Cognizant Technology Solutions Corp (CTSH): Diminishing Immigration Overhang Should Favor Stock

Shares of Cognizant Technology Solutions Corporation (CTSH) could see an upside in the coming days due to low probability of immigration bill passing this year. More importantly, the support for outplacement restriction, which is the key draconian provisions in the immigration bill has waned.

The immigration bill has been the key overhang on the shares of Cognizant, which is among the leading companies receiving H-1B visas to bring immigrant workers to the United States. As of June 30, 2013, Cognizant employed about 164,300 people and its has over 100,000 employees working in India.

Immigration reform has into the limelight again after the government shutdown ended as President Obama renewed his call to Congress to take on immigration reform and the Speaker John Boehner didn't rule out the possibility of taking up immigration reform in 2013.

However, given that there are only seven legislative days in November and the Congress is off in December, there is a extremely low likelihood of immigration legislation in 2013.

"With mid-term elections next year, house republicans may not take up the immigration in early 2014 at least till after their nominations are confirmed in the primaries as they risk being challenged by more conservative candidates," Deutsche Bank analyst Bryan Keane said in a client note.

Although, there is potential for Congress to take up the immigration reform in mid-to-late 2014 in order to appease the minority voters, the path to citizenship remains the core issue of contention between the two parties.

If the immigration bill gets pushed out after 2014, there will be a fresh set of congressmen in 2015 which could potentially reset the efforts on the immigration reform.

In addition, two republicans namely Congressmen John Carter and Sam Johnson dropped out of the bipartisan group of "Gang of Seven" which is a setback for the immigration reform in the House.

"No republicans have signed up for the bill and we believe it was just a messagin! g effort and don't expect the version of the bill to proceed," Keane noted.

Minority house leader, Nancy Pelosi and 120 other House Democrats introduced the Senate version of the immigration bill except for the revised border security provisions on Oct 2, 2013.

Meanwhile, the super committee may consider parts of the immigration reform within the budget deal considering revenue potential highlighted by the CBO. However, checks suggest minimal likelihood of getting through.

"In the event immigration reform does get passed, we believe the support for outplacement restrictions has waned as India rolled back two protectionist measures namely Preferred Market Access (PMA) and transfer pricing which will help the US multinationals interested in expanding their operations in India," Keane wrote.

Also, the Indian government has been lobbying actively, and the issue has been raised by Prime Minister Manmohan Singh in a meeting with Obama and Wipro chairman Azim Premji met US vice-president Joe Biden to raise his concerns.

In addition, Nasscom and US-India Business Council (USIBC), a trade lobby comprising top US and Indian companies as well as the Indian offshore companies have increased their lobbying efforts. Five former US ambassadors to India have written to Senate urging them to rollback the outplacement restrictions.

"We believe the efforts of these lobbying activities along with support from the Fortune 2000 US companies likely diminish the potential for outplacement restrictions in the final bill," Keane said.

Cognizant's headcount grew 1 percent quarter-over-quarter (13.2 percent year-over-year) in the second quarter, with the company adding about 1,600 people. 48 percent of additions were direct college hires with the remaining being experienced hires from within the industry. The company's headcount growth rate could pick up with solid demand environment.

Solid demand environment for IT Services has been driven by regulatory, transformation services, cha! nnel stra! tegy and digital marketing as well as emerging technologies namely, cloud, analytics, and mobility.

Given the solid demand environment and waning overhang of immigration bill, the company's ability to gain share and grow faster than the market are solidified.

"We believe CTSH can deliver 20% growth in FY13, above company's current guidance of 19%," Keane added.

Shares of Cognizant have gained 17 percent this year and traded between $60.92 and $90.01 during the past 52-weeks. The stock trades 19 times its 2014 consensus earnings estimate. 

Top 10 High Tech Companies For 2014

Just when you thought that things couldn't get any worse for the desktop, it gets kicked by a cold boot.

Industry tracker IDC is reporting that just 76.3 million PCs were shipped during this year's first quarter, down 13.9% from a year earlier.

Remember when Microsoft's (NASDAQ: MSFT  ) Windows 8 was supposed to make desktops and laptops popular again? It's amusing in retrospect. The percentage decline is the largest drop that IDC has reported since it began tracking quarterly shipment trends nearly two decades ago.

A meteor made dinosaurs extinct. A cloud is making PCs extinct.

Think about it. Everyone knows that smartphones and tablets are eating into the traditional PC market, but have you ever wondered why that's even possible? Have you wondered why Microsoft's mobile operating system hasn't been as dominant as what Apple (NASDAQ: AAPL  ) and Google (NASDAQ: GOOG  ) have been cooking?

It's really all about the cloud.

Top 10 High Tech Companies For 2014: Fermiscan Holdings Ltd(FER.AX)

Fermiscan Holdings Limited focuses on the commercialization of Fermiscan Test, the non-invasive breast cancer screening test for women of all ages. Its Fermiscan Test is based on detecting change in the structure of hair by the X-ray diffraction technique using an intense X-ray beam generated from synchrotron. The company is headquartered in Sydney, Australia.

Top 10 High Tech Companies For 2014: Santa Fe Metals Corp(SFM.V)

Santa Fe Metals Corp., together with its subsidiaries, engages in the acquisition, exploration, and development of precious and base metal properties primarily in Mexico. The company principally holds a 100% interest in the Cuatro Cienegas copper property that consists of 6 concessions totaling approximately 3,408 hectares located northeast of the city of Torreon in the State of Coahuila, Mexico. It also focuses on the acquisition of producing or near-term producing gold properties. The company was formerly known as Tequila Minerals Corp. and changed its name to Santa Fe Metals Corp. in February 2008. Santa Fe Metals Corp. was incorporated in 2006 and is based in Vancouver, Canada.

10 Best Financial Stocks To Invest In Right Now: Ringbolt Ventures Ltd (RBV.V)

North American Potash Developments Inc., an exploration stage company, engages in acquiring and developing agricultural assets in the United States. It holds interests in the Lisbon Valley potash property that has 9 mineral leases covering 6,277 acres located in the Paradox Basin, Utah; the Holbrook Basin Potash property, which has 15 exploration permits covering 9,594 acres located in the Apache County, Arizona; and the Hornby Basin uranium property that consists of 4 mineral claims covering approximately 10,330 acres located in the Great Bear Lake area of the Northwest Territories. North American Potash Developments Inc . was formerly known as Ringbolt Ventures Ltd. and changed its name to North American Potash Developments Inc. in November 2011. North American Potash Developments Inc. was incorporated in 2006 and is based in Vancouver, Canada.

Top 10 High Tech Companies For 2014: African Copper Corp (ACCS)

African Copper Corporation, formerly New York Tutor Company, incorporated on April 6, 2011, is an exploration-stage company. The Company is engaged in the business of exploration of precious metals with a focus on the exploration and development of copper and other precious metals deposits in northwestern Botswana, Africa. On April 4, 2013 the Company completed the acquisition of the Property from Guerrero Exploration, Inc.

The Company�� mineral interests consist of exploration stage properties referred to as the Property. As of April 4, 2013, the Company had not generated revenues from its operations. The Company plans to conduct exploration activities on its mineral properties, which exploration may include the completion of feasibility studies necessary to evaluate whether a commercial mineable mineral exists on any of its properties.

Top 10 High Tech Companies For 2014: Triangle Industries Ltd. (TIA.V)

Triangle Industries Ltd., together with its subsidiaries, provides transloading services to shippers of bulk commodities in Canada. The company principally provides freight and reloading services. It also offers ancillary trucking services in support of its transloading activities primarily through subcontractors. The company was incorporated in 1983 and is based in Vancouver, Canada.

Top 10 High Tech Companies For 2014: SCBT Financial Corporation(SCBT)

SCBT Financial Corporation operates as the holding company for SCBT, N.A. that provides retail and commercial banking services in the Carolinas. Its deposit products include checking, savings, and time deposits; and certificates of deposit, as well as interest-bearing transaction accounts, including NOW, HSA, IOLTA, and market rate checking accounts. The company also offers loans for businesses, agriculture, real estate, personal use, home improvement, and automobiles, as well as provides credit cards, letters of credit, and home equity lines of credit. In addition, it offers mortgage lending and investment services. Further, the company provides brokerage services and alternative investment products, such as annuities and mutual funds; trust and asset management services; safe deposit boxes; bank money orders; wire transfer services; correspondent banking services; and ATM facilities. As of January 27, 2012, it operated 68 locations in 16 South Carolina counties, 10 north Georgia counties, and Mecklenburg County in North Carolina. The company was founded in 1933 and is headquartered in Columbia, South Carolina.

Top 10 High Tech Companies For 2014: Penske Automotive Group Inc.(PAG)

Penske Automotive Group, Inc. operates as an automotive retailer. It sells new and used vehicles of approximately 40 vehicle brands; offers vehicle maintenance and repair services; and engages in the sale and placement of third-party finance and insurance products, third-party extended service contracts, and replacement and aftermarket automotive products. As of December 31, 2011, the company operated 320 retail automotive franchises, of which 166 franchises were located in the United States and 154 franchises are located outside of the United States primarily in the United Kingdom. It also has operations in Puerto Rico and Germany. Penske Automotive Group, Inc. was founded in 1990 and is headquartered in Bloomfield Hills, Michigan.

Advisors' Opinion:

• [By Seth Jayson]

  When judging a company's prospects, how quickly it turns cash outflows into cash inflows can be just as important as how much profit it's booking in the accounting fantasy world we call "earnings." This is one of the first metrics I check when I'm hunting for the market's best stocks. Today, we'll see how it applies to Penske Automotive Group (NYSE: PAG  ) .

• [By Seth Jayson]

  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 Penske Automotive Group (NYSE: PAG  ) , whose recent revenue and earnings are plotted below.

• [By Seth Jayson]

  Penske Automotive Group (NYSE: PAG  ) reported earnings on April 29. Here are the numbers you need to know.

  The 10-second takeaway
  For the quarter ended March 31 (Q1), Penske Automotive Group missed estimates on revenues and beat slightly on earnings per share.

• [By Marc Bastow]

  Automotive retail and transportation services giant Penske (PAG) raised its quarterly dividend 6.3% to 17 cents per share, payable on Dec. 2 to shareholders of record as of Nov. 11.
  PAG Dividend Yield:�1.72%

Top 10 High Tech Companies For 2014: Royal Caribbean Cruises Ltd.(RCL)

Royal Caribbean Cruises Ltd. operates in the cruise vacation industry worldwide. It owns five cruise brands, which comprise Royal Caribbean International, Celebrity Cruises, Pullmantur, Azamara Club Cruises, and CDF Croisi�es de France. The Royal Caribbean International brand provides various itineraries and cruise lengths with options for onboard dining, entertainment, and other onboard activities primarily for the contemporary segment. It offers surf simulators, water parks, ice skating rinks, rock climbing walls, and shore excursions at each port of call, as well as boulevards with shopping, dining, and entertainment venues. The Celebrity Cruises brand operates onboard upscale ships that offer luxurious accommodations, fine dining, personalized services, spa facilities, venue featuring live grass, and glass blowing studio for the premium segment, as well as resells computers and other media devices. The Pullmantur brand provides an array of onboard activities and serv ices to guests, including exercise facilities, swimming pools, beauty salons, gaming facilities, shopping, dining, complimentary beverages, and entertainment venues serving the contemporary segment of the Spanish, Portuguese, and Latin American cruise markets. The Azamara Club Cruises brand offers various onboard services, amenities, gaming facilities, fine dining, spa and wellness, butler service for suites, and interactive entertainment venues for the up-market segment of the North American, United Kingdom, German, and Australian markets. The CDF Croisieres de France brand offers seasonal itineraries to the Mediterranean; and various onboard services, amenities, entertainment venues, exercise and spa facilities, fine dining, and gaming facilities for the contemporary segment of the French cruise market. As of December 31, 2011, the company operated 39 ships with a total capacity of approximately 92,650 berths. Royal Caribbean Cruises Ltd. was founded in 1968 and is headqua rtered in Miami, Florida.

Advisors' Opinion:

• [By Ben Levisohn]

  Carnival�(CCL) has fallen 7.6% to $34.56 in early trading this morning after the company reported a profit of $1.38, above forecasts for $1.32, but issued disappointing guidance. It’s also dragging down shares of�Royal�Caribbean�Cruises (RCL), which have fallen 3.1% to $38.18.

• [By Rick Munarriz]

  Carnival stock is trading closer to its 52-week low than its high, and the same can't be said of rivals Royal Caribbean (NYSE: RCL  ) and NCL (NYSE: NCL  ) .�

• [By Monica Wolfe]

  Royal Caribbean Cruises (RCL)

  Chairman and CEO Richard Fain has made the largest insider buy this week, buying nearly one million dollars worth of shares.

Top 10 High Tech Companies For 2014: Canadian Overseas Petroleum Lim (XOP.V)

Canadian Overseas Petroleum Limited, an oil and gas company, engages in the identification, acquisition, exploration, and development of oil and natural gas offshore reserves in offshore West Africa and in the United Kingdom North Sea. The company was formerly known as Velo Energy Inc. and changed its name to Canadian Overseas Petroleum Limited in July 2010. Canadian Overseas Petroleum Limited is headquartered in Calgary, Canada.

Top 10 High Tech Companies For 2014: Vaaldiam Resources Inc (VAA.TO)

Vaaldiam Mining Inc., a junior mining company, engages in the acquisition, exploration, and development of mineral properties. The company primarily owns diamond and exploration properties in Brazil. It holds a 100% interest in the Bra煤na gold project located within the Rio Itapicuru Greenstone Belt area in Brazil; holds a 100% interest in the Catal茫o diamond project that comprises 3 kimberlite pipe-like deposits covering a surface area of 0.75 hectares located in the state of Goi谩s, Brazil; and owns various exploration properties in Canada that are available for joint venture or purchase. The company also owns a portfolio of royalty and equity investments. Its portfolio covers gold in Africa, Peru, and the United States; copper in Peru; diamonds in Brazil; and titanium, zircon, and rutile in Kenya. The company was formerly known as Tiomin Resources Inc. and changed its name to Vaaldiam Mining Inc. in March 2010. Vaaldiam Mining Inc. is headquartered in Toronto, Canada.

Is This a New Frontier?

With shares of Frontier Communications Corporation (NYSE:FTR) trading at around $4.29, is FTR an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock's Movement

Frontier Communications has been losing customers. In Q1 of 2011, Frontier had 3,338,306 residential customers. In Q1 of 2013, it had 2,859,229 residential customers. In Q1 of 2011, it had 333,396 business customers. In Q1 of 2013, it had 281,052 business customers.

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In addition to the loss of customers, there are other negatives as well:

Increased competition High expenses (mostly due to promotions) Access line losses Atrocious stock performance over the past two years (in a bull market) 23.40 percent short position on the stock (a lot of non-believers) Poor debt management Decline in revenue in 2012 Decline in earnings four consecutive years Verizon assets Poor company culture

It's amazing how often company culture matches the success (or lack of success) of a company. In other words, company culture is important. According to Glassdoor.com, Frontier Communications has a 2.3 of 5 rating, which is subpar. Only 28 percent of employees would recommend the company to a friend, and only 25 percent of employees approve of CEO Maggie Wilderotter.

There are a few positives for Frontier Communications, which include an increase in ARPC and the divestments of non-core assets. It should also be noted that there is a 9.40 percent yield on the stock. This makes the stock appealing to investors; they're certainly not interested because of growth potential.

Jeffries recently cut its price target to $5 from $6, but rated it a Buy.

The chart below compares fundamentals for Frontier Communications, AT&T (NYSE:T), and CenturyLink (NYSE:CTL).

	FTR	T	CTL
Trailing P/E	28.60	28.79	26.78
Forward P/E	19.50	13.79	13.62
Profit Margin	3.19%	5.81%	4.79%
ROE	4.10%	7.92%	4.43%
Operating Cash Flow	1.53B	39.53B	5.88B
Dividend Yield	9.40%	4.80%	5.70%
Short Position	23.40%	1.30%	7.30%

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

T = Technicals Are Mixed

Frontier Communications has been a dog over the past two years, but the past year has been good.

At $4.29, Frontier is trading above its 50-day SMA and below its 200-day SMA.

	1 Month	Year-To-Date	1 Year	3 Year
FTR	1.42%	2.50%	35.78%	-27.41%
T	-3.52%	13.21%	16.37%	70.86%
CTL	1.37%	-2.07%	2.37%	37.21%

50-Day SMA	4.07
200-Day SMA	4.31

E = Equity to Debt Ratio Is Weak

The debt-to-equity ratio for Frontier Communications is weaker than the industry average of 0.80. This isn’t much of an issue now, but when interest rates increase (eventually), it will become a factor. It’s possible for Frontier Communications to improve its debt management by that time, but not likely.

	Debt-To-Equity	Cash	Long-Term Debt
FTR	2.07	875.91M	8.43B
T	0.85	3.88B	74.92B
CTL	1.10	476.00M	20.79B

E = Earnings Have Weakened

Earnings have consistently weakened on an annual basis. Revenue had been improving, but there was a setback in 2012.

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When we look at the last quarter on a year-over-year basis, revenue declined and earnings improved. Revenue also declined on a sequential basis. Clearly,it is becoming a concern.

Fiscal Year	2008	2009	2010	2011	2012
Revenue ($) in billions	2.24	2.12	3.80	5.24	5.01
Diluted EPS ($)	0.57	0.38	0.23	0.15	0.13

Quarter	Mar. 31, 2012	Jun. 30, 2012	Sep. 30, 2012	Dec. 31, 2012	Mar. 31, 2013
Revenue ($) in billions	1.27	1.26	1.25	1.23	1.21
Diluted EPS ($)	0.03	0.02	0.07	0.0250	0.05

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

T = Trends Do Not Support the Industry

The industry is seeing decreased demand and increased competition. This is not a recipe for success.

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Conclusion

Frontier Communications is losing customers, and it’s in a weakening industry. The high yield is the most appealing attribute for the stock, but debt management is a concern and the dividend might be cut in the future. The stock has performed well over the past year, but almost any stock has the potential to perform well in a dartboard market. Therefore, there is near-term upside potential. However, if and when the market begins to act normally, this isn’t a good place to be. There are too many risks.

Pfizer's Earnings Beat Keeps the Dow on a Healthy High

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

Stocks are surging today as earnings season powers on, and the Dow Jones Industrial Average's (DJINDICES: ^DJI  ) push higher has it within 100 points of its all-time high. As of 2:15 p.m. EDT, the Dow has ridden strong momentum all day to gains of more than 90 points. Most blue-chip stocks are up on the index, and Pfizer's (NYSE: PFE  ) strong earnings report has sent this big pharma stock soaring with the Dow's leaders today.

That's a relief to health care investors disappointed with Merck's (NYSE: MRK  ) lackluster earnings release yesterday, although the stock has rebounded slightly today. Here's what you need to know.

Pfizer hits the right marks
Pfizer's stock has risen by 1.7% after the company announced before the opening bell today that its third-quarter diluted earnings came in at $0.58 per share. That pushed the company to raise the lower end of its full-year guidance, impressing investors who have worried about the ongoing sales dive of former best-seller Lipitor and the slow pace of two recently approved drugs, Xeljanz and Eliquis.

Sales still fell 2.5% for the quarter, an expected drop that managed to beat estimates. While Lipitor's been taking a pounding, Pfizer's cancer-fighting drug portfolio is shining for investors. Oncology drug sales jumped by 26% for the quarter, highlighter by the 92% year-over-year revenue gain of small but surging drug Xalkori. If this division can keep up its momentum, it'll help investors to quickly get over the pain of the patent cliff.

Even better for Pfizer investors, the company announced separately today that it will continue its push to get osteoarthritis drug tanezumab to the market. The drug seemed dead a few years ago following the finding that it was linked to the possibility of joint destruction in patients. Fellow Big Pharma giant Eli Lilly (NYSE: LLY  ) has signed on to share the costs of kicking up another late-stage trial of the drug, although Pfizer and Eli Lilly have now agreed to share any profits should they get it to the market.

An FDA panel gave the go-ahead last year for trials to start back up using more carefully chosen patients, although it's still a long shot that tanezumab will overcome its risky image. If it does, it's competition for Merck's bone-treating drug hopeful odanacatib, one of the company's best hopes for a future blockbuster from its lackluster pipeline. Merck disappointed investors earlier this year by delaying odanacatib's FDA filing until 2014, although analysts still peg the drug's peak sales near or above $1 billion.

Merck's stock has still risen 0.5% today, but it will need odanacatib -- and any other hopeful that can succeed in phase 3 trials -- to make a big impact on the market as soon as possible. With diabetes drugs Januvia and Janumet slowing down and the patent cliff still taking a big bite out of sales and earnings, Merck's in dire need of a booster shot to its finances.

The long-term prognosis
Merck's in need of long-term drug hopefuls, and that long-term approach is the best way to keep any financial plan on level ground. Is your portfolio in the clear? 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.

Big investors buy up homes in key markets

Big investors continue to expand into more cities for single-family homes as they pull back in others.

Last month, institutional investors, who largely buy single-family homes to turn into rentals, accounted for about one in four home sales in Atlanta, Las Vegas, St. Louis and Jacksonville, data from RealtyTrac show.

They also accounted for a big chunk of sales in Charlotte and Memphis.

Price gains will likely follow the investor buyers, says John Burns, CEO of John Burns Real Estate Consulting, as they did in earlier hot investor markets such as Phoenix and Sacramento.

HOUSING MARKET: Pending home sales slip: Flat sales next year?

He speculates that investor buyers — including institutional Wall Street buyers, individuals who flip homes for quick profits and mom and pop investors — have driven much of this year's home price appreciation.

CoreLogic data show prices up 12.4% in August year over year, but faster in areas favored by investors, like Phoenix and Sacramento, which were up 18% and 26% respectively.

"Investors were just smart. They saw that homes were undervalued. They jumped in and pushed prices back up to normal," Burns says.

Big investors still account for a small part of the overall housing market. As a result, their impact on overall prices isn't that great, said Richard Smith, CEO of real estate firm Realogy Holdings, at a Zillow housing forum Thursday.

Prices have also risen in areas that have had little investor activity, says Mike Orr, real estate expert at the W.P. Carey School of Business at Arizona State University.

Orr tracks the Phoenix market, which was one of the first targeted by investors.

In mid-2012, investor activity peaked in Phoenix, Orr says. Then, they accounted for almost 40% of home sales. Those investors would include small investors.

LENDERS: Home loans become a little easier to get

For this September, Orr says investors accounted for about 23% of sales. Historically, they'd be 15! % to 20% of the market, he says.

While Phoenix home prices in August were up more than the national average, home price gains have been slowing this year, show seasonally adjusted price data from Standard & Poor's Case-Shiller index.

A "cooling wave" in terms of demand has now settled in after a frantic spring, Orr says. Falling investor interest is playing a role, but lack of enthusiasm from regular buyers is more important because they're more numerous, Orr says.

Can Dish Network Stock Continue To Rise?

With shares of Dish Network (NASDAQ:DISH) trading around $45, is DISH an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock's Movement

Dish Network is a pay-television provider that offers a range of local and national programming, featuring more national and local high-definition channels than most pay-TV providers. A rising number of consumers are opting for satellite services due to the reduced costs and increased coverage offered. Dish Network is poised to capitalize on this rise in consumer interest as entertainment takes center stage for consumers in the United States.

Dish Network, the second-largest U.S. satellite TV company, swung to a loss last quarter thanks to large impairment charges and a sizable decrease in pay-TV subscriber additions. The maturing of the U.S. subscription television business has not made it easy to attract new subscribers nor has the popularity of online entertainment, only making the situation worse.

T = Technicals on the Stock Chart are Strong

Dish Network has been steadily rising over the past several years. The stock is now trading near a long-term selling zone that was most prominent back in 2007. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Dish Network is trading above its rising key averages, which signals neutral to bullish price action in the near term.

Source: Thinkorswim

Taking a look at the implied volatility and implied volatility skew levels of Dish Network options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Dish Network Options	40.65%	13%	10%

What does this mean? This means that investors or traders are buying a small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
August Options	Flat	Average
September Options	Flat	Average

As of today, there is an average demand from call buyers or sellers, and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bullish over the next two months.

E = Earnings are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Dish Network's stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Dish Network look like and more importantly, how did the markets like these numbers?

	2013 Q2	2013 Q1	2012 Q4	2012 Q3
Earnings Growth (Y-O-Y)	-104.00%	-41.25%	-34.09%	-149.30%
Revenue Growth (Y-O-Y)	1.12%	-0.74%	-1.15%	-2.20%
Earnings Reaction	0.45%*	-2.04%	-0.16%	3.35%

Dish Network has seen decreasing earnings and mixed revenue figures over the last four quarters. From these numbers, the markets have had conflicting feelings about Dish Network's recent earnings announcements.

* As of this writing.

P = Excellent Relative Performance Versus Peers and Sector

How has Dish Network stock done relative to its peers – DirecTV (NASDAQ:DTV), Time Warner Cable (NYSE:TWC), Comcast (NASDAQ:CMCSA) — and sector?

	Dish Network	DirecTV	Time Warner Cable	Comcast	Sector
Year-to-Date Return	23.46%	21.67%	17.25%	20.21%	19.47%

Dish Network has been a relative performance leader, year-to-date.

Conclusion

Dish Network offers a television subscription service that provides national and local programming to consumers in the United States. The company has recently been struggling with subscribers but is looking for methods to bounce back. The stock has been trending higher in recent years and is now near 2007 prices. Over the last four quarters, investors in the company have had conflicting feelings, as earnings have been decreasing while revenue figures have been mixed. Relative to its peers and sector, Dish Network has been a year-to-date performance leader. Look for Dish Network to OUTPERFORM.

Bank layoffs rise as mortgage refinances fall

Banks are laying off thousands of people, but it's because the economy is actually getting a little better.

Bank of America's announcement that it is laying off 1,200 people who work on mortgage refinancings was only the latest salvo. The company also said it will cut another 3,000 people who work on restructuring problem loans before the end of the year. Banks from Citibank to Wells Fargo to SunTrust are also laying off hundreds or more than a thousand workers each.

The reason: With the economy improving, not nearly as many old loans are going bad, and not nearly as many new ones are being made. Because home values have been rising in many areas fewer fewer homes underwater, so there are far fewer requests for loan modifications and extensions.

MORTGAGE RATES: Average 30-year mortgage rate falls to 4.13%

And with interest rates having risen over the spring and summer — reacting to the bond market's guess that an improving economy would lead to tighter monetary policy — fewer people are refinancing their homes.

"It's good news for the country,'' Bank of America spokesman Terry Francisco said. "The number of people who need loan modifications or short sales is smaller, and with rates higher it has significantly impacted our refi volume. As the market shrinks, we need to reduce costs.''

At Bank of America, only 398,000 mortgages are now 60 days or more past due, Francisco said, down from 1.5 million at the worst of the housing bust. Third-quarter profits from mortgage banking income dropped by $1.4 billion on lower refinancing volume, the bank said.

Citigroup has announced 1,200 mortgage-related layoffs, spokesman Mark Rodgers said. At Wells Fargo, now the nation's biggest mortgage lender, 6,400 mortgage-related layoffs have been announced since summer. Atlanta-based SunTrust said it would cut 800 workers.

"Like many financial institutions, we are adjusting our staffing to current market conditions,'' SunTrust spokesman Michael McCoy said. The cuts refl! ect "not only the reduced volume of mortgage loan refinancing but also our efforts to reduce delinquent loan servicing given the improving housing recovery.''

In August, about 939,000 homes in the U.S. were in some stage of the foreclosure process, 33% fewer than 1.4 million in August 2012, according to CoreLogic. That represented 2.4% of all homes with a mortgage this August, compared to 3.3% last year.

Americans took out $1.25 trillion of mortgage-refinancing loans in 2012, according to the Mortgage Bankers Association. That's expected to fall to $989 billion this year and $388 billion next year.

Why Scholastic Shares Tumbled

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 Scholastic (NASDAQ: SCHL  ) were sliding again today, falling as much as 10% after the company posted another disappointing earnings report.

So what: The children's publishing house said revenue slid 25%, to $506.9 million, as sales fell off from the hit trilogy The Hunger Games, a major revenue stream since it debuted. Earnings per share from continuing operations, meanwhile, came in at $0.76 per share, down from $1.86 a year ago. Both results were below the mark set by the one analyst covering Scholastic. The company, which once had a lock on children's education and media, has been struggling to shift into the digital age, as investments in e-books and other online portals has weighed on profits.

Now what: Like the publishing industry in general, Scholastic is struggling to maintain its relevance, as the advent of electronic media has turned the industry upside down. The company can't count on blockbusters like The Hunger Games every year, but management said it expects to improve profitability in the next fiscal year with the introduction of a number of education technology products, and projects an EPS from continuing operations between $1.40 and $1.80, excluding items. Those numbers aren't terrible, but I'd wait to see consistent revenue and profits before getting on board.

Want more on Scholastic? Add the company to your Watchlist by clicking right here.

Top 5 Cheap Companies To Own For 2014

Here are today's top news headlines from�Fool.com. Check back throughout the day as this list is updated, and follow us on Twitter at�TMFBreaking.

Report: China: America's Third Largest Export Market

New Poll Reveals Middle Class Anxiety

15-Year Mortgages Now Cheaper Than 1-Year ARMs

Commerce Department Releases Q1 GDP

Cyprus Tries to Make Politicians More Accountable

German Inflation Down, Door Open for ECB Rate Cut

"Pain and Gain" Leads Weekend Domestic Box Office Sales

Alibaba Buys 18% Stake in SINA's Weibo Platform

Novartis Rebuts Government Allegations of Misconduct

Fitch Likely to Assign Apple an 'A' Credit Rating

Sprint Gets SoftBank Permission to Explore DISH Bid

Taylor Capital to Join S&P SmallCap 600

Sinclair Broadcast Keeps Quarterly Dividend at $0.15

Economic Gains May Not Help Democrats Much in 2014

Sohu.com Earnings Beat Top- and Bottom-Line Forecasts

Top 5 Cheap Companies To Own For 2014: AeroVironment Inc.(AVAV)

AeroVironment, Inc. designs, develops, produces, and supports unmanned aircraft systems (UAS), and efficient energy systems for various industries and governmental agencies. Its UAS provide intelligence, surveillance, and reconnaissance, including real-time tactical reconnaissance, tracking, combat assessment, and geographic data to the small tactical unit or individual war fighter. The UAS wirelessly transmit critical live video and other information generated by their payload of electro-optical or infrared sensors directly to a hand-held ground control system, enabling the operator to view and capture images during the day or at night on a hand-held ground control unit. AeroVironment also provides spare equipment, alternative payload modules, batteries, chargers, repair services, and customer support for the UAS. In addition, the company produces industrial productivity and clean transportation solutions for commercial and government customers, develops potential clean t ransportation solutions, and performs contract engineering services; offers PosiCharge electric vehicle charging systems for industrial electric material handling fleets, electric vehicle charging systems for passenger and fleet vehicles, and power cycling and test systems for developers and manufacturers of plug-in electric and hybrid vehicles, as well as battery packs, electric motors, and fuel cells; and supplies power cycling and test systems to research and development organizations that focus on developing electric propulsion systems, electric generation systems, and electricity storage systems. It supplies its UAS primarily to the organizations within the United States department of defense. AeroVironment, Inc. was incorporated in 1971 and is headquartered in Monrovia, California.

Advisors' Opinion:

• [By Travis Hoium]

  It's not easy being a government supplier these days. Small-drone manufacturer AeroVironment (NASDAQ: AVAV  ) is finding that out ��� terrible fiscal fourth quarter has to give investors pause about the company's growth.

• [By Jon C. Ogg]

  Aerovironment�Inc. (NASDAQ: AVAV) was maintained Neutral but its 2014 earnings estimates were cut by almost half after the company signaled order delays in its earnings report.

• [By Rich Smith]

  AeroVironment (NASDAQ: AVAV  )
  Shifting over the implications of this news for automotive investments, the key attraction for AeroVironment investors (aside from selling UAVs into an Afghan war that's winding down) has been the company's "PosiCharge" electric-car battery recharging technology. AV says it beats all comers with the ability to recharge a lithium ion battery pack in mere minutes. But if Khare's invention bears fruit, and battery recharge times begin getting measured in seconds, AV's raison d' etre could vanish.

• [By Rich Smith]

  President Obama just released his 2014 proposed defense budget -- and it's chock-full of nada for investors in the fledgling drone/unmanned aerial vehicle industry. What does the lack of funding for drones portend for such manufacturers as General Atomics, Northrop Grumman (NYSE: NOC  ) , �AeroVironment (NASDAQ: AVAV  ) , and Textron (NYSE: TXT  ) ?

Top 5 Cheap Companies To Own For 2014: Advance Auto Parts Inc(AAP)

Advance Auto Parts, Inc., through its subsidiaries, operates as a retailer of automotive aftermarket parts, accessories, batteries, and maintenance items. It operates in two segments, Advance Auto Parts (AAP) and Autopart International (AI). The AAP segment operates stores, which primarily offer auto parts, including alternators, batteries, chassis parts, clutches, engines and engine parts, radiators, starters, transmissions, and water pumps; accessories comprising floor mats, mirrors, vent shades, MP3 and cell phone accessories, and seat and steering wheel covers; chemicals consisting of antifreeze, freon, fuel additives, and car washes and waxes; and oil and other automotive petroleum products. This segment also provides battery and wiper installation, battery charging, check engine light reading, electrical system testing, video clinics and project brochures, loaner tool programs, and oil and battery recycling services; and sells its products through online. The AI segm ent operates stores that offer replacement parts for domestic and imported cars, and light trucks to customers in northeast and mid-Atlantic regions, as well as to warehouse distributors and jobbers in North America. As of January 1, 2011, the company operated 3,369 AAP stores, including 3,343 stores located in the northeastern, southeastern, and Midwestern regions of the United States under the Advance Auto Parts and Advance Discount Auto Parts trade names; 26 stores situated in Puerto Rico and the Virgin Islands under the Advance Auto Parts and Western Auto trade names; and 194 stores under the Autopart International trade name in the United States. It serves do-it-yourself, do-it-for-me, or commercial customers. The company was founded in 1929 and is based in Roanoke, Virginia.

Advisors' Opinion:

• [By Brad Thomas]

  Like many of the other Triple-Net REITs, Agree operates its investment platform with a variety of free-standing net lease tenants including many household names such as Walgreens (WAG), CVS (CVS), Staples, Chase Bank, AutoZone (AZO), Advance Auto Parts (AAP), Lowe's (LOW), McDonald's (MCD), Family Dollar (FDO), Harris Teeter, Dollar General (DG), and Wawa. As shown below, Agree has a majority (88%) of nationally-recognized tenants, including many investment grade retailers (62.6%).

Hot Insurance Stocks To Own Right Now: Capstone Turbine Corporation(CPST)

Capstone Turbine Corporation develops, manufactures, markets, and services turbine generator sets and related parts for use in stationary distributed power generation applications. Its stationary distributed power generation applications include cogeneration combined heat and power (CHP), integrated (CHP), resource recovery, and secure power, as well as combined cooling, heat, and power; and its products are used as battery charging generators for hybrid electric vehicle applications. The company primarily offers microturbine units, subassemblies, and components. It also provides various accessories, including rotary gas compressors with digital controls, heat recovery modules for CHP applications, dual mode controllers that allow automatic transition between grid connect and stand-alone modes, batteries with digital controls for stand-alone/dual-mode operations, power servers for multipacked installations, and protocol converters for Internet access, as well as frames, ex haust ducting, and installation hardware. Further, it remanufactures microturbine engines; and provides after-market parts and services, scheduled and unscheduled maintenance, and factory and on-site training services. The company?s microturbines can be fueled by various sources, including natural gas, propane, sour gas, landfill or digester gas, kerosene, diesel, and biodiesel. It primarily sells its products directly to end users, as well as through distributors in North America, Asia, Australia, Europe, the Russian Federation, and South America. Capstone Turbine Corporation was founded in 1988 and is based in Chatsworth, California.

Advisors' Opinion:

• [By Dan Caplinger]

  On Thursday, Capstone Turbine (NASDAQ: CPST  ) will release its latest quarterly results. But lately, investors have already anticipated some huge results from the company, having bid the shares up by about 50% in just the past several weeks. Can Capstone deliver on what investors want to see?

• [By Dan Caplinger]

  Beyond the fundamentals, though, news plays an important role in short-term stock movements. Outside the Dow, microturbine producer Capstone Turbine (NASDAQ: CPST  ) soared 8.8% after receiving its second large order in the past week. After getting word of a purchase from real-estate and investment firm Related Companies on Tuesday, Capstone got an order today from Southern California Gas to buy three of its C65 uninterruptible power-source units for use at the gas company's data center. Given the relatively small size of the business, which sports sales of only about $122 million over the past year, orders like this have a material effect on Capstone and also draw the attention of other prospective buyers.

• [By Selena Maranjian]

  Fisher reduced its stake in lots of companies, including Capstone Turbine (NASDAQ: CPST  ) and Nokia (NYSE: NOK  ) . Capstone is a smallish company, making low-emission microturbines used in power generation. Its top line has been growing by double digits over the past few years, and it's poised to profit from huge interest in shale oil, but it remains in the red. Still, it has recently announced a bunch of promising deals and some think the many folks short the stock will end up burned.

• [By Tyler Crowe]

  What:�Shares of Capstone Turbine (NASDAQ: CPST  ) skyrocketed 13.59% as the company announced that it had signed a major supplier deal with private real estate and investment firm Related Companies. Shares of Capstone haven't been this high in over a year.

Top 5 Cheap Companies To Own For 2014: Horizon Lines Inc.(HRZ)

Horizon Lines, Inc., through its subsidiaries, provides container shipping and integrated logistics services. It ships a range of consumer and industrial items, such as refrigerated and non-refrigerated foodstuffs, household goods, auto parts, building materials, and other materials used in manufacturing. The company offers container shipping services to ports within the continental United States, Puerto Rico, Alaska, Hawaii, Guam, the U.S. Virgin Islands, and Micronesia. Its integrated logistics services comprise rail, truck brokerage, warehousing, distribution, expedited logistics, and non-vessel operating common carrier operations. Horizon Lines, Inc. also offers terminal services. The company operates terminals in Alaska, Hawaii, and Puerto Rico; contracts for terminal services in seven ports in the continental United States; and the ports in Guam, Yantian, and Xiamen, China, as well as Kaohsiung, Taiwan. In addition, it offers inland transportation services. As of Dec ember 20, 2009, the company owned or leased approximately 20 vessels and 18,500 cargo containers. Horizon Lines, Inc. serves consumer and industrial products companies, as well as various agencies of the U.S. government, including the Department of Defense and the U.S. Postal Service. The company was founded in 1956 and is based in Charlotte, North Carolina.

Top 5 Cheap Companies To Own For 2014: Freeport-McMoran Copper & Gold Inc.(FCX)

Freeport-McMoRan Copper & Gold Inc. engages in the exploration, mining, and production of mineral resources. The company primarily explores for copper, gold, molybdenum, silver, and cobalt. It holds interests in various properties, located in North and South America; the Grasberg minerals district in Indonesia; and the Tenke Fungurume minerals district in the Democratic Republic of Congo. As of December 31, 2010, the company?s consolidated recoverable proven and probable reserves totaled 120.5 billion pounds of copper, 35.5 million ounces of gold, 3.39 billion pounds of molybdenum, 325.0 million ounces of silver, and 0.75 billion pounds of cobalt. The company was founded in 1987 and is headquartered in Phoenix, Arizona.

Advisors' Opinion:

• [By Joshua Bondy]

  Freeport-McMoRan Copper & Gold (NYSE: FCX  ) is one of the most interesting plays within the copper market. It recently broke the mold when it decided to merge with the oil and gas firm, Plains Exploration & Production. The merger reduces Freeport's dependency on the volatile metal prices, but it also means that management must navigate two very different industries.�

• [By Alex Planes]

  A major part of SoCo's weakness -- copper prices -- is simply out of its hands, and the trend has not been favorable over the past few years. Since peaking in early 2011, copper prices have fallen back to roughly the same level they reached at the start of our three-year tracking period. SoCo's stock has actually outperformed the slide for a year, but Freeport McMoRan (NYSE: FCX  ) has almost exactly mirrored the movements of copper:

This Week's 5 Dumbest Stock Moves

Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. As I do every week, let's take a look at five dumb financial events this week that may make your head spin.

1. The first cut is always the deepest
The prognosis wasn't favorable for Intuitive Surgical (NASDAQ: ISRG  ) this week, as its shares tumbled 16% on Tuesday after lowering its sales estimates.

The company behind the da Vinci robotic arm surgical system warned that revenue during the second quarter came in at roughly $575 million, well below the $630 million that analysts were forecasting. The math here is made more cruel because $575 million implies just 7% in year-over-year growth.

Intuitive Surgical has carried a lofty earnings multiple in the past because of its healthy double-digit percentage growth. Clearly, 7% isn't going to cut it, and the 3% projected pop in profitability isn't helping.

Making matters worse, Intuitive Surgical is targeting a year-over-year drop in sales of the actual surgical systems.

Canaccord Genuity and Lazard Capital slashed their price targets on the fallen medical products darling, and JMP Securities and Goldman Sachs joined Canaccord Genuity in downgrading the stock's rating.

2. Sam Walton is a marked man
If you're hankering for a tasty conversation starter, bring up the Large Retailer Accountability Act of 2013 that was passed by the D.C. City Council this week.

Wal-Mart (NYSE: WMT  ) got whacked by the move that demands retailers making more than $1 billion and opening stores larger than 75,000 square feet to pay a minimum wage that is 50% higher than the rest of the city's retailers.

It was clearly a lob at Wal-Mart, which was in the process of constructing three locations and planning to open three more in the area. It may as well be called the Wal-Mart Accountability Act, because other large chains that already have a presence in the city will have four years before joining Wal-Mart with a minimum wage floor of $12.50 an hour instead of $8.25 an hour.

There's also a pro-labor stipulation that would free a large retailer from the new rule if it operates with unionized labor.

It's going to be controversial, and, naturally, you're probably set on loving this or hating this depending on where you stand politically, and how you feel about the world's largest retailer. However, Wal-Mart got duped here. It has called off plans for the three stores that were in the works, but now it has to decide the fate of the three stores that are currently being built.

3. Get busy with the fizzy
Is SodaStream (NASDAQ: SODA  ) really up for sale?

The New York Post is reporting that SodaStream has been quietly trying to sell itself for at least three weeks, but sources say that any interest in acquiring the company behind the system that turns flat water into carbonated soda is starting to fizzle out.

Really?

It's easy to picture SodaStream eyeing an exit strategy if it was trading at a ridiculous valuation, or if growth was starting to stall, but that's just not the case here. SodaStream is trading for just 19 times forward earnings, even though it's currently growing at a faster clip.

Sodastream is still a disruptor, something that it deliciously plays up in its ads.

If SodaStream is really up for sale, it's a dumb move.

If SodaStream isn't really up for sale, it's a dumb rumor.

4. Mac attack
The PC market is getting ugly.

Industry trackers Gartner and IDC both reported this week that PC shipments fell by roughly 11% during the second quarter relative to the prior year.

The news is worse for Apple (NASDAQ: AAPL  ) , which is the only one of the four largest PC companies in this country to see its domestic market share decline. Losing share in a shrinking pie isn't a good place to be.

The silver lining here is that Apple isn't trading on the merits of its original computer business these days. Currently, iPhones and iPads are the real growth drivers at the tech bellwether. However, with margins in those businesses starting to slip, it would've been nice to have Macs to fall back on.

5. Panned aura
Pandora (NYSE: P  ) ended a blistering rally that saw the shares move higher in 10 of 11 trading days by announcing disappointing metrics for the month of June.

Listener hours at the country's leading music streaming service fell from 1.35 billion in May, to just 1.25 billion in June. There is a seasonal slowdown in the summertime, but it's never been this bad. Pandora's share of the total U.S. radio listening market shrank from 7.29% in May, to 7.04% in June, pointing to a bigger problem in popularity than the summertime swoon.

Pandora's move to cap mobile usage for free customers may be taking its toll, but it's now proving to be a risky gamble, with tech giants introducing new offerings this year.

Get smart
With so much of the financial industry getting bad press these days, it may be a greedy-when-others-are-fearful moment. Not surprisingly, some of Warren Buffett's biggest investments are in the space. In the Motley Fool's free report, The Stocks Only the Smartest Investors Are Buying, you can learn about a small, under-the-radar bank that's too tiny for Buffett's billions. Too bad, because it has better operating metrics than his favorites. Just click here to keep reading.

AT&T Inc. Hits Earnings Estimates on the Head (T)

After markets closed Wednesday,  AT&T Inc. (T) reported Q3 earnings, with both EPS and revenues falling right in line with analyst expectations.

T’s Q3 Earnings in Brief

- EPS came in at $0.66 while revenues hit $32.16 billion, the exact results that the street was looking for. Diluted EPS grew 14.3% from Q3 2012 while revenues were up 2.2% from the year prior.
- T’s popular U-verse service hit a milestone with its first billion-dollar revenue month, up a handsome 28.1% year-over-year. There are now approximately 10 million subscribed to the U-verse service.
- Wireless revenues are up 5.1% from the same quarter a year ago while wireless data revenues are up 17.6% from the same quarter in 2012.

CEO Commentary

CEO and Chairman Randall Stephenson had the following to say about T’s earnings: “We're setting the standard for 4G LTE speeds and network reliability. Our fiber and U-verse expansion projects are ahead of schedule bringing high-speed broadband to millions more customers. With these initiatives, we're seeing excellent growth across our major platforms — mobility, U-verse and strategic business services."

T’s Dividend

AT&T Inc.’s dividend remained unchanged, with a payout of 45 cents per quarter, or $1.80 per year. Note that the company has grown its dividend for 28 straight years, since the close of the 1985 fiscal year.

Shares Flat

Immediately after the report was released, T’s stock had a very muted reaction, falling by just a few pennies. Despite hitting analyst estimates and recording record U-verse growth, investors seemed neutral on the earnings results. The stock is up 4.6% YTD.

10 Best Undervalued Stocks To Own Right Now

Based on our relative strength and volatility rankings of ETFs, we are adding two new positions to our growth and income portfolio��ne focused on buybacks, and one focused on the gaming sector, reports Marvin Appel, editor of Systems & Forecasts.

Buyback Achievers ETF (PKW)

The stocks in this ETF are those that have repurchased at least 5% of their shares in the 12 months preceding the reconstitution of the index every January. 200 stocks currently qualify. (They are weighted by market capitalization.)

The theory underlying the strategy is that companies that aggressively buy back their own shares, either view them as undervalued, or are earning abundant extra profits.

PKW steadily outperformed the S&P 500 Index (by 2.9% per year, since inception in 2006), but has experienced the same maximum drawdown as the S&P 500 (55%).

The biggest difference in sector exposure is that PKW has 27% of its portfolio in consumer discretionary stocks, versus 12% in the S&P 500 Index.

10 Best Undervalued Stocks To Own Right Now: Tupperware Corporation(TUP)

Tupperware Brands Corporation operates as a direct seller of various products across a range of brands and categories through an independent sales force. The company engages in the manufacture and sale of kitchen and home products, and beauty and personal care products. It offers preparation, storage, and serving solutions for the kitchen and home, as well as kitchen cookware and tools, children?s educational toys, microwave products, and gifts under the Tupperware brand name primarily in Europe, Africa, the Middle East, the Asia Pacific, and North America. The company provides beauty and personal care products, which include skin care products, cosmetics, bath and body care, toiletries, fragrances, nutritional products, apparel, and related products principally in Mexico, South Africa, the Philippines, Australia, and Uruguay. It offers beauty and personal care products under the Armand Dupree, Avroy Shlain, BeautiControl, Fuller, NaturCare, Nutrimetics, Nuvo, and Swissgar de brand names. The company sells its Tupperware products directly to distributors, directors, managers, and dealers; and beauty products primarily through consultants and directors. As of December 26, 2009, the Tupperware distribution system had approximately 1,800 distributors, 61,300 managers, and 1.3 million dealers; and the sales force representing the Beauty businesses approximately 1.1 million. The company was formerly known as Tupperware Corporation and changed its name to Tupperware Brands Corporation in December 2005. The company was founded in 1996 and is headquartered in Orlando, Florida.

Advisors' Opinion:

• [By Brian Pacampara]

  Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, household products company Tupperware Brands (NYSE: TUP  ) has earned a coveted five-star ranking.

10 Best Undervalued Stocks To Own Right Now: Caterpillar Inc.(CAT)

Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. It operates through three lines of businesses: Machinery, Engines, and Financial Products. The Machinery business offers construction, mining, and forestry machinery, including track and wheel tractors, track and wheel loaders, pipelayers, motor graders, wheel tractor-scrapers, track and wheel excavators, backhoe loaders, log skidders, log loaders, off-highway trucks, articulated trucks, paving products, skid steer loaders, underground mining equipment, tunnel boring equipment, and related parts. It also manufactures diesel-electric locomotives; and manufactures and services rail-related products and logistics services for other companies. The Engines business provides diesel, heavy fuel, and natural gas reciprocating engines for Caterpillar machinery, electric power generation systems, marine, petrol eum, construction, industrial, agricultural, and other applications. It offers industrial turbines and turbine-related services for oil and gas, and power generation applications. This business also remanufactures Caterpillar engines, machines, and engine components; and offers remanufacturing services for other companies. The Financial Products business provides retail and wholesale financing alternatives for Caterpillar machinery and engines, solar gas turbines, and other equipment and marine vessels, as well as offers loans and various forms of insurance to customers and dealers. It also offers financing for vehicles, power generation facilities, and marine vessels. The company markets its products directly, as well as through its distribution centers, dealers, and distributors. It was formerly known as Caterpillar Tractor Co. and changed its name to Caterpillar Inc. in 1986. Caterpillar Inc. was founded in 1925 and is headquartered in Peoria, Illinois.

Advisors' Opinion:

• [By Arjun Sreekumar]

  For mining operations, one of the most commonly used trucks is Caterpillar's (NYSE: CAT  ) Caterpillar 797, or Cat 797 for short ��an enormous dump truck with a 400-ton capacity that's capable of hauling a million pounds of bituminous sand at a single time.

• [By Travis Hoium]

  Another Dow stock sinking is Caterpillar (NYSE: CAT  ) , also down 1.9% after it was put on notice by short-seller James S. Chanos, who said he was shorting the stock because Caterpillar faces a lot of headwinds relating to the commodities market, where miners generate demand. If commodities demand drops in China, it will hit Caterpillar's sales and profit. The stock still pays a considerable 2.8% dividend yield and trades at just 12 times trailing earnings, but demand can swing wildly, and eventually China will have to stop its stimulus-fueled growth, which could have a big impact on demand. A short-seller's call isn't reason to dump the stock, but it may be a reminder to look at the macro picture and re-evaluate Caterpillar's prospects. �

• [By John Divine]

  Speaking of surprising quarters, Caterpillar (NYSE: CAT  ) shares tacked on 2.8% -- its largest single-day gain in three months ��after the company shared optimism for the state of construction equipment demand in China, one of Caterpillar's most important markets. That said, first-quarter profit was down dramatically from a year ago: It earned just $1.31 per share, compared with $2.37 per share a year ago. The company also forecast sales this year to be in the range of $57 billion to $61 billion, down significantly from the $60 billion to $68 billion range it had expected before.�

• [By Jeremy Bowman]

  Two industrial powerhouses on the Dow delivered earnings today. First, Caterpillar (NYSE: CAT  ) shares finished down 2.4% after missing estimates as many had expected. The slowdown in Chinese construction has hurt demand for materials and thus mining equipment, a key component of Caterpillar's business. The world's largest maker of earth-moving equipment said profits fell 43% as EPS came in at $1.45, down from $2.54 a year ago, and worse than estimates at $1.69. Revenue dropped 15.8% to $14.6 billion, below expectations of $15.1 billion. Management promised cost-cutting to cope with the decrease in demand, and cut its full-year EPS outlook from $7 to $6.50.

Top 10 Low Price Stocks To Buy Right Now: Dollar Tree Inc.(DLTR)

Dollar Tree, Inc. operates discount variety stores in the United States and Canada. Its stores offer merchandise primarily at the fixed price of $1.00. The company operates its stores under the names of Dollar Tree, Deal$, Dollar Tree Deal$, Dollar Giant, and Dollar Bills. Its stores offer consumable merchandise, including candy and food, and health and beauty care, as well as household consumables, such as paper, plastics, household chemicals, in select stores, and frozen and refrigerated food; variety merchandise, which includes toys, durable housewares, gifts, party goods, greeting cards, softlines, and other items; and seasonal goods, such as Easter, Halloween, and Christmas merchandise. As of April 30, 2011, it operated 4,089 stores in 48 states and the District of Columbia, as well as 88 stores in Canada. The company was founded in 1986 and is based in Chesapeake, Virginia.

Advisors' Opinion:

• [By Paul Ausick]

  Dollar General�� share price is up less than 6% in the past 12 months, but since the beginning of the year shares have risen more than 22%. And even then, Dollar General�trails Dollar Tree Inc. (NASDAQ: DLTR) in share price growth since January 1. Dollar Tree stock is up 30%.

• [By Jacob Roche]

  With the economy starting to improve, you might think Dollar Tree's (NASDAQ: DLTR  ) fortunes will reverse. The deep discounter provided unemployed and lower-income consumers a safe place in the storm, but with the economic weather clearing up, it would be reasonable to expect consumers to venture out again to higher-end retailers. However, that assumption would be wrong.

10 Best Undervalued Stocks To Own Right Now: Schlumberger N.V.(SLB)

Schlumberger Limited, together with its subsidiaries, supplies technology, integrated project management, and information solutions to the oil and gas exploration and production industries worldwide. The company?s Oilfield Services segment provides exploration and production services; wireline technology that offers open-hole and cased-hole services; supplies engineering support, directional-drilling, measurement-while-drilling, and logging-while-drilling services; and testing services. This segment also offers well services; supplies well completion services and equipment; artificial lift; data and consulting services; geo services; and information solutions, such as consulting, software, information management system, and IT infrastructure services that support oil and gas industry. Its WesternGeco segment provides reservoir imaging, monitoring, and development services; and operates data processing centers and multiclient seismic library. This segment also offers variou s services include 3D and time-lapse (4D) seismic surveys to multi-component surveys for delineating prospects and reservoir management. The company?s M-I SWACO segment supplies drilling fluid systems to improve drilling performance; fluid systems and specialty tools to optimize wellbore productivity; production technology solutions to maximize production rates; and environmental solutions that manages waste volumes generated in drilling and production operations. Its Smith Oilfield segment designs, manufactures, and markets drill bits and borehole enlargement tools; and supplies drilling tools and services, tubular, completion services, and other related downhole solutions. The company?s Distribution segment markets pipes, valves, and fittings, as well as mill, safety, and other maintenance products. This segment also provides warehouse management, vendor integration, and inventory management services. Schlumberger Limited was founded in 1927 and is based in Houston, Texas.

Advisors' Opinion:

• [By Dan Caplinger]

  One potential thing for Core Labs shareholders to watch out for is the prospect for a takeover bid. With a market cap of $6 billion, Core Labs would be a substantial acquisition for most industry players. But both Schlumberger (NYSE: SLB  ) and Halliburton (NYSE: HAL  ) are large enough to at least consider adding Core Labs to their respective oil-services portfolios, and both companies have fairly healthy balance sheets that could arguably withstand taking on more debt for a buyout.

• [By Tony Daltorio]

  The biggest oilfield service companies should get a big lift from the boom, Moors said. That includes Schlumberger Ltd. (NYSE: SLB), Halliburton Co. (NYSE: HAL), Weatherford International Ltd. (NYSE: WFT), and Baker Hughes Inc. (NYSE: BHI).

• [By Jonas Elmerraji]

  2013 has been a stellar year for shares of oil service giant Schlumberger (SLB). Since the calendar flipped over to January, SLB has rallied more than 25%, beating the broad market's impressive pace by double digits. As oil prices linger on the high end of their historic range, SLB is well positioned to keep ticking higher.

  Schlumberger provides must-have services to national and supermajor oil firms as well as smaller E&Ps, offering up niche services like seismic surveys and well drilling and positioning. In a nutshell, SLB's job is to pull oil out of the ground as efficiently as possible. Oil firms turn to Schlumberger because the tasks they need to accomplish are too nuanced or proprietary to pull off in-house. So as long as the company continues to pour cash into R&D for drilling technology and software, the firm should continue to score lucrative contracts.

  Some of Schlumberger's most attractive opportunities right now come from overseas. The firm is one of the largest oil servicers in Russia, a key growth market in the years ahead. It's also got an important presence in smaller oil markets, where it's a big fish in a small pond. A big scale and stellar reputation should guarantee Schlumberger an attractive piece of the oil pie for years to come.

Five Stocks For A New Russia

Prepare to become familiar with this term: New Russia. You are going to hear a lot more about it.

Russia has been avoided by investors but offers selected opportunities (Photo credit: Ed Yourdon)

Generally, Russia has been on the avoid list for many emerging market investors in recent years. In addition to all the other problems facing emerging market assets today – such as a risk-off attitude in the world investment community that is favouring US and European holdings rather than those in the high-growth emerging world – Russia has an impressive assortment of ailments all of its own. Top of the pile is corruption: it ranks 113rd out of 174 in Transparency International's Corruption Perceptions Index. Then there are corporate governance worries, a history of state involvement and intrusion, and a decline in the commodities sector of which so many of Russia's major credits are a part.

But perhaps that's not the whole story. Today Charles Robertson, global chief economist at Renaissance Capital in London and one of the most interesting voices in emerging market investment, sent a note to clients saying: "The theme that's exciting our Russia research team is 'New Russia'."

"The investor feedback we've got from the past two months is pro-Russia," Robertson says. "For all of Russia's problems (and it has a fair few), it does still have the most literate, large, IT savvy population in emerging markets." Renaissance argues that Russia is uniquely placed to both produce and consume the IT and high-tech sector. "Investors want more exposure to New Russia," it writes in a new research report today. "Underpenetrated sectors combining fast growth with world-class levels of technology, management and corporate governance; sectors the government sees as enabling Russia's growth and modernisation and thus without the regulatory, taxation and legacy burden of many of Russia's index heavyweights."

"We're not arguing that Russia is embarking on a new reform effort – in fact, we argued the opposite over the summer," Robertson says. "But asset prices can still rise without reform, for a few years at least. And New Russia is its own idiosyncratic reform story."

Carl Icahn Halves Netflix Stake, Citing 457% Gain

Updated to reflect Carl and Brett Icahn statements and additional information throughout

NEW YORK (TheStreet) - Carl Icahn is paring his stake in Netflix  (NFLX) by over 50%, citing a 457% investment gain since his investment conglomerate, Icahn Enterprises (IEP), became the company's largest shareholder about a year ago.

Icahn disclosed that his holding company has cut its stake in Netflix to 4.5% from an over 9% position that the activist investor made in November 2012, according to filings with the Securities and Exchange Commission. The move comes just a day after Netflix reported better-than-expected third quarter earnings.

In total, Icahn sold nearly three million Netflix shares and will now own 4.5% of the company's outstanding stock, according to a Tuesday filing with the SEC. The filing said the partial stake sale comes after Icahn's 457% gain on the investment, first disclosed on Nov 1., 2012.

"The decision to sell Netflix common shares was made by Carl Icahn in view of the 457% increase in the price of those shares since the original investment at approximately $58 per share," Icahn said in a Tuesday filing.

In multiple media appearances, Icahn has said his son Brett Icahn, a portfolio manager at the firm, was responsible for the Netflix investment and for maintaining the firm's 9.4% stake through a significant 2013 rally in the company's stock. Icahn, now an active Twitter user, took to the micro-blogging site to thank the company for its strong performance. Sold block of NFLX today. Wish to thank Reed Hastings, Ted Sarandos, NFLX team, and last but not least Kevin Spacey: http://t.co/BRWpKOBfD2 � Carl Icahn (@Carl_C_Icahn) October 22, 2013
Icahn maintained optimism in Netflix's outlook for growth, it pricing power and the company's valuation. The firm's views on Netflix also appear to pit the big picture optimism of Brett Icahn with the cold rationality of a seasoned investor like Carl Icahn.

"[We] believe the company remains significantly undervalued. As a subscription service priced at only $7.99 per month, we believe Netflix is one of the great consumer bargains of our time," Brett Icahn said in a letter disclosed on Tuesday.

"In our experience, there are few companies at any given time in history that represent the pure life blood of a colossal secular growth category, and even fewer where the CEO of that company instills deserved confidence among the company's investors by repeatedly exhibiting both vision and the ability to execute on that vision," the younger Icahn added.

In a separate part of the letter, Carl Icahn appeared to temper Brett's enthusiasm.

"While I basically agree with David [Schechter] and Brett's assessment above and have often held positions for many years, as a hardened veteran of seven bear markets I have learned that when you are lucky and/or smart enough to have made a total return of 457% in only 14 months it is time to take some of the chips off the table," Carl Icahn said.

The firm's Sargon Portfolio, which is co-managed by Brett Icahn and David Schechter and is supervised by Carl Icahn, has generated 37% annualized returns since its inception in April, 2010 and currently manages in excess of $4.8 billion. Overall, Icahn Enterprises has assets of $29 billion.

Netflix shares fell over 9% in Tuesday trading. Shares continued to fall on Icahn's disclosure, dropping over 2% in after-hours trading to $314.08 a share.

Follow @AntoineGara

Fiscal Crisis Leaves Stocks in a Sweet Spot

The Washington mess of the past few weeks was ugly and disruptive for financial markets. It could do more damage in December as investors contemplate resumed acrimony when 2014 arrives.

Yet it all has a silver lining. ‪

The federal government's shutdown and threat of default on U.S. debt spawned anxiety among businesses and consumers, hurt the U.S.'s image around the world and took about half a percentage point off fourth-quarter economic growth, economists estimate.

But the economy kept growing. Inflation stayed low. And the turmoil is widely expected to keep the Federal Reserve more supportive of the economy and markets than money managers had anticipated until recently.

‪Analysts who have studied past market behavior say that backdrop—moderate economic growth with low inflation and strong central-bank backing—is excellent for stocks. That may help explain why financial markets remained fairly calm throughout the crisis and how the S&P 500 stock index finished Friday at 1744.50, a record high. The S&P 500 is up 22.3% this year.

"This is the best environment for stocks right now. You don't have rising interest rates becoming a problem. You don't have inflationary pressures. You do have earnings growth," said Tim Hayes, chief global investment strategist at Ned Davis Research in Venice, Fla. ‪The firm has studied stock performance in a wide variety of economic environments going back decades.

‪One of the most positive indicators today, Mr. Hayes said, is that unemployment is a high 7.3%, but declining. ‪

"When the unemployment rate is above 6% and falling, that is the best situation for the stock market" based on the performance of the S&P 500 back to the 1940s, Mr. Hayes said.

Stocks average 13.5% annual gains when unemployment is above 6%, and 16.5% when the rate is that high and falling. Joblessness isn't good for ordinary people, of course, but stocks respond more to expectations for corporate earnings, inflation, interest rates and the like.

High unemployment is good for stocks if it holds down labor costs. High but falling unemployment is even better because it keeps a lid on costs and fuels consumer-spending growth, as expanding employment puts money in people's pockets. ‪

Stocks also do better when earnings growth is below 5% on a year-over-year basis than when it is above 5%, according to the Ned Davis studies. That is because moderate earnings growth is less likely to spur inflation or push interest rates higher.

‪Another big boost for stocks is the growing hope that low inflation and worries about economic growth will induce the Federal Reserve to keep stimulating the economy by holding down long-term interest rates.

‪Over the summer, many investors expected the Fed would decide in September that the economy was strong enough for it to cut back on its $85 billion in monthly bond-buying stimulus. Then the Fed surprised investors and analysts by delaying action, citing among other things the risk to growth from Washington's fight over debt and government funding.

‪Now, many economists think the Fed could hold off until the end of the year or longer. Laurence Fink, chairman and chief executive of BlackRock Inc., which oversees $3.8 trillion and is the world's biggest asset manager, as well as other well-known Wall Street executives and investors, have predicted that the Fed could wait until March or even June. ‪

Fed stimulus helps stocks because low interest rates hold down corporate costs, and the stimulus money itself leaks into the stock market, fueling investment there. The longer the Fed maintains the central bank's exceptionally supportive policy, the longer stocks benefit, said Michael Fredericks, a BlackRock portfolio manager. ‪

Mr. Fredericks also has studied the market's behavior during varying economic circumstances. He agrees with Mr. Hayes of Ned Davis that low inflation and low labor costs help stock performance. Mr. Fredericks believes strong growth is better than slow growth, but the two men define slow growth differently, making it hard to compare their views. The two agree on the Fed's importance to continued stock gains, especially now. ‪

"We think a lot of this comes down to just the importance of central-bank policy," Mr. Fredericks said. ‪

A big question for the future, he said, is how and when central banks around the world unwind their financial stimulus. ‪Mr. Hayes thinks how that is handled could determine when stocks next face a bear market, most commonly defined as a 20% decline from a high. ‪While he is optimistic about the immediate future, he said he wouldn't be surprised to see stocks pull back by next summer.

Such a decline is common after stocks have risen strongly for years, Mr. Hayes said. That is especially true when stock prices are above average when compared to corporate earnings, as they are today. The S&P 500 trades at more than 18 times its component companies' earnings for the past 12 months, above the historical average of about 16. ‪

"I wouldn't be surprised if we see a cyclical bear market next year" or at least a sharp decline, Mr. Hayes said.

His best guess about the trigger: continued stock gains that make the market look expensive whenever the Fed finally trims its bond-buying stimulus and pushes long-term interest rates higher.

But as long as inflation remains low and the economy is growing, any pullback could be brief, he said. The economic backdrop would support renewed stock gains, assuming Washington isn't back in crisis when the Fed is withdrawing stimulus.

Eventually, dysfunction in Washington is bad for the stock market and economy, said Mark Zandi, chief economist at Moody's Analytics. ‪

For years, the ability to cut labor costs has helped companies remain profitable despite limited business investment, he said. Now, wages and hiring are on the rise. Future business success depends on expansion and investment. Stocks seem to be shrugging off Washington's acrimony in the short run, but in the longer run it damages business confidence and limits investment, Mr. Zandi said.

‪"I'm not sure I draw the conclusion that this kind of climate is good for business and stock investors in the long run," he said.

Here's How Nathan's Famous Is Making You So Much Cash

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 Nathan's Famous (Nasdaq: NATH  ) , 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, Nathan's Famous generated $8.5 million cash while it booked net income of $7.5 million. That means it turned 11.9% of its revenue into FCF. That sounds pretty impressive.

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 Nathan's Famous 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 13.4% of operating cash flow coming from questionable sources, Nathan's Famous 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 6.6% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed 10.5% 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.

Does Nathan's Famous have what it takes to execute internationally? Take a look at some American restaurant concepts that are generating profits in all over the globe in, "3 American Companies Set to Dominate the World." It's free for a limited time. 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.

Add Nathan's Famous to My Watchlist.

Another Big Fall on Wall Street Today

After a few terrible trading sessions last week, the bearish sentiment was back on Wall Street again today. As the closing bell rang today, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) was lower by 139 points, or 0.94%. But as bad as that may seem, the Dow was down as many as 248 points. The other two major indexes also performed poorly, as the S&P 500 lost 1.21% and the Nasdaq fell lower by 1.09%.

The Federal Reserve and its announcement that it will soon begin slowing stimulus surely is still playing on investors' minds today, but it's more conceivable that the Chinese government's decision to allow its country's markets to work through a credit crunch was the real cause for the declines in the U.S. markets.

A few Dow losers
Shares of Boeing (NYSE: BA  ) fell 2.13% after news that a 787 Dreamliner had to make an emergency landing today. This marks the third time in the past week that a 787 Dreamliner needed to land unexpectedly. We have seen the Dreamliner have problems in the past with its battery system, and now mechanical problems seem to be the issue for the planes, which when we look at the big picture shouldn't be something that weighs on investors' minds for too long.  

Walt Disney (NYSE: DIS  ) also fell into the red today despite what should be seen as good news from its Pixar unit. The animated film Monsters University took first place this past weekend at the box office, bringing in $82.4 million in ticket sales. It had been estimated that the film would bring in $78 million, so this was a nice surprise for the company. But Disney was still lower by 0.46% today and again similar to Boeing, investors shouldn't be discouraged by this one-day move lower. It's very plausible that the company was simply pulled lower by the overall negative sentiment moving throughout the market.  

Lastly, shares of both the Dow's banking giants also fell. Bank of America (NYSE: BAC  ) lost 3.07% while JPMorgan Chase (NYSE: JPM  ) declined by 2.00% as investors look toward China and its tightening monetary policies. Both companies have operations in Asia and will likely be hurt by what's going on in China, but investors may be overreacting today. Bank of America only realizes about 4% of its revenue from Asian markets while JPMorgan gets about 6%. In the big picture, these amounts are a drop in the bucket and really shouldn't affect the overall financial health of either company.  

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Adapt To A Bear Market

Witnessing a bear market for stocks doesn't have to be about suffering and loss, even though some cash losses may be unavoidable. Instead, investors should always try to see what is presented to them as an opportunity - a chance to learn about how markets respond to the events surrounding a bear market or any other extended period of dull returns. Read on to learn about how to weather a downturn.

What is a Bear Market?

The boilerplate definition says that any time broad stock market indices fall more than 20% from a previous high, a bear market is in effect. Most economists will tell you that bear markets simply need to occur from time to time to "keep everyone honest." In other words, they are a natural way to regulate the occasional imbalances that sprout up between corporate earnings, consumer demand and combined legislative and regulatory changes in the marketplace. Cyclical stock-return patterns are just as evident in our past as the cyclical patterns of economic growth and unemployment that have been around for hundreds of years.

Bear markets can take a big bite out of long-term stockholders' returns. If investors could, by some miracle, avoid the downturns altogether while participating in all the upswings (bull markets), their returns would be spectacular - even better than Warren Buffett or Peter Lynch. While that kind of perfection is simply beyond reach, savvy investors can see far enough around the corner to adjust their portfolios and spare themselves some losses.

These adjustments are a combination of asset allocation changes (moving out of stocks and into fixed-income products) and switches within a stock portfolio itself.

When the Bear Comes Knocking

Growth Stocks: If it appears that a bear market could be around the corner, get your portfolio in order by identifying the relative risks of each holding, whether it's a single security, a mutual fund or even hard assets like real estate and gold. In bear markets, the stocks most susceptible to falling are those that are richly valued based on current or future profits. This often translates into growth stocks (stocks with price-earnings ratios and earnings growth higher than market averages) falling in price. Value stocks: These stocks may outperform the broad market indices because of their lower P/E ratios and perceived earnings stability. Value stocks also often come with dividends, and this income becomes more precious in a downturn when equity growth disappears. Although value stocks tend to get ignored during bull market runs, there is often an influx of investor capital and general interest in these stodgy companies when markets turn sour. Lesser-Known Stocks: Many young investors tend to focus on companies that have outsized earnings growth (and associated high valuations), operate in high-profile industries or sell products with which they are personally familiar. There is absolutely nothing wrong with this strategy, but when markets begin to fall broadly, it is an excellent time to explore some lesser-known industries, companies and products. They may be stodgy, but the very traits that make them boring during the good times turn them into gems when the rain comes. Defensive Stocks: In working to identify the potential risks in your portfolio, focus on company earnings as a barometer of risk. Companies that have been growing earnings at a fast clip probably have high P/Es to go with it. Also, companies that compete for consumers' discretionary income may have a harder time meeting earnings targets if the economy is turning south. Some industries that commonly fit the bill here include entertainment, travel, retailers and media companies. You may decide to sell or trim some positions that have performed especially well compared to the market or its competitors in the industry. This would be a good time to do so; even though the company's prospects may remain intact, markets tend to drop regardless of merit. Even that "favorite stock" of yours deserves a strong look from the devil's advocate point of view. Options: Another way to help cushion your portfolio losses is to use options contracts. If you feel that a bear market is around the corner, then selling calls or buying puts may be a wise course of action if you are familiar with how options work. If you feel that the bear market is nearing an end and economic indicators are signaling a possible rise in the near future, then it may be time to buy calls or sell puts. A correctly called purchase of puts or calls at the right time can substantially cushion the blow of a bear market, as can the additional income generated from selling them. Selling Short: Shorting stock can be another good way to profit in a bear market. This practice consists of borrowing stock that you don't own now, selling it while the price is high and then buying it back after the price declines. You can also do this with stock that you already own, which is known as shorting "against the box." Of course, as with option trading, there are risks involved; if the stock price continues to rise after you have sold short, you will lose money. But this can be another effective method of generating income in a down market if your timing is right. Harvest Tax Losses

Investors who hold securities that have depreciated substantially from their purchase price may find a silver lining in some cases. If you sell your losers while they are down and wait 31 days before buying them back, you can realize a capital loss that you can report on your tax return for that year while maintaining your portfolio allocation. You can then write these losses off against any capital gains that you realized for that year up to the full amount of the losses. For example, if you have a single stock that did well and received a $10,000 gain, and then you were able to realize $5,000 in losses, you could net that loss against the gain and only report a $5,000 gain for the year. But if those numbers were reversed and you had a $5,000 net loss for the year, IRS regulations only allow you to declare up to $3,000 of losses on your return against other types of income. So you would report that amount for that year and the remaining $2,000 the following year.

Harvesting tax losses may provide another opportunity for you to improve your portfolio if you sold individual securities for a loss and are waiting for the necessary 31-day window to elapse before you dive back in (if you buy back the same security sooner than this, the IRS will disallow the loss under the wash-sale rules). But you might be wise to buy an ETF that invests in the same sector as the holding you liquidated instead of just buying back that same security. You would not have to wait 31 days to do this, since you are not buying back an identical security and you would also further diversify your portfolio.

A Case Study: 2008 Bear Market

Consider the bear market that occurred at the beginning of 2008. The investment banks were making ridiculous money from selling collateralized debt obligations (CDOs), which were ultimately backed by consumer mortgage debt and then credit default swaps, which were speculative insurance instruments that would pay out if borrowers in the CDOs they insured w! ere to default. Of course, Wall Street's insatiable appetite for the income from CDOs caused issuers to begin inserting subprime mortgages into them, and mortgage lenders were now free to irresponsibly market mortgages to buyers who had no business owning homes. Adjustable-rate loans were the final straw that broke the camel's back. Once borrowers started to default on these, the whole system collapsed. The U.S. government had to step in and bail out AIG, the ultimate insurer of the credit default swaps, which owed enormous sums of money to those who had paid the premiums on them.

Of course, by this time CDOs had found their way into numerous institutional portfolios, pension funds and investment banks. Bear Stearns was the first financial stock to plummet, and most other major financial conglomerates soon followed, including Bank of America, AIG and Lehman Brothers, which went bankrupt and was not bailed out by Uncle Sam.

Those who had studied the economic signals could see the coming crisis when the real estate market peaked in 2007 and the number of defaults started to rise. Those who paid the premiums on credit default swaps made vast fortunes, while all holders of these instruments and CDOs suffered horrendous losses. But investors who shorted financial stocks in 2007 or bought puts on the market indices profited enormously.

The Snowball Effect

As always happens near the peak of a bubble, confidence turned to hubris and stock valuations grew well above historical norms. Some analysts even felt the internet was enough of a paradigm shift that traditional methods of valuing stocks could be thrown out altogether. But this was certainly not the case, and the first evidence came from the companies that had been some of the darlings of the stock race upward – the large suppliers of internet trafficking equipment, such as fiber-optic cabling, routers and server hardware. After rising meteorically, sales began to fall sharply by 2000, and this sales drought was then felt by those companies' suppliers, and so on across the supply chain.

Soon the corporate customers realized they had all the technology equipment they needed, and the big orders stopped coming in. A massive glut of production capacity and inventory had been created, so prices dropped hard and fast. In the end, many companies that were worth billions as little as three years earlier went belly-up, never having earned more than a few million dollars in revenue.

The only thing that allowed the market to recover from bear territory was when all that excess capacity and supply got either written off the books, or eaten up by true demand growth. This finally showed up in the growth of net earnings for the core technology suppliers in late 2002, right around when the broad market indices finally resumed their historical upward trend.

Start Looking at the Macro Data

Some people follow specific pieces of macroeconomic data, such! as gross domestic product (GDP) or the recent unemployment figure, but more important is what the numbers can tell us about the current state of affairs. A bear market is largely driven by negative expectations, so it stands to reason that it won't turn around until expectations are more positive than negative. For most investors - especially the large institutional ones, which control trillions of investment dollars - positive expectations are most driven by the anticipation of strong GDP growth, low inflation and low unemployment. So if these types of economic indicators have been reporting weak for several quarters, a turnaround or a reversal of the trend could have a big effect on perceptions. A more in-depth study of these economic indicators will teach you which ones affect the markets a great deal, and which ones may be smaller in scope but apply more to your own investments.

Parting Thoughts

You may find yourself at your most weary and battle-scarred at the tail end of the bear market, when prices have stabilized to the downside and positive signs of growth or reform can be seen throughout the market.

This is the time to shed your fear and start dipping your toes back into the markets, rotating your way back into sectors or industries that you had shied away from. Before jumping back to your old favorite stocks, look closely to see how well they navigated the downturn; make sure their end markets are still strong and that management is proving responsive to market events.

It may take some time for a consensus to form, but eventually there will be evidence of what caused the bear market to occur. Rarely is one specific event to blame, but a core theme should start to appear, and identifying that theme can help identify when the bear market might be at an end. Armed with the experience of a bear market, you may find yourself wiser and better-prepared when the next one arrives.

Bear markets are inevitable, but so are their recoveries. If you have to suffer throu! gh the mi! sfortune of investing through one, give yourself the gift of learning everything you can about the markets, as well as your own temperament, biases and strengths. It will pay off down the road, because another bear market is always on the horizon. Don't be afraid to chart your own course despite what the mass media outlets say. Most of them are in the business of telling you how things are today, but investors have time frames of five, 15 or even 50 years from now, and how they finish the race is much more important than the day-to-day machinations of the market.