[Investor Place] NSC is rolling along and should keep picking up speed

Norfolk Southern?(NYSE:NSC), among my top picks for November, is one of the nation’s premier rail transportation companies, operating approximately 20,000 route miles in 23 states. It serves every major container port in the Eastern U.S. and provides connections to many of the country’s other rail carriers.

Norfolk is the product of more than 200 railroad mergers, reorganizations and consolidations over the last 150 years. Its rich history began in 1838 with a nine-mile stretch in Virginia. Now, at $25 billion in market cap, Norfolk is the fourth-largest rail carrier in the U.S., with over $9.5 billion in annual revenues.

Most of the major rail carriers are as profitable now as they’ve ever been. Decades of consolidation have resulted in the top four carriers generating over 80% of total revenues, and despite the competitive structure, they often share joint ventures, resources and equipment among one another.

The Staggers Act of 1980, much like the Airline Deregulation Act of 1978 before it, largely deregulated the rail industry and allowed rail carriers to establish any rate they wanted if adequate competition existed in the area. Make no mistake, the railroad system in the U.S. is still subject to regulation, and this heightens the importance of competitive advantage and strong management, something Norfolk excels at.

With barriers to entry nearly impossible to overcome, operating efficiency, rail location and freight mix separate good railroads from great ones. I believe Norfolk is set up to benefit greatly over the next several years.

It has an ideal freight mix, separated into three categories: coal, general merchandise and intermodal. Coal represents 31% of operating revenues and is up 28% in 2011 from a year ago.

General merchandise, which largely represents automotive parts, consumer products, construction and chemicals, represents just over 50% of operating re! venues. This segment has grown 11% year-to-date and most closely rides on overall consumer demand.

Intermodal, has been the fastest-growing segment for Norfolk in recent years and continues to represent a tremendous future opportunity. It currently represents nearly 21% of total operating revenues, an increase of 19% from a year ago.

Intermodal freight transportation is the movement of freight in specialized containers that can use multiple modes of transportation (ship, rail, truck) without any handling of the freight itself. This process allows freight to come into a port via ship, get transferred to a rail car and then subsequently moved onto a truck closer to its final destination, all without any cargo handling. This reduces costs, improves security and cuts down on damages and losses.

Norfolk has amped up its investment in intermodal operations the past few years by expanding coverage and adding new warehouse facilities and intermodal terminals, specifically along the East Coast. This has given it a competitive advantage — and this growth segment is what separates Norfolk from its rivals.

Chief Executive Wick Moorman has been in place since 2005 and has held several positions in the company prior to taking over, including VP of technology. Not surprisingly, he’s been a big proponent of leveraging technology to continually become more efficient and improve margins.

Norfolk’s most recent quarter resulted in a 24% jump in net income and an 18% increase in revenues from a year ago. Free cash flow is up 9% year-to-date, and management has steadily improved the balance sheet the last few years with a current cash reserve of around $825 million. Additionally, according to Morningstar, rail operators should be able to raise rates slightly faster than inflation going into next year.

Despite the stock being up over 18% so far this year, Norfolk is still trading at just 12.6 times 2012 earnings, accordi! ng to Th omson estimates, well below some of its lesser-positioned peers. Conservatively applying a 15x multiple to expected earnings gives us a stock price of nearly $90 per share, a 20% premium to where it currently trades.

Norfolk has performed admirably this year in the midst of macroeconomic duress, and it should perform even greater as the economy recovers. Keep holding.

Research associate: James Mack

[Barrons] Alcatel Sees Dimmer Q4; Analysts See Struggle For Revenue

Shares of Alcatel-Lucent (ALU) are down 47 cents, or almost 17%, at $2.30 this morning after the company this morning reported Q3 revenue short of analysts’s expectations and gave a downbeat view of the current quarter that confirmed for some analysts their fears the company is struggling to find new sources of revenue.

Revenue in the three months ended in September fell 0.7% to �3.8 billion, yielding EPS of �0.08 per share.

Analysts had been modeling �3.99 billion and �0.04 per share.

CEO Ben Verwaayen said the company was well underway in its “transformation,” one what will produce cost savings of �200 million next year.

However, “For the remaining part of 2011, given these market uncertainties, and selective spending from our customers, especially in Europe, we now expect weaker revenues there than initially planned in the fourth quarter of 2011,” he said.

Specifically, “In Europe, the market remains hesitant and focuses on 3G renovation where we are not playing to the extent we do in other parts of the globe.��

MKM’s Michael Genovese, who has a neutral rating on the stock, this morning writes that the beat on the bottom line might actually be a miss by most people’s standards, given that ” it includes a �0.05 tax benefit and a �0.01 one-time license fee.”

Genovese cut his revenue estimate to �4.34 billion for this quarter from a prior �4.41 billion. His EPS estimate, however, goes up a penny to �0.12.

Sanford Bernstein’s Pierre Ferragu, who maintains an Underperform on the stock, writes that “Cash burn was severe this quarter, �244m, despite �180m of one offs mentioned above, driven by working capital changes, interest charges, restructuring and pension cash contribution.”

Genovese echoes some of those claims made on Monday, namely that the company is struggling to find alternative sources of revenue:! “ Alcatel-Lucent struggles to find avenues for growth. In particular, the company is losing ground in Europe as it doesn��t participate to network modernisation programs and operators switch spending from fixed to mobile in that context.”

Moreover, “The company struggles to deliver sustainable and visible cost cutting and improve structurally gross margins.”

[Investor Place] Asian nation¡¯s hydrologic issues could slam production in Q4

It��s a scene reminiscent of the book of Genesis, only this time, Noah has to pilot the ark through Thailand. Since July, the southeast Asian nation has experienced heavy monsoonal rains that have caused severe flooding described as the country��s worst in more than 50 years. Months of intense rainfall and subsequent flooding already has claimed hundreds of lives, and now there is fear that additional rain and more flooding will paralyze the country. That paralysis could lead to a severe curtailing of production in several major industries, including automotive, cameras and, perhaps most significantly, hard drive and semiconductor chip makers.

Many Japanese and U.S. firms in these sectors call Thailand their home, and many have major production facilities that have been forced to shut down because of the flooding. A recent report from research firm IHS iSuppli said the Thai floods have been harmful to tech manufacturing, and in particular to the operations of disk-drive maker Western Digital (NYSE:WDC).

According to the report, the most direct impact will be felt by the hard disk drive business, which will see total shipments fall approximately 28%, to 125 million units from 173 million in the previous quarter. That would represent the biggest drop since the final quarter of 2008, when the sector was hammered with a 21% drop.

The production drop in HDDs might result in significant price increases that could cause consumer hard drive prices to rise as much as 10%. And while IHS iSuppli says the PC industry has enough drives on hand to make it through a temporary shortage, the effects of a long-term drive shortage could start to impact Q1 2012 notebook computer production. That��s not a positive for PC makers such as Dell (NASDAQ:DELL) and Hewlett-Packard (NYSE:HPQ).

On Thursday, analog chipmaker ON Semiconductor (NASDAQ:ONNN) CEO Keith Jackson was interview! ed on Fo x Business Network, and he said, ���� we don��t expect the (floods) to completely recede for another month. At that point, we��ll be able to get into the factories and really understand the damage and have a clear path to recovery.” Jackson said his company��s earnings guidance for Q4 2011 and Q1 2012 reflected the impact of the floods, but until the damage is fully assessed, the impact on the bottom line for chipmakers won��t be fully understood.

In addition to the hard drive shortage, the flooding is likely to slam Japanese camera manufacturers Nikon and Sony (NYSE:SNE), which also have halted production at Thai facilities because of the disaster. Both companies have manufacturing facilities that make digital single-lens reflex (DLSR) cameras, and both were directly damaged by the flood.

Then there��s the auto industry, which will be hit by production shutdowns from car electronics maker Pioneer Corp. (PINK:PNCOF). Honda Motor Corp. (NYSE:HMC) was forced to suspend production at its automobile plant in Ayutthaya, Thailand, because of ?flood waters. The latest casualty is Toyota Motor Corp. (NYSE:TM), which actually shut down production at U.S. facilities for one day because of a shortage of parts from Thai suppliers. Ford (NYSE:F) and General Motors (NYSE:GM) are having similar production shortage snafus due to impaired facilities in Thailand.

Given the potential for a serious production shortage in hard drives, as well as supply chain disruptions to varying degrees in sectors such as PCs, cameras and autos, smart investors need to consider the circumstances and their yet-unknown impact before putting money to work in stocks with exposure to the Thai flood zone.

As of this writing, Jim Woods did not own a position in any of the aforementioned stocks.

[WallstCheatSheet] Investors are Scoffing at Groupon’s New Self-Comparison

Many are scoffing at Groupon��s (GRPN) recent comparison of itself to Amazon (NASDAQ:AMZN). Groupon is trying to tout its alluring qualities on the eve of its initial public offering. According to regulatory filings, Groupon is trying to raise $540 million by selling 30 million shares at $16 to $18 a piece, however many analysts feel their claims are a bit lofty.

Peter Sorrentino, a senior money manager at Huntington Asset Advisors in Cincinnati told Bloomberg that Amazon was better off at the time of its 1997 IPO than Groupon is now as Groupon is generating lower revenue per employee and spending more money on marketing than Amazon was. He continued commenting on Groupon��s self-comparison to Amazon by saying, ��In terms of its progress toward a profitable enterprise, I think that��s a huge stretch.�� For Groupon, ��the beast is growing faster than its revenue stream, and you may be chasing profitability for a while.��

Jeff Holden, Groupon��s (GRPN) Senior Vice President of Product Management proclaimed in a webcast that ��The parallels between Amazon and Groupon are amazing.�� Analyst Kerry Rice from Needham and Co. counters the statement by saying ��Like Groupon, Amazon was very much criticized for not making any money, and there were questions about whether it would ever make any money. That��s where the similarities end.��

Investing Insights:?Jeff Bezos has Fire to Ignite Amazon��s Stock During the Holidays.




[iStockAnalyst] Counterproductive Handwringing Over Productivity

In September, the US Bureau of Labor Statistics revised its earlierestimate of Q2 nonfarm business sector labor productivity. Following therevision, the report showedworker productivity declined at a -0.7% annual rate in the quarter. Sowhat drove the decline? Not a dip in output, which rose at a +1.3%annual rate. Rather, it was that a +2.0% gain in average hours workedoutstripped the rising output. Which, while the numbers vary somewhat,is very similar to Q1 2011.

Without doubt, productivity is a critical component of the US economyand one of the fundamental strengths behind America's highly competitiveprivate sector. So it isn't terribly surprising some media sourceshave recently homed in on the headline dip and drawn some relativelyvast conclusions. Some speculate this is bad for private-sector hiringprospects. Others postulate it means government estimates of where GDPwill be five years from now are wrong. Others speculate it means higherfederal budget deficits.

A bit of perspective: Government revisions to old data are normal, andthese archeological digs aren't typically very impactful for markets.But also, that productivity dipped in Q1 and Q2 isn't abnormal in anexpansion. Typically, productivity sharply rises as recession abates,followed by much more uneven growth. Over time, the result is a moregradual increase in productivity during expansions overall.

And that makes sense��as businesses cut costs to stay afloat duringrecessions, they pare back hours for workers, maybe even lay folks off.Essentially, they try to wring every bit of output they can from eachworker and every hour worked. But as the economy��and businesses'sales��recover, increasing volume eventually stretches these workers tothe limit. Even with technological advances, there's still a point atwhich a bare-bones workforce can't meet demand in a timely fashion,which can cost a company sales��something management would obviously liketo avoid. All this is essentially a cog in the economic machineultimately causing ! growth t o work through slack in the labor force(unemployment).

And that seems to be what's likely at work here. After all, UScorporate revenues have risen for seven consecutive quarters (Q3 willlikely mark eight)��at a 12% clip in Q2.[i] And it isn't like actualbusiness output fell��it grew! So with that backdrop��a growing economy,increasing sales and rising private-sector output��two quarters ofslightly shrinking productivity doesn't strike us as a bad thing at all.In fact, it could represent the fact many businesses have added topayrolls��and may have to further increase them soon. Now, as businessesmove forward, there's little reason productivity couldn't reacceleratein volatile fashion. Firms could, for example, spend cash on technologyupgrades ultimately buoying output per hour. So digging below theheadline number shows a couple quarters of slightly dipping productivityisn't truly some major negative��or necessarily negative at all.

But there's also speculation volatile productivity statistics mean thegovernment's long-term growth projections are wrong. Ask yourself this:When have long-range government projections been right? (Crickets.)After all, these are the very folks who brought you 2000-era forecastsof budget surpluses for a decade. Just a tad off. Ultimately,this all seems to us fairly typical productivity volatility��andvolatility off what had been very high productivity levels to boot.

source: Market Minder
Disclaimer: This article reflects personal viewpoints of the author and is not a description of advisory services by Fisher Investments or performance of its clients. Such viewpoints may change at any time without notice. Nothin herein constitutes investment advice or a recommendation to buy or sell any security ot that any security, portfolio, transaction or strategy is suitable for any specific person. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.{$end}

[Stock Advisors] McDonald's & Starbacks - Iconic brands

Gordon PapeThe markets have been crazy of late so we need to stay defensive. This month I want to recommend two iconic brands.

McDonalds (MCD) and Starbucks (SBUX) both offer the broad global footprints that come with geographic diversification.

In the event that Europe does melt down, both of these companies have opportunities for accelerating growth in China and India. Let's take a quick look at them individually.

McDonalds is the largest fast food franchise in the world with over 33,000 stores and 400,000 employees.

Incredibly, 80% of the properties are still owned and operated by individuals. The company has revenues of over $24 billion, over $5 billion in profits, and they are still growing.
August marked their 100th consecutive month of positive global comparative sales growth and the stock pays a dividend of nearly 3%.

I think the pull-back gives investors a chance to get in at a reasonable price and enjoy a decent yield with consistent growth and a product mix that is perfect for lean economic times.

At 15.4 times forward earnings, the shares don't look expensive and given the uncertainties that surround us peace of mind is worth a great deal. Buy with a target of $98. The shares closed on Friday at $88.29.

The headline story on Starbucks is that since the founder, Howard Schultz, has returned to run the company the business has dramatically improved.

The other headline is that Mr. Schultz recently announced aggressive expansion plans in both China and India, with more than 1,000 new stores in China alone.

Also underway are major expansions in South Korea where they plan to open several hundred locations.

Starbucks has also revived their Seattle's Best brand and partnered with Burger King and Subway w! hich wil l give them access to 30,000 additional locations.

I have also been impressed by the company's reaction to rising coffee prices. Some of their competitors tried to cut prices at just the wrong time, whereas Starbucks maintained their prices and worked on frequent buyer reward programs.

At 21.5 times forward earnings, Starbucks may not seem cheap but the growth that lies in front of them more than justifies the current price. Buy with a target of $46.

People have to eat (and drink). Even in tough times most people will cut back on a lot before they give up their caffeine and parents will still need an inexpensive place to take their kids.

Both these iconic American brands have become truly international and will continue to thrive over the long haul while offering defensive positions during times of market turbulence.

Learn more about this financial newsletter at Gordon Pape's Internet Wealth Builder.

[Investor Place] Realistically, politicians have too much to lose

Herman Cain��s surprising surge in the race for the GOP nomination this week can be at least partially attributed to the appeal of his 9-9-9 tax plan. Although he is short on specifics, the basic idea is to eliminate all special deductions and move to a flat corporate rate of 9%. Clearly, this former CEO has tapped into something widely appealing.

Democrats and Republicans do not appear to agree on anything in this caustic political season. However, both parties have supported the general idea of simplifying the corporate tax code to lower the rate.

On paper, U.S. corporations pay a very high rate of taxes as compared to their counterparts overseas. However, given the wide array of credits, deductions and subsidies (i.e. ��loopholes��), many companies actually pay a low rate — or no tax at all. Creating a more simple and fair tax code seems commonsensical. But the details of such an endeavor probably are insurmountable.

Although the details of the 9-9-9 plan remain vague, we can surmise the basics. The first phase of Cain��s plan has three main elements: eliminating most credits and deductions for individuals and corporations; imposing a flat tax on income and creating a new national sales tax. Ideally, Cain would like to eliminate all federal taxes and replace them with a national sales tax of 30%.

Eliminating credits and deductions completely and replacing them with a lower, flat corporate tax rate has also been endorsed by Jon Huntsman and other GOP leaders. While the simplicity of this idea is appealing, the effects of such a radical transformation would be extraordinarily complex.

The corporate tax code basically is a massive system of rewards and penalties for certain behavior. (For that matter, so is the individual tax code. We��ll look at that separately.) Some of these rewards are small and specific — tax credits that congressmen have parceled out to their favored constituents. For example, Senat! e Minori ty Leader Mitch McConnell, of Kentucky, already is making noise about keeping the tax credit for horses in Kentucky. Sen. John Kerry, D-Mass., continues to support a credit that benefits the Samuel Adams Brewery in Boston.

Other tax benefits are large and general: allowing deductions for certain types of research and product development. Subsidies that benefit the oil and gas industry are well-known. The tax code also encourages pharmaceutical companies to develop new drugs and advertise them. Even the video gaming industry gets special treatment. It is, in fact, one of the most highly subsidized businesses in the United States.

If you have ever been to a work-related ��conference�� at a swanky, warm-weather, golf-happy resort, you know the company that sent you did not pay full price. They wrote off the cost of that trip as a business expense. The same is true for long client lunches and entertainment.

Clearly, a lot of players have a big stake in maintaining the status quo. Legislators need to be able to reward companies in their states or districts. Tax benefits are among the most effective ways to do that.

Lobbyists make it their life��s work to ensure their clients receive the best possible treatment by the tax code. CEOs have to determine whether other countries will give them a new ��break�� that they can not get here in the United States. (For example, Canada also substantially subsidizes video game developers.) Whether it is encouraging companies to develop new products, explore new sources of energy, plan a conference or schmooze a client, corporations can write off these expenses at every turn.

So what would be the effects of a completely unbiased tax code, where every company paid taxes at the same rate and certain expenses were not also write-offs? It certainly would put a lot of accountants, tax attorneys, event planners and resort managers out of work. It also would radically reduce the power and re! ach of m any lobbyists and congressmen. So for better or worse, the idea of closing all the loopholes will remain the stuff of campaigns — not legislation.


Few companies declared their quarterly earnings before the opening bell today, while several companies are scheduled to report their financial results after the closing bell. Some notable earners are discussed here.

China Precision Steel,Inc. (Nasdaq: CPSL), a leading precision steel processing company principally engaged in producing and selling high precision, cold-rolled steel products, today announced financial results for the fiscal 2011 fourth quarter. Net income for the quarter was $283,000 compared with net income of $1.3 million in the same period of the prior year. Fully diluted earnings per share were 1 cent, compared with 3 cents in the fourth quarter of fiscal year 2010. During the period, revenue increased 26.5 percent to $46 million and sales volume was a record 49,000 tons. CEO Hai Sheng Chen said, "We are pleased to experience a healthy growth in revenues throughout fiscal year 2011 and in particular a strong pickup in sales during the fourth quarter. The increased revenue for the fourth quarter was primarily due to orders realized that were delayed from the third quarter, as well as continued growth in demand for our low carbon, cold-rolled steel products and high carbon, cold-rolled products. Supporting our continued revenue growth is our increased production capacity, which contributed to record sales volume of 175,328 tons for fiscal year 2011. We plan to continue to gradually ramp up production capacity for our third mill over the next few years which we expect to reach up to approximately 80,000 tons, giving us a combined annual production capacity of approximately 260,000 tons."

AZZ Inc. (NYSE: AZZ), a leading manufacturer of electrical equipment and components for power generation, transmission and distribution, and industrial markets primarily in the U.S. and Canada, is scheduled to release its fiscal 2012 second! quarter earnings later today. Analysts estimate a net profit of 76 cents per share for the company. It has a market capitalization of $509.36 million with a P/E ratio of 12.90. It has more than 12 million outstanding shares.

CalAmp Corp. (Nasdaq: CAMP), which develops and markets wireless communications solutions that deliver data, voice and video for critical networked communications in the U.S., will release its FY2012 Q2 financial results after the market closes today. Analysts forecast a net profit of 3 cents per share for the company. It has a market capitalization of $73.95 million and more than 28 million outstanding shares.

DemandTec Inc. (Nasdaq: DMAN), a leading provider of collaborative optimization network software services connecting retailers and consumer products companies, is set to release its fiscal 2012 Q2 earnings later today. Analysts estimate a net loss of 2 cents per share for the company. It has a market capitalization of $197.25 million and more than 32 million outstanding shares.

Xyratex Ltd. (Nasdaq: XRTX), which designs, develops, and manufactures enabling technology that supports storage and data communication networks, will unveil its fiscal 2011 Q3 earnings after the closing bell today. Analysts estimate a net profit of 18 cents per share. It has a market capitalization of $265.27 million with a P/E ratio of 3.95. It has more than 30 million outstanding shares.


7 Stocks the Dow Has Liked for a Long Time

The Dow Jones Industrial Average (INDEX: ^DJI), as the name suggests, started out by tracking the leading U.S. industrial companies of the late 19th century. It has since widened its scope beyond traditional heavy industries, but it still tracks the movement of 30 large companies during daily trading sessions. A scaled average of these companies is reported throughout the trading day, and like the S&P 500, it's used to track the general health of the stock market, if not the entire U.S. economy.

Some very familiar names have been on the index the longest. Without fail, these companies have generated shareholder value, both in the form of dividends and growth. Three of the companies make the grade as "dividend aristocrats," paying and increasing their dividend for at least 25 years. The other four have long histories of paying dividends, including one that has been paying quarterly dividends uninterrupted since 1899! What companies are they?

! 3.2%



Date Added to DJIA

Dividend Yield

30-year CAGR

General Electric (NYSE: GE  ) Conglomerates Nov. 7, 1907 3.6% 12.5%
ExxonMobil (NYSE: XOM  ) Oil and gas Oct. 1, 1928 2.4% 15.3%
Procter & Gamble (NYSE: PG  ) Consumer goods May 26, 193214.7%
DuPont (NYSE: DD  ) Chemicals Nov. 20, 1935 3.7% 11%
United Technologies (NYSE: UTX  ) Conglomerates March 4, 1939 2.6% 14.3%
Alcoa (NYSE: AA  ) Aluminum June 1, 1959 1.2% 6.8%
3M (NYSE: MMM  ) Conglomerates Aug. 9, 1976 2.8% 12.2%

Sources: DJIndexes.com, FinViz.com, and Yahoo! Finance.

Been a long time

General Electric was added to the Dow Jones when such stalwarts as U.S. Steel and Amalgamated Copper were ruling the list. The uninterrupted dividend since 1899 belongs to GE, including a 32-year streak with annual increases before the 2008 financial crisis. Throw in GE's growth opportunity in China, and you have a large company that shouldn't be ignored.

ExxonMobil was added to the Dow Jones list when it was known as Standard Oil of New Jersey, one of the 34 companies that came into existence as a result of the breakup of Standard Oil and its monopoly. Renamed Exxon in 1972, it later merged with Mobil in 1999, resulting in the oil-and-gas behemoth that exists today. It had long been the largest company based on market cap until being briefly passed by Apple earlier this year. It has since resumed top-dog status, and as the leading U.S. producer of natural gas, it's poised to stay there.

One of our "dividend aristocrats," Procter & Gamble has paid dividends since 1891, with 55 consecutiv! e years of increases. It joined the Dow roster along with Coca-Cola and IBM, companies that were later replaced by others on our list. P&G, the consumer-goods leader with 24 different billion-dollar brands, has outlasted more than a few recessions in its 174-year history. It provides staple products in American households, including a brand that's a member of the "lipstick index."

Out with the old
DuPont replaced Coca-Cola on the Dow in 1935, with Coke not returning until 1987. It currently has the highest yield of these long-term Dow stalwarts and has paid a dividend since 1904. On top of that, the chemical company's dividend looks reasonably strong based on a variety of factors. As a company that creates products for use in a variety of industries, DuPont can weather most any storm and has more than 200 years of success to proves it.

When the next company replaced IBM on the Dow in 1939, it was known as United Aircraft. It has since become megaconglomerate United Technologies, the parent company of companies such as Sikorsky Aircraft, Pratt & Whitney, Otis Elevator, Carrier, and Hamilton Sundstrand. This diversification helps protect the diverse company from looming cuts to its defense-heavy subordinates. Throw in that a recent acquisition helps the company lower some costs, and it looks like United Technologies will be an industry leader for a long time.

Some troubles ahead?
Aluminum producer Alcoa has typically led off quarterly earnings reports, and it kicked off the latest quarter with some less than stellar news. That said, the former Aluminum Company of America has stayed in the Dow far longer than the other three companies added in 1959. Alcoa has the smallest dividend and return of the seven companies on the list, and Boeing's recent switch to carbon composite airplanes might force future aluminum prices down.

The baby of the group
The "youngest" company current! ly on th e Dow is not a young company. 3M has been around in some form since 1902, starting out as the Minnesota Mining and Manufacturing Company. The company has a large stable of products, including Post-it notes, Scotch Tape, Bondo, and Ace bandages, among others. This diverse product line has allowed this "dividend aristocrat" to increase its annual dividend for 53 years. You can't deny the power of 3M's dividend since the 1960s, and it's a great stock for the long haul.

A great place to start
The folks at Dow Jones have simply created an index that looks at 30 important stocks. A company's placement on the list does not guarantee a great stock, but these seven companies have been in the Dow for a while. I think it means that these companies can be expected to continue along a similar growth path for the foreseeable future.

In fact, two of these companies have made the grade and are included on our free report "13 High-Yielding Stocks to Buy Today." To find out which two made the cut, sign up for the free report while it's still available.

The Dollar's Biggest Advantage: It's Not The Euro

The U.S. dollar appears to have found its footing. It was the beginning of September when the greenback surged off of its bottom and broke out sharply to the upside. But by the start of October, it peaked and rolled back over. Since last Friday, the U.S. dollar seems to have bottomed once again, and now looks like it’s gearing up for another run higher. A variety of factors should help provide a tailwind for the dollar going forward.

A key fundamental factor supporting the U.S. dollar is simply that it is not the euro. Across global currency markets, the relationship between these two currencies is most pronounced. Overall, 60% of the direction of the U.S. dollar is determined by the euro. And the economic problems that continue to plague the European continent remain severe. Either European policymakers resort to rescue policy actions that are likely to apply weakening forces on the currency, or the problems are left to fester further, driving capital to flee the continent altogether. And the most liquid safe haven for capital to migrate to is the U.S. dollar.

The U.S. dollar also enjoys a great deal of technical support at these levels. First, when examining the PowerShares DB US dollar Index Bullish ETF (UUP), it has been responding well in recent days to support at its 200-day moving average (blue line on chart). At the same time, the U.S. dollar is also receiving support from its sharply upward sloping 50-day moving average (red line on chart). In addition, it continues to rest right above what was previously strong resistance and is now support at $21.75 on the UUP (orange horizontal line on chart).

The convergence of these three support levels is collectively providing meaningful support for the U.S. dollar at current levels. Moreover, the U.S. dollar’s Relative Strength Index recently bounced off of the 40 level, which has been a bottom signal for the greenb! ack sinc e the end of QE2 on June 30. Furthermore, momentum readings for the dollar are at historically wide bearish extremes, suggesting that a bounce back in momentum may be likely in the near term.

All of these factors are increasingly supportive of the U.S. dollar going forward. Of course, currencies can be unpredictable, particularly in an environment where the next government policy intervention can be right around the corner. So any bullish positions in the U.S. dollar should be undertaken carefully and with a close eye along the way.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: This post is for information purposes only. There are risks involved with investing, including loss of principal. Gerring Wealth Management (GWM) makes no explicit or implicit guarantee with respect to performance or the outcome of any investment or projections made by GWM. There is no guarantee that the goals of the strategies discussed by GWM will be met.

The longer you're in the game, the more you stand to gain

In a nutshell, the data is holding up better than the sentiment.

Whether it’s the numbers on rail and boat shipments, tax revenues, durable goods orders and shipments or auto sales, there’s plenty in the U.S. economy that points to continued growth — albeit slower growth than we’d like, of course. Last week’s update on Q2 GDP was an improvement as well. I’ve seen some estimates that third-quarter GDP is going to come in with better than 2% growth.

Don’t get me wrong — 2% growth is not going to produce lots of new jobs, nor is it going to magically repair the housing market. But it isn’t a recession, either.

What’s holding us back is the fact that consumer, investor and business sentiment stinks. So does voter sentiment, for that matter. For the past week or so it’s been Europe’s bailout plans that have been front-and-center. A month or so ago it was the debt-ceiling debate here at home. Tomorrow? I’m confident there are plenty of “issues” that will stall the market, or cause investors to fret, or spark more screaming from politicians on all sides of the aisle, none of whom really seems to have the nation’s interests at heart, or at least as high on their list as their own election, or re-election prospects.

But as we close out the quarter, it’s important to remind myself that I’m not investing in sentiment, I’m investing in companies.

I’m sure that as you watch the market’s moves — on Monday, the Dow Jones went from a loss of 90 points to a gain of 60 points, back to a loss of 90 points, up to a slight gain and finished with a nosedive of 260 points — you’ve got to wonder whether having a long-term view makes sense when the day-to-day is so volatile.

In fact, some recent research conducted by Jeff DeMaso, one of my analysts, shows the odds of making money in the stock m! arket se verely outweigh the odds that you won’t. But don’t try to day trade. Jeff looked at every day’s stock market return from 1927 through the end of 2010.

He found that the chance that you’ll lose money investing for one day is 46% — not quite 50/50. Invest for one week and your odds of losing money decline to just 44%. Invest for 12 months and the odds of a loss drop to 33%, and if you invest over three years, the possibility that you won’t make money goes to 24%. That means there’s a 76% chance you will make money. Take a 10-year perspective and, well, there’s an 87% chance you’ll make money. Actually, the chances for making money are higher than these calculations because Jeff only looked at index returns and didn’t factor in dividends.

In any case, given the fact that the odds are well on our side of the fence, I’ll leave the day trading and attempts at timing the market to the hedge funds and others who think they’ve got a magic formula but have so far proved the only formula they have is for minting fees for the partners while their investors are left holding the bag.

How to Collect 18% Dividends by Being the Bank

I'd never done it before... But a few weeks ago, I MADE my first mortgage loan.
I'll safely earn a double-digit interest rate in this zero-percent world.
The mortgage loan I made will pay me 12% interest, plus a "point" (1%) up front. It's a first mortgage on a home, and it's well-secured by a 40% down payment.

I never intended to make a mortgage loan. I never intended to "be the bank." But these days, banks won't make this particular loan...
Banks are perfectly willing to make loans that conform to certain government guidelines. The typical "conforming" loan is to a middle-class couple buying a middle-class house for their primary residence, with a decent down payment and decent credit.
Banks want to make conforming loans because they know they can immediately turn around and "sell" that loan to the government.
But the loan I made is lower risk, I think, than many conforming loans.
You see, the homebuyer – a friend of a friend – is in the real estate business. He's not buying this as a "primary residence." He's speculating. He's buying the property dirt-cheap. And he believes he already has it sold for a much higher price.
Whether he has it sold or not, I'm not that worried. The collateral is there for the loan. So I'm secured. But because it doesn't conform to the government standard, banks don't want it. And I get to safely pocket 13% over the next year. I'll take it!
I don't expect you to do exactly what I'm doin! g. But t oday, you can make a similar investment in the stock market...
The company is called Chimera. It's a sister business to our favorite mortgage traders – the guys behind Annaly.
Right now, roughly 20% of Chimera's capital is invested exactly as Annaly invests: with leverage in government-guaranteed mortgages. But the rest is invested in non-conforming loans, like the one I wrote... non-conforming loans paying double-digit interest rates. (These are not sub-prime loans.)
Unlike a bank, which uses a large amount of leverage (borrowing money), Chimera's current business model is to hold mortgages mostly without leverage. Just like me, it's resisting the temptation to borrow money at a low interest rate to invest it in these mortgages at a higher rate.
Even without all that leverage, the business earns a mid-teens yield on its portfolio. And it distributes nearly all those profits to shareholders through dividends. Chimera yields nearly 18%.
It's also incredibly cheap. It sells for just 0.85 times book value. And with a business like Chimera, book value IS liquidation value. So we have an opportunity to buy $1 for just $0.85 cents...

Fed Still Has Arrows in its Quiver, Minutes Show

Some members of the Federal Reserve were considering taking more aggressive actions to spur the economy at the FOMC’s September meeting, minutes released today show. In the end, the Fed decided to undertake “Operation Twist”: sell short-term securities and buy longer-term securities to force long-term rates down.

Three members of the panel voted against the action. But others appeared ready to do even more.

“Two members said that current conditions and the outlook could justify stronger policy action, but they supported undertaking the maturity extension program at this meeting as it did not rule out additional steps at future meetings.”

In addition, QE3 is apparently still on the table.

“A number of participants saw large-scale asset purchases as potentially a more potent tool that should be retained as an option in the event that further policy action to support a stronger economic recovery was warranted.”

Of, course, the Fed being the Fed, the minutes do not actually give the actual number specified by “a number of participants”.

Nokia: RBC Sees Improving ‘Placeholder’; Skeptics Remain

Shares of Nokia (NOK) are up 33 cents, or 5.3%, at $6.45, still holding some gains from this morning’s better-than-expected Q3 report.

Of course, today’s report was just a prelude to the real event, which is next week, when the company is expected to show off new phones running Microsoft’s (MSFT) Windows at an even in London.

Mark Sue, RBC Capital Markets: Reiterates an Outperform rating and a $9 price target. Sue raised his Q4 revenue estimate to �9.7 billion from �8.9 billion, on sales of 114 million mobile devices. He cut his EPS estimate, however, to break-even from a penny per share, on declining selling prices. If Nokia can ship 1 million units running Windows this quarter, Sue writes, it would be considered a success. “Near-term, people seem to be embracing the dual SIM devices (18M units) and the rate of decline in traditional Symbian seems to be slowing, although some of it is related to price stimulation. Nokia is benefiting from a halo effect in India where buzz around dual SIM devices is carrying over to other low cost devices. ” As for valuation, “CY12 EPS variability remains high and at this stage we think investors may resort to an EV/Sales multiple rather than PE to value to the stock considering how early we are in the reboot cycle.”

Charlie Wolf, Needham & Co.: Maintains a Hold rating on Nokia shares. He cut his 2012 EPS estimate to �0.40 per share from a prior �0.45 per share on declining average selling prices. He notes sales were “especially weak in Europe,” though the company was able to stem share loss in India and China with new feature phone using “dual-SIM” configurations. Wolfe is focused on the “binary event,” the introduction of the Microsoft phones. “Nokia will begin to roll out smartphones running on the Windows Phone 7 operating system in the fourth quarter. However, Stephen Elop, the company��s CEO! , cautio ned that it would be a country-by-country launch. Therefore, it could take a number of quarters before we can assess the success of this venture.”

Pierre Ferragu, Sanford Bernstein: Reiterates an Underperform rating and a $4.29 price target on the shares. The strong shipments of dual-SIM phones in emerging markets were widely expected. And he’s not impressed: “We take a view opposite to today��s market reaction and read further weaknesses in the quarter, the latter being in essence well in line with our expectations.” With mobile phone gross margin and average selling price declining in the quarter, these dual-SIM phones don’t seem to him to be helping the business fundamentals. ” The feature phone market is now likely to shrink rapidly in value, and as Nokia will not ship an additional 18m ��catch up batch�� of Dual SIM phones every quarter, it is reasonable to expect a pronounced structural decline in Mobile Phone sales and profits in the very near future, most likely as early as next quarter, if adjusted for seasonality. “

Has Cosan Become the Perfect Stock?

Every investor would love to stumble upon the perfect stock. But will you ever really find a stock that provides everything you could possibly want?

One thing's for sure: You'll never discover truly great investments unless you actively look for them. Let's discuss the ideal qualities of a perfect stock, then decide if Cosan (NYSE: CZZ  ) fits the bill.

The quest for perfection
Stocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:

  • Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it's certainly a better sign than a stagnant top line.
  • Margins. Higher sales mean nothing if a company can't produce profits from them. Strong margins ensure that company can turn revenue into profit.
  • Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt.
  • Money-making opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors.
  • Valuation. You can't afford to pay too much for even the best companies. By using normalized figures, you can see how a stock's simple earnings multiple fits into a longer-term context.
  • Dividends. For tangible proof of profits, a check to shareholders every three months can't be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.

With those factors in mind, let's take a closer look at Cosan.


What We Want to See


Pass or Fail?

Growth 5-Year Annual Revenue Growth > 15% 50% Pass
? 1-Year Revenue Growth > 12% 22.1% Pass
Margins Gross Margin > 35% 15.5% Fail
? Net Margin > 15% 7.6% Fail
Balance Sheet Debt to Equity < 50% 46.4% Pass
? Current Ratio > 1.3 1.96 Pass
Opportunities Return on Equity > 15% 35.1% Pass
Valuation Normalized P/E < 20 6.80 Pass
Dividends Current Yield > 2% 2.4% Pass
? 5-Year Dividend Growth > 10% NM NM
? ? ? ?
? Total Score ? 7 out of 9

Source: S&P Capital IQ. NM = not meaningful; Cosan paid its first dividend in Aug. 2010. Total score = number of passes.

When we looked at Cosan last year, it had the same score of 7. But the company has made impressive moves to cut its debt, and some small improvement in its margins has made a big difference on the bottom line.

Cosan is a Brazilian company that produces sugar. That gives it two attractive but totally different businesses: its refined sugar and related products tap into the same emerging consumer markets that AmBev (NYSE: ABV  ) and Brasil Foods (NYSE: BRFS  ) have found to be profit opportunities, but it also produces sugar-based ethanol.

With Brazilian markets having seen significant drops this year on fears of an overheating economy, the ethanol segment is getting more attention. In the U.S., corn-based ethanol has meant tax credits for domestic refiners Sunoco (NYSE: SUN  ) and Valero (NYSE: VLO  ) as well as ethanol producer Archer Daniels Midland (NYSE: ADM  ) while sticking foreign producers like Cosan with a big import tax. But lately, that subsidy has come under fire over the inefficiency of corn ethanol compared to sugar.

In the end, free markets should prevail, and that will play up Cosan's sugar ethanol business -- especially if energy prices remain high. Meanwhile, with the possibility of a Brazilian slowdown, investors may well get an even bigger bargain on Cosan shares than ever. Cosan may not be perfect, but it represents a great value at today's prices.

Keep searching
No stock is a sure thing, but some stocks are a lot closer to perfect than others. By looking for the perfect stock, you'll go a long way toward improving your investing prowess and learning how to separate out the best investments from the rest.

Click here to add Cosan to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Finding the perfect stock is only one piece of a successful investment strategy. Get the big picture by taking a look at our 13 Steps to Investing Foolishly.

GramercyOne Lands $14.5 Million in Funding

GramercyOne, which provides online booking and business management software for companies, announced on Tuesday it has raised $14.5 million in its first round of venture funding.

The New York-based start-up sells software to local businesses, like spas and beauty salons, as well as large companies including Hilton and W Hotels, that allows consumers to schedule and pay for appointments online.

While a substantial portion of GramercyOne's clients are spas and health facilities -- the company last year spun out of spa management software maker SpaBooker -- it's starting to expand into other verticals like bookings for doctor's offices and recreational activities.

The company is trying to become the equivalent of restaurant booking platform OpenTable(OPEN) for service companies, Chief Operating Officer Daniel Lizio-Katzen told TheStreet.

"Just like how OpenTable lets you book a table for two for dinner in Midtown, we let you search for a hot stone massage in Midtown," he said.

As opposed to most other booking systems which use traditional software and require an up-front fee, GramercyOne has a software-as-a-service (SaaS) model in which clients pay on a monthly basis.

Pricing starts at $25 per month for the most basic product and goes up to $1,000 for larger customers.

The company, which has just over 60 employees, has seen significant growth in the last year.

It expects to process $420 million in transactions this year, up from $190 million in 2010. In 2012, it's forecast to hit $1 billion.

Venture firm Revolution Ventures led the funding round, along with GroTech Ventures, TDF, and Jubilee Investments.


>To submit a news tip, send an email to: tips@thestreet.com.

Moynihan thinks you're being too hard on poor BofA

Bank of America (NYSE:BAC) is one of the most hated companies in America — and for good reason. BAC stock is down 50% this year and over 85% from its 2008 peak. Bank of America plans on instating a $5-per-month debit-card fee at the beginning of next year. It took billions in bailout money while regular Americans continue to face stagnant wages, runaway inflation and no relief from the brutal realities of both the housing market and job market.

But apparently Bank of America CEO Bryan Moynihan thinks we are all being a bit too hard on him and his cronies.

��I, like you, get a little incensed when you think about how much good all of you do, whether it’s volunteer hours, charitable giving we do, serving clients and customers well,” Moynihan said to employees last week, according to a Bloomberg report. “You ought to think a little about that before you start yelling at us.”

Really? Do you really want us to think more about the antics of Bank of America and expect that reflection to benefit you?

OK, fine. Here are a few musings citizens are chewing over:

  • Your predecessor, CEO Ken Lewis, was indicted by the SEC on civil charges but never faced jail time. Whatever fines and legal fees he ultimately will incur for his tenure are more than offset by a jaw-dropping $125 million severance package.
  • Even as you proposed to gouge consumers with a $5 debit card fee, Bank of America wrote a final paycheck worth $6 million to former wealth-management division head Sallie Krawcheck. Another manager, Joseph Price, got a $5 million payday. That��s means the first 2.2 million debit-card charges will go solely to paying off these BofA lackeys.
  • Your $5 fee just so happens to coincide with ��tests�� by JPMorgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC) over a $3 fee, prompting calls for an inv! estigati on that the big dogs in the financial sector are colluding to roll out fees at the same time — browbeating consumers into suffering though the charges because there will be fewer alternatives.
  • The government is suing BofA (along with 16 others) for its role in the mortgage debacle.
  • Bank of America placed 28th?out of 30 in a recent American Banker survey of bank reputations.

The list goes on. And through it all, the pompous Moynihan is due up to $10 million in performance-based cash and bonuses this year.

Sorry Brian. It��s not us — it��s you. And boneheaded comments like this one are just further proof that Bank of America’s hubris knows no bounds. Maybe you had a sympathetic audience among your employees when you made that asinine statement, but the rest of America isn��t fooled one bit.

Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. As of this writing, he did not own a position in any of the aforementioned stocks.

Waste Management: Bill Gates talks 'trash'

Ian WyattThere are only a few investments out there now that deserve your trust. But Waste Management (WM) is one; even Bill Gates trusts this company enough to own 6% of it.

Waste removal is a critical component to any society. And Waste Management is poised for very strong capital gains and pays a consistent dividend quarterly.

Waste Management is the largest waste disposal company in North America. In 2010, it served nearly 20 million customers through 294 transfer stations and 271 landfills.

The company is by no means just about trash pickup though, as they do everything: managing landfills (18% of revenues), selling recycled materials (9%), transferring waste (10%), and even creating energy from trash (6%).

This diversified revenue stream adds to the companies stability, while also providing several internal growth opportunities.

What happens if people make more trash? WM makes money. What happens if people recycle more? WM makes even more money.
The company is has made significant efforts to advance technologies to reduce waste, increase recycling and reuse, create even safer treatment and disposal options, and develop sources of renewable energy.

Waste Management's waste-to-energy program is particularly impressive. While the program is currently a small portion of revenues, it remains a strong growth segment and had a 53% increase in sales in 2010 with a wide profit margin.

The company knows all too well the benefits of being green, and in 2007 announced its plans to pay $500 million a year for 10 years to increase the fuel efficiency of its fleet.

Besides its resiliency, Waste Management has another attribute that makes it a perfect defensive investment--- the company is a cash generating machine.

With a history of convert! ing this cash into shareholder value, Waste Management's dividend has steadily increased at a compound annual growth rate of 7.7% over the past seven years.

The payout nearly doubled in value from $0.75 paid per a share in 2004 to $1.36 paid per a share in the past 12 months---a yield of 4.4%.

Of course dividends aren't the only way to return money to investors, and the $501 million spent on share repurchases in 2010 is a pretty clear example of this.

With another $575 million in share buybacks planned for 2011, Waste Management's impressive history of share repurchases is set to continue.

Waste Management startled investors when it lowered its EPS guidance for 2011 to $2.14, having been $2.30 previously.

The lowered expectations reflected softer volume and more competitive pricing pressures, but investors reacted a bit more negative than necessary-making now the perfect time to buy the stock.

Margins may be squeezed temporarily by pricing pressure, but WM will remain resilient given the strength of its position.

This year I expect the company to generate $2.14 EPS from $13.3 billion in sales. Next year I estimate they will earn $2.44 EPS from just under $14 billion in revenue. At $31, shares trade at one times sales and 13 times EPS.

Although this is not a fast growth company anymore, shares deserve to trade at least 15 times EPS, or $37. Combined with the 4.4% dividend, that's 25% upside from here.

3 Deals to Watch: UTX, HP, AOL

Deals continued to be inked despite volatility in the equity markets Thursday.

After half a week of speculation, United Technologies (UTX) confirmed that it will buy Goodrich(GR) for $16.4 billion, roughly $1.5 billion more than earlier reported.

The deal values Goodrich at $18.4 billion because United Technologies will take on $1.9 billion in debt with the purchase.

UTX, the industrial conglomerate, will pay Goodrich, the commercial plane landing gear and materials specialist $127.50 a share, roughly a 50% premium over the price of shares before merger rumors circled this week.

Goodrich's landing gear and aerospace expertise will be added to United Technologies' aerospace divisions, which include Sikorsky helicopters, Pratt & Whitney plane engines and its aerospace electronics unit, Hamilton Sundstrand. A diversified industrial conglomerate, United Technologies also sells Carrier climate control units, Otis elevators, and UTC fire, security and power services.

In earlier interviews with TheStreet , Brian Langenberg, principal of research firm Langenberg & Co., said United Technologies is looking to grow its presence in commercial aircraft sales to diversify from its military aircraft focus. He says Goodrich will likely be added to its Hamilton Sundstrand unit.

Matt Collins, an analyst at Edward Jones, said that, "Given United Technologies' strong balance sheet and record low interest rates, we would expect cash on hand and additional debt to be used" to finance the purchase.

The $127.50 price would be the highest stock price for Goodrich in its 23-year history, and an 80% gain on pre-recession stock highs.

HP's Board to Reassess CEO and Spinoff Strategy

HP(HPQ), the largest U.S. personal computer maker is reconsidering its plan to tack in strategy by spinning i! ts PC di vision and making a shift into business services by buying British data search software provider Autonomy for $10.3 billion. The struggling U.S. computer giant is battling to find a profitable business strategy and leadership after a year in which profit margins and leadership have come in below expectations.

Last fall, the company ousted Chief Executive Mark Hurd on allegations of inappropriate conduct and replaced him with Leo Apotheker, a former CEO of German software giant SAP(SAP) with no executive experience in the United States. Apotheker's strategy is for HP to get out of building personal computer hardware and move into software services geared toward businesses, an idea that he pitched to the company board and which they are now reconsidering, according to reports from Bloomberg.

This morning The New York Times reported that HP's board is leaning toward replacing Apotheker with Meg Whitman, the former eBay(HPQ) chief executive.

When Apotheker unveiled his new strategy, he also said the company would stop making mobile products such as the Touchpad, discontinuing operations that were built up after the company acquired Palm last year for $1.2 billion.

According to company filings, sales and operating income fell in the latest quarter ended in July. Gross profits fell 1.6% year over year in July. The stock was down nearly 5% in morning trading after surging close to $25 a share yesterday on news of a potential change of strategy. HP is down more than 45% year to date, the worst performer of any Dow Jones Industrial Average company.

AOL Shares Fall on Speculation of No Yahoo! Merger

After falling over 15% yesterday, AOL (AOL) shares fell 5.2% to $11.15 in early trading as traders speculated whether it was actually considering a merger with sear! ch giant Yahoo!(YHOO).

In an interview with The Wrap, Arianna Huffington President of AOL's new Huffington Post Media Group after its $315 million purchase of the popular news website in February said about reports AOL was looking to merge with Yahoo!, "I almost feel like there's a reverse correlation between rumors and reality."

On Sept. 9, Bloomberg reported that AOL Chief Executive Officer Tim Armstrong was in talks with private equity firms and investment bank Allen & Co. to assess a merger with Yahoo after it fired its CEO Carol Bartz. According to the report, Yahoo!, with a market cap of $17.6 billion would buy smaller AOL with a market cap of $1.26 billion and leave its CEO Tim Armstrong on to run the combined media, search and dial up Internet conglomerate.

Speaking about her experience with mergers when AOL bought huffingtonpost.com, Huffington said, "There wasn't a single rumor about AOL and the Huffington Post merging before that was about to happen. When people want something to happen and they care, they're careful about leaks."

AOL shares are down 50.3% year to date, while Yahoo!. Shares are down 16%.

Is Gold Good for Society?

Gold has many roles in the world. ?It is used in everything from electronics to glass making. ?Many will even argue, and rightly so, it is the only real currency that keeps money printing under control. No matter what the role is, the pursuit of gold itself can have a significant impact. ?The World Gold Council recently concluded a study that looks at the effects gold can have on a society.

The study focused on four mines in Peru. ?The mines were owned or operated by Newmont, Barrick, Gold Fields, and Buenaventura. ?At the national level, the mining industry accounted for 60% ($16.3 billion) of Peru’s total export revenues in 2009. ?Gold miners alone, accounted for $5.6 billion in exports for 2008. ?The four mines in the study accounted for 60% of gold’s contribution to exports. ?The report states, “Gold has played a pivotal role in Peru’s economy for centuries. ?It has been an important source of wealth since the pre-colonial Inca civilization.” ?Over the past 30 years, the mining industry in Peru has represented between 40% and 60% of Peru’s total earnings. ?While the US collects the majority of its taxes from individuals, Peru’s successful mining industry has become the largest taxpayer in the country over the past 10 years, peaking to 25% of total government revenues in 2007.

Investing Insights: Is This Commodity Staging a Comeback?

The credit bubble bust has left the US with a prolonged high unemployment rate. ?The official headline unemployment rate is over 9%, and the broadest unemployment rate (U-6) from the BLS is over 16%. ?While the US government enters into political debates and gridlock over job creation, Peru is seeing job creation through its mining industry. ?The study explains that of the $250 million in mining salaries expected to be paid in the peak years 2011-2014, community salaries account for more than $100 million, which is a significant boost to the local and regio! nal econ omies. ?Looking forward, the study states, “Based on the multiplier used for this study, we estimate that the indirect job creation impact of the four mines from 2005 to 2014 to be approximately 8,000 additional jobs annually.” ?Furthermore, the four mines in the study are directly improving the local job market for Peru. ?Peruvian nationals are expected to make up 90% of their total workforces for 2011.

The success of the mining industry also has a spillover effect to other parts of the economy that is beneficial to many. ?The study explains, “In terms of local procurement, the four mines’ expenditure with national suppliers averaged 90% of their total procurement or nearly $1.4 billion per year from 2007 to 2010. ?In some years, this exceeds twice the total of all taxes paid by these mines and, in turn, generates additional revenues for government. ?The local effects of this expenditure are just as noteworthy, with 41% of all purchases from national suppliers going to community-based firms (or some $70 million) for 2010.”

Investor Insight: Will Endeavour Silver Lead a Great Mining Rally?

In conclusion, gold mining has played an important role in the development of Peru’s economy. ?It provides jobs for locals and strong revenues for the government. ?Aside from gold’s hard asset and safe-haven status, the future looks bright for gold demand, which could prompt other governments to promote gold mining activities. ?India, the world’s largest consumer of gold, demands 900 tonnes of physical gold a year. ?Just in the second quarter, consumer gold demand increased 38% in India, and 25% in China. ?Other countries around the world are taking note of the benefits that come from precious metals. ?South Africa, a top platinum producer and gold exporter, is in the early stages of looking at developing its own metals exchange as the government tries to boost national revenues and employment.

Yahoo!: Stifel Ups To Buy; Prospects Of A Sale Rise

Shares of Yahoo! (YHOO) are up 13 cents, or 1%, at $14.09 this morning after Stifel Nicolaus’s Jordan Rohan raised his rating on the stock to Buy from Hold, with an $18 price target, arguing the chances have increased for a buyout of the company.

“The likelihood of a buyout has increased to 80%, in our view,” writes Rohan, given the diminished profit picture. He recently cut his estimate for the company’s 2012 Ebitda to $1.54 billion from $1.7 billion.

“At some level, bad means good (for YHOO shareholders), as faltering fundamentals weaken the case that Yahoo should remain independent.” Put another way, the weakening fundamentals have “prioritized the outright sale of the company.”

Rohan expects Microsoft (MSFT) could play in any private equity deal that might happen, given its search advertising interests are tied up with Yahoo!

The value of Yahoo!’s stake in China’s Alibaba Group is probably $10 per share, though it’s possible someone could value it higher. He sees a bid for Yahoo! of as much as $22 being possible.

And on that note, I would observe that my friend Eric Savitz at Forbes this morning confirms through an independent source what Kara Swisher of AllThingsD first reported this morning, namely that private equity firms Silver Lake and Russia’s DST Global are leading a $1.6 billion tender offer for a roughly 5% stake in Alibaba, valuing the company at $32 billion.

Kara notes Silver Lake and DST are cooperating with something called Yunfeng Capital, which is a China-based private equity firm founded by Alibaba’s Chairman and CEO Jack Ma.

Eric notes in his article that would increase Yahoo!’s 39% ownership stake in the company to $12.48 billion , leaving aside liquidity and tax issues.

Update: DST and Silver Lake issued a formal press release confirming they are committing to making an investment in Alibaba, without disclosing any amounts, “in part” through a tender to employees and options holders and “certain other shareholders.” As Kara wrote, Yunfeng will take part. The tender will commence today and is expected to close in six weeks’ time.

Silver Lake’s head of Asia operations, Kan Hao, is quoted in the release as saying, “Alibaba is a technology company of profound importance and growth potential. We have developed a strong relationship with Alibaba��s management over several years, and this commitment reflects our confidence in the company��s leadership position and the growth of the e-commerce market in China.��

Buy Gabelli Global Gold for appreciation and its dividend

Gabelli Global Gold, Natural Resources & Income Trust (AMEX:GGN)–This non-diversified, closed-end management fund invests in the equity securities of companies principally engaged in the gold and natural resources industries. It has provided a steady dividend return as well as a way to participate in major mining stocks.

I have recommended GGN many times over the last two years, especially when it pulled back to where its dividend yield surpasses 10%.

There has been much written lately about the undervalued condition of the gold mining stocks, and GGN appears to again provide a way to participate in a resumption of higher gold prices without the volatility associated with other gold-related investments. Buy now for both appreciation and yield.

Trade of the Day �C Gabelli Global Gold, Natural Resources & Income Trust (AMEX:GGN)

Trade of the Day Chart Key

  • See Sam Collins�� Daily Market Outlook: Nasdaq in Dangerous Territory
  • See Serge Berger��s Daily Market Outlook: The Number the Bulls Must Conquer
  • See Serge Berger��s Trade of the Day: Can UPS Deliver Profits?

The Winning Streak Continues for Gold & Silver Investors

On Wednesday, gold?(NYSE:GLD) futures for December delivery jumped $23.10 to settle at $1,723.50 per ounce, while silver (NYSE:SLV)?futures gained 26 cents to settle at $33.31.? It marked the fourth consecutive day of gains for the two precious metals.

Investing Insights: Are Gold & Silver Investing Safe-Havens Again?

The euro soap opera decided to toss in some action this week.? Discussions over economic reform actually came to blows between two Italian deputies during parliament today.? Members of the ruling right-center party, Northern League, fought with members of the opposing FLI (Future and Freedom for Italy) party over sarcastic comments aired on television regarding the Northern League leader��s wife.? The US dollar (NYSE:UUP) received a boost against the euro, but dropped to a record low against the Japanese yen.

In afternoon trading, gold miners (AMEX:GDX) Barrick Gold (NYSE:ABX) and AngloGold Ashanti (NYSE:AU) climbed 1.5% and 1% higher, respectively.? Shares of Yamana Gold (NYSE:AUY) did not participate in today��s rally as shares fell more than 3%.

Silver miners (NYSE:SIL) First Majestic (NYSE:AG) and Fortuna Silver Mines (NYSE:FSM) both gained nearly 2% before the close.? Yesterday, First Majestic announced it would probably fall short of producing 8 million ounces of silver equivalent in 2011, but investors do not appeared to be worried, as shares continue to rise.? Analysts maintain an average price target of about $24.

Progress Down 10%: Sees FYQ4 Below Estimates

Shares of Progress Software (PRGS) were halted at 4:27 pm, Eastern, just before the company reported fiscal Q3 revenue and profit ahead of estimates but forecast this quarter and the year below expectations.

The stock is expected to start trading again at 5 pm, Eastern. It closed up 42 cents, or 2%, at $19.39.

Revenue in the three months ended in August fell slightly, year over year, to $128.4 million, yielding EPS of 31 cents, down roughly a third from the year-earlier level, excluding some costs.

That was better than the $128.05 million and 29 cents the Street had been expecting.

CEO Richard Reidy remarked that the company’s results were mostly held back in the division called Enterprise Business Solutions, or ESB, where companies were frozen with uncertainty about the direction of the economy.

“The challenging macroeconomic environment in August, particularly within financial services, led some customers to postpone their purchasing decisions,” he said. “With our focus on solution selling, delays in closing larger deals have a material impact on our quarterly results. Though we have greatly improved our sales capabilities over the last year, we are not consistently performing at desired levels.”

For the current quarter, fiscal Q4, the company sees revenue in a range of $130 million to $134 million, and EPS of 30 cents to 33 cents. That is below the average estimate of $145 million and 42 cents.

Update: Progress shares have resumed trading and are down $1.89, or 10%, at $17.50 in late trading.

1-Star Stocks Poised to Plunge: Pandora?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, online radio company Pandora Media (NYSE: P  ) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at Pandora's business and see what CAPS investors are saying about the stock right now.

Pandora facts

Headquarters (Founded) Oakland, Calif. (2000)
Market Cap $2.39 billion
Industry Broadcasting
Trailing-12-Month Revenue $203.3 million
Management Chairman/CEO Joseph Kennedy
CFO Steven Cakebread
Trailing-12-Month Net Income Margin (4.4%)
Cash/Debt $95.31 million / $0

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 73% of the 390 members who have rated Pandora believe the stock will underperform the S&P 500 going forward. These bears include fellow Fool Charly Travers (TMFCandyMountain), who is ranked in the top 0.5% of our community, and Jbay76.

Late last month, Charly nicely summed up the Pandora bear case:

Love the business as a consumer but not as an analyst. There's no scale. Royalty costs go ! up as mo re people listen. Also those listeners are going from desktops to mobile where ad rates are lower so that hurts revenue. Red thumb.

In fact, Pandora currently trades at a lofty price-to-sales ratio of 11.7. That represents a clear premium to online music threats like Amazon.com (Nasdaq: AMZN  ) (2.6), Apple (Nasdaq: AAPL  ) (3.7), and Google (Nasdaq: GOOG  ) (5.3).

CAPS member Jbay76 expands on the underperform argument:

How can P, and therefore their investors, make money when their biz model is such that they lose money on every new customer? These guys have stated in their filings that they will be losing money every quarter through 2012 and that there is no indication that they can modify existing contracts with music industry in 2015 to make their biz model profitable. When a company flat out tells you it will lose your money, why are you gonna race to own a piece of that company?

What do you think about Pandora, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!

The Quiet Buying Of Shale Gas Assets

The Financial Times notes in an articleWednesday how M&A activity in the shale gas arena reached almost $50BN during the third quarter, a 135% jump from a year ago. Some deals were large and notable, such as Kinder Morgan's (KMP) purchase of El Paso. Others took place out of the spotlight, but what is clearly taking place is a growing acknowledgment by the major energy companies that domestic natural gas in the U.S. will represent an increasingly important source of energy production.

It's here in the U.S., it's cleaner than other fossil fuels (though global warming is yesterday's story) and it's persistently cheap. The very success of so many E&P companies in drilling for natural gas has depressed its price, helping consumers but hurting profitability. When Petrohawk (HK) sold its business to BHP Billiton it confirmed CEO Floyd Wilson's oft-stated belief that the assets Petrohawk owned better belonged within a larger company with a lower cost of capital. That statement really is the key to the natural gas story. In a time of abundant and cheap natural gas, the company that has the lowest overall cost structure (including the cost of financing the necessary capex) will win.

As an investor, you have to choose carefully though, and definitely avoid companies that use too much leverage. As a result we've never invested in Chesapeake (CHK). Aubrey McClendon is a great cheerleader for the industry but has exhibited a wholly different risk appetite in the past than we would like. We continue to like Comstock (CRK), a name that's fallen too far. We also think Devon Energy (DVN) is a solid investment trading as it does close to the value of its proved reserves (providing a cheap option on likely but not yet proven assets) and with half its revenue now coming from crude oil production! . It's a lso all onshore, having divested its offshore and non-U.S. assets in recent years.

But Master Limited Partnerships (MLPs) also allow an interesting angle on the development of shale gas assets. Once the gas is extracted it needs to be processed, refined, transported and stored. This is to a large degree what drove KMP's acquisition of El Paso; positioning for the huge infrastructure investments required to move natural gas from under the ground to the U.S. consumer. I found it interesting that earlier this month JPMorgan initiated research coverage of MLPs. It used to cover them but the analyst left several years ago and it dropped their emphasis on the sector. But JPMorgan estimates $130BN in capital investment over the next ten years as the industry responds to a shifting mix of fuels to provide energy. The tax status of MLPs precludes them from retaining much of their earnings, so new projects are usually funded with freshly raised debt or equity capital.

For an investor this imposes discipline on management, since a poorly conceived project won't easily attract cheap financing. JPMorgan no doubt sees an attractive long-term fee opportunity. Meanwhile, there are ways to participate in shale gas development for the equity investor through E&P companies and the income seeking investor through MLPs. The sector has also recovered strongly from the sell-off in equity markets through September - the Alerian MLP Index is back within 5% of its high reached in April. 6% distribution yields and steady growth help.

Disclosure: I am long CRK, DVN, KMP.

NYT: Q3 EPS Beats By A Penny As Digital Subs Rise 15%

Shares of The New York Times (NYT) are up 35 cents, or 5.4%, at $6.87, after the company this morning slightly missed Q3 revenue expectations but beat by a penny on the bottom line.

The Times said it ended the quarter with 324,000 paying subscribers to its Times digital edition “package,” and various e-reader subscription options, combined. That’s an increase of 15% from the 281,000 the company recorded at the end of Q2.

Revenue in the three months ended in September fell 3.1%, year over year, to $537 million, yielding 5 cents a share in profit, excluding some costs. Analysts had been modeling $543 million and 4 cents.

Ad revenue dropped 8.8% but circulation rose 3.4%, with print ad revenue was down 10.4%, while digital revenue rose 4.5%. Circulation revenue was boosted by new subscribers to the Times’s digital edition.

Operating costs fell 3.6% to $504 million.

The company said its circulation revenue will rise “in the low to mid single digits” this quarter, while operating costs will decline by the same percentage.

In a note to clients shortly after the results, Citigroup’s Leo Kulp, who rates the shares a Buy, writes that costs were better than expected, and that the 100,000 additional payday subscribers was fewer than the 125,000 he was expecting, but probably more than the Street was looking for.

The circulation outlook, moreover, is not what he would have hoped for the current quarter, though costs decline is better than he’d hoped for.

Kulp reiterates a $7 price target on the stock.

10 ETFs Moving into Buy Range

These funds should continue to improve as the markets continue to recover from the disaster that was September, writes Peter Way of Block Traders’ ETF Monitor.

Leveraged ETFs
There has been no subtle shift towards opportunity in leveraged long ETFs, when compared with our last letter. Back then, we saw only four out of 30-plus candidates as buyable.

Our practice requires risk-balanced return prospects that are multiplied by the leverages present, in order to be considered for a buy recommendation. Now, three of those are slightly short of that hurdle. Only DRN, an ETF investing in REITs, meets the test.

Shudder again, as you may have a fortnight ago about actually putting money into that persistently troubled sector. But the time to buy is when they’re on sale.

So, maybe the market turn is not convincingly upon us yet. Still, at least much of the “bottomless pit” uncertainty should be dissipated.

Broad ETFs
When looking at the broader-oriented ETFs, those tracking market indexes or the sector measures, there is no enthusiasm yet for a big rally. Nothing in either set meets our buy recommendation criteria.

To find opportunity we must probe those ETFs that are more narrowly focused, at the commodity, industry, or geographic level.

The best-priced of this set is IBB, a holder of stocks in the Nasdaq Biotech index. Its current forecast gives it about four times as much upside as downside exposure. In over four years, it has had this favorable an appraisal less than 2% of the time.

When that has been the case, end-of-day market quotes for IBB in the following three months have been higher than at the time of forecast 87% of the time, or seven out of every eight market days. Those gains averaged 7.8%, compared to the few drawdown days, which averaged -2.7%, a ratio of better than 3 to 1.

The com! bination of high odds and favorable payoffs rank IBB as better than 98% of all 2,100 stocks and ETFs in our covered population.

Other industry-oriented ETFs that meet our 5% prior risk-balanced return in three months are CU, NLR, FDN, and FBT. CU holds stocks of worldwide copper miners, NLR has nuclear-energy stock holdings, FDN tracks the DJ Internet index, and FBT tracks a different biotech index than IBB.

Commodity ETFs
The 5 ETFs qualifying buys in commodity-based ETFs are all precious metals-related. Three deal mainly in gold, and the other two in silver.

IAU holds physical gold, against which ETF shares are issued. When priced as it is now, in relation to forecast prices, subsequent quotes were at a profit compared to the time of forecast 84% of the days of the following three months. Gains averaged 7%, while drawdowns of only -2% were minimal, ranking IAU as better than 98% of alternatives.

SGOL is another physical gold holder in Switzerland. Its drawdowns have been even more miniscule, only -1%, against similar 7% gains, coming nine out of every ten market days.

DGL uses gold futures to track price changes in the metal. Its performance in periods of prior forecasts like the present has been at a 8% level, but with -4% drawdowns and a frequency slightly better than three out of four days. Still, due to present market concerns, it ranks better than 95% of all stocks and ETFs on our risk-reward performance scale.

Similarly, DBS tracks the price changes in silver by using futures. A more volatile experience, silver’s price can be more severely impacted by smaller capital commitments, and DBS has registered average gains of 18% from forecast proportions like those at present. Along with the gains have been drawdowns averaging -13%. Despite the negatives, the annual gain rate at 95% is enough to earn it a rank b! etter th an 95% of other possible present choices. Wild and wooly, the excitement quotient here is quite high.

SLV tracks silver price changes by means of securities rather than physically holding the metal, but has done it effectively at present forecast balances. Gains historically have averaged 12% in three months about 2/3 of the time, with drawdowns of -8% on average.

  • 5 ETFs to Ride the Market Uptrend
  • The 2 Best Tactical ETFs to Buy Now
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Shorting These Stocks Could Crush You

With the sovereign debt crisis in Greece reaching new heights and the threat of contagion raising ugly reminders of the U.S. financial crisis three years ago, investors have run away from European investments faster than a BMW driving down the Autobahn. Increasingly, hopes that the European Central Bank and the stronger economies of the eurozone might reach some consensus on reforming the ailing credit markets on the continent are fading as regional bickering takes precedence over concrete solutions.

In fact, some investors who are eager for a chance to profit from a European financial crisis are salivating at the idea of selling Europe short. But before you make a big bet on Europe's downfall, you should take a step back and look at all the ways in which things could go dramatically wrong with such a move.

The dangerous world of currency investing
Just last week, I asked whether the U.S. dollar had finally hit bottom. With Europe's governments at an impasse on how to deal with Greece and other weak eurozone economies, the euro has already lost a lot of ground against the dollar.

The simple rule of the past several years is that if you want to make a bet on something, there's an exchange-traded fund that will make it easy for you. Shorting the euro is no exception, as you have a couple of choices. Selling shares of the CurrencyShares Euro Trust (NYSE: FXE  ) short would help you profit from a downward move in the euro, and buying the inverse levered ETF ProShares UltraShort Euro (NYSE: EUO  ) could potentially give you even more profits -- albeit with the added risk that levered ETFs bring.

But before you think your currency bet is a sure thing, remember what happened with the Swiss franc earlier this month. Until recently, investors saw Switzerland's currency as a much safer haven than the dollar, due in part to the country's budget surpluses, l! ow unemp loyment, above-average economic growth, and low levels of government debt. Investors piled into franc investments like CurrencyShares Swiss Franc (NYSE: FXF  ) .

Then, the Swiss National Bank pulled the rug out from under investors, announcing several measures, including a currency peg between the franc and the euro, that resulted in a drop of about 20% from the franc's recent highs. In other words, despite the franc's obvious strength against the euro, investors suffered dramatic losses because the governments involved saw the continued stability of the eurozone as a more important policy goal than preserving their own financial superiority. That could easily happen in the U.S. as well, with competitive devaluation continuing and short-euro bets backfiring -- not to mention the potential bloodbath shorts could suffer if Europe actually manages to solve its problems.

Venturing into stocks
In many ways, those betting against European stocks are taking on even more risk. In order for shares of European companies to take hits, not only does Europe need to continue struggling economically, but the size of those home-market hits for multinationals has to outweigh the benefits of a weaker euro for their international business.

For many companies, that simply doesn't seem likely. For international giants like SAP (NYSE: SAP  ) , which gets more than half its revenue from outside Europe, and Siemens (NYSE: SI  ) , for which Europe accounts for around 60% of sales, a euro crisis would hurt but not be fatal. Moreover, because these companies have concentrations in the stronger parts of the eurozone, such as Germany, they might actually benefit in the long run from cutting out the weaker countries from the common currency scheme. Similarly, even companies like Spain's Telefonica (NYSE: TEF  ) and Italy's Luxottica (NYSE: LUX  ) have enough presence beyond their home markets that they shouldn't collapse even if Greek problems spread to the Spanish and Italian economies.

Profit from panic
When investors run away from an entire region, they inevitably throw out the baby with the bathwater. By searching for the investments that are wrongly associated with a stampede away from an entire stock market, you can pick up some great bargains that stand a great chance of eventually paying off.

Currency ETFs may not be the safest way to play international markets, but that doesn't mean you can't find profitable investments. Read the Fool's free special report on ETFs to get the name of one smart international play that capitalizes on emerging markets for big profits.