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Up 32% This Year, This Health Stock Is Set To Really Take Off
Investors in a certain global leader in medical equipment have been seen mildly erratic behavior (to put it nicely) from the stock over the better part of a decade.
Shares rose from $40 in 2004 to highs of $75 in 2007 before sinking to $30 in 2009 and rebounding to $50 in 2011. Since then, the stock has steadily risen to its current level near $75.
But while the stock was spinning its wheels over that nine-year period, the company was growing at a good clip. Annual revenue climbed a cumulative 29% between 2009 and 2012, to $8.7 billion. Net earnings jumped 17% in that time, to $1.3 billion.
Last month, Stryker (NYSE: SYK) delivered rather uneven third-quarter numbers: Revenue rose 4.8% from a year ago, to $2.2 billion, but earnings fell more than 70%.
The revenue boost came from a revival in Stryker's largest division, specifically in orthopedic implants used in hip and knee joint replacements. This division grew 9% in the third quarter, one of its strongest performances in some time. Most of the dip in earnings can be attributed to litigation related to a recall of Stryker's ABG II and Rejuvenate hip implants (ranging from $700 million to $1.1 billion) last year. Excluding that lump sum, earnings rose 1%.
Except for a few rough patches, Stryker's been riding a wave of momentum good enough for a 32% year to date gain -- and it hasn't yet begun to crest. It's all coming together for this $25 billion provider of surgical tools and neurotechnology, despite ongoing criticism about a series of expensive acquisitions (the other component of Stryker's third-quarter dip in earnings).
Stryker's most recent purchase: a $1.65 billion deal for MAKO Surgical (Nasdaq: MAKO), a pioneer in robot-assisted orthopedic surgery with its RIO systems and Restoris implants. Considered a long-term bet on the robotics industry, the acquisition gives Stryker new product lines that it can market through its broad distribution network. The deal may position Stryker to compete with Intuitive Surgical (Nasdaq: ISRG), famed for its da Vinci surgical robot.
Before its purchase of MAKO, Stryker acquired Boston Scientific's (NYSE: BSX) neurovascular unit for $1.5 billion, which provided inroads into a thriving market in devices to treat strokes. It also gobbled up orthobiologic and biosurgery products maker Orthovita for $316 million, and China-based Trauson Holdings, a competitor of Stryker's spine segment, for $685 million to build its business overseas.
So Stryker has been busy in recent years shoring up various industry positions, adding to its product lines and building a presence overseas.
The strategy appears to be paying off: Analysts expect earnings growth of 8.5% next year and for the next five years as well.
Risks to Consider: Stryker can ill afford any more product recalls, which could damage its reputation beyond repair and scare away customers and investors. The company also faces stiff competition from Smith & Nephew (NYSE: SNN) and Johnson & Johnson (NYSE: JNJ) in an industry challenged by falling prices.
Actions to Take --> Everything about this stock screams "long term." An aging population will help drive the need for knee and hip replacements in the not-too-distant future. Stryker's string of acquisitions is set to begin paying off; the question is, how soon? At about $75 a share, STk is expected to rise single digits in 2014.
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Up 32% This Year, This Health Stock Is Set To Really Take Off
Get Value And Growth With This Little-Known Stock
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The Retirement Crisis, Illustrated
America is facing its own little demographic headache in the coming years thanks to the declining birthrate, drop-off in immigration and massive wave of retiring boomers?
Source:
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Dave Landry's Market in a Minute - Tuesday, 11/26/13
Random Thoughts
With the indices relatively unchanged, I hate to read too much into things.
The Quack ended off its best levels but did end in the black. This was enough to keep it at multi-year highs.
The Ps tried to rally but ended down .13%. This action has them .13% away from all-time highs.
What the Ps lost, the Rusty gained. And, this is enough to keep it at all-time highs.
Again, I don't want to read too much into a flat day. As you would imagine, most stocks were mixed.
There were a few standouts though:
Biotech, which recently looked pretty sick just recently, closed at all-time highs. Drugs overall and Health Services, in spite of all the news, also closed at all-time highs. See my recent column about not confusing the issue with facts.
Selected Regional Banks accelerated to all-time highs.
The Transports also closed at all-time highs.
Not all was rosy though. Metals & Mining continue to roll over. And, Real Estate still looks anemic.
With a flat day, not much changes. I'm still not seeing a lot of new meaningful longs just yet. This is perfectly normal for a methodology that requires a pullback. I am seeing a few shorts but not enough to cause alarm. Focus mostly on managing your existing positions. Take partial profits as offered and trail your stops higher. Continue to avoid getting too bearish as long as the market remains at or near new highs. If you really really like a short side setup, then take it-we actually have one that we are going after today. Again though, just don't get too aggressive as long as the market is at new highs. In an ideal world, the market continues higher and we avoid a new position altogether. Then, we look to add on the long side. And, if it does trigger and the market goes straight up, we'll get stopped. This won't be the first losing trade and it certainly won't be the last. Nothing ventured, nothing gained. Learning how to shrug your shoulders and shout next! -focusing on the next potential trade--takes a while. This may be hard to believe if you are just starting out but it can be done Grasshopper.
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Low Risk, 19% Upside On This American Favorite
Dunkin' Brands (Nasdaq: DNKN) has far outpaced the performance of the S&P 500 Index year to date, gaining nearly 48% compared with the broader index's 26% gain.
Even more exciting is that if the shares can crack round-number resistance at $50, they are likely to challenge $60 in fairly short order. Since there is a well-defined stop-loss level at the major uptrend line, which intersects the chart just under $46, the reward-to-risk ratio is roughly 2.5 to 1, which is highly attractive.
Dunkin' Donuts, which has been around since 1950, is an American favorite. Through aggressive expansion, it is capturing an even larger domestic and international following. (My colleague David Goodboy is also a longtime fan of the company, as he wrote recently.)
In its third quarter, the company, which also owns the Baskin-Robbins brand, added 222 new stores worldwide, 81 of which were U.S.-based Dunkin' Donuts locations. There are now 7,500 Dunkin' Donuts restaurants in the U.S.
CEO Nigel Travis announced his goals of opening at least 15,000 Dunkin' Donuts restaurants in the U.S., including 3,000 east of the Mississippi and 5,000 in Western states. That's double the size of the current chain. At present, Dunkin' Donuts is heavily situated in the eastern United States, so there is a lot of virgin territory that can be easily conquered.
In the third quarter, the first Dunkin' Donuts locations in Colorado opened. The company also signed development agreements in Southern California, bringing the total number of planned outlets there to 70. During this same period, the company's U.S.-based same-store sales increased 4.2%, revenue increased 8.5% from a year ago, and earnings increased at a double-digit clip (10.8%).
Since the stores are almost entirely operated by franchisees, continued expansion should mean an influx of franchise fees and royalty income, along with minimal operating expenses. That's a formula for strong future profit growth.
The chart is strong, to say the least. Since its July 2011 IPO near $19, the stock has been on a highly bullish run and shows no sign of slowing down.
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November 26, 2013 ? Quote of the Day
?I think we?re in the middle of the game, maybe the fourth or fifth inning. I really think this thing has another five years to go. It?s going to take that long before people become confident enough and they start becoming confident enough and blowing themselves up again,? said John Paulson of Wells Capital Management.
go to the Mad Hedge Fund Trader's website
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Here Comes the Next Peace Dividend
I was amazed to see the Dow Average open up only 60 points this morning, and oil to fall a mere $1.50, given the enormous long term implications of a real nuclear deal with Iran. Over the decades, I have noticed that Wall Street isn?t very good at analyzing international political matters and the implications for their own markets. This appears to be one of those cases.
The news over the weekend about a freeze on Iran?s nuclear enrichment program in exchange for international inspections and the unfreezing of $4 billion of their assets is unbelievably positive for all asset classes, except energy. It came much sooner than expected. It proves that the administration?s preference for economic sanctions over military action has been wildly successful.
The US is now in a tremendously powerful negotiating position. If Iran dumps their nuclear program to our satisfaction it can get the carrot. It will rejoin the world economy, unfreeze the rest of its assets, and recover $100 billion a year in trade. Its oil exports (USO) can recover from 750,000 barrels a day back to the pre crisis level of 3 million barrels. If it doesn?t then it gets the stick again in six months, resuming their economic freefall.
The geopolitical implications for the U.S. are enormous. Iran is the last major rogue state hostile to the U.S. in the Middle East, and it is teetering. The final domino of the Arab spring falls squarely at the gates of Tehran. A friendly, or at least a non-hostile Iran, means we really don?t care what happens in Syria.
Remember that the first real revolution in the region was Iran?s Green Revolution in 2009. That revolt was successfully suppressed with an iron fist by fanatical and pitiless Revolutionary Guards. The true death toll will never be known, but is thought to be in the thousands. The antigovernment sentiments that provided the spark never went away and they continue to percolate just under the surface.
At the end of the day, the majority of the Persian population wants to join the tide of globalization. They want to buy iPods and blue jeans, communicate freely through their Facebook pages and Twitter accounts, and have the jobs to pay for it all. Since 1979, when the Shah was deposed, a succession of extremist, ultraconservative governments ruled by a religious minority, have abjectly failed to cater to these desires.
If Iran doesn?t do a deal on nukes soon, it?s economy with sink deeper into the morass in which they currently find themselves. The Iranian ?street? will figure out that if they spill enough of their own blood that regime change is possible and the revolution there will reignite. The Obama administration is now pulling out all the stops to accelerate the process.
The oil embargo former Secretary of State, Hillary Clinton, organized is steadily tightening the noose, with heating oil and gasoline becoming hard to obtain. Yes, Russia and China are doing what they can to slow the process, but conducting international trade through the back door is expensive, and prices are rocketing. The unemployment rate is 40%. The Iranian Rial has collapsed by 50%. Iranian banks were kicked out of the SWIFT international settlements system, a deathblow to their trade.
Let?s see how docile these people remain when the air conditioning quits running this summer because of power shortages. Iran is a rotten piece of fruit ready to fall of its own accord and go splat. The US is doing everything she can to shake the tree. No military action of any kind is required on America?s part. No shot has been fired. That?s a big deal when the shots cost $10,000 apiece.
The geopolitical payoff of such an event for the U.S. would be almost incalculable. A successful revolution will almost certainly produce a secular, pro-Western regime whose first priority will be to rejoin the international community and use its oil wealth to rebuild an economy now in tatters.
Oil will lose its risk premium, now believed by the oil industry to be $30 a barrel. A looming supply could cause prices to drop to as low as $30 a barrel. This would amount to a gigantic $1.66 trillion tax cut for not just the U.S., but the entire global economy as well (87 million barrels a day X 365 days a year X $100 dollars a barrel X 50%). Almost all funding of terrorist organizations will immediately dry up. I might point out here that this has always been the oil industry?s worst nightmare. Hezbollah is a short.
At that point, the US will be without enemies, save for North Korea, and even the Hermit Kingdom could change with a new leader in place. A long Pax Americana will settle over the planet.
The implications for the financial markets will be enormous. The U.S. will reap a peace dividend as large, or larger, than the one we enjoyed after the fall of the Soviet Union in 1992. As you may recall, that black swan caused the Dow Average to soar from 2,000 to 10,000 in less than eight years, also partly fueled by the technology boom.
A collapse in oil imports will cause the U.S. dollar (UUP) to rocket. An immediate halving of our defense spending to $400 billion or less and burgeoning new tax revenues would cause the budget deficit to collapse. With the U.S. government gone as a major new borrower, interest rates across the yield curve will fall further.
A peace dividend will also cause U.S. GDP growth to reaccelerate from 2% to 4%. Risk assets of every description will soar to multiples of their current levels, including stocks, junk bonds, commodities, precious metals, and food. The Dow will soar to 30,000 and the S&P 500 (SPY) to 3,500, the Euro collapses to parity, gold rockets to $2,300 an ounce, silver flies to $100 an ounce, copper leaps to $6 a pound, and corn recovers $8 a bushel. The 60-year bull market in bonds ends.
Some 1 million of the armed forces will get dumped on the job market as our manpower requirements shrink to peacetime levels. But a strong economy should be able to soak these well-trained and motivated people right up. We will enter a new Golden Age, not just at home, but for civilization as a whole.
Wait, you ask, what if Iran develops an atomic bomb and holds the U.S. at bay? Don?t worry. There is no Iranian nuclear device. There is no real Iranian nuclear program. The entire concept is an invention of Israeli and American intelligence agencies as a means to put pressure on the regime. According to them, Iran has been within a month or producing a tactical nuclear weapon for the last 30 years.
The head of the miniscule effort they have was assassinated by Israeli intelligence two years ago (a magnetic bomb, placed on a moving car, by a team on a motorcycle, nice!).
If Iran had anything substantial in the works, the Israeli planes would have taken off a long time ago. There is no plan to close the Straits of Hormuz, either. The training exercises in small rubber boats we have seen are done for CNN?s benefit, and comprise no credible threat.
I am a firm believer in the wisdom of markets, and that the marketplace becomes aware of major history changing events well before we mere individual mortals do. The Dow began a 25-year bull market the day after American forces defeated the Japanese in the Battle of Midway in May of 1942, even though the true outcome of that confrontation was kept top secret for years.
If the advent of a new, docile Iran were going to lead to a global multi-decade economic boom and the end of history, how would the stock markets behave now? They would rise virtually every day, led by the technology sector (XLK), industrials (XLI), and the banks (XLF) (C), offering no substantial pullbacks for latecomers to get in.
That is exactly what they have been doing since August. The markets are telling us that a treaty of real substance is a done deal.
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Taking Profits on the Yen?.Again!
This is my 14th consecutive closing Trade Alert, and the 20th including my remaining profitable open positions. I have only six more to go until a break my previous record of 25. It doesn?t get any better than this.
The yen is now in free fall, and the Japanese stock market is going ballistic, as I expected. Both the ProShares Ultra Short Yen double short ETF (YCS) and the Wisdom Tree Japan Hedged Equity ETF (DXJ) have pierced new five-month highs, and loftier levels beckon.
The immediate trigger was a meeting at the Bank of Japan, where the governors voted to maintain their ultra low, 0.1% discount rate. They also reiterated their commitment to growing the money supply by a blistering $600-$700 billion a year, or nearly triple the US monetary easing rate on a per capita GDP basis.
On the same day, we received month old Fed minutes showing a definite lean towards tapering our own quantitative easing. When this eventually does happen, the interest rate differential for dollar/ yen will rise dramatically. Needless to say, this is all terrible news for Japan?s beleaguered currency, as interest rate differentials are the primary drivers of foreign exchange markets.
Given all this, I am going to take profits on my existing short position in the yen through the Currency Shares Japanese Yen Trust (FXY) December, 2013 $101-$104 in-the-money bear put spread. At this mornings shockingly high prices for the spread, we can harvest 83% of the potential profit with one full month still to run to the December 20 expiration.
The outlook for the yen is no so bleak that I want to have plenty of cash to reload on the short side during the slightest recovery. I will move to closer strikes and more distant maturities to maximize your profits. It is now looking like we will soon challenge the 2013 low for the (FXY) of $94.80 and the $72 high for the (YCS).
We have a lot of new readers on board now, as my white-hot performance has become a talking point in the hedge fund community. So for the newbies to familiarize themselves with the basic structural flaws in the yen, please click here
http://www.madhedgefundtrader.com/rumblings-in-tokyo-2/, here
http://www.madhedgefundtrader.com/ne...r-craters-yen/, and finally here
http://www.madhedgefundtrader.com/ne...ushes-the-yen/.
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Barchart.com's Chart of the Day - Autozone (AZO) for Nov 25, 2013
The Chart of the Day is Autozone (AZO). I found the stock by sorting the New High List for frequency in the last month then panned through the chart using the Flipchart feature. I picked the stock for its recent momentum. The stock has a Trend Spotter buy, a Weighted Alpha of 25.00+ and gained 21.50% in the last year. In the last quarter while the S&P 500 Index was up 8.31% the stock was up 10.11%, that's 24.8% better than the market.
It is a specialty retailer of automotive parts and accessories, primarily focusing on do-it-yourself customers. Each of the company's auto parts store carries an extensive product line for cars, vans and light trucks, including new and re-manufactured automotive hard parts, maintenance items, and accessories. Many of the company's domestic auto parts stores also has a commercial sales program, which provides commercial credit and prompt delivery of parts and other products to local repair garages, dealers and service stations.
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Follow Up to Trade Alert ? (XLI) November 25, 2013
As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price.
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check It's Time To Get 'Greedy' With These 'Hated' Stocks
What can a 90 year-old woman from Nebraska teach us about finding profit opportunities in today's downtrodden mining sector?
Let me tell you a story.
In 1983, Mrs. Rose Blumkin -- nonagenarian proprietor of Nebraska Furniture Mart -- was approached by a local investment fund manager who was interested in putting money into her family's business. After talking with "Mrs. B" and observing her Herculean managerial style about the store, the buyer handed her a check for $55 million. No audit of the books, check of inventory, or verification of property titles. He saw all the qualities he liked in Mrs. B -- and was willing to pay a lot based on a few key observations and a handshake.
That man was Warren Buffett. I've learned a lot by studying his examples, like the one above, and applying them to natural resources investing.
This "be like Warren" message is an important one for my Junior Resource Advisor readers. That's because investing in mining -- and particularly its highest-potential-return sub-sector, exploration and development -- is radically different from conventional investing.
Unlike banks or manufacturers, mineral exploration and development companies have no revenue or cash flow. I've sat in meetings with Wall Street bankers and been asked about the price-to-earnings (P/E) ratios for these firms -- and had to point out that the number is technically infinity, the inevitable result when you divide any P by an E that is zero.
So why should we care about these serial spillers of red ink? Because, when done correctly, exploration can yield profit multiples nearly unmatched across the investment universe. In the mineral business it's possible to spend millions of dollars identifying an in-ground asset through sampling, drilling and compilation of results, and come up with a single, massive product that commands a one-time sale price in the billions.
Many observers believe that the exploration market is dead today. With commodity prices slumping and the valuations of major miners down, who cares about finding new ore deposits?
But my analysis shows something completely different. The market for exploration properties is as active as it's ever been -- if not more frenetic.
Look at the chart below. I've plotted acquisitions of exploration properties during the second quarter of this year. These are deals where one company pays another to purchase the rights to a mineral project.
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These European Blue Chips Offer Better Value than Their U.S. Peers
As we head into the final weeks of 2013, European central bankers are on pins and needles. They're hoping the fourth-quarter economic data reveal signs that the Continent is truly on the mend.
An early November report from the European Commission sees signs of that upturn coming. The report's main takeaway: "The signs of hope that we saw last spring have started to turn into tangible positive outcomes. After six consecutive quarters of stagnation or contraction, the EU economy has posted positive growth in the second quarter of 2013. The recovery is expected to continue, and to gather some speed next year."
Indeed, while the European economic region likely contracted a bit in 2013, these economists predict GDP will likely grow 1.5% in 2014, and perhaps 2% in 2015. And where will that strength come from? "Domestic demand is expected to take over as the main engine of growth," they predict.
If they're right, then it's useful to make sure you have European exposure in your portfolio. Heading into Labor Day, my colleague David Goodboy profiled the Vanguard FTSE Europe ETF (NYSE: VGK).
A quick look at a five-year chart of this ETF against the S&P 500 Index shows the extent to which European blue chips have lagged. The outperformance for U.S. stocks really began to pull away in late 20109, when it became apparent that the U.S. economy was on the mend while Europe was not. Now, with Europe perhaps on the mend as well, global investors are likely to allocate more funds to European stocks and funds.
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These Energy Stocks Now Yield Up To 20%
Dividend investors crave predictability. Once they lock onto payment streams, they don't want to hear about any interruptions. And if a company dares to withhold a quarterly dividend payout, then many investors simply head to the exits.
I discussed this phenomenon recently with regard to Carl Icahn and his big stake in CVR Refining (NYSE: CVRR).
As I noted earlier this month, CVR had a big hiccup with its third-quarter dividend, but it appears positioned to pay out $3 or $4 per unit in dividends next year. Shares trading around $22 don't begin to reflect that potential income.
Amazingly, a virtually identical scenario has just played out with another oil refiner. And the setup is every bit as compelling.
A series of technical problems at a key refinery led to a sharp drop in output for Alon USA Partners (NYSE: ALDW), the master limited partnership (MLP) of Alon Energy (NYSE: ALJ). In fact, the quarterly production was so weak that Alon USA Partners didn't simply make less money -- it lost money. And though investors were bracing for a smaller than usual dividend, they got nothing. Shares of ALDW, which traded up toward the $30 mark in the spring, are now below $14.
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This 'Green' Stock Is Undervalued By 25%
The cost of energy production isn't just about money. There are also environment effects.
Last year, according to one environmental group, hydraulic fracturing (commonly known as fracking) alone generated an estimated 280 billion gallons of toxic wastewater, enough to flood Washington, D.C., to a depth of 22 feet. It's no wonder that there's a strong push to institute cleaner practices.
Green initiatives have come to dominate the corporate landscape and are attracting investment flows in record numbers. The performance in alternative energy this year is evidence of this growing trend -- the iShares S&P Global Clean Energy Fund (Nasdaq: ICLN) is up more than 50% year to date. While most of the attention has been focused on renewable energy and clean coal, environmentally friendly sectors like pollution and treatment controls have gone relatively unnoticed.
Calgon Carbon Corp. (NYSE: CCC) is a small-cap stock involved in the purification and treatment of water, air and food, as well as the poisonous emissions from coal-fired power plants. The company has been making tremendous strides in cost reduction, improving operating margins to around 20% from 13.6% just a year ago. (Calgon's leaner operation is one reason the research staff at StreetAuthority's Top 10 Stocks advisory recently named CCC a Top 10 small-cap stock.)
Calgon reported earnings on Nov. 5 and the results were right on line with expectations at $0.22 per share. Gross margins continued to grow, to 33.3% in the most recent quarter from 27.3% a year ago. The demand for activated carbon cloth, used in water, food, and other specialty markets, contributed to a 28.2% gain in consumer sales. The company's cash position climbed 65% from last year to about $30 million, while long-term debt increased only 8.7%, to $48.3 million.
Calgon's stock looks like a value in comparison to CECO Environmental Corp. (Nasdaq: CECE), its closest competitor, trading at around 25 times earnings while CECO trades at over 38. It also looks better from a debt standpoint, with a debt-to-equity ratio of just 0.54 compared to CECO's 1.09. While Calgon's stock is up 44% year to date, CECO's is up 58% and could be due for a pullback.
Looking to the future, Calgon sees opportunity in the mercury removal business. The current annual demand for mercury removal stands at 130 million to 180 million pounds and could grow to as much as 765 million pounds by 2016 as the EPA begins enforcing mercury removal regulations on industrial boilers and cement manufacturers.
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Why Starbucks Is Still A Growth Stock
The number of Starbucks coffee shops that flooded the market during the mid-2000s was almost comical. In 2008, there were more than 230 Starbucks stores in New York City, with over 180 just in Manhattan.
There were literally Starbuckses right across the street from each other. As a coffee lover and Starbucks fanboy, I didn't mind.
But rapid expansion and market saturation turned out to be an unsustainable business model, which led to a large number of underperforming stores. As a result, Starbucks brought back former CEO Howard Schultz in 2008, and the company closed a number of U.S. stores and ceased expansion efforts.
Yet half a decade later, Starbucks (Nasdaq: SBUX) is back in full-blown growth mode.
Despite concerns that Starbucks might again be hitting a saturation point, the coffee company is still very much a growth story. Starbucks has a number of growth levers it can pull this time around beyond just rapid store expansion. These include the company's innovation on the food side and its single-serving products, Verismo and Teavana.
With the likes of McDonald's (NYSE: MCD), Tim Horton's and Dunkin' Donuts all fighting for a piece of the market, the competition in the coffee market has increased over the past half-decade -- but Starbucks continues to set itself apart.
For a couple years there, it looked as though Starbucks and its chief rival, Dunkin' Brands (Nasdaq: DNKN), were going to trade in lockstep forever. However, after upgrading its fourth-quarter guidance and announcing its partnership with Danone, Starbucks begin pulling away and appears to be leaving Dunkin' in the dust.
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Wal-Mart (WMT) Tags McMillon For CEO, Job Hires Expected To Increase In 2014
Markets were headed higher at the beginning of Thanksgiving week. The National Association of Realtors announced that for the fifth month in row pending sales of existing homes fell in the U.S. During the month of October pending sales fell 0.6% following a 4.6% decline in September. This was below the expected 1% gain economists were calling for. This can partially be attributed to rising mortgage rights, prices increasing on existing homes as well as a smaller supply of available homes. Patrick Newport, an economist with IHS Global Insight, said, ?When mortgage rates went up, people got spoiled and rushed into the market to seal deals. The numbers that we?re seeing for pending home sales are payback for the stronger numbers earlier this year.? Overall for the 2013, sales of existing homes are expected to top out around 5.1 million, and remain around the same in 2014. During 2012 there were nearly 4.7 million existing homes sold.
There was a revise of economists short-term growth forecast for the U.S. in the final quarter of this year. Analysts are now predicting growth of 1.8% in the fourth-quarter; the previous prediction came in at a 2.3%. Expectations for growth in the first-quarter of 2014 are a gain 2.5%, also down from the original estimate of 2.7%. Growth for this entire year is expected to be 1.7%. Despite the decrease in projections for growth, hiring expectations have been revised higher. Analysts are projecting average monthly job growth over the next two quarters to come in around 187,000 then increasing to 202,000 by the end of 2014. They also expect the jobless rate to decrease to 7% by the end of next year.
Shares of Wal-Mart (WMT) were trading slightly higher on Monday after the company announced their new CEO of their international division. Doug McMillon will replace Current Chief Executive Mike Duke on January 31, when Mr. Duke retires. McMillon will step up to the plate once the holiday season is over and the competition between retail stores increases. He has held several big roles within the company, including president and CEO of the company?s retail warehouse chain Sam?s Club and head of Wal-Mart International. Walter Loeb, president of retail consultancy of Loeb Associates, said, ?McMillon was responsible for the growth area for Wal-Mart-international sales ? and that?s why he got the nod.?
That?s all for the day.
All the best,
Jack Aubrey, Oakshire Financial
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GLD ? You Made My Life a Living Hell!
A recent piece of correspondence by a regular reader has prompted us to make a brief macro-review before we take on the week.
Please remember where we?ve been.
This is a bull market that has weathered ?
the much ballyhooed ?fiscal cliff?,
the ?sequester?,
the European debt debacle,
the highly anticipated Chinese hard landing,
QE 1,2 and 3 in all its iterations,
a year and a half rise without a correction,
the latest government shutdown,
Bernanke screaming,
Janet Yellen,
Obama Liking it and Keeping it,
and a host of other crises large and small, real and imagined, that have been hammered into our ears by the media for almost five full years.
And yet?
The market keeps rising.
So when the good folks who read our rantings (and we?re forever grateful for each and every one of you!) say that we only have a few hundred Dow points before the top, that the coming January debt ceiling showdown will mark a decisive market turning point, and that the fear of midnight is soon to befall us, we remind you once a
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Earnings Consensus has Benjamin Button Disease
This is one of the more hilarious charts documenting the impossibility with which price targets and market forecasts are made each year by Wall Street?s analyst community.
Here?s a Morgan Stanley chart via @ukarlewitz of Fat Pitch Financial:
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Dave Landry's Market in a Minute - Monday, 11/25/13
Random Thoughts
I'd like to give thanks to all the folks at Traders Expo, especially Tim Bourquin and Elaina Lowe.
Well, things looked a little iffy way back last Wednesday before I left for Vegas. The Quack had pulled back into its prior trading range. And, the Rusty appeared to be on its way to the bottom of its trading range.
As I said, with things mixed and the overall market not too far from new highs, a few big up days would be just what the Doctor ordered. And, that's exactly what we got on Thursday and Friday.
This action puts the Ps back to all-time highs. The Rusty is also at all-time highs. And, the Quack closed at multi-year highs.
The sector action looks great. Biotech, which had been rolling over, has now come back with a vengeance.
There are a few areas stinking up the joint such as Metals & Mining (especially Gold & Silver), Real Estate, and the Semis (which have been mostly sideways). Overall though, most areas are looking pretty good. Chemicals, Manufacturing, Defense, Brokerages, Regional Banks, Drugs, Insurance, Health Services to name a few are all at new highs.
The above is why we take things one day at a time and resist the urge to get too bearish when a market is not too far from new highs. Sure, fire off a short if you really really like the setup but for the most part, you want to wait to make sure the market isn't just taking a breather.
Okay Big Dave, things are looking good. So, do we buy, buy, buy? Well, not just yet. Enjoy the ride on existing longs. Make sure you take partial profits as offered and trail those stops higher. Since the methodology requires a pullback, hold off on new long side positions for now until the market follows through and pulls back. I'd avoid the short side for now. No need to fight it.
Click here to watch today's Market in a Minute.
Best of luck with your trading today!
Dave
omgmachines.com/ericx
__________
Expert swing trader Dave Landry comments on the charts for the major markets, indexes and sectors for the upcoming trading day in his daily one-minute video.
Make sure your sound is turned up. A new browser window will open and the video will begin playing within a few seconds.
Click here to watch today's Market in a Minute.
You can contact Dave Landry by email at
dave@davelandry.com or visit his website DaveLandry.com.
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This 'Green' Stock Is An Undervalued Top 10 Favorite
The cost of energy production isn't just about money. There are also environment effects.
Last year, according to one environmental group, hydraulic fracturing (commonly known as fracking) alone generated an estimated 280 billion gallons of toxic wastewater, enough to flood Washington, D.C., to a depth of 22 feet. It's no wonder that there's a strong push to institute cleaner practices.
Green initiatives have come to dominate the corporate landscape and are attracting investment flows in record numbers. The performance in alternative energy this year is evidence of this growing trend -- the iShares S&P Global Clean Energy Fund (Nasdaq: ICLN) is up more than 50% year to date. While most of the attention has been focused on renewable energy and clean coal, environmentally friendly sectors like pollution and treatment controls have gone relatively unnoticed.
Calgon Carbon Corp. (NYSE: CCC) is a small-cap stock involved in the purification and treatment of water, air and food, as well as the poisonous emissions from coal-fired power plants. The company has been making tremendous strides in cost reduction, improving operating margins to around 20% from 13.6% just a year ago. (Calgon's leaner operation is one reason the research staff at StreetAuthority's Top 10 Stocks advisory recently named CCC a Top 10 small-cap stock.)
Calgon reported earnings on Nov. 5 and the results were right on line with expectations at $0.22 per share. Gross margins continued to grow, to 33.3% in the most recent quarter from 27.3% a year ago. The demand for activated carbon cloth, used in water, food, and other specialty markets, contributed to a 28.2% gain in consumer sales. The company's cash position climbed 65% from last year to about $30 million, while long-term debt increased only 8.7%, to $48.3 million.
Calgon's stock looks like a value in comparison to CECO Environmental Corp. (Nasdaq: CECE), its closest competitor, trading at around 25 times earnings while CECO trades at over 38. It also looks better from a debt standpoint, with a debt-to-equity ratio of just 0.54 compared to CECO's 1.09. While Calgon's stock is up 44% year to date, CECO's is up 58% and could be due for a pullback.
Looking to the future, Calgon sees opportunity in the mercury removal business. The current annual demand for mercury removal stands at 130 million to 180 million pounds and could grow to as much as 765 million pounds by 2016 as the EPA begins enforcing mercury removal regulations on industrial boilers and cement manufacturers.
The company has been positioning itself to take advantage of the new market by landing long-term contracts in February and September of this year for deals worth an estimated $50 million.
Even better for investors, the company -- which just wrapped up a successful $50 million share buyback program -- may initiate a far more aggressive $150 million to $200 million plan at the suggestion of Starboard Value, which owns about a 10% stake.
Risks to Consider: Like most "green" companies, Calgon is depending upon continued trends in corporate sustainability and tax credits for businesses purchasing their environmental controls. While the company expects the demand for mercury removal to increase by 2016, supply exceeds demand and could continue to do so for the short term.
Actions to Take --> The stock was upgraded to "buy" by BB&T Capital Markets on Nov. 11, suggesting that Wall Street may have finally caught on to Calgon's performance. The stock is currently trading at just over $20, which based on future earnings potential, placing it at about a 25% discount.
- Daniel Cross
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This 'Green' Stock Is An Undervalued Top 10 Favorite
The cost of energy production isn't just about money. There are also environment effects.
Last year, according to one environmental group, hydraulic fracturing (commonly known as fracking) alone generated an estimated 280 billion gallons of toxic wastewater, enough to flood Washington, D.C., to a depth of 22 feet. It's no wonder that there's a strong push to institute cleaner practices.
Green initiatives have come to dominate the corporate landscape and are attracting investment flows in record numbers. The performance in alternative energy this year is evidence of this growing trend -- the iShares S&P Global Clean Energy Fund (Nasdaq: ICLN) is up more than 50% year to date. While most of the attention has been focused on renewable energy and clean coal, environmentally friendly sectors like pollution and treatment controls have gone relatively unnoticed.
Calgon Carbon Corp. (NYSE: CCC) is a small-cap stock involved in the purification and treatment of water, air and food, as well as the poisonous emissions from coal-fired power plants. The company has been making tremendous strides in cost reduction, improving operating margins to around 20% from 13.6% just a year ago. (Calgon's leaner operation is one reason the research staff at StreetAuthority's Top 10 Stocks advisory recently named CCC a Top 10 small-cap stock.)
Calgon reported earnings on Nov. 5 and the results were right on line with expectations at $0.22 per share. Gross margins continued to grow, to 33.3% in the most recent quarter from 27.3% a year ago. The demand for activated carbon cloth, used in water, food, and other specialty markets, contributed to a 28.2% gain in consumer sales. The company's cash position climbed 65% from last year to about $30 million, while long-term debt increased only 8.7%, to $48.3 million.
Calgon's stock looks like a value in comparison to CECO Environmental Corp. (Nasdaq: CECE), its closest competitor, trading at around 25 times earnings while CECO trades at over 38. It also looks better from a debt standpoint, with a debt-to-equity ratio of just 0.54 compared to CECO's 1.09. While Calgon's stock is up 44% year to date, CECO's is up 58% and could be due for a pullback.
Looking to the future, Calgon sees opportunity in the mercury removal business. The current annual demand for mercury removal stands at 130 million to 180 million pounds and could grow to as much as 765 million pounds by 2016 as the EPA begins enforcing mercury removal regulations on industrial boilers and cement manufacturers.
The company has been positioning itself to take advantage of the new market by landing long-term contracts in February and September of this year for deals worth an estimated $50 million.
Even better for investors, the company -- which just wrapped up a successful $50 million share buyback program -- may initiate a far more aggressive $150 million to $200 million plan at the suggestion of Starboard Value, which owns about a 10% stake.
Risks to Consider: Like most "green" companies, Calgon is depending upon continued trends in corporate sustainability and
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This Cheap Drug Stock Has 245% Upside
The first rule of running a biotech company: Don't run low on cash. Once investors smell a cash squeeze coming, they'll hammer shares mercilessly.
That was the painful lesson learned by the executives at Dynavax Technologies (Nasdaq: DVAX). Though DVAX was pursuing the development of a very promising new vaccine, the company was burning through more than $15 million in cash every quarter and was at risk of not making it to the FDA finish line. Shares, which traded around $5 in October 2012, skidded all the way to $1.
The good news is that the company shored up its balance sheet late last month, and shares have finally begun to rebound. And, with a few breaks, DVAX looks poised to rise from a recent $1.45 to $3, $4 or even $5.
Little Company, Big Target Market
DVAX has spent years developing Heplisav, which is a vaccine for hepatitis B, a disease that currently afflicts 240 million people around the world, according to the World Health Organization.
Though there are existing vaccines on the market, DVAX believes that Heplisav offers the promise of earlier and better protection with fewer doses than current vaccines.
It appeared it was going to be smooth sailing through the FDA approval process until late last year. The FDA seeks two virtues from any new drug: higher efficacy and a comparable or improved safety profile compared to existing drugs.
On the first count, the FDA gave a resounding thumbs-up, as an advisory panel voted 13-to-1 in favor of the drug's increased effectiveness. But the FDA also decided that DVAX had not sufficiently proved that Heplisav was safe.
The FDA did not say that Heplisav was unsafe, only that the clinical trials thus far couldn't conclusively prove that the drug was safe. And the company has been scrambling ever since to deliver better data, essentially conducting a completely new Phase III clinical trial. For much of 2013, DVAX has been designing that new trial, and the company recently said that it will get underway in a few months.
Although that Heplisav trial will not be completed until sometime in 2015, management is likely to deliver interim results throughout 2014, which should serve as catalysts for the stock.
Meanwhile, Heplisav is also in front of the European Medicines Agency (EMA), and the company is expected to respond to the EMA's final information queries later in the fourth quarter and in early 2014. European approval of Heplisav would quickly push this stock toward the $2.50 to $3 mark, and shares would likely move higher from there as U.S. approval starts to come into focus.
So, what would this stock be worth if DVAX receives both European and U.S. approval for Heplisav?
The current hepatitis B vaccine market is around $700 million, led by vaccines offered by GlaxoSmithKline (NYSE: GSK) and Merck (NYSE: MRK), which require three doses. But, according to DVAX, poor compliance is an issue, with only 30% of the people that should get all three required doses doing so. Also, the current vaccines have a slow onset of protection and aren't always effective, especially in people over 40, or those that also have other ailments such as diabetes.
DVAX's Heplisav, which provides more rapid protection, has also been shown to have high levels of efficacy in those who are less responsive to currently licensed hepatitis B vaccines, such as men, people who are obese, and smokers, as well as diabetics. This could lead to greater demand for DVAX's vaccine compared with others.
Moreover, Heplisav may come with a higher price tag than current vaccines. As a result, the $700 million market may expand beyond $1 billion if Heplisav gets approved.
Assuming a $1 billion sales base and 15% operating margins, DVAX would be poised for $150 million in annual profits. The company would likely be worth 10 times that peak profit forecast, or $1.5 billion. The company's current market value is below $400 million, so shares appear to have 200% to 300% upside if both the U.S. and Europe approve Heplisav.
Understand that these are rough estimates, and the ultimate market value will be easier to determine once the company's pricing strategies are better articulated. (More than likely, DVAX would be acquired by a large drug company before actual drug sales took place.)
For now, it's safe to say that the current market value sharply discounts future success, as shares are only starting to recover from the balance sheet issues discussed earlier. Notably, trading volumes now exceed 5 million shares in many sessions, up from around 1 million shares per day earlier this year, reflecting a dramatic increase in investor interest.
Another bullish sign is that since Nov. 6, shares have risen in every trading session (though they still remain well below the $5 levels seen a little more than a year ago). I think longer-term shareholders could see the stock move beyond the $5 mark, a more than 200% gain from current levels.
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Editor?s Note
This will be an extremely light week of posting at TRB. Thanksgiving, while sometimes active for the markets, is always a quiet time in terms of client service, meetings and scheduled calls. In the meantime, I?ve got my work cut out for me on the following projects:
1. I?m finishing up my second book right now (I?m a co-author) for a spring release. I think people are going to love it, but it?s still in draft mode at the moment.
2. My team and I are working on the new firm?s official website and related material, which we?ve opted to take our time on rather than throw together just because the firm has been launched. Still have no idea what the finished product will come out like, I?m taking a backseat to Barry on that project for the most part.
3. I?ve picked up a couple of interesting speaking gigs I need to be ready for. One speaking engagement I?m particularly excited about is for the employees at a certain recently-public social media giant during the first week of December. I?m so psyched to meet and greet the troops and hopefully have helpful insights to share.
4. I?ve got a series of fun posts planned for the newest, hottest, most aggressive media firm on the web this winter. They?ve got a kickass audience, tens of millions of young professionals and creative-types hitting their posts every day. I really want to kill it for them.
5. We?re integrating a new performance-reporting and portfolio analytics engine for our advisory clients that we?re really excited about. The rollout is expected to take place next week, it?s taken about six weeks so far to build out and is widely believed to be the best in the industry. I think our clients are going to be really excited as they get access to it.
So that?s it from me for awhile. I?ll be making a couple of TV appearances this week and maybe I?ll put up a post or two, but if I?m not around now you know why. In the meantime, I?d suggest you take this time to read as little as possible about the markets, the economy, etc. It will all be waiting for you when you get back.
Enjoy, my friends, see you soon. ? JB
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Mad Hedge Fund Trader Hurtles to 58%
The performance of the Mad Hedge Fund Trader?s Trade Alert Service is still going ballistic, falling just short of a 60% gain for the year last week. Every new subscriber since September has seen 100% of their trades turn profitable. This is your classic ?shooting fish in a barrel? market.
I know guys my age aren?t supposed to be packing in 16-hour workdays. But it?s all worth it when I can level the Wall Street playing field for the individual investor.
Including both open and closed trades, the last 21 consecutive Trade Alerts have been profitable. I am rapidly closing in on old record of 25 successful Trade Alerts, made earlier this year.
The Trade Alert service of the Mad Hedge Fund Trader is now up 58.00% in 2013. The November month to date record is now an enviable 13.54%.
The three-year return is an eye popping 113.05%, compared to a far more modest increase for the Dow Average during the same period of only 32%.
That brings my averaged annualized return up to 38.8%.
This has been the best profit since my groundbreaking trade mentoring service was launched three years ago. These numbers place me at the Mount Everest of all hedge fund managers, where the year to date gains have been far more pedestrian. It seems that their shorts are killing them.
I took profits on my long position in Citigroup (C), which just achieved a major upside breakout, and then rolled the capital into the Financials Select Sector SPDR (XLV). I cashed in on a long position in the Australian dollar (FXA). I also took profits on short positions in the Japanese yen as it approached new lows for the year.
My remaining long positions in Apple (AAPL) and the Industrials Sector Select SPDR (XLI) are contributing daily to my P&L, thank you very much. I am also keeping my short in the Treasury bond market, and will double up on the next ten basis point backup in ten-year rates.
This is how the pros do it, and you can too, if you wish.
Carving out the 2013 trades alone, 74 out of 89 have made money, a success rate of 83%. It is a track record that most big hedge funds would kill for.
My esteemed colleague, Mad Day Trader Jim Parker, has also been coining it. Since April, his own performance numbers have just come back from the auditors, revealing that he is up a staggering 279%.
The coming winter promises to deliver a harvest of new trading opportunities. The big driver will be a global synchronized recovery that promises to drive markets into the stratosphere in 2014. The Trade Alerts should be coming hot and heavy. Please join me on the gravy train. You will never get a better chance than this to make money for your personal account.
Global Trading Dispatch, my highly innovative and successful trade-mentoring program, earned a net return for readers of 40.17% in 2011 and 14.87% in 2012. The service includes my Trade Alert Service and my daily newsletter, the Diary of a Mad Hedge Fund Trader. You also get a real-time trading portfolio, an enormous trading idea database, and live biweekly strategy webinars. Upgrade to Mad Hedge Fund Trader PRO and you will also receive Jim Parker?s Mad Day Trader service.
To subscribe, please go to my website at
www.madhedgefundtrader.com, find the ?Global Trading Dispatch? box on the right, and click on the lime green ?SUBSCRIBE NOW? button.
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Now vs 2007 via Eric Peters at wknd notes: ?Show me something h
Now vs 2007
via Eric Peters at wknd notes:
?Show me something hairy, disgusting, distressed,? he said to Singapore?s top real estate deal-maker. And I laughed, having always wondered how my buddy conducted meetings. He runs one of America?s greatest family offices. And we travelled across Asia for 2wks, searching for investment themes, cheap assets, insights, talent. ?Nothing?s underpriced,? answered the deal-maker. So I asked if it felt like 2007? ?That was fueled by excessive debt, private equity, Lehman ? this mkt?s driven by cash, there?s no leverage, just cash, and behind it, more cash.?
Very well said.
The Fed wanted everyone to be flush with cash and now they are. In 2005, only 19% of all home sales were made with cash. Goldman Sachs says that, as of this summer, that number was 57%. Amazing.
Who needs debt when dollars are everywhere?
Sources:
wknd notes (sub required)
Nearly half of homes are purchased in cash (MarketWatch)
The Reformed Broker
Joshua Brown is a New York City-based financial advisor at Fusion Analytics. Josh helps people invest and manage portfolios. Clients range from individuals to corporations to retirement plans to charitable foundations.
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Now vs 2007
via Eric Peters at wknd notes:
?Show me something hairy, disgusting, distressed,? he said to Singapore?s top real estate deal-maker. And I laughed, having always wondered how my buddy conducted meetings. He runs one of America?s greatest family offices. And we travelled across Asia for 2wks, searching for investment themes, cheap assets, insights, talent. ?Nothing?s underpriced,? answered the deal-maker. So I asked if it felt like 2007? ?That was fueled by excessive debt, private equity, Lehman ? this mkt?s driven by cash, there?s no leverage, just cash, and behind it, more cash.?
Very well said.
The Fed wanted everyone to be flush with cash and now they are. In 2005, only 19% of all home sales were made with cash. Goldman Sachs says that, as of this summer, that number was 57%. Amazing.
Who needs debt when dollars are everywhere?
Sources:
wknd notes (sub required)
Nearly half of homes are purchased in cash (MarketWatch)
The Reformed Broker
Joshua Brown is a New York City-based financial advisor at Fusion Analytics. Josh helps people invest and manage portfolios. Clients range from individuals to corporations to retirement plans to charitable foundations.
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Free Access - take a look at Today's 50 Top Trending Stocks and start trading like the smart money!
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This Week on TRB
Here were the most read posts on TRB this week, in case you missed them:
Buy Wood.
The Inevitable Year-End Melt-Up
Feel better, everybody gets killed sometimes.
BAML: Here comes the big bank breakout
Jim Chanos on Taking Risks Early
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Sunday links: trend starters
Quote of the day
Bob Lefsetz, ?If you want to start a trend, start with consumers, not businesses.? (Big Picture)
Chart of the day
Finance stocks are showing signs of life. (StockCharts Blog)
Markets
Why the stock market rally still needs to be respected. (Dynamic Hedge)
Another bear throws in the towel. (The Reformed Broker)
Q4 is for large caps. (Mark Hulbert)
Stocks have been the ?only game in town? for awhile now. (The Short Side of Long)
At least someone is making money on the short side. (Zero Hedge)
A fearless market prediction. (A Dash of Insight
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Top clicks this week on Abnormal Returns
Thanks for checking in with us this weekend. Here are the items our readers clicked most frequently on Abnormal Returns for the week ended Saturday, November 23rd, 2013. The description reads as it does in the relevant linkfest:
Jeremy Grantham?s latest provides fodder for everyone. (Kid Dynamite)
Ten high-conviction picks from the ultimate stock pickers. (Morningstar)
On finding investment ideas. (Aleph Blog)
REITs are on sale. (BCA Research)
Four costly ideas investors have paid attention to. (A Dash of Insight)
If you are going to take career risk, do it early in your career. (The Reformed Broker)
We are in the ?mature phase? of the bull market. (Dynamic Hedge)
The case for timber. (The Reformed Broker)
Ten lessons learned from ten years of investing. (Monevator)
Are these really reasons to be bearish? (Macro Man)
Thanks for checking in with Abnormal Returns. You can follow us on StockTwits and Twitter.
The post Top clicks this week on Abnormal Returns appeared first on Abnormal Returns.
Abnormal Returns
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Bison Forging Ahead With with Bighorn Plans (BISN)
At the end of last month I brought your attention to the shares of a start-up oil and gas company, Bison Petroleum, which trades over-the-counter under the symbol BISN. That was around the time Bison Petroleum management issued an update on its plans to tap into its Wyoming oil prospect reserves?which became the catalyst for some notable buying interest in BISN shares, ultimately driving them to a new all-time top of $1.70. Congrats to all readers who jumped in and profited from the initial trade alert.
As I previously wrote in my original piece on BISN, Wyoming probably isn?t the first area of the country that comes to mind as a major player in domestic oil production. The fact is, however, that state has a long and storied history as a significant oil producer, with the renown ?Muddy Formation? discovery in the Bighorn Basin region of the state having already generated 3.1 billion barrels of oil to date.
Despite the massive amount of oil and natural gas that has already been produced in the region, estimates by the University of Wyoming put remaining recoverable Bighorn Basin oil reserves at over 2 billion barrels. Estimates also include the potential for 3.5 million additional barrels waiting to be tapped. In addition, the state?s natural gas deposits are estimated to be in the neighborhood of 2 trillion cubic feet.
What initially whet investors? appetite for BISN shares was the company?s October 30th update business update, when Bison management announced its plans to develop its two Bighorn Basin prospects, located within 10 miles of two giant oil-producing fields owned by Marathon Oil. Known collectively as the ?Independence Prospect,? Bison?s two leases include a 100% working interest and 80% net revenue interest in a total tract measuring 840 acres. Company estimates put potential recoverable crude for the prospect at north of 5 million barrels.
Included in the company?s update was an exploration plan for these leases complete with 2D seismic acquisition, a Seep Study, and 3D seismic to define optimized drilling locations in the targeted Lower Cretaceous Muddy Formation. The Independence Prospect is located along several of the existing structures marbling the area, which are cut by numerous faults. Bison expects the Muddy accumulations to be between 2,000′ to 6,000′ drilling depths, with well-spacing potential at 10 acres per well.
By focusing on historically proven basins and utilizing conventional drilling technology, Bison management believes it can achieve relatively low-cost production with substantially less capital risk than many of its industry peers. And I?m hopeful as well. Having its assets located so close to established industry infrastructure should dramatically reduce the overhead often required to transport oil and connect to a pipeline network. Bison also plans to evaluate the natural gas holdings on its acreage, which may result in a significant additional revenue stream.
In another development that may bode well for Bison, acquisition activity has been notable, with several established heavy hitters in the industry recently buying out mid-level Wyoming producers. Taken together, Breitburn Energy Partners and Linn Energy have recently made production acquisitions in the region of more than $1 billion. Other potential suitors with current production operations in the area include big-time players Chevron, Conoco-Phillips and Royal Dutch Shell.
Shares of BISN began actively trading over-the-counter at the end of October, with solid volume coming in throughout November. The company?s exploration and development plans, coupled with a bullish article on the company in the Oil Stock Journal, drove some steady buy-side interest?despite an ongoing decline in the open market price of crude.
A round of profit-taking kicked in on Friday, pushing BISN shares all the way back down to an intraday low of $0.81?with the entire oil and gas sector under sell pressure during the week. That?s when buyers stepped into the fray once again, bouncing BISN shares back to the $1.05 level where they currently reside.
One of the biggest battles for development-stage companies is trying to accurately determine how much demand there is for their products. In the case of American oil and gas companies there is no such fear. Oil production in the U.S. is on the rise, with domestic energy security one of the few areas where common ground exists on all side of the political spectrum. In fact, it?s estimated that by 2020, roughly half of all U.S. oil demand will be supplied domestically.
As a result, the spotlight should continue to shine on oil and gas production companies?both big and small?with the potential to help supply this growing demand in the years ahead. It?s always difficult to predict how the market will treat the share price of young start-up concerns like Bison, but good news from the company, accompanied by a bump in worldwide oil prices, might make the recent price pullback in BISN shares an attractive entry point for an aggressive investor.
As always, trade BISN and all stocks with care!
Warren Gates, Senior Analyst, Oakshire Financial
Related Articles
10/30/13 -- Tapping Into the Bighorn Basin Boom with Bison Petroleum (BISN)
05/22/13 -- Revisiting The Alaskan North Shore and Polar Petroleum Corp (POLR)
04/30/13 -- Four Reasons For OCTX
05/13/13 -- Getting Stronger with Tungsten
08/26/13 -- On the Lookout For A Gusher With NAMG
08/19/13 -- Getting in on the Ground Floor with PLCSF
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Hugh Hendry Throws in the Bearish Towel
Hugh Hendry is one of the brightest, most entertaining of the long-standing bears and this week he?s grudgingly flipped bullish.
?I can no longer say I am bearish. When markets become parabolic, the people who exist within them are trend followers, because the guys who are qualitative have got taken out,? Hendry said.
?I have been prepared to underperform for the fun of being proved right when markets crash. But that could be in three-and-a-half-years? time.?
?I cannot look at myself in the mirror; everything I have believed in I have had to reject. This environment only makes sense through the prism of trends.?
?I may be providing a public utility here, as the last bear to capitulate.You are well within your rights to say ?sell?. The S&P 500 is up 30% over the past year: I wish I had thought this last year.?
?Crashing is the least of my concerns. I can deal with that, but I cannot risk my reputation because we are in this virtuous loop where the market is trending.?
Is this capitulation emblematic of a market top, as Hendry jests above? Is he doing his followers any favors by turning bullish now, after a 40% growth rate in the market?s sentiment toward stocks (expanded PE multiple) backed by very little in the way of earnings, sales or economic growth? Is there anything to gain by such a late-in-the-game admission?
And what if he?s actually been right all along about how at risk everything is? What if future events play out just as he?d been predicting over the last five years after he gives in? Can he turn back? Can he resurrect the old playbook in time should the crash begin shortly?
This game is really hard, even for the smartest guys who play it, guys like Hugh Hendry who can get almost all of the facts right and yet still reach a precisely incorrect conclusion. And if that can happen to him, think about how difficult the prediction game can be for the rest of us.
Source:
Hugh Hendry Capitulates: ?Can?t Look At Himself In The Mirror? As He Throws In The Towel, Turns Bullish (Zero Hedge)
And here is Mr. Hendry in better times for the structural bears ? his greatest hits from the 2011 almost-apocalyptic Eurodebt Crisis:
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Saturday links: cognitive fluency
The weekend is a great time to catch up on some long form items that we passed up on during the week. Thanks for checking in.
Lessons
Two dozen things learned from Bill Miller and Monish Pabrai on investing. (25iq)
Ten lessons learned from ten years of investing. (Monevator)
In a world full of randomness, process matters. (Robert Seawright)
Finance
Cognitive fluency: or why investors prefer stocks with fluent stock symbols. (New Yorker)
How to talk to clients hell-bent on investing in hot IPOs. (Enterprising Investor)
An extended interview with Jack Bogle. (Motley Fool)
Economy
Are we now in a post-scarcity economy? (Pieria)
The case for a universal income. (Tim Harford)
A non-monetary explanation for inflation. (Inside Investing)
Making the case for a basic income. (FT Alphaville)
Startups
On the differences between angel investors and venture capitalists. (Points and Figures)
There is a fatal flaw with MOOCs. (Fast Company)
STEM job growth is happening in some surprising places outside of Silicon Valley. (New Geography)
Technology
Just how close are we to the self-driving car age? (New Yorker)
Now human resources is using algorithms to make better hiring decisions. (The Atlantic)
The ways in which Elon Musk and the late Steve Jobs think alike. (Fortune)
Health
The quest to end the flu. (The Atlantic)
The benefits of napping. (Fast Company)
Juice cleanses are a big waste of money. (Slate)
How to avoid getting sick. (Farnam Street)
You should (and why) brush your teeth at work. (Quartz)
How gut bacteria affect the workings of our brains. (NPR)
Food
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Barchart.com's Chart of the Day - Repligen (RGEN) for Nov 22, 2013
The Chart of the Day is Repligen (RGEN). I found the stock by sorting the New High List for frequency and this stock was right at the top of the list. Since the Trend Spotter signaled a buy on 10/29 the stock gained 19.17%.
It is a life sciences company focused on the development, production and commercialization of high-value consumable products used in the process of manufacturing biological drugs. Their bioprocessing products are sold to major life sciences and biopharmaceutical companies worldwide. They are a leading manufacturer of Protei
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The Energy Sector's Most Volatile Niche Now Offers Stunning Yields
Dividend investors crave predictability. Once they lock onto payment streams, they don't want to hear about any interruptions. And if a company dares to withhold a quarterly dividend payout, then many investors simply head to the exits.
I discussed this phenomenon recently with regard to Carl Icahn and his big stake in CVR Refining (NYSE: CVRR).
As I noted earlier this month, CVR had a big hiccup with its third-quarter dividend, but it appears positioned to pay out $3 or $4 per unit in dividends next year. Shares trading around $22 don't begin to reflect that potential income.
Amazingly, a virtually identical scenario has just played out with another oil refiner. And the setup is every bit as compelling.
A series of technical problems at a key refinery led to a sharp drop in output for Alon USA Partners (NYSE: ALDW), the master limited partnership (MLP) of Alon Energy (NYSE: ALJ). In fact, the quarterly production was so weak that Alon USA Partners didn't simply make less money -- it lost money. And though investors were bracing for a smaller than usual dividend, they got nothing. Shares of ALDW, which traded up toward the $30 mark in the spring, are now below $14.
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Profit From The 'Graying Of America' With This Must-Own Stock
My dad is in his early 70s. I remember when he was in his 50s and would joke that when he retired, he would be glad to take the spare bunk in my youngest son's room. Luckily, it hasn't come to that.
Like many American seniors, he and my mother, also in her early 70s, are in excellent health and extremely active. They both still work full time. They're not baby boomers. They're part of the smaller pre-boomer generation that was born at the tail end of the Great Depression and during World War II.
They have more in common with their parents than their younger boomer siblings or cousins. On the whole, they seem to be a little tougher, a little more independent and self-sufficient.
Baby boomers, on the other hand, not so much.
From the toy companies of the '50s to the Big Pharma companies of the 1990s hawking erectile dysfunction cures, corporations and their shareholders have consistently profited in a big way by catering to the perceived immediate needs of the biggest bubble of the U.S. population -- all 76 million of them, with another estimated 10,000 baby boomers turning 65 every day over the next 16 years. (My colleague Joseph Hogue wrote about this looming trend this summer in his "Graying of America" series.)
And as the boomers enter their golden years, the needs may change, but the opportunities for investors remain as lucrative as ever.
The Trend is Your Friend
One of the best investment ideas available to capture the upside of the aging Boomer trend is health care real estate investment trust (REIT) Senior Housing Properties Trust (NYSE: SNH). I've followed and recommended this stock for more than a decade.
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Nose-Blowing Premiums with Kimberly Clark (KMB) We note that this week, several
Nose-Blowing Premiums with Kimberly Clark (KMB)
We note that this week, several big-name market hotshots openly mused about the possibility of a nose dive in the markets that could potentially lead to an end of the current global financial system.'
And while that prospect may not be news to readers of these letters ? indeed, Bourbon and Bayonets has been drumming upon that inevitability for some time now ? the fact that all these gurus chose to speak up within a week of each other has got a great many breaking out the home blood-pressure testing kits.
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Caterpillar (CAT) Investigated By Feds
Stocks were relatively flat on Friday after U.S. job openings reached a five-year high in September. The Labor Department announced that job postings were up 69,000 to a seasonally adjusted 3.9 million. This surpassed economist?s expectations of 3.85 million openings. Job openings have not seen this level since March 2008. Keeping in line with the positive jobs data, hiring was also up in September. Hiring increased 26,000 to 4.6 million, a level not seen since August 2008. The increase in both numbers suggests that employers are posting more jobs and actively filling the positions. The total filled positions, however, still sits below the 5 million mark, which is the average number in a healthy job market. Brian Jones, senior U.S. economist at Societe Generale, said, ?Things are genuinely getting better. I don?t think we?re at the point where people will quit without having something in hand, but hopefully we?re moving in that direction.?
Shares of Ross Stores (ROST) were dropping after the company announced that they are expecting some stiff competition throughout the holiday season. Competition is growing amongst retailers as more stores are staying open on Thanksgiving and the shopping time between Thanksgiving and Christmas is shorter than normal. Ross said they are expecting fiscal fourth-quarter profits to come in around 97 cents and $1.01 per share. This is below analyst?s expectations of $1.08 per share. They are expecting earnings between $3.83 and $3.87 per share, while analysts were predicting $3.94 per share.
The price for shares of Caterpillar (CAT) were also falling after news was released that federal investigators are beginning a probe accusations that the company has been dumping train parts into the ocean. This dump allegations are allegedly part of a scam in an effort to charge customers for parts they didn?t need. Investigators are beginning to delve in and see if Progress Rail was dumping brake parts along with other items near the Port of Long Beach, in an effort to hide evidence that they were charging owners of rail equipment for replacing parts that were still in good shape. Caterpillar acquired Progress Rail in 2006.
That?s all for the day. Have a great weekend, loyal readers.
All the best,
Jack Aubrey
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Feel better, everybody gets killed sometimes.
John Authers at the Financial Times writes about a survey carried out Harvard, Columbia and NYU academics looking at the investment behavior of the ultra wealthy retail investor. They look at the period from 2000-2009, monitoring the buys, sells and holds of 115 wealthy investors with an average net worth of $90 million.
Of all the conclusions they had come to, the most interesting one is that despite all of their high-cost advisors and celebrity fund managers (there were 450 investment managers working with the families in the study) and access to the best of everything available, they still managed to lose MORE money than the market during the recent crisis.
People are people, in the end, and no one is safe from the swiftness with which overconfidence turns to panic.
Here?s Authers:
The fascinating question, however, is how they behaved under the extreme stress of the 2008 financial crisis. And they did not show up well. This was one time when rebalancing would have been a great strategy, because it would have forced them to buy stocks near their bottom in the dark months after the Lehman bankruptcy.
But on average, the stock in wealthy investors? portfolios tended to fall by more than the market during the crisis, meaning they had suspended their regular rebalancings and had instead sold even more stock. Some may have been forced to do this by calls from private equity funds for more money, which their investors were obliged to provide during the worst of the crisis.
The median wealthy investor had just as much in cash in mid-2009 as in mid-2007. There was no great move to take evasive action in the months before the disaster unfolded.
No one who?s worked on The Street for a few cycles is really surprised by this, even if it does continue to fascinate.
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The Arbitrage Opportunity Of A Lifetime
Arbitrage is a financial concept that's been around since the dawn of the time.
Simply put, engaging in arbitrage means buying an asset in one location where it's cheap, then immediately turning around and selling it in a place where it commands a higher price.
With globalization and international trade continuing to play a larger role in today's economy, arbitrage opportunities are getting harder to find... and even when you do spot them, chances are they won't last long.
Yet despite the rarity of these occurrences, this is exactly the kind of opportunity we're seeing in today's natural gas market...
Dave Forest - StreetAuthority's resident commodities expert and Chief Investment Strategist for Junior Resource Advisor -- is so excited about this opportunity that he recently dedicated an entire issue of his premium newsletter to covering it. Said Dave in his November issue of Junior Resource Advisor:
The current situation in natural gas markets is unique. As I write these words, U.S. and Canadian natural gas sells for a paltry $3.50 per thousand cubic feet (Mcf). And yet just across the Pacific in markets such as Japan and Korea, gas is going for nearly $16 -- as measured by the JKM Marker price for liquefied natural gas shipments to these countries.
That kind of geographic price discrepancy is unprecedented in the modern natural resources business.
Given how good people are at moving commodities to take advantage of price discrepancies, it's striking that natural gas markets could be laboring under such a massive regional disconnect. No other good today is in such a predicament. Almost all others have a price that is more or less global.
To be fair, there is a reason for the price discrepancy. Shipping natural gas is a tricky process. It needs to be liquefied and condensed before it can be transported. Then, once it arrives at the destination, it needs to be regasified so it can return to its original state.
As it stands, the United States currently lacks the infrastructure to export large volumes at an economical price. Consequently, most of the gas we produce ends up getting consumed here at home rather than packed up and shipped abroad.
But the arbitrage opportunity in the natural gas market is starting to garner considerable attention from American energy companies. For example, Cheniere Energy (NYSE: LNG) has been working on a natural gas export terminal in Louisiana for the past few years. Freeport LNG -- one of ConocoPhillip's (NYSE: COP) major partners -- is also working on an export terminal after it received a federal permit allowing the company to sell natural gas overseas in May.
All the efforts to move U.S. gas abroad hints at a major investment opportunity in this sector. As Dave went on to say in his issue:
In the U.S. exploration and production sector today, producers are being valued on expectations of a $4 natural gas price.
If gas were to rise to even $6 (still low by global standards), it would cause of flurry of upward revisions to valuations. (Not to mention a rush of investor excitement that could take valuations to more manic levels -- making significant profits for early-in investors.)
Now imagine if U.S. natural gas were to revert to average global prices. Maybe not the $15 we saw in 2006, but, say, $10 (which is probably around the global average for the developed world).
Such a move would represent one of the biggest price increases seen in the commodities space recently. Copper would have a hard time gaining 150% from current levels. I doubt even gold has the juice for such a move. But with natural gas, triple-digit price increases are entirely possible.
Now if you're interested in investing here, there are several ways you can play this trend. For one, you could start by buying companies with considerable investment in shale assets. These are stocks like Chesapeake Energy (NYSE: CHK) and Range Resources (NYSE: RRC) -- both of which control prime acreage in some of the country's top-producing shale fields.
But as we mentioned before, rising production costs are starting to weigh on the economic viability of companies with heavy shale exposure. Since most of these companies are already trading at lofty valuations, an uptick in natural gas prices might not be enough to offset the increase in costs.
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Get Value And Growth With This Little-Known Stock
When I was in elementary school, we called a student who got good grades, stayed out of trouble and embraced his or her position as teacher's pet "Goody Two-shoes."
With that in mind, I'd like to introduce you to a company I like to consider the Goody Two-shoes of insurance companies. It takes few risks, performs admirably and is well liked by some of the most upstanding clients around.
Founded in 1945 by two Illinois schoolteachers, Horace Mann Educators (NYSE: HMN) is an $8.5 billion national multi-line insurance company. Just about every penny comes from public K-12 teachers, administrators and their families in the U.S., a market expected to grow 14% by 2020. The auto, property and casualty segment represents 52% of Horace Mann's business, with commission-generating annuities and life insurance accounting for 39% and 9%, respectively.
About 6 million teachers, administrators and support personnel worked in K-12 in the U.S. in 2012. Another 413,000 college students are planning to become teachers, and 1.2 million are retired. That's a big, loyal, responsible, insurance-buying market that blesses Horace Mann with higher-than-average retention rates, a low rate of paid claims and steady growth of its annuity and life insurance products.
The company gets an A-plus on its third-quarter 2013 figures. Its $8.5 billion in total assets as of Sept. 30, a 4.9% year-over-year increase, is supported mainly by a 17.2% increase in annuity income and an 18.4% increase in life insurance income.
Those numbers look great, but what about competition? Horace Mann certainly has its share of general competition with the likes of Allstate (NYSE: ALL), Travelers (NYSE: TRV) and other insurers. However, Horace Mann's roots are firmly planted among teaching communities, and its competitors haven't made a concerted effort to enter its territory.
Because many former educators still active as PTA members or school board members have become independent agents for Horace Mann, they're on the grounds in more than half of the country's public schools. It's a tight-knit community of professionals who take each other's words as gospel, so Horace Mann agents are likely preaching to the choir on many occasions.
The key to keeping Horace Mann's competition at bay is the constant maintenance of close relationships with school districts and teachers organizations. No other insurance company has even tried to impede on this niche, a factor that serves Horace Mann well in the face of potential price wars from larger companies.
The fact that premiums grew 4% in third quarter 2013 on a year-over-year basis to $152.5 million is proof the strategy is working. Retention rates remain solid at 85% in auto and 89% in property. Those numbers, along with strong growth in annuities and life insurance as well as lower-than-expected paid catastrophe claims, prompted the company to increase its full-year earnings guidance from $1.95 to $2.05 a share.
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The One 'Secret' Trait That Makes A Good Stock Great
$388.5 billion is a staggering figure. It's more than the entire economy of Thailand, Denmark, Colombia or the United Arab Emirates.
And it's how much operating cash flow was generated by America's top 12 companies in 2012.
Source: Thomson Reuters
Of course, the old adage "It takes money to make money" applies. Many of these companies need to spend billions of dollars in research, infrastructure and other areas to generate that cash flow, and their actual take-home pay is a lot less. Exxon Mobil (NYSE: XOM), for example, spent more than $34 billion on capital expenditures last year, sapping a considerable chunk of its $56 billion in operating cash flow.
As a bit of silver lining, these companies spend much of that on goods and services offered by other companies, creating a virtuous circle of corporate spending. Here are the top 12 capex spenders of 2013.