Motley Fool: Being lazy can boost your returns

A few months ago, Shane Parrish of Farnam Street, wrote an excellent blog post -- "Why Clever and Lazy People Make Great Leaders." In essence, the post suggested that perhaps laziness, when paired with intelligence, can be an admirable quality. Much of the impetus for the line of thing was based on a quote by a German military strategist, who said: "Anyone who is both clever and lazy is qualified for the highest leadership duties, because he possesses the intellectual clarity and the composure necessary for difficult decisions."

That got me thinking: Could being lazy make you a better investor? Certainly, investing involves difficult decisions, and every investor could benefit from more intellectual clarity and composure. I identified three primary investment behaviors that are enhanced by laziness.

1. Focus on the essentials

More information doesn't necessarily lead to better investment decisions. In fact, too much information is more likely to muddy your mental waters than provide insight. The success or failure of an investment is typically driven by only a few key factors. Everything else is just noise and distraction. By nature, lazy investors narrow their focus to the key issues (if only to save time). But, as a result, they avoid classic "over-thinking" errors made by many investors.

2. Stick to your circle of competence

As an investor, it's vital to know what you're buying. You need to stick to your "circle of competence," to use Warren Buffett's famous phrase. If you don't understand a business or its industry, you're likely to make a mistake. If a twinge of indolence makes you unwilling to tackle problems that are too hard, too complex, or even unsolvable, that could help you investing.

Some ambitious investors think they can figure out every situation, but that's clearly not the case. Take the case of Citigroup (NYSE: C ) , particularly before the financial crisis. Its balance sheet was undecipherable. Five years ago, one professional investor told me that ! following Citigroup was so tough, at least at that time, that it required one trained analyst working on it full time, 40 hours a week, with no other responsibilities. It was so difficult that he didn't see any other way to fully understand it. I don't know if that was an exaggeration, but clearly he considered it too hard. Obviously, because of that insight and his unwillingness to put in the work to understand it, he was able to avoid massive losses in Citigroup. Unfortunately, other harder-working investors did own Citigroup, when it clearly should've been a candidate for the "too-hard" pile. Citigroup's share price is down nearly 90% over the past 10 years.;

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Chipotle (NYSE: CMG ) is another story. Even the laziest investor could understand the business model and quickly key in on the driving factors. The company sells tasty food to loyal customers, it operates efficiently with excellent returns on capital, and its got a first-rate founder and CEO. It's also has room to grow its store base across the country. Even a child could understand it, but investors in Chipotle have seen more than 1,200% stock appreciation over the past five years.

3. Trade less and hold longer

Some investors think that constantly trading and reshuffling their portfolios will lead to better returns. In many areas of life, more action and more effort lead to better results. In investing, that simply isn't the case. In fact, more trading typically leads to worse returns for individual investors. In a landmark paper, Trading is Hazardous to Your Wealth, Professors Barber and Odean found, using real data from 66,465 household accounts, that active traders underperformed the market by 6.5%.

Tom Gayner, chief investment officer at Markel (NYSE: MKL ) , has an excellent investment track record. Markel, a Richmond, Va-based specialty insurer, has generated 40-fold returns for inv! estors si! nce 1990, thanks in part to Gayner's investment savvy. And Gayner has often remarked that investors often make more money from their butts than their brains. In other words, in investing, you'll making more money buying a stock and holding (i.e., sitting on your butt) than using your brain to trade.

Foolish bottom line

Obviously, if you're totally lazy, you'll never get off the couch to make an investment. And I'm not advocating against continuous learning and appropriate diligence, but in certain cases, inactivity will benefit your portfolio. If embracing a bit of natural sloth helps you become a master of purposeful inactivity, that's all the better (for your life and your returns).

The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

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Average 30-year mortgage rate falls to 4.32%

WASHINGTON (AP) — Average U.S. rates for fixed mortgages slipped this week as new data showed a decline in home prices in November and a drop in new homes sales last month.

Mortgage buyer Freddie Mac says the average for the 30-year loan fell to 4.32% from 4.39% last week. The average for the 15-year loan eased to 3.40% from 3.44%.

Mortgage rates have risen about a full percentage point since hitting record lows roughly a year ago. The increase was driven by speculation that the Federal Reserve would reduce its $85 billion a month in bond purchases.

HIGHER PAYMENTS: Higher rates loom for some modified mortgages

SLOWDOWN?: Pending home sales tumble in December

Deeming the economy to be gaining in strength, the Fed pushed ahead Wednesday with a

plan to reduce the bond purchases

, which have kept long-term interest rates low.

Data issued this week suggested a pause in the housing market's recovery. Home prices fell slightly in November as colder weather slowed buying, ending nine straight months of price gains, the Standard & Poor's/Case-Shiller 20-city home price index released Tuesday showed.

The Commerce Department reported Monday that sales of new homes fell in December for a second straight month. Even with the end-year decline, though, home sales for 2013 climbed to the highest level in five years as they benefited from historically low mortgage rates.

Most economists expect home sales and prices to keep rising this year, but at a slower pace. They forecast sales and prices will likely rise around 5%, down from double-digit gains in 2013.

The National Association of Realtors said Thursday that fewer Americans signed contracts to buy previously occupied homes last month. Cold weather stalled home purchases.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the ! lowest rates. One point equals 1% of the loan amount.

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The average fee for a 30-year mortgage was unchanged at 0.7 point. The fee for a 15-year loan declined to 0.6 point from 0.7 point.

The average rate on a one-year adjustable-rate mortgage edged up to 2.55% from 2.54%. The fee slipped to 0.4 point from 0.5 point.

The average rate on a five-year adjustable mortgage fell to 3.12% from 3.15%. The fee was steady at 0.5 point.

Mortgage rates dip

Average rate nationwide for 30-year fixed-rate home loan

Sponsored byPercentSource: Freddie Mac weekly survey of about 125 lenders

Lennar Gains 4% as Earnings Provide Foundation for Homebuilder Rally

Now that’s how you construct a homebuilder rally.

Getty Images

Lennar (LEN) reported earnings today that were solid enough to boost the entire sector, despite mixed numbers from fellow homebuilder KB Home (KBH). The Wall Street Journal has the details:

For the quarter ended Aug. 31, Lennar reported a profit of $120.7 million, or 54 cents a share, up from $87.1 million, or 40 cents a share, a year earlier. The latest quarter included a $67.2 million tax provision, while the year-ago quarter included a $12.8 million tax benefit. Revenue rose 46% to $1.6 billion.

Analysts polled by Thomson Reuters most recently had forecast adjusted earnings of 45 cents on revenue of $1.56 billion.

Belus Capital Advisors’ Brian Sozzi looks for the cloud in the sunny numbers:

Taking Lennar’s “stellar” 3Q earnings this AM and comparing them to 2Q (the sequential look is the go-to analytical comparison when covering homebuilders, especially during current market conditions) a couple things stand out:

1. CEO sounded more cautious in prepared remarks regarding business trends, basically confirming demand has softened from the last time he was on a press release in June.

2. Deliveries: +37% vs. +39% 2Q

3. New orders: +14% vs. +27% 2Q

4. New orders down in the Central and Southeast Florida vs. up in 2Q.

Note these are some of the same sequential occurrences (slowing) we saw in the recent report from Toll Brothers (TOL).  Very curious on how the stock acts today (and the entire homebuilder complex, such an Owens Corning (OC) and Home Depot (HD)); does market focus on slowing trends that were caused by the summer rate spike (and the prospect they may continue due to worsening housing affordability) or a possibly re-acceleration in demand with mortgage rates back in check?

It appears to be the latter. Lennar has gained 3.6% to $35.77, while KB Home has risen 1.4% to 17.26 and Toll Brothers has advanced 2.5% to $33.45. As for for Owens Corning, it’s gained 0.6% to $39.38, while Home Depot has risen 0.1% to $75.99.

BMY Pummeled After Earnings, But Bristol-Myers Squibb Stock Still a Buy

Popular Posts: 5 Tech Stocks With Electric Dividend Yields5 Biotech Stocks With Big Catalysts on the HorizonMore U.S. Companies Realize China Isn’t Worth the Trouble Recent Posts: BMY Pummeled After Earnings, But Bristol-Myers Squibb Stock Still a Buy EBAY Stock: Sorry, Carl Icahn, But a PayPal Spinoff Only Helps You More U.S. Companies Realize China Isn’t Worth the Trouble View All Posts

Bristol-Myers Squibb (BMY) did better in the fourth quarter than most analysts and investors were expecting, beating per-share earnings exceptions by 18% and topping revenue estimates by 3.2%, thanks to strong sales of Baraclude, Orencia, Yervoy and Sprycel.

All told, BMY reported a profit of 51 cents per share, vs. estimates of 43 cents and a year-ago figure of 47 cents. Sales-wise, Bristol-Myers Squibb generated $4.44 billion worth of revenue, which compares favorably to the anticipated Q4 2013 top line of $4.19 million and Q4 2012′s revenue of $4.19 billion.

The bulk of the sales growth came from overseas markets, while the improvement in profits was driven by a combination of higher sales and lower R&D costs.

With all of that being said, current or prospective Bristol-Myers Squibb stock owners might want to embrace the fact that — for better or worse — the same BMY from last quarter isn’t going to be the same BMY a year from now. A significant reconfiguring of Squibb’s drug portfolio in addition to a change of plans for some of the most promising therapies in its pipeline require a more thorough look, just so shareholders know what to expect in 2014.

A New (and Likely Improved) Bristol-Myers Squibb

Last quarter, Bristol-Myers Squibb saw sales of hepatitis drug Baraclude grow 14%, reaching $412 million. Revenue from cancer drug Yervoy was up 23%, to $260 million. Immunotherapy (rheumatoid arthritis) Orencia sales expanded 22%, to $397 million. Sales of HIV treatment Sustiva grew 11% to $427 million. And, cancer drug Sprycel improved sales to the tune of 30%, reaching revenue of $365 million.

BMY stock owners and observers should know, however, there were some red flags waving in last quarter’s report. Sales of antipsychotic drug Abilify slumped 22%, to only $635 million, and though sales of blood-thinning Plavix were technically up 65% on a year-over-year basis in the fourth quarter, Plavix only generated $81 million in revenue during Q4. In 2012, Plavix sales were approaching sales of nearly $2 billion per quarter, before its patent expired.

The hot spots last quarter in its portfolio of existing drugs largely reflect the company’s new direction. Going forward, Bristol-Myers Squibb stock holders can expect an even deeper focus on cancer treatments like Yervoy and Sprycel, as well as further development of immunotherapy drugs like Orencia, and antivirals.

Conversely, though BMY has no apparent plans to shed its slumping Plavix or Abilify franchises, the company isn’t devoting a great deal of time or resources to develop replacements…. perhaps because the heir-apparent to Plavix, Eliquis, has been a very slow starter. In fact, Bristol-Myers Squibb is looking to shed many of its non-cancer and non-immunotherapy projects to better focus on those two areas. Case in point: Despite decent revenue growth from its diabetes portfolio in Q4, the company will be selling all four of its diabetes drugs to AstraZeneca (AZN) later in the year.

And despite growth in Baraclude’s sales, BMY also announced in November that it would be axing its hepatitis C programs.

What Now for Bristol-Myers Squibb Stock Owners?

With a new-found focus on the areas that Bristol-Myers Squibb is most interested in, “how” becomes the big question. Broadly speaking, it looks like the company is willing to let go of its partnership bent and start to do more on its own.

Selling its diabetes business to now-former-partner AstraZeneca is some evidence to that end, but it’s not the only sign that BMY is migrating to a policy of self-sufficiency. The company has also given up on partnering with Gilead (GILD) on the hepatitis C front.

Gilead is the maker of Sovaldi, the first-ever pill-form hepatitis C treatment. Alone the pill works quite well, but when combined with Bristol-Myers Squibb’s daclatasvir hepatitis therapy, the drug duo is almost miraculous. Gilead wants none of such a partnership, however, opting to develop its own drugs to combine with Sovaldi to improve its efficacy. As it turns out, however, BMY stock owners may have the last laugh, though, and Gilead may regret its decision go it alone. Daclatasvir is up for a likely approval in Europe, where doctors are apt to prescribe it in off-label combinations with other hepatitis therapies. Success there in conjunction with other hepatitis drugs could serve as a launching point for approval in the United States.

Bristol-Myers Squibb stock holders will also want to keep tabs on Nivolumab. The story of this non-small-cell lung cancer therapy took an apparent wrong turn earlier in the week when it was announced that a new Phase 3 study of the drug was being initiated, implying that the previous study of Nivolumab (in combination with Yervoy) isn’t going as well as hoped. It’s important to note that the company has said nothing of any issues with the Yervoy/ Nivolumab trial, however, and it’s entirely possible BMY has simply chosen to pursue two parallel studies, just to see which option produces the highest efficacy.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

Herbalife Ltd (HLF): Will Political Donations Save Bill Ackman and the Shorts?

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Bill Ackman has launched nothing short of a crusade against Herbalife Ltd (NYSE: HLF) because he and his Pershing Capital have had a massive short position against the stock. Moreover, Bill has made it no secret (e.g. see a detailed blog post on the Opensecrets Blog entitled: Herbalife Battle Weapons Include Lobbyists, Campaign Dollars) that he intends to enlist government support in order to make his short position profitable. But who will ultimately win the battle of political influence, cronyism and campaign contributions – Herbalife and its bakers or Bill Ackman and the shorts?

Its time to go off Wall Street and onto K-Street to follow the campaign contributions and lobbyist money to see where the government sledgehammer might fall.

Follow the Campaign Contributions or Lobbyist Cash

I won't revisit the epic battle between Herbalife investor Carl Icahn and Bill Ackman who is shorting the stock but it appears the latter's crusade has finally paid off because Senator Edward J. Markey of Massachusetts has sent letters to the Federal Trade Commission and the Securities and Exchange Commission urging them to investigate the company. And in an apparently unrelated move, there is also word that California Atty. Gen. Kamala D. Harris' staff has agreed to meet Friday in Los Angeles with a coalition of critics who believe that Herbalife preys on "poverty-stricken immigrants with false hopes of easy money."

But first, just who is Edward J. Markey? From 1976 to 2013, he served as the U.S. Representative for Massachusetts's 5th congressional district before winning a special election to fill John Kerry's seat following his nomination as United States Secretary of State. In other words, he's a career politician who knows how the game is played in the corridors of the Capitol and the back alleys of K-Street.

With that in mind, a quick look at Opensecrets.org for Bill Ackman's political contributions reveals the following:

ContributorOccupationDateAmountRecipient

ACKMAN, WILLIAM A NEW YORK,NY 10106	PERSHING SQUARE CAPITAL MANAGEMENT	4/30/2013	$32,400	Democratic Senatorial Campaign Cmte
ACKMAN, WILLIAM A MR NEW YORK,NY 10024	PERSHING SQUARE CAPITAL	11/6/2012	$20,000	National Republican Congressional Cmte
ACKMAN, WILLIAM A MR NEW YORK,NY 10024	PERSHING SQUARE CAPITAL	11/6/2012	$20,000	National Republican Senatorial Cmte
ACKMAN, KAREN NEW YORK,NY 10024	LANDSCAPE ARCHITECT	10/16/2013	$10,000	New Jersey Democratic State Cmte
ACKMAN, WILLIAM A NEW YORK,NY 10024	PERSHING SQUARE CAPITAL MANAGEMENT	10/16/2013	$10,000	New Jersey Democratic State Cmte
ACKMAN, KAREN NEW YORK,NY 10024	LANDSCAPE ARCHITECT	7/22/2013	$5,200	Booker, Cory
ACKMAN, KAREN NEW YORK,NY 10024	LANDSCAPE ARCHITECT	7/22/2013	$5,200	Booker, Cory
ACKMAN, WILLIAM A NEW YORK,NY 10024	PERSHING SQUARE CAPITAL MANAGEMENT	7/22/2013	$5,200	Booker, Cory
ACKMAN, WILLIAM A NEW YORK,NY 10024	PERSHING SQUARE CAPITAL MANAGEMENT	7/22/2013	$4,767	Booker, Cory
ACKMAN, KAREN NEW YORK,NY 10024	LANDSCAPE ARCHITECT	7/22/2013	$2,600	Booker, Cory
ACKMAN, KAREN NEW YORK,NY 10024	LANDSCAPE ARCHITECT	7/22/2013	$2,600	Booker, Cory
ACKMAN, WILLIAM A NEW YORK,NY 10024	PERSHING SQUARE CAPITAL MANAGEMENT, LP	9/30/2013	$2,600	Eldridge, Sean
ACKMAN, WILLIAM A NEW YORK,NY 10024	PERSHING SQUARE CAPITAL MANAGEMENT, LP	9/30/2013	$2,600	Eldridge, Sean
ACKMAN, WILLIAM A NEW YORK,NY 10024	PERSHING SQUARE CAPITAL MANAGEMENT	7/22/2013	$2,600	Booker, Cory
ACKMAN, WILLIAM A NEW YORK,NY 10024	PERSHING SQUARE CAPITAL MANAGEMENT	7/22/2013	$2,167	Booker, Cory
ACKMAN, JEANNE B WESTON,MA 02493	MASSACHUSETTS GENERAL PHYSICIANS ORGAN	4/10/2013	$500	Markey, Ed
ACKMAN, WILLIAM A NEW YORK,NY 10024	PERSHING SQUARE CAPITAL MANAGEMENT	8/28/2013	$433	Booker, Cory
ACKMANN, BARBARA BUNCOMBE,IL 62912	FARMER	4/1/2013	$300	Shimkus, John M
ACKMAN, WILLIAM A NEW YORK,NY 10024	PERSHING SQUARE CAPITAL MANAGEMENT	7/22/2013	$-2,167	Booker, Cory
ACKMAN, KAREN NEW YORK,NY 10024	LANDSCAPE ARCHITECT	7/22/2013	$-2,600	Booker, Cory
ACKMAN, KAREN NEW YORK,NY 10024	LANDSCAPE ARCHITECT	7/22/2013	$-2,600	Booker, Cory
ACKMAN, WILLIAM A NEW YORK,NY 10024	PERSHING SQUARE CAPITAL MANAGEMENT	7/22/2013	$-2,600	Booker, Cory

 

Note: Jeanne Ackman is apparently Bill's sister according to the New York Times while Bill's $32,400 to the Democratic Senatorial Campaign Committee on April 30 occurred on the same day Ed won the Democratic primary. Just over a month later, the Democratic senatorial committee gave $45,400 to the Markey's campaign.

More data on 2013-2014 political contributions to Edward J. Markey can be found here on Opensecrets.org, but note the following top 20 industries where his campaign cash is coming from:

Top 20 Industries contributing to Campaign Cmte MemberRank  DistrictRank  Industry  Total  Indivs  PACs  

1	3	Lawyers/Law Firms	$741,875	$651,375	$90,500
2	1	Securities & Investment	$297,000	$276,000	$21,000
3	22	TV/Movies/Music	$290,400	$205,800	$84,600
4	17	Leadership PACs	$251,200	$0	$251,200
5	4	Real Estate	$248,150	$229,650	$18,500
6	36	Environment	$218,289	$193,340	$24,949
7	2	Retired	$192,004	$192,004	$0
8	37	Lobbyists	$165,300	$163,000	$2,300
9	8	Business Services	$151,850	$150,850	$1,000
10	11	Pharmaceuticals/Health Products	$114,050	$57,150	$56,900
11	9	Education	$105,950	$105,950	$0
12	10	Computers/Internet	$99,100	$71,100	$28,000
13	14	Non-Profit Institutions	$97,000	$97,000	$0
14	6	Public Sector Unions	$86,250	$750	$85,500
15	30	Telecom Services & Equipment	$80,500	$29,000	$51,500
16	19	Printing & Publishing	$78,750	$70,750	$8,000
17	12	Misc Finance	$76,975	$74,375	$2,600
18	23	Misc Business	$72,450	$71,450	$1,000
19	20	Health Professionals	$71,400	$39,400	$32,000
20	13	Democratic/Liberal	$69,328	$61,705	$7,623

 

Of course, it should come as no surprise that the biggest source of campaign money for a Democrat congressman comes from trial lawyers or law firms, and it should be remembered that Herbalife will be a target of such firms should any allegation stick – meaning it might be interesting to examine any data about how much money Markey has received from so-called "shareholder rights" law firms.

Moreover, Herbalife is not exactly defenseless either because the company has increased its spending on lobbyists in recent years according to Opensecrets.org data:

For last year, Herbalife International spent $1,340,000 on lobbying efforts:

Firms HiredTotal Reported by FilerReported Contract Expenses (included in Total Reported by Filer)

Herbalife International	$950,000	-
Herbalife International of America	-	$950,000
Downey McGrath Group	-	$190,000
Ogilvy Government Relations	-	$80,000
Podesta Group	-	$80,000
Glover Park Group	-	$20,000
Intl Business-Government Counsellors	-	$20,000
		$1,340,000

  In fact and according to Opensecrets.org, Herbalife hired five lobbying firms last year (up from two in 2012) in addition to its in-house lobbying arm to defend itself in the political arena. They have also hired hired former Los Angeles Mayor Antonio Villaraigosa, the first Latino mayor of Los Angeles since 1872, as a senior advisor to CEO Michael O. Johnson to try and head off trouble with critical Hispanic lawmakers like Rep. Linda Sanchez (D-CA) along with Hispanic groups while Rep. Xavier Becerra (D-CA), who represents the Los Angeles district where HLF is headquartered, has "cautioned his caucus colleagues not to rush to any conclusions about the dietary supplement maker until all the facts have come in" (Note: Opensecrets.org says that Herbalife's PAC has made contributions of $1,000 to Becerra in both the 2010 and 2014 election cycles). 

 

Herbalife or its employees have also been active in state politics – including California politics as according to Followthemoney.org data:

 

TABLE 1: Total HERBALIFE INTERNATIONAL Contributions from 2003 to 2012 Contribution SourceIncluded in Total?Total

HERBALIFE INTERNATIONAL	always	$350,000
Employees of HERBALIFE INTERNATIONAL	no	$28,051	Include
	Grand Total	$350,000

TABLE 3: Contributions by State from 2003 to 2012 StateRecords↓Total↓

California	30	$329,000
New Mexico	1	$20,000
Virginia	1	$1,000

TABLE 4: Contributions to Candidates from 2003 to 2012 CandidateStateYearsRecords↓Total↓

SCHWARZENEGGER, ARNOLD	CA	2008	1	$75,000
KOMADINA, STEVE	NM	2008	1	$20,000
BROWN, JERRY	CA	2008	2	$13,000
WHITMAN, MEG	CA	2010	1	$13,000
HORTON, JEROME E	CA	2004-2006	4	$7,000
HAYASHI, MARY	CA	2008-2010	2	$3,000
DYMALLY, MERVYN M	CA	2006-2008	2	$2,000
GALGIANI, CATHLEEN	CA	2006-2010	2	$2,000
HERNANDEZ, ED	CA	2006-2010	2	$2,000
PEREZ, JOHN A	CA	2010	1	$2,000
CALDERON, RONALD S	CA	2006-2010	2	$1,500
FUENTES, FELIPE	CA	2010	1	$1,500
BASS, KAREN	CA	2008	1	$1,000
COOLEY, STEVE	CA	2010	1	$1,000
DE LEON, KEVIN	CA	2010	1	$1,000
HALL, ISADORE	CA	2010	1	$1,000
MCDONNELL, ROBERT F (BOB)	VA	2009	1	$1,000
PADILLA, ALEX	CA	2006	1	$1,000
PRICE, CURREN D	CA	2006	1	$1,000
STRICKLAND, AUDRA	CA	2008	1	$500
STRICKLAND, TONY	CA	2010	1	$500

Note that someone forgot to give California Attorney General Kamala D. Harris a donation, but her opponent, Los Angeles County District Attorney Steve Cooley, did receive a $1,000 contribution from the company as a big chunk of his campaign cash came from the LA area where HLF is headquartered. Finally, a look at where Harris's campaign cash came from on Followthemoney.org reveals the usual assortment of Democratic friendly trial lawyers and public sector unions as being her biggest source of money: TABLE 3: Top 15 All Time Industries IndustryTotal

Lawyers & Lobbyists	$1,320,033
General Trade Unions	$478,118
TV & Movie Production/Distribution	$333,102
Public Sector Unions	$320,775
Party Committees	$288,644
Real Estate	$185,230
Computer Equipment & Services	$156,661
Securities & Investment	$141,695
Health Professionals	$114,926
Miscellaneous Finance	$108,034
Tribal Governments	$92,000
Civil Servants/Public Officials	$71,671
Printing & Publishing	$66,570
Candidate Committees	$59,605
Telecom Services & Equipment	$45,335

The Bottom Line. I have to admit that I have been thinking of buying Herbalife and I know some money managers who have also been (cautiously) putting clients into the stock; but given how much money is being thrown around by the company and its defenders along with Bill Ackman and the shorts or HLF critics, I'd give the stock a past because its hard to see right now where the government sledgehammer will fall as everyone jockeys for political influence. Moreover, there is a risk that Herbalife and its defenders (e.g. employees and distributors) could end up fighting a battle on too many fronts should 49 other attorney generals, the 500+ other members of Congress, 50 state governors or countless other legislators across the country decide to stick their noses into the company's business – especially those politicians who are friendly with trial lawyers. Remember, all Bill Ackman and the shorts have to do is "convince" a couple of politicians like Edward J. Markey or Kamala D. Harris to take them up on their position and continue to make life miserable for the company and its shareholders.

Yes, CEL-SCI Has Found a New Groove (CVM)

To say that 2014 has been a good year so far for CEL-SCI Corporation (NYSEMKT:CVM) would be an understatement. It's been a great year for the company, and more specifically, its shareholders. CVM is up 96% year-to-date, cutting into a big chunk of the loss that was suffered in 2013. And, though a near-doubling in less than a month would normally be an invitation to a painful wave of profit-taking, in the case of CEL-SCI, the situation says this is one of those rallies that could get hotter the hotter it gets.

If the name rings a bell, it may be because CVM was one of the SmallCap Network's featured stocks - off and on - over the course of 2006, 2007, and part of 2008. There's no need to go into all the details of why we liked it so much for so long. Let's just suffice it to say the fact that CEL-SCI Corporation was on the verge of carrying its flagship development, head and neck cancer drug Multikine, from Phase 2 to Phase 3 was a pretty exciting time for the company as well as shareholders, and we wanted to reap whatever we could from the opportunity (especially knowing that any drug that makes it to Phase 3 trials has extremely strong odds of a final approval.

The market is fickle, of course, and quick to lose interest. CVM, without any major milestones to tout until it got close to the end of Phase 3 testing, found it tough to keep traders interested. The stock flamed out as a result, leading to (through no fault of the company's) a disappointing performance from CEL-SCI shares between 2009 and 2013.

As they say though, nothing lasts forever, and expect it when you least expect it.

If the chart's clues are any indication, the tide just turned in favor of CVM owners again.... and not in just a short-term, superficial way either. We're talking paradigm shift here. After getting whacked on October and falling to a low of around $0.80 for a couple of months - and then drifting to a low of $0.53 in December - it would have been easy for an investor to put CEL-SCI Corporation on the shelf forever. And, some traders did just that. Big mistake. As was said already, investors should know that nothing lasts forever, and we should expect things when we least expect them.

Since the end of December, CVM has blasted past a couple of key short-term moving average lines, and as of today has cleared the 100-day moving average line for the first time (barring one unusual and short-lived surge in August) in almost a year. And, there's something distinctly different about this crossover - it's happened on the heels of a string of higher and higher volume. It's the first time we've seen any real volume or any real volume growth behind a rally effort. We can take the change at face value, and say the undertow has finally shifted in a favorable direction.

It's not a purely technical trade, however. Though the fundamentals the market chooses to focus on tends to reflect and jive with the chart's current direction, one actually fuels the other. So, it's no surprise to see that the media's rhetoric has turned bullish. Thing is, not only will that bullish chatter spur the stock higher, the higher the stock moves, the more bullish the rhetoric becomes. And, given that the company's underlying technology is still just as solid today as we knew it was five years ago, the market should have little problem falling in love with CEL-SCI Corporation again.

Bottom line? Don't overthink things. CEL-SCI is a company with a lot going for it, and with a market cap of only $56 million versus a head and neck cancer market that's worth an estimated $3 billion (globally) - with the end of Phase 3 trials in sight - CVM may have only begun to rally.

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

Hot Canadian Companies To Own For 2014

Fiat, owner of Chrysler Group, has agreed to buy the United Auto Workers' remaining 41.46% stake in Chrysler for $3.65 billion, plus four separate payments totaling $700 million.

The agreement, announced Wednesday, heads off a public stock offering of Chrysler shares that Fiat and Chrysler didn't want, but the UAW was forcing, in order to set a value on its stake.

It puts to an end months of cantankerous wrangling between the union and automakers about the value of the retirement trust's shares. And it's happened suddenly, in an unexpected way, as firm plans had been announced late last year for the IPO.

Fiat previously bought out the stake held by Canadian governments, so once the current deal closes, Fiat and Chrysler can be merged into a single company. No details have been hinted about where a merged automaker would have headquarters, nor whether a full merger would change product plans or management teams.

Hot Canadian Companies To Own For 2014: NRG Energy Inc.(NRG)

NRG Energy, Inc., together with its subsidiaries, operates as a wholesale power generation company. The company engages in the ownership, development, construction, and operation of power generation facilities. It also involves in the transacting in and trading of fuel and transportation services; the trading of energy, capacity, and related products in the United States and internationally; and the supply of electricity, energy services, and cleaner energy and carbon offset products to retail electricity customers in deregulated markets. The company operates natural gas- fired, coal- fired, oil-fired, nuclear, solar, and wind power plants. As of December 31, 2010, it had power generation portfolio of 193 operating fossil fuel and nuclear generation units with an aggregate generation capacity of approximately 24,570 megawatt (MW), as well as ownership interests in renewable facilities with an aggregate generation capacity of 470 MW. The company portfolio also includes appr oximately 24,035 MW generation capacity in the United States, and 1,005 MW generation capacity in Australia and Germany. In addition, it has a district energy business with steam and chilled water capacity of approximately 1,140 megawatts thermal equivalent. NRG Energy, Inc. was founded in 1989 and is headquartered in Princeton, New Jersey.

Advisors' Opinion:

• [By Joshua Bondy]

  The Ivanpah project
  Recently the Ivanpah 392 megawatt (MW) CSP plant was competed in the Californian desert.�NRG Yield (NYSE: NYLD  ) and its parent company�NRG Energy (NYSE: NRG  ) �worked to bring the plant to fruition. The facility will help California reach its goal of 33% renewable energy production by 2020. Southern California Edison and Pacific Gas & Electric have already signed long-term agreements to buy power from the facility.�

• [By Ben Levisohn]

  The S&P 500 fell 0.2% to 1,767.69, as Cliffs Natural Resources� (CLF) fell 4% to $26.27 on lower metal prices and NRG Energy (NRG) dropped 3.5% to $27.06 after it reported a profit of 37 cents, well below forecasts for 63 cents. The Dow Jones Industrial Average dipped 0.2% to 15,750.76, as taper talk hit Travelers (TRV), which fell 1.7% to $86.44, and Chevron (CVX), which dropped 0.9% to $120.

Hot Canadian Companies To Own For 2014: Goldcorp Incorporated(GG)

Goldcorp Inc. engages in the acquisition, exploration, development, and operation of precious metal properties in Canada, the United States, Mexico, and Central and South America. It produces and sells gold, silver, copper, lead, and zinc. The company was founded in 1954 and is headquartered in Vancouver, Canada.

Advisors' Opinion:

• [By Doug Ehrman]

  The verdict
  When gold prices remain stagnant, even in the face of global weakness, it's time for concern. Gold has enjoyed a solid run, but the current slump seems likely to continue. In addition, where miners such as Goldcorp (NYSE: GG  ) have underperformed the commodity for an extended period, earlier in the week that trend seemed to be reversing. Structural changes of this nature should be seen as an additional warning sign and a cause to stay on the sidelines. If you want to maintain some exposure to gold, the miners may be ready to reverse some of their underperformance and may provide a more attractive investment profile at current levels. Gold remains under pressure, and a tumble to $1,400 seems a good probability.

• [By Itinerant]

  Recently pressure has mounted to update this cost reporting standard in order to improve transparent accounting for all costs associated with production. Or as Chuck Jeannes, CEO of Goldcorp (GG), puts it:

• [By Dan Caplinger]

  But Yamana has benefited from its low cost structure, and it only intends to make its operations even cheaper going forward in light of low gold prices. Despite already having cash operating costs of less than $400 per ounce, the company expects to cut those costs by another $100 per ounce, doing its best to increase efficiency and maximize profit margins in a tough environment. Weak prices for byproduct metals like copper and zinc have added to Yamana's woes, but it and peer Goldcorp (NYSE: GG  ) have kept enough of a lid on their expenses to remain profitable even with gold at current levels.

• [By Sean Williams]

  If you're willing to roll the dice even further, my suggestion would be to look at the two most cost-efficient gold miners: Yamana Gold (NYSE: AUY  ) and Goldcorp (NYSE: GG  ) . Both Yamana and Goldcorp stood atop my top-performing gold miners leaderboard in the first-quarter thanks to extremely low mining costs associated with byproduct metal sales. Yamana has been particularly strong, turning in remarkable production growth, while Goldcorp offers investors one of the lowest debt-to-equity ratios in the sector thanks to its strong operating cash flow. To add, Yamana and Goldcorp both offer yields of 2% and are valued at just 10 and nine times forward earnings estimates.

Top 5 Blue Chip Stocks To Invest In 2014: Penn West Petroleum Ltd(PWE)

Penn West Petroleum Ltd. engages in acquiring, exploring, developing, exploiting, and holding interests in petroleum and natural gas properties and related assets in North America. The company produces light and medium crude oil, natural gas liquids, heavy oil, and natural gas. It operates in two major regions, including the Southern District, which covers properties within Manitoba, Saskatchewan, and southern and east central Alberta with developed and undeveloped land base totaling approximately 3.3 million net acres; and the Northern District encompassing northeastern British Columbia, northern Alberta, parts of west central Alberta, and the Northwest Territories with developed and undeveloped land position of approximately 2.9 million net acres. The company was formerly known as Penn West Energy Trust and changed its name to Penn West Petroleum Ltd. in January 2011. Penn West Petroleum Ltd. was founded in 1979 and is headquartered in Calgary, Canada.

Advisors' Opinion:

• [By Dan Caplinger]

  The biggest worry that some investors have about Pengrowth is that its dividend is large compared to its earnings. Similar issues forced Penn West Petroleum (NYSE: PWE  ) , also a former Canroy, to cut its dividend a couple months ago. Although extraordinary measures have helped Pengrowth and Enerplus (NYSE: ERF  ) sustain payouts at levels that were last reduced in the middle of 2012, both companies could eventually see further pressure on their payouts in future.

• [By Roberto Pedone]

  Another under-$10 stock that's starting to trend within range of triggering a big breakout trade is Penn West Petroleum (PWE), which is engaged in the business of acquiring, exploring, developing, exploiting and holding interests in petroleum and natural gas properties and related assets. This stock has been under pressure by the bears during the last three months, with shares off by 24%.

  If you take a look at the chart for Penn West Petroleum, you'll notice that this stock has been trending sideways over the last two months, with shares moving between $7.89 on the downside and $8.84 on the upside. Shares of PWE are now starting to spike higher above its recent low of $8.14 a share and it's quickly moving within range of triggering a breakout trade above the upper-end of its recent sideways trading chart pattern.

  Market players should now look for long-biased trades in PWE if it manages to break out above some near-term overhead resistance levels at $8.84 a share to its 50-day moving average of $8.96 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 2.43 million shares. If that breakout hits soon, then PWE will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $10.07 to $11 a share. Any high-volume move above those levels will then give PWE a chance to tag $11.50 to $12 a share.

  Traders can look to buy PWE off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $8.14 a share or at $7.89 a share. One can also buy PWE off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Hot Canadian Companies To Own For 2014: Plains All American Pipeline L.P.(PAA)

Plains All American Pipeline, L.P., through its subsidiaries, engages in the transportation, storage, terminalling, and marketing of crude oil, refined products, and liquid petroleum gas (LPG) products in the United States and Canada. The company operates in three segments: Transportation, Facilities, and Supply and Logistics. The Transportation segment transports crude oil and refined products on pipelines, gathering systems, trucks, and barges. As of December 31, 2011, this segment owned and leased 16,000 miles of active crude oil and refined products pipelines and gathering systems; 23 million barrels of above-ground tank capacity used primarily to facilitate pipeline throughput; 67 trucks and 382 trailers; and 82 transport and storage barges, and 44 transport tugs. The Facilities segment provides storage, terminalling, and throughput services for crude oil, refined products, and LPG and natural gas, as well as offers LPG fractionation and isomerization, and natural gas processing services. The Supply and Logistics segment purchases crude oil at the wellhead, and pipeline and terminal facilities; waterborne cargoes at their load port and various other locations in transit; and LPG from producers, refiners, and other marketers. This segment also resells or exchanges crude oil and LPG; and transports oil and LPG on trucks, barges, railcars, pipelines, and ocean-going vessels to various delivery points. It has 622 trucks and 731 trailers, and 2,453 railcars. The company also owns and operates natural gas storage facilities. Plains All American Pipeline, L.P. was founded in 1998 and is headquartered in Houston, Texas.

Advisors' Opinion:

• [By Dividend]

  Plains All American Pipeline (PAA) has a market capitalization of $17.83 billion. The company employs 4,700 people, generates revenue of $37.797 billion and has a net income of $1.127 billion. Plains All American Pipeline�� earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $1.928 billion. The EBITDA margin is 5.10 percent (the operating margin is 3.77 percent and the net profit margin 2.98 percent).

• [By Jon C. Ogg]

  Plains All American Inc. (NYSE: PAA) was raised to Outperform from Neutral with a $64 price target at Credit Suisse.

  Royal Caribbean Cruises Ltd. (NYSE: RCL) was maintained Buy and its target was raised by $2 to $46 at Argus.

Hot Canadian Companies To Own For 2014: Potomac Electric Power Company(POM)

Pepco Holdings, Inc., through its subsidiaries, engages in the transmission, distribution, and supply of electricity. The company also distributes and supplies natural gas. It distributes electricity to approximately 1.8 million customers in the mid-Atlantic region and delivers natural gas to approximately 123,000 customers in Delaware. In addition, the company involves in the retail supply of electricity and natural gas; provision of energy efficiency services to federal, state, and local government customers; and designs, constructs, and operates combined heat and power and central energy plants, as well as owns and operates two oil-fired generation facilities. Further, it offers high voltage electric construction and maintenance services, low voltage electric construction and maintenance services, and streetlight construction and asset management services to utilities, municipalities, and other customers in the Washington, District of Columbia. Additionally, the company holds investments in eight cross-border energy leases. Pepco Holdings, Inc. was founded in 1896 and is based in Washington, District of Columbia.

Advisors' Opinion:

• [By Sally Jones]

  
  Highlight: Pepco Holdings Inc. (POM)

  The POM share price is currently $18.17 or 20.0% off the 52-week high of $22.72. Its yield is 5.90%.

• [By Sean Williams]

  Powering up
  It's pretty rare for stocks in the electric utility sector to see a prolonged dip given that electricity is a necessity product, but that's what we've seen from Mid-Atlantic electric utility provider Pepco Holdings (NYSE: POM  ) .

August jobs report: Hiring continues as unemployment falls

WASHINGTON (CNNMoney) Hiring continued at a slow pace in August, and the unemployment rate fell as more Americans dropped out of the labor force.

The U.S. economy added 169,000 jobs in August, the Department of Labor said Friday.

Although that was an improvement from 104,000 jobs added in July, it was also slower than the average pace of job growth over the last 12 months, and missed economist expectations.

Job growth for both June and July was also revised lower by a total of 74,000 jobs.

Meanwhile, the unemployment rate fell to 7.3%, but the decline came for the wrong reasons, as 312,000 people dropped out of the labor force. Only 63.2% of Americans now participate in the labor force -- meaning they have a job or are looking for one. That's the lowest rate since August 1978.

The report was being closely watched for signs that the Federal Reserve will begin pulling back on its controversial bond-buying program later this month. The Fed has said that the timing of the "tapering" would depend heavily on improvement in the labor market.

"When they look at the full weight of evidence, they'll conclude there's been no significant change in the last few months," said Jim O'Sullivan, chief U.S. economist for High Frequency Economics. "I think they will go ahead with the tapering in September."

But economists were mixed in their reactions. And stocks rose following the report, as investors took weak job growth as a sign that the Fed may hold off on tapering until later this year.

"It would very much surprise me if they tapered at this upcoming meeting," said J.J. Kinahan, chief strategist at TD Ameritrade. "Not only is the quality of jobs not exactly great, perhaps we're not creating as many jobs as we think."

Hot Undervalued Companies To Own For 2014

Many of the jobs came in traditionally low-paying sectors, with retailers adding 44,000 jobs and restaurants and bars adding about 21,000 jobs.

Despite the housing recovery, the construction sector added no jobs overall.

Other bright spots included 33,000 jobs added in health care, 23,000 jobs add! ed in professional services and 14,000 jobs added in manufacturing.

Overall, the trend remains the same: Modest hiring has continued at a rate of about 184,000 jobs a month for the last year, but that's not nearly fast enough for the 11.3 million people who remain unemployed. The economy needs at least 200,000 new jobs a month just to keep pace with population growth.

Breaking Down The Balance Of Trade

Top Canadian Stocks To Invest In Right Now

The balance of trade is the difference between a nation's exports and its imports. A crucial point to note is that both goods and services are counted for exports and imports, as a result of which a nation has a balance of trade for goods (also known as the "merchandise trade balance") and a balance of trade for services. The net or overall figure forms the balance of trade or "trade balance," a major contributor to a country's economic well-being. A nation has a trade surplus if its exports are greater than its imports; if imports are greater than exports, the nation has a trade deficit.

Trade Data – Census Basis and BOP Basis
While data on a nation's exports and imports of physical goods can be collated from customs documents such as export declarations and import manifests, this is not possible for trade in intangible services. The latter is therefore compiled based on the flow of funds, the foundation on which balance of payments (BOP) trade statistics are based. Therefore, data on merchandise trade is available based on both custom-based trade statistics and BOP, while data on services is only available on a BOP basis.

For example, in the U.S., statistics on exports and imports are compiled by the Commerce Department's Bureau of Economic Analysis (BEA) and released in a monthly report. The BEA collates information on exports from exporters' electronic export information (EEI) that have been submitted to the U.S. Automated Export System (AES). Exporters submit this export information to the U.S. Census and also to U.S. Customs and Border Protection. Similarly, import data is compiled from documents collected by the U.S. Customs and Border Protection pertaining to goods that have arrived in the U.S. from foreign countries. The BEA adjusts the goods total on a census basis to bring the data in line with the concepts used to prepare national and international accounts. The BOP-basis data derived in this manner enables goods trade numbers to be summed with services trade figures to arrive at a more accurate picture of overall U.S. trade, goods and services.

Distinguishing Between a Service Export and Import
Statistics for trade in services are derived from the BEA's estimates of service transactions between foreign countries and the U.S., based on periodic surveys and partial information from monthly reports. The BEA provides export and import data on services in a number of categories – travel, passenger fares, royalties and license fees, transfers under U.S. military sales contracts (only for exports), and direct defense expenditures (only for imports).

While the distinction between an export and import of a physical good is readily apparent, it is not as clear for a service. Here, the flow of funds determines whether a service transaction qualifies as an export or an import, depending on whether it is a debit transaction that results in a payment or outflow of funds, or a credit transaction that results in a receipt or inflow of funds.

So, for instance, fares received by U.S. carriers from foreign residents for travel between the U.S. and foreign countries, or between two points overseas, would show up on the export side of the trade balance for services. Likewise, fares paid by U.S. residents to foreign carriers would show up on the import side of the trade balance for services.

Breaking Down the Balance of Trade Numbers
Consider the U.S. trade balance figures for June 2013. The U.S. reported a trade deficit of $34.2 billion, the smallest deficit since October 2009 and well below the $45 billion deficit expected on average by economists.

Here's how the numbers stacked up for that month:
The merchandise trade (balance of trade for goods) deficit was $53.16 billion, as exports of $134.26 billion were exceeded by imports of $187.42 billion. These figures are BOP-based. The numbers on a census basis are slightly different, with exports of $133.31 billion and imports of $185.10 billion, for a trade deficit of $51.79 billion. The balance of trade for services was a surplus of $18.94 billion (exports of $56.91 billion less imports of $37.97 billion). The overall balance of trade was therefore -$53.16 billion + $18.94 billion = -$34.22 billion. Total exports of goods and services (BOP-based) amounted to $191.17 billion ($134.26 + $56.91), while total imports were $225.39 billion ($187.42 + $37.97). Subtracting total exports of goods and services from total imports gives the same trade deficit number of $34.22 billion. Capital goods ($46.22 billion) and industrial supplies ($42.32 billion) were the biggest export categories for goods in the month. On the goods import side, industrial supplies and materials ($54.6 billion, of which petroleum accounted for $22 billion) and capital goods ($45.58 billion) were the biggest categories. In services, the biggest categories among exports were "other private services" ($25.87 billion) and travel ($11.27 billion). The former category includes financial services, insurance services, business and professional services, and so on. Among service imports, these two categories were the biggest as well (other private services totaled $17.26 billion and travel $7.15 billion). Factors That Affect Trade Balance
Numerous factors affect a country's trade balance. These include:
Trade policies: Nations that are insular and have restrictive trade policies such as high import tariffs and duties may have larger trade deficits than countries that have open trade policies, since they may be shut out of export markets because of these impediments to free trade. Exchange rates: A domestic currency that has appreciated significantly may pose a challenge to the cost-competitiveness of exporters, who may find themselves priced out of export markets. This may pressure a nation's trade balance. Foreign currency reserves: To compete effectively in extremely competitive international markets, a nation has to have access to imported machinery that enhances productivity, which may be difficult if forex reserves are inadequate. Inflation: If inflation is running rampant in a country, the price to produce a unit of a product may be higher than the price in a lower-inflation country. This would affect exports, affecting the trade balance. Use Trade Balance As An Economic Indicator
The utility of trade balance data as an economic indicator depends on the nation. The biggest impact is generally seen in nations with limited foreign exchange reserves, where the release of trade data can trigger large swings in their currencies.

The trade data is usually the largest component of the current account, which is closely monitored by investors and market professionals for indications of the economy's health. The current account deficit as a percentage of GDP, in particular, is tracked for signs that the deficit is becoming unmanageable and could be a precursor to a devaluation of the currency.

However, a temporary trade deficit may be viewed as a necessary evil, since it may suggest that the economy is growing strongly and needs imports to maintain the growth momentum.

Trade data is also parsed to see which trading partners are contributing to the overall surplus or deficit. In June 2013, for example, the U.S. had a trade deficit of $26.6 billion with China, bringing its year-to-date deficit with the Asian giant to $147.7 billion. In contrast, the trade deficit with Canada – the biggest trade partner of the U.S., accounting for 16.8% of total trade in the first half of 2013 – was only $1.6 billion, for a YTD deficit of $15.5 billion. China's enormous trade surplus with the U.S. may lead to renewed calls for the nation to revalue its yuan, which critics opine is being held artificially low to stimulate exports.

U.S. trade data occasionally affects the greenback, which in turn has an impact on commodity prices because of the negative correlation between the two (stronger dollar causes weaker commodity prices and vice versa). These moves often result in volatility in Canada's TSX Composite index, which has a heavy weighting in commodities.

In general, market watchers appear more concerned with trade deficits than trade surpluses. This may be because chronic deficits often trigger a steep currency devaluation, leading to severe repercussions for the local economy as the higher interest rates that are used to prop up the currency take their toll. In summer of 2013, the currencies of India and Indonesia slumped 14% in just over two months as investors focused on nations with large trade and current account deficits. While India's foreign currency reserves grew in leaps and bounds after the economic reforms of the 1990s, rising gold imports in 2013 led to widening trade deficits, causing the Indian government to take measures to restrict gold imports.

The Bottom Line
The balance of trade is a key indicator of a nation's health. Trade balance data is available on a census / customs basis and BOP-basis for goods, and only on a BOP-basis for services. In general, investors and market professionals appear more concerned with trade deficits than trade surpluses, since chronic deficits may be a precursor to a currency devaluation.

Pay Attention to this Software Company

Even though Champion Shares PRO analyst Mark Rogers from The Motley Fool UK usually doesn't get too excited when it comes to software companies, today he's taking a closer look at this one.

I'm not exactly known for my enthusiasm when it comes to investing in software businesses.

Don't get me wrong—economically, the software industry has a number of attractive advantages. Returns on shareholder capital can be enormous—the company's earning power comes from its proprietary code, rather than heavy, depreciating machinery or demanding shareholder investments.

But like any fast-moving industry, staying on top of a market position in high technology can be like trying to capture lightning in a bottle. And as we know, lightning rarely strikes in the same place twice.

So it might be a surprise that I'm looking at Sage (LSS:SGE) today, which primarily develops business and accounting software for small-to-medium sized companies. There are three things I particularly like about Sage.

Firstly, unlike many other software companies, I think Sage could enjoy a long-lasting durability in its market. I get the impression that Sage is particularly well embedded within the firms who use their software. Generally, once companies start using Sage's software, I suspect they become reluctant to switch to another system they're less familiar with. This kind of stickiness provides an attractive recurring source of revenue from subscribers, and keeps the cash rolling in.

Secondly, the company's record of growing its earnings, dividends and cash flow over time is remarkable. Sage's performance has slipped in the last few years, but I think this can be forgiven, considering how small European businesses have struggled in recent years. Sage's customer base has grown from four million to six million since 2003, and in my view, we could see further growth in the next decade too. This track record, perhaps, suggests that other firms have struggled to muscle in on Sage's market position to date.

Finally, I think the current valuation is a fair—if not spectacularly cheap. Sage's shares trade at roughly 16 times normalized earnings, or 15 times last year's free cash flow. I feel that a 6-7% earnings yield is acceptable, assuming Sage can grow its profits modestly in the coming years.

Of course, no potential investment is without risks—the valuation isn't exceptionally cheap, and as ever in the software industry, there's a constant threat of competition and upheaval. But on a balance of the facts, I think Sage is a company worth taking a closer look at.

Mark does not own any share mentioned in this article.

Read more from The Motley Fool UK here...

Top 5 Energy Companies To Invest In 2014

Sometimes, don't you just wish governments would quit meddling with everything? Alan Oscroft of The Motley Fool UK sure does, especially in regards to a stock he feels is perfect for investors just starting out.

If you're starting out, you should consider SSE PLC.

It seems like fate.

My recent enthusiasm for Centrica as a good investment for novices had barely been published, before Labor leader Ed Miliband started rattling his sabre at the nasty greedy energy companies.

It's the companies that are responsible for energy being expensive these days, you see, and it's nothing to do with actual out-of-the-ground prices soaring or demand being high. Dear Ed, bless his socialist heart, is planning to do what no leader has successfully done to date—he wants to buck the market.

Now, my bull case for electricity supplier SSE (LSS:SSE) is, not surprisingly, very similar to that for Centrica. But please don't walk away at that, because I first want to address one specific thought...

Top 5 Energy Companies To Invest In 2014: Bankers Petroleum Ltd (BNK.TO)

Bankers Petroleum Ltd. (Bankers) is engaged in the exploration for and oil in Albania. The Company generates all of the oil revenue from its operations in Albania, which is located northwest of Greece in South Eastern Europe. In Albania, Bankers operates and has the rights to develop the Patos-Marinza and Kucova oilfields pursuant to License Agreements with the Albanian National Agency for Natural Resources (AKBN) and Petroleum Agreements with Albpetrol Sh.A (Albpetrol), the state-owned oil and gas corporation. The Patos-Marinza oilfield is an onshore oilfield in continental Europe, holding approximately 5.1 billion barrels of original-oil-in-place (OOIP). The Company also has rights to exploration Block F (adjacent to the Patos-Marinza oilfield), an 185,000 acre oil and gas prone exploration field. The Company�� subsidiaries include Bankers Petroleum Albania Ltd. (BPAL), Bankers Petroleum International Limited (BPIL) and Sherwood International Petroleum Ltd (Sherwood).

Top 5 Energy Companies To Invest In 2014: Reliance Industries Ltd (RELIANCE)

Reliance Industries Limited (RIL) is a conglomerate with business in the energy and materials value chain. The Company operates in three segments: petrochemicals, refining and oil & gas. The petrochemicals segment includes production and marketing operations of petrochemical products which include, polyethylene, polypropylene, polyvinyl chloride, poly butadiene rubber, polyester yarn, polyester fibre, purified terephthalic acid, paraxylene, ethylene glycol, olefins, aromatics, linear alkyl benzene, butadiene, acrylonitrile, caustic soda and polyethylene terephthalate. The refining segment includes production and marketing operations of the petroleum products. The oil and gas segment includes exploration, development and production of crude oil and natural gas. Its others segment includes textile, retail business, special economic zone (SEZ) development and telecom / broadband business.

Hot High Tech Stocks To Invest In 2014: Spire Corporation(SPIR)

Spire Corporation develops, manufactures, and markets engineered products and services in the areas of PV solar, biomedical, and optoelectronics. It offers specialized equipment for the production of terrestrial photovoltaic modules from solar cells; and photovoltaic systems for application to powering buildings with connection to the utility grid, as well as supplies photovoltaic materials. It also provides surface treatments to manufacturers of orthopedic, cardiovascular, and other medical devices; and performs sponsored research programs into practical applications of biomedical and biophotonic technologies. In addition, the company offers custom compound semiconductor foundry and fabrication services to customers involved in biomedical/biophotonic instruments, telecommunications, and defense applications. Its services comprise compound semiconductor wafer growth, other thin film processes, and related device processing. Further, the company provides materials testing s ervices; and performs services in support of sponsored research into practical applications of optoelectronic technologies. The company offers its products primarily through its sales personnel in the United States, Europe, Africa, and Asia. Spire Corporation was founded in 1969 and is headquartered in Bedford, Massachusetts.

Top 5 Energy Companies To Invest In 2014: Caiterra International Energy Corp (CTI)

CaiTerra International Energy Corporation (Caiterra), formerly Cyterra Capital Corp., is a Canada-based company is engaged in the exploration and development of oil and gas properties. The Company�� project includes Faust, Amadou and Lac La Biche. On March 9, 2012, the Company completed its qualifying transaction with West Pacific Petroleum Inc. (WPP), pursuant to which the Company acquired all of WPP�� working interests in certain petroleum and natural gas leases and an oil sand lease in the Lac La Biche and Amadou Projects located in Alberta, Canada and certain other assets (the QT Oil and Gas Properties) from West Pacific Petroleum Inc. (WPP). On December 17, 2012 the Company acquired the Faust Property located just north of the Swan Hills oil field and south of the Town of Slave Lake.

Top 5 Energy Companies To Invest In 2014: New Western Energy Corp (NWTR)

New Western Energy Corporation, incorporated on September 25, 2008, is an oil and gas and mineral exploration and production company with current projects located in Oklahoma, Kansas and Texas. The Company�� principal business is in the acquisition, exploration and development of, and production from oil, gas and mineral properties. The Company�� project includes Oklahoma Project, Texas Project, Kansas Project and Pennsylvania project. As of December 31, 2011, the Company�� total estimated unproved reserves were approximately 1,495,757 barrels of oil reserves. On January 2, 2012, the Company acquired of 100% interest in Royal Texan.

Oklahoma Project

This project comprises of two leases Glass and Phillips. The Glass Lease is located in Roger County, Oklahoma. The Glass leasehold property contains approximately 120 acres. The Phillips Lease is located in Rogers County, Oklahoma. The Phillips leasehold property contains approximately 150 acres. The Company�� oil leases located in Oklahoma were originally obtained from one lessor RC Oil Co.

Texas Project

This project comprises of three leases Swenson, Reves and McLellan. On January 27, 2011, the Company�� subsidiary New Western Texas acquired a 50% working interest in 160 acres of oil and gas leases in Jones County, Texas, known as the Swenson Lease. On August 8, 2011, the Company�� subsidiary New Western Texas was assigned from a third party a Paid Up Oil and Gas Lease agreement with Michael L. McLellan and Paula McLellan (Lessors), which provided us a 50% working interest in approximately 160 acres of land for the purpose of exploring for developing, producing and marketing oil and gas, along with all hydrocarbon and non-hydrocarbon substances produced.

Kansas Project

On December 20, 2011, entered into an assignment of oil and gas lease with an independent third party for an oil and gas property in Kansas referred to as Chautauqua Lease, whereby the assignor gra! nted the rights to the Company to carry on geographical and other exploratory work, including core drilling, and the drilling, and operating for producing, and marketing all of the oil, gas, including all associated hydrocarbons. As of December 31, 2011, the Company has not started any oil and gas exploration on Chautauqua Lease.

Pennsylvania project

The property is approximately 23 acres and is located on a glacial aged kame terrace. The terrace sands, gravels and finer sediments were deposited in response to blockage by glacial ice. Pennsylvania's Marcellus Shale natural gas producers operate approximately 50,000 wells and deliver more than 158 billion cubic feet of natural gas.

Advisors' Opinion:

• [By Peter Graham]
  New Western Energy Corp (OTCMKTS: NWTR) May Have Enough Cash for Now

  Small cap New Western Energy Corp is an independent energy company engaged in the acquisition, development, production, and exploration of oil, gas and minerals primarily in North America. On Friday, New Western Energy Corp fell 16% to $0.189 for a market cap of $13.02 million plus NWTR is down 37% over the past year and down 10% since February 2012 according to Google Finance.

Seth Klarman’s Investment Framework

Margin of safety and risk aversion is Seth Klarman's central investment tenet. And risk aversion begins with defining a margin of safety for your investments. In his book Margin of Safety, Klarman outlines three of the best ways to build a winning stock portfolio:

· Consider the risk and downside associated with the investment before focusing on potential returns.

· Perform a bottom-up approach on individual companies while ignoring the industry and its connections with the economic cycle as a whole.

· Evaluate how the company achieves its returns and research why revenues and profits have increased or decreased year by year.

The key to downside risk protection

In the current financial market environment, unprecedented things are happening with surprising regularity. This is as true for our preparations for financial disaster as for any other kind. And when the memories of disaster, along with worry and diligence, dim over time, it leads to complacency in investors. Complacent investors naturally focus more on benefits and the focus on benefits will lessen the concern over what could go wrong. It is important to prepare your investments for stormy times and one way to do this is to consider the downside protection an investment offers. Downside protection starts with understanding the risks associated with the investment. When the risks are identified, then the best course of action is developing a plan for protecting against those downsides. One of the most popular forms of downside protection is investing with a margin of safety.

As Klarman writes in Margin of Safety, "A margin of safety is achieved when securities are purchased at prices sufficiently below underlying value to allow for human error, bad luck, or extreme volatility in a complex, unpredictable and rapidly changing world." Klarman, when giving a margin of safety, drives towards investments that provide adequate balance sheet cash and low-risk collateral. A margin of safety d! oesn't guarantee an investment will generate high returns but it provides room for error in an investor's judgment. In particular, it provides a cushion against any miscalculations that may occur. Miscalculations, no doubt, will be inevitable because an investment's intrinsic value is subject to various interpretations by investors, which affect how large a margin of safety investors will choose to set. In general, the bigger the margin of safety set by investors, the less likely investors will suffer losses.

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Why use bottom-up approach

Bottom-up investing focuses more on analyzing a specific company and less on the the financial markets and economy as a whole. With bottom-up investing, a thorough review of the company is done, paying close attention to factors like financial stability and the conduct of management. This approach is commonly used during instances where we think that individual companies can do well in an industry that is not performing well. They pose great opportunities for value investors because these types of companies are ones most likely to be overlooked by the average investor.

Most investors naturally choose top-down investing, a strategy focused on investing according to the market cycles and economic environment, which tends to be a better measure of how the stock market is performing as a whole. However, economies and industries are often too complex for investors to gain useful insight.

Bottom-up investors ignore the markets and focus on specific dynamics to get ahead of the game. They evaluate factors like competitive advantage and management reputation.

Klarman said the following to investors in his Baupost letter earlier this year: "Our disciplined risk aversion throughout 2011 enabled us to avoid dangerous temptations and remain focused on investments in our areas of strength and competitive ! advantage! ." Competitive advantage comes down to two questions. Can the company raise prices for their products while maintaining sales in a competitive environment? Can it continue to retain customers as the business undergoes operational and technological changes? One aspect for investors to keep in mind is that of technological change, a constant threat to industries like retail stores and mobile communications. Best Buy (BBY) used to be the go-to place where customers could shop for electronic appliances but internet retail took that away. RIM (RIMM) used to be a model company that produced phones for email on-the-go but competitors like Apple (AAPL) and Google (GOOG) upped the ante and took away the value of RIM's products. These kinds of circumstances show that keeping up with trends on a regular basis is a vital part of bottom-up investing.

Management reputation explains a company's business model, a measure of how the business makes a profit while delivering value to its stakeholders. If there is one theme that continually runs through the public statements of billionaire investor Warren Buffett, it is the principle that investors should only consider investing in companies with managers of competence and integrity. Buffett explains that he likes managers who stick to doing what the company does best. He declares, "The best business returns are usually achieved by companies that are doing something quite similar today to what they were doing five or ten years ago." On the contrary, Buffett suggests investors to avoid companies with managers who pursue growth for growth's sake and acquisitions for the sake of owning more. Like Buffett, Klarman is a deep value investor who thinks more bottom-up than top-down.

Develop a framework for decision making

Outstanding investment returns are, indeed, hard to achieve. But once investors take care of the risks and understand a company better, it is possible to develop a strategy for generating better returns. Investors can increas! e their c! hances at bigger returns by gaining an idea on how much cash a business is generating, where it is coming from, and whether its origin is sustainable. According to Klarman, a company's share price often fluctuates significantly in the absence of fundamental developments, such as when a sizeable seller needs cash quickly. So how can investors determine the sustainability of cash within the business? Reading through the financial statements, focusing on the line items that affect cash generation, and trying to remember key statistical numbers are just a few of the key steps.

When investors find the information they need, they need to dig deeper into those numbers by examining sub-statements and reports that say something about the numbers. These steps, taken altogether, will form the foundation of a unique investing strategy for each value investor. Over time, Klarman discovered a great strategy that produced a top-of-the-line stock portfolio.

Four of Klarman's stocks include PDLBioPharma (PDLI), Ituran Location and Control (ITRN), BP (BP), and Microsoft (MSFT). What these companies have in common are annually increasing total revenues, annually increasing cash flows, and gradually decreasing operating expenses and debt. Additionally, they show a clear value focus with P/E ratios no greater than 15. And even when stocks like these go through a troubling period brought on by a sagging economy or major scandal, they have an ability to bounce back.

The following sums up what Klarman tries to do at Baupost: "We are always long-term oriented. We never attempt to gauge near-term market movements; we have no edge there. We strive to make long-term investments that have truly compelling risk-reward characteristics. We are never afraid to stand apart from the crowd. We stick to our game plan, and focus on areas where we are skilled and experienced."

An investment framework like Klarman's is necessary to develop a winning portfolio. The framework should include principles! through ! which ideas and decisions are filtered. A sound investment process, most of the time will lead to a good investment result. But ultimately, investor success in the long term is shaped by how well we can develop and utilize our skills over time to understand companies better.

J.C. Penney Store Closures – Likely Just A Starting Point

J. C. Penney Company, Inc. (NYSE: JCP) is raising the white flag of surrender on some  of its operations. Late on Wednesday came word that the struggling department store retail player will take new initiatives to advance its turnaround. That includes store closures, which also means layoffs are coming.

The number of closures was put at 33 stores, labeled as underperforming stores. This will happen fast because the company said that final closings will take place in early May.

If you read on, you may also determine that the effort is simply not enough for a company in its shape. The annual cost savings are put at roughly $65 million. It will take about $26 million in pre-tax charges in the fourth quarter of 2013 and $17 million in future periods.

Some 2,000 jobs will be eliminated as a part of the store closures. Remaining inventory in the stores being closed will be sold over the next several months.

CEO Mike Ullman said that, while it is a difficult decision, this is an important step to address a strategic priority to improve the profitability of the stores and to position the company for future success. Our take is that more closures are going to have to be made if the company cannot fix itself from within.

Many of the places that are being closed you may have never heard of. Also, keep in mind that J.C. Penney operates close to 1,100 stores. A full list of store closures is as follows (state, city, location):

AL- Selma; Selma Mall CA- Rancho Cucamonga; Arrow Plaza CO- Colorado Springs; Chapel Hills Mall CT- Meriden; Meriden Square FL- Leesburg; Lake Square Mall FL- Port Richey; Gulf View Square IA- Muscatine; Muscatine Mall IL- Bloomingdale; Stratford Square Mall IL- Forsyth; Hickory Point Mall IN- Marion Five Points Mall IN- Warsaw Marketplace Shopping Center MD- Salisbury; The Centre at Salisbury MI- Marquette; Westwood Plaza MN- Worthington; Northland Mall MS- Gautier; Singing River Mall MS- Natchez- Natchez Mall MT- Butte; Butte Plaza Shopping Center MT- Cut Bank NC- Kinston; Vernon Park Mall NJ- Burlington; Burlington Center NJ- Phillipsburg; Phillipsburg Mall OH- Wooster; Wayne Towne Plaza PA- Exton; Exton Square Mall PA- Hazleton; Laurel Mall PA- Washington; Washington Mall TN- Chattanooga; Northgate Mall VA- Bristol; Bristol Mall VA- Norfolk; Military Circle Mall WI- Fond Du Lac; Forest Mall WI- Janesville; Janesville Mall WI- Rhinelander; Lincoln Plaza Center WI- Rice Lake; Cedar Mall WI- Wausau; Wausau Mall

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When Macy’s announced store closers its shares rallied. J.C. Penney shares were down close to 1% after the news was announced. It seems that this is just not enough of an effort to close underperforming stores. It is highly unlikely that the company’s woes are isolated in only 3 out of every 100 locations.

Time to Say Bye to Liquidmetal Technologies, Just for a While (LQMT)

Well, I hate to be the one to say I told you so, but, I told you so. Back on November 22nd I told you the gain from Liquidmetal Technologies Inc. (OTCBB:LQMT) was no ordinary gain. It was a catalyst for a much bigger bullish move. See, with that day's advance, LQMT hopped above a nagging resistance line. The end result was a stock that was not only proverbially free to move about the cabin, but a stock that had proven it had already established some upward momentum. Sure enough, Liquidmetal Technologies shares are up 47% since then. You're welcome.

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I don't come here to gloat about my call on LQMT though. I'm reprising my look because, thanks to this month's volatility, the uptrend is once again threatened - at least in the short run - and some decisions need to be made.

First things first. We can now look back on the daily chart of Liquidmetal Technologies Inc. and recognize that the wedge shape I was talking about a couple of months ago did its job.... squeezing the stock to a point where a breakout was inevitable. Thing is, after a few months worth of squeezing, it was going to take at least a couple of months for the chart to make up for lost time. But, it was worth the wait. LQMT is well up now, and plenty profitable for anyone who took a swing then.

The question is, now what? The stock's going nuts to be sure, but it looks a little too hot for its own good.

To answer that question the first thing we want to do is take a step back and look at the bigger picture... a weekly chart of Liquidmetal Technologies. We can still see the wedge pattern in this timeframe, but more than that, we can gain some perspective on what's going on with LQMT. Yes, it's bullish in the short-term, but better still is the fact that it's also pulling out of a long-term funk. Even better than that is the fact that we're finally seeing higher-volume buying that's persistent - one of the missing ingredients with the prior recovery efforts.

Still, LQMT is wickedly overbought in the short run. How does a trader handle that?  Incredibly enough, this is NOT a situation where a trader would want to set a stop loss in place and just deal with whatever pullback happens to hit the stock before the next bullish leg. This is a case where the smart thing to do is to lock in the gain, head back to the sidelines, and then what and see how, it, and when the buyers regroup. I'd be willing to stick with a 20% gain and ride it out. We've got more than a 40% gain in Liquidmetal Technologies to protect though, and that gain could be cut in half by the end of today. And, as overbought as it is right now, I'd be very surprised if the stock didn't pull back to the $0.18 area real soon. I'd be a buyer again there, provided the 20-day moving average lines and the highs we saw in December acted as a floor.

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Is McDonald’s Tastier Than Burger King and Wendy’s?

With shares of McDonald's Corp. (NYSE:MCD) trading at around $101.72, is MCD 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

For those who haven't already heard, Technomic recently conducted a survey on Informal Eating Out establishments, including McDonald's, Burger King Worldwide (NYSE:BKW), and The Wendy's Company (NYSE:WEN). Below are the results:

Food Quality

1st Place: Wendy's

2nd Place: Burger King

3rd Place: McDonald's

Taste & Flavor

1st Place: Wendy's

2nd Place: Burger King

3rd Place: McDonald's

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You don't have to be a statistician to see a pattern forming here. However, the irony is that McDonald's dominates when it comes to running a business, and it has been the best investment of the three throughout the years. In addition to the most impressive stock appreciation, McDonald’s also offers the highest yield. McDonald's currently yields 3 percent whereas Burger King yields 1.30 percent and Wendy's yields 2.60 percent.

McDonald's is an exceptional performer when it comes to branding. It's the fourth most valuable brand in the world behind IBM (NYSE:IBM) (3rd), Google (NASDAQ:GOOG) (2nd), and Apple (NASDAQ:AAPL) (1st).

This doesn't mean that McDonald's is free of problems. It has too many menu items – 145 items to be exact. McDonald's better not sign up for an episode of Kitchen Nightmares. Chef Ramsay would tear the place apart. Having this many menu items has also led to slower food service. Considering many diners look at McDonald's as a fast food establishment – regardless of what McDonald's wants to call itself – this is a big negative. That said, it’s an easy problem to fix since many of the menu items are repetitive. Thankfully, McDonald's is reworking the menu. It's also going through a store reimaging process. This will lead to increased near-term costs, but it should also lead to increased market share over the long haul.

Now let's get to some numbers. Below is a chart comparing fundamentals for McDonald's, Burger King, and Wendy's.

	MCD	BKW	WEN
Trailing P/E	18.97	48.49	N/A
Forward P/E	16.39	20.78	26.65
Profit Margin	19.79%	8.07%	-0.12%
ROE	36.59%	12.07%	-0.23%
Operating Cash Flow	7.02B	250.20M	238.16M
Dividend Yield	3.00%	1.30%	2.60%
Short Position	1.10%	12.00%	9.40%

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

T = Technicals Are Strong

McDonald’s has been a steady winner over the past three years. This should come as no surprise.

	1 Month	Year-To-Date	1 Year	3 Year
MCD	2.23%	16.74%	15.63%	65.21%
BKW	3.35%	15.30%	-0.53%	-0.53%
WEN	13.33%	31.16%	37.56%	50.21%

At $101.72, McDonald’s is trading above its averages.

50-Day SMA	101.28
200-Day SMA	94.50

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E = Equity to Debt Ratio Is Normal

The debt-to-equity ratio for McDonald’s is close to the industry average of 0.90. Debt management has been good over the years, but there are now concerns about increased debt ratios due to consistent buybacks.

	Debt-To-Equity	Cash	Long-Term Debt
MCD	0.84	1.87B	12.80B
BKW	2.55	598.80M	3.05B
WEN	0.74	428.68M	1.46B

E = Earnings Are Steady

Earnings and revenue have steadily increased on an annual basis. However, the pace has slowed.

Fiscal Year	2008	2009	2010	2011	2012
Revenue ($) in millions	23,522	22,745	24,075	27,006	27,567
Diluted EPS ($)	3.76	4.11	4.58	5.27	5.36

When we look at the last quarter on a year-over-year basis, we see an increase in revenue and earnings. That said, both revenue and earnings declined on a sequential basis.

Quarter	Mar. 31, 2012	Jun. 30, 2012	Sep. 30, 2012	Dec. 31, 2012	Mar. 31, 2013
Revenue ($) in millions	6,546.60	6,915.90	7,152.40	6,952.10	6,605.30
Diluted EPS ($)	1.23	1.32	1.43	1.38	1.26

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

Conclusion

McDonald's is one of the strongest brands in the world. For that reason alone, it would be unwise to bet against McDonald's. This doesn't mean a long position should be initiated. It simply means that shoring the stock would be extremely risky.