Top US Insurance: April 2014

Wednesday, April 30, 2014

Gold Miners Still Can’t Get Earnings Right; Still Life in Newmont-Barrick Merger?

Earnings from Yamana Gold (AUY) and Barrick Gold (ABX), as well as the death of the merger between Barrick and Newmont Mining (NEM), are weighing on gold miners this morning.

Associated Press

Barrick Gold reported a profit of 20 cents a share, beating forecasts for 19 cents a share, on sales of $2.63 billion. Analysts had expected $2.6 billion. Barrick also lowered its copper guidance. No mention was made of a merger with Newmont Mining in Barrick’s press release.

Yamana Gold, meanwhile, reported a profit of 2 cents a share, missing forecasts for 4 cents. It said it will focus on its Canadian and Argentine operations.

Morgan Stanley’s Brad Humphrey and team assess Yamana’s miss:

[Yamana's] 1Q14 results missed consensus but were in line with our estimates. Gold and copper output came in below our forecasts, offset by lower than expected expenses. Due to seasonality, [Yamana] typically reports a weaker 1H. Given April results provided, output is trending up in Q2. [Yamana] Shares could be weak initially on back of consensus miss but going fwd, output is expected to trend up QoQ and if successful acquiring 50% of Osisko, political risk profile improves, with the addition of this material, long life, low cost asset.

Cowen’s Adam Graf and Misha Levental

[Barrick] 1Q14 adjusted earnings of $0.20/share, slightly ahead of consensus, down from $0.92/share y/y. The decrease primarily reflects the impact of lower metal prices and lower gold sales volumes. Additionally, lower earnings reflect the impact of asset sales that occurred since the second half of 2013, including the sale of the Kanowna and Plutonic mines in Australia and its 33% stake in the Marigold mine in Nevada in 2014.

Full-year guidance remains on track for gold at 6.0-6.5MM oz Au at AISC of $920- $980/oz. Copper production has lowered, however, to 410-440MM lbs Cu (from 470-500MM), at original cost guidance of $1.90-$2.10/lb Cu. Copper production was lowered due to a processing disruption at Lumwana; the failure is currently being assessed, with production expected to resume in 3Q14.

And of course, there’s no mentioning Barrick without talking about Newmont Mining, which ended merger talks with Barrick this week. Credit Suisse analysts Anita Soni and Robert Reynolds asses the state of the negotiations:

In our view the potential remains for a merger/take-over of [Barrick] and [Newmont Mining] (either friendly or hostile), with the potential synergies likely accretive to a Newco’s [free cash flow and net asset value]. Key hurdles may be the Newco’s size and the headquarters location…

We maintain our Neutral as we view [Newmont Mining] as fairly valued on NAV and OpCFa vs. peers. Positively, [Newmont Mining] provides peer leading FCF in 2015 and 2016 with a resolution of the Indonesia export ban. With maturing current operations, [Newmont Mining] will weigh external M&A against its internal opportunities (Merian, Conga and Ahafo expansion) to reinvest FCF. On the other hand, [Newmont Mining's] favourable medium term FCF outlook and potential synergies make it an attractive partner for [Barrick], in our view.

Shares of Barrick Gold have dropped 1.4% to $17.42, while Yamana Gold has fallen 2.4% to $7.46 and Newmont Mining is off 0.5% at $24.90. The Market Vectors Gold Miners ETF (GDX) has declined 0.7% to $24.14, while the SPDR Gold ETF (GLD) is down 0.3% at $124.51.

Tuesday, April 29, 2014

Twitter sinks as user growth underwhelms

Click the chart for more info.

NEW YORK (CNNMoney) Investors are starting to lose patience with Twitter.

Shares sank nearly 9% in after-hours trading Tuesday following uninspiring first-quarter results from the social-media company.

Twitter's active-user base is still growing, hitting 255 million as of last month. But that was only a 6% increase from the previous quarter -- not the breakneck pace that investors have come to expect from young social media companies.

Twitter (TWTR) booked $250 million in sales for the first quarter, but it still wasn't profitable, losing $132 million. Both revenue and Twitter's quarterly loss managed to beat Wall Street analysts' forecasts.

But Twitter's outlook wasn't much to be excited about: The company expects sales to rise only modestly to between $270 million and $280 million in the current quarter. That's in line with analysts' expectations, but investors were clearly hoping for more.

Twitter has been one of the biggest losers in this year's downturn for tech stocks, falling over 30% since the start of 2014. It is the second-worst performer in CNNMoney's Tech 30 index.

The stock surged over 70% on during its debut on the New York Stock exchange in November to $44.90, but was down to $43.03 as of Tuesday's close.

Monday, April 28, 2014

Drive-through brings fresh meat to customers

ALEXANDRIA, VA. – As a line of cars forms in the back parking lot of a church here, a massive refrigerated truck hums on the edge of the lot. It's a Zaycon Foods truck, offloading chilled boxes of ground beef and ham straight into customers' trunks.

After delivering a couple hundred pounds of meat to customers here, the truck will head on to Lynchburg, Va., the 39th of 45 stops over a period of about two weeks. In total, it will deliver more than 20,000 pounds of meat, reloading with fresh cases several times during the trip. In each location, the truck creates make-shift drive-throughs, where customers will come to pick up their share of farm-fresh meat.

In nearly every state, Zaycon Foods customers are bypassing the grocery store to buy boneless skinless chicken breasts, hickory smoked bacon and sirloin steaks straight from the source: the farms where the animals were raised. Zaycon partners with those farms to deliver food to customers in a model that's like a marriage between Costco and a farmers market.

Customers prepay for bulk cases of meat, and at bulk prices. The highest a chicken breast has ever sold for is $1.89 a pound, co-owner Mike Conrad says. Ground beef goes for around $3.99 a pound. Products are 100% natural without added hormones or preservatives.

Customers are notified of upcoming "events" – when a certain product is going to become available – and can pre-order as many cases as they want. When they arrive on location, they don't even have to get out of the car. A truck driver uses an iPad to find their order and loads the boxes into their trunk.

Zaycon sells everything from chicken and beef to salmon and even fresh produce and milk in some locations, all in bulk, and in about half the time it takes for most products to reach, and then sell from, grocery store shelves. The model has caught on with 350,000 customers across the country as Americans have become more conscious about where and how they get their food.

"People like to know where the! ir food comes from," Conrad says. Zaycon's goal is to deliver food to customers within a maximum of six days from when it leaves the processing plant, and often in two to three days.

Since starting in Spokane, Wash., in 2009, Zaycon has grown to serve 48 states, representing about 1,300 drop-off locations. The company primarily specializes in meat, and because of the size of orders, customers are mostly families, Conrad says.

Zaycon's marketing efforts are entirely based on word-of-mouth and social media. It uses Facebook pages to rally customers and see whether there's enough interest in potential new markets and gives food credits to customers who help recruit others.

"I think companies miss the boat by not letting their customers be a part of you," Conrad says. "There's an emotional attachment there."

Stacy Medrano first ordered chicken breasts with Zaycon about eight months ago. She was impressed enough to place a second order for ground beef, which she came to pick up in Alexandria.

"The chicken breasts are fresher," she says. "There's no smell, there's no foul taste or sliminess to them. They're bigger and juicier, just overall better quality."

Zaycon doesn't have enough customers to be able to partner with local farmers in each of its locations, though it does in some. In order to keep prices down it primarily works with larger farms in Florida, Georgia and Louisiana.

Eventually Conrad hopes the company grows enough to buy and sell everything locally in each of the company's locations.

"It's really about the health and wellness of people," he says. "Most people don't understand where food comes from. I'm trying to educate them."

Sunday, April 27, 2014

Chipotle Is A Tasty Bet For The Long Run

Despite increasing competition and diet-conscious customers, the restaurant industry's sales have been rising . In 2 years, annual restaurant sales have almost tripled from $232.3 billion to $586 billion and are projected to reach $684 billion in 2014. This growth has led various restaurants to increase their footprint by increasing their restaurant chains, with many new players also entering this market.

For those who like to opt in food and beverages segment stocks, can always look at Chipotle (CMG) and Cheesecake (CAKE). Both these companies are recording growth. These two are established players as well.

Chipotle is currently on a growth run as a result of efforts to modify its food menu and is also expanding its chain of the restaurants globally. The traffic at Chipotle seems to be increasing, which is helping its growth. Fiscal 2013 was all growth for Chipotle. It expanded its chain by adding 185 new restaurants and recorded a total revenue of $3.21 billion, up by 17.7% from the previous year. The bottom line was also impressive, coming in at $327.4 million, up by 17.8%.

The growth momentum has continued in the first quarter of 2014, with Chipotle adding 44 new restaurants and recording revenue of $904.2 million, up by 24.4% from the same quarter last year. Compared with the year ago quarter, comparable restaurant sales were up by 13.4% and net income was $83.1 million, up by 8.5%.

As the growth continues, it is focused on "food with integrity" that resonates well with its customers. Moreover, its announcement about eliminating genetically modified organisms, or GMOs, from its food by the end of 2014 has been received well by health-conscious consumers as well as investors. For 2014, it has plans to open 180-195 restaurants to sustain the growth trajectory.

Chipotles is known for using fresh ingredients. But, over the years, the prices of the fresh ingredients has been constantly rising . This does effect the margins and the earnings of the company. To offset this, it plans to increase prices in the menu to boost its profits in the future. The share price of Chipotle was pushed down due to profits being hit by an increase in ingredient costs. The price rise in the menu is certainly good news for the investors and I can fore see a better bottom line in the future.

The anticipated price rise would be in mid-single digits (~5%) by the end of the quarter. This will certainly offset the rising food cost for the burrito chain. A 5% increase would raise the cost of Chipotle's chicken burrito from $7.81 to about $8.20 in New York. Most consumers probably won't even notice because the price hikes will only amount to a few dollars and cents.

Although stock price did fall as the news of price hike was aired, but this is a temporary fall and the patient investors are always the winners.

Conclusion

Chipotle has been constantly expanding its outlets and at an impressive growth rate. So, it seems to be a good bet for investors.

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Saturday, April 26, 2014

Will Wall Street stay world's financial capital?

"People think you can just walk right in," the bemused security guard said to his co-worker, who snickered, shook his head and returned to his outpost under the tented area outside the otherwise-regal entrance to the New York Stock Exchange.

The dejected tourist walked away after learning that, no, there is no visitors' gallery at the exchange where he could watch what was happening inside. He then disappeared into a dense crowd of tourists browsing the mall around the exchange one pleasant early April day. Apparently, the man had made multiple efforts — "guard shopping" as one of the security personnel put it — to get a look at the trading inside the confines of 11 Wall St.and was unsuccessful each time.

Nearby, folks posed in front of the George Washington statue at Federal Hall, across the walkway from the exchange. They aimed their camera phones curiously around Broad and Wall streets, many drawn to the enormous American flag that flies in front of the NYSE, where it has stood proudly since shortly after the Sept. 11, 2001, terror attacks.

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And they wondered what was going on inside. This is, after all, supposed to be the financial capital of the world, so there must have been some really amazing beehives of activity happening.

If they only knew.

Truth is, there's really not that much to see anymore inside these majestic halls.

An exchange that used to house more than 5,000 traders shouting out their business now is a mostly docile habitat in which those still left on the floor quietly tap out orders on hand-held computers and barely make a peep at swift changes in market activity.

Things indeed have changed a lot for the exchange over the past 25 years.

The next 25 years — well, things could get dicey.

Will the exchange still exist? Will it be a museum? An office complex? An au! tomated emporium run by robots?

More importantly, will New York still be the financial capital of the world?

Nobody seems quite sure, though the building itself does maintain its nostalgic appeal even if it's lost much of its relevance as a trading center.

"Symbols matter," said Nicholas Colas, chief market strategist at New York-based brokerage ConvergEx. "It's important to have a symbol that people can relate to, and it's much easier to relate to a physical space. It will be important for the New York Stock Exchange to maintain some relevance with investors."

As things stand in 2014, the prospects for 2039 for the building and what happens inside it hinge on three things: Just how far the trading community pushes automation, how hard regulators push back and how well the 80 or so locations now where stocks are traded can maintain their trust and credibility with the investing public.

A rapidly changing ecosystem

New York faces a bevy of challenges. Automated trading has taken up about four-fifths of the market's volume. Dark pools—privately run trading centers away from the NYSE — are scattered around the metropolitan area. Exchanges around the world such as those in Tokyo, London and Shanghai are seeing their volumes increase, though they still draw just a fraction of the volume seen in New York at the NYSE and the Nasdaq.

The current market is dealing with one whale of a black eye caused by suspicion over high-frequency trading and its stranglehold on market activity. The proliferation of trading aberrations such as 2010's "Flash Crash" and the intense debate over Michael Lewis' HFT-centered book "Flash Boys" has underscored the credibility problem, which will have to be rectified — and soon — if the market is to have a future in 2½ decades.

Conversations with the folks who help make the market machinery work reveal some interesting — and surprising — thought trends.

For instance, there is a pervasive belief that the market will bec! ome less ! fractured and perhaps even a bit slower than the current incomprehensible millisecond-moving speeds. While automation is a fact of life, there is no widely shared dystopian view of a market run by faceless machines without accountability.

There's even a bit of whimsy.

Market veteran Art Hogan peered into his crystal ball at CNBC.com's request and saw two megamergers that would shake Wall Street at its core. One would see Facebook and Twitter join to take over the New York Stock Exchange; the other would have Apple and Google combine forces to wrest control of the Nasdaq, which trades mostly tech stocks.

In the Hogan scenario, the two mammoths blow out the rest of the 80 or so exchanges and dark pools where trades currently take place and defragment the market. At the same time, regulators change trading "ticks," or the increments in which stocks can trade, from the current decimalization to nickel sizes, eliminating the benefits that high-frequency traders enjoy from capitalizing on moves of pennies.

Hogan is kidding . . . sort of, but in a way that indicates the general direction the market needs to trend to win back investor confidence.

"You've got a world (in 25 years) where technology, social media and financial markets have come together to increase investor confidence in markets," said Hogan, the chief market strategist at Wunderlich Securities. In his future vision, "Wall Street gets to play its role again as the greatest place to form capital for emerging companies, and to research those emerging companies."

Don't laugh too loudly.

Hogan's scenario of a market that undergoes massive transformation that actually benefits the retail investor and re-establishes some sanity in a market that has lost so much of its trading volume over the years is a widely shared vision.

"We're moving faster and faster. The speeds are incredible, but we're going to get to the point where it doesn't go any faster," said Peter Costa, president of Empire Executions and an ! NYSE gove! rnor with 33 years of trading experience.

A quieter street

In the Costa scenario, trading changes completely.

In a future world where cash becomes marginalized and digital "credits" take over as a system of payments, companies find old-fashioned stock issuance a trite method of raising funds. Stocks, meanwhile, start to more closely resemble mutual funds, with very little if any price movement during market hours and instead "a final pricing at the end of the day," Costa said.

"There will be more financial options for investors," said Todd Schoenberger, managing partner at LandColt Capital. "For example, we now have stocks, bonds, mutual funds, etc. Look for new products to enter the market, which will be a real hassle for regulators. But, expanded options is what you get when you have too many players transacting business."

Whatever form trading takes — high speed, low speed or no speed — what will matter most is fairness, and many Wall Street pros expect Washington regulators to continue their pursuit of an equitable environment.

"What they're realizing is money managers like myself don't care about getting a sell in half a second," said Michael Cohn, chief market strategist at Atlantis Asset Management. "I don't care about the pennies, I care about the perception and the fairness. It affects my business if people think the market is not fair."

If there is a common theme in terms of hopes for the future, it indeed would be some simple fairness.

"You can still have automation, but it would be nice to bring back some sort of ecosystem into it," said Joe Saluzzi, co-founder of Themis Trading and an ardent campaigner against the ills of high-frequency trading.

Saluzzi hopes the next 25 years hold a greater emphasis on human involvement, not less.

"You like to have someone involved. The investor relations officer, the chief financial officer, really has no idea what's going on in their stock," he said. "There are no specialists involved. They! need mor! e information as to what's going on. It's not there anymore."

While the amount of bodies on the exchange floor indeed has dimmed considerably over the years, the level of employment in financial services has remained fairly and surprisingly resilient.

Financial services jobs peaked out in late 2006 at about 8.4 million, according to the Bureau of Labor Statistics. While that level certainly has declined, the nearly 6% drop to 7.9 million as of March 2014 could have been much worse considering the way Wall Street banks cut jobs en masse during the crisis.

A shift to markets abroad

Expectations, though, are for even fewer footsteps on the Street.

"The amount of employees that will be working on Wall Street, if you want to call it that, is going to continue to go down year after year," said Marc Pfeffer, a former trader at Goldman Sachs and the defunct Bear Stearns who now works as a portfolio manager at CLS Investments. "I am perplexed till today to understand why there are that many people at these firms. I think they're going to be cut by a huge percentage, if they even exist at all."

So where does that leave the exchange as a physical property?

If you close your eyes tightly enough you can almost see the tumbleweeds rolling across the cobblestones past the Wall Street subway station, past the Deutsche Bank building and gliding on a path to nowhere. After all, what possible use could there be for such a structure in the next age of trading?

"I don't think the NYSE exists anymore period," said Dick Bove, the outspoken banking analyst and vice president of equity research at Rafferty Capital Markets. "I think it's a good television set for you guys."

Well, there's that. It's true that on some days the most excitement comes from the guests that CNBC and other media attract, whether that's market veterans like Kenny Polcari, CEOs such as AIG's Robert Benmosche or professional celebrities like Kim Kardashian. But is it possible the building will serve no! function! ?

Bove sees the global financial center shifting from New York only to various other places around the world—Canada, China, wherever countries are committed to a thriving banking sector and not obsessed with handcuffing "too big to fail" institutions. He also points out that the exchange isn't even owned by a New York firm anymore, and that most of the trading happens at high-frequency nerve centers in New Jersey.

Other challenges New York faces include its inability to attract technology-focused industries, intensified regulation from city and state politicians, and the rise of financial centers around the world that will provide major competition.

All those factors, he said, will make the NYSE, if not obsolete, at least substantially declining in relevance.

"It's a historical oddity. It should be given to one of the historical preservation societies," Bove added. "It does not exist today. It will not exist in 25 years."

Follow Cox on Twitter: @JeffCoxCNBCcom.

Friday, April 25, 2014

Mid-Afternoon Market Update: Markets Show Weakness as Weatherford Remains Up

Related BZSUM Mid-Day Market Update: Pandora Shares Tumble After Q1 Results; Weatherford Spikes Higher Mid-Morning Market Update: Markets Open Lower; Ford Profit Misses Street View

Toward the end of trading Friday, the Dow traded down 0.77 percent to 16,374.72 while the NASDAQ tumbled 1.68 percent to 4,078.84. The S&P also fell, dropping 0.77 percent to 1,864.40.

Leading and Lagging Sectors
Utilities sector was the only gainer in the US market on Friday. Leading the sector was strength from FirstEnergy (NYSE: FE) and Wisconsin Energy (NYSE: WEC). Technology shares declined around 1.53 percent in Friday's trading.

Top losers in the sector included CommVault Systems (NASDAQ: CVLT), off 28 percent, and Mellanox Technologies (NASDAQ: MLNX), down 13 percent.

Top Headline
Ford Motor Co (NYSE: F) reported a drop in its first-quarter profit. Ford's quarterly profit slipped to $989 million, or $0.24 per share, versus a year-ago profit of $1.61 billion, or $0.40 per share. Its revenue rose to $35.9 billion versus $35.6 billion. However, analysts were projecting earnings of $0.31 per share on revenue of $34.54 billion.

Equities Trading UP
Gigamon (NYSE: GIMO) shares shot up 6.59 percent to $17.14 after the company announced Q1 results. Gigamon reported a Q1 loss of $0.07 per share on revenue of $31.80 million. Needham upgraded the stock from Buy to Strong Buy.

Shares of Weatherford International (NYSE: WFT) got a boost, shooting up 9.99 percent to $20.25 after the company reported upbeat quarterly earnings. Weatherford reported its Q1 earnings of $0.13 per share on revenue of $3.60 billion.

Cirrus Logic (NASDAQ: CRUS) was also up, gaining 4.44 percent to $21.55 after the company beat on the bottom line and caught an upgrade from Northland Securities to an Outperform rating and $27 price target.

Equities Trading DOWN

Shares of CommVault Systems (NASDAQ: CVLT) were 30.14 percent to $47.93 after the company reported downbeat quarterly revenue. CommVault reported earnings of $0.52 per share on revenue of $156.80 million. However, analysts were expecting a profit of $0.47 per share on revenue of $160.16 million.

Pandora Media (NYSE: P) shares tumbled 16.03 percent to $23.69 on weak Q1 earnings and Q2 outlook. Pandora reported a Q1 loss of $0.13 per share.

Plug Power (NASDAQ: PLUG) was also down, falling 10.48 percent to $5.38 after the company priced its 22.6 million share public offering at $5.50 before the market opening Friday.

Commodities
In commodity news, oil traded down 1.38 percent to $100.53, while gold traded up 0.79 percent to $1,300.50.

Silver traded up 0.02 percent Friday to $19.67, while copper rose 1.73 percent to $3.09.

Eurozone
European shares were lower today.

The Spanish Ibex Index dropped 1.47 percent, while Italy's FTSE MIB Index fell 2.07 percent.

Meanwhile, the German DAX tumbled 1.53 percent and the French CAC 40 fell 0.80 percent while U.K. shares declined 0.38 percent.

Economics
The preliminary reading of Markit Services PMI came in at 54.20 in April, versus economists' expectations for a reading of 55.50.

The final reading of Reuter's/University of Michigan's consumer sentiment indexrose to 84.10 in April, versus a prior reading of 82.60. However, economists were expecting a reading of 83.00.

Posted-In: Earnings News Guidance Eurozone Futures Forex Global Econ #s Economics Intraday Update Markets Movers Tech

Most Popular Apple Soars Following Q2 Top & Bottom Line Beat, Stock Split, Dividend Raise, Increased Buyback Market Wrap For April 23: S&P 500 Ends Winning Streak, Apple Announces 7-for-1 Stock Split Apple Earnings Roundup: iPhone Strength, Stock Split, Buybacks And More Earnings Scheduled For April 24, 2014 Facebook Earnings Breakdown: After A Blowout Quarter, Could The Momentum Continue? 5 Companies That Apple Should Buy Related Articles (CRUS + BZSUM) Mid-Afternoon Market Update: Markets Show Weakness as Weatherford Remains Up Mid-Day Market Update: Pandora Shares Tumble After Q1 Results; Weatherford Spikes Higher Mid-Morning Market Update: Markets Open Lower; Ford Profit Misses Street View #PreMarket Primer: Friday, April 25: More Sanctions On Russia Likely Market Wrap For April 24: Apple's Smashing Earnings Overshadowed By Ukraine Concerns Mid-Afternoon Market Update: Apple Hangs onto Gains as Fusion-io Drops on Earnings

Thursday, April 24, 2014

Stocks to Watch: AT&T, Boeing, Delta

Among the companies with shares expected to actively trade in Wednesday’s session are AT&T Inc.(T), Boeing Co.(BA) and Delta Air Lines Inc.(DAL)

Amgen Inc.(AMGN) said its first-quarter earnings fell 25% on higher costs that masked the biopharmaceutical company’s revenue growth. Shares dropped 2.6%to $116.15 premarket.

AT&T sales rose to start the year, as the carrier added more subscribers and increasingly sold mobile devices like the iPhone at full price. But profit declined due to higher taxes. Shares declined 2.5% to $35.38 premarket.

Boeing said its first-quarter earnings fell 13% as costs tied to changes to its retirement plans masked the continued strong demand for its jetliners. Shares edged up 2.3% to $130.50 premarket as the results beat expectations and the company raised its earnings guidance.

Cree Inc.(CREE) said its fiscal third-quarter earnings climbed 27% on higher sales of its lighting bulbs. Shares declined 7.4% to $53.75 premarket as the company’s outlook was mostly below views.

Delta said first-quarter earnings surged, with higher revenue and passenger demand. The big U.S. airline’s financial improvement came despite the fact it cancelled more than 17,000 flights due to severe weather in January and February. Earnings beat expectations, pushing shares up 5.6% to $36.89 premarket.

Dow Chemical Co.(DOW) said first-quarter earnings rose 65% on modest revenue growth and a boost from lower costs. Earnings beat expectations, and shares edged up 2% to $49.90 premarket.

Gilead Sciences Inc.(GILD) reported nearly $2.3 billion in first-quarter sales for its new hepatitis C treatment Sovaldi in what is believed to be the best-selling prescription drug launch in history. Shares climbed 3.6% to $75.45 premarket.

Illumina Inc.(ILMN) swung to a first-quarter profit, as the gene-sequencing company recorded a sharp increase in revenue. The company also raised its outlook for the year, pushing shares up 7.4% to $158.93 premarket.

Intuitive Surgical Inc.(ISRG) said its first-quarter earnings fell 77% on a steep decline in sales of its da Vinci robotic-surgery systems. Shares dropped 8.9% to $384.69 premarket.

Shares of Sanmina Corp.(SANM) jumped in after-hours trading Tuesday as the electronics manufacturer posted better-than-expected results for the fiscal second quarter. Sanmina also issued rosy outlook targets for the current quarter, pushing shares up 9.5% to $20 premarket.

Skechers USA Inc.'s(SKX) first-quarter profit soared as the footwear company reported broad sales growth in the U.S. and abroad, while also striking a bullish tone about demand later this year. The latest period’s results easily topped Wall Street’s expectations. Shares climbed 12% to $41.38 premarket.

Skyworks Solutions Inc.'s(SWKS) shares rose Tuesday after the wireless-chip supplier reported better-than-expected fiscal second-quarter profit and revenue growth. Shares climbed 8.8% to $41.30 premarket.

Shares of Super Micro Computer Inc.(SMCI) jumped 17% to $22.09 premarket after the servers maker reported better-than-expected profit and sales growth for the fiscal third-quarter. Super Micro also issued a rosy outlook for the fiscal fourth quarter.

Yum Brands Inc.'s(YUM) first-quarter profit rose 18%, as the parent company of KFC, Taco Bell and Pizza Hut recorded improved sales in China. Yum’s earnings topped Wall Street’s expectations, pushing shares up 2.9% to $79.72 premarket.

Tuesday, April 22, 2014

Edmunds:The key to simplifying your life

After a long and brutal winter it was easy to wonder if spring would ever come. But, yesterday while walking the park I noticed tiny buds on some trees and daffodils swaying in the warm 75-degree breeze. And I breathe a sigh of relief that spring has finally arrived.

Spring serves as a reminder to get busy with the spring-cleaning. It's message says that we can lighten the load and pack up the winter gear in exchange for the things that are less burdensome.

Spring is my reminder to live the simple life. I get visions of enjoying ice tea and warm weather and taking walks in the park and throughout the neighborhood to watch the bulbs planted last fall come into their own.

It's enjoying these simple things that makes life grand, and it takes this time of the year to remind me to check and double check that I continue to simplify my life.

You may think that being an entrepreneur and simplifying your life are contradictory activities, especially if you envision the entrepreneur as having a busy schedule and a simple lifestyle as being laid back and easy.

The truth is that many people are happy living a simple lifestyle. And a great number of people are millionaires who are first-generation entrepreneurs.

One of my favorite nonfiction books is The Millionaire Next Door. The authors, Thomas Stanley and William Danko, learned through extensive research that most financially well-heeled entrepreneurs achieved their success because of a simple lifestyle.

They wrote that self-discipline is the key word they consistently came across when studying how successful individuals, most of whom were entrepreneurs, attained their way of life.

Simplifying your life isn't difficult if you apply a little self-discipline. You don't have to give up your city home and rush off to the country to buy a farm. You can start right now and where you are.

To live a simple lifestyle, you can trade material trappings for freedom and less stress, quality instead of quantity.

! Take a look at how you spend your money. Do you insist on designer clothes, flashy cars, support your adult children, buy all the latest gadgets, and have to attend every social event?

If your money is fueling one or more of the above and you are happy, skip the rest of this article. Simple living is not for everyone.

I remember some time ago when cell phones became popular I was walking the park and stopped to go to the restroom. I accidently dropped my cellphone into the toilet. When I called the cell phone company to see if they would replace my phone they told me that they would be happy to replace the phone for a mere $400. I wasn't interested in buying a phone and decided to see what would life be like without having a phone attached to me.

I spent 3 years without a cell phone and it was the most peaceful years of my career. Yes I now have a cell phone that no one calls me on because they know I will not answer but I do receive and send text messages. It seems to be a much easier system of living.

Recently I was standing in line at the post office and a phone started ringing. Three women started rummaging through their purses in search of their phones to see if it was their phone that was ringing. Turns out the ringing phone belonged to the woman in front of me and she dropped her packages and nearly dumped everything out of her purse in search for that ringing phone. By the time she found her phone it had stopped ringing and she looked both frustrated and aggravated. I am all to familiar with the problems that a purse can bring.

I decided one day that life should become less complicated as I grew older. I started by giving up the burden of carrying a purse. Who needs both a purse and a brief, was my thought. The decision wasn't difficult, since most of the time I could never find things in it when I wanted them. Just searching for my keys was a major event.

The final straw came one morning when the trash had to be taken out. To save myself time ! and an ex! tra trip back into the house, I grabbed my car keys from the kitchen counter, my purse, briefcase and the trash.

I dropped the trash off at the curb and took off in the car headed for the office. After arriving at my desk after a 45 minute commute, I reached for my purse to put my keys away—and yikes, no purse! I ran back to the parking garage to search the car, hoping that maybe I had left it on the seat. There was no purse in the car!

Then I thought it might have slipped off my shoulder when I set the trash down. I had visions of my purse being crushed in the garbage truck's compactor.

I drove at breakneck speed, shaving about 15 minutes off of that 45-minute commute. I prayed all the way home that the trash men hadn't arrived. When I turned onto our street I breathe a sigh of relief. The trash was still there! I jumped out of the car and rushed over to the green plastic bags, feeling certain that my purse would be there. No Purse!

Frustrated and upset, I entered the house. When I walked into the kitchen, there on the counter, was my purse.

That fiasco was more than enough for me. That day, instead of returning to my office, I stayed home, emptied my closet of purses, and donated them to Goodwill. The problems, time and energy my purses had caused were just not worth it.

Cutting back on spending is another way to simplify your life. If you are looking to simplify, the next time you go shopping and see what you think is a "must have," ask yourself, "Do I have to maintain it, dust it, wash it, feed it or store it?" If you answer yes to these questions and it doesn't cause clutter or a burden in any way, then go for it.

That brings me to my final thoughts on simplifying life; clearing and cleaning away clutter. I once read somewhere that if you go through a whole season and didn't wear it or use it, then get rid of it.

A simplified lifestyle means more freedom, which means more time, More time for the things you want and need to do to balance y! our life.!

Once I simplified my life, I spent less time cleaning, dusting, and looking for things like my keys and I enjoy life more.

Let the joy of these spring days be a reminder of how beautiful the simple life really is.

Gladys Edmunds, founder of Edmunds Travel Consultants in Pittsburgh, is an author and coach/consultant in business development. Her column appears Wednesdays. E-mail her at gladys@gladysedmunds.com. An archive of her columns is here. Her website is gladysedmunds.com

Hedge Funds Shake Financial System More Than Banks During Crises: Study

Hedge funds may play an even bigger role than banks in transmitting financial shocks to the rest of the market, and thus may intensify systemic risk more than previously thought, according to new research.

An economic letter issued last week by the Federal Reserve Bank of San Francisco reported a new risk measurement that suggests that financial crises intensify spillover effects among certain types of financial institutions.

It shows that hedge funds may be the most important transmitters of shocks during crises.

Reint Gropp, a visiting scholar at the San Francisco Fed from Goethe University in Frankfurt, developed a new way to measure spillover effects, and estimated the effects for investment banks, commercial banks, insurance companies and hedge funds.

How big and how long risk spillovers among financial institutions last depend on whether markets are in normal times or in crisis, Gropp reported. They can be much larger during crisis times.

He found that insurance companies — the case of AIG during the recent financial crisis notwithstanding — are not systemically important in causing distress elsewhere. They tend to be relatively safe in crises, as their returns are negatively correlated to those of other institutions.

In contrast, spillovers from hedge funds during crises become huge, and make the funds more important shock transmitters than either commercial or investment banks.

The reason is that hedge funds are opaque and highly leveraged, Gropp said. If forced to liquidate under duress, they may sustain big losses, possibly leading to further defaults or threatening systemically important entities both directly as counterparties or creditors and indirectly through asset price adjustments.

How big are the spillover effects from hedge funds? Gropp said that during normal market conditions a one percentage-point increase in hedge fund riskiness raises risk of investment banks by an estimated 0.09 percentage point.

During crises, the same shock increases the risk of investment banks by 0.71 percentage point.

By comparison, a one percentage-point increase in risk of commercial banks leads to a 0.01 percentage-point increase in risk of investment banks during normal times, and a 0.05 percentage point increase during crises.

Hedge fund spillover effects are largest after 10 to 15 days, and subside after about three months, according to Gropp.

He said more research is needed to explain the mechanisms that underlie the estimated spillover effects.

Monday, April 21, 2014

Central bankers roam the globe making deals

Fire the boss and bring in an outsider. Football teams do it. So do manufacturing companies and tech giants. Now central bankers are the latest class of internationally itinerant technocrats roaming the globe, shaking up the staid world of central banking, carrying bold ideas across borders and shining light in dark corners.

They are modern-day rōnin — roaming samurai warriors without a master — only instead of swords, they've got PhDs in economics, done stints at major international organizations such as the International Monetary Fund, and hold teaching positions at top universities.

And they are powerful, because they make money, actually create it … or not. It's their call. Who are they? Central bankers.

The title may not sound cool, but, boy, do governments in trouble need them. Central banks set basic interest rates, control the money supply, provide credit to commercial banks and are often responsible for monitoring bank health and rescuing them when needed.

Saturday, April 19, 2014

Bond ETFs posted a good start to 2014, though March showed its lion's side

Bonds, markets, ETFs, emerging markets, municipal bonds,

Sparking rate concerns: Janet Yellen

The first quarter of 2014 saw equities change course from the torrid returns they posted last year, and rising interest rates in 2013 gave way to falling yields for 2014 — so far. Starting the new year, market observers generally expected a correction to equity prices at some point, although unsettling headlines from key emerging markets such as China and Brazil and disappointing economic activity at home accelerated the softening.

Unusually cold weather was widely blamed for lax economic data for January and February, but late in the quarter we heard that the fourth-quarter 2013 real gross domestic product growth was revised higher — from 2.4% to 2.6%, which lifted equities and weighed on many bond types. But the bond markets had a particularly bad scare in mid-March when new Federal Reserve Chairman Janet Yellen, in an attempt to sound soothing and familiar to journalists, instead sparked concerns that the Fed would begin raising rates much sooner than expected. Many bond exchange-traded

Friday, April 18, 2014

Why Rally Software Shares Rallied

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Rally Software (NYSE: RALY ) rallied today by as much as 20% after the company announced fiscal first quarter results.

So what: Revenue in the quarter hit a record $16 million, which was higher than the $14.8 million consensus estimate. That translated into an adjusted net loss of $0.86 per share, well ahead of the $1.06 per share in red ink that investors were expecting. This is Rally's first earnings release as a public company, and investors are impressed.

Now what: Outlook was also strong, with second quarter revenue expected in the range of $17.25 million to $17.75 million. Full-year revenue should be $71 million to $73 million, which should translate into an adjusted net loss of $1.01 to $1.04 per share. Needham expressed confidence in the company, reiterating its buy rating while increasing its price target to $25. The analyst cited strong net additions and new enterprise wins.

Interested in more info on Rally Software? Add it to your watchlist by clicking here.

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Thursday, April 17, 2014

Stocks to Watch: IBM, Morgan Stanley, PepsiCo

Among the companies with shares expected to actively trade in Thursday’s session are International Business Machines Corp.(IBM), Morgan Stanley(MS) and PepsiCo Inc.(PEP)

IBM reported a 21% drop in first-quarter profit as the computing giant’s revenue continued to be stung by a sharp decline in hardware sales. Shares fell 4.3% to $187.70 premarket.

Morgan Stanley said first-quarter profit jumped 5% as strong results in the company’s wealth-management business were bolstered by an unexpected rise in fixed-income trading revenue. Shares rose 3% to $30.80 premarket as results solidly beat analyst estimates.

PepsiCo said its first-quarter profit climbed 13% as growth in the company’s snack-foods operations masked another weak period from its beverage business. Results beat expectations, sending shares 2.3% higher to $86.71 premarket.

Goldman Sachs Group Inc.’s first-quarter net income fell 10%, but results comfortably topped analysts’ estimates sending the stock 2% higher to $160.29 in premarket trading.

Noble Corp.(NE) said its first-quarter earnings soared 70% as the offshore oil driller saw fleet growth and higher revenue. Results surpassed analysts’ expectations. Shares rose 3.7% to $31.50 premarket.

SanDisk Corp.(SNDK) said its first-quarter earnings jumped 62% as the flash-memory maker reported a rise in revenue. Adjusted earnings and revenue topped Wall Street’s expectations. Shares rose 6.3% to $80.64 premarket.

Baker Hughes Inc.(BHI) said first-quarter income grew 23%, as the oil-field services company posted continued growth in its Middle East and Asia Pacific business. Shares rose 3.4% to $68.50 premarket as results topped Wall Street’s expectations.

Google Inc.(GOOGL) posted a 3.2% increase in first-quarter net income amid a continuing decline in how much advertisers pay per click, as users shift to smartphones and tablets. Shares slipped 1.8% to $546.81 premarket.

Renewable Energy Group Inc.'s(REGI) shares dropped after the company tempered its expectations for the first quarter, saying unseasonably cold winter weather reduced demand for diesel. Shares fell 14% to $10.76 premarket.

Senior Housing Properties Trust sa(SNH)id it plans to offer 12 million shares, and expects to use the proceeds to repay amounts outstanding on its revolving credit facility and for general corporate purposes. Senior Housing Properties Trust recently had 188.2 million shares outstanding, according to FactSet. Shares fell 4.8% to $21.68 premarket.

Tuesday, April 15, 2014

Top Financial Stocks For 2015

New products introduced over the last week include three new hedged equity ETFs from Deutsche Asset & Wealth Management, three new funds from BMO Global Asset Management, and a new emerging markets income fund from Neuberger Berman.

In addition, Direxion launched a new long/short global currency fund, Ramius announced its new event-driven equity mutual fund, and American Independence Financial Services announced a strategic partnership with Cougar Global Investments on investment solutions.

Here are the latest developments of interest to advisors:

1) Deutsche Asset & Wealth Management Launches Three New Funds

Deutsche Asset & Wealth Management announced Tuesday the launch of three new hedged equity ETFs on the db X-trackers platform. The new funds track MSCI hedged equity indexes and provide direct exposure to several international equity markets, while aiming to protect against fluctuations in value of the U.S. dollar and non-U.S. currencies.

Top Financial Stocks For 2015: Franklin Universal Trust (FT)

Franklin Universal Trust (the Fund) is a diversified, closed-end investment company. The Fund�� primary investment objective is to provide high current income consistent with preservation of capital. Its secondary objective is growth of income through dividend increases and capital appreciation. The Fund invests primarily in two asset classes: high-yield bonds and utility stocks.

The Fund invests in sectors, such as non-energy minerals, utilities, commercial services, communications, consumer durables, consumer non-durables, electronic technology, industrial services, process industries, technology services and transportation. The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market Portfolio (the Sweep Money Fund), an open-end investment company managed by its investment manager. The Fund may invest in restricted securities. The Fund�� investment manager is Franklin Advisers Inc. Its administrative manager is Franklin Templeton Services, LLC.

Advisors' Opinion:

[By Canadian Value]
(FT): A 500-tonne gap in China's gold consumption data is fueling talk that the central bank took advantage of weak prices last year to bulk up its holdings of the precious metal.

Top Financial Stocks For 2015: Powershares S & P Small Cap Energy Portfolio (PSCE)

PowerShares S&P SmallCap Energy Portfolio (the Fund) seeks investment results that correspond generally to the price and yield performance of an index called the S&P SmallCap 600 Capped Energy Index (the Underlying Index). The Underlying Index consists of common stocks of the United States energy companies that are principally engaged in the business of producing, distributing or servicing energy-related products, including oil and gas exploration and production, refining, oil services, pipeline, and solar, wind and other non-oil-based energy. The Underlying Index is compiled, maintained and calculated by Standard & Poor's Financial Services LLC (Standard & Poor's). The Fund will normally invest at least 80% of its total assets in common stocks of small-capitalization energy companies. The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Underlying Index. The Fund�� investment adviser is Invesco PowerShares Capital Management LLC. Advisors' Opinion:

[By John Udovich]
Yesterday, small cap oil and gas stock Penn Virginia Corporation (NYSE: PVA) surged 14.84% after reporting earnings and was also rising close to 6% in�pre-market trading��meaning it might be worth taking a closer look at the small cap along with the performance of ETF peers IQ Global Oil Small Cap ETF (NYSEARCA: IOIL) and PowerShares S&P SmallCap Energy Portfolio (NASDAQ: PSCE). After all, a look at the longer term chart of Penn Virginia Corporation does not reveal a pretty picture for investors over the long haul.

Top 10 Retail Stocks To Buy Right Now: BBVA Banco Frances S.A. (BFR)

BBVA Banco Franc茅s S.A., together with its subsidiaries, provides various financial services to corporations, medium and small companies, and individual customers in the Republic of Argentina. The company offers checking and savings accounts, time deposits, and investment accounts. It also provides short and long-term loans to companies, overdraft lines of credit, discounted instruments, loans to financial institutions and the governmental sector, collateral loans, and real estate mortgage, as well as consumer loans comprising credit card loans and other consumer loans. In addition, the company offers home and personal accident insurance; payroll services; asset management services; and insurance advisory services to customers in the areas of coverage of risks related to life, personal accidents and home insurance, and automated teller machine (ATM) robbery insurance. Further, it provides foreign trade services, including letters of credit, collections, bank drafts, fund transfers, and foreign currency transactions; and electronic banking, ATM, self-service terminals, Internet and mobile banking, call center, and trust services. Additionally, the company engages in capital market and securities activities, principally underwriting and placement of corporate bonds, commercial paper, and equity securities; corporate advisory; and securities brokerage. As of December 31, 2011, it operated 268 branches comprising 240 retail branches, 28 branches specialized in small and medium enterprises segment, 13 in-company branches, 7 corporate banking units, and 3 points of sale, as well as 654 ATM�s and 695 quick deposit boxes. The company was formerly known as Banco Frances del Rio de la Plata S.A. and changed its name to BBVA Banco Franc茅s S.A. in October 2000. The company was founded in 1886 and is based in Buenos Aires, the Republic of Argentina. BBVA Banco Franc茅s SA operates as a subsidiary of Banco Bilbao Vizcaya Argentaria, S.A.

Advisors' Opinion:

[By Federico Zaldua]
Banco Frances (BFR), 75% controlled by Banco Bilbao Viscaya Argentaria, is among the biggest banks in Argentina. The bank has the smallest exposure to Argentina's public debt out of the three banks analyzed in the article and presents the lowest pace of growth. That said, its one of the healthiest banks in the country given that it has the lowest NPL ratio and the highest reserve ratio to absorb potential losses. The bank also trades cheaply at 3.5 times P/E and 85% its book value. Being more expensive (although still very cheap relative to the sector's average) and with the lowest liquidity among this group of three, I would exclude Banco Frances from my Argentinean bank portfolio.

Top Financial Stocks For 2015: Barclays PLC (II)

Barclays PLC (Barclays) is a global financial services provider engaged in retail banking, credit cards, wholesale banking, investment banking, wealth management and investment management services. The Company�� operations include its overseas offices, subsidiaries and associates. The Company operates in eight segments: UK Retail and Business Banking (UK RBB), Europe Retail and Business Banking (Europe RBB), Africa Retail and Business Banking (Africa RBB), Barclaycard, Barclays Investment Bank, Barclays Corporate Banking, Wealth and Investment Management, and Head Office and Other Operations. Advisors' Opinion:

[By Todd Sullivan]
HHC has increased all our ownership percentage through the repurchasing of outstanding warrants.
From the 13D/A
On December 31, 2013, certain of the Reporting Persons entered into swaps for the benefit of certain Pershing Square Funds. Under the terms of the swaps, (i) the relevant Pershing Square Funds will be obligated to pay to the bank counterparty any negative price performance of the 5,399,839 notional number of Common Shares subject to the swaps as of the expiration date of such swaps, plus interest rates set forth in the applicable contracts, and (ii) the bank counterparty will be obligated to pay the relevant Pershing Square Funds any positive price performance of the 5,399,839 notional number Common Shares subject to the swaps as of the expiration date of the swaps. During the term of the swaps, cash will be paid by the bank counterparty to the relevant Pershing Square Fund in an amount equal to the amount of notional distributions or dividends paid by the Issuer in respect of such notional number of Common Shares. All balances will be settled in cash. The Pershing Square Funds��counterparties for the swaps include entities related to Citibank, Nomura, Soci茅t茅 G茅n茅rale and UBS. The swaps do not give the Reporting Persons direct or indirect voting, investment or dispositive control over any securities of the Issuer and do not require the counterparty thereto to acquire, hold, vote or dispose of any securities of the Issuer. Accordingly, the Reporting Persons disclaim any beneficial ownership of any Common Shares that may be referenced in the swap contracts or Common Shares or other securities or financial instruments that may be held from time to time by any counterparty to the contracts.

Top Financial Stocks For 2015: Arlington Asset Investment Corp (AI)

Arlington Asset Investment Corp. is a principal investment firm that acquires mortgage-related and other assets. The Company acquires residential mortgage-backed securities (MBS), either issued by United States government agencies or guaranteed as to principal and interest by United States government agencies or United States government-sponsored entities (agency-backed MBS). It also acquires MBS issued by private organizations (private-label MBS). It manages a portfolio of mortgage holdings with the goal of obtaining a high risk-adjusted return on capital. The Company acquires direct interests in residential MBS guaranteed as to principal and interest by Fannie Mae or Freddie Mac.

The Company focuses on acquiring Fannie Mae MBS and Freddie Mac MBS. It also acquires and holds non-agency private-label MBS. Private-label MBS are MBS that are not issued by the United States Government agency or a United States Government-sponsored entity, such as Fannie Mae or Freddie Mac, and that are generally backed by a pool of single-family residential mortgage loans. Certificates are issued by originators of, investors in, and other owners of residential mortgage loans, including savings and loan associations, savings banks, commercial banks, mortgage banks, investment banks and special purpose conduit subsidiaries of these institutions. The Company focuses on acquiring Residential Prime Senior MBS, Residential Non-Prime Senior MBS, Residential Subordinate MBS and Residential Re-REMIC Support MBS.

Advisors' Opinion:

[By Ning Jia]
Reuters Description: Advance Auto Parts, Inc. (Advance), incorporated on August 1, 2001, is a specialty retailer of automotive aftermarket parts, accessories, batteries and maintenance items primarily operating within the United States. The Company operates in two segments: Advance Auto Parts (AAP), and Autopart International (AI). The AAP segment is comprised of its store operations, which operate under the trade names Advance Auto Parts and Advance Discount Auto Parts.The AI segment consists of the operations of Autopart International, Inc. which operates under the Autopart International trade name. The Company�� stores carry a product line for cars, vans, sport utility vehicles and light trucks.The Company serves both do-it-yourself (DIY), and do-it-for-me (Commercial), customers. Its Commercial customers consist primarily of delivery customers for whom the Company delivers product from its store locations to it Commercial customers��places of business, including independent garages, service stations and auto dealers. On December 31, 2012, the Company acquired B.W.P. Distributors, Inc.

Top Financial Stocks For 2015: Abu Dhabi Islamic Bank Egypt SAE (ADIB)

Abu Dhabi Islamic Bank Egypt SAE, formerly National Bank for Development (NBD), is an Egypt-based public shareholding company engaged in the provision of retail, corporate and investment banking services through a network of 69 branches located across Egypt. The Bank�� products and services are structured into four segments: the Personal banking segment includes current and saving account, investment account, club finance, charitable accounts and sukuk, among others; the Microfinance segment includes microfinance program; the Wholesale banking segment includes corporate banking, financial institutions and trade, cash management and corporate finance, and the Treasury segment includes foreign exchange, sharia-compliant products and market analysis/updates. In January 2014, the Company sold 11,619,575 shares representing 77.46% stake in National Company for Glass and Crystal�� share capital to Abu Dhabi Islamic Financial Investments Holding. Advisors' Opinion:

[By Gregor Stuart Hunter]
Tirad Mahmoud, the chief executive of Abu Dhabi Islamic Bank (ADIB), has warned of "irrational exuberance" in the UAE's corporate lending market, saying companies are seeking to lower borrowing costs by so much that banks may no longer find it appealing to lend.

Top Financial Stocks For 2015: Territorial Bancorp Inc.(TBNK)

Territorial Bancorp Inc. operates as the bank holding company for Territorial Savings Bank, a federally-chartered savings bank that provides a range of financial services to individuals, families, and businesses in Hawaii. It involves in accepting deposits from the general public and investing those deposits together with funds generated from operations and borrowings in loans and investment securities. The company?s deposit products include passbook and statement savings accounts, certificates of deposits, money market accounts, commercial and regular checking accounts, and NOW accounts. Its loan products include one-to-four-family residential mortgage loans; home equity loans and lines of credit; construction, commercial, and other non-residential real estate loans; consumer loans; and multi-family mortgage loans. The company, through its subsidiary, Territorial Financial Services, Inc., also engages in insurance agency activities. In addition, it provides various non-d eposit investments, including annuities and mutual funds through a third-party broker-dealer. As of December 31, 2010, the company operated 26 full-service branch offices in Hawaii. The company was founded in 1921 and is headquartered in Honolulu, Hawaii.

Advisors' Opinion:

[By Lisa Levin]
Territorial Bancorp (NASDAQ: TBNK) shares touched a new 52-week low of $21.31. Territorial Bancorp shares have dropped 9.43% over the past 52 weeks, while the S&P 500 index has gained 16.18% in the same period.

Top Financial Stocks For 2015: Marsh & McLennan Companies Inc. (MMC)

Marsh & McLennan Companies, Inc., a professional services company, provides advice and solutions in the areas of risk, strategy, and human capital. It operates in two segments, Risk and Insurance Services, and Consulting. The Risk and Insurance Services segment provides risk management and insurance broking, reinsurance broking, and insurance program management services for businesses, public entities, insurance companies, associations, professional services organizations, and private clients. The Consulting segment offers advice and services to the managements of organizations in the area of human resource consulting, comprising retirement and investments, health and benefits, outsourcing and talent; and strategy and risk management consulting, such as management, economic, and brand consulting. The company also provides investment consulting services for endowments and foundations in the United States; health and benefit recordkeeping, and employee enrollment technology; human resource knowledge, data, and solutions for professionals in various industries; and Medicaid policy consulting services. It principally serves customers in the United States, the United Kingdom, the Asia Pacific, and Continental Europe. Marsh & McLennan Companies, Inc. was founded in 1871 and is headquartered in New York, New York.

Advisors' Opinion:

[By Dan Caplinger]
The real test for Obamacare
In any event, the biggest challenge that Obamacare faces is getting its Health Insurance Marketplace up and running by Oct. 1. Although private exchanges from Marsh & McLennan (NYSE: MMC ) subsidiary Mercer as well as Towers Watson (NYSE: TW ) have done a good job of getting Aetna, UnitedHealth, and other popular insurers to participate in their programs, the reception that public exchanges have gotten has been far less favorable. Without a smooth launch in less than three months, Obamacare could find itself facing much greater criticism than it is today.
[By CRWE]
Marsh & McLennan Companies, Inc. (NYSE:MMC) held its annual meeting of shareholders, at which the Company announced that its Board of Directors has voted to increase the Company�� quarterly cash dividend by 5 percent to $.23 per share on outstanding common stock.

Top Financial Stocks For 2015: Legg Mason Inc (LM)

Legg Mason, Inc. (Legg Mason), incorporated in 1981, is a global asset management company. The Company, through its subsidiaries, provides investment management and related services to institutional and individual clients, company-sponsored mutual funds and other pooled investment vehicles. It offers these products and services directly and through various financial intermediaries. The Company provides its asset management services through a number of asset managers, each of which generally markets its products and services under its own brand name and, in many cases, distributes retail products and services through a centralized retail distribution network. Its investment advisory services include discretionary and non-discretionary management of separate investment accounts in a number of investment styles for institutional and individual investors. Legg Mason�� investment products include mutual funds ranging from money market and other liquidity products to fixed income and equity funds managed in a variety of investment styles, other domestic and offshore funds offered to both retail and institutional investors and funds-of-hedge funds. As of March 31, 2012, assets under management were $643.3 billion. During the fiscal year ended March 31, 2012 (fiscal 2012), the Company sold Bartlett & Co., a Cincinnati-based wealth manager.

Asset Managers

The Company conducts its business primarily through 12 asset managers. Its asset managers are individual businesses, each of which generally focuses on a portion of the asset management industry in terms of the types of assets managed (primarily equity or fixed income), the types of products and services offered, the investment styles utilized, the distribution channels used, and the types and geographic locations of its clients. The Company�� asset managers provide a range of separate account investment management services to institutional clients, including pension and other retirement plans, corporations, insurance companies, ! endowments and foundations and governments, and to high-net-worth individuals and families. In addition, its asset managers also sponsor and manage various groups of the United States mutual funds, including the Legg Mason Funds, The Royce Funds and the Western Asset Funds, funds-of-hedge funds and a number of equity, fixed income, liquidity and balanced funds that are domiciled and distributed in countries worldwide, and provide investment advisory services to a number of retail separately managed account programs. Western Asset Management Company is a global fixed income asset manager for institutional clients. Western Asset's operations include investment operations in New York City, the United Kingdom, Japan, Brazil, Australia and Singapore. Western Asset offers a range of products spanning the yield curve and encompassing the bond markets, including a suite of limited duration and core products, emerging market and high yield portfolios, municipal portfolios and a variety of sector-oriented and global products. Among the services Western Asset provides are management of separate accounts and management of mutual funds, closed-end funds, international funds and other structured investment products.

ClearBridge Advisors is an equity asset management firm. ClearBridge Advisors provides asset management services to 29 of the equity funds (including balanced funds and closed-end funds) in the Legg Mason Funds, to retail separately managed account programs, to certain of its international funds and, primarily through separate accounts, to institutional clients. ClearBridge also sub-advises domestic mutual funds that are sponsored by third parties. Royce & Associates is investment advisor to all of The Royce Funds and to certain of the Company�� international funds. In addition, Royce & Associates manages other pooled and separate accounts, primarily institutional. Brandywine Global Investment Management manages fixed income, including global and international fixed income, and equity portf! olios for! institutional and, through wrap accounts, high-net-worth individual clients.

Batterymarch Financial Management manages the United States, international and emerging markets equity portfolios for institutional clients. Permal Group Ltd. is a global funds-of-hedge funds management firm. With a headquarters in London and other offices in New York City, Boston, Dubai, Paris, Tokyo, Hong Kong, Singapore and Nassau, Permal manages products, which include both directional and absolute return strategies, and are available through multi-manager and single manager funds, separately managed accounts and structured products sponsored by a number of financial institutions. Legg Mason Capital Management is an equity asset management business that manages both institutional separate accounts and mutual funds. Legg Mason Capital Management manages 12 Legg Mason Funds, and also sub-advises the mutual fund managed by the joint venture described below and investment products sponsored by its other subsidiaries, including certain of the Company�� international funds.

Legg Mason Investment Counsel & Trust Company, National Association is a national banking association with authority to exercise trust powers. Legg Mason Investment Counsel & Trust Company provides services as a trustee for trusts established by its individual and employee benefit plan clients and manages fixed income and equity assets. Legg Mason Investment Counsel, LLC, a subsidiary of Legg Mason Investment Counsel & Trust, manages equity, fixed income and balanced portfolios for high-net-worth individual and institutional clients and a number of its mutual funds. Legg Mason Investment Counsel operates out of offices in New York City, Cincinnati, Philadelphia, Easton, Maryland, and Bryn Mawr, Pennsylvania. Esemplia Emerging Markets is an emerging markets equities investment manager. Esemplia offers a range of portfolio management strategies, including core long-only and alpha-extension portfolios, to institutional investors worl! dwide, in! cluding pension funds and sovereign wealth funds.

Private Capital Management manages equity assets for high-net-worth individuals and families, institutions, endowments and foundations in separate accounts and through limited partnerships. Legg Mason's business in Poland engages in portfolio management, servicing and distribution of both separate account management services and local funds in Poland. The firm provides portfolio management services primarily for equity assets to institutions, including corporate pension plans and insurance companies, and, through funds distributed through banks and insurance companies, individual investors. Legg Mason Australian Equities is an Australian asset management business that offers Australian equity products, Australian property trusts and asset allocation products. As of March 31, 2012, Legg Mason Australian Equities managed assets with a value of $1billion.

United States Mutual Funds

The Company�� United States mutual funds business primarily consists of three groups of mutual and closed-end funds, the Legg Mason Funds, The Royce Funds and the Western Asset Funds. The Legg Mason Funds invest in a range of domestic and international equity and fixed income securities. The Royce Funds invest primarily in smaller-cap company stocks using a value investment approach. The Western Asset Funds invest primarily in fixed income securities. The Legg Mason Funds consist of 113 mutual funds and 27 closed-end funds in the United States, almost all of which are sub-advised by its subsidiary asset managers. The mutual funds and closed-end funds within the Legg Mason Funds include 63 equity funds (including balanced funds) that invest in a spectrum of equity securities. The fixed income and liquidity mutual funds and closed-end funds within the Legg Mason Funds include 77 funds. As of March 31, 2012 , the Legg Mason Funds included $114.7 billion in assets, respectively, in their mutual funds and closed-end funds, of which approximate! ly 30% an! d 27%, respectively, were equity assets, approximately 24% and 18%, respectively, were fixed income assets and approximately 46% and 55%, respectively, were liquidity assets.

The Royce Funds consist of 32 mutual funds and three closed-end funds, most of which invest primarily in smaller-cap company stocks. The Royce Funds are distributed through non-affiliated fund supermarkets, its centralized funds distribution operations, non-affiliated wrap programs, and direct distribution. In addition, two of the portfolios in The Royce Funds are distributed only through insurance companies. The Company�� mutual funds business also includes the Western Asset Funds, a family of nine mutual funds and two closed-end funds. The mutual funds are marketed primarily to institutional investors and retirement plans through the Company�� institutional funds marketing group. Western Asset Management Company manages these funds. The funds primarily invest in fixed income securities.

International Funds

The Company, outside the United States, manages, supports and distributes a number of funds across an array of global fixed income, liquidity and equity investment strategies. Its international funds include a range of cross border funds that are domiciled in Ireland and Luxembourg and are sold in a number of countries across Asia, Europe and Latin America. The Company�� international funds also include local fund ranges that are available for distribution in the United Kingdom, Australia, Japan, Singapore, Poland, Hong Kong and Canada. All of its international funds are distributed and serviced by Legg Mason's global distribution group. Its international funds include equity, fixed income, liquidity and balanced funds that are primarily managed or sub-advised by Batterymarch Financial Management, Brandywine Global, ClearBridge, Esemplia, Legg Mason Capital Management, Private Capital Management, Royce & Associates, Western Asset Management and its global asset allocation team. In a! ggregate,! the Company sponsors and manages more than 220 of these international funds.

Retail Separately Managed Account Programs

The Company is a provider of asset management services to retail separately managed account programs, commonly known as managed account or wrap programs. These programs typically allow securities brokers or other financial intermediaries to offer their clients the opportunity to choose from a number of asset management services. It provides investment management services to a number of retail separately managed account programs sponsored by a number of financial institutions.

Distribution

The Company�� centralized global distribution group distributes and supports its United States and international funds and retail separately managed account program business. The United States-based operations of the Company�� global distribution group support and distribute the Legg Mason Funds, The Royce Funds and the Western Asset Funds, and include its mutual fund wholesalers and its institutional funds marketing group. The Company�� mutual fund wholesalers distribute the Legg Mason Funds through a number of third-party distributors. The Company�� institutional funds marketing group distributes institutional share classes of the Legg Mason Funds and the Western Asset Funds to institutional clients and also distributes variable annuity sub-advisory services provided by its asset managers to insurance companies. Its institutional liquidity funds are primarily distributed by Western Asset's distributors. In addition to its centralized funds distribution group, Royce & Associates' distributors also distribute The Royce Funds. In addition to distributing funds, the wholesalers in the Company�� global distribution operations also support its retail separately managed account program services. These services are provided through programs sponsored by Morgan Stanley Smith Barney's retail business, as well as other financial institutions.

! The international distributors within the Company�� global distribution group offer its investment management services to individual and institutional investors across Asia, Europe and the Americas. These distributors operate out of distribution offices in 18 cities in 14 countries and are the sole distributors of its cross border funds globally and its international local funds in their respective countries. Legg Mason Investments is responsible for the distribution and servicing of cross border and local fund ranges across Europe, the Americas and Asia. Legg Mason Investments has offices in locations including London, Paris, Milan, Geneva, Frankfurt, Madrid, Singapore, Hong Kong, Taipei, Miami, Santiago and New York. In addition to Legg Mason Investments, the Company�� global distribution group includes separate distribution operations in Australia, Canada and Japan. In Australia, its distribution operations distribute local and cross border pooled investment vehicles sub-advised by the Company�� asset managers primarily to retail investors, pension plans, fund-of-funds managers, insurance companies and government funds/agencies. In Canada, its distribution operations distribute Legg Mason-managed products primarily to pension plans, endowments, foundations, banks and mutual fund companies and separately managed account programs. In Japan, the Company�� distribution operations distribute domestic investment funds, cross border funds and institutional separate accounts primarily to the retail market, which includes retail banks, private banks, asset managers, funds platforms and insurance companies.

Advisors' Opinion:

[By Shauna O'Brien]
Susquehanna International reported on Wednesday that it has maintained a “Negative” rating on Legg Mason Inc (LM).

The firm has reiterated a “Negative” rating on LM, but has increased the company’s price target from $23 to $24. This new price target suggests an 18% decline from the stock’s current price of $32.74.

An analyst from the firm noted: ��e are raising our f2Q14 estimate to $0.6 Negative. 0 from $0.48 reflective of a lower tax rate and some revenue benefits from the market lift in September. We are modeling a 15% GAAP tax rate in f2Q as a result of new U.K. corporate tax reductions that were put into place. Our calendar 2013 and 2014 estimates are now $1.70 and $2.00 compared to $1.61 and $1.90, previously. The calendar 2014 revision is reflective of higher buybacks and some flow-through with higher equity asset levels to end the current quarter. Our target is now $24 or 12x our new calendar 2014 estimate. We expect net long-term outflows of $5 billion-$6 billion this quarter or a 4% organic decay rate, the worst since December 2012. Frankly, we do not think estimates or flow matter all that much to shares. The ability to repurchase stock remains the most important driver of the equity.��/p>
Legg Mason shares were up 14 cents, or 0.43%, during Wednesday morning trading. The stock is up 27% YTD.

Top Financial Stocks For 2015: Piedmont Office Realty Trust Inc.(PDM)

Piedmont Office Realty Trust, Inc. engages in the acquisition and ownership of commercial real estate properties in the United States. Its property portfolio primarily consists of office and industrial buildings, warehouses, and manufacturing facilities. As of December 31, 2007, the company owned interests in 83 properties that are wholly owned and controlled through consolidated joint ventures. It has elected to be taxed as a real estate investment trust and would not be subject to federal income tax, if it distributes approximately 90% of its taxable income to its shareholders. The company was incorporated in 1997 and is headquartered in Norcross, Georgia.

Advisors' Opinion:

[By Brad Thomas]
Other REITs mentioned: (O), (NNN), (STAG), (DCT), (EGP), (PDM), (DRE), (LRY)
Source: Chambers Street: More Liquidity Magic On The Way In REIT-Dom
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

Finra gets arbitration process back on track in Puerto Rico

puerto rico, bonds, arbitration, finra, regulator, merrill lynch, ubs

Finra has expanded its pool of arbitrators and is ready to move forward with the hundreds of complaints related to collapses in Puerto Rico bond funds, according to an announcement posted on its web site Monday.

After several months of deliberation, Finra said it will resume processing investor complaints now that it has about 700 arbitrators from Southeastern U.S. and Texas who are willing to fly to Puerto Rico.

The Financial Industry Regulatory Authority Inc. has also resolved issues related to the language barrier as UBS AG and Bank of America Merrill Lynch agreed to pay fees for translators.

“I'm confident that we will have enough arbitrators and enough staff that we will be able to process those that go forward,” said Linda Fienberg, the president of dispute resolution at Finra.

(See also: Finra freezes new arbitration cases in Puerto Rico)

Finra, which had received around 200 complaints from investors, had stopped assigning arbitrators to new cases and was trying to determine how it would address a number of challenges, including the language barrier and the fact that there were only nine arbitrators in Puerto Rico.

One month ago, the regulator said it had heard from only 60 arbitrators on the mainland who said they would be open to flying to Puerto Rico to hear

Monday, April 14, 2014

Is Standard Motor Products a Cash Machine?

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 Standard Motor Products (NYSE: SMP ) , 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, Standard Motor Products generated $63.8 million cash while it booked net income of $45.3 million. That means it turned 6.6% of its revenue into FCF. That sounds OK.

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 Standard Motor Products 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 20.1% of operating cash flow coming from questionable sources, Standard Motor Products 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 11.1% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed 15.8% 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.

If you're interested in companies like Standard Motor Products, you might want to check out the jaw-dropping technology that's about to put 100 million Chinese factory workers out on the street – and the 3 companies that control it. We'll tell you all about them in "The Future is Made in America." Click here for instant access to this free report.

We can help you keep tabs on your companies with My Watchlist, our free, personalized stock tracking service.

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