Sunday, December 29, 2013

Employers Add Fewer Jobs than Forecast in September

Economy (In this Thursday, Oct. 25, 2012, photo, a sign attracts job-seekers during a job fair at the Marriott Hotel in Colonie,Mike Groll/AP WASHINGTON -- U.S. employers added far fewer than expected workers in September, suggesting a loss of momentum in the economy that supported the Federal Reserve's decision to maintain its monthly bond purchases. Nonfarm payrolls increased 148,000 last month, the Labor Department said Tuesday. While the job count for August was revised to show more positions created than previously reported, employment gains in July were the weakest since June 2012. But there was some silver lining in the report, with the unemployment rate dropping a tenth of a percentage point to 7.2 percent, the lowest level since November 2008. The jobless rate is derived from a separate survey of households, which showed an increase in employment last month. The closely watched monthly employment report was released more than two weeks later than originally scheduled because of the partial shutdown of the federal government earlier this month. Signs the economy lost steam even before the budget fight could rattle financial markets.

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Economists estimate the 16-day government shutdown shaved as much as 0.6 percentage point off annualized fourth-quarter gross domestic product, through reduced government output and damage to both consumer and business confidence. Officials at the Federal Reserve are likely to hold off any decision on scaling back the U.S. central bank's bond buying until the extent of the economic damage from the budget fight is clearer. Fed officials will meet next week to discuss monetary policy, on Oct. 29-30. They surprised markets last month by sticking to their $85 billion per month bond-buying pace, saying they wanted to see more evidence of a strong recovery.

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Now, many economists think the Fed will hold off on scaling back economic stimulus until next year. Economists fear that lawmakers will engage in another bruising round early next year when Congress must agree on a budget to fund the government and once again raise the nation's borrowing limit. The pattern of employment gains in September was mixed last month, with government payrolls increasing 22,000 jobs after rising 32,000 in August. The leisure and hospitality industry shed the most jobs since December 2009. There was a small bounce in information sector payrolls, which dropped in August as the motion picture industry shed workers. Construction payrolls increased 20,000, which could ease fears of a leveling off in home building. Manufacturing sector added only 2,000 jobs, while retail employment increased 20,800. Other details of the employment report were mildly encouraging, with average hourly earnings increased three cents in September. The length of the average workweek held steady at 34.5 hours.

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Wednesday, December 25, 2013

SEBI tightens norms for investment advisors

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Thus, in order to correct this anomaly and crack its whip on investment advisors indulging in unfair trade practices, the capital market regulator- Securities and Exchange Board of India (SEBI) has put in place strict norms for investment advisors. Post implementation of the SEBI's stricter norms, all investment advisors would need to register with SEBI (Securities and Exchange Board of India) after payment of required application and registration fees. Going forward, SEBI eventually wants them (investment advisors) to be regulated through a SRO (Self-Regulatory Organisation) model.

Under the proposed norms the investment advisers would be under strict vigil for any front-running, a phrase used in market parlance for trading in stocks based on prior information about trades to be conducted by a fund manager . Moreover, to address any conflict of interest, investment advisers would be required to segregate other businesses from their activity as an investment adviser and disclose all commission and rewards that they receive from their clients. Some of the other guidelines which the investment advisors need to follow are:

Investment advisers may charge fees subject to the ceiling specified by SEBI Disclose conflicts of interest arising from any association with a product provider Disclose to the investor the holding or position (of investment advisors), if any, in the financial product which is subject matter of recommendation Fair treatment of clients in case of unavoidable conflicts of interests Abide by a Code of Conduct and conduct risks profiling and risk Assessment of the investor Maintain written records relating to investment advisory services for a period of five years and conduct yearly audit in respect of compliance with regulation. Cannot employ any device or scheme to defraud any client or prospective client We are of the view that, SEBI has taken a step in the right direction by reining the investment advisors. Such steps by the SEBI will infuse confidence in the minds of investors and given the right advice based on each investors' respective risk appetite will help investors to benefit from their investments in mutual fund schemes. Moreover, the mutual fund industry too, will be able to achieve financial inclusion. Despite these steps to improve the advice provided by the investment advisors, investors should act responsibly and do a little homework before having a blind-fold faith on the investment advisors.

PersonalFN is a Mumbai based Financial Planning and Mutual Fund Research Firm

Tuesday, December 24, 2013

Does Priceline Have More Upside Potential?

With shares of Priceline.com Incorporated (NASDAQ:PCLN) trading at around $795.73, is PCLN an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock's Movement

On a day where the S&P dropped 1.38 percent, Priceline only dropped 0.37 percent. This is a sign of resiliency. However, this doesn't mean Priceline is bulletproof. If the market were to suffer a severe correction, there's a good chance that Priceline would suffer with it. When the market falls and personal investment gains turn into losses, discretionary income for many people quickly becomes horded. This, in turn, impacts the travel industry. All that said, nobody knows for sure what direction the market will go tomorrow, the next day, or the day after that. That being the case, many investors prefer to focus on quality companies, and Priceline is definitely a quality company. Priceline has also made highly strategic acquisitions through the years. Considering the company's strong balance sheet, there might be more acquisitions to help fuel growth in the future.

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As we all know, Priceline has had no problem with top-line growth. The bottom line has also been impressive over the years, for the most part. And, it should be noted the gross bookings have consistently improved. However, the best way to take a stab at future results is to look at online traffic. If traffic has increased for a company like Priceline, then the odds of improved results also increase. And vice versa. Below is a quick list of properties that might provide some clues. Aside from Global and U.S. ranks, performance numbers are based on the past three months.

Priceline.com

Global Rank: 779

U.S. Rank: 160

Pageviews-Per-User: Increased 1.0 percent

Time-On-Site: Increased 6.0 percent

Bounce Rate (only one pageview per visit): Increased 13 percent

 

Booking.com

Global Rank: 165

U.S. Rank: 402

Pageviews-Per-User: Decreased 2.65 percent

Time-On-Site: Increased 4.0 percent

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Bounce Rate: Decreased 2.0 percent

 

Agoda.com

Global Rank: 993

Thailand Rank: 49

Pageviews-Per-User: Increased 17.50 percent

Time-On-Site: Increased 25.0 percent

Bounce Rate: Decreased 24.0 percent

 

Rentalcars.com

Global Rank: 5305

U.S. Rank: 6818

Pageviews-Per-User: Decreased 14.19 percent

Time-On-Site: Decreased 5.0 percent

Bounce Rate: Decreased 7.0 percent

The Agoda.com numbers are phenomenal. This is important because it has allowed Priceline to compete in Asia. To give readers an idea of the size of Agoda.com, it has 285,000 hotels available for booking, 7 million customers, and it's available in 37,000 cities across the world. There is also a best price guarantee, and there have been over 4 million reviews left by Agoda customers.

Below are some more directional numbers from the last quarter. These numbers are all year-over-year.

Hotel Room Nights: Increased 36.8 percent

Rental Car Days: Increased 37.5 percent

Airline Tickets: Increased 21.4 percent

Bookings: Increased 36.4 percent

Gross Margins: Increased 747 bps

Agency Business: Grew 6.5 percent

Merchant Business: Grew 43.2 percent

Priceline also recently announced the sale of $1 billion of senior unsecured notes as well as a $1 billion share buyback.

The chart below takes a look at some basic fundamentals for Priceline, Expedia Inc. (NASDAQ:EXPE), and Orbitz Worldwide (NYSE:OWW).

PCLN EXPE OWW
Trailing P/E 27.61 42.85 N/A
Forward P/E 17.46 13.98 21.51
Profit Margin 26.82% 4.24% -18.82%
ROE 42.74% 7.28% -179.93%
Operating Cash Flow 1.79B 1.27B 184.56M
Dividend Yield N/A 0.90% N/A
Short Position 5.80% 8.40% 19.90%

Let's take a look at some more important numbers prior to forming an opinion on this stock.

T = Technicals Are Strong

Priceline has been one of the biggest winners throughout the broader market over the past three years. That’s saying a lot.

1 Month Year-To-Date 1 Year 3 Year
PCLN 10.03% 28.54% 29.34% 346.6%
EXPE -6.62% -10.15% 24.52% 217.8%
OWW 21.54% 177.9% 108.8% 56.52%

At $795.73, Priceline is trading above its averages.

50-Day SMA 754.01
200-Day SMA 695.71
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E = Equity to Debt Ratio Is Strong

The debt-to-equity ratio for Priceline is stronger than the industry average of 0.50.

Debt-To-Equity Cash Long-Term Debt
PCLN 0.35 5.18B 1.46B
EXPE 0.48 2.09B 1.25B
OWW 0.03 219.77M 450.00M

E = Earnings Have Been Steady

Priceline usually impresses on the both top and bottom lines.

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 1,885 2,338 3,085 4,356 5,261
Diluted EPS ($) 3.98 9.88 10.35 20.63 0.00

Looking at the last quarter on a year-over-year basis, revenue and earnings have both improved. On a sequential basis, revenue improved and earnings declined.

Quarter Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012 Mar. 31, 2013
Revenue ($) in millions 1,037.25 1,326.76 1,706.31 1,190.64 1,302.01
Diluted EPS ($) 3.54 6.88 11.66 5.63 4.76

Now let's take a look at the next page for the Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

Conclusion

Priceline is dealing with a few headwinds at the moment, which include exposure to Europe, regulatory challenges in Argentina, competition in Asia, and slight foreign currency impacts. However, the positives greatly outweigh the negatives with this story. As mentioned earlier, the biggest risk is steep market correction. Priceline isn’t likely to hold up well in such an environment.

Monday, December 23, 2013

UAE Close to Saudi Arabia

A recent survey shows significant business growth in the UAE, which many investors are confident shows the economy in the region will perform well into the year's end, writes Tom Arnold, of The National.

Private-sector activity in the UAE is close to catching up with the performance of the GCC powerhouse Saudi Arabia, according to a monthly survey of purchasing managers.

The HSBC purchasing managers' index (PMI) for the UAE for last month came in at 56.3 points, slightly down from September's 56.6.

Saudi Arabia's PMI reading, dragged lower by a deceleration in output and new orders, fell two points to 56.7, indicating a more moderate pace of growth in its private sector.

At a difference of only two fifths of a point, it was the closest the UAE's figure has been to the kingdom's since the index began in August 2009.

A reading above 50 indicates growth in business activity; below 50, contraction. In the UAE, some 400 private-sector purchasing managers took part in the survey.

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"The [UAE] headline number may be down on the September high, but the underlying data remains strong," said Simon Williams, the chief economist of HSBC Middle East and North Africa. "Production and new orders are continuing to gain, employment is up, and inflation still looks benign.

"I remain confident that the economy will perform well into the year-end."

The UAE managers' reports of new export orders rose at the highest rate in the PMI survey history. The managers said the increase was driven by competitive pricing and buoyant market conditions.

New orders also grew, with 46% of respondents indicating growth.

Employment picked up, although the rate of growth eased. About 5% of companies reported higher employment levels, while less than 1% indicated a decline.

HSBC warned that a rise in the index for input prices to 54.2 signaled inflationary pressures could be starting to build, as demand strengthens in the economy.

"Although the pressures look limited to firms—rather than consumers—for now, they could well feed through to higher output prices going forward," HSBC said in a note about the data.

Read more from The National here…

Sunday, December 22, 2013

The Dow's Triple-Digit Gains Left These Stocks Behind

Investors can never predict whether the market will rise or fall on any given day, but lately, a pretty good bet has been to expect some substantial volatility in one direction or the other. For the sixth straight day, the Dow Jones Industrials (DJINDICES: ^DJI  ) made a triple-digit move, with today's result being a 138-point gain that signaled investor optimism that the Federal Reserve will remain in control of the markets even after tomorrow's announcement following the Fed's latest meeting. The U.S. market remains a pocket of strength amid less exuberant markets around the world, with rioting in Brazil marking the latest uprising among populations dissatisfied with the sluggish conditions in various economies across the globe.

Only a couple of stocks posted losses today. Merck (NYSE: MRK  ) fell 0.1% in light of a Supreme Court decision that gave the Federal Trade Commission the power to challenge arrangements between primary-drug developers and generic-drug manufacturers that involve upfront payments in exchange for delays in releasing generic versions of name-brand drugs. Clearly, Merck and its peers have incentives to keep brand-name profits going as long as possible, and FTC challenges could reduce their ability to do so going forward.

Microsoft (NASDAQ: MSFT  ) also posted the narrowest of losses. Reports that the company will turn to Qualcomm (NASDAQ: QCOM  ) to supply some chips for new versions of its Surface RT tablet were bad news for NVIDIA, which is the existing supplier for the Surface RT, but probably didn't move Microsoft's own stock substantially. In any event, the newer Surface Pro seems like a better prospect for Microsoft going forward, given its ability to run full versions of Windows 8 programs despite its heftier price tag.

Finally, outside the Dow, MannKind (NASDAQ: MNKD  ) fell 12%, extending its losses from yesterday after completing its phase 3 trial of its Afrezza treatment for type 2 diabetes. MannKind's management couldn't identify any fundamental news affecting the stock, although later comments from CFO Matthew Pfeffer concerning whether the company might seek a partner before getting an approval decision on Afrezza from the FDA weren't sufficient to wipe out all of the stock's losses. The volatility highlights the danger of investing in small stocks with substantial speculative elements in their results.

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Saturday, December 21, 2013

Don't Get Too Worked Up Over Avista's Earnings

Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.

Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.

Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on Avista (NYSE: AVA  ) , whose recent revenue and earnings are plotted below.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.

Over the past 12 months, Avista generated $12.1 million cash while it booked net income of $82.2 million. That means it turned 0.8% of its revenue into FCF. That doesn't sound so great. FCF is less than net income. Ideally, we'd like to see the opposite.

All cash is not equal
Unfortunately, the cash flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash flows are of high quality. What does that mean? To me, it means they need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).

For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable for the short term) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it's ordinary in recessionary times, and you can only increase collections so much. Finally, adding stock-based compensation expense back to cash flows is questionable when a company hands out a lot of equity to employees and uses cash in later periods to buy back those shares.

So how does the cash flow at Avista look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar.

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

When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.

With 10.8% of operating cash flow coming from questionable sources, Avista investors should take a closer look at the underlying numbers. Within the questionable cash flow figure plotted in the TTM period above, other operating activities (which can include deferred income taxes, pension charges, and other one-off items) provided the biggest boost, at 7.8% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed 96.0% of cash from operations.

A Foolish final thought
Most investors don't keep tabs on their companies' cash flow. I think that's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated home-run stocks that provide the market's best returns.

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Friday, December 20, 2013

3 Charity Strategies to Cope With Rising Taxes

There’s no “new new” in philanthropy, but standbys come back into favor with changing times, according to Carol Kroch, managing director for wealth and philanthropic planning at Wilmington Trust.

“Because of the increased wealth from the past couple of years — certainly this year has been a very good year in the equity market  — people are focusing more on the philanthropic side,” Kroch said in a recent telephone interview.

She noted that her clients have shown particular interest in three areas.

From a tax-planning perspective, appreciated securities have returned to the fore, Kroch said. Wealthy taxpayers are allowed to take a 30% deduction for gifts of appreciated stock to public charities and certain foundations.

“In 2008, when you touted the virtues of being able to transfer your appreciated securities and diversify them in a tax-deferred mechanism, people looked at you and asked, ‘What appreciation?’” It has taken time to build back up after 2008, Kroch said.

“It’s not new, but a good time for them.”

Another tax-favored technique that has gained renewed interest as tax rates have increased is charitable remainder trusts. A CRT allows the donor to benefit a charity and benefit himself or a family member with annual payments from the trust for up to 20 years or the lives of the beneficiaries. At the end of the term, remaining assets are distributed to one or more qualified charities.

Kroch said a CRT was highly attractive to charitably minded people with highly appreciated assets. She said an important feature of a CRT was when it sold appreciated assets. The capital gains tax is deferred, making it useful for a donor who wants to diversify an asset and then derive income from it.

As each distribution is made to a non-charitable beneficiary, it is included in that person’s income. Depending on the amount of ordinary income earned by the trust, a portion of the distribution may represent capital gains previously earned by the trust. A CRT doesn’t avoid tax on capital gains, but merely defers it until distributed.

At the same time, the vehicle allows all proceeds from a sale by a CRT of an appreciated asset to be invested and grow rather than having to pay all the capital gains tax in the year of the sale.

“Depending on the amount of gains and amount of other income, it could be a very long time before they’re all fully paid out or until any are paid out,” she said. Again, not new new.

There are also “soft side issues,” Kroch said. “People do philanthropy for a lot of reasons, but it generally comes down to values. They want to do it tax efficiently because if you can give more to charity and save more money, that’s great. But I don’t think that’s ever the first motivator.

“A lot of values-oriented issues are very much top of mind for philanthropic families.”

Working together on a philanthropic project can help parents teach their children about the family’s wealth and to what uses it can profitably and charitably be put.

Philanthropy is a platform that can be neutral, though not always noncontroversial. “It’s less fraught with emotion,” Kroch said.

“The transmission of values issues is one that resonates for people year round.”

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Check out more 2014 outlooks and these related stories on ThinkAdvisor.

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Wednesday, December 18, 2013

Social Security to Run 12% Yearly Deficit: CBO

The Social Security Administration will run an annual deficit averaging 12% over the next decade and the funding gap will grow as more baby boomers retire, according to an analysis by the Congressional Budget Office.

For fiscal 2013, Social Security spending totaled $808 billion, representing about a quarter of all federal spending. Revenue added to the Social Security system in 2013 was $745 billion. The system makes payments to 58 million people, about 70% of them retirees or their spouses and children.

The Social Security deficit will rise to more than 30% by 2030, according to the CBO forecast, as more baby boomers retire, increasing benefits payments as a share of the economy.

At the same time, tax collections as a share of the economy will remain constant. About 96% of Social Security’s money comes from payroll taxes. The rest comes from taxes paid by those receiving benefits once they reach a certain income level.

The two trust funds for benefit payments – one for disability and the other for old age and survivors insurance – are in danger of being exhausted in the next 20 years. If that happens, benefit payments will be reduced because the only money available to make them will be from incoming tax collections. In that case, retirement benefits would be cut by 25%.

Various ideas to prolong the lifeof the Social Security trust funds have been proposed. One idea is to remove the wage cap from Social Security taxes. Currently, the tax is not paid on earnings above $113,700. That plan would increase revenue and, by some measure, eliminate the deficit. Other proposals have called for cuts in benefits or raising the retirement age. Those plans would decrease outlays.

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Check out 6 Things About Social Security Advisors Should Tell Clients on ThinkAdvisor.

Tuesday, December 17, 2013

Australia central bank: Rate cut still possible

SYDNEY--Australia's central bank said interest rates may still be cut again next year as the local currency remains "uncomfortably high," hindering a shift away from mining-dependent growth as a long resources boom slows.

In minutes of its Dec. 3 policy meeting, published Tuesday, the Reserve Bank of Australia said a recovery in non mining industries remained "very weak," tempering the outlook for growth.

The central bank last week held interest rates steady at a record-low 2.5% for the fourth-straight monthly meeting, reiterating that it was looking for stronger signs a recovery in non mining industries was more than a blip before it would be prepared to shift rates.

"It was prudent to hold the cash rate steady while continuing to gauge the effects of earlier reductions, but not close off the possibility of reducing it further," the meeting minutes said. "While the exchange rate had depreciated over the month, members agreed that it remained uncomfortably high and a lower level would likely be needed to achieve balanced growth in the economy," the central bank added.

Reserve Bank Governor Glenn Stevens has been repeatedly attempting to jawbone the currency lower in recent months, saying he wouldn't rule out intervention. Last week he said predicted it could fall to 85 U.S. cents over time. The remarks saw it sink to a three-month low of 89 U.S. cents.

The Australian dollar is down about 14% against the U.S. dollar so far this year.

-Write to James Glynn at james.glynn@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

Monday, December 16, 2013

Finalists named for ‘green car’ tech award

Most auto buyers just focus on finding new vehicles with impressive gas mileage estimates without considering the technology that led to those estimates.

Enter the 2014 Green Car Technology Award, which seeks to reward automakers who come up with the best ideas that lead to vehicles that save energy. The winner will named at the Washington, D.C., Auto Show on Jan. 22.

"Advanced technology plays an increasingly important role in the development of cars and trucks capable of achieving significantly greater levels of efficiency and improved environmental impact," say Ron Cogan, publisher of Green Car Journal. "While new and advanced vehicle models get the limelight, it's these underlying technologies that make their amazing achievements possible."

The nominees include:

•The three-motor, all-wheel-drive hybrid in the Acura Sport Hybrid SH-AWD.

•The turbocharged direct-injection engine in the Audi 3-liter TDI diesel engine.

•The carbon-fiber body of the BMW i3 electric car.

•The regenerative braking and deceleration charging system on the new Cadillac ELR extended-range electric car.

•The smallest turbocharged engine, the Ford 1-liter EcoBoost in the 2014 Fiesta.

•The plug-in charging system in the Honda Accord, capable of 115 MPGe.

•The fuel cell system in the new Hyundai Fuel Cell, a converted Tucson crossover.

•The capacitor system that stores energies in Mazdas, called the i-ELOOP Brake Energy Regeneration System.

•The plug-in hybrid system in the Porsche.

•The new diesel engine in the Ram pickup, the first diesel in years in a small pickup.

Sunday, December 15, 2013

Weekend Edition – Start, Stop, Continue

As 2013 fast approaches its demise we’re squarely in the season of holiday parties, big meals, too much food (and perhaps drink), catching up with friends and family who are around for the season, annual “best of” lists and a mad dash to try to squeeze in any last minute “to-dos” that remain unchecked on your list marked “To-Do In 2013.”

Given the time of year, it’s natural (and healthy) to look ahead to 2014 as discussed here, but also to retrospectively look back on the year that was in terms of how you approached your investments and more broadly your finances.

At Dividend.com we like to use a mental framework whenever we’re looking back and bucket things items into three, simple categories:

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1. Stop
2. Start
3. Continue

If you think about this mental exercise in the context of personal finance or investing you will come up with an improved framework for your decision-making going forward. This is less an exercise about specifics of the stocks within your portfolio and more so about your behavior and reaction to circumstances related to your portfolio.

How It Works

Stop
Upon reflection you might look back on 2013 and realize you prematurely sold a good position in a fundamentally sound stock based on irrational or emotionally charged reasoning. Perhaps you came across one of the many perma-bears online ranting about the imminent crash of the stock's price based on no other rationale than bluster and hand waving. The blog post triggered an emotional reaction–fear of loss–and prompted you to scratch your itchy ‘”sell&#

Friday, December 13, 2013

Stocks to Watch: Anadarko Petroleum, Simon Property, Qualcomm

Among the companies with shares expected to actively trade Friday are Anadarko Petroleum Corp.(APC), Simon Property Group Inc.(SPG) and Qualcomm Inc.(QCOM)

A U.S. bankruptcy judge ruled Anadarko Petroleum could be liable for at least $5 billion in a lawsuit over environmental and legal liabilities related to its 2006 acquisition of Kerr-McGee Corp. Judge Allan L. Gropper said Anadarko could have to pay damages of between $5.2 billion and $14.2 billion in his opinion. Energy analysts had pegged Anadarko’s liability at $3 billion or less. Shares sank 11% premarket to $74.85.

Simon Property unveiled plans to spin off all its strip centers and smaller enclosed malls into an independent, publicly traded real-estate investment trust, as the nation’s largest mall owner looks to focus on its larger malls and outlets. Shares rose 2.8% premarket to $152.50.

Qualcomm Inc. named its chief operating officer, Steve Mollenkopf, as its new chief executive, replacing Paul Jacobs, who has led the chip maker since 2005. The move comes amid reports that Mr. Mollenkopf had been a possible contender to succeed Steve Ballmer as chief executive of Microsoft Corp.(MSFT) Shares rose 0.7% premarket to $73.25.

Restoration Hardware Holdings Inc.'s(RH) Co-Chief Executive Carlos Alberini is resigning from the high-end home-goods retailer as of the end of next month, to become the chairman and chief executive of Lucky Brand. The announcement was made as the company also raised its fiscal-year guidance and reported that its fiscal third-quarter earnings surged as same-store sales climbed 29%. Still, shares were down 7.9% to $60.10 premarket.

Adobe Systems Inc.(ADBE) said its fiscal fourth-quarter profit tumbled 71% as the software company reported a sharp drop in product sales and higher sales and marketing expenses. The company also issued targets for the new year that missed Wall Street’s expectations. However, shares rose 6.1% to $57.30 premarket as revenue for the latest quarter topped analysts’ estimates.

Xoma Corp.(XOMA) announced it plans to sell shares of its common stock, though it didn’t say how many. The drug developer recently had about 93.1 million shares outstanding, according to FactSet. Shares fell 8.3% to $5.19 premarket.

Building materials company Texas Industries Inc.(TXI) is considering a sale, Bloomberg News reported, citing three people familiar with knowledge of the matter. Shares of the company jumped 12% premarket to $65.50.

Biopharmaceutical firm Coronado Biosciences Inc.(CNDO) said a recent pilot study found that the first five patients using its potential autism treatment showed statistically significant separation from placebo, in favor of the drug. The treatment was also well-tolerated. The study is still ongoing. Shares jumped 26% to $2.25 premarket.

Sonus Networks Inc.(SONS) agreed to buy Performance Technologies Inc.(PTIX), a supplier of network communications products, for $3.75 a share, a 26% premium of Thursday’s close, or $42 million. The companies said the deal was worth $30 million, net of Performance Technologies’ cash and excluding acquisition costs. Performance Technologies shares jumped 24% to $3.70 premarket, just under the offer price.

Coca-Cola Co.(KO) is shaking up its senior management, announcing late Thursday that its Americas chief is leaving the beverage giant. The sudden departure of Steve Cahillane, once viewed as a potential successor to Chief Executive Muhtar Kent, comes as the maker of Minute Maid orange juice, Powerade sports drinks and namesake cola struggles to grow in its key U.S. market and slowing sales in Brazil and Mexico.

Medical-testing services provider Quest Diagnostics Inc.(DGX) raised the low end of its 2013 profit estimate, a rosier view that comes two days after rival Laboratory Corp. of America Holdings issued a disappointing 2014 outlook.

United Technologies Corp.(UTX) issued profit and revenue targets for 2014 that mostly fell short of Wall Street’s expectations, as the industrial conglomerate signaled asset sales will temper top-line growth.

Thursday, December 12, 2013

Here's What Saved Blackstone's Once-Faltering Hilton Deal

Six years after taking Hilton private in a $26 billion deal, Blackstone is ready for its IPO payoff.

The New York firm is said to have sold some 117 million shares at $20 a pop raising about $2.34 billion. Tomorrow's IPO is expected to be the biggest for a hotel.

The public will get a chance to purchase shares tomorrow when they're listed on the New York Stock Exchange under the ticker HLT.

It seems Blackstone, which bought Hilton in 2007 for $26 billion including some $7 billion in debt, had little trouble gaining interest from investors. The offering was reportedly 10x oversubscribed.

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Still, Blackstone is playing the pricing game somewhat conservatively with its $20 shares. The expected price range was $18 to $21 per share.

Why didn't Blackstone up the price and raise more money out of the box?

Well, for one thing, Blackstone is going to hold shares of Hilton for years.

That makes sense as the hotel industry is poised for more growth.

The industry's most important metric, RevPAR (revenue per available room), has been on the rise for the last three to four years, and there's more growth to come.

Right now, hotel supply levels are at historic lows. The long term average for annual hotel room supply is around 2%, but in 2011 the supply increased just .5%, and in 2012 supply fell again to .2%.

If the economy picks up steam, construction of new hotels will pick up with it.

Hilton will be among those contributing to the industry's growth.  Since Blackstone purchased it Hilton has increased the number of open rooms by 34%, or 170,000 rooms, the highest rate of any major hotel company. There are more rooms on the way as the development pipeline has jumped by 52% to an industry-leading 176,000 rooms, Blackstone says in its filing.

Hilton's revenue for the first six months of the year rose 2.7% to $4.64 billion from a year earlier, while profit jumped 66% to $189 million.

But Hilton's success under Blackstone was a long shot early on. The deal nearly cost head of its real estate unit, Jonathan Gray, his job.

Gray, who has led nearly all of the firm's hotel deals over the last 15 years, was behind the $26 billion Hilton purchase. The deal was made just before downturn hit hard, and real estate prices dropped as well as consumer travel.

The saving grace for Gray's giant investment? The debt had no covenants. Had it not been for the favorable finance structuring Hilton would likely have been seize by lenders, and Gray would have been out of a job.

Instead, he's one of the firm biggest stars, and tomorrow's Hilton IPO will only confirm his reign as king of real estate at Blackstone.

Tuesday, December 10, 2013

Ford, GM take differing approaches to CEOs

DETROIT — General Motors and Ford are following succession plans designed to promote from within, but they are playing out quite differently.

At Ford, Chief Operating Officer Mark Fields has been the heir apparent to Chief Executive Alan Mulally for so long that he has become almost as big a household name as the man he is expected to succeed.

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While Fields still waits to take the corner office, GM accelerated the transition from CEO Dan Akerson to Mary Barra, who will take charge next month.

For many, the idea of Barra rising to the top was not even a point of speculation until Akerson said in September that he thought a woman eventually would run a Detroit automaker.

The speed with which Akerson's words came true are rooted in both corporate and personal circumstances. Akerson has a pressing family matter and GM shed public ownership Tuesday, allowing it to conduct business free of government oversight.

"GM had its circumstances and ownership change dramatically," said Michael Robinet, managing director of IHS Automotive in Southfield, Mich. "Ford hasn't had a logical turning point."

But Ford has had Microsoft's protracted courtship of Mulally. The company reportedly wants Mulally to return to Seattle to succeed current CEO Steve Ballmer, who is stepping down.

“GM had its circumstances and ownership change dramatically. Ford hasn't had a logical turning point.”

— Michael Robinet, IHS Automotive

Mulally and Ford spokesmen have repeated many times that the 68-year-old executive will stay in Dearborn, Mich., through 2014, but he declines to say that he's not interested in the Microsoft job.

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Noel Tichy, author and professor at the University of Michigan's Ross School of Business, called Ford's method the crown prince process of narrowing down the field.

Spe! culation about Mulally's successor ended in 2012 when the board of directors announced Fields' promotion to a newly created position of chief operating officer and said he would run day-to-day operations while Mulally stays through the end of 2014.

Some observers say the drawn-out process has worked so well that if Mulally leaves for Microsoft, his departure would barely ruffle any feathers inside or outside of Ford's corporate headquarters.

"I think Ford has been a lot more transparent," said Jeffrey Sonnenfeld, senior associate dean at Yale School of Management and expert on corporate succession issues. "The fact that they had a much more careful protégé relationship at Ford, I think, is to be admired."

Akerson, who turned 65 in October, had been expected to step down within a year or so, and a competition was unleashed among four internal candidates to replace him.

Dave Jackson, founder of Jackson Leadership Systems, said both companies should benefit from promoting from within and gain a long-term and loyal leader.

Saturday, December 7, 2013

Top Ten Retailer Stocks On Black Friday

Retailers are well into their Black Friday shopping day by now and we thought we'd take a look at how the stocks at ten leading retailers are reacting to early news of shopper enthusiasm. Recall that the National Retail Federation is forecasting that 140 million shoppers will hit the bricks this weekend, a decline from an estimated 147 million who were searching for Black Friday bargains last year.

Amazon.com Inc. (NASDAQ: AMZN) has been offering Black Friday deals all week and is now gearing up for Cyber Monday. Shares are trading about 1.5% higher just before noon on Friday at $392.17 after hitting a new 52-week high of $393 earlier this morning. The stock's 52-week low is $242.75.

Wal-Mart Stores Inc. (NYSE: WMT) announced this morning that it had rung up 10 million cash register transactions between 6 p.m. and 10 p.m. on Thanksgiving Day. The store also claimed that it served up 400 million page views at its website yesterday. Protests at 1,500 of the company's stores are also underway today. Shares are trading up fractionally at $80.97 after posting a new 52-week high of $81.34 earlier. The stock's 52-week low is $67.37

Target Corp. (NYSE: TGT) reported robust crowds for its early opening on Thanksgiving Day, but did not provide any numbers. The stock is trading down about 0.7% at $63.97 in a 52-week range of $58.01 to $73.50.

J.C. Penney Co. Inc. (NYSE: JCP) may have the most at stake of any retailer this weekend. Crowds were reported to be sparse at stores that opened Thursday night, but at least one report said that crowds kept trickling in all night. The stock is down about 0.2% at $10.06 in a 52-week range of $6.24 to $23.10. Penney's stock has gained nearly 11% in the past five trading days.

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Macy’s Inc. (NYSE: M) opened on Thanksgiving evening for the first time this year and the company's CEO told Bloomberg TV this morning that 15,000 people were waiting to get into the company's flagship store in Herald Square. The stock price is down about 06.% now after posting a new 52-week high of $54.07 earlier. The 52-week low is $36.30.

Costco Wholesale Corp. (NASDAQ: COST) did not open at all on Thanksgiving and is open normal hours on Black Friday. The store does have a few specials for its member-customers, but "doorbuster" is not in the company's vocabulary. The stock is up about 0.2% at $125.59, near the top of its 52-week range of $96.51 to $126.12.

Best Buy Co. Inc. (NYSE: BBY) appears to be overcoming its role as a place where customers check out the stuff and then buy the product they want online ("showrooming"). The company is competing hard with Amazon on pricing and has implemented a price-matching guarantee as well. The stock is up nearly 1.5% at $40.16 in a 52-week range of $11.20 to $44.66.

Sears Holdings Corp. (NASDAQ: SHLD) has said nothing about store traffic at either its Sears or Kmart locations. Like Penney's, Sears needs a blockbuster holiday season to convince both management and investors that it remains a viable company. Doesn't look like good news, though, as the stock is down about 2.2% at $62.33 in a 52-week range of $38.40 to $67.50.

The TJX Companies Inc. (NYSE: TJX), like Costco, remained closed on Thanksgiving. The company has been one of the best performers in the retail sector over the past year with its stock price up almost 45%. No word from the company on traffic or sales at its T.J. Maxx and Marshall's Stores. Shares are down about 0.1% at $63.22 in a 52-week range of $40.98 to $64.09.

Kohl's Corp. (NYSE: KSS) opened most stores at 8:00 p.m. last night and won't close again until midnight tonight. The company has not had anything to say yet about its Thanksgiving Day traffic, nor has there been any claim for Black Friday success. The stock is down about 0.7% at $55.57 in a 52-week range of $41.35 to $59.00.

Friday, December 6, 2013

How long must clients be married to collect Social Security on each other? It depends

Sometimes I spend so much time focusing on the complicated details of Social Security claiming strategies for married couples that it's easy to overlook the basic rules. A reader e-mailed me the other day with a simple question: How long does one need to be married to qualify for Social Security benefits?

It's a great question, but the answer is anything but simple. As with so many aspects of Social Security rules, the answer is: It depends. The rules governing minimum length of marriage to qualify for Social Security benefits differ depending on the type of benefits in question: spousal, survivor or divorced spouse.

I'd like to thank William “BJ” Jarrett of the Social Security Administration's national press office for supplying me with the details of these various rules.

SPOUSE

For a Social Security spouse's benefit, a spouse must be legally married to the worker at the time the application is filed and for at least one continuous year immediately before the day of the application. The application actually can be filed before the first anniversary of the marriage as long as the anniversary occurs prior to processing.

Same-sex couples who are legally married and reside in one of the 16 states or the District of Columbia that recognizes their marriage now are entitled to the same Social Security benefits as traditional married couples.

There is an exception to the one-year duration requirement: if the spouse and the worker are the natural parents of a minor child. Both the child and the caregiving parent are entitled to benefits equal to one-half of the worker's benefit, subject to a family maximum amount that ranges from 150% to 180% of the worker's benefit. The worker's benefit is not affected by the family maximum restrictions.

A caregiving parent is subject to annual earnings cap restrictions. For 2013, the parent would forfeit $1 in benefits for every $2 earned over $15,120. A caregiving parent's benefits stop when the child turns 16. Spousal benefits can resume when the individual reaches 62.

SURVIVOR

For a Social Security survivor's benefit, a widow or widower must have been married to the deceased worker at the time of his or her death and for

Thursday, December 5, 2013

Update: Shares of BRE Properties Jump on Bloomberg Report of Possible Company Sale

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Shares of BRE Properties Inc. (NYSE: BRE) jumped to new 52 week highs of $61.50, immediately following a Bloomberg report that the company is working with investment bankers at Wells Fargo (NYSE: WFC) for a possible sale of the company.

Bloomberg reported Essex Property Trust Inc. (NYSE: ESS) has made an offer to acquire BRE Properties for about $5 billion.

BRE Properties Chief Executive Office Constance B. Moore had publicly hinted earlier this year that the company would consider "any legitimate proposal" after an investment firm Land & Buildings had made a $4.6 billion offer valued at $60 a share.

Earlier this year Essex had approached BRE with an offer that was rebuffed.

Essex has been one of the strongest performers in the REIT space, so an acquisition of BRE would create further synergies. BRE owned or had stakes in more than 21,000 apartments mostly in the San Francisco Bay area as of the end of the third quarter. Essex, meanwhile, has ownership stakes in more than 34,000 apartments, mostly in Los Angeles, Riverside and San Diego.

The proposed acquisition, if approved, would mark the second largest REIT acquisition this year. American Realty Capital Properties purchased Cole Real Estate Investments Inc. for $6.85 billion in October.

Posted-In: American Realty Capital Properties Bloomberg bre properties Cole REal EState Investments Inc Essex REIT Wells FargoNews Markets Media

(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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Tuesday, December 3, 2013

Illinois OKs pension cuts in landmark reform

illinois pensions

Illinois lawmakers approved reducing annual cost-of-living increases for retirees, raised the retirement age for younger workers, and imposed a limit on pensions for the highest-paid workers.

NEW YORK (CNNMoney) Illinois lawmakers approved a landmark pension reform package Tuesday that would cut retirement benefits for teachers, nurses and other retired and current state workers.

The legislation comes after years of debate on how to fix the state's ailing retirement system -- considered the most troubled in the country.

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The plan will reduce annual cost-of-living increases for retirees, raise the retirement age for workers 45 and under, and impose a limit on pensions for the highest-paid workers.

Employees will contribute 1% less out of their paychecks under the reform, while some will be given the option to contribute to a 401(k)-style plan.

Legislative leaders of both parties crafted the deal, which they say will save $160 billion over the next three decades -- savings desperately needed to help fill the state's $100 billion pension shortfall.

The bill will head to the desk of Governor Pat Quinn, who is expected to sign it into law. He said Tuesday the plan "addresses the most difficult fiscal issue Illinois has ever confronted."

Illinois unions, who have announced strong opposition to the deal, are expected to challenge it in court.

"Teachers, caregivers, police, and others stand to lose huge portions of their life savings," We Are One Illinois, a coalition of labor unions, said in a statement.

On the flip side, some argued that the reform doesn't go far enough.

Illinois, which has the worst credit rating of any state in the country, has set aside only 40% of the funds it needs to pay the pensions it promised current workers and retirees. Today, 20 cents of every tax dollar goes toward pension obligations -- up 400% from two decades ago, according to a recent report from the Pew Charitable Trusts.

Many cities and states across the country are struggling to keep up with pension bills. But most major pension reform in recent years has focused on cuts to new hires, not current workers and retirees.

Retired union workers facing 'unprecedented' pension cuts

In Illinois, one of the plan's biggest changes will significantly slow the growth of retirees' pension checks. Currently retirees receive 3% annual increa! ses. So an initial $30,000 pension benefit would become $30,900 the next year, nearly $40,000 after 10 years, more than $50,000 after 20 years and so on.

Under the deal, the annual bumps will now only apply to a portion of pension payouts, based on a formula using years worked. For example, a retired teacher with 25 years on the job would receive 3% increases on only the first $25,000 of pension benefits, a base amount which would be tied to inflation.

Detroit tries to rise again   Detroit tries to rise again

Proponents say the reduced increases will help keep pensions in check, especially for higher-paid workers.

Unions counter that the cuts will significantly erode pension benefits over time and make it "impossible" for retirees to keep up with inflation. Many government workers are not eligible for Social Security and so rely heavily on their pensions.

A state nurse who retired with a $40,000 pension would lose more than $7,500 in the next five years, according to We Are One Illinois, while younger workers could see deeper reductions. To top of page

Monday, December 2, 2013

GenCorp Subsidiary Lands Air Force Nuke Engine Contract

Aerojet Rocketdyne is heading back to space ... with a bullet.

On Monday, the GenCorp (NYSE: GY  ) subsidiary announced that it has won a contract from the U.S. Air Force Nuclear Weapons Center Propulsion Applications Program to demonstrate a new Medium Class Stage III motor that could be used to refurbish America's aging arsenal of Minuteman III Intercontinental Ballistic Missiles.

Financial terms of the contract were not disclosed, but Rocketdyne noted that its role will be to develop, build and demo of a full-scale motor that, if successful, could replace the SR-73 third stage motors currently used on the Minuteman. Rocketdyne Vice President of Missile Defense and Strategic Systems Michael Bright called the contract "an important win" for this company, and a chance to help "maintain critical industrial base capability in solid rocket motor design and development" for the country.

The U.S. arsenal currently contains some 450 operational Minuteman III missiles.

In addition to the Minuteman program, Rocketdyne says its new engine could eventually become the basis for "a family of affordable, sustainable motors that can support a wide range of potential AF solutions," among them, powering drone missiles used for target practice by missile defense system interceptors.

Sunday, December 1, 2013

DLTR – Snatch Up Discounted Dollar Tree Stock Today

Shares of Dollar Tree (DLTR) were substantially lower this morning after the company reported third-quarter earnings. Dollar Tree earnings tallied 59 cents per diluted share of DLTR stock, which missed analyst estimates by two pennies.

dltr-stock-dollar-tree-stockThe results also compared poorly to earnings of 68 cents per share of DLTR stock in the third quarter of 2012.  However, that quarter also included a one-time gain of 17 cents per diluted share due to the company's sale of Ollie's Holdings.

Plus, the Dollar Tree earnings report showed that consolidated net sales for DLTR increased by nearly 10% to $1.88 billion. While that was an improvement, the revenue figures also missed DLTR stock analysts’ expectations.

Following the earnings announcement, DLTR Chief Executive Officer Bob Sasser said, “I am pleased with our performance in the third quarter.” He also cited fast growth in higher-margin variety categories as a contributing factor for the improved sales numbers.

However, Dollar Tree stock investors were not so pleased. DLTR stock opened significantly lower this morning at $55.55, down around 6% from yesterday's close of $58.92.

What’s Next for DLTR Stock

DLTR stock has ranged from a low of $37.47 to a high of $60.19 over the past 52 weeks. Although Dollar Tree stock has traded sideways recently, as the accompanying chart shows, share of DLTR have been on a blistering pace, up some 57% year-to-date before this morning's gap lower.

The other dollar store stocks were also seen somewhat lower after the news. Dollar General (DG) opened down 1.9 % while Family Dollar Outlet (FDO) was lower by 1.4%.

dltr-stock-dollar-tree-stock

This is not the first time that Wall Street has crushed Dollar Tree stock and other discount retailer stocks. One year ago, DLTR stock fell from $49 to $37 after disappointing the Street, while fellow discounters FDO stock and DG stock were also trounced at various times during 2012 following disappointing earnings reports.

However, all three of these stocks subsequently bounced back, rising to new 52-week highs. It seems like the Street continually overreacts to what are essentially terrific business models whenever the earnings fail to match the lofty expectations of the analysts. Investors who have picked up shares of DLTR stock or DG stock at far lower levels within three to four weeks after the earnings reports have been rewarded handily for their faith.

Plus, the Dollar Tree earnings report wasn’t all bad news. Year-to-date earnings per diluted share of DLTR stock tallied $1.73 vs. earnings per diluted share of $1.69 through three quarters last year. And excluding the gain from the sale of Ollie's Holdings, earnings per share of DLTR stock through three quarters last year came to just $1.53.

Plus, Dollar Tree has recently entered into a $1 billion accelerated share repurchase program, which is expected to be completed by June of 2014. The company received 15 million shares of DLTR stock during the third quarter.

Therefore, the negative earnings report coupled with the repurchase program provides long-term investors with an opportunity to pick up shares of DLTR stock well-below its late October high of $60.19.

However, having now fallen through the 50-day moving average, Dollar Tree stock is likely to head towards its recent support area just below $53. Should that fail to hold, the next stop for DLTR stock would be the 200-day moving average, currently at $51.45.

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If you can pick up shares at or near that level, DLTR stock will be a screaming buy.

As of this writing, Ethan Roberts did not hold a position in any of the aforementioned securities,