance and don’t offer as much protection as people think.”

The reformed broker says he and Ritholtz see five to 10 prospects’ portfolios a week, and commonly find them larded with private equity, hedge funds, managed futures.

“The data tell us they don’t diversify as much as [their promoters say] they do,” Brown says. “Over long stretches of time, you eliminate costs and you actually do better [by excluding them,” he says, adding that he would say the same about currently popular risk parity strategies involving bonds.

“They do not lower your volatility—not as bonds are exiting a 30-year bull market. What they’re really doing is compromising potential upside and adding layers of cost. So that’s the kind of conversation we’re trying to have with people,” Brown says.

“We’ve got to get out of the mindset that volatility is evil,” he adds, noting that investors’ time horizons are probably “longer than they think,” such that the overly conservative portfolios he and Ritholtz are seeing in prospects’ portfolios are undermining their future retirement security.

To effect their strategies, Ritholtz Wealth Management, which Brown refers to as “primarily an ETF shop,” will be focusing on forward expected returns.

“Valuation plays a big role in the types of tilts we bring to client portfolios. It’s where the puck will be as to where it has been,” he says.

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Check out these related stories on ThinkAdvisor:

Friday, January 24, 2014

Fidelity Favorites

Fidelity continues to be creative and innovative, both on the mutual fund side, and with its recent launch of passive sector ETFs, explains Jim Lowell, editor of Fidelity Investor.

Our top conservative idea for 2014, Fidelity Event Driven Opportunities (US:FARNX), is so new that Morningstar doesn't rate it; nevertheless, I gave it a buy rating fresh out of the box on December 12.

Especially in a toppy market, I think this fund looks like a smart money move. Fidelity's game here is not buying markets in bunches, but by selecting top bananas.

I like the emphasis on special situations; the ability to out-analyze, out-think, and out-execute the field, ought to lead to outperformance; though the probability of low correlation can lead to performance dislocations in the shorter term.

Seeing as many companies as Fidelity does, every day of every week, means bright minds and attentive ears ought to be able to glean advantages in a 2014 marketplace that is already so crowded with buyers, it's hard to know where to look for bargains.

Time will tell the tale of this being a good fund or not; but the idea is likely to withstand the test of time and the timing of its launch tells me Fidelity thinks its time is now.

Meanwhile, my top speculative pick for 2014 is one that swims against the current: the Fidelity MSCI Materials Index ETF (FMAT), which holds stock in chemical, construction materials, glass, paper, and forest products, as well as companies involved with metals, minerals, and mining.

The top ten holdings are Monsanto, Dupont, Dow Chemical, Freeport-McMoran Copper & Gold, Praxair, LyondellBasell Industries, Ecolab, PPG Industries, Air Products and Chemicals, and International Paper.

The bet is that the global economy does, in fact, turn out to be faster-paced in 2014. The risk is that the fast pace turns out to be lackluster or worse.

Offsetting the risk: you can trade out of this ETF quickly with no redemption fee issues to worry about. The opportunity: owning supplies of what the world wants more of, but can't get enough of.

Subscribe to Fidelity Investor here...

For More 2014 Top Stock Picks

Wednesday, January 22, 2014

Early tech earnings worrying investors

Disappointing results from tech companies early out of the earnings season gate are making investors nervous about what's next.

Shares of tech giant International Business Machines and computer chipmaker Advanced Micro Devices are down sharply Wednesday as investors see more things to hate than love in their quarterly results. And if such disappointment in tech's results continues, that could be a big problem for stocks. The tech sector is the number one source of earnings, hauling in 22% of profit.

While most technology companies are finding ways to haul in enough profit to satisfy demanding investors, many are coming short on revenue. And the shortfalls in revenue are troubling because they may indicate slackening global demand for tech products. These concerns are presenting themselves as just 22% of tech companies have reported. Investors are awaiting big reports from eBay and Netflix Wednesday, Microsoft on Tuesday and Apple on Monday, and hoping things get better.

"Tech is a tick up on the earnings side," says Howard Silverblatt of S&P Dow Jones indices. "On sales, nobody's sales are good, and that's the killer."

Shares of IBM are trading down $6.38, or 3.4%, to $182.05 in midday trading. The company's earnings topped expectations, but its revenue of $27.7 billion fell short of expectations by 2.1%. Over at AMD, both revenue and earnings topped views, but the problem was the future revenue, which the company now says will fall faster than expected this year. Shares of AMD were down 46 cents, or 11%, to $3.71.

Tech investors are demanding to see more than just earnings growth. So far, 16 of the 65 technology companies in the S&P 500 have reported. And 75% of technology companies have beaten expectations, outpacing the 61% of S&P 500 companies at large that have done so, says John Butters of FactSet Research.

The problem, though, is investors have been slashing their expectations so the bar wasn't considered all that high. Investors are only expecting 1! .8% earnings growth from technology, well below the 5.4% expected for the S&P 500, says S&P Capital IQ. Investors had been expecting 7.3% growth from tech companies for the quarter as of October 2013.

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The higher scrutiny investors are paying to companies' results are hitting technology stocks hard, says Sheraz Main of Zacks Investment Research. On the surface, the companies are reporting better-than-expected earnings. But it's the closer scrutiny on things like revenue where investors are showing their disappointment, he says. "Not many of the tech companies reporting so far have been able to beat revenue estimates," he says. "That's problematic for these guys."

Tuesday, January 21, 2014

Five Hurdles the Market Must Clear this Fall

Top Value Stocks To Watch For 2014

September may be considered as, historically, the worst month for the market, but MoneyShow's Howard R. Gold still wants to share five other important obstacles he thinks are also standing in the way.

While you and I were enjoying the last rays of summer sunshine, the pundits, gurus, and Twitter addicts have sounded the warning bell for a rocky fall.

The Standard & Poor's 500 index (SPX) fell 4.5% from its August peak, the Dow Jones Industrial Average lost 5.4%, and emerging markets have been pummeled.

But the pundits say several big events—mostly political—could make things even worse during the historically weakest month for stocks.

How big an impact? Let's review them one by one.

1. Syrian crisis. President Obama has asked Congress to approve limited military action against Syria in retaliation for the alleged use of chemical weapons against civilians by President Bashar al-Assad.

After much hemming and hawing, I think he'll get Congressional approval and will then launch cruise missiles against selected targets. (On Wednesday, the Senate Foreign Relations Committee authorized military action by a 10-7 vote.) It will go on for a couple of days, the rhetoric will be heated, there may be some limited retaliation against US or Israeli targets, but it won't lead to a regional war. Or if he doesn't get the votes, there may be no fighting at all.

So, on a scale of 1 to 10, I'd peg the short-term impact at 4 and the longer-term impact at 1.

2. German election. Germans go to the polls September 22, and most pundits expect Chancellor Angela Merkel to be re-elected. But Social Democratic opponent Peer Steinbrueck's strong debate performance may narrow her wide lead in the polls.

Steinbrueck could make this election a referendum on Merkel's European austerity policies. Late last month, her own finance minister pulled a Joe Biden and said Greece may need another bailout.

Still, in an email, Klaus Deutsch of Deutsche Bank wrote me: "European policy will hardly change, no matter what the election outcome might look like. Only a true change in government to a SPD/Green government would open up a different position on eurozone debt issues."

My best guess: Even an upset SPD victory would have a short-term impact of 4, but a long-term effect of only 2.

3. New Fed chairman. The president punted on appointing a new Federal Reserve chairman to replace Ben Bernanke, after Democrats pushed back, on reports former Treasury Secretary Larry Summers was his choice over current Fed vice-chair Janet Yellen.

Read Howard's take on whether Larry Summers really saved the world on MoneyShow.com.

Still, well-connected reporters like Ben White of Politico, John Harwood, and Ezra Klein say it's still in the bag for Summers. Some liberal Democrats on the Senate Finance Committee may vote no, but I expect the Senate to hold its nose and confirm him.

Nonetheless, Summers' notorious abrasive style will take its toll. Six current Fed presidents and top officials—including Yellen and Bernanke—may step down by next year, and more could follow. So, I give the short-term impact a 3 and the long-term impact a 5.

NEXT: Is tapering tightening?

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Monday, January 20, 2014

Facebook's New Goals

When Mark Zuckerberg built "The Facebook" (NASDAQ: FB ) back in 2004, his goal was to "create a richer, faster way for people share information about what was going on around them." Now, with over a billion people sharing their information freely, Zuck has a few new goals, which he revealed in the company's most recent conference call: "connect everyone, understand the world, and help build the knowledge economy."

These are long-term goals, as Zuckerberg put it; these are the changes he wants to make in the world over the next 5 to12 years. This long-term outlook, which Zuckerberg and Facebook have seemingly always held, is what makes Facebook the kind of company worth a Foolish investment.

Connect everyone

There are currently only about 2.7 billion people with Internet access around the world. Even in the U.S., only about 80% of the population has access to the Internet. That leaves a huge 4 billion person market for a company like Facebook to monetize.

In the last two years Facebook has made it easier and less expensive to access its service, particularly in developing countries. It launched its "Facebook for every phone," which recently reported its 100 millionth user and contributed to significant earnings growth in Asia and the rest of the developing world. Additionally, Facebook is making deals with carriers to allow subscribers to use Facebook's app and website without paying for data.

Internet growth is decelerating, and companies like Facebook and Google (NASDAQ: GOOG ) are working to ramp up the growth again. Google, for its part, is full of interesting experiments to help increase access to the Internet and its services. For example, a network of blimps or balloons carrying wireless signals across Sub-Saharan Africa and Southeast Asia could connect approximately 1 billion people.

It's no doubt that both Facebook and Google have a lot to gain from increased connectivity. The two advertising giants rely on scale to grow ad revenue. And while the next 5 billion Internet users will mostly come from the developing world, where ad rates are lower for both companies, it's reasonable to expect rates to climb as those economies grow. In the meantime, scale will have to make up for lower rates. So, both in the near-term and long-term, there's lots of growth left for these Internet advertisers in connecting the rest of the world.

Understand the world

With its 1 billion-plus active users, Facebook is gathering new information every second that can help it build up long-term knowledge about the world: people's interests, favorite restaurants, good hotels. Unlike networks like Yelp (NYSE: YELP ) , which specifically ask for user generated reviews, Facebook is gathering this information organically.

As this knowledge base grows, Facebook will become a bigger threat to networks like Yelp and TripAdvisor as it develops new services that help users find the information they want. Graph Search was the first of such services, but is really only a starting point for Facebook. Zuckerberg believes his company "should be able to build intelligent services ... that could answer lots of questions for you that no other service can."

Last year, Yelp generated $138 million off of its 86 million unique visitors (twelve month average)That number is expected to grow with the website's audience, but the company's margins will continue to feel pressure as new competition from both Facebook and Google encroach on its local business review market. As Yelp is just an advertising business, attracting a large audience is key. Both Facebook and Google have significantly larger audiences and the capabilities to make competitive products. I expect Facebook to move swiftly into this area, which should attract more advertisers and ad views.

Knowledge economy

When Zuckerberg speaks to a knowledge economy he's referring to helping companies grow through Facebook's advertising platform. Facebook's platform, perhaps more so than any other, allows businesses to connect with potential customers. It helps developers create apps, nearly 18 million local businesses find customers, and big brands to tell their story.

Going forward, Facebook ought to continue the excellent advertising growth it saw in the second quarter. It plans to add special video advertisements that could generate upwards of $1 billion in added revenue for the company next year. Additionally, it should see continued acceleration in its app install advertisements. Moreover, the visual nature of its yet-to-be-monetized Instagram service lends itself well to excellent advertising opportunities.

On the back end, Facebook's acquisition of Atlas from Microsoft earlier this year will allow it to provide analytics and important insights for both advertisers and Facebook itself, thus increasing ad value and prices. Eventually, Facebook could build an ad network to place its ads on websites outside of Facebook. Using its knowledge from its vast user base, an external ad network could increase revenue 200%.

For investors concerned that Facebook could compromise its user experience through advertising, fear not. Facebook is likely even more concerned. That's why Zuckerberg iterated on the conference call, "Our top priority is to expand the number of marketers and overall demand in our system. ... We believe that this will help us ... by creating a more competitive auction." Investors should see increases in cost-per-click, and more clicks will come from an expanded user base, not more advertisement, thus preserving the user experience.

Bottom line

Facebook has come a long way from its dorm-room beginnings. Originally designed as a place for people share information with their friends, the site has become a depository for the goings-on of 1 billion lives. Going forward, the company has plenty of opportunity to 1) bring its service to two-thirds of the world's population, 2) use the information users share to create new products, and 3) help businesses (and its own revenue) grow using its advertising platform. All three of these factors make Facebook a great long-term investment.

The tech world has been thrown into chaos as the biggest titans invade one another's turf. At stake is the future of a trillion-dollar revolution: mobile. To find out which of these giants is set to dominate the next decade, we've created a free report called "Who Will Win the War Between the 5 Biggest Tech Stocks?" Inside, you'll find out which companies are set to dominate and give in-the-know investors an edge. To grab a copy of this report, simply click here -- it's free!

Sunday, January 19, 2014

What the Future Holds for Roofing Stocks

It's been a volatile year for the roofing industry, and over the last three months, investors have seen more downside. Roofing materials distributor Beacon Roofing Supply (NASDAQ: BECN ) is down 11.5% in the last three months, and building products manufacturer Owens Corning (NYSE: OC ) fell 5.5% in the same period -- all in a year when many commentators thought this sector would outperform.

It's complicated
A resurgent housing market should lead to a marginal increase in new residential roofing demand, while the underlying reroofing demand should provide its usual support. Indeed, these conditions looked like they were in place for 2013, and analysts built a fair amount of optimism into their expectations. So what went wrong?

First, the US has had some unusual weather patterns in recent years. In previous years, hurricane Irene (and to a lesser extent Sandy) helped to generate reroofing demand, while this year's weather has been far more clement. Worse yet, according to Owens Corning, those storms pulled forward reroofing work that homeowners might otherwise have planned to do this year. And this spring's bout of wet weather further hurt roofing activity, because contractors simply couldn't work.

Second, rising mortgage rates have slowed new home sales' growth. For example, according to the U.S. Census Bureau, new home sales were at a seasonally adjusted annual rate of 390,000 and 421,000 in July and August respectively, where the average for the first six months of the year was 445k.

For a number of reasons, you shouldn't give up on housing just yet, but the roofing market remains weakened in the short term.

Problems leaking into Carlisle Companies and Owens Corning
A combination of these developments has dampened market conditions, and ultimately the operational performance of companies in the industry. It's difficult to be a supplier to roofing contractors when end demand is weaker than expected, because it can leave suppliers with too much inventory on their hands.

For example, Owens Corning had previously expected that the full-year market shipments would be flat. But in its third-quarter results from Oct. 23 , the company now forecasts that "... we came into the year thinking the overall roofing market should be about flat for the full year, it's down mid-single-digits year-to-date, and we think it'll be probably down mid-single-digits for the full year."

Moreover, Owens Corning has been affected by unusual variations in regional demand caused by the factors discussed above. It argued that US industry volume growth was stronger in Western and Atlantic markets, with weakness in Central regions. Unfortunately, Owens Corning has stronger market share in the Central regions, and weaker in the Western and Atlantic. In response, it appears to have decided to keep margins up at the expense of volume growth. Its roofing sales were flat in the third quarter, while its EBIT margins improved to 20% as EBIT rose 15.6% to $96 million.

Carlisle Companies (NYSE: CSL ) also has a major construction materials division that supplies roofing products to Beacon. It appears to have taken the opposite approach to Owens Corning, and gone for volume growth instead of keeping pricing and margins up. In discussing its third quarter results on Oct.22, Carlisle disclosed:

Pricing was negative 3% while volume was up 14%. We also experienced very healthy growth in Europe, where sales were up 11%. Both new construction and reroofing drove sales growth in the quarter.

Carlisle also argued that the pricing difficulties were due to excess capacity in the industry, but that underlying demand remains "very strong." It may well be, but it's also likely that the industry was geared for even stronger growth.

Which stock is the best pure-play on US roofing demand?
For a play on a bounce back in North American roofing activity, Beacon may be your best bet. Carlisle is not really a pure-play roofing company, and Owens Corning has struggled to generate significant cash flows over the last few years. Moreover, Owens Corning doesn't have the kind of long-term structural opportunity that Beacon has to consolidate its industry.

Beacon will give its next set of results toward the end of November, and you shouldn't expect too much from them. Having chosen to buy inventory from its suppliers ahead of price increases, Beacon then suffered margin decreases as its growth lagged its previous quarter's forecasts. On the evidence of what Carlisle and Owens Corning just reported, Beacon may be in the middle of a tough quarter right now.

I don't want to be too negative on the stock. On the contrary, I'm looking for a potential buying opportunity. In the longer term, Beacon has many attractive qualities, and the roofing industry looks set for a better year in 2014. But for now, it's a good time to be a little cautious.

Thursday, January 16, 2014

Impax Challenges Toviaz Patent - Analyst Blog

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Impax Laboratories Inc. (IPXL) recently announced that it is looking to get its generic version of Pfizer Inc. (PFE) and UCB Pharma GmbH's Toviaz (fesoterodine fumarate) tablets (4 mg and 8 mg) approved in the US. The company has filed an Abbreviated New Drug Application (ANDA) containing a paragraph IV certification with the US Food and Drug Administration (FDA) for its candidate.

The FDA informed the innovator companies about the ANDA filing following its acceptance of the same.

Toviaz is approved for reducing overactive bladder (OAB) symptoms. As per IMS Health, 12 month US sales of Toviaz (4 mg and 8 mg) were $159 million as of May 31, 2013.

Once the generic version is approved, Global Pharmaceuticals, which handles Impax' generic operations, will commercialize the product.

Pfizer and UCB have filed a patent infringement lawsuit against Impax in the US District Court for the District of Delaware. The filing of the lawsuit within the stipulated time period under the Hatch-Waxman Act ensures that the FDA cannot grant final approval to Impax' generic for up to 30 months or the court's decision, whichever is earlier.

We note that Impax is actively working on strengthening its generic products portfolio. In May 2013, the company launched its authorized generic version of AstraZeneca's (AZN) Zomig tablets and orally disintegrating tablets in the US as per the terms of its agreement with AstraZeneca. Zomig is approved for treating headaches due to migraine in adults.

Impax currently carries a Zacks Rank #3 (Hold). Other generic players like Mylan, Inc. (MYL) currently look better positioned with a Zacks Rank #2 (Buy).

Wednesday, January 15, 2014

Intel Corporation (INTC) and 5 Other Stocks That Could Pop on Earnings This Week

As a much younger man, I can remember watching ABC's Wide World of Sports on TV. The Saturday afternoon sports variety show opened with one of the most famous taglines of all, "The thrill of victory and the agony of defeat."

Who can forget the skier wiping out to illustrate agony?

Investors know their won thrills and agony, it's called quarterly earnings. We've all felt the sheer rush of a stock jumping on positive results and, unfortunately, shared the skier's pain, actual physical pain when a holding tanks for disappointing Wall Street. If we don't shout it, we think things like *#$%^ as a penny miss chops a stock by a third -Dramamine comes in handy.

The purpose of this article is to try and identify stocks that are reporting in the week ahead with a bullish history of price sensitivity. First, the ground rules for selection.

We have to have a confirmed EPS release date. The company is expected to turn a profit Average daily volume is in excess of 750,000 shares At least 10 of the previous 16 EPS announcements pushed shares higher in price Finally, investing $10,000 in each of the last 16 – good and bad – delivered a positive ROI

[Related -Intel Corporation (INTC) Q4 Earnings Preview: Room To Pop On EPS]

The last qualification might need some additional explanation so here it is. In this case, we are defining return-on-investment (ROI) as a $10,000 invested into the company three days before reporting earnings for each of the last 16 announcements. That's 16 separate $10,000 buys.

[Related -Montage Technology Group Ltd ((NASDAQ:MONT): A Strong Growth Stock With Discounted Valuation]

We sell three days after the announcement and determine the profits/losses for all 16 trades. If the sum is greater than zero, then the strategy has a positive ROI. Now, you might be wonder, how can a stock go up 10 times and be down or flat six times and lose money?

Well, that's exactly what Goldman Sachs Group Inc (NYSE:GS) accomplished. Trading $10k in each of the last 16 GS earnings announcements would have cost you $660.

Hopefully that clears up the picture. Without more virtual ink, here are the six companies reporting this week that meet all of the above criteria. (listed in order of report date.)

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Kinder Morgan Energy Partners LP (NYSE:KMP) reports on 1/15/2014 and its stock price has moved higher 13 of the last 16 earnings announcement with a cumulative return of $3,490.

Associated Banc Corp (NASDAQ:ASBC) reports on 1/16/2014 and its stock price has moved higher 10 of the last 16 earnings announcement with a cumulative return of $3,150.

Intel Corporation (NASDAQ:INTC) reports on 1/16/2014 and its stock price has moved higher 11 of the last 16 earnings announcement with a cumulative return of $3.280.

Skyworks Solutions Inc (NASDAQ:SWKS) reports on 1/16/2014 and its stock price has moved higher 13 of the last 16 earnings announcement with a cumulative return of $11,070.

Morgan Stanley (NYSE:MS) reports on 1/17/2014 and its stock price has moved higher 10 of the last 16 earnings announcement with a cumulative return of $4,210.

Schlumberger Limited (NYSE:SLB) reports on 1/17/2014 and its stock price has moved higher 11 of the last 16 earnings announcement with a cumulative return of $4,890.

If history holds form, then four of the six should rise on their quarterly results and make a total profit of $700-$1,100, which isn't too bad for a couple of days work.

Monday, January 13, 2014

Bull of the Day: Medivation (MDVN) - Bull of the Day

Looking for a biotech stock with the potential to steal major market share from Johnson & Johnson (JNJ) in a key disease market?Then it's time to take a look at Medivation (MDVN), a $4 billion biopharmaceutical company based in San Francisco that is projected to turn profitable next year with a breakthrough drug treatment for prostate cancer.Big MarketThe prostate cancer market represents huge commercial potential and Medivation's drug, Xtandi (enzalutamide), is already off to a strong start since its approval by the FDA last August. Launches in Europe and Asia will drive sales further, with projected revenues of $2 to $4 billion over the next five years.According to the American Cancer Society, prostate cancer is the most commonly diagnosed cancer among men in the U.S., other than skin cancer. It is estimated by the American Cancer Society that about 242,000 new cases of prostate cancer were diagnosed in the U.S. in 2012 with 28,000 men dying from it.New LifeMedivation's business model is to acquire promising technologies in the late preclinical development phase and develop them quickly and cost-effectively. The approval and launch of Xtandi is a major milestone for the company which had previously faced failure with the development of another key pipeline candidate, dimebon (Alzheimer's disease and Huntington disease).The company has consistently presented impressive data on Xtandi. Based on clinical results so far, many institutional research analysts believe Xtandi has blockbuster potential. The drug is currently in several studies including for the pre-chemo setting which would be a big opportunity for Medivation.Key Partner for Global ReachAs with all up-and-coming small and mid-cap biotech companies with unproven science and little-to-no positive cash flow, a big partner is often required to sustain years of drug R&D. Medivation's "big brother" is the Japanese drug-maker Astellas Pharma.Medivation and Astellas have been targeting patients with metastatic castration-resistant prostate canc! er (CRPC). Metastatic prostate cancer that has become castration-resistant is extremely aggressive and this is a key treatment differentiation for Xtandi vs JNJ's drug Zytiga.The partners are also studying Xtandi in early stage prostate cancer patients (pre-chemo), which could represent a very big market for the candidate. In 2010, the companies initiated a phase III study (PREVAIL) in chemotherapy-naïve advanced prostate cancer patients with data read-outs expected in the second half of 2013.With the aid of Astellas, Xtandi gained EU approval in June 2013. Medivation recorded $181.7 million in revenues in 2012 under its collaboration agreements with Astellas and former partner, Pfizer (PFE). While the Pfizer upfront payment of $225 million was recognized through the third quarter of 2012, the $110 million Astellas payment will be recognized through the first quarter of2014.As the drug gains new reach, Medivation has a 60-person sales force in place for promoting Xtandi and Astellas has a 90-person sales force to promote the product in Europe and Asia. Positive Data, Enthusiastic AnalystsFor one quick snapshot of the efficacy of Xtandi, let me share this data bite: Xtandi showed a 4.8-month advantage in median overall survival compared to placebo (18.4 months versus 13.6 months). And a 37% reduction in risk of death was observed in the Xtandi arm compared to placebo.Based on these results, Xtandi enjoys fast track status with the FDA for the post-chemo indication. Major institutional research houses covering the biotech industry have been watching the preliminary data from Medivation and in the last two months they've been scrambling to upgrade the stock with expectations of positive data from the PREVAIL study.The average 12-month price target on the Street is north of $65 if PREVAIL data is positive, with UBS recently raising eyebrows with their $74 target.Running the GauntletAs with all young, unprofitable biotech companies, there is extra volatility and risk as we watch them pass through the FDA ga! untlet of! clinical trials.For me, the key is seeing enough analysts positive on the company and its chances of success with new R&D because, by myself, I can't keep up with all the complex science and so I use the analysts as my researchers.Many biotech analysts are physicians or clinical researchers themselves who have gone to work for brokerages. And in cases where no medical PhDs are on the research staff, they all have a routine of consulting physician experts who are considered Key Opinion Leaders (KOLs) in clinical circles and that the FDA may rely on as well. I also want to see the analysts raising their estimates as future profitability becomes visible. Climbing back to being a Zacks #1 Rank (Strong Buy) or #2 Rank (Buy) on a regular basis now -- vs a Rank #4 (Sell) or #5 (Strong Sell) as it was last fall -- is a nice turn-around we want to see.Throw in a positive price trend and institutional accumulation and I'm all in. In full disclosure, I own MDVN for the Zacks Follow the Money portfolio and I own September 55 calls for my own portfolio.Kevin Cook is a Senior Stock Strategist with Zacks.com

Sunday, January 12, 2014

JCP: Perry Capital to Demand Questrom, Hicks Step in, Says CNBC

Analysts today were reflecting on the war of words inside, and outside, of J.C. Penney (JCP), with activist investor Bill Ackman of Pershing Square Capital, and the company’s board, both releasing public statements in the last 24 hours attacking one another’s handling of the search for a new chief executive.

CNBC’s David Faber reported a short while ago that Perry Capital, a 7% holder, is going to file a 13-D later today asking the company to immediately move to replace Mike Ullman as interim CEO with former CEO Allen Questrom as chair and Ken Hicks, head of FootLocker (FL) as CEO.

Penney shares are down 75 cents, or 6%, at $12.91.

Credit Suisse’s Michael Exstein, reiterating an Underperform rating on the stock, and a $15 price target, writes this morning that the battle is “Just what JC Penney does not need,” as “The very public debate around Mr. Ullman’s tenure will only make it more difficult to attract senior level executives to JC Penney.”

“Personalities” have crept into the battle over the company, he writes, at a moment when it is at an especially “crucial stage” in its efforts to write itself. Interim CEO Mike Ullman hasn’t had the time to make necessary changes, writes Exstein:

Mr. Ullman stepped into not only a significant management void but also into what appears to be a company in strategy limbo with the added stress of internal political maturations. Having been reappointed into management last April, Ullman could not have done anything considerably different at this point to either prove or disprove his competency or impact the content of the store. Actions taken by Ullman to-date have been in two areas: changes in promotional strategies and new management appointments. Given JCP’s prior commitments and long merchandise lead times, significant changes to merchandising will not likely show up in the stores until at least October.

And Citigroup’s Deborah Weinswig reiterates a Sell rating and an $11 price target, writing that the company needs a “dream team,” and that Questrom and Hicks appear to be just that:

We observed that if Mr. Ullman and the Board were able to convince Ken Hicks, President and CEO of Foot Locker, to rejoin JCP in an executive role, we believe that our Sell call would be at risk. We do not think it is realistic to expect business to improve without a full team and turnaround plan in place […] Mr. Questrom and Mr. Hicks have turnaround experience at several retailers and could be a "dream team" to right the ship at JCP. Mr. Questrom was previously Chairman and CEO of Neiman Marcus, Federated Department Stores (now Macy‘s (M)), and Barneys New York. From 2000 to Dec. 2004, he was Chairman and CEO of JCP. Mr. Hicks resigned from JCP in June 2009 to be President and CEO of Foot Locker.

Update: CNBC’s Scott Wapner updated the story a short while ago, reprinting that Ackman contacted him to refute claims by chair Tom Engibous that Ackman’s allegations about the Baird were erroneous. Says Ackman, ” Our letter is entirely accurate in all respects. We look forward to meeting with the full board to discuss the future of the company.”

Saturday, January 11, 2014

PetMed Express Beats on Both Top and Bottom Lines

PetMed Express (Nasdaq: PETS ) reported earnings on July 22. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended June 30 (Q1), PetMed Express beat expectations on revenues and beat expectations on earnings per share.

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

Margins increased across the board.

Revenue details
PetMed Express reported revenue of $74.2 million. The seven analysts polled by S&P Capital IQ expected net sales of $70.0 million on the same basis. GAAP reported sales were 7.6% higher than the prior-year quarter's $69.0 million.

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

EPS details
EPS came in at $0.24. The seven earnings estimates compiled by S&P Capital IQ forecast $0.22 per share. GAAP EPS of $0.24 for Q1 were 20% higher than the prior-year quarter's $0.20 per share.

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

Margin details
For the quarter, gross margin was 32.4%, 10 basis points better than the prior-year quarter. Operating margin was 10.1%, 110 basis points better than the prior-year quarter. Net margin was 6.4%, 70 basis points better than the prior-year quarter. (Margins calculated in GAAP terms.)

Looking ahead
Next quarter's average estimate for revenue is $59.0 million. On the bottom line, the average EPS estimate is $0.21.

Next year's average estimate for revenue is $233.3 million. The average EPS estimate is $0.88.

Investor sentiment
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 870 members out of 900 rating the stock outperform, and 30 members rating it underperform. Among 243 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 238 give PetMed Express a green thumbs-up, and five give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on PetMed Express is hold, with an average price target of $12.70.

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Friday, January 10, 2014

Out With That, In With This (RNN, GTXI)

If you were lucky enough to step into Rexahn Pharmaceuticals, Inc. (NYSEMKT:RNN) when your truly suggested it was a budding buy back on December 23rd, then congratulations - you're now up a little more than 60% (assuming you bought into RNN after the break above a key resistance line on the 27th). Now get out. Instead, use your profits from the Rexahn to take on a stake in GTx, Inc. (NASDAQ:GTXI). No, GTXI may not look like much at first, but when you take a step back and look at a chart of GTx, Inc. through a longer-term lens, the upside potential becomes clear.

Odds are good that suggesting Rexahn Pharmaceuticals, Inc. will ruffle some feathers. After all, RNN is one of the market's newest favorite stocks, and has been absolutely on fire of late. Putting the buy label on GTx won't be quite as controversial, as it doesn't look like I'm bailing out right in the middle of a rally. On the other hand, GTXI has been so anemic of late, it would be easy to question my call. All I can say about both suggestions is, hear me out.

Yes, Rexahn Pharmaceuticals Inc. is right in the middle of a red-hot rally. I get it. But, between yesterday's bullish gap and today's even-stronger open, there's just not much meat left on the bone. The stock's doubled in value since the end of November, and yesterday's high-volume surge from RNN has all the markings of a blowoff top... or a reverse capitulation. Yeah, the stock's up a little more today, but that looks like the last of the buyers who regret missing yesterday's pop and are still clamoring to get in. That's not the kind of mentality you want behind a rally, especially one that's this overbought.

In other words, this is as good as it's probably going to get for Rexahn.

And what makes GTx, Inc. so great? After all, this chart hasn't really gone anywhere in months following August's plunge. Well, take a closer look. As of yesterday - and using the 20-day and 50-day moving average lines as the springboard - GTXI has pushed its way above a recently-developed ceiling at $1.86. Better still, that breakout move unfurled on decidedly higher volume... the second high-volume rally we've seen from GTx in less than a month.

Hot Penny Stocks To Watch Right Now

Remember, this stock was trading around $4.00 before the huge bearish gap to less than $2.00 in August, so even if for no other reason than technical mechanics, there's a lot of upward/bullish pressure being applied to GTXI. If it can move above $2.00 here (which has also been something of a resistance level), that could really light a fire for GTx Inc.

For more trading ideas and insights like these, be sure to sign up for the free SmallCap Network newsletter. You'll get stock picks, market calls, and more, every day. Here's what you've missed recently.

Thursday, January 9, 2014

NY AG: BlackRock agrees to stop analyst surveys

NEW YORK (AP) — Asset manager BlackRock agreed to end a stock analyst survey program under an agreement that New York's top prosecutor on Thursday said was the result of a financial industry investigation into how the release of some Wall Street analyst information that gives some investors an unfair advantage.

New York State Attorney General Eric Schneiderman said BlackRock's surveys would ask analysts about companies they followed and were frequently timed before the official release of publicly available opinions.

Under the program, BlackRock would combine survey responses with the publicly available analyst opinions to make investment decisions, Schneiderman said.

5 Best Biotech Stocks To Buy For 2014

"To their credit, they recognized this was a problematic area and agreed to stop completely," Schneiderman said.

BlackRock didn't confirm or deny any of the attorney general's findings in making the agreement with Schneiderman's office. The company also agreed to pay $400,000 to cover the costs of the investigation and Schneiderman said BlackRock would be cooperating in the office's continuing investigation.

A call to BlackRock seeking comment was not immediately returned.

Schneiderman has made a cause of taking on what he has called "Insider Trading 2.0" — the release of extra or early information to some market players. Modern stock trading is dominated by automated computer systems that make trades in fractions of a second, and traders can profit from receiving data even milliseconds before its public release.

In July, Schneiderman reached an agreement with Thomson Reuters in which the news and business information provider agreed to stop distributing results of consumer surveys a couple of seconds early to clients who paid for advanced access.

Wednesday, January 8, 2014

Are These Obamacare Changes Unconstitutional?

Eleven state attorneys general are crying foul, calling U.S. President Barack Obama's unilateral Obamacare changes unconstitutional since he is bypassing congressional approval.

Last Thursday, West Virginia Attorney General Patrick Morrisey and 10 co-signatories sent a letter to Health and Human Services Secretary Kathleen Sebelius to object to the Obama administration's recent changes to his healthcare brainchild.

The attorneys general argue that the courts have been clear that the legislative branch makes laws, while the executive branch has the power to enforce those laws - and they claim changes to Obamacare exceed precedents adjudicated by the U.S. Supreme Court.

Obamacare Changes: The Case for Illegal Action

The 11 attorneys general argue the courts have been clear that a president does not have the authority to completely eliminate the enforcement of an entire section of a statute. And that's exactly what the Obama administration did when it delayed the employer insurance mandate for one year.

They cite cases such as Heckler v. Chaney (1985), in which the high court decided that some executive branch's enforcement actions of laws are first subject to judicial review.

Typically, statutory language would spell out what the executive branch has the power to do. But because the language of Obamacare is particularly murky, legislative intent should serve as the fallback guide.

The legislative intent of Obamacare was for the entire population - individuals and employers - to pay money into a healthcare pool to keep costs down. But now the president delayed the employer mandate for a year, taking money out of the pool and, arguably, illegally changing the intent of the legislation.

To make this move legally, the Obama administration should have gone through the right channels and put the adjustment to congressional vote, according to the attorneys general. Otherwise, suspending a section of a statute for a year might be unconstitutional action from the executive branch.

According to Texas Attorney General Gregg Abbott, a co-signatory on the letter, making these changes legally is just a phone call away.

"If the President called Sen. Harry Reid (D-NV) and said, 'Harry, I want you to agree with the U.S. House of Representatives, and pass the law they passed,' this would be solved. But the President won't do that," said Abbott.

The employer mandate is not the only significant modification the Obama administration made post-facto, without congressional approval...

The 11 attorneys general cite the president's move to allow insurance companies to continue offering health plans that'd been canceled for failing to comply with Obamacare standards.

"We support allowing citizens to keep their health insurance coverage, but the only way to fix this problem-ridden law is to enact changes lawfully: through Congressional action," the attorneys general wrote. "The illegal actions by this administration must stop."

They view the president's action as a way to save political face for having clearly broken his promise that people will be able to keep their old health insurance "no matter what," and call the way he went about the adjustment "flatly illegal under federal constitutional and statutory law."

Besides Morrisey and Abbott, co-signatories on the letter included the following attorneys general: Bill Schuette (Michigan), Luther Strange (Alabama), Jon Bruning (Nebraska), Samuel Olens (Georgia), E. Scott Pruitt (Oklahoma), Lawrence Wasden (Idaho), Derek Schmidt (Kansas), Kenneth Cuccinelli (Virginia), and James D. "Buddy" Caldwell (Louisiana).

All 11 are members of the GOP. In a FOX News interview, Abbott stated that he knows some fellow democrat attorneys general agree with the premise put forth in the letter, but that they won't go on record for political reasons.

What's Next?

Ultimately, the letter can be seen as an administrative remedy, but does little to actually land this unconstitutionality issue in a courtroom.

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That's because there are questions as to who has actual legal standing to challenge the Obama administration on their one-sided actions regarding the healthcare law. Whether the states have such standing, or employers, or even individuals, would have to be adjudicated in and of itself.

What do you think? Are these Obamacare changes unconstitutional? Tell us in the comments below...

Editor's Note: Keep in mind, no matter how Obamacare affects your health, your wallet, or your politics, there is always a bright side when it comes to investing. We've found a way to profit from the shift in our nation's healthcare process. You can get started here.

Tuesday, January 7, 2014

Markets Rise on a Weak GDP Number. What's Going On?

This morning, the release of the final revision to the first-quarter GDP number was seen as a positive thing for equities, despite the GDP number representing slower than previously estimated economic growth in the U.S. during the first three months of 2013. A previous GDP report indicated that the economy grew at a rate of 2.4% in the first quarter, but that was revised downward to growth of a mere 1.8%. A slow economy would typically mean doom and gloom for Wall Street, as businesses would be expected to report weak quarterly results. But as the closing bell rang today, the Dow Jones Industrial Average (DJINDICES: ^DJI ) was up 149 points, or 1.02%, and now sits at 14,910.

So the reason for the rise today is that this poor economic data will likely push the Federal Reserve's tapering of bond-buying back. The Fed had stated that if the economy continues to move forward and grow at a reasonable rate, it would start slowing its bond-buying program toward the end of 2013. Now that we all know the economy isn't as strong as what it appeared to be, the Fed may need to adjust its date for tapering, which is what equity investors want to see happen.

The Dow's triple-digit move higher allowed all but three of its components to move higher today. The three losers were IBM (NYSE: IBM ) , Alcoa, and Caterpillar. This afternoon I discussed why Alcoa and Caterpillar were moving lower, now let's take a look at IBM.

IBM lost 0.06% today as the other Dow technology stocks all moved higher by more than half of a percent. The company has long been a stalwart in the technology industry with its massive server business and IT support units. But the top dog may be losing some of its dominance as we see other technology-focused companies move onto its turf. Hewlett-Packard, Microsoft, and Cisco, to mention a few, have all made big moves into the server and cloud computing business and ramped up their own IT support staffs. We have long thought of IBM as a slow-moving giant, which it rightfully has gained that image, but if it can't soon quickly begin moving to fight off the invaders, it may soon stumble and fall.

Outside the Dow, we once again saw some big moves lower from the coal stocks. Shares of Peabody Energy (NYSE: BTU ) fell another 3.26%, while Consol Energy (NYSE: CNX ) slid another 2.97%. Both companies are big players in mining coal and with the slowing Chinese economy, which is a huge customer for the industry and Obama's recent comments on climate control, the stocks have been bounded. While many experts had been expecting the president to make a stand against coal-fired power plants, a speech he gave on Tuesday was the first time we heard a plan to slow the carbon output caused by burning coal in electric power plants. Obama is aiming to put further restrictions on coal-fired power plants by forcing them to reduce their carbon emissions, a move that most would argue will cost more than it is worth and essentially force utility companies to shut down the plant or convert it to operate on another form of fuel. If his plan goes into effect, the move will surely hurt the coal industry as demand for the resource will take a nosedive.

Another big loser was the Apollo Group (NASDAQ: APOL ) , which lost 10.27% of its value today. The company announced earnings yesterday after the market closed, and although it beat the Street's estimates for adjusted profit, its revenue misses expectations. For the quarter, revenue was down 16% as enrollment for the company's for-profit education unit, The University of Phoenix, fell 17% to 287,500 students. Apollo also announced that it expects revenue to come in at $3.65 billion to $3.7 billion for the full 2013 year while analysts had pinned the number to be higher at $3.71 billion.

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Monday, January 6, 2014

Does This Pipeline Promise Tomorrow's Blockbuster Sales?

Nearly every big pharma player has been hit with patent expirations that have hit hard on sales lately, and Merck (NYSE: MRK ) is no exception. Merck's one of the industry's biggest giants, but the loss of patent protection on former top blockbuster drug Singulair and other leading medications has threatened this company's future. While leading drugs such as Januvia are holding up Merck's foundation, the company's pipeline will make or break its long-term success.

Just how strong is Merck's pipeline? Let's take a look at this firm's portfolio of developmental drugs and see what investors should think of Merck's potential.

No shortage of drug candidates
Merck's pipeline isn't lacking for quantity. The company currently has six drugs and indications under review for regulatory approval, with 15 more therapies undergoing phase 3 trials as of May 6. Those 21 drugs in total match up well with some of the top pipelines in the business. As a comparison, Pfizer (NYSE: PFE ) , whose pipeline I've singled out for praise in the past, currently has six drugs undergoing regulatory review and 16 therapies in phase 3 trials as of May 9. Pfizer's future looks strong with its robust pipeline that boasts 74 total drugs in development, and at least in late-stage candidates, Merck looks strong as well, with another 23 therapies in phase 2 development.

However, it's the quality, not the quantity, of the pipeline that matters.

Insomnia aid suvorexant and osteoporosis drug odanacatib remain two of Merck's most promising drugs in its late-stage pipeline. Suvorexant's on track for approval soon, particularly after a Food and Drug Administration panel gave a thumbs-up to the drug's safety and efficacy in May. Still, don't get too carried away with this drug's potential. Suvorexant might not even hit blockbuster potential, as average analyst estimates peg its peak sales at just $650 million by 2018. That won't be enough to replace the more thanthe $1.6 billion Singulair alone lost in 2012.

Analysts give more weight to odanacatib's potential, but this drug has hit hurdles of its own recently. Merck earlier delayed its expected filing for odanacatib's approval until 2014, and while peak sales estimates are optimistic -- analysts say the drug could hit up to $3 billion in peak sales -- investors will have to be patient with this therapy.

Odanacatib has competition as well. Amgen (NASDAQ: AMGN ) has its own bone therapy drugs, Prolia and Xgeva, each of which are expected to succeed. Morningstar in May said that it expects Amgen's osteoporosis and fracture-preventing drugs, respectively, to generate more than $3 billion in peak sales. There's an opportunity for odanacatib to thrive alongside Amgen's two drugs, but competition for the top spot in this niche will be a battle to watch.

Singulair and odanacatib aren't Merck's only drugs in the pipeline. Hepatitis-C therapy vaneprevir is an early phase 3 candidate to watch, and the drug performed well in its phase 2 trial efficacy. Considering that hep-C affects more than 150 million people across the globe, with a market for new medications estimated at $20 billion by Bloomberg, an approval here could be a big win for Merck. Don't expect vaneprevir to reach the regulatory approval stage any time soon, however.

Atherosclerosis treatment and cardiovascular therapy anacetrapib is another promising candidate to watch. The drug's a successor in a long line of developmental drugs to promote HDL cholesterol -- many of which have flamed out -- but Merck pushes on. Anacetrapib's a long shot, but if the drug pans out, it could be a multibillion-dollar blockbuster for Merck. It's currently in phase 3 trials, and Merck investors will likely have a long time to wait on this candidate.

Even this faces competition, however. Sanofi (NYSE: SNY ) and Regeneron's (NASDAQ: REGN ) competing LDL cholesterol-reducing therapy REGN727 launched phase 3 trials last year, and while the drug likely will see a long wait for results, some analysts are optimistic about its potential. Peak sales estimates range from $2.5 billion to $6 billion -- no chump change for sure -- and Sanofi's hoping the drug can clear regulators by 2015 in time to beat Merck's and other competing therapies to the market.

Is all this enough for Merck to beat back patent loss-related sales? Current leading drugs should help, as diabetes-fighting Januvia and Janumet continue to fortify Merck's revenue, and other leaders such as Gardasil have grown strongly in recent years despite exceeding blockbuster status. Still, you'll need to keep an eye on Merck's pipeline. While this company has plenty of drugs and indications under development, it'll have to hit on promising potential blockbusters like odanacatib and anacetrapib in order to stabilize Merck's future. Anything less, and the patent cliff could be a much bigger worry than expected.

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 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.

Sunday, January 5, 2014

The Rich Investor's Secret to Avoiding Worry and Wasted Time

Stansberry & Associates: Doc, your advisories – Retirement Millionaire and Retirement Trader – are centered around an idea you call "anaconda trading." Can you define this idea for us? Dr. David Eifrig: Sure... First, "anaconda trading" doesn't pertain to a particular trading strategy. Instead, it's a framework to think about trading and investing. It's how many of the world's richest and most successful investors grow and protect their wealth. I realize it might seem like a silly comparison, but I've found the most useful way to describe this approach is in terms of the anaconda. Anacondas are the largest snakes in the world. And they're one of the deadliest, most efficient predators... but they don't hunt like most other animals. Anacondas don't "zip" around chasing after their prey. They don't get into long battles with them. In fact, they don't hunt in a traditional sense at all. Instead, they lie around in rivers for long periods of time. They wait for an unsuspecting animal to pass by or stop for a drink of water. Only then do they strike... by slowly wrapping themselves around the prey and holding on until the animal stops breathing. Then, with their large mouth, they swallow their prey whole. It's a unique strategy in nature. They're nature's "cheap shot" artists. Said another way, anacondas aren't interested in fair fights... They'll only strike when the odds are overwhelmingly on their side. They're "no risk" operators. And they take their time waiting for their prey and, once it's captured, waiting for the capture to pay off. Anacondas can grow to enormous size because they don't spend much time or energy chasing every animal that comes along. S&A: How do you apply this idea to investing? Eifrig: Well, that's how the world's best investors think about buying stocks, bonds, and commodities. They act only when the odds are heavily stacked in their favor. In a similar way, their portfolios can grow to enormous size because they're greatly reducing risk. If you begin to think about investing this way, you can avoid a huge amount of worry and wasted time, and set yourself up to make extraordinary returns. Like the anaconda, you can rest along the river bank until the right opportunity presents itself. S&A: Can you give us an example of how you've used this approach? Eifrig: Sure, a great example was in 2010 when bank analyst Meredith Whitney went on 60 Minutes and predicted hundreds of billions of dollars of losses in the municipal bond market. Muni bonds collapsed in price, but I thought it was a major overreaction... the predictions were factually incorrect. So we were able to buy these bonds at a major discount with little risk, simply by waiting for a fantastic opportunity to come to us. And we made great, safe returns over the next several years. S&A: How about an example of how this idea applies to shorter-term trading? Eifrig: One of my favorite ways to use this idea for trading is to take advantage of spikes in volatility. The Volatility Index, also known as the "VIX" or "fear index," tends to rise as stocks fall and investors become more fearful. The VIX is also used to determine option prices... When volatility spikes, options become more expensive. Yet these periods of high volatility typically don't last long... and as any professional trader will tell you, most options expire worthless. So when we occasionally see a big spike in volatility, it often makes sense to sell – essentially short-sell – puts on stocks you'd like to own anyway. The ins and outs of selling puts are beyond the scope of this interview, but this is an ideal "anaconda" situation. One of the best examples of this is the stock crash of late 2008 and early 2009. Investors who were patient and prudent were able to collect a huge amount of low-risk income and pick up some of the world's best companies at absurdly cheap prices. S&A: Are there any risks or hurdles with "anaconda trading?" Eifrig: Because it's a framework rather than a specific strategy, there aren't really risks in the traditional sense. Followed prudently, it can only help you. It's a simple idea, but it can be quite difficult for the novice investor to apply consistently. You'll learn patience and discipline. Few people are naturally wired with the patience required to be successful investors. In fact, it's often just the opposite. Many investors act as though frequent buying and selling is the ticket to huge wealth. But it's exactly this behavior that ensures the average investor will never build real wealth through investing. It doesn't help that Wall Street does all it can to encourage this behavior – that's where the commissions are made – and the financial media are constantly talking about the latest hot stock picks. For most people, this is something they have to work at... a skill they have to build. But it's one of the best things you can do to improve your investing and trading results immediately. I recommend everyone give it a try. S&A: Thanks for talking with us, Doc. Eifrig: You're welcome.

Saturday, January 4, 2014

Consolidated Communications Holdings Earnings Are on Deck

Consolidated Communications Holdings (Nasdaq: CNSL ) is expected to report Q1 earnings on May 9. Here's what Wall Street wants to see:

The 10-second takeaway
Comparing the upcoming quarter to the prior-year quarter, average analyst estimates predict Consolidated Communications Holdings's revenues will increase 68.2% and EPS will wither -17.6%.

The average estimate for revenue is $157.1 million. On the bottom line, the average EPS estimate is $0.14.

Revenue details
Last quarter, Consolidated Communications Holdings reported revenue of $160.1 million. GAAP reported sales were 71% higher than the prior-year quarter's $93.7 million.

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

EPS details
Last quarter, non-GAAP EPS came in at $0.20. GAAP EPS of $0.03 for Q4 were 88% lower than the prior-year quarter's $0.26 per share.

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

Recent performance
For the preceding quarter, gross margin was 61.4%, 80 basis points worse than the prior-year quarter. Operating margin was 13.8%, 300 basis points worse than the prior-year quarter. Net margin was 0.9%, 750 basis points worse than the prior-year quarter.

Looking ahead

The full year's average estimate for revenue is $621.3 million. The average EPS estimate is $0.68.

Investor sentiment
The stock has a five-star rating (out of five) at Motley Fool CAPS, with 68 members out of 78 rating the stock outperform, and 10 members rating it underperform. Among 20 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 19 give Consolidated Communications Holdings a green thumbs-up, and one give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Consolidated Communications Holdings is outperform, with an average price target of $17.00.

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