Benzinga Weekly Preview: Europe's Central Banks In The Spotlight

The European Central Bank and the Bank of England are both set to make interest rate decisions next week.

Although both banks are expected to keep rates constant, investors will be watching the ECB expectantly as President Mario Draghi has hinted at using other tools to help spur the region's recovery and fight falling inflation.

Key Earnings Reports

Next week investors will be waiting for several key earnings reports including FedEx Corporation (NYSE: FDX), Thor Industries, Inc. (NYSE: THO), American Eagle Outfitters (NYSE: AEO), and Big Lots, Inc. (NYSE: BIG).

FedEx Corporation

FedEx is expected to report second quarter EPS of $1.63 on revenue of $11.43 billion, compared to last year's EPS of $1.39 on revenue of $11.11 billion.

JP Morgan reiterated FedEx with an Overweight rating with a $153.00 price target on November 14.  The firm noted that 13F filings showed that although there was a rise of hedge fund positions in FDX, the size of the positions were quite modest.

"Activist positions are modest…. Earlier this week Dan Loeb of Third Point disclosed he had taken a position in FDX and he had met with FDX Chairman and CEO Fred Smith. As of September 30, Third Point owned a modest 2.0 mm shares or 0.6%. Other high profile hedge funds also established positions in 3QCY13 that were smaller than Third Point including Pointstate, Soros, Paulson, and Eminence. The combined position of all of these funds, along with the 1.3% owned by Perry Capital and 0.5% owned by Highfields, was 4.0% as of September 30, 2013."

Thor Industries, Inc.

Thor Industries is expected to report first quarter EPS of $0.70 on revenue of $844.74 million, compared to last year's EPS of $0.58 on revenue of $875.61 million.

Analysts at Wedbush reiterated Thor Industries with an Outperform rating with a $69.00 12 month price target at the beginning of November. The team at Wedbush noted that order backlogs indicate that the company will see stronger growth later this year.

"While Q1 Towables sales were softer than expected, order backlog in Towables accelerated sharply, indicating stronger sales growth to come in upcoming quarters. Total order backlog, a leading indicator for sales in future quarters, rose an impressive 42%, sequentially higher than 32% growth in Q4:13. In Towables, backlog rose a stronger than expected 14%, sharply higher than flat backlog a quarter ago, indicating sales growth in this segment should similarly accelerate in upcoming quarters."

American Eagle Outfitters

American Eagle is expected to report third quarter EPS of $0.19 on revenue of $846.75 million, compared to last year's EPS of $0.41 on revenue of $910.37 million.

Goldman Sachs reiterated American Eagle with a Neutral rating with a $17.00 price target at the beginning of November, noting that the company has responded well to stalling consumer spending.

"We are positively surprised by the better performance in 3Q, particularly in light of ANF's announcement that 3Q comps deteriorated to -14% and gross margins were worse than feared. AEO's proactive management of the softer consumer backdrop, which included aggressive discounting through August and September, appears to have given them a competitive edge as others took longer to follow suit. AEO mentioned on the 2Q call it had re-assorted 4Q in response to the softer environment, but we do not believe much of that effort benefited 3Q. It may influence the 4Q outcome."

On November 7, Jefferies took a similar stance and reiterated American Eagle with a Hold rating with a $17.00 price target.

"AEO reported upward revised 3Q EPS guidance, which sends an encouraging signal for a potential turn around in this name. As sales trends become less negative, we think margins have troughed, inventories are controlled and earnings revisions can start to move higher once again. However, we remain on the sidelines until we see more consistent improvement and a more compelling entry point. Maintain Hold, raising PT to $17."

Big Lots, Inc.

Big Lots is expected to report a third quarter loss of $0.08 per share on revenue of $1.17 billion, compared to last year's loss of $0.10 per share on revenue of $1.13 billion.

Analysts at Deutsche Bank reiterated Big Lots with a Hold rating with a $38.00 price target on November 12, noting that the company had long term potential.

"After a trip to CA to understand the depth of BIG's recent cooler tests, we believe certain strategic changes could propel a fundamental turnaround at the retailer. To this point, the addition of coolers in conjunction with a store remodel program based on category refinement, an improved marketing strategy, as well the development of an online business, should boost recent stagnant SPSF performance. We remain sidelined for now given ongoing SSS headwinds and a likely multi-year timetable for changes to take hold."

Economic Releases

PMI data will be in focus next week as several countries will report their manufacturing PMI figures, including the US. US manufacturing PMI likely dropped in November, something that will likely cause taper watchers to push back their estimates for the Fed's cutback.

Daily Schedule

Monday

Earnings Releases Expected: FedEx Corporation (NYSE: FDX), Goldmans Stores, Inc. (NASDAQ: GMAN), Thor Industries, Inc. (NYSE, THO), Krispy Kreme Doughnuts, Inc. (NYSE: KKD), Shoe Carnival, Inc. (NASDAQ: SCVL) Economic Releases Expected: Spanish manufacturing PMI, French manufacturing PMI, German manufacturing PMI, eurozone manufacturing PMI, British manufacturing PMI, US ISM manufacturing PMI, Reserve Bank of Australia interest rate decision.

Tuesday

Earnings Expected From: Bank of Montreal (NYSE: BMO), United Natural Foods, Inc. (NASDAQ: UNFI), OmniVision Technology, Inc. (NASDAQ: OVTI), Universal Technical Institute, Inc. (NYSE: UTI) Economic Releases Expected: Chinese HSBC Services PMI, Australian GDP, Brazilian GDP, eurozone PPI, British construction PMI.

Wednesday

Earnings Expected From: Christopher & Banks Corporation (NYSE: CBK), Brown Forman Corporation (NYSE: BFB), Express, Inc. (NYSE: EXPR), Avago Technologies (NASDAQ: AVGO) Economic Releases Expected: US nonfarm employment change, US trade balance, Canadian trade balance, US new home sales, US ISM non-manufacturing PMI

Thursday

Earnings Expected From: UTi Worldwide Inc. (NASDAQ: UTIW), Renesola Ltd. (NYSE: SOL), Royal Bank of Canada (NYSE: RY), Kroger Company (NYSE: KR), Dollar General Corporation (NYSE: DG), Diamond Foods, Inc. (NASDAQ: DMND) Economic Releases Expected: US factory orders, French unemployment rate, Bank of England interest rate decision, US GDP

Friday

Earnings Expected From: Big Lots, Inc. (NYSE: BIG), Bank of Nova Scotia (NYSE: BNS), American Eagle Outfitters (NYSE: AEO) Economic Releases Expected: French trade balance, Swiss CPI, US non-farm payrolls, US unemployment rate

Posted-In: Bank Of England European Central Bank Mario DraghiEurozone Commodities Previews Economics Federal Reserve Pre-Market Outlook Markets Trading Ideas Best of Benzinga

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

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Why Electronic Arts, Maximus, and Western Union Dropped Today

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.

Dow 16,000, S&P 1,800, and Nasdaq 4,000 didn't become reality today, but each of these benchmarks came close to reaching those respective levels as investors continued to respond favorably to the macroeconomic and monetary-policy environment going forward. But despite the market's broad gains, Electronic Arts (NASDAQ: EA  ) , Maximus (NYSE: MMS  ) , and Western Union (NYSE: WU  ) gave up ground today with fairly substantial drops. Let's take a closer look at why these stocks bucked the market's favorable trend today.

Electronic Arts declined 7% in a surprising move, given that the maker of console-based video games should arguably be celebrating the release of the PlayStation 4 today. Yet even with the new console available and the Xbox One following next week, investors ignored analysts at Piper Jaffray and sent the stock stumbling. With NPD Group reporting that industrywide video game software sales rose 4.7% in October even in advance of the new consoles, long-term trends seem favorable even though several of its games didn't rank as highly on top-sellers' lists last month as in previous months.

Maximus posted a 5% drop despite reporting quarterly profit that rose by more than half from the year-ago quarter. The company benefited from its role in helping six health-insurance exchanges under the Affordable Care Act, including those in New York and the District of Columbia. But Maximus gave dour forward guidance, projecting a revenue range below current expectations and earnings that could be as much as a dime per share lower than what investors expect to see.

Western Union fell 4% after news surfaced that the Central Intelligence Agency is collecting data on money transfers as part of its larger attempts to gather foreign intelligence. Although Western Union already complies with various rules designed to protect against money laundering and financing potential terrorist activity, the report about the CIA could well deter some of its customers from using the service to send money abroad, as well as raising compliance costs generally.

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One must-buy dividend stock

BreitBurn Energy Partners (ticker: BBEP ) recently reported a terrific third quarter. Oil and gas production hit a record, and is up 43% year-over-year. The company's focus on high-margin oil growth has really paid off, as it represents 61% of total production.

This oil-rich production is falling right to the bottom line. Last quarter the company reported that it was able to earn 30% more than it paid its investors in distributions. That said, if there was one concern about the company, it's the fact that it has put on a lot of debt this year. The company really stretched its limits when it made a big oil deal this summer that was funded completely with debt.

At the time of that deal, BreitBurn's units were under pressure; it was swept up in the same negativity as LINN Energy (ticker: LINE ) and LinnCo (NASDAQ: LNCO ) when it was called "LINN Energy Junior", while its distribution was called a "mirage." Times certainly have changed, as LINN Energy seems to have basically been cleared to continue with business as usual. That has fueled a recovery in the price of LINN Energy's units and LinnCo's shares. It is a recovery that has also affected units of BreitBurn.

It was only a matter of time before BreitBurn took advantage of this recovery in its units to raise equity. In my third-quarter review, I said that one thing "investors should expect to see at some point in the future is an equity raise." That's why it comes as no surprise to see BreitBurn doing just that.

The company announced that it would offer to sell upwards of 17 million units, which could raise over $300 million for the company. If it sells that many units the distribution coverage ratio would drop from 1.3 times to 1.13 times, which is still very solid. In fact, to put that into perspective, LINN Energy's current coverage ratio is just at 1.0 times.

Another point of reference: BreitBurn's coverage ratio will still be higher than Vanguard Natural Resources (NASDAQ: VNR ) , which has a ratio of 1.09 times. Va! nguard is regarded as the most conservative of the three because it doesn't invest any capital to grow organically, instead acquiring its growth.

For BreitBurn to continue growing it needed to raise equity capital. The company only had about $300 million left on its credit facility, and its leverage ratio was just slightly below four times. BreitBurn has said repeatedly that it wants to get its leverage ratio closer to three times. By raising close to $300 million it should push its leverage ratio down to about 3.3 times, which, while not at its stated goal, is a much more comfortable ratio.

All of this is to say that BreitBurn's more than 10% distribution is rock-solid and one worth buying today. This is a company that has plenty of room to grow its payout, and, with a history of 14 straight quarters of distribution raises, BreitBurn's payout will keep going higher. Not only that: starting next year, it will move to a monthly distribution payment schedule. Add it all up, and BreitBurn is a must buy for investors looking for a rock-solid high yield.

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

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Advanced Game Theory Strategies For Decision-Making

Game theory, the study of strategic decision-making, brings together disparate disciplines such as mathematics, psychology and philosophy. Game theory was invented by John von Neumann and Oskar Morgenstern in 1944 and has come a long way since then. The importance of game theory to modern analysis and decision-making can be gauged by the fact that since 1970, as many as 12 leading economists and scientists have been awarded the Nobel Prize in Economic Sciences for their contributions to game theory.

Game theory is applied in a number of fields including business, finance, economics, political science and psychology. Understanding game theory strategies – both the popular ones and some of the relatively lesser-known stratagems – is important to enhance one's reasoning and decision-making skills in a complex world.

Prisoner's Dilemma – In a Nutshell

One of the most popular and basic game theory strategies is Prisoner's Dilemma. This concept explores the decision-making strategy taken by two individuals who, by acting in their own individual best interest, end up with worse outcomes than if they had cooperated with each other in the first place.

In the Prisoner's Dilemma, two suspects who have been apprehended for a crime are held in separate rooms and cannot communicate with each other. The prosecutor informs each of them individually that if he (call him Suspect 1) confesses and testifies against the other, he can go free, but if he does not cooperate and Suspect 2 does, Suspect 1 will be sentenced to three years in prison. If both confess, they will get a two-year sentence, and if neither confesses, they will be sentenced to one year in prison.

While cooperation is the best strategy for the two suspects, when confronted with such a dilemma, research shows that most rational people prefer to confess and testify against the other person rather than stay silent and take the chance that the other party confesses.

Game Theory Strategies

The Prisoner! 's Dilemma lays the foundation for advanced game theory strategies of which the popular ones include:

Matching Pennies: This is a zero-sum game that involves two players (call them Player A and Player B) simultaneously placing a penny on the table, with the payoff depending on whether the pennies match. If both pennies are heads or tails, Player A wins and keeps Player B's penny. If they do not match, Player B wins and keeps Player A's penny. Deadlock: This is a social dilemma scenario like Prisoner's Dilemma in that two players can either cooperate or defect (i.e. not cooperate). In Deadlock, if Player A and Player B both cooperate, they each get a payoff of 1, and if they both defect, they each get a payoff of 2. But if Player A cooperates and Player B defects, then A gets a payoff of 0 and B gets a payoff of 3. In the payoff diagram below, the first numeral in the cells (a) through (d) represents Player A's payoff, and the second numeral is that of Player B:

Deadlock Payoff Matrix		Player B
		Cooperate	Defect
Player A	Cooperate	(a) 1, 1	(b) 0, 3
	Defect	(c) 3, 0	(d) 2, 2

Deadlock differs from Prisoner's Dilemma in that the action of greatest mutual benefit (i.e. both defect) is also the dominant strategy. A dominant strategy for a player is defined as one that produces the highest payoff of any available strategy, regardless of the strategies employed by the other players.

A commonly cited example of Deadlock is that of two nuclear powers trying to reach an agreement to eliminate their arsenals of nuclear bombs. In this case, cooperation implies adhering to the agreement, while defection means secretly reneging on the agreement and retaining the nuclear arsenal. The best outcome for either nation, unfortunately, is to renege on the agreement and retain the nuclear option while the other nation eliminates its arsenal, since this will give the former a tremendous hidden advantage over the latter if war ever breaks out between the two. The second-best option is for both to defect or not cooperate, since this retains their status as nuclear powers.

Cournot Competition: This model is also conceptually similar to Prisoner's Dilemma, and is named after French mathematician Augustin Cournot, who introduced it in 1838. The most common application of the Cournot model is in describing a duopoly or two main producers in a market. For example, assume two companies A and B produce an identical product and can produce high or low quantities. If they both cooperate and agree to produce at low levels, then limited supply will translate into a high price for the product on the market and substantial profits for both companies. On the other hand, if they defect and produce at high levels, the market will be swamped and result in a low price for the product and consequently lower profits. But if one cooperates (i.e. produces at low levels) and the other defects (i.e. surreptitiously produces at high levels), then the former just breaks even while the latter earns a profit that is higher than if they both cooperate.

The payoff matrix for companies A and B is shown (figures represent profit in millions of dollars). Thus, if A cooperates and produces at low levels while B defects and produces at high levels, the payoff is as shown in cell (b) – break-even for company A and $7 million in profits for company B.

Cournot Payoff Matrix		Company B
		Cooperate	Defect
Company A	Cooperate	(a) 4, 4	(b) 0, 7
	Defect	(c) 7, 0	(d) 2, 2

Coordination: In coordination, players earn higher payoffs when they select the same course of action. As an example, consider two technology giants who are deciding between introducing a radical new technology in memory chips that could earn them hundreds of millions in profits, or a revised version of an older technology that would earn them much less. If only one company decides to go ahead with the new technology, market adoption by consumers would be significantly lower, and as a result, it would earn less than if both companies decide on the same course of action. The payoff matrix is shown below (figures represent profit in millions of dollars).

Thus, if both companies decide to introduce the new technology, they would earn $600 million apiece, while introducing a revised version of the older technology would earn them $300 million each, as shown in cell (d). But if Company A decides alone to introduce the new technology, it would only earn $150 million, even though Company B would earn $0 (presumably because consumers may not be willing to pay for its now-obsolete technology). In this case, it makes sense for both companies to work together rather than on their own.

Coordination Payoff Matrix		Company B
		New technology	Old technology
Company A	New technology	(a) 600, 600	(b) 0, 150
	Old technology	(c) 150, 0	(d) 300, 300

Centipede Game: This is an extensive-form game in which two players alternately get a chance to take the larger share of a slowly increasing money stash. The Centipede game is sequential, since the players make their moves one after another rather than simultaneously; each player also knows the strategies chosen by the players who played before them. The game concludes as soon as a player takes the stash, with that player getting the larger portion and the other player getting the smaller portion. As an example, if Player A and Player B are playing the Centipede game, assume Player A goes first and has to decide if he should "Take" or "Pass" the stash, which currently amounts to $2. If he takes, then A and B get $1 each, but if A passes, the decision to "Take or Pass" now has to be made by Player B. If B takes, she gets $3 (i.e. the previous stash of $2 + $1) and A gets $0. But if B passes, A now gets to decide whether to take or pass, and so on. If both players always choose to pass, they each receive a payoff of $100 at the end of the game.

The point of the game is that if A and B both cooperate and "pass" to the end of the game, they get the maximum payoff of $100 each. But if they distrust the other player and expect them to "take" at the first opportunity, then the Nash equilibrium predicts that players will take the lowest possible claim ($1 in this case). Experimental studies have shown, however, that this "rational" behavior (as predicted by game theory) is seldom exhibited in real life. This is not intuitively surprising given the tiny size of the initial payoff in relation to the final one. Similar behavior by experimental subjects has also been exhibited in the Traveler's Dilemma.

Traveler's Dilemma: This is a non-zero sum game in which both players attempt to maximize their own payoff without regard to the other. Devised by economist Kaushik Basu in 1994, in Traveler's Dilemma, an airline agrees to pay two travelers compensation for damages to identical items. However, the two travelers are separately required to estimate the value of the item, with a minimum of $2 and a maximum of $100. If both write down the same value, the airline will reimburse each of them that amount. But if the values differ, the airline will pay them the lower value, with a bonus of $2 for the traveler who wrote down this lower value and a penalty of $2 for the traveler who wrote down the higher value. The Nash equilibrium level, based on backward induction, is $2 in this scenario. But as in the Centipede game, laboratory experiments consistently demonstrate that most participants – naively or otherwise – pick a number much higher than $2.

Traveler's Dilemma can be applied to analyze a variety of real-life situations. The process of backward induction, for example, can help explain how two companies engaged in cutthroat competition can steadily ratchet product prices lower in a bid to gain market share, which may result in them incurring increasingly greater losses in the process.

Additional Game Theory Strategies

Battle of the Sexes: This is another form of the coordination game described earlier but with some payoff asymmetries. It essentially involves a couple trying to coordinate their evening out. While they had agreed to meet at either the ball game (the man's preference) or at a play (the woman's preference), they have forgotten what they had decided, and to compound the problem, cannot communicate with one another. Where should they go? The payoff matrix is as shown – the numerals in the cells represent the relative degree of enjoyment of the event for the woman and man, respectively. For example, cell (a) represents the payoff (in terms of enjoyment levels) for the woman and man, respectively, at the play (she enjoys it much more than he does). Cell (d) is the payoff if both make it to the ball game (he enjoys it more than she does). Cell (c) represents the dissatisfaction if both go not only to the wrong location, but also to the event they enjoy least – the woman to the ball game and the man to the play.

Battle of the Sexes Payoff Matrix		Man
		Play	Ball game
Woman	Play	(a) 6,3	(b) 2, 2
	Ball game	(c) 0, 0	(d) 3, 6

Dictator Game: This is a simple game in which Player A must decide how to split a cash prize with Player B, who has no input into Player A's decision. While this is not a game theory strategy per se, it does provide some interesting insights in people's behavior. Experiments reveal that about 50% keep all the money to themselves; 5% split it equally, and the other 45% give the other participant a smaller share. The dictator game is closely related to the ultimatum game, in which Player A is given a set amount of money, part of which has to be given to Player B, who can accept or reject the amount given. The catch is that if the second player rejects the amount offered, both A and B get nothing. The dictator and ultimatum games hold important lessons for issues such as charitable giving and philanthropy. Peace-War: A variation of the Prisoner's Dilemma in which the "Cooperate or Defect" decisions are replaced by "Peace or War." An analogy could be two companies engaged in a price war. If both refrain from price cutting, they enjoy relative prosperity (cell a), but price war would reduce payoffs dramatically (cell d). However, if A engages in price cutting (war) but B does not, A would have a higher payoff of 4 since it may be able to capture substantial market share, and this higher volume would offset lower product prices.

Peace-war Payoff Matrix		Company B
		Peace	War
Company A	Peace	(a) 3,3	(b) 0,4
	War	(c) 4,0	(d) 1,1

Volunteer's Dilemma: In a volunteer's dilemma, someone has to undertake a chore or job for the common good. The worst possible outcome is realized if nobody volunteers. For example, consider a company where accounting fraud is rampant but top management is unaware of it. Some junior employees in the accounting department are aware of the fraud but hesitate to tell top management, because it would result in the employees involved in the fraud being fired and most probably prosecuted. Being labeled as a "whistleblower" may also have some repercussions down the line. But if nobody volunteers, the large-scale fraud may result in the company's eventual bankruptcy and the loss of everyone's jobs. The Bottom Line

Game theory can be used very effectively as a tool for decision-making whether in an economical, business or personal setting.

Benzinga's Top #PreMarket Gainers

Ocean Power Technologies (NASDAQ: OPTT) surged 23.89% to $2.80 in the pre-market session after the company received a $2.6 million contract from Mitsui Engineering & Shipbuilding Co.

Expedia (NASDAQ: EXPE) shares jumped 17.67% to $58.79 in pre-market trading after the company reported upbeat quarterly profit. Bank of America upgraded the stock Neutral to Buy and lifted the target price from $60 to $75.

XOMA (NASDAQ: XOMA) shares gained 7.55% to $4.70 in the pre-market session on encouraging Phase 2 Gevokizumab results.

Central European Media Enterprises (NASDAQ: CETV) soared 5.67% to $2.98 in the pre-market trading. Central European Media shares have tumbled 48.07% over the past 52 weeks, while the S&P 500 index has gained 23.52% in the same period.

Posted-In: PreMarket GainersNews Pre-Market Outlook Markets Movers

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

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Once spooky Oct. serves up Wall St. treat

NEW YORK — October, a month with spooky connotations on Wall Street is proving it isn't as scary as its reputation.

As the month nears its end, stocks are poised to deliver a profit-filled sweet surprise to investors, who don't seem scared off by market history: crashes in 1929 and 1987 shortly before Halloween.

The Standard & Poor's 500, up 5.4% this month, is on track for itsbest monthly gain since October 2011. Tuesday's 1771.95 close marked the 33rd record close of 2013, the most since 1999, says S&P Dow Jones Indices.

The S&P 500 is up 24.2% this year, on pace for its best annual gain since 1995.

Of course, Halloween isn't until Thursday, and the Federal Reserve could still throw a fright into the market if it emerges from its meeting Wednesday and announces a monetary tightening move. Absent such a shock, no one seems afraid of buying stocks.

MARKET STRATEGY: 'Sell in May' stock advice proves costly

FED MEETING: Tapering of stimulus unlikely this week

Tech stocks are enjoying a renaissance that harks back to 1999, as investors bid up shares of hot names like Google and social media darlings like LinkedIn and Yelp. They're also salivating over next week's initial public offering of Twitter, the micro-blogging site best known for its 140-character "tweets." Blue chip stocks are flying high, too, as are small stocks.

TWITTER IPO: Regular folks can afford to wait

Wall Street headed into the month worried about an array of risks. They ranged from political gridlock in Washington and the threat of a fresh fiscal crisis, to ongoing worries about the pace of corporate earnings and concerns that the Fed would soon turn off its stimulus spigot that has powered stocks higher for years.

A government shutdown did occur, lasting 16 days. But the nation didn't default on its debt, which was the market's biggest fear. The Fed's decision last month not to cut back on its bond-buying program to boost the economy also turned a possible headwind! into a tailwind. And corporate earnings for the July-through-September quarter are coming in at a growth rate of 4.9%, vs. an estimate of 3.4% on Oct. 1.

Stocks now enter what historically has been their best six-month stretch. November is the Dow's second-best performing month in the past 20 years.

EARNINGS: Corporate profit powers ahead again in Q3

If the increasingly frothy market is to keep chugging higher, it will need to start going up on more than just the cheap money flooding the market from the Fed and global central bankers, says Quincy Krosby, a market strategist at Prudential Financial.

"The market needs to climb on the backs of better earnings reports and better economic data," Krosby says. "We want to see more evidence of growth and a pick up in consumer confidence."

Edward Yardeni, chief investment strategist at Yardeni Research, says his biggest fear is "that we have nothing to fear but the notion that there is nothing to fear." A continued market "melt-up," Yardeni says, would make him more "worried about a market meltdown."

Top Blue Chip Stocks To Own For 2014

After a surprising burst over the last week that sent shares to record highs once again, Wall Street fell back slightly today as the Dow Jones Industrial Average (DJINDICES: ^DJI  ) closed down 32 points or 0.2%. Coca-Cola (NYSE: KO  ) disappointed in its earnings report, as the beverage giant dropped 1.9%, the blue chips' worst performer today. The secular decline in U.S. soda consumption seems to be finally catching up with the world's most valuable brand, as unadjusted profits fell 4%. In addition to weak U.S. sales, the company blamed bad weather, including cold and wet conditions in the U.S. and flooding in Europe, for the poor quarter. Soda volume fell by 4% in North America, but the company still finished with an adjusted earnings per share of $0.63, in line with estimates. Revenue was down 2.5% to $12.75 billion, missing estimates of $12.95 billion.

On the economic slate, the June consumer price index was up 0.5%, above expectations, but the core rate grew just 0.2%, which excludes the volatile food and energy categories, indicating that inflation is under control. Last month's figures for industrial production and capacity utilization came in essentially in line with estimates, and the National Association of Home Builders' Housing Market Index jumped to 57, ahead of expectations of 51, indicating that the housing market remains strong despite rising interest rates.

Top Blue Chip Stocks To Own For 2014: McDonald's Corporation(MCD)

McDonald?s Corporation, together with its subsidiaries, operates as a worldwide foodservice retailer. It franchises and operates McDonald?s restaurants that offer various food items, soft drinks, coffee, and other beverages. As of December 31, 2009, the company operated 32,478 restaurants in 117 countries, of which 26,216 were operated by franchisees; and 6,262 were operated by the company. McDonald?s Corporation was founded in 1948 and is based in Oak Brook, Illinois.

Advisors' Opinion:

• [By Mick Weinstein]

  ��What does McDonald's (MCD) �need to do to recover its momentum?

• [By Sean Williams]

  Last year was rough for much of the restaurant industry, but fast-food giant McDonald's (NYSE: MCD  ) had seen considerably tougher challenges before. It has thrived through countless recessions by focusing on its value menu to drive new and repeat customers into its restaurants, modifying its menu to suit ever-changing palates, and remodeling its restaurants to appeal to both family-oriented and younger crowds.

• [By Wallace Witkowski]

  Other earnings highlights in the coming week include Dow components McDonald�� Corp. (MCD) , DuPont (DD) , AT&T Inc. (T) , and Procter & Gamble Co. (PG) . Notable S&P 500 companies include Halliburton Co. (HAL) , Netflix Inc. (NFLX) �, Amgen Inc. (AMGN) �, TripAdvisor Inc. (TRIP) �, Amazon.com Inc. (AMZN) �, Colgate-Palmolive Co. (CL) �, Ford Motor Co. (F) �, Dow Chemical Co. (DOW) �, and United Parcel Service Inc. (UPS) �

• [By Andrew Marder]

  Walking a thin line
  The difficulty that Wendy's has had, and will continue to have, I think, is that it's very hard to be all things to all people. The idea of being the better burger chain means that Wendy's is going to be competing not only with McDonald's (NYSE: MCD  ) and Burger King, but also Five Guys and In-and-Out Burger.

Top Blue Chip Stocks To Own For 2014: Colgate-Palmolive Company(CL)

Colgate-Palmolive Company, together with its subsidiaries, manufactures and markets consumer products worldwide. It offers oral care products, including toothpaste, toothbrushes, and mouth rinses, as well as dental floss and pharmaceutical products for dentists and other oral health professionals; personal care products, such as liquid hand soap, shower gels, bar soaps, deodorants, antiperspirants, shampoos, and conditioners; and home care products comprising laundry and dishwashing detergents, fabric conditioners, household cleaners, bleaches, dishwashing liquids, and oil soaps. The company offers its oral, personal, and home care products under the Colgate Total, Colgate Max Fresh, Colgate 360 Advisors' Opinion:

• [By Dan Burrows]

  Rival Colgate-Palmolive (CL) has different concerns, namely sluggishness in emerging markets where it enjoys commanding market share and derives more than half its revenue.

• [By Travis Hoium]

  Colgate-Palmolive
  Toothpaste and toothbrushes may not be exciting business, but it's consistent and consumers tend to develop habits they rarely break. Once they find a toothpaste brand they like, it could be years before they try another one. That leads to another incredibly consistent business for Colgate-Palmolive (NYSE: CL  ) , one that has paid back investors with a dividend since 1895. �

• [By Wallace Witkowski]

  Other earnings highlights in the coming week include Dow components McDonald�� Corp. (MCD) , DuPont (DD) , AT&T Inc. (T) , and Procter & Gamble Co. (PG) . Notable S&P 500 companies include Halliburton Co. (HAL) , Netflix Inc. (NFLX) �, Amgen Inc. (AMGN) �, TripAdvisor Inc. (TRIP) �, Amazon.com Inc. (AMZN) �, Colgate-Palmolive Co. (CL) �, Ford Motor Co. (F) �, Dow Chemical Co. (DOW) �, and United Parcel Service Inc. (UPS) �

• [By Demitrios Kalogeropoulos]

  Colgate-Palmolive (NYSE: CL  )
  Colgate's shares are trading well below the $62 high they hit just last month. The consumer goods company is heavily levered to international sales, with more than 80% of its business coming from outside the U.S. and more than half coming from emerging markets.

Best Growth Stocks For 2014: Chevron Corporation(CVX)

Chevron Corporation, through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. It operates in two segments, Upstream and Downstream. The Upstream segment involves in the exploration, development, and production of crude oil and natural gas; processing, liquefaction, transportation, and regasification associated with liquefied natural gas; transportation of crude oil through pipelines; and transportation, storage, and marketing of natural gas, as well as holds interest in a gas-to-liquids project. The Downstream segment engages in the refining of crude oil into petroleum products; marketing of crude oil and refined products primarily under the Chevron, Texaco, and Caltex brand names; transportation of crude oil and refined products by pipeline, marine vessel, motor equipment, and rail car; and manufacture and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives. It a lso produces and markets coal and molybdenum; and holds interests in 13 power assets with a total operating capacity of approximately 3,100 megawatts, as well as involves in cash management and debt financing activities, insurance operations, real estate activities, energy services, and alternative fuels and technology business. Chevron Corporation has a joint venture agreement with China National Petroleum Corporation. The company was formerly known as ChevronTexaco Corp. and changed its name to Chevron Corporation in May 2005. Chevron Corporation was founded in 1879 and is based in San Ramon, California.

Advisors' Opinion:

• [By Helix Investment Research]

  We note that Keating Capital's co-investors in many of its portfolio companies are not simply other venture capital or existing investors, but strategic investors as well. Examples include Agilyx, where Waste Management (WM) is a co-investor, BrightSource, where Chevron (CVX) and BP (BP) are co-investors, Kabam, where Google (GOOG) and Intel (INTC) are co-investors, or Tremor Video (TRMR), where Time Warner (TWX) is a co-investor. As of the end of Q2 2013, 9 (excluding Jumptap) of Keating Capital's portfolio companies had unrealized gains, with an average gain of 25.6% (again excluding Jumptap, which had unrealized gains of 8% as of the end of Q2 2013). The remaining 6 companies had an average loss of 44.46%. However, on an overall basis, Keating Capital's portfolio currently has an average unrealized gain of 2.15%. While this is not a large gain, we note that the bulk of Keating Capital's profits are realized upon exiting an investment in conjunction with the portfolio company's IPO or sale. Furthermore, portions of Keating Capital's portfolio are defended by structurally protected appreciation clauses that the company has struck with its portfolio companies, clauses that are not reflected on its balance sheet. These clauses, which are negotiated between Keating Capital and its portfolio companies, allow the company to receive shares in the portfolio company's IPO at a discount, or grant it warrants to purchase additional shares in an IPO for a nominal price. Since inception, Keating Capital has negotiated structurally protected appreciation clauses in 11 of the 20 companies it has invested in. As of the end of Q2 2013, 6 of Keating Capital's 15 portfolio companies were protected by structurally protected appreciation clauses, representing $22 million in total capital (almost 43% of the company's invested capital), thereby entitling Keating Capital to a weighted-average aggregate value of 1.9x its investment at the time of an IPO.

• [By Arjun Sreekumar]

  And Chevron (NYSE: CVX  ) announced in March that it will proceed with the development of the Moho Bilondo "Phase 1 bis" and Moho Nord projects offshore the Republic of Congo. The projects, situated roughly 50 miles southwest of Pointe-Noire in water depths ranging from 1,500 to 4,000 feet, are expected to cost about $10 million and produce a combined 140,000 barrels of crude oil per day at their productive peak, which Chevron reckons will be attained in 2017.

• [By David Smith]

  Bowing out of Egypt
  It's also noteworthy that Egypt shares a western border with Libya, which is a significant producer, but where chaos and contretemps also reign. Is it any wonder, then, that Chevron (NYSE: CVX  ) announced on Tuesday that it will unload its Egyptian downstream operations, including 66 service stations and a couple of oil depots, to Total (NYSE: TOT  ) ? The French company is also buying the retail assets in the land of the Sphinx from Royal Dutch Shell (NYSE: RDS-B  ) . Perhaps it knows something of which the rest of us are unaware.

• [By Wallace Witkowski]

  This will be a ��ow-a-day��week of quarterly results with Merck & Co. (MRK) �on Monday, Pfizer Inc. (PFE) �on Tuesday, Visa Inc. (V) �on Wednesday, Exxon Mobil Corp. (XOM) �on Thursday, and Chevron Corp. (CVX) �on Friday.

Top Blue Chip Stocks To Own For 2014: Apple Inc.(AAPL)

Apple Inc., together with subsidiaries, designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide. The company sells its products worldwide through its online stores, retail stores, direct sales force, third-party wholesalers, resellers, and value-added resellers. In addition, it sells third-party Mac, iPhone, iPad, and iPod compatible products, including application software, printers, storage devices, speakers, headphones, and other accessories and peripherals through its online and retail stores; and digital content and applications through the iTunes Store. The company sells its products to consumer, small and mid-sized business, education, enterprise, government, and creative markets. As of September 25, 2010, it had 317 retail stores, including 233 stores in the United States and 84 stores internationally. The company, formerly known as Apple Computer, Inc., was founded in 1976 and is headquartered in Cupertino, California.

Advisors' Opinion:

• [By Paul Ausick]

  For the three months ending in July 2013, Samsung Electronics closed the market share gap slightly between itself and Apple Inc. (NASDAQ: AAPL) in the U.S. smartphone market. Compared with market share totals at the end of April, Apple�� share rose from 39.2% to 40.2%, while Samsung�� share rose from 22% to 24.1%.

• [By Anders Bylund]

  Management expects to get to these ambitious targets thanks to several so-called flagship Android devices that are about to ship with high-end Qualcomm processors inside. The core processor strength is also bolstered by Qualcomm's powerful position in the market for high-speed wireless radio technologies. When it comes to next-generation protocols like 802.11ac Wi-Fi and LTE Advanced radio tower networks, even Apple (NASDAQ: AAPL  ) leans on Qualcomm's products. That's a particularly important win, because Apple holds a strong market share in exactly the kinds of highly developed and high-speed markets where Qualcomm does its best work.

• [By Dan Radovsky]

  Getting the right to offer the iPhone no longer has the power to lift a mobile carrier above the rest of the field. Despite making their pacts with Apple (NASDAQ: AAPL  ) , Nos. 3 and 4 U.S. mobile carriers Sprint Nextel (NYSE: S  ) and T-Mobile US (NYSE: TMUS  ) , respectively, are still being surprassed by the top two, AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) .

Top Blue Chip Stocks To Own For 2014: Visa Inc.(V)

Visa Inc., a payments technology company, engages in the operation of retail electronic payments network worldwide. It facilitates commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses, and government entities. The company owns and operates VisaNet, a global processing platform that provides transaction processing services. It also offers a range of payments platforms, which enable credit, charge, deferred debit, debit, and prepaid payments, as well as cash access for consumers, businesses, and government entities. The company provides its payment platforms under the Visa, Visa Electron, PLUS, and Interlink brand names. In addition, it offers value-added services, including risk management, issuer processing, loyalty, dispute management, value-added information, and CyberSource-branded services. The company is headquartered in San Francisco, California.

Advisors' Opinion:

• [By Ben Levisohn]

  No really. Don’t call it a comeback. U.S. stocks tried with all its might to finish the day in positive territory, but in the end it could not overcome big drops in stocks like Visa (V) and JPMorgan Chase�(JPM).

Top Blue Chip Stocks To Own For 2014: International Business Machines Corporation(IBM)

International Business Machines Corporation (IBM) provides information technology (IT) products and services worldwide. Its Global Technology Services segment provides IT infrastructure and business process services, including strategic outsourcing, process, integrated technology, and maintenance services, as well as technology-based support services. The company?s Global Business Services segment offers consulting and systems integration, and application management services. Its Software segment offers middleware and operating systems software, such as WebSphere software to integrate and manage business processes; information management software for database and enterprise content management, information integration, data warehousing, business analytics and intelligence, performance management, and predictive analytics; Tivoli software for identity management, data security, storage management, and datacenter automation; Lotus software for collaboration, messaging, and so cial networking; rational software to support software development for IT and embedded systems; business intelligence software, which provides querying and forecasting tools; SPSS predictive analytics software to predict outcomes and act on that insight; and operating systems software. Its Systems and Technology segment provides computing and storage solutions, including servers, disk and tape storage systems and software, point-of-sale retail systems, and microelectronics. The company?s Global Financing segment provides lease and loan financing to end users and internal clients; commercial financing to dealers and remarketers of IT products; and remanufacturing and remarketing services. It serves financial services, public, industrial, distribution, communications, and general business sectors. The company was formerly known as Computing-Tabulating-Recording Co. and changed its name to International Business Machines Corporation in 1924. IBM was founded in 1910 and is based in Armonk, New York.

Advisors' Opinion:

• [By Eric Volkman]

  Benck, who will also occupy a seat on the board, had been Emulex's COO since joining the company in 2008. He was appointed its president in 2010. Before Emulex, Benck had served in both capacities at QLogic (NASDAQ: QLGC  ) . Earlier, he worked for 18 years at IBM (NYSE: IBM  ) , where he helped establish the storied tech giant's blade server line.

• [By Jayson Derrick]

  Stanley Druckenmiller has labeled IBM (NYSE: IBM) as one of the ��ore high probability shorts��he has seen in years. Shares of "Big Blue" lost 1.54 percent for the day, closing at $181.29.

• [By Mani]

  International Business Machines Corp. (NYSE:IBM) is making the right kind of investments to position itself to win across key growth drivers including cloud, mobile, analytics and big data. All these mega-themes are expected to evolve in the next 3-5 years.

Top Blue Chip Stocks To Own For 2014: Philip Morris International Inc(PM)

Philip Morris International Inc., through its subsidiaries, engages in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States. Its international product brand line comprises Marlboro, Merit, Parliament, Virginia Slims, L&M, Chesterfield, Bond Street, Lark, Muratti, Next, Philip Morris, and Red & White. The company also offers its products under the A Mild, Dji Sam Soe, and A Hijau in Indonesia; Diana in Italy; Optima and Apollo-Soyuz in the Russian Federation; Morven Gold in Pakistan; Boston in Colombia; Belmont, Canadian Classics, and Number 7 in Canada; Best and Classic in Serbia; f6 in Germany; Delicados in Mexico; Assos in Greece; and Petra in the Czech Republic and Slovakia. It operates primarily in the European Union, Eastern Europe, the Middle East, Africa, Asia, Canada, and Latin America. The company is based in New York, New York.

Advisors' Opinion:

• [By David Sterman]

   

  4. Phillip Morris (NYSE: PM) After shares of this tobacco giant pulled back from the mid-$90s in the spring to $89 by early August, director Graham Mackay thought he spotted value, plunking down more than $1.1 million of his money to buy shares. He should have waited, as shares have since fallen below $84.

   

• [By Sean Williams]

  Russia's move could pose a threat to global cigarette producers such as Philip Morris International (NYSE: PM  ) and British American Tobacco. Although both tobacco producers operate around the globe, a dramatic shift in curbing smoking from the world's third-largest tobacco consumer is bound to sting. In Philip Morris' case, according to Trefis, Russia accounted for approximately 6% of its total revenue last year, and the Eastern Europe, Middle East and Africa region accounted for roughly one-quarter of sales.�

• [By Selena Maranjian]

  Other large-cap stocks didn't do quite so well over the last year but could see their fortunes change in years to come. Philip Morris International (NYSE: PM  ) , for example, gained 5% and yields 4.1%. With domestic tobacco companies challenged by tightening regulations, rising taxes, and a shrinking smoking base, many have assumed that Philip Morris is the best bet in tobacco. But in the third quarter, it posted the weakest results, with volume taking a sizable drop and a strong dollar reducing its earnings. Bulls like its innovation and share buybacks.

• [By Ben Levisohn]

  Phillip Morris (PM) gained 2.8% to $86.56 after boosting its dividend by 10.6%.

  Restoration Hardware (RH) dropped 12% to $68.04 despite what many considered to be a solid earnings�report. Not Barron’s.

Market Wrap-Up for Oct. 25 – Mind The Noise

Major U.S. equity benchmarks opened and ended in green territory on Friday after a frenzy of earnings and economic data releases permeated the headlines and bolstered optimism.

Always Read Beyond The Headlines

As wild as it seems, when considering last week’s absolutely stellar gains on Wall Street from growth bellwethers like Chipotle and Google, the bulls remain in the driver’s seat. Today’s encouraging price action was largely fueled by upbeat earnings and seemingly better-than-expected durable goods data. Technology juggernauts Amazon and Microsoft (MSFT) kickstarted the rally with solid quarterly results, while stronger-than-expected revenues and shipping volume came in from United Parcel Service (UPS).

Many were also quick to applaud the latest durable goods report, cheering after reading “Durable-goods orders rise 3.7%!” across financial media news outlets. However, as always, we encourage investors to take the time to read beyond the headlines and do their own homework. Upon further review, investors might not be so cheery to discover that without orders from the transportation sector, namely for aircraft, the durable goods figure actually slipped 0.1% in September. Furthermore, orders for core capital goods, which is often considered a leading indicator for business investment, fell by 1.1% last month.

It’s quite likely that the durable goods orders were dragged down by businesses scaling back on spending in light of the political drama that was happening on Capitol Hill last month. Whatever the case may be, it’s becoming clear that market sentiment is entering a dangerous territory where mixed data is still perceived as “good enough” to draw in new buyers from the sidelines.

New Stock Recommendations This Week

Amid broad-based equity indexes charging to new all-time highs this week, we added two opportunities to the Best Dividend Stocks list that offer meaningful yields and are trading at attractive levels. While these stocks likely won’t deliver eye-popping gains over the coming months, you can

Ten Classic American Brands That are Foreign-Owned

In September, major U.S. pork producer Smithfield Foods was purchased by Chinese holding company Shanghui International Holdings, Ltd for $4.7 billion. The deal represents the largest purchase of a U.S. company by a Chinese entity. Of course, this is certainly not the first time that a major U.S. brand has been acquired by a foreign operation.

Established American brands are extremely valuable to foreign companies. Building a reputation in this country, which is one of the largest consumer markets in the world, can take decades, if it can be done at all. Many of America’s most well-known names have been around since the 19th century. 24/7 Wall St. examined 10 famous brands founded in the U.S. that are no longer owned by American companies.

Many of these brands are not just iconic American names because they were founded and developed in the U.S., but also because they marketed themselves over the years as American. Budweiser beer, introduced by Anheuser-Busch in St. Louis in 1876, is the most widely-known American beer brand. In 2008, Anheuser-Busch was purchased by Belgian-Brazilian conglomerate InBev. The company continued to market Budweiser as American, and even introduced an "American Ale" the same year, although that line has been discontinued.

Nearly all of these brands were purchased by an international conglomerate with large and diversified brand portfolios. Notably, Anglo-Dutch giant Unilever has purchased several of the iconic brands on this list, including Hellmann's and Good Humor.

These are ten great American brands that are foreign-owned.

U.S. Home Sales Drop for Fifth Straight Month

Gregory Bull/AP WASHINGTON -- Contracts to buy previously owned U.S. homes hit a 10-month low in October, but a strong rebound in services sector activity early this month suggested some resilience in the economy as the year winds down. The National Association of Realtors said Monday its pending home sales index, based on contracts signed last month, slipped 0.6 percent to 102.1, the lowest level since December. It was the fifth straight month of declines in contracts and suggested home resales could remain on the back foot for the rest of this year. These contracts become sales after a month or two. Home resales fell in October for a second straight month. "The data suggest sluggish home sales going into the end of the year and that the tightening of financial conditions this summer did have a negative impact," said Yelena Shulyatyeva, economist at BNP Paribas in New York. Economists, who had expected pending home sales to rise 1.3 percent in October, said the weak home sales trajectory could see the Federal Reserve sticking to its $85 billion monthly bond buying program at least until early next year. The U.S. central bank has targeted housing as a channel to boost growth and speed up job creation. The Realtors group said October's 16-day partial shutdown of the federal government had sidelined potential buyers. According to NAR, a survey of realtors found 17 percent of respondents reported delays in signing contracts because they had to wait for the Internal Revenue Service to verify income before the mortgage could be approved. The group expected a bounce back in contracts, but it cautioned that lack of inventory remained a constraint. Promising Signs "Early data for November look a little better, with separate data on mortgage purchase application volumes perking up in the middle of the month from a very low level," said Daniel Silver, an economist at JPMorgan in New York. "The weekly purchase application data are very volatile, but it is possible that this signals activity picking up to some degree very recently or at least flattening out." Home sales have been muted by a rise in mortgage rates. Though housing is cooling, the economy appears to have retained some of the upward momentum from the third quarter. In a separate report, financial data firm Markit said its preliminary Purchasing Managers Index for the services sector rose to 57.1 this month from a record low 49.6 in October. This is the first month that Markit is publishing data on the services industries, which it has been compiling since October 2009. Readings above 50 signal expansion in the services industries. The services sector survey adds to data such as retail sales and nonfarm payrolls that have painted a fairly upbeat picture of the economy early in the fourth quarter. Economists expect a slowdown in gross domestic product growth this quarter as businesses cut back on inventories after rapidly accumulating stocks in the July-September quarter. "With other data showing the recovery in the labor market still on track, and confidence moving up again, we expect home sales to start trending up again in coming months," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, N.Y. "For now, though, the weaker data are a reason for the Fed to remain cautious about tapering." Pending home sales were up in the Northeast and Midwest. They dropped 4.1 percent in the West.

Hot China Stocks To Watch Right Now

Ford China SUV media event. Photo Credit: Ford Motor Co.

If you follow the automotive industry you know the elite automakers are all drooling at the potential sales volume expected in China by 2020. General Motors (NYSE: GM  ) is throwing $11 billion toward its investments in China through 2016.�Ford (NYSE: F  ) �was late to the game in China but is investing nearly $5 billion on new plants there as well as introducing 15 new vehicles by mid-decade. Ford's sales in China have increased almost 50% through May but the company still trails its crosstown rival General Motors�by a large margin. This is a gap that Ford hopes to close as it plans to double its market share over the next few years. One thing is clear, China is a future gold mine for automakers. Here are some details at just how how big China's surge is and what it means for investors.

By the numbers
China is witnessing a surge in light vehicle demand as a result of its growing middle class. Here are some facts to chew on to better understand the potential in China. Right now mature markets in Europe and here in the U.S. are on pace to sell roughly 12 million and 15.4 million vehicles this year, respectively. Last year China sold just over 19 million vehicles and is projected to sell 27 million vehicles by 2021, according to research from R.L. Polk & Co. Some estimates even have China breaking 30 million in that same time frame. Either of those two estimates is a significant increase compared to estimates that vehicle sales in Europe and the U.S. will reach around 15 million and 17.5 million, respectively, by 2020.�

Hot China Stocks To Watch Right Now: Trina Solar Limited(TSL)

Trina Solar Limited, through its subsidiaries, designs, develops, manufactures, and sells photovoltaic (PV) modules worldwide. The company offers monocrystalline PV modules ranging from 165 watts to 185 watts in power output; and multicrystalline PV modules ranging from 215 watts to 240 watts in power output that provide electric power for residential, commercial, industrial, and other applications. It also involves in the design and production of various PV modules, such as colored modules for architectural applications and larger sized modules for utility grid applications based on customers? and end-users? specifications. Trina Solar Limited sells and markets its products primarily to distributors, wholesalers, power plant developers and operators, and PV system integrators. The company was founded in 1997 and is based in Changzhou, the People?s Republic of China.

Advisors' Opinion:

• [By Travis Hoium]

  Europe cuts solar lifeline -- solar lives on
  Europe has been even more aggressive cutting subsidies the solar industry once relied on. Germany began 2011 with feed-in tariffs that ranged from 0.29 euros per kilowatt-hour for a rooftop system to 0.21 euros per kW-hr for a large ground-mounted system. Today, a rooftop system will earn 0.165 euros per kW-hr and a utility scale system will earn 0.195 euros per kW-hr. The driver of feed-in tariff reductions is the rapidly falling cost of solar. We talk about how the flood of cheap Chinese panels affect prices and competition here in the U.S., but solar giants Yingli Green Energy (NYSE: YGE  ) and Trina Solar (NYSE: TSL  ) count on Europe for most of their demand, and they're responsible for a lot of the drop in costs there.

• [By Rick Munarriz]

  5. The sun sets
  Trina Solar (NYSE: TSL  ) didn't seem so bright after posting disappointing quarterly results this week.

  The Chinese maker of solar energy products tumbled 11% on Wednesday after posting a surprising decline in revenue and a much wider loss than Wall Street expected.

• [By Travis Hoium]

  Who will win the solar panel battle?
  Installers, particularly those in residential, deal with this conundrum every day, and the industry is changing rapidly. SolarCity (NASDAQ: SCTY  ) has been known to use manufacturers like Trina Solar (NYSE: TSL  ) and Yingli Green Energy (NYSE: YGE  ) , who are two of the biggest manufacturers in the world and compete mostly on cost. Where system costs are low, they will win business.

• [By Travis Hoium]

  Trina Solar (NYSE: TSL  ) is one of the leaders in the Chinese solar industry, but now it looks like it's following the downward path of Suntech Power and LDK Solar, who have both defaulted on loans. Trina updated first-quarter guidance yesterday and said it shipped between 390 MW and 400 MW versus a previous guidance of 420 MW and 430 MW, another sign that Chinese solar is slowly going out of favor. �

Hot China Stocks To Watch Right Now: Suntech Power Holdings Co. LTD.(STP)

Suntech Power Holdings Co., Ltd., a solar energy company, engages in the design, development, manufacture, and marketing of photovoltaic (PV) products. The company also provides engineering, procurement, and construction services to building solar power systems for certain related party and third party customers. Its products include monocrystalline and multicrystalline silicon PV cells; PV modules; and building-integrated photovoltaics products. In addition, the company provides PV system integration services, including designing, installing, and testing PV systems used in lighting for outdoor urban public facilities, as well as in farms, villages, and commercial buildings; and project development services. Its products are used to provide electric power for residential, commercial, industrial, and public utility applications. The company sells its products through value-added resellers, such as distributors and system integrators; and to end users, such as project develo pers primarily in Germany, Italy, Spain, France, Benelux, Greece, the United States, Canada, China, the Middle East, Australia, and Japan. Suntech Power Holdings Co., Ltd. is headquartered in Wuxi, the People?s Republic of China.

Advisors' Opinion:

• [By Paul Ausick]

  In the Chinese solar sector we tracked the following short interest changes: JA Solar Holdings Co. Ltd. (NASDAQ: JASO), LDK Solar Co. Inc. (NYSE: LDK), Suntech Power Holdings Co. Ltd. (NYSE: STP), Trina Solar Ltd. (NYSE: TSL) and Yingli Green Energy Holding Co. Ltd. (NYSE: YGE).�For China-based firms, the percentage of shares short is not available because the companies are also listed on other exchanges.

• [By Rebecca McClay]

  Along with communications technology, several other sectors were noting strong movements this week, including solar stocks and dry bulk shipping. Solar stocks have soared since JPMorgan said today the industry has significant room for growth. Suntech Power Holdings Co. Ltd. (NYSE ADR: STP) shares were up about 2.2% in afternoon trade.

• [By Travis Hoium]

  It's been a little over a month since Suntech Power (NYSE: STP  ) refused to pay bondholders the money they were owed, which eventually left the company's Chinese operations in insolvency. The company isn't quite bankrupt yet, but all indications are that it's headed that way, because even Chinese banks want to liquidate operations.

5 Best Warren Buffett Stocks To Watch For 2014: ChinaCast Education Corporation(CAST)

ChinaCast Education Corporation, together with its subsidiaries, provides post-secondary education and e-learning services in China. The company operates in two segments, E-learning and Training Service Group and Traditional University Group. The E-learning and Training Service Group provides post secondary education distance learning services that enable universities and other higher learning institutions to provide nationwide real-time distance learning services. It also provides K-12 educational services, such as broadcast multimedia educational content services to primary, middle, and high schools; and vocational/career training services. The Traditional University Group segment operates private residential universities that offer four-year bachelor?s degree and three-year diploma programs in finance, economics, trade, tourism, advertising, IT, music, foreign languages, tourism, hospitality, computer engineering, law, and art. The company also provides logistic service s. ChinaCast Education Corporation was founded in 1999 and is headquartered in Central, Hong Kong.

Hot China Stocks To Watch Right Now: Changyou.com Limited(CYOU)

Changyou.com Limited develops and operates online games in the People?s Republic of China. It involves in the development, operation, and licensing of massively multi-player online role-playing games (MMORPGs), which are interactive online games that might be played simultaneously by various game players. The company operates seven MMORPGs that include its in house developed Tian Long Ba Bu; and licensed Blade Online, Blade Hero 2, Da Hua Shui Hu, Zhong Hua Ying Xiong, Immortal Faith, and San Jie Qi Yuan. As of December 31, 2010, Changyou?s games in China had approximately 111.4 million aggregate registered accounts; 1.0 million aggregate peak concurrent users; and 2.7 million aggregate active paying accounts. The company was founded in 2003 and is based in Beijing, the People?s Republic of China. Changyou.com Limited is a subsidiary of Sohu.com Inc.

Advisors' Opinion:

• [By Seth Jayson]

  Changyou.com (Nasdaq: CYOU  ) is expected to report Q2 earnings on July 29. Here's what Wall Street wants to see:

  The 10-second takeaway
  Comparing the upcoming quarter to the prior-year quarter, average analyst estimates predict Changyou.com's revenues will increase 24.3% and EPS will expand 1.5%.

• [By Yiannis Mostrous]

  Changyou.com (CYOU)

  A subsidiary of Internet portal Sohu.com, video game developer Changyou.com specializes in massively multiplayer online role-playing games (MMORPG).

Hot China Stocks To Watch Right Now: Spreadtrum Communications Inc.(SPRD)

Spreadtrum Communications, Inc., through its subsidiaries, operates as a fabless semiconductor company that designs, develops, and markets baseband processor and RF transceiver solutions for wireless communications and mobile television markets. It offers a portfolio of integrated baseband processor solutions that support a range of wireless communications standards, including global system for mobile communication (GSM), general packet radio service (GPRS), enhanced data rates for GSM evolution (EDGE), time division synchronous code division multiple access (TD-SCDMA), and high speed packet access (HSPA), as well as offer an array of multimedia capabilities, such as MP3 digital audio playback, touch screen, JAVA acceleration, digital camera support, motion JPEG, MPEG4, AVS and H.264 digital video playback, and 64-channel polyphonic ringtone playback. The company also provides single-chip CMOS multi-mode RF transceivers that perform across various standards covering GSM/GP RS, EDGE, wideband code division multiple access, TD-SCDMA, and high speed uplink/downlink packet access. In addition, it designs, develops, and markets a CMMB-based channel demodulator and audio/video decoder processor solution for the mobile television market. The company sells its products directly, as well as through distributors to brand manufacturers, independent design houses, and original design manufacturers primarily in China, Hong Kong, and Macau. Spreadtrum Communications, Inc. was founded in 2001 and is headquartered in Shanghai, the People?s Republic of China.

Advisors' Opinion:

• [By Brian Pacampara]

  What: Shares of Chinese smartphone chip maker Spreadtrum Communications (NASDAQ: SPRD  ) surged 17% today after Tsinghua University, through its subsidiary Tsinghua Unigroup, offered to acquire it for $1.4 billion.

• [By Dan Radovsky]

  Chinese semiconductor maker Spreadtrum (NASDAQ: SPRD  ) has received a buyout offer valued at up to $1.5 billion from Tsinghua Unigroup, a subsidiary of Chinese government-owned Tsinghua Holdings, Spreadtrum announced today.

• [By Bloomberg News]

  The Bloomberg China-US 55 Index (CH55BN), the measure of the most- traded U.S.-listed Chinese companies, added 0.2 percent in New York yesterday. Spreadtrum Communications Inc. (SPRD) gained after Bank of America Corp. said rising smartphone use will boost Asian semiconductor makers.

• [By Brian Pacampara]

  What: Shares of smartphone chip maker Spreadtrum Communications (NASDAQ: SPRD  ) popped 13% today after Chinese state-owned company Tsinghua Unigroup agreed to acquire it for about $1.8 billion.

Hot China Stocks To Watch Right Now: BHP Billiton Limited(BHP)

BHP Billiton Limited, together with its subsidiaries, operates as a diversified natural resources company worldwide. The company engages in the exploration, development, and production of oil and gas; mining and refining of bauxite into alumina, and smelting of alumina into aluminum metal; and mining of copper, silver, lead, zinc, molybdenum, uranium, gold, diamonds, and titanium minerals, as well as development of potash deposits. It also involves in the mining and production of nickel products, manganese ore, and manganese metal and alloys, as well as in the mining of iron ore, metallurgical coal, and thermal coal. BHP Billiton Limited sells its copper, lead, and zinc concentrates, and alumina to smelters; copper cathodes to wire rod mills, brass mills, and casting plants; uranium oxide to electricity generating utilities; rough diamonds to diamond buyers and diamond manufacturers; nickel products to stainless steel, specialty alloy, foundry, chemicals, and refractory ma terial industries; metallurgical coal to steel producers; and energy coal to power stations, power generators, and industrial users. The company, formerly known as BHP Limited, was founded in 1885 and is headquartered in Melbourne, Australia.

Advisors' Opinion:

• [By Geoff Gannon]

  ��The ranking exercise (is) based on growth and fundamental analysis. EXC ranks at the bottom in both analyses��op 4 results are Apple, BHP Billiton (BHP), Mosaic (MOS) and Rio Tinto (RIO). MOS was eliminated as it has one year of negative FCF.

Hot China Stocks To Watch Right Now: China Gerui Advanced Materials Group Limited(CHOP)

China Gerui Advanced Materials Group Limited engages in the manufacture and sale of cold-rolled narrow strip steel products in the People's Republic of China. The company converts steel manufactured by third parties into thin steel sheets and strips. It sells its products directly to its customers in a range of industries, including food and industrial packaging, construction and household decorations materials, electrical appliances, and telecommunications wires and cables industries. The company was formerly known as Golden Green Enterprises Limited and changed its name to China Gerui Advanced Materials Group Limited in December 2009. China Gerui Advanced Materials Group Limited is based in Zhengzhou, China.

Hot China Stocks To Watch Right Now: ChinaEdu Corporation(CEDU)

ChinaEdu Corporation, together with its subsidiaries, provides educational services to the online degree programs of universities in the People?s Republic of China. It also offers online tutoring services to primary and secondary school students; operates primary and secondary schools; and markets international English language curriculum programs to established learning institutions, as well as international polytechnic programs to vocational schools in China. The company?s online degree programs offer associate and bachelor?s degree programs, including accounting, marketing, finance, business administration, international business, law, civil engineering, education, computer science, literature, project management, marketing, and administrative management. These online degree programs primarily target working adults. Its services also include academic program development, technology services, enrollment marketing, recruiting, student support services, and finance operati ons. The company provides technical, recruiting, and other services for the online degree programs of 27 universities; and technology support services to 7 additional universities that are awaiting regulatory approval to launch their online degree programs. As of December 31, 2010, it served approximately 311,000 online degree programs students, as well as approximately 51,450 students in other businesses. ChinaEdu Corporation was founded in 1999 and is based in Beijing, the People?s Republic of China.

PepsiCo Posts Better-than-Expected Results, Thanks to Its Snack Business

The food and beverage giant PepsiCo (PEP) came out with its earnings on October 16 and crushed analyst estimates by recording stronger than expected profit. Though the North American beverage unit results were weak, the Frito-Lay snack side managed to post solid sales which compensated for the beverage unit sales. Let's take a closer look at some of the essential numbers of the quarter earnings of the soft drink and snack company.

A Look at the Quarter

The total revenue of PepsiCo increased 1.5% to $16.9 billion, marginally below consensus estimates of $17 billion. The maker of Pepsi, Gatorade and Doritos posted net income of $1.9 billion, or $1.23 per share, and thrashed analyst estimates of $1.8 billion. Earnings growth was relatively flat compared to last year comparable period figure. The operating profit of PepsiCo went down 1% to $2.7 billion.

Growth in the beverage segment is slowing down. Even Coca-Cola (KO), PepsiCo's archrival, has been complaining that sales gain is a bit on the slow side for the carbonated drinks segment as consumers continue to shift to still beverages at a fast rate. The beverage giant also reported its quarterly earnings a day before PepsiCo. The company's soda volume remained flat in North America, but still the beverage giant experienced gain in market share. Both the companies are struggling in their domestic market as people are getting conscious of their health and avoiding carbonated drinks.

However, PepsiCo should be thankful to its snack segment which saw strong sales and helped offset the ill effect of its beverage unit. Americas beverage sales dropped 2% to $5.4 billion for the third quarter, while Asia, Middle East and Africa plunged 3% to $1.6 billion. However, Europe showed positive results with 3% growth to $3.8 billion, thanks to the higher prices of its offerings. In contrast, the food business is going well. The company's food sales increased 5% to $6.1 billion.

As the company is in both snack and drinks, the loss ! of one is being balanced by the gain in the other business. The company executives said that PepsiCo intends to combine its drink and snack business. The management aims to maximize shareholders' interest at large, rather than focusing on the needs of a segment of the stakeholders. The chief executive of the company Indra Nooyi said that she was "pleased" with PepsiCo's quarterly performance given the volatile macroeconomic condition.

The Bottom Line

Slow emerging market growth and restricted demand for carbonated drinks could be reasons for concern for the beverage company. To overcome such challenges, PepsiCo is focusing on advertisement and concentrating on its 12 best brands to help it boost organic growth. The company's strategy is to strengthen its competitive position by investing on innovation and market its offerings in the most profitable manner.

Kimberly Clark Corporation Prepares Another Spin-Off

Background of the Proposed Spin-Off

On November 14 Kimberly Clark announced the board of directors had authorized management to pursue a tax-free spin-off of the health care business, currently planned for 3Q, 2014. A spin-off would create a stand-alone, publicly traded health care company with approximately $1.6 billion in annual sales, 70% of which are derived from North America and net sales and leading market positions in both surgical and infection prevention products and medical devices (the maker of surgical masks, catheters, surgical gowns and drapes and other sterile supplies.) Robert Abernathy joined Kimberly-Clark in 1982 and is currently Kimberly-Clark Group President. He and 16,000 other employees would lead K-C Healthcare globally.

Chairman and Chief Executive Officer Thomas J. Falk had this to say, "While K-C Health Care has been part of our company since the 1970's, its strategic fit and growth priorities have changed over time and we now think that pursuing a spin-off makes sense for our shareholders. This move would allow K-C Health Care to optimize its performance and flexibility to pursue its own value-creation opportunities. A spin-off would also allow us to further sharpen our focus on our consumer and K-C Professional brands. This announcement is further evidence of our focus on creating shareholder value and how we use portfolio management to run our company." "I think the two companies will be better run as separate organizations rather than together," he added.

More Information on K-C Health Care

K-C Health Care sells surgical and infection prevention products for the operating room and a portfolio of innovative medical devices focused on pain management, respiratory and digestive health. The business has the number one or number two market position in several product categories in the United States, including sterilization wrap, face masks, surgical drapes and gowns, closed suction catheters, pain pumps and enteral feeding tubes. K-C Health Car! e is a global leader in education to prevent healthcare-associated infections. Products are sold primarily under the Kimberly-Clark and ON-Q brand names. Total net sales are split approximately 70 percent surgical and infection prevention products and 30 percent medical devices. The business had more than 16,000 employees at the end of 2012, with a large majority located in low-cost manufacturing operations in Latin America and Asia. Business unit headquarters are in Roswell, Georgia.

Previous Kimberly Clark Spin-Off Performance

Neenah Paper (NP) Spin-off in 2004

Neenah Paper was named after the Kimberly Clark headquarters in Wisconsin and has two primary operations: technical products business and fine paper business. The Company's technical products business is a producer of transportation and other filter media and coated substrates for industrial products backings and a variety of other end markets. The Company's fine paper business is the supplier of writing, text and cover papers, bright papers and specialty papers in North America. The Company's writing, text, cover and specialty papers are used in commercial printing and imaging applications for corporate identity packages, invitations, personal stationery and corporate annual reports, as well as, labels and packaging.

Revenue is up a total 65% since 2004 and the share price has appreciated, although not significantly. Ownership has continued to be diluted with an additional 2M shares introduced than was available in 2004, (14.7M vs. 16.5M) and equity has grown at roughly 3.5% for the last ten years, not spectacular value creation.

Below is a chart of the two years after the spin-off and the subsequent price performance of the company.
[ Enlarge Image ]

Midwest Express IPO in 1995 – Taken over by Republic Airways Holdings

Midwest had deep roots within the company and originated as a tool to shuttle executives around t! he countr! y. Midwest was previously known as K-C airlines and Kimberly Clark sold the company in an initial public offering during September 1995.

A take over bid ensued and on August 14, 2007, AirTran increased its offer to the equivalent of $16.25 a share, slightly more than the $16 a share from TPG Capital investors group. However, Midwest announced TPG would increase its offer to $17 per share and a definitive agreement had been reached late on August 16, 2007.

On August 17, 2007 TPG and Northwest Airlines finalized their bid for Midwest with the final offer of $17 per share and a total deal of $450 million.

On February 1, 2008, Midwest Air Group announced that the US Department of Justice had cleared the acquisition of Midwest by TPG Capital and Northwest. This finalized the acquisition; trading of Midwest Air Group on the American Stock Exchange ceased at the end of the trading day on January 31, 2008, and stockholders in Midwest received the agreed-upon $17 per share. This ended the independent existence of Midwest Airlines.

On June 23rd, 2009 Republic Airways Holdings, Inc announced it would acquire Midwest Airlines for $31 million and is currently operated as a wholly owned subsidiary. The total loss of investment by TPG and Northwest was 93% or $419 million.

I was unable to find concrete data (in the limited time I had to conduct the research) on the performance of the individual subsidiary since acquisition in 2009 compared to the 1995-1997-time period, I would assume it is far worse. This assumption is based on examining the 1995 annual report and options with the nearest strike of $18 compared to the takeover price of $17, twelve years later. The ultimate winner of the Spin-off was Kimberly Clark, divesting a money losing business in an idiotic industry of airlines.

Schweitzer-Mauduit, Cigarette Paper Manufacturer (SWM) – 1995 Spin-off

This is the big winner of the portfolio of spin-offs and logically makes the most sense. The price has increased by aro! und 500% ! since 1995, not including dividends. The Company manufactures and sells paper and reconstituted tobacco products to the tobacco industry as well as specialized paper products for use in other applications. The primary products in the group include cigarette, plug wrap and tipping papers, or Cigarette Papers, used to wrap various parts of a cigarette and reconstituted tobacco leaf, or RTL, which is used as a blend with virgin tobacco in cigarettes, reconstituted tobacco wrappers and binders for cigars. These products are sold directly to the tobacco companies or their designated converters in the Americas, Europe, Asia and elsewhere. Non-tobacco products are a diverse mix of products that includes low volume, high-value engineered papers as well as commodity paper grades produced to maximize machine utilization.

The company was up over 50% in the two year span after it was spun-off from Kimberly Clark as shown in the chart below.

[ Enlarge Image ]

All fundamentals have had impressive growth since the spin-off and this is the only winner of the three most recent spin-offs by Kimberly Clark.

Conclusion

K-C is 2 for 3 in regards to value creation at the parent (KMB) but they are batting 0.333 when it comes to providing lucrative deals for the capital markets to absorb. It is early, and much of the information regarding the deal will be coming in 2014 so I can not say wether the deal is enticing to me or not, but the health care business priced attractively, could be a big winner by 2017.

Anytime a Fortune 500 or another high profile company is spinning off a subsidiary, I will take the time to follow the story. Abbott Labs, Liberty Global, and Liberty Media Corporation are great examples from 2012-2013.About the author:I am working towards the CPA & CFA designations, and would love to manage an investment partnership in the future. I am a self taught investor through Warren Buffett, Charlie Munger! , Ben Gra! ham, Peter Lynch, Joel Greenblatt, David Einhorn, Seth Klarman, Howard Marks, Phillip Fisher and Thornton O'Glove. My focus is a bottoms up Value-GARP strategy with a mix of top down contrarianism.

"When you find yourself on the side of the majority, it is time to pause and reflect." - Mark Twain

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