Best Chinese Stocks For 2013, Best Chinese Stocks To Buy For 2013: May 2013

Friday, May 31, 2013

Costco (NASDAQ: COST ) beat earnings with positive numbers all around, except for its stock price on the day. Even with earnings rising 19% from a year ago, revenue up 8%, and revenue from stores open at least one year up 5%, the stock fell nearly 1%. Of course, a daily stock move shouldn't worry long-term investors. And sometimes more important than the raw numbers is what's hidden in the earnings call.

Here's what you need to know from Costco's recent earnings call.

Increasing openings
CFO Richard Galanti discusses the increasing expansion: "Between now and September 1, the end of our fiscal year, we expect to open an additional nine locations, three in the U.S., three in Japan, and one each in the U.K., Taiwan, and Australia, such that we'll most likely end the fiscal year with 28 new openings for the year. That's up from 16 net openings in fiscal 2012."

Of Costco's 627 stores, 449 are in the United States. This presents a huge opportunity in countries where it is just getting started, like Australia, where it only has three stores. And for Costco, where stores perform better as they get older due to building up the local membership roll, the sooner it builds them, the better off its future will be.

Continued long-term management
Next, Galanti discusses Costco's pride in falling margins:

The four core categories -- food and sundries, hardlines, softlines, and fresh foods -- each showed lower year over year gross margin percents as we continue to invest in price, both in our domestic and in our international operations. And as I've stated before, this is Costco playing offense. It's driving sales, member shopping frequency, member signups and renewals, and market share.

Like Amazon.com, Costco isn't afraid to take a lower profit today to build a sustainable future business. This customer-centric thinking is a sign that management's attitude continues to follow founder James Sinegal's values even after his departure from the company. As The New York Times summed up in a profile on Sinegal, "At Costco, one of Mr. Sinegal's cardinal rules is that no branded item can be marked up by more than 14 percent, and no private-label item by more than 15 percent." Because of this, loyalty to Costco remains high, with membership renewal rates hovering around 90%.

Online growth
The important fact from the conference call that Galanti notes:

In terms of Costco Online, we currently operate Costco e-commerce activities in the U.S., Canada, and more recently in the U.K. For the third quarter, sales and profits were up nicely over the last year. Third-quarter e-commerce sales were up over 20%.

While many may think Costco's oversize product line doesn't lend itself well to shipping and e-commerce, the sales figures show otherwise. And for Costco, online sales allow it to grow revenue with little physical investment compared to building a new store. Efforts to improve its online presence are paying off with this 20% sales growth, and a recent survey by market research firm Vividence puts Costco Online fourth for retailers best at displaying products and prices. While a majority of sales will always be in-store, online sales can grow to offer a nice boost to Costco's bottom line.

Costco's low prices haven't just benefited customers -- shareholders have walloped the market, returning 11,000% over the past two decades. However, with prices near all-time highs, is the ride over for Costco investors? To answer that and more, The Motley Fool's compiled a premium research report with in-depth analysis on Costco. Simply click here now to gain instant access to this valuable investor's resource.

Is This Deal Unstoppable Now?

Micron Technology (NASDAQ: MU ) is finally getting ready to close the acquisition of bankrupt rival Elpida. The Japanese operation will give Micron a slew of manufacturing facilities, a whole new level of pricing power, and even a few brand-new customers.

In the video below, Fool contributor Anders Bylund highlights the recent dismissal of another roadblock in front of this long-suffering deal, this time from a Japanese court. The sooner Micron can close this agreement and get down to multicontinental business, the better.

It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.

Thursday, May 30, 2013

United Tech Sub Wins $435 Million Heavy Helo Contract

The Department of Defense awarded more than $961 million worth of contracts to a total of 17 awardees on Thursday. And yet, one company, Hartford, Conn.-based United Technologies (NYSE: UTX ) , managed to capture nearly half the funds on offer when its subsidiary Sikorsky Aircraft landed a single contract for $435.3 million.

The contract, benefiting Naval Air Systems Command, Patuxent River, took the form of a modification to a previously awarded cost-plus-incentive-fee contract. It pays UTC's Sikorsky to supply the Navy with four new CH-53K Super Stallion heavy-lift helicopter "System Demonstration Test Article" aircraft by June 2017.

Sikorsky describes the Super Stallion as "the world's premier heavy lift helicopter" -- a 30-foot long, nine-foot wide, three-engine monster capable of flying at speeds of 170 knots, traveling 454 nautical miles without refueling, and hauling 18 tons of cargo in an external sling.

Should You Trade Pfizer Stock for Shares in Zoetis?

Owners of Pfizer (NYSE: PFE ) stock have an animal of a decision to make. The pharma giant is giving shareholders a chance to exchange Pfizer stock for shares in Zoetis (NYSE: ZTS ) , its former animal health business that was spun out in February. Pfizer still owns 80% of Zoetis but is willing to give its shares away to its current shareholders in exchange for retiring Pfizer stock.

Investors certainly don't want to feel like a fish out of water owning a new company, and sometimes a bird in the hand is worth two in the bush.

On the other hand, investors shouldn't look a gift horse in the mouth, especially one that may be the bee's knees.

Curiosity may have killed the cat, but let's chew the cud and take a look at what investors should do with their Pfizer stock. And I'll hold my horses with the animal sayings so we can get through the details.

If investors decide to exchange their Pfizer shares, they'll receive about $107.52 worth of Zoetis shares for every $100 worth of Pfizer shares, although there's a limit of 0.9898 shares of Zoetis stock per share of Pfizer stock. The values will be determined by the average price of the three days before the deal closes on June 19 after the closing bell.

Don't count your chickens before they hatch
The 7% discounts sounds like a good deal, but you have to want to own shares of Zoetis to justify making the exchange. There's no telling what Pfizer shares or Zoetis shares are going to do after the exchange before you might have a chance to sell them. If Pfizer is able to exchange all its shares, it's possible investors will be so happy to have gotten rid of Zoetis that they'll bid up the shares, negating the discount.

Zoetis looks like a solid company. Sales in the first quarter were up 5% year over year, which topped the 4% growth Merck (NYSE: MRK ) saw with its animal health division and solidly trumped Elanco, Eli Lilly's (NYSE: LLY ) animal health division, which saw sales up just 2%.

Being the largest animal health company, Zoetis should have some operational efficiencies that aren't available to Merck, Eli Lilly, Bayer, and Sanofi. And it's really the only choice if you want to specifically tap the animal health care market. The animal health divisions are tiny parts of the pharmaceutical companies overall revenue, so they're not likely to move the needle at Merck, Eli Lilly or one of the other larger players.

Pfizer is as happy as a clam
Pfizer isn't doing the exchange out of the goodness of its heart. The company said that a full exit from Zoetis would be accretive to Pfizer's earning per share starting next year.

The exchange will remove Zoetis' earnings that flow through Pfizer's financial statement, but it'll also lower the number of shares outstanding since the Pfizer stock has to be turned in to get shares of Zoetis. The exchange reduces the "per share" in the EPS and increases the earnings by reducing the dividend that doesn't have to be paid on the retired Pfizer stock.

Barking up the wrong tree
This doesn't have to be an all or nothing situation. If you want to own Zoetis, which looks potentially more stable than Pfizer although perhaps with slower growth, consider trading in just some of your Pfizer stock and own both companies.

And if you're on the lookout for other dividend-paying stocks, The Motley Fool has compiled a special free report outlining our nine top dependable dividend-paying stocks. It's called "Secure Your Future With 9 Rock-Solid Dividend Stocks." You can access your copy today at no cost! Just click here.

Why Himax Shares Are Rolling Higher

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 Himax Technologies (NASDAQ: HIMX ) have been advancing throughout the trading day, and are now perched atop gains of 12%, after Oppenheimer analysts Andrew Uerkwitz and Martin Yang initiated coverage with a buy rating, making some strongly supportive comments in the process.

So what: According to a note obtained by Barron's this morning, Himax is "well positioned to supply in high volume the growing need for complex display technologies used in smartphones, tablets, TVs, and the burgeoning market of wearable computing devices." While the display-tech market has seen a number of high-potential stocks rising of late, and is packed with competition, Himax's increasingly diverse product portfolio looks appealing to the Oppenheimer analysts. They've slapped a $9 price target on shares, which represents another 20% upside from here.

Now what: Himax is surprisingly inexpensive for such a hot stock -- its P/E is less than 25 even after today's pop, and its forward P/E is only half that. The company could be at the beginning of a great run, but it's worth understanding why, rather than buying into hot rumors. Speculation lately has involved Himax supplying Google with the materials for its Glass headwear's tiny display. There's been no confirmation of that (to my knowledge), but the company is clearly finding a lot of customers and earning respectable profits somewhere. Dig a little deeper to make sure that this company is truly the hidden gem indicated by its recent heady price growth.

Want more news and updates? Add Himax Technologies to your watchlist now.

Things to Know About Kroger Stock

When looking for promising candidates for your stock portfolio, certain big names might easily come to mind, such as IBM, General Electric, or Coca-Cola. But there are plenty of other possibilities, many of which we often overlook.

Consider supermarket giant Kroger (NYSE: KR ) , for example. You might be inside one of its stores, thinking about investing in the companies that produce the items it sells (pudding, chicken, paper towels), without thinking of investing in the market itself. You might want to add Kroger stock to your portfolio, though. Why? Well, check this out: Kroger stock has appreciated by more than 50% over the past year. It has gained, on average, about 14.4% annually over the past 30 years, enough to turn $10,000 into about $566,000.

Of course, that's not enough to base an investment decision on, so let's take a closer look at the Kroger company and Kroger stock.

Meet Kroger
Kroger was launched in 1883, fully 130 years ago, when Barney Kroger put his life savings of $372 into a Cincinnati grocery store. Kroger stores were the first to have their own bakeries, which reduced the cost of bread for shoppers. Kroger was also the first to sell meats along with groceries in the same building. The company still makes many of its own products -- almost half of the 14,400 private-label products in its stores. These generate 26% of Kroger's grocery sales and boost its profit margins, as name-brand products tend to be more expensive at the wholesale level, in part due to manufacturers investing in advertising.

Today Kroger is one of the world's biggest retailers, with more than 340,000 workers, more than 2,400 stores, and operations in 31 states. Its locations recently included 786 convenience stores, 328 jewelry stores, 1,169 supermarket fuel stations, and 37 food processing plants. (Adding fueling stations to many of its locations has helped drive more business.) Store names under Kroger's roof include Kroger, City Market, Dillons, Jay C, Food 4 Less, Fred Meyer, Fry's, King Soopers, QFC, Ralphs, and Smith's. Kroger operates about 1,900 in-store pharmacies and its many floral shops make Kroger the world's largest florist.

An attractive stock
You might not find Kroger's net profit margin impressive, but even its recent 1.6% level can be productive, given enough volume. And with Kroger raking in more than $96 billion annually in revenue, that's enough to generate about $1.5 billion in net income. Putting the value of all Kroger stock together yields a market capitalization close to $60 billion. That's big, but not too big to keep it from growing.

A peek at some of the characteristics of Kroger stock via the company's financial statements reveals it posting solid growth (with management projecting more), but also being saddled with considerable debt. That debt has been falling in recent years, though, and Kroger is cranking out substantial free cash flow that can help it keep paying down debt.

The dividend yield of Kroger stock was recently 1.8%, and it has grown by an annual average of about 11% over the past five years. Its payout ratio is very low, too, around 22%, suggesting plenty of room for further increases.

The stock's valuation is appealing, with a recent P/E ratio of 12.4 comparing favorably with the company's five-year average of 28, and a forward-looking P/E of 11.5 well below the S&P 500's 14.6.

Kroger stock compares well with competitors, as well. Whole Foods Market (NASDAQ: WFM ) might have fatter profit margins, for example, but both its current and forward P/E ratios are above its five-year average of 28. Whole Foods may be the go-to grocer for organic fare, but Kroger is increasingly offering organic items, as is even Wal-Mart (NYSE: WMT ) . Meanwhile, Wal-Mart's current P/E is a bit above its 14.5 five-year average and its forward P/E a bit below. Its dividend, recently yielding 2.4%, has been growing faster, though, at a 15% average over the past five years. Wal-Mart's revenue has been growing more slowly than Kroger's.

Kroger stock is worth considering if you're looking for a solid long-term performer and a little dividend income. You might want to add it to your watchlist and review it further. A good place to start is the company's own Fact Book.

It's hard to believe that a grocery store could book investors more than 30 times their initial investment, but that's just what Whole Foods has done for those who saw the organic trend coming some 20 years ago. However, it may not be too late to participate in the long-term growth of this organic foods powerhouse. In this premium report on the company, we walk through the key must-know items for every Whole Foods investor, including the main opportunities and threats facing the company. So make sure to claim your copy today by clicking here.

Bank of America and Citigroup: How Stable, Really?

The debate over whether the nation's largest banks are too big to fail rages on, as does the question of just how much in implicit subsidies these banks enjoy because of this notion. When it comes to Bank of America (NYSE: BAC ) and Citigroup (NYSE: C ) , the two megabanks have been found to be much more dependent on TBTF-generated backstops than peers JPMorgan Chase (NYSE: JPM ) and Wells Fargo (NYSE: WFC ) , particularly when it comes to profits -- which would dip into the negative zone for both B of A and Citi if funding subsidies were removed.

Indirect TBTF support aids debt ratings, too
Not surprisingly, tacit advantages exist when it comes to ratings on the biggest banks' debt, as well. A new report by Bloomberg shows that, without such backup, the debt of Wells and JPMorgan would be much less attractive for investors -- and, for Bank of America and Citi, pretty much its entire debt load would make even the pluckiest of investors run for the hills.

What constitutes this particular subsidy? Much as the belief that none of these huge banks will be allowed to fail gives them a funding advantage -- since investors are willing to take lower yields in exchange for lower risk -- a similar boost occurs when it comes to corporate debt. So certain are bank bondholders that the government will always be at the ready to step in if problems arise, that they are willing to accept lower bond yields.

According to World Bank economist Deniz Anginer, the author of a new study that highlights this particular phenomenon, this subsidy has infused an extra $82 billion into the coffers of Goldman Sachs (NYSE: GS ) and Morgan Stanley (NYSE: MS ) , as well as B of A, Citi, JPMorgan, and Wells. That's a lot of extra dough, and it's notable that, without it, Moody's estimates that essentially all of Bank of America's and Citigroup's holding company debt would sink below junk status. Things are less dire for Morgan Stanley's and Goldman's debt, but still pretty dicey; JPMorgan would suffer, as would Wells, but they both would still have plenty of investment grade debt to float.

On the plus side, both B of A and Citi got some good news when The Wall Street Journal reported that the cost of insuring against a default at the two bank holding companies dropped this month to its lowest point since the financial crisis. But, as the Bloomberg articles shows, these two banks still have a long way to go.

Wells Fargo's dedication to solid, conservative banking helped it vastly outperform its peers during the financial meltdown. Today, Wells is the same great bank as ever, but with its stock trading at a premium to the rest of the industry, is there still room to buy, or is it time to cash in your gains? To help figure out whether Wells Fargo is a buy today, I invite you to download our premium research report from one of The Motley Fool's top banking analysts. Click here now for instant access to this in-depth take on Wells Fargo.

Wednesday, May 29, 2013

Will Microsoft Repeat Vista's Mistake?

Steve Ballmer learned a painful lesson with Vista the hard way. Is Microsoft (NASDAQ: MSFT ) about to repeat that mistake with the Xbox One?

Microsoft's disappointing Vista operating system was an easy target for Apple attack ads several years ago, but the clunky platform was doomed even before Justin Long and John Hodgman began trading zingers about it.

Customers weren't happy.

"Application compatibility in Vista was not as high as many of our customers would have liked," CEO Steve Ballmer conceded five years ago, more than a year before it was relieved by Windows 7.

"What we have learned is that maybe our customers care a little bit more about compatibility and a little bit less about security," he concluded, believing that customers would eventually come around.

They didn't. Compatibility was too important. Apple was able to take plenty of shots with its attack ads, but Vista's demise was self-inflicted. It was an island.

This brings us to the Xbox One's lack of compatibility with earlier gaming consoles.

Despite packing plenty of bar-raising features, the one thing that could keep buyers back initially is the inability to play Xbox and Xbox 360 games. Sure, there are often obscure titles that don't make the upgrade cut, but by switching to a brand-new Advanced Micro Devices (NYSE: AMD ) chip architecture we're talking about Xbox and Xbox 360 discs being worthless on the Xbox One. The Wii U and the upcoming PlayStation 4 will all be powered by AMD now.

For now, the big loser here is GameStop (NYSE: GME ) . The shares tumbled 19% last week, weighed down by the Xbox One news and a ho-hum quarterly report. The video game retailer score juicy margins in its resale business, and Xbox One owners won't be buying a lot of older secondhand games anymore. They will probably be selling their discs, and that will create an inventory glut at your local GameStop that will likely drive prices lower.

However, the lack of backward compatibility will naturally also sting Microsoft -- just as it did with Vista. Microsoft argued that time would heal the dissent. Developers would upgrade their applications for Vista, but customers don't usually crave the hassle or additional costs to make something that used to work just fine work again on a new operating system.

To be fair, the Xbox One is considerably cooler than Vista. It better be. Asking gamers to come in with clean slates isn't going to be an easy sell.

Are we ready for the "I'm an Xbox One, I'm a Wii U" attack ads?

Prepare for battle
It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.

Inland Real Estate Floats New Stock Issue

A Trust-Busting Crusade and a Marketing Masterstroke

On this day in economic and business history...

The fifth month of 1911 is often remembered for the landmark dissolution of the legendary Standard Oil Trust, a judgment which put forth a standard of "reasonableness" in assessing the size and competitive efforts of massive companies. What's often forgotten is that Standard Oil was not the only trust in the government's crosshairs during the 1911 session. On May 29, 1911 -- just before its annual recess -- the Supreme Court dissolved the American Tobacco Trust, using the same standard of reasonableness it had set weeks earlier against Standard Oil.

American Tobacco was founded in 1890 by James B. Duke, who pioneered the use of mechanical cigarette-rollers and thus gained a level of control over his industry similar to that of oil-industry counterpart John D. Rockefeller. Duke already controlled roughly 40% of the cigarette industry by the time he founded American Tobacco, and his control only grew as the trust absorbed hundreds of smaller competing firms. This made it a logical choice to become one of the Dow Jones Industrial Average's (DJINDICES: ^DJI ) 12 founding stocks, alongside several other notable trusts of the late 1890s. Despite the rapid growth of the tobacco industry following Duke's use of machine rollers, American Tobacco held onto its market lead right up to its dissolution: Two decades after its founding, the company still controlled between 75% and 80% of the tobacco industry, compared to Standard Oil's 65% share of the oil market on the eve of its breakup.

The dissolution presented similar problems to those of Standard Oil. Both companies controlled a wide range of vertically integrated operations owned by a large number of shareholders. However, where Standard Oil had geographical segments to consider, American Tobacco's breakup was more a question of branding and organizational separation, because much of the tobacco industry was (and continues to be) based in Virginia and nearby Southern states.

At the time of the breakup, the American Tobacco Trust controlled or held significant interests in 65 subsidiary companies in the United States, as well as two British companies. These interests were eventually separated into 14 different tobacco companies, of which four became an American tobacco oligopoly to replace the monopoly: R. J. Reynolds (now Reynolds American), Liggett and Myers (now Vector Group (NYSE: VGR ) ), Lorillard (NYSE: LO ) , and a diminished American Tobacco.

Despite this setback, American Tobacco's market position and prestige were still meaningful enough to bring it back to the Dow in 1925. It remained on the index until 1985, when it was replaced by a fast-rising tobacco competitor that had always been just out of its grasp: Altria, then still known as Philip Morris. The remnants of American Tobacco's original business (after diversification and rebranding) were sold in 1994 to British American Tobacco, once American Tobacco's joint international partnership at the turn of the century.

The birth of a giant
The world's largest company (that you'll never be able to invest in) celebrates May 29, 1933 as its birthday, although the company itself was only formally created in 1988. How can this be? Perhaps it's best to let Saudi Aramco tell its own story:

[The] beginning, in Saudi Arabia, was in 1933. That's when the Saudi government signed a concession agreement with the Standard Oil Company of California, predecessor of today's Chevron (NYSE: CVX ) , opening up a large part of the young desert country for hydrocarbon exploration. In March 1938, following three years of frustrating drilling, the first commercially viable oil field was discovered at Dhahran. The kingdom and the company never looked back, in time joining the ranks of the world's greatest producers and exporters of oil and natural gas liquids.

"Joining the ranks" seems like an understatement, as Saudi Arabia has for many years been the world's leading producer of oil, with consistent daily production of more than 9 million barrels nearly eight decades after that first successful oil strike. Key to this massive output is the Ghawar oilfield, the undisputed king of all oil fields. From its discovery in 1948 to the start of the 21st century, Ghawar supplied the world with an astounding 51 billion barrels of oil, and there are an estimated 71 billion barrels remaining. With reserves like these, it should be no surprise that the state-controlled Saudi Aramco is usually considered the most valuable company in the world.

Modern marketing's origin story
A simple, plain-text advertisement in the May 29, 1886 edition of the Atlanta Journal marked the start of what may be the world's greatest marketing effort:

COCA-COLA (NYSE: KO )

Delicious! Refreshing! Exhilarating! Invigorating!

The New and Popular Soda Fountain Drink, containing the properties of the wonderful Coca plant [yes, that coca plant] and the famous Cola nuts. For sale by Willis Venable and Nunnaly & Rawson.

Pharmacist John Pemberton purchased this quick-and-dirty promotion for the drink he had invented just three weeks earlier, but it was nothing compared to the marketing blitz to come once true entrepreneurs got their hands on the secret formula. When Coke came under the control of Asa G. Candler, it got an intense promotional push, with sponsorships, branded products, and advertisements plastered on all manner of pre-broadcast media across the U.S. However, it was his 1919 sale of the company to a group of investors that would allow Coke to become a masterful marketing enterprise, because four years after that sale, lead investor Ernest Woodruff installed his son Robert Woodruff at the helm.

Robert Woodruff immediately recognized the ultimate importance of brand quality and brand awareness to the success of what everyone can ultimately agree is a completely unnecessary product. He quickly ramped up advertising expenditures and also spearheaded the creation of some innovative new merchandise concepts, including the now-ubiquitous six-pack, which broadened Coke's reach and made it easier than ever for people to enjoy a cold, refreshing soft drink anytime and anywhere. His efforts during the years surrounding World War II also contributed greatly to Coke's global cachet, as American GIs were frequently kept supplied with Cokes during the war via 64 overseas bottling plants established especially for that purpose. Of course, once the war ended, many Asians and Europeans who had gotten their first taste of Coke from a friendly Yankee could buy a Coke of their own once these plants simply shifted their distribution networks to civilian centers.

After more than a century of advertising evolution, Coca-Cola has grown into one of the world's most dedicated advertisers, with one of the largest corporate ad budgets in the world. In 2010, for example, the company spent nearly $3 billion around the world to make sure its many brands remained front and center in consumers' minds.

Coca-Cola's wide moat has helped provide its shareholders with superior gains in the past, but the company faces some new threats to its continued market dominance. The Motley Fool recently compiled a premium research report containing everything you need to know about Coca-Cola. If you own or are considering buying shares in the company, you'll want to click here now and get started!

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More Expert Advice from The Motley Fool

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

Best Energy Companies To Watch In Right Now

All industries are dominated by the biggest and most successful companies. In technology, there is Google (Nasdaq: GOOG) and Amazon.com (Nasdaq: AMZN). In energy, companies such as ExxonMobil (NYSE: XOM) and Conoco Phillips (NYSE: COP) reign supreme.

But every once in a while, a new guy comes along and shakes things up. And that's what's happening in the private-equity space right now. Since the 1980s, this industry has been dominated by stalwarts such as the Blackstone Group (NYSE: BX) and Kohlberg Kravis Roberts & Co. (NYSE: KKR). But the newest player in the private-equity scene is burning up the charts and putting its competition to shame.

In fact, the company's investments have been so successful, shares have been surging higher -- up 110% in just the past 12 months. Take a look at the chart below.

Best Energy Companies To Watch In Right Now: Vitec Group(VTC.L)

The Vitec Group plc, together with its subsidiaries, provides products and services for the broadcast, photographic, military, aerospace, and government markets worldwide. It operates in three divisions: Imaging and Staging, Videocom, and Services. The Imaging and Staging division engages in the design, manufacture, and distribution of equipment and accessories for professionals and amateurs in photography, video, and events fields. This division offers photo, video, and lighting support products; and stage and lighting systems, as well as distributes products for the photographic, video, cine, and lighting production markets. The Videocom division designs and distributes equipment principally for professionals engaged in producing and transporting video content for the media industries, such as broadcast, film, live events, and education, as well as for the military, aerospace, and government markets. It offers bags, camera accessories, lighting products, microwave system s, mobile power systems, prompters, and camera support equipment, as well as equipment rental services. The Services division provides equipment rental, workflow design, and technical support services for camera, video, audio, fiber optic, and wireless technology used by television production teams and film crews. It offers production equipment rental, used production equipment sales, maintenance services, event systems and services, and audio services and sales, as well as fiber optic system design, installation, and maintenance services. The company was formerly known as Vitec Group plc and changed its name to The Vitec Group plc in 2001. The Vitec Group plc was founded in 1910 and is headquartered in Kingston upon Thames, the United Kingdom.

Best Energy Companies To Watch In Right Now: Ltd (SPP.V)

Spot Coffee (Canada) Ltd. designs, develops, and operates community oriented cafes in Canada and the United States. As of November 29, 2012, it operated nine cafes. The company was founded in 2004 and is headquartered in Toronto, Canada.

Best Heal Care Stocks To Invest In Right Now: Royale Energy Inc.(ROYL)

Royale Energy, Inc. operates as an independent oil and natural gas producer in the United States. It engages in the production and sale of oil and natural gas; acquisition of oil and gas lease interests and proved reserves; drilling of exploratory and development wells; and sale of working interests in wells to be drilled. The company also owns wells and leases located principally in the Sacramento Basin and San Joaquin Basin in California, as well as in Utah, Texas, and Louisiana. In addition, it holds proved developed producing reserves of oil and natural gas in Texas and Louisiana. As of December 31, 2009, Royale Energy operated 52 natural gas wells in California; owned and operated 7 natural gas wells in Utah; and had non operating interests in 17 oil and gas wells in Texas, 3 in Oklahoma, 1 in California, and 2 in Louisiana. It also had proved developed reserves of 4,563 MMcf and total proved reserves of 4,617 MMcf of natural gas; and proved developed oil reserves of 16 Mbbl and total proved oil reserves of 16 Mbbl. The company was founded in 1986 and is based in San Diego, California.

Tuesday, May 28, 2013

1 Thing Worth Watching at REX American Resources

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 REX American Resources (NYSE: REX ) , 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, REX American Resources generated $18.8 million cash while it booked net income of $0.3 million. That means it turned 2.7% of its revenue into FCF. That doesn't sound so great.

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 REX American Resources 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.

REX American Resources's issue isn't questionable cash flow boosts, but items in that suspect group that reduced cash flow. Within the questionable cash flow figure plotted in the TTM period above, changes in taxes payable provided the biggest boost, at 1.5% of cash flow from operations. Overall, the biggest drag on FCF came from changes in accounts receivable, which represented 13.9% 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.

Looking for an alternative to REX American Resources? By investing in this multibillion-dollar energy company, you can get in before its stock rebounds, when natural gas prices eventually do turn upward. And until natural gas prices do rebound (which a top Motley Fool analyst expects will happen by 2014), you can cash in on its stable 5.7% dividend. 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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Right Drug Class, Wrong Company

We've been speculating for almost a year that Amarin (NASDAQ: AMRN ) would be purchased by AstraZeneca (NYSE: AZN ) . The large pharma sells cholesterol-lowering drug Crestor, which would be a perfect fit with Amarin's lipid-lowering fish oil Vascepa.

Right drug class. Wrong company.

Instead, AstraZeneca purchased Amarin's competitor Omthera Pharmaceuticals (NASDAQ: OMTH ) , which has a fish oil product, Epanova, similar to Vascepa. Omthera expects to file a marketing application with the Food and Drug Administration within a few months for the same indication that Vascepa is currently approved for.

Why Omthera over Amarin? Here are three possibilities:

Technology
Omthera's technology allows for better absorption, which allows for once-daily dosing without food. Vascepa is taken twice a day with food. It may not seem like a lot, but patients prefer the more convenient dosing, and when all things are equal, doctors will prescribe the once-daily drug because they know they'll get better adherence from the patient.

Patents
Without being able to patent the fish oil itself -- a composition-of-matter patent -- Amarin and Omthera have to rely on patents on how their drugs are made. I'm not a patent lawyer nor do I play one on the Internet, but a formulation that changes the dosing might be more defendable than Amarin's war chest of patents. We'll know in a few years when the generic-drug vultures to come in.

Price
This seems like the most obvious reason. Amarin ended last week with a market cap around $1 billion. AstaZeneca is paying about $323 million for Omthera and could give shareholders an additional $120 million in development and sales milestone payments.

With an approved drug and an outcomes study well under way, Amarin is arguably worth more than Omthera, but there's a long way between $443 million and $1 billion. Amarin's shares are rightfully seeing pressure today as they adjust to the reality check on what big pharma is willing to pay.

Poor Amarin?
Don't feel too sorry for the company. Vascepa still has a solid head start and could have an expanded approval for patients with moderately high triglyceride levels by the end of the year -- before Epanova is even approved for patients with extremely high triglyceride levels.

At this point, I doubt Amarin gets a buyout above $1 billion. A more likely scenario is finding a partner willing to market Vascepa that might make a purchase down the line. Amarin is clearly worth more than $1 billion if doctors will prescribe Vascepa for moderately high triglyceride levels, but they may not do that in large numbers until the outcomes study proves that Vascepa decreases heart attacks and strokes.

Now that AstraZeneca is out of the picture, Merck (NYSE: MRK ) seems like the most obvious choice as a partner. The pharma sells Zetia, which lowers cholesterol, so there are the same synergies that AstraZeneca will see with Epanova. Merck might even be interested in developing a combination product containing Vascepa and a statin like it has done with Zetia to make Vytorin and Liptruzet.

Craving more info on Amarin?
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More Expert Advice from The Motley Fool

2 of the Best Stocks to Invest In

Since the financial collapse and ensuing stock market crash, we've witnessed one of the greatest bull markets in history. Look at the graph below displaying how the S&P 500 has soared since February 2009.

^SPX Chart

^SPX data by YCharts

Warren Buffet's quote, "Be fearful when others are greedy, and greedy when others are fearful", seems to fit our current situation quite well. With the market sitting near record highs it has some investors so nervous about a potential pullback that it's making them cautious to invest in the market – and that's understandable. But there are always values to be found, and profits to be had. Ford (NYSE: F ) and General Motors (NYSE: GM ) are two stocks that have a sustainable and profitable future, and could be two of the best stocks to invest in right now.

Market share
In the first quarter this year, Detroit's Big Three accomplished something that hadn't been done in 20 years – all three gained market share. "The renaissance in Detroit is real," AutoNation CEO Mike Jackson told AutoNews in a telephone interview. "They have fantastic new products, and they're in a very good position to compete."

The good news is that Ford's market share is expected to increase this May compared to last year, according to TrueCar. It forecasts Ford to improve its share in the U.S. from 15.5% to 17.2%, while GM is expected to stay flat at 18.5%. For GM, staying flat is better than losing share, as rival Toyota is forecast to drop from 15.3% to 14.9%.

Leaner operations
Ford's CEO Alan Mulally established his "One Ford" vision and it's paying off big-time. The company is producing more profits than GM, off lower revenue, because it's running so efficiently. The good news for GM is that it's potential isn't as tapped as Ford's right now. It expects to improve operations and significantly boost profits and margins by mid-decade.

Analysts estimate that Detroit automakers are running lean enough to break even or produce slim profits if the U.S. automotive market breaks 10 million units in sales. That's great news, as the previous break-even mark was 16 million units, and the SAAR is standing just above 15 million right now.

Future lineup
Lean operations are a huge reason for excitement with investors, but it gets better. Both companies are having success with new models. Consider that Ford can't make enough Fusions or Escapes to keep its inventories as high as it would like. Plants that produce the Fusion are said to be running at 114% capacity, making each sedan rolling off the line more profitable than the last. Ford is bringing extra capacity to plants next year and is shortening its standard summer shutdown in half. Ford gets it now, and will continue to produce vehicles that strike the right balance of design and value with consumers – a great sign for investors.

GM is a little behind Ford in releasing new vehicles because it needed to shore up its financials first. Finally it's able to dust off the oldest vehicle portfolio in the industry and plans to refresh, replace, or redesign almost 90% of its vehicles by 2016. I expect that to pay off for GM and improve its top and bottom lines drastically. GM also has a leg up on Ford when it comes to its luxury Cadillac line – which brings home higher profit margins than standard cars. Ford's working to turn its Lincoln line to compete in the luxury segment, but it has a lot of progress to make.

Bottom line
Ford and GM seem to have bright futures with their leaner operations and popular new models. Both look to gain market share and are taking full advantage of consumers hitting the showrooms. Investors are happy with improving profits, operations, market share, and vehicles, and the second quarter is shaping up to be just as profitable as the first. Ford and GM have a lot of momentum right now, and seem like two of the best stocks to invest in.

The best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

3 Stocks Near 52-Week Lows Worth Buying

A Fool Looks Back

Earlier this month it seemed as if Facebook (NASDAQ: FB ) would be buying Waze, the fast-growing traffic app that uses crowdsourcing to deliver breaking news on traffic tie-ups and speed traps. Facebook was reportedly willing to pay $800 million to $1 billion for the Israeli-based company.

Well, now chatter finds Google (NASDAQ: GOOG ) potentially interested in Waze.

Can we get some navigation tips to get around Waze's headquarters? Things seem to be getting a bit busy with gentleman callers on its porch.

Facebook and Google have the money to complete the deal. They also have the resources to whip up their own Waze knockoff. The problem there is that Waze already has 47 million active users worldwide submitting real-time information to help out their fellow drivers. Why compete against Waze -- and probably lose this game of numbers -- when you can buy it?

Would Google be a better fit than Facebook? That's not the point. At its very core, Google's interest may be primarily to keep Facebook away. Facebook is already siphoning away search traffic and online time. If it wins over the mobile crowd, it will become an even fiercer competitor.

Watch this battle. It will get interesting.

Briefly in the news
And now let's take a quick look at some of the other stories that shaped our week.

8x8 (NASDAQ: EGHT ) moved higher after posting better-than-expected revenue growth in its latest quarter. The provider of PBX telephony, video conferencing, and other Web-based communication services did miss on the bottom line, but it was still another period of margin expansion and explosive earnings growth. SodaStream (NASDAQ: SODA ) popped to a fresh 52-week high last week after its well-received Analyst Day, but an analyst this week was feeling more flat than fizz on the company behind the carbonated beverage maker system. J.P. Morgan downgraded the stock but also boosted its price target from $56 to $70 to keep pace with the bubbly share price. Tesla Motors (NASDAQ: TSLA ) continues to do all of the right things. The electric-car maker on Wednesday wired a payment that zeroes out the federal loan it received four years ago. Tesla claims to be the first American company to fully repay its government loan, but Chrysler disputed the claim. Take it outside, you two.

Tech battles can be profitable for investors
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Monday, May 27, 2013

Home Depot or Lowe's?

The following video is from Thursday's Motley Fool Money roundtable discussion, in which host Chris Hill and analysts Charly Travers, James Early, and Ron Gross discuss the top business and investing stories of the week.

Home Depot (NYSE: HD ) reported higher-than-expected first-quarter earnings. Same-store sales were up more than 4% and the stock hit an all-time high. Competitor Lowe's (NYSE: LOW ) also reported a rise in first-quarter earnings but same-store sales fell slightly. Shares of Lowe's also hit an all-time high. In this installment of Motley Fool Money, our analysts debate the merits of the two hardware retailers.

The relevant video segment can be found between 5:53 and 7:18.

For the full video of today's Motley Fool Money, click here .

FirstMerit Declares Fresh Dividends

FirstMerit (NASDAQ: FMER ) is sliding a few bills across the counter in the form of dividends. The financial services company will pay a quarterly distribution of $0.16 per share of its common stock on June 17 to shareholders of record as of May 28. This amount is in line with each of FirstMerit's previous 14 quarterly disbursements stretching back to late 2009.

Holders of the firm's 5.87% series A preferred stock will also be rewarded. They are to be paid $14.69 per regular share, or $0.36725 per depository share, on August 5, provided that they are the holders of record as of July 19.

The common stock dividend annualizes to $0.64 per share. That yields 3.6% at FirstMerit's most recent closing stock price of $17.95.

More Expert Advice from The Motley Fool

Top 5 Railroad Stocks To Buy Right Now

Union Pacific (NYSE: UNP ) and CSX (NYSE: CSX ) are selections for the real-money Inflation-Protected Income Growth portfolio. Like any investments, they need to be reviewed from time to time to see if� they're still worth owning. In the brief video below, portfolio manager Chuck Saletta reviews their valuations, balance sheets, and dividends and decides whether to hold on to the stocks or let them go.

To follow the iPIG portfolio as buy and sell decisions are made, watch Chuck's article feed by clicking here. To join The Motley Fool's free discussion board dedicated to the iPIG portfolio, simply click here. For more information on the Graham Equation used for the valuation estimates, see the article at this link.

For more on iPIG portfolio selection CSX
With 21,000 miles of track serving two-thirds of the U.S. population, CSX maintains a valuable proprietary asset. Still, this railroad will face difficult obstacles in the years ahead due to a domestic surplus of natural gas and coal's declining popularity. To help investors better understand how CSX can deal with these challenges, The Motley Fool has released a brand-new premium research report authored by Isaac Pino, Industrials Bureau Chief and transportation expert. Isaac provides an in-depth look at CSX's competitive advantages, risk areas, and prospects for the future. Simply click here now to access your copy of this invaluable investor's resource.

Top 5 Railroad Stocks To Buy Right Now: PAYPOINT ORD GBP0.0033(PAY.L)

PayPoint plc, a specialist payments company, provides convenient payments and value added services to consumer service organizations primarily in the United Kingdom, Ireland, Romania, and North America. It operates branded retail networks, which consist of terminals to process energy meter prepayments, cash bill payments, mobile phone top-ups, transport tickets, BBC TV licences, and various other payment types for utilities and telecommunications, and consumer service companies. The company operates 29,508 terminal sites and 2,538 ATMs. It also offers PayPoint.net, an Internet payment service linking into various UK banks to deliver secure online credit and debit card payments for Web merchants. In addition, the company provides PayByPhone services to parking authorities allowing consumers to use their mobile phones to pay for their parking by credit or debit card. It serves various sectors, such as utilities, telecoms, media, financial services, transport, retail, gaming, and public sectors. The company was founded in 1996 and is based in Welwyn Garden, the United Kingdom.

Top 5 Railroad Stocks To Buy Right Now: Seroja Investments Limited (IW5.SI)

Seroja Investment Limited, an investment holding company, provides domestic marine cargo and coal transportation services in Indonesia and China. It charters tugboats and barges primarily to transport dry bulk freight comprising thermal coal, sand, and other quarry materials. The company primarily serves coal and cement producers. It owns and operates a fleet of 64 vessels consisting of tugboats and barges, which navigate waters around the Indonesian archipelago. The company is based in Singapore.

Top 5 Blue Chip Companies To Watch For 2014: TiVo Inc.(TIVO)

TiVo Inc., together with its subsidiaries, provides technology and services for television solutions, including digital video recorders (DVRs) and connected televisions in the United States and internationally. The company offers subscription-based TiVo service, which enhances home entertainment by providing consumers with a way to record, watch, and control live television, as well as to receive videos, pictures, and movies from cable, broadcast, and broadband sources in one interface. It also provides a platform for advertising and audience research measurement services. TiVo Inc. distributes the TiVo DVR through consumer electronics retailers and its online store at TiVo.com, as well as the TiVo service through agreements with satellite and cable television service providers; and broadcasting companies. As of January 31, 2011, it had approximately 1.5 million subscriptions to the TiVo service. The company was founded in 1997 and is headquartered in Alviso, California.

Top 5 Railroad Stocks To Buy Right Now: U.S. Physical Therapy Inc.(USPH)

U.S. Physical Therapy, Inc., through its subsidiaries, operates outpatient physical and occupational therapy clinics in the United States. Its clinics provide pre-and-post operative care and treatment for orthopedic-related disorders, sports-related injuries, preventative care, rehabilitation of injured workers, and neurological-related injuries. The company also offers physician services to third parties; and operates clinics, which specialize in the outpatient, non-surgical treatment of osteo arthritis degenerative joint disease and other musculoskeletal conditions. As of December 31, 2011, it operated 416 clinics in 42 states; and managed 15 physical therapy facilities for third parties, including physicians. The company focuses its marketing efforts on physicians comprising orthopedic surgeons, neurosurgeons, physiatrists, internal medicine physicians, podiatrists, occupational medicine physicians, and general practitioners. U.S. Physical Therapy, Inc. was founded in 1 990 and is based in Houston, Texas.

Top 5 Railroad Stocks To Buy Right Now: Genting Singapore Plc (G13.SI)

Genting Singapore PLC, an investment holding company, engages in the development and operation of integrated resorts. It operates casinos; hotels with approximately 1500 rooms; approximately 22 beach villas; and a marine life park. The company is also involved in the provision of sales and marketing support services to leisure and hospitality related businesses; online gaming operations; and the food street business. It has operations in Europe and the Asia Pacific. The company was incorporated in 1984 and is headquartered in Singapore. Genting Singapore PLC is a subsidiary of Genting Overseas Holdings Limited.

2 Retail Stocks Struggling to Survive

The following video is from Tuesday's Investor Beat, in which host Chris Hill and analysts Jason Moser and Jeff Fischer dissect the hardest-hitting investing stories of the day.

Best Buy (NYSE: BBY ) and hhgregg (NYSE: HGG ) are bricks-and-mortar electronics retailers that are struggling for survival. Both reported earnings with very different results. Best Buy showed encouraging signs of growth in online sales while reducing costs. Meanwhile, hhgregg's fourth-quarter profits fell 82%. In this installment of Investor Beat, Motley Fool analysts Jason Moser and Jeff Fischer discuss the electronics retail industry and why investors should steer clear of both stocks.

The brick-and-mortar vs. e-commerce battle wages on, with Best Buy caught in the middle. After what might have been its most tumultuous year in history, there are now even more unanswered questions about the future for the big-box electronics retailer. How will new leadership perform? Will a smaller store format work out for both the company and its brave investors? Should you be one such brave investor? To help answer all these questions, The Motley Fool has released a premium research report detailing the opportunities -- and the risks -- in store for Best Buy. Simply click here now to claim your comprehensive report today.

The relevant video segment can be found between 0:15 and 2:58.

Sunday, May 26, 2013

1 Thing to Watch at Sapient

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 Sapient (Nasdaq: SAPE ) , 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, Sapient generated $77.9 million cash while it booked net income of $62.9 million. That means it turned 6.8% of its revenue into FCF. That sounds OK.

So how does the cash flow at Sapient 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.

With 26.6% of operating cash flow coming from questionable sources, Sapient investors should take a closer look at the underlying numbers. Within the questionable cash flow figure plotted in the TTM period above, stock-based compensation and related tax benefits provided the biggest boost, at 13.6% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed 30.4% of cash from operations.

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

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Top Casino Stocks To Watch Right Now

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 Global Cash Access (NYSE: GCA ) have plunged today by as much as 10% after the company reported first-quarter earnings.

So what: Revenue in the first quarter added up to $146.8 million, with earnings per share of $0.09. Both results were well below forecasts, as investors were expecting the company to report sales of $149.2 million and $0.19 per share in profit. CEO David Lopez said the results were right on target to meet its full-year guidance.

Now what: Lopez said that GCA's kiosk business and sales pipeline continue to improve, and that the company is working to provide even more cash access delivery systems to the market. GCA is reaffirming its 2013 outlook, with adjusted EBITDA expected in the range of $70 million to $74 million. The company noted that there's little to no growth in the domestic gaming industry and no significant casino openings expected this year.

Top Casino Stocks To Watch Right Now: (XTRN)

Las Vegas Railway Express Inc. focuses to re-establish a conventional passenger train service between the Las Vegas and Los Angeles metropolitan areas. It plans to establish a ?Vegas-style? passenger train service. The company is based in Las Vegas, Nevada.

Top Casino Stocks To Watch Right Now: Penn National Gaming Inc.(PENN)

Penn National Gaming, Inc. and its subsidiaries own and manage gaming and pari-mutuel properties in the United States. It operates approximately 27,000 gaming machines; 500 table games; and 2,000 hotel rooms in 23 facilities in 16 jurisdictions, including Colorado, Florida, Illinois, Indiana, Iowa, Louisiana, Maine, Maryland, Mississippi, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, West Virginia, and Ontario. The company was formerly known as PNRC Corp. and changed its name to Penn National Gaming, Inc. in 1994. Penn National Gaming, Inc. was founded in 1982 and is based in Wyomissing, Pennsylvania.

Advisors' Opinion:

[By Quickel]
Penn National Gaming(PENN) squeaked past its guidance through improved cost controls, and investors praised its efforts.

But expectations were low, and its upbeat outlook shouldn't be viewed as a message that regional markets are recovering. "Going forward, we project soft regional gaming revenue results over the next three to six months, as we do not expect to see a significant increase in consumer spending patterns given the uncertain economic environment," J.P. Morgan analyst Joseph Greff wrote in a note.

Penn National raised its full-year earnings guidance to $1.18 from $1.13 a share, and up its revenue outlook by $26 million to $2.44 billion from $2.41 billion.

During the second quarter, the company earned $9.2 million, or 9 cents a share, compared with $28.5 million, or 27 cents, in the year-ago period. Excluding items, Penn actually earned 29 cents a share, a penny higher than estimates.

Revenue rose 3% to $598.3 million, higher than the $597.1 million Wall Street projected. The upside was driven by both better revenues and margins and was generally broad-based across many properties, especially larger venues in Charlestown, Lawrenceburg and Grantville, Pa.

Penn National rolled out table games in West Virginia and Pennsylvania during the quarter, which should be a growth catalyst moving forward. The company also plans to open a slot facility in Maryland on Sept. 30 and expects its Toldeo, Ohio, location to open in the first-half of 2012. Its Columbus project is slated to open in the second-half of 2012.

The company repurchased 409,000 shares during the quarter. "[This] sends a message to investors on the value of its equity, but perhaps indicating the lack of near-term acquisition opportunities," J.P. Morgan analyst Joseph Greff wrote in a note.

Top Beverage Companies To Buy Right Now: Wynn Resorts Limited(WYNN)

Wynn Resorts, Limited, together with its subsidiaries, engages in the development, ownership, and operation of destination casino resorts. The company owns and operates Wynn Las Vegas casino resort in Las Vegas, which includes approximately 22 food and beverage outlets comprising 5 dining restaurants; 2 nightclubs; 1 spa and salon; 1 Ferrari and Maserati automobile dealership; wedding chapels; an 18-hole golf course; meeting space; and foot retail promenade featuring boutiques. Wynn Las Vegas casino resort also features approximately 147 table games, 1 baccarat salon, private VIP gaming rooms, 1 poker room, 1,842 slot machines, and 1 race and sports book. It also owns and operates an Encore at Wynn Las Vegas resort, a destination casino resort located adjacent to Wynn Las Vegas that features a 2,034 all-suite hotel, as well as a casino with 95 table games, 1 sky casino, 1 baccarat salon, private VIP gaming rooms, and 778 slot machines. In addition, the company operates Wyn n Macau casino resort located in the Macau Special Administrative Region of the People?s Republic of China. Wynn Macau casino resort features approximately 595 hotel rooms and suites, 410 table games, 935 slot machines, 1 poker room, 1 sky casino, 6 restaurants, 1 spa and salon, lounges, meeting facilities, and retail space featuring boutiques. Further, it operates Encore at Wynn Macau resort located adjacent to Wynn Macau. Encore at Wynn Macau resort features approximately 410 luxury suites and 4 villas, as well as casino gaming space, including a sky casino consisting of 60 table games and 80 slot machines, 2 restaurants, 1 luxury spa, and retail space. The company was founded in 2002 and is based in Las Vegas, Nevada.

Advisors' Opinion:

[By Jeanine Poggi]
Wynn Resorts'(WYNN) run up of more than 55% this year has caused Wall Street to question its valuation.

Currently, eight analysts have a buy rating on Wynn, 16 say hold, two rate it underperform rating and one says to sell the stock.

"With little on the growth horizon in the intermediate term, new competition from Cotai coming in 2011 and 2012 ... and the unclear timing of a true recovery in Las Vegas, we see few catalysts not yet priced-in to pull valuation higher than current levels," Bain wrote in a note following its third-quarter earnings report.

During the quarter, Wynn lost $33.5 million, or 27 cents a share, compared with a profit of $34.2 million, or 28 cents, in the year-ago period. The loss was attributed to charges related to servicing its debt. On an adjusted basis, Wynn actually earned 39 cents, matching Wall Street's outlook.

Total Revenue grew to $1 billion from $773.1 million, better than the $990.8 million analysts predicted.

In Macau, Wynn reported a 50% surge in revenue to $671.4 million, while EBITDA was $198 million, up 54.5% from $128.2 million in the third quarter of 2009. Earlier in the year the company opened its $600 million Wynn Encore Macau, which added 414 rooms to the market.

Looking ahead, Wynn expects to break ground on its Cotai development in early 2011. The $2 billion to $3 billion project is slated to open in 2015, and management said it would provide additional details following its fourth-quarter earnings report.

In Las Vegas, CEO Steve Wynn says the Strip is on the road to recovery. "I believe we have seen the bottom in Las Vegas," he said during the company's third-quarter conference call. "I don't know how fast it is going to get better but it isn't going to get any worse."

Las Vegas revenue inched up 3.1% to $334.5 million during the three-month period, and EBITDA grew 9.3% to $76.5 million.

Wynn also issued a cash dividend of $8 a share payable on Dec. 7 to sharehold! ers of record on Nov. 23.
[By Carlson]
Wynn Resorts(WYNN) saw its second-quarter profit more than double, but most of that strength came from casino wins, and investors were unimpressed.

During the quarter, the casino operator earned $52. 4 million, or 52 cents a share, on revenue of $1.03 billion, higher than forecasts of 42 cents on revenue of $992.3 million. This compares with a profit of $25.5 million, or 21 cents, on revenue of $723.3 million, in the year-ago period.

Wynn had already pre-announced disappointing results for its Las Vegas properties, citing higher costs, including employee health care and benefits, and marketing expenses. Its operating loss for its Wynn Las Vegas and Encore widened to $17.2 million from $8.3 million last year. Revenue rose 1.7% to $318 million.

Occupancy at the Wynn Las Vegas jumped to 92.6% from 86.6% a year earlier, but revenue per available room fell 3.2%.

Still, management indicated that there is a slight improvement on the Strip, with an increase in forward group bookings and some bright spots for the ability to yield rates. But management tempered enthusiasm by saying there are some struggles and uncertainty in the marketplace.

"We hope for continued improvement in Las Vegas or -- let me put it different, we hope that we'll get smarter in Las Vegas in dealing with the peculiarities of this market --and this very, very mercurial, national economic market we're living with," said Steve Wynn, chief executive, in a conference call. "The national economy and the political environment in the country as we head up to the elections [is] very, very touchy. And it is impacting all businesses."

The biggest boost, of course, came from Macau, where revenue surged 74% to $714.4 million from $410.4 million last year.

The company opened its Encore Macau in the spring, boosting its market share to about 16% from about 13%, Sterne Agee analyst David Bain wrote in a note.

Wynn is in the process of working on a new development on the Cotai st! rip, which should spike investors' interest as more details are revealed in the coming quarters.

Still, investors are concerned that as comparisons get harder in Macau, and second-quarter results are adjusted for hold (how much the casino won), Wynn may not be able to outperform. But Bain reassures, "this has been discussed as nauseam by investors, sell-side analysts, the press -- and even dinner-table relatives -- for some time. We believe the Street is underestimating the summer months in Macua, which may help to produce a new leg up for Macau stories, with Wynn being the most profitable on a per position basis."

Top Casino Stocks To Watch Right Now: Pinnacle Entertainment Inc.(PNK)

Pinnacle Entertainment, Inc. owns, develops, and operates casinos, and related hospitality and entertainment facilities in the United States. It operates casinos, such as L'Auberge du Lac in Lake Charles, Louisiana; River City Casino and Lumiere Place in St. Louis, Missouri; Boomtown New Orleans in New Orleans, Louisiana; Belterra Casino Resort in Vevay, Indiana; Boomtown Bossier City in Bossier City, Louisiana; and Boomtown Reno in Reno, Nevada. The company also operates River Downs racetrack in southeast Cincinnati, Ohio. As of May 26, 2011, it operated seven casinos and one racetrack. The company was formerly known as Hollywood Park, Inc. and changed its name to Pinnacle Entertainment, Inc. in February 2000. Pinnacle Entertainment, Inc. was founded in 1935 and is based in Las Vegas, Nevada.

Advisors' Opinion:

[By Jeanine Poggi]
Pinnacle Entertainment(PNK) was the great transition story of 2010, with shares spiking about 45% this year.

The regional casino operator's most impressive story has been in its gross margins, as management, under the leadership of new CEO Anthony Sanfilippo, is in the process of increasing the company's operating efficiencies and prudently allocating capital. Analysts believe Pinnacle is in the early stages of this process, and will continue to drive revenue growth.

In its third quarter, Pinnacle reported a surprise profit of 10 cents a share on an adjusted basis, better than consensus estimates of a loss of 7 cents. Revenue grew 15% to $287.8 million, while property-level margins reached 23.4%, also ahead of forecasts.

Last month, Pinnacle purchased Cincinnati's River Downs Racetrack for $45 million. The deal includes 155 acres, 35 of which are still undeveloped. The transaction is expected to close by the end of the first quarter of 2011.

This deal could generate significant returns in the event that Ohio decides to legalize video lottery terminals at racetracks, Santarelli said.

Pinnacle is also in the process of looking for a buyer of its oceanfront land in Atlantic City, where it originally intended to build a $1.5 billion casino, before squelching plans. The casino operator bought the land in 2006 for $270 million from groups affiliated with Carl Icahn and later added another piece of land for $70 million.

While the land's currently value is $38 million, Pinnacle insists it will not sell it on the cheap, holding out for the best deal.

Pinnacle currently has $228 million in cash and $375 million of availability under its revolver.
[By Sherry Jim]
Pinnacle Entertainment(PNK) swung to a loss in its second quarter, as costs rose.

During the quarter, the regional casino operator lost $49.3 million, or 81 cents a share, compared with a profit of $4.7 million, or 8 cents, in the year-ago period for Pinnacle.

Excluding items, Pinnacle actually lost 14 cents a share, 10 cents worse than analysts' estimates of a 4-cent loss.

Pinnacle's revenue rose 8.5% to $273.6 million from $252.3 million, but also fell short of Wall Street's forecast of $284.4 million.

Even though revenue was weaker, margins rebounded at all but one of Pinnacle's properties. "Margins are the story for Pinnacle ahead of any longer-term potential true rebound in the economy, and we continue to believe there are multiple opportunities for near-term operational improvements across the Pinnacle portfolio," Bain wrote in a note.

At a time when most casino operators are striving to reduce costs to offset the decline in consumer spending, Pinnacle saw expenses rise 21% to $289.3 million. But Bain said Pinnacle is still in the early stages of cost-refining. "Given what we view as several areas of potential improvements in this regard, we believe Pinnacle is less dependent on an economic recovery than some of its regional peers," he wrote.

J.P. Morgan analyst Joseph Greff also reaffirms his overweight rating on the stock, viewing Pinnacle as a transition story. "We continue to believe that new CEO Anthony Sanfilippo and team will drive increased operating efficiencies and allocate capital prudently," he wrote in a note.

Greff praises Sanfilippo for shelving the Sugarcane Bay project and instead focusing on Baton Rouge.

Pinnacle's liquidity remains strong, with $200 million in cash and $375 million of availability under its revolver

Top Casino Stocks To Watch Right Now: Boyd Gaming Corporation(BYD)

Boyd Gaming Corporation, together with its subsidiaries, operates as a multi-jurisdictional gaming company in the United States. As of December 31, 2011, the company owned and operated 1,042,787 square feet of casino space, containing approximately 25,973 slot machines, 655 table games, and 11,418 hotel rooms. It also owned and operated 16 gaming entertainment properties located in Nevada, Illinois, Louisiana, Mississippi, Indiana, and New Jersey. In addition, the company owns and operates a pari-mutuel jai-alai facility located in Dania Beach, Florida, as well as a travel agency in Hawaii. Further, it holds a 50% controlling interest in the limited liability company that operates Borgata Hotel Casino and Spa in Atlantic City, New Jersey. Boyd Gaming Corporation was founded in 1988 and is headquartered in Las Vegas, Nevada.

Advisors' Opinion:

[By Jeanine Poggi]
The Las Vegas locals and Atlantic City markets have the longest road to recovery, making Boyd Gaming (BYD) one of the most challenged stocks in the sector long-term.

It's not a surprise then that Boyd saw some of the most muted gains in 2010, with shares rising just 13.8% since the beginning of the year.

In Atlantic City, where Boyd owns a 50% stake in the Borgata, gambling revenue plunged 13% in November. The New Jersey Boardwalk has been under pressure even before the recession began, as nearby regions expand their gaming presence.

Both West Virginia and Pennsylvania added table games to casinos in the second half of the year and new properties opened in Philadelphia and Maryland. In 2011, Atlantic City will also have to contend with additional growth in Pennsylvania and the pending opening of the Aqueduct in New York City.

Given this, Boyd decided not to exercise its right to match a $250 million offer MGM Resorts(MGM) received for its 50% stake in the Borgata. MGM decided to divest its joint venture with Boyd after the Atlantic City Gaming Commission criticized its relationship with Pansy Ho in Macau, whose family has allegedly been tied to organized crime in China.

In the Las Vegas locals market, where Boyd generates about 44% of its EBITDA, trends are improving, but not as quickly as analysts would have hoped. In October, gaming revenue in the market grew 6.2% to $169.4 million.

In its third quarter, Boyd disappointed Wall Street, with adjusted earnings coming in at 2 cents a share, shy of consensus estimates of 5 cents. Revenue dropped 4% to $595.4 million.

Boyd also announced plans to sell $500 million of eight-year notes. Proceeds will be used to buy back senior subordinated notes due 2012 and to repay bank loans.

Is Google a Buy?

The following video is from Friday's Motley Fool Money roundtable discussion with host Chris Hill, and analysts Ron Gross, James Early, and Charly Travers.

Shares of Google (NASDAQ: GOOG ) hit an all-time high this week. The search giant unveiled a new music streaming service and other new features. But it wasn't all good news. CEO Larry Page revealed that he's been diagnosed with vocal-cord paralysis. Page said that the condition has weakened his voice, but has not affected his day-to-day management of the company. What does the news mean for Google investors? In this installment of Motley Fool Money, our analysts discuss the future of Google.

As one of the most dominant Internet companies ever, Google has made a habit of driving strong returns for its shareholders. However, like many other web companies, it's also struggling to adapt to an increasingly mobile world. Despite gaining an enviable lead with its Android operating system, the market isn't sold. That's why it's more important than ever to understand each piece of Google's sprawling empire. In The Motley Fool's new premium research report on Google, we break down the risks and potential rewards for Google investors. Simply click here now to unlock your copy of this invaluable resource.

The relevant video segment can be found between 0:23 and 3:50.

For the full video of today's Motley Fool Money, click here.

3 Reasons Bank of America and Friends Can Brave a Storm

In the following video, Fool analyst David Hanson interviews Motley Fool financial analyst Matt Kopenheffer regarding Bank of America (NYSE: BAC) as an example of a large bank facing the potential for a sudden rise in interest rates.

Matt describes an environment in which a jump in interest rates could cause the bank's cost of funds to rise faster than income from assets on the balance sheet. He also discusses three reasons large banks may be positioned to mitigate the potential decrease in earnings: core deposits, loan-to-deposit ratios, and shorter duration assets and hedging activities.

Bank of America's stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it's critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool's premium research report on B of A, Matt joins analyst Anand Chokkavelu, CFA, to lift the veil on the bank's operations, including detailing three reasons to buy and three reasons to sell. Click here now to claim your copy.

Rumor Has It This Retailer Is Going Up for Sale

Earlier this week, the New York Post reported that high-end retailer Saks (NYSE: SKS ) had brought in Goldman Sachs to explore a possible sale. The company also reported its first-quarter results, and is looking fairly strong. Comparable sales grew, and earnings per share hit analyst expectations. The combination of quarterly results and sale rumors conspired to push the stock up 11% yesterday, and overnight it rose another 18%. Is this the right time for Saks to sell, and if so, what should investors be on the lookout for?

Saks on the auction block?
There are a few reasons that a firm would want to go private, but Saks' biggest motivating factor has to be its behind-the-scenes operation. Last quarter, operating margin dropped down to 7% from 8.6% the year before. Almost all of that fall came from an increase in selling, general, and administrative costs.

A prospective sale would likely involve a private equity firm looking to capitalize on Saks' strong name and solid fundamentals. That firm would likely cut back on employees and other costs, generating a quick increase in profit. Studies have shown that when private equity is involved in a public company takeover, employment drops by 10% within two years.

Saks is a great opportunity for private equity because it combines a strong brand with weak backroom operations. Compare that to a brand like recently acquired denim retailer True Religion (NASDAQ: TRLG ) , which has had trouble driving traffic through the door. Last quarter, comparable sales only rose 0.7%, and earnings per share plummeted.

TowerBrook Capital, which bought True Religion, is going to have to bring the brand back to life. It's in a position where that's a manageable feat, though, as the company has dealt with retail brands before. Saks' strength as a brand means that it would be easier for a non-retail-focused private equity firm to jump in, maybe to test the retail waters.

What it means for investors
From my perspective, a Saks sale is an interesting mixed bag for investors. On one hand, it could mean a quick return for those who are just getting in on the stock, assuming the final sale price is high enough. On the other hand, Saks is a strong brand, and the long-term return could be higher than the quick-shot buyout.

Last quarter, comparable sales grew by 5.9%, which puts Saks ahead of many of its competitors. That kind of brand strength is hard to come by, and to see it get pulled away into the black hole of private equity would be a shame.

But there's no doubt that the stock has been dragging. Not counting the recent jump, Saks has been trailing the S&P 500 for the last 12 months, which means investors are losing out. Either way -- sale or no sale -- now is a good time to be holding Saks. We'll just have to wait and see if the same is true three months from now.

Retail rulers
The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.

Saturday, May 25, 2013

Great News for Detroit's Big Three

It's been a busy couple weeks for Detroit automakers Ford (NYSE: F ) and General Motors (NYSE: GM ) . Both beat estimates across the board on their first-quarter-earnings reports and gave investors hope that the losses in Europe could be subsiding. Both companies also reported sales figures for the month of April, and buried in the numbers is some great news. Let's take a look at some details between sales and market share and see which automaker is gaining ground.

Sales and market share
Let's start by using total sales year to date and compare it to last year's. Out of the 20 top vehicles only eight had declines in sales from the previous year, while the rest had significant gains. Out of those eight models with sales declines, only two were domestic. Out of the 12 models with sales gains, eight were domestic. Here's a glimpse at the biggest movers by percentage.

All graphs by author; data from The Wall Street Journal.

Ford's newer models have been a hit with critics and consumers alike and it's starting to show with a nice surge in sales. The percentage change is nice to view, but it's important to keep it in perspective with overall sales numbers. Toyota (NYSE: TM ) Camry declined compared to last year but still out sells any model in its segment – and is third overall. Here's a look at the 10 top vehicles in total year-to-date sales.

The two top spots go to the highly profitable F-Series and Silverado trucks – welcome news for investors. Ford also has the most models in the top 10 with three, followed by Toyota and Honda (NYSE: HMC ) , each with two. If you're a Ford investor, things are continuing to look bright this year with nice improvements over last year. With those numbers we should expect Ford to take some market share – let's take a look.

Ford had the best jump in market share but still trails GM. Overall, Detroit's Big Three each made improvements on market share versus last year, while Toyota and Honda had slight declines. In fact, the Big Three are practically the only automakers to have any market share gains, as Nissan, Mazda, and Kia all posted losses while Hyundai remained flat.

Bottom line
These graphs point toward Ford doing extremely well, which is a great because Ford derives most of its profits from North America. It's far behind rivals in creating profits in emerging markets, but it's gaining ground. Ford's popular Fusion and Escape are making debuts in Europe and China shortly and it hopes to export similar strategy and success from the U.S. abroad. We're starting to see – for the first time in a while – market share in the U.S. swing back toward Detroit's big automakers. That's a huge deal; it's great news for investors who jumped on board in time to watch Ford and GM rebound.

Is there still time to buy Ford?
If you're concerned that Ford's turnaround has run its course, relax – there's good reason to think that the Blue Oval still has big growth opportunities ahead. We've outlined those opportunities in detail, in the Fool's premium Ford research service. If you're looking for some freshly updated guidance to Ford's prospects in coming years, you've come to the right place – click here to get started now.

New Durable Goods Orders Up 3.3% for April

New orders for manufactured goods increased 3.3% to $222.6 billion for April, according to a Commerce Department report (link opens as PDF) released today. After falling a revised 5.9% in March, this month's increase is a return to average, rather than a major manufacturing boost.

Source: Census.gov.

Analysts' 1.1% growth estimates proved too pessimistic for April's numbers. Transportation equipment led the rebound, boosting 8.1% to $67.6 billion. But even excluding transportation numbers, new orders still managed a 1.3% bump, beating Mr. Market's 0.4% prediction.

Shipments fell 0.6% on a 2.9% slump in computers and electronic products, but unfilled orders increased 0.3% primarily because of a 0.8% bump in computers and electric products.

Inventories squeaked up 0.4% to $377.9 billion for April, setting (yet again) a new record since data was first recorded in 1992.

Today's April report exceeded expectations, but a May manufacturing index report released yesterday points to potentially tough times ahead.

Friday, May 24, 2013

SABMiller Results Bubbling Nicely

LONDON -- In its final results for the year to March 31, SABMiller (LSE: SAB ) (NASDAQOTH: SBMRY ) , the global beverage-brewer and bottler with more than 200 beer brands and Coca-Cola bottling operations, saw group revenue increase by 10% to $34.5 billion and EBITA rise 14% to $6.4 billion, while pre-tax profit fell 16% to $4.7 billion.

The fall in profit before tax was attributed to the previous year being bolstered by exceptional gains. Constant-currency group revenue was up 7%, with revenue per hectoliter up 3% and lager volume up 3%. Growth was seen in all divisions except North America. Constant-currency EBITA growth was 9%, and the profit margin rose to 18.6%.

The strong revenue growth was spearheaded by its developing-market operations in Africa, Latin America, Asia-Pacific, and South Africa. The beverage volume growth of 4% was driven by new product innovations and benefited from investments in new capacity, particularly in Africa. The integration of the Foster's acquisition in Australia is progressing ahead of schedule.

Basic earnings per share fell by 23% to $2.06, although adjusted EPS rose 11% to $2.39. The dividend was increased by 11% to $1.01 per share. Free cash flow rose by 6% to $3.2 billion, and net debt decreased by $2.1 billion to $15.7 billion.

John Manser, acting chairman, commented:

I am delighted to report another year of significant progress and strong results for the group. Through a combination of innovation, effective brand development and good commercial execution we continued to develop the beer category and widen the appeal of our products. Strong growth in our developing markets was supported by investments in additional capacity, commercial capability and distribution reach. Group revenue grew by 10% and the focus on operating efficiencies helped us achieve growth in profit margins.

Looking forward, SABMiller is looking to continue developing beer and soft-drink brand portfolios and tinker with price increases to maximize profit. The group is also looking to focus on cost-saving initiatives including further synergies in Australia. The share price has fallen 2.3% as of 10:30 a.m. EDT, though this is against a backdrop of a 2% fall for the wider market, indicating a fairly neutral response from investors. The long-term prospects of SABMiller remain promising and point to strong growth prospects.

Indeed, SABMiller has been a growth success story with a 45% gain in the last 12 months. If you are interested in tapping into similar opportunities, then take a look at this free report, which could help you on your way. The report explains how taking a contrarian view and backing unloved companies can be vital steps on the path to the magic £1 million milestone. Maybe one day a resurgent SABMiller could be the share that transforms your wealth. Just click here to download the report today, but hurry -- all Fool reports are free for a limited time only.