Provident Energy Ltd (USA) achieved New Top Price of 12 months - NYSE:PVX

Provident Energy Ltd (USA) (NYSE:PVX) achieved its new 52 week high price of $9.88 where it was opened at $9.41 up 0.37 points or +3.91% by closing at $9.83. PVX transacted shares during the day were over 3.28 million shares however it has an average volume of 1.22 million shares.

PVX has a market capitalization $2.67 billion and an enterprise value at $3.04 billion. Trailing twelve months price to sales ratio of the stock was 1.38 while price to book ratio in most recent quarter was 4.58. In profitability ratios, net profit margin in past twelve months appeared at -9.10% whereas operating profit margin for the same period at 11.41%.

The company made a return on asset of 9.43% in past twelve months and return on equity of 23.15% for similar period. In the period of trailing 12 months it generated revenue amounted to $1.87 billion gaining $9.96 revenue per share. Its year over year, quarterly growth of revenue was 23.90% holding 439.00% quarterly earnings growth.

According to preceding quarter balance sheet results, the company had $36.31 million cash in hand making cash per share at 0.13. The total of $507.69 million debt was there putting a total debt to equity ratio 89.96. Moreover its current ratio according to same quarter results was 1.33 and book value per share was 2.07.

Looking at the trading information, the stock price history displayed that its S&P500 52 Week Change illustrated 1.62% where the stock current price exhibited up beat from its 50 day moving average price $9.16 and remained above from its 200 Day Moving Average price $8.69.

PVX holds 272.02 million outstanding shares with 269.92 million floating shares.

Is Nokia's Windows Phone 7 Debut Absolute Garbage?

Depending on who you talk to, it might not matter.

Earlier today, CNBC tweeted the following question: ��How would you rebrand Research in Motion and its BlackBerry?��

This inspired a few thoughts from my colleague, Sam Mattera, who said that he thinks Research in Motion (NASDAQ: RIMM) should switch to Android but keep the keyboard.

��[It could] be a premier Android phone with a keyboard,�� he said. ��There's a market for people who want a keyboard.��

Indeed, I have known and worked with several people who said that one of the primary reasons why they would never buy an iPhone is because it does not have an actual keyboard.

This suggestion was not in dispute. But as someone who values variety (and appreciates what good competition can do for an industry), I told Sam that I felt it would be a mistake for Research in Motion to play a game of follow-the-leader and bring Android to future BlackBerry phones. ��I disagree, there's network affects,�� Sam replied. ��Reducing [the] number of [mobile operating systems] is ideal.��

Sam's view is shared by one very prominent group: software developers. They would love to be able to design their apps for one platform, sell them on a thousand devices, and reach as many consumers as possible. This has been the software developer's dream for generations. They want it with game consoles, they want it with mobile phones, and though they know they'll never get it, they'd love to have it with computers as well.

Nonetheless, I reminded Sam that reduced competition is never a good thing.

��It is sometimes,�� he replied. ��Take HD-DVD and Blu-ray.��

That's an interesting point, but it's not an accurate comparison. Video players, whether of the cassette or disc-based form, have one specific goal: to play and/or record video. While Sony (NYSE: SNE) has added Internet connectivity and other features to its Blu-ray players, the core functionality has always been the same.

How is this any different from game co! nsoles, which have always had more than one format? With video games, you have a multitude of features to consider: graphic quality (ex: Xbox was more powerful than PlayStation 2), disc memory (PlayStation 3's Blu-ray discs hold more gigabytes than an Xbox 360 DVD), controller format (is the game better suited for a Wii remote or standard PlayStation controller?), and online services (Sony has PSN, Microsoft (NASDAQ: MSFT) has Xbox Live, etc.). These are just a few of the variables that can vastly change a game's development.

Consumers were essentially trained to play more than one game console. Through that training, we ultimately explored each offering, fell in love with select brands, and discovered the value of owning more than one game machine.

This is a vastly different experience from that of a video player. A 10-year-old DVD player is still capable of playing my brand-new copy of Harry Potter. No, it can't play the Blu-ray version. But that doesn't really matter because the core function of the old DVD player is still being utilized with both old and new DVDs.

The same cannot for game consoles. After five or six years, game consoles really start to age. We need new machines to keep pushing the boundaries of interactive entertainment. Without this ongoing evolution, we'd still be playing Pong. But without Blu-ray, we'd still have DVD. Without DVD, we'd still have VHS, and the world of movies would remain unchanged. If anything, streaming and digital distribution stands to change movies more than the cassette and disc formats.

Then we have mobile phones. Sam said that we (consumers) want lots of different phone models, which is true. He said he wouldn't want 50 different operating systems, which is also true to an extent, but only because that would limit the amount of software that each device could run.

��[Suppose] you want this app but it's only on this OS,�� Sam explained. ��You want [another] app [but] it's on OS 2. [That's a] pain in the ass for consumers!��

Again,! Sam is right �C it is a pain for consumers.

The problem is that if we sacrifice diversity for simplicity and universal connectivity, we are doomed to a world of stagnant growth and weak innovation.

Right now, Apple (NASDAQ: AAPL) is driven by its desire to produce the number-one mobile OS in the world. The iPhone maker knows that while Google (NASDAQ: GOOG) is its biggest threat, there are other corporations that could be just as challenging. Thus, Apple continues to release iOS upgrades that are jam-packed with new features. Those features may not be everything we want. But more often than not they are a step in the right direction.

Similarly, if it weren't for Google's fear of losing to Apple, the search engine giant wouldn't have pushed so hard to make Ice Cream Sandwich the best version of Android.

Apple and Google are also threatened by Windows Phone 7, which takes us back to the subject of the story: is Nokia's (NYSE: NOK) Windows Phone 7 debut absolute garbage?

As I stated at the beginning of this article, the quality of Nokia's phone does not matter. American consumers have not been interested in the Nokia brand for a long, long time. They have already chosen their favorite phone manufacturers: Apple, Samsung and HTC. To most Americans, Nokia is an afterthought, Motorola (NYSE: MMI) is dead weight, and Research in Motion is a sinking ship.

The ironic thing about these consumer choices is that they could eventually create the two-horse raise that my colleague desires. Microsoft and Research in Motion won't perpetually produce operating systems if consumers aren't buying them.

If that's the fate of the mobile market, then so be it. But we shouldn't oust the competition by default and make it easier for Apple and Google to get lazy. When that happens, consumers will long for the variety they once had but were too blind to appreciate.

Follow me @LouisBedigian

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Traders who believe that the future of mobile phones is with iOS and Android should note that:

  • Whether it's a two-horse race or a free-for-all battle among many OS makers, Apple and Google will continue to lead the pack of mobile operating systems in the coming year.
  • With fewer operating systems available, Glu Mobile (NASDAQ: GLUU) could reduce its expenses and sell more games to more consumers.

The demise of non-Apple, non-Google operating systems could be imminent, but that doesn't mean you can't take action:

  • Nokia might provide investors with a short opportunity. The stock is down this afternoon (a fact that Benzinga Pro members were alerted to first), perhaps on fears that Windows Phone 7 wasn't the best platform for the company's latest phone.
  • Though it might be too soon to entirely dismi! ss Resea rch in Motion, the company's stock has been going downhill since March, paving the way for another potential short.
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

BMC Software, Inc past twelve months Gross Margin Remained 76.78% - BMC

BMC Software, Inc. (NASDAQ:BMC) recently hit 52 week peak price $49.62, opened at $48.56 scored +1.83% closed $49.51. BMC traded on over 1.87 million shares in comparison to average volume of 1.68 million shares.

BMC has earnings of $452.00 million and made $1.99 billion sales for the last 12 months. Its quarter to quarter sales remained 6.26%. The company has 177.67 million of outstanding shares and 178.24 million shares were floated in the market.

BMC has an insider ownership at 1.07% and institutional ownership remained 98.90%. Its return on investment (ROI) for the last 12 month was 16.14% as compare to its return on equity (ROE) of 31.04% for the last 12 months.
The price moved ahead 2.65% from the mean of 20 days, +4.07% from 50 and went up 20.03% from 200 days average price. Company��s performance for the week was 1.43%, +4.52% for month and yearly performance remained 35.79%.

Its price volatility for a month remained 1.73% whereas volatility for a week noted as 1.41% having beta of 0.71. Company��s price to sales ratio for last 12 months was 4.41 while its price to book ratio for the most recent quarter was 4.41 and its earnings before interest, tax, depreciation and amortization (EBITDA) remained 1.50 billion for the past twelve months.

3 Things You Should Know About Small Business: Dec. 15

What's happening in small business today?

1. How to legally change the structure of your growing business. Your business is growing and now it's time to make sure that the legal structure of your small company fits with its size.

"Gaining protection against personal liability, seeking a break from excessive bookkeeping, dissolving a partnership and more" are among the reasons to think about a change, according to a blog on the Small Business Administration's Web site written by marketing consultant and small-business owner Caron Beesley.

The vast majority of small businesses are sole proprietorships and can be vulnerable to personal liability for business debts and obligations. Limited liability companies offer protection for the owners' personal assets in the event of lawsuit or debt. Business owners who are thinking of significantly growing their businesses or seek outside investment should structure the business as a C corporation, Beesley says.

Beesley offers details on how to switch between the various entities or dissolve a partnership if needed. Four steps should be on a business owner's checklist to change their legal structure, including registering with state and local agencies; registering with the IRS; reapplying for business licenses; and communicating the change to banks, insurance companies, customers and vendors.

2. What about closing a business? The economy is still struggling and small-business owners are bearing the brunt. If it's time to close your business, Small Business Trends provides some tips on how to best do that without getting in trouble with authorities.

Formally shutting a business isn't that complicated, but for tax purposes it's better to wrap things up before 2012.

Business owners need to make sure they dissolve their LLC or C corp; pay off debts associated with the business; distribute remaining assets to the owners; cancel permits, licen! ses or f ictitious business names; and notify the IRS, among other things, the article says. 3. Federal contracting is down. What does that mean for small businesses? The U.S. government is the world's largest single buyer of goods and services, but even it is not recession proof. Federal government contracting spending amounted to $461 billion in fiscal year 2011, down 14% from the previous year, according to American Express (AXP) OPEN.

For the second year AmEx has surveyed 740 active small-business contractors to look at trends; it plans to publish the findings in four installments. Among what's already known:

Small businesses are spending more time and money to seek out federal contracting opportunities. On average they spent $103,827, up 21% from the previous year. But they are bidding less as the contracting environment becomes more competitive. Average success rates in prime and subcontracting have declined,.

Small-business contractors reported that they had to submit an average of 4.4 bids before they won their first prime federal contract. Once they succeeded, they wasted little time in trying -- and succeeding -- for more bids.

It is encouraging to note that AmEx OPEN believes that 2012 will bring more opportunity for small businesses to work with the government. There is plenty of opportunity for niche businesses, such as women- and minority-owned businesses and green companies, says AmEx OPEN's adviser on government contracting, Lourdes Martin-Rosa.

There is also "tremendous" government contracting opportunities in construction, engineering and architecture, as well as a high demand for IT services, Martin-Rosa says.

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As Starbucks Stores Brim To Overflowing, Investors Sell The Stock

The stock market was unsettled by Starbucks quarterly results. Revenue rose a very modest 9% to $2.6 billion, which is not impressive given the economic recovery of middle and upper class discretionary spending. Comparable store sales also rose 9%. Net income rose 41% to $209 million, which shows that the company has developed a the consistent cost discipline that eluded it for years.

Starbucks forecast fiscal 2011 earnings of between $1.36 a share and $1.41 a share, which was below the consensus forecast of $1.41 a share profit.

Starbucks stores have begun to fill up again and its store closings of two years ago may haunt it.Starbucks may find that is does not have enough locations to accommodate a growth rate greater than it had last quarter. Instant coffee, loyalty programs, and free internet service bring in customers, but whether they are mostly new customers is a matter of speculation. When Starbucks retrenched in the middle of 2008, it probably lost its chance to pick up large numbers of new consumers that might have come back to buy coffee that costs $4 a cup.

Starbucks fired 12,000 people in July 2008 to help offset the financial damage that the recession had caused. The coffee company also closed 600 stores. Starbucks plans to open 500 new stores in the US and overseas in fiscal 2011, but it will have lost the chance to exploit the improvement in the economy that is happening now. Ironically, what saved Starbucks money two yeas ago, may cost it sales this year and next.

The evidence that Starbucks stores are overfull, seating is scarce, and lines are long is anecdotal. The crush of customers will cause some potential consumers to walk in and walk back out immediately because waiting is never pleasant.

Starbucks’s period as a growth company ended when it made its retreat. The company increased its cash dividend by 30% to $.13 per quarter. Dividend increase are hallmarks of mature corporations.

Somewhere among those 600 shu! ttered s tores there was a seed of growth for 2010 and 2011, and Starbucks probably killed that off too early. Cheap gets expensive.

Douglas A. McIntyre

Six Things That Have Completely Changed for Investors

By David Sterman, StreetAuthority

Friday's employment report has created an even hazier backdrop for stocks. Recent economic data showed an economy starting to cool, but with 244,000 jobs created in April -- the best showing in 11 months -- this expansion still may have legs after all. The key distinction: the economy's areas of support are not what you would have expected a few months ago.

In recent weeks and months, investors have been trying to assess stocks in the context of a sharp spike in commodities -- from oil to silver to wheat. Only recently, we've seen how the massive flooding in the Midwest is leading to forecasts of sharply falling farm output and eventually, higher food prices. Consumers didn't need to hear that while gasoline prices were eating a hole in their pocketbooks.

Despite that, stocks were able to rally through much of April, thanks to a declining dollar that was boosting prospects for U.S. blue chips. In effect, the domestic economic picture looked troubling, while the rest of the world promised to provide at least a decent tailwind.

That scenario now looks backward, as former global growth pillars are starting to wobble. Efforts to slow the Chinese economy may be taking effect, as a range of data points in that all-important economy imply that growth in 2011 may move down to the mid single-digits from a seemingly never-ending run of nearly double-digit GDP growth. Brazil is trying to curb inflation, efforts of which have not always yielded soft landings. And in just a few trading sessions, high-flying commodities such as silver and oil have sharply pulled back while the dollar has begun to rebound. Many are suddenly shifting their sights back to the United States as an engine ! of growt h. Friday's jobs report simply underscores that notion.

GM's (GM) first-quarter results help tell the story. The automaker earned $908 million from its foreign operations a year ago. That figure dropped to $480 million in the recent first quarter. The company's chief financial officer, Daniel Ammann, told investors that GM's growth rate in China "is at 10% to 15%, down from the 40% to 50% we've been seeing." Profits also fell sharply in South America from a year ago and Europe remains unprofitable. Here in the United States, GM is doing quite well: Earnings (before interest and taxes) at the North American division were about $1.3 billion, $100 million higher than a year ago. Merrill Lynch thinks North American earnings before interest and taxes will average around $2 billion for each of the next three quarters.

What It Means

For investors, the question is whether today's jobs report (and the subsequent rally after four straight down sessions) means it's time to keep fully-exposed to the market. The answer is a qualified yes (I never like to be fully exposed, as it's nice to have cash set aside for major pullbacks that create value). Yet even as it pays to stay invested, the investing themes are now changing.

These changes include the following:

1. Airline stocks could really move into favor if oil keeps pulling back and U.S. job creation remains respectable. Oil has quickly moved from $114 last week to just under $100 late this week. It's no coincidence that the Amex Airline Index (XAL) has surged 10% since April 19. [My colleague Ryan Fuhrmann profiled airlines a month ago.]

2. In a similar vein, the automakers such as GM and Ford (F) have been penal! ized for the fear that $4 gasoline will hurt truck sales. If gasoline falls back to $3.50 in coming weeks, then these stocks could get a relief rally. The same logic applies to auto-parts makers. American Axle (AXL), for example, trades for just six times projected 2012 profits after a recent slide. Shares of RV maker Winnebago (WGO) took a big hit from rising oil prices. Might the converse also be true?

3. You can't ignore retail. Consumer spending remains subpar, but if the private sector can create a million more jobs between now and year's end, then spending is bound to get a boost. Big retailers don't appear especially cheap, so I'm focused on the names that have had poor execution up until now such as Best Buy (BBY), and Aeropostale (ARO), along with small caps Casual Male (CMRG) and CitiTrends (CTRN).

On the downside of the ledger:

4. Commodity plays may have further to fall until they are bargains -- especially if concerns build that the Chinese economy is slowing. For example, I suggested in mid-April that shares of silver miner Couer D'Alene Mines Corp. (CDE) were due for a pullback. Shares have dropped 20% since then and will soon enough represent a bargain. But we're not there yet.

5. You also need to avoid the temptation to try to spot bargains in Japan. The country's blue chip exporters are dealing with the effects of the continued plant shutdowns as well as a super-strong yen that is making companies' exports less competitive. I hate to be alarmist, but Japan may be headed for a deep financial crisis if its economy doesn't generate the growth required to tackle its massive government debt.

Any such crisis in Japan, which holds a good chunk of the United States' debt, could create indigestion for U.S. stocks.

6 . A dimming outlook for Europe and Asia could also create headwinds for high-tech companies, many of which derive a substantial amount of profits from foreign markets. As this chart shows, the iShares DJ Technology Index (IYW) has benefited from expectations that global economic growth will take off in the periods ahead.

It's not time to be bearish on tech stocks, but many of the biggest tech firms such as Oracle (ORCL) will be hard-pressed to generate double-digit profit growth in coming years -- unless they pull off major acquisitions or buy back a lot of stock. You want to see this sector newly-cheapened before jumping in again.

Action to Take: A little-noted item in the jobs report bears watching. The headline figure showed that 244,000 jobs were created, which is even more impressive when you consider that government payrolls continue to shrink. Job creation in private sector was really robust: 268,000 private sector jobs were created in April -- the best monthly showing in more than five years. That figure may cool in coming months, but as long as private-sector job creation stays above the 200,000 monthly mark, then the economic upturn will become self-reinforcing. Dropping food and gas prices could help really brighten the outlook for the U.S. consumer in coming quarters. And if you keep the six points I mentioned above in mind, you should be well-positioned to avoid pitfalls and profit accordingly.

Disclosure: Neither David Sterman nor StreetAuthority, LLC hold positions in any securities mentioned in this article.

Ship Finance International's Shares Plunged: What You Need to Know

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

What: Shares of global shipper Ship Finance International (NYSE: SFL  ) lost steam today, falling as much as 10.3% on fairly heavy volume.

So what: Over the weekend, Financial Times published a study of the shipping industry's dire financial straits. According to the story, nearly every shipper is in violation of loan covenants today and that raises the dual specter of consolidation and potential bankruptcies in the industry.

Now what: So why did Ship Finance fall far faster than DryShips (Nasdaq: DRYS  ) or Teekay (NYSE: TK  ) ? For one, Ship Finance's balance sheet is more leveraged, with total debt 240 times larger than the equity against which it's supposed to be balanced. Lehman Brothers would have killed for leverage like that. I wouldn't necessarily join the very large cohort of short-sellers here, because you just never know when the tide might turn and swamp your shorts, but I'd also advise you to stay clear of that oh-so-tempting 16% dividend payout. If something looks too good to be true, it probably is.

Is Ultra Petroleum's Stock as Cheap as Its P/E Ratio?

Numbers can lie -- but they're the best first step in determining whether a stock is a buy. In this series, we use some carefully chosen metrics to size up a stock's true value based on the following clues:

  • The current price multiples.
  • The consistency of past earnings and cash flow.
  • How much growth we can expect.

Let's see what those numbers can tell us about how expensive or cheap Ultra Petroleum (NYSE: UPL  ) might be.

The current price multiples
First, we'll look at most investors' favorite metric: the P/E ratio. It divides the company's share price by its earnings per share -- the lower, the better.

Then, we'll take things up a notch with a more advanced metric: enterprise value to unlevered free cash flow. This divides the company's enterprise value (basically, its market cap plus its debt, minus its cash) by its unlevered free cash flow (its free cash flow, adding back the interest payments on its debt). Like the P/E, the lower this number is, the better.

Analysts argue about which is more important -- earnings or cash flow. Who cares? A good buy ideally has low multiples on both.

Ultra has a P/E ratio of 13.8 and a negative EV/FCF ratio over the trailing 12 months. If we stretch and compare current valuations to the five-year averages for earnings and free cash flow, Ultra Petroleum has a P/E ratio of 23.2 and a negative five-year EV/FCF ratio.

A positive one-year ratio under 10 for both metrics is ideal (at least in my opinion). For a five-year metric, under 20 is ideal.

Ultra is zero for four on hitting the ideal targets, but let's see how it compares against some competitors and industry mates.?



1-Year P/E

1-Year EV/FCF

5-Year P/E

5-Year EV/FCF

Ultra Petroleum 13.8 NM 23.2 NM
Cabot Oil & Gas (NYSE: COG  ) 55.9 NM 53.5 NM
EOG Resources (NYSE: EOG  ) 26.5 NM 24.9 NM
Range Resources (NYSE: RRC  ) NM NM 145.1 NM

Source: S&P Capital IQ; NM = not meaningful because of losses.

Numerically, we've seen how Ultra Petroleum's valuation rates on both an absolute and relative basis. Next, let's examine...

The consistency of past earnings and cash flow
An ideal company will be consistently strong in its earnings and cash flow generation.

In the past five years, Ultra's net income margin has ranged from -72.8% to 59.2%. In that same time frame, unlevered free cash flow margin has ranged from -78.8% to -6.9%.

How do those figures compare with those of the company's peers? See for yourself:


Source: S&P Capital IQ; margin ranges are combined.

Additionally, over the last five years, Ultra has tallied up four years of positive earnings and no years of positive free cash flow.

Next, let's figure out...

How much growth we can expect
Analysts tend to comic! ally ove rstate their five-year growth estimates. If you accept them at face value, you will overpay for stocks. But while you should definitely take the analysts' prognostications with a grain of salt, they can still provide a useful starting point when compared to similar numbers from a company's closest rivals.

Let's start by seeing what this company's done over the past five years. In that time period, Ultra has put up past EPS growth rates of 11.1%. Meanwhile, Wall Street's analysts expect future growth rates of 16.6%.

Here's how Ultra compares to its peers for trailing five-year growth (because of losses, Range Resources' trailing growth rate isn't meaningful):


Source: S&P Capital IQ; EPS growth shown.

And here's how it measures up with regard to the growth analysts expect over the next five years:


Source: S&P Capital IQ; estimates for EPS growth.

The bottom line
The pile of numbers we've plowed through has shown us the price multiples shares of Ultra?are trading at, the volatility of its operational performance, and what kind of growth profile it has -- both on an absolute and a relative basis.

The more consistent a company's performance has been and the more growth we can expect, the more we should be willing to pay. We've gone well beyond looking at a 13.8 P/E ratio, and we notice that its EV/FCF ratios don't keep up with its P/E ratios. This is because of massive capital expenditures (which decreases free cash flow) and debt on its balance sheet (which increases enterprise value).

Potential investors should analyze whether those capital expenditures will result in future growth. Future energy prices will p! lay a bi g role as well as any company actions, though. Those are things to consider beyond the initial numbers. Check out my fellow analyst Paul Chi's thoughts as a next step. If you find Ultra's numbers or story compelling, don't stop. Continue your due diligence process until you're confident one way or the other. As a start, add it to My Watchlist to find all of our Foolish analysis.

To see the stocks that I've researched beyond the initial numbers and bought in my public real-money portfolio, click here.

Checking an Important, Overlooked Metric at ASM International

It takes money to make money. Most investors know that, but with business media so focused on the "how much," very few investors bother to ask, "How fast?"

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

Let's break this down
In this series, we measure how swiftly a company turns cash into goods or services and back into cash. We'll use a quick, relatively foolproof tool known as the cash conversion cycle, or CCC for short.

Why does the CCC matter? The less time it takes a firm to convert outgoing cash into incoming cash, the more powerful and flexible its profit engine is. The less money tied up in inventory and accounts receivable, the more available to grow the company, pay investors, or both.

To calculate the cash conversion cycle, add days inventory outstanding to days sales outstanding, then subtract days payable outstanding. Like golf, the lower your score here, the better.

Here's the CCC for ASM International NV, alongside the comparable figures from a few competitors and peers.


TTM Revenue


?ASM International $2,198 ?128
?Lam Research (Nasdaq: LRCX  ) $3,112 ?113
?Applied Materials (Nasdaq: AMAT  ) $10,517 ?121
?Aixtron SE (Nasdaq: AIXG  ) $935 ?200

Source: S&P Capital IQ. Dollar amounts in millions. Data is current as of last fully reported fiscal quarter. TTM = trailing 12 months.

For younger, fast-growth companies, the CCC can give you valuable insight into the sustainability of that growth. A company that's taking longer to make cash may need to tap financing to keep its momentum. For older, mature companies, the CCC can tell you how well the company is managed. Firms that begin to lose control of the CCC may be losing their clout with their suppliers (who might be demanding stricter payment terms) and customers (who might be demanding more generous terms). This can sometimes be an important signal of future distress -- one most investors are likely to miss.

While I find peer comparisons useful, I'm most interested in comparing a company's CCC to its prior performance. Here's where I believe all investors need to become trend-watchers. Sure, there may be legitimate reasons for an increase in the CCC, but all things being equal, I want to see this number stay steady or move downward over time.


Source: S&P Capital IQ. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.

Because of the seasonality in some businesses, the CCC for the TTM period may not be strictly comparable to the fiscal-year periods shown in the chart. Even the steadiest-looking businesses on an annual basis will experience some quarterly fluctuations in the CCC. To get an understanding of the usual ebb and flow at ASM International NV, consult the quarterly period chart below.


Source: S&P Capital IQ. Dollar amounts in millions. FQ = fiscal quarter.

On a 12-month basis, the trend at ASM International looks very good. At 128.3 days, it is 27.3 days better than the five-year average of 155.7 days. The biggest contributor to that improvement was DSO, which improved 23.9 days compared to the five-year average. That was partially offset by a 19.3-day increase in DPO.

Considering the numbers on a quarterly basis, the CCC trend at ASM International looks OK. At 167.8 days, it is 39.7 days worse than the average of the past eight quarters. Investors will want to keep an eye on this for the future to make sure it doesn't stray too far in the wrong direction. With quarterly CCC doing worse than average and the latest 12-month CCC coming in better, ASM International gets a mixed review in this cash-conversion checkup.

Though the CCC can take a little work to calculate, it's definitely worth watching every quarter. You'll be better informed about potential problems, and you'll improve your odds of finding the underappreciated home run stocks that provide the market's best returns.

To stay on top of the CCC for your favorite companies, just use the handy links below to add companies to your free watchlist.

  • Add ASM International to My Watchlist.
  • Add Lam Research ?to My Watchlist.
  • Add Applied Materials ?to My Watchlist.
  • Add Aixtron SE ?to My Watchlist.

You Said It: Should Drivers Be Barred From Talking on the Phone?

We asked readers on Facebook what they thought about the National Transportation Safety Board's recommendation that all cell phones, including hands-free devices, should be banned while driving, and the response was enthusiastic.

On Tuesday, the NTSB recommended a full ban on cell phones and text messaging while driving as a continuation of the Board's battle against distracted driving. "No call, no text, no update, is worth a human life," NTSB Chairman Deborah A.P. Hersman said in a statement.

The NTSB noted an accident in Missouri last year where the driver of a pickup truck, who was sending text messages while driving, caused a pileup that killed two people and injured another 38.

This is in relation to the story, "Cell-Phone Ban in Cars Extreme," where TheStreet contributor Anton Wahlman argues against a full ban against devices while driving.

Below you'll find a sampling of readers' responses to this question on TheStreet's Facebook page: Do you agree with the NTSB that all cell phones and electronic devices should be banned while driving?

Donald Rivers: "Yes I am driving as I type this and I can't see pedestrians."

Brendan Major: "Only for those born before 1978 (they can NOT multitask and operate vehicles)."

Debbie McMenemy: "And talking to passengers too! And digging for things in and around the inside of your car. And smoking because you know your attention is not on driving while you're finding and lighting up a cigarette, and looking at maps while the car is moving, and, and, and... People just need to use their common sense while operating a vehicle. It can be a weapon!"

Todd Kleemann: "The government can't legislate the stupid out of society. In fact it is in the business of creating these mindless idiots. Bring back individual responsibility."

Bill Schroder: "Then we also need to ban makeup, coffee and other distractions... We ! can't le gislate away our personal responsibility to pay attention!"

Georgiana Craven Salter: "It is more dangerous than drinking while if you do it, you should get a ticket. I think that very few things should be regulated...but I think this should be one of them. You could kill me just to talk on the phone. No thanks."

John Cope: "There are always safe places to pull over and answer your 'ringy dingys'!"

Joe Ward: "With the all the tech nowadays, why did the cell phone manufacturing companies not add a safety motion sensor with GPS that kills the text mode, let's say anything moving over 5 mph or more?"

Marsha Zotta: "No. It's not about safety, it's about the money from fines."

David Torgerson: "No! They'll ban every device if you let them. Make using the devices safer."


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VeriFone Systems Inc. Earnings Cheat Sheet: Earnings Higher Than Expected

VeriFone Systems Inc. (NYSE:PAY) reported net income above Wall Street’s expectations for the fourth quarter. VeriFone designs, markets, and services transaction automation systems that enable secure electronic payments among consumers, merchants, and financial institutions.

VeriFone Systems Earnings Cheat Sheet for the Fourth Quarter

Results: Net income for VeriFone Systems Inc. rose to $198.8 million ($1.84 per share) vs. $49.4 million (55 cents per share) in the same quarter a year earlier. This is a more than fourfold rise from the year earlier quarter.

Revenue: Rose 48.8% to $410.7 million from the year earlier quarter.

Actual vs. Wall St. Expectations: PAY reported adjusted net income of 53 cents per share. By that measure, the company beat the mean estimate of 44 cents per share. Analysts were expecting revenue of $406.4 million.

Quoting Management: “We finished 2011 with another year of record revenues and record profit, and are now midway through our multi-year transformation to the world’s leading services-driven payment technology provider,” said Douglas G. Bergeron, Chief Executive Officer. “Looking to 2012, we are very encouraged by the opportunities at hand throughout our growing, global marketplace.”

Key Stats:

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 29.1%, with the biggest boost coming in the most recent quarter when revenue rose 48.8% from the year earlier quarter.

The company has now seen net income rise in three straight quarters. In the third quarter, net income rose 42.1% and in the second quarter, the figure rose 24.6%.

The company beat estimates last quarter after being in line with expectations in the third quarter with net income of 40 cents per share.

Looking Forward: For the next quarter, analysts are growing pessimistic about the company’s expected results. The average estimate for the first quarter of the next fiscal year is 48 cents per share, dropping from 49 cents a month ago. For the fiscal year, the average estimate has been unchanged at $1.62 a share.

Competitors to Watch: Hypercom Corporation (NYSE:HYC), NCR Corporation (NYSE:NCR), Radiant Systems, Inc. (NASDAQ:RADS), MICROS Systems, Inc. (NASDAQ:MCRS), Global Payment Tech., Inc. (GPTX), USA Technologies, Inc. (NASDAQ:USAT), PAR Technology Corporation (NYSE:PAR), Pitney Bowes Inc. (NYSE:PBI), and ZUK Elzab SA (ELZ).

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)


A Santa Claus Rally, For Real?

by Tim Parker

Investors are taught never to use hope as a reason to invest, but after 2011 has left the majority of professional money managers lagging the market, there is still, albeit fading, hope of an upcoming Santa Claus rally.

Even with the SPDR S&P 500 (SPY) down another 1.06% on Wednesday, there is still time for a turnaround in the next two weeks.

So just what is a ‘Santa Claus Rally’ and what does it mean for your portfolio? (For related reading, see The Frosty, Festive World Of Investing.)

What Is It?
If there is an academic explanation that explains a Santa Claus rally, it would be a strong move to the upside that occurs between Christmas and the New Year. There are as many explanations for this rally as there are lights on a Christmas tree, but some of the more common include the euphoria of the holiday season and excitement about the New Year, positioning portfolios for maximum tax benefits, and the absence of some of the market’s more pessimistic traders who are still on vacation.

This year, the Santa Claus rally has been extended. On November 28th and 29th of 2011, when the S&P 500 added more than 3%, financial media including CNBC, called it the beginning of the Santa Claus rally. It seems that Santa is expected to come earlier this year.

Show Me the Facts
If the Santa Claus rally is real, the facts should support it, and according to Bespoke Investment Group, they do. Going back to 1990, December has seen average returns of 2.02% with positive returns 81% of the time. In the past 100 years, the average December return is 1.39% with positive returns 73% of the time.

1 Reason the Street Should Expect Big Things From Eastman Chemical

Here at The Motley Fool, I've long cautioned investors to keep a close eye on inventory levels. It's a part of my standard diligence when searching for the market's best stocks. I think a quarterly checkup can help you spot potential problems. For many companies, products that sit on the shelves too long can become big trouble. Stale inventory may be sold for lower prices, hurting profitability. In extreme cases, it may be written off completely and sent to the shredder.

Basic guidelines
In this series, I examine inventory using a simple rule of thumb: Inventory increases ought to roughly parallel revenue increases. If inventory bloats more quickly than sales grow, this might be a sign that expected sales haven't materialized.

Is the current inventory situation at Eastman Chemical (NYSE: EMN  ) out of line? To figure that out, start by comparing the company's figures to those from peers and competitors:


TTM Revenue Growth

TTM Inventory Growth

Eastman Chemical 36.8% 30.4%
Dow Chemical (NYSE: DOW  ) 13.9% 15.6%
Air Products & Chemicals (NYSE: APD  ) 11.7% 19.2%
Albemarle (NYSE: ALB  ) 19.5% 27.2%

Source: S&P Capital IQ. Data is current as of latest fully reported quarter. TTM = trailing 12 months.

Ho! w is Eas tman Chemical doing by this quick checkup? At first glance, OK, it seems. Trailing-12-month revenue increased 36.8%, and inventory increased 30.4%. Over the sequential quarterly period, the trend looks worrisome. Revenue dropped 3.9%, and inventory grew 13.6%.

Advanced inventory
I don't stop my checkup there, because the type of inventory can matter even more than the overall quantity. There's even one type of inventory bulge we sometimes like to see. You can check for it by examining the quarterly filings to evaluate the different kinds of inventory: raw materials, work-in-progress inventory, and finished goods. (Some companies report the first two types as a single category.)

A company ramping up for increased demand may increase raw materials and work-in-progress inventory at a faster rate when it expects robust future growth. As such, we might consider oversized growth in those categories to offer a clue to a brighter future, and a clue that most other investors will miss. We call it "positive inventory divergence."

On the other hand, if we see a big increase in finished goods, that often means product isn't moving as well as expected, and it's time to hunker down with the filings and conference calls to find out why.

What's going on with the inventory at Eastman Chemical? I chart the details below for both quarterly and 12-month periods.


Source: S&P Capital IQ. Data is current as of latest fully reported quarter. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.


Source: S&P Capital IQ. Data is current as of latest fully reported quarter. Dollar amounts in millions. FQ = fiscal quarter.

Let's! dig int o the inventory specifics. On a trailing-12-month basis, raw materials inventory was the fastest-growing segment, up 34.4%. On a sequential-quarter basis, raw materials inventory was also the fastest-growing segment, up 12%. Eastman Chemical may display positive inventory divergence, suggesting that management sees increased demand on the horizon.

Foolish bottom line
When you're doing your research, remember that aggregate numbers such as inventory balances often mask situations that are more complex than they appear. Even the detailed numbers don't give us the final word. When in doubt, listen to the conference call, or contact investor relations. What at first looks like a problem may actually signal a stock that will provide the market's best returns. And what might look hunky-dory at first glance could actually be warning you to cut your losses before the rest of the Street wises up.

I run these quick inventory checks every quarter. To stay on top of the inventory story at your favorite companies, just use the handy links below to add companies to your free watchlist, and we'll deliver our latest coverage right to your inbox.

  • Add Eastman Chemical to My Watchlist.
  • Add Dow Chemical to My Watchlist.
  • Add Air Products & Chemicals to My Watchlist.
  • Add Albemarle to My Watchlist.

2 Energy MLPs with 8%-Plus Yields

Back in April, I wrote a piece about taking profits on some of the energy master limited partnerships or MLPs. [You can read the original article here.]

How have things turned out since? Two of the names I discussed, Kinder Morgan Energy (NYSE: KMP) and Navios Maritime Partners (NYSE: NMM) are textbook examples of how bipolar markets can be. Kinder Morgan is slightly up (exclusive of income) by about 4%, while Navios has lost almost 27%. Even with the yield, investors are still behind the eight ball.

But how have energy MLP's as a whole performed this year? Again, it's, at best, a mixed bag.

The best benchmark for energy MLP's is the Alerian MLP Index (NYSE: AMZ). From the index high shortly after publication to the present, the index is off less than 4%. Not a big deal. But in early August, the Alerian MLP Index was off more than 19% from the same level.

Many widely held MLP names, such as the aforementioned KMP and perennial investor favorite ONEOK Partners (NYSE: OKS), have held their ground or appreciated nicely. So while some value was created briefly during the white-knuckled summer the markets experienced, it would appear that things have returned to normal in MLP land. Are there any opportunities? Yes -- especially in the much-hated coal fields and the nation's seemingly limitless natural gas supply.

The opportunity in coal
There's plenty of coal in the United States. It's cheap, and we've been using it for centuries. But it's dirty. As an energy source, however, it's not going away tomorrow.

While many energy MLP prices have held steady most of this year, many of the coal MLPs have been banged up like a screen door in ! a hurric ane. Coal prices have been cut nearly in half since their 2008 peak spot price of about $150 a ton. Since then, prices have been wallowing at the $80 level this year.

It's funny. I've always noticed that MLP price volatility mirrors price volatility of the commodity stored or transported, especially the oil pipeline and storage companies. Ironically, the ACTUAL price of oil has little to do with the revenue of the MLP. The pipeline guys are basically a railroad. They get paid to move the product. Granted, demand will affect the volume of stuff they have to transport, but the price of the product really shouldn't matter much. But stock prices are not rational beings.

Anyway, I smell an opportunity in coal. Many investors seem to be avoiding it -- all the more reason to look at it. In the coal MLP space, Natural Resource Partners, LP (NYSE: NRP) is a compelling idea. The company owns and manages domestic coal reserves in Appalachia, the Illinois Basin and the Powder River Basin. Rather than owning and operating coal mines and producing its own coal, Natural Resource Partners leases its properties and reserves to mine operators in return for royalty payments. All leases are long-term, and the company has more than 2 billion tons of reserves.

Units are trading at around $26.50, which is a 25% discount to their 52-week high and are yielding 8.3% (the term for an ownership stake in MLPs is "units," rather than "shares"). The attraction to Natural Resource Partners is the lack of exposure to the direct risks of mine operation (remember Massey Energy?). The income stream also appears more stable, thanks to its royalty collection model.

Natural gas
StreetAuthority's energy expert Nathan Slaughter, however, is a much bigger fan of natural gas. Natural gas has a much cleaner perception and is just as abundant if not more so than coal. The problem with natty gas is that the huge supply has kept prices in the basement.! Also as an industry group, it remains very fragmented. Many natural-gas distributors and producers are still independent. This makes it difficult to get the kind of true political traction required to gain any significant policy shift.

But that doesn't mean there's not money to be made.

And while coal may be the stepchild of the energy world, natural gas is the consistently underachieving middle child. Natural-gas prices have floundered in a sub-$5/cubic foot channel for the better part of a year. At the same time, natural gas extraction technology continues to become more and more cost efficient, allowing producers to pull more and more of it out of the ground cheaply.

Supply isn't a problem. Demand is. Natural gas demand is anemic at best: yet another energy head scratcher. Natty gas is clean, cheap and abundant. Real abundant. We should be using it to power our homes, keep us warm and drive our cars. (In fact, Nathan thinks this may happen soon enough.)

One stock I like is Niska Gas Storage Partners (NYSE: NKA). Niska is the largest independent owner and operator of natural-gas storage in North America. In total, the company has about 185.5 billion cubic feet of storage capacity. They're only using 55% of that.

Needless to say, the stock's fundamentals aren't the greatest. But the story behind owning this stock is the valuation. Units trade around $9.37 and yield better than 14%. They're also priced at a 27% discount to their book value.

Analysts estimate the market has placed a value on Niska's storage at just $7 million per billion cubic feet, which is less than half of the current market cost to build new storage. The biggest concern surrounding the company was that due to the soft operating environment, the dividend distribution was at risk. However, the company has taken necessary steps to protect the payout to common unit holders by repurchasing $62 million of debt this year. The compa! ny is al so in the process of monetizing $200 million worth of its current natural-gas inventory. Thanks to these maneuvers, Credit Suisse analyst Yves Siegel projects Niska will have enough cash to cover the current distribution to common unit holders for the next year and a half. When the operating environment improves, the company will be well positioned due to its size.

Unit holders shouldn't expect distribution increases any time soon, but a 14% yield and a unit price below tangible value is a decent-enough incentive.

Risks to consider: In researching this article, this five-year chart of the Alerian index concerned me.

While I'm not a wiggle reader by trade, this is self explanatory, thus confirming why the energy MLP space made me nervous in the first place. Focusing on names that have already been beaten down is a good way to play defense.

Variable Annuity Sales Steady in Q4

Variable annuity sales rose in 2010 on "continued innovation in product development" by annuity carriers, according to a report compiled by Morningstar and released Wednesday by the Insured Retirement Institute.

"We expect the pendulum to continue the swing back toward more generous benefits during 2011," Kevin Loffredi, vice president of annuity solutions for Morningstar, wrote in the report.

While sales remained "virtually flat" from the third quarter of 2010 to the fourth, fourth quarter sales increased dramatically over fourth quarter 2009. Carriers filed 63 material changes last quarter, according to the report, compared with just 36 in the fourth quarter of 2009. Twelve new contracts and 15 new benefits were issued last quarter, and three insurers - Ohio National, Pacific Life and Sun Life – issued new products.

Fees increased as well, though the report notes this is an indication that carriers are returning to more generous benefits and are "adjusting their prices accordingly."

The move to more generous benefits began in the second quarter, according to the report, when carriers added withdrawal opportunities for younger owners, and issued new benefits, especially living benefits. Of seven new benefits released in the second quarter, six were lifetime withdrawal benefits. In the third quarter, nine of 11 new benefits were lifetime withdrawal benefits.

A few carriers, however, have left the business. ING announced in May that it was formally exiting the variable annuity business, and Genworth announced Jan. 6 that it would discontinue its sales of retail variable annuities and group variable annuities.

A Jan. 12 survey from IRI and Cerulli Associates predicted growth in the annuity industry in 2011, as advisors struggle to prepare their clients for retirement.

Friday On My Mind: Stocks Poise To Fall As Anxieties Resume

If Thursday was supposed to be the calm, Friday isn’t quite living up to some expectation of a storm. Folks on Wall Street might find they’ve gotten a little wet. But, at least on the open, it doesn’t look like they’re going to get doused.

In Thursday’s trading, the headwinds that caused equities to falter over the previous week largely reversed themselves. Energy prices stopped falling. Raw materials moved up, not down.Risk-averse traders stopped piling into safe havens like Treasuries and the dollar. Equity investors eschewed defensive issues in health care and consumer products in favor of materials and banks.

These weren’t seismic changes. More evolutionary than revolutionary. And equity buyers clearly didn’t believe they had much endurance, because market averages staged one of those classic ”barely budged” trading days: the S&P 500 (GSPC)rose 3 points, or three-tenths of one percent. TheDow Jones Industrial Average (DJI)increased 4 points, or six-hundredths – that’s two places behind the zero – of one percent.

It turns out that equity traders were right to be suspicious.Here on Friday, crude prices took another slide, piercing the $60 a barrel level to the downside. Treasuries have traded higher once again as risk-averse traders sought safe havens. Shares of Merck (MRK)head for gains.

Of course, given how tentative most of the trends have seemed – energy prices being the exception, since the 14% decline in crudethis month looks pretty convincing – it’s not surprising that the declines forecast for Friday have looked rather tentative. The S&P 500 futures have suggested a 7-point decline on the open. Losses could mount as the session wears on, especially if investorshear the siren song of the open road, amid the sparkling weather (at least, between Wall Street and the Hamptons) and decide to leave the market to its own trends.

Ne xt week holds promise of a little more action, a few morecatalysts, than has been the case thus far in July. Maybe investors will wait for something to trade off.

CV Writing - Interview Guide

The interviewer hopes that YOU are the right person for the job.They are under pressure to fill the position so that they canget back to their own work. Therefore you are in a greaterposition of strength than you think. Concentrate on what youhave to offer in the way of qualifications and experienceinstead of feeling intimidated.

An interviewer has 3 aims:

1) To learn if you are the right person for the job

2) To assess your potential for promotion

3) To decide whether you will fit into the company environment

The key to a successful interview is in preparation

Be prepared: For the types of questions you will be asked

Be prepared: To ask questions yourself

Be prepared: To research the company

Be prepared: To look the part

Be prepared: To turn up on time

Questions you may be asked

Example question: How would you describe yourself?

Your answer: Should describe attributes that will enhance yoursuitability for the position. Have some ready in advance.Example question: What are your long-term goals?

Your answer: Should be career orientated. Make sure you havegoals to discuss.

Example question: Why did you leave your last job? Your answer:Could be more responsibility; better opportunity; increasedincome. Do not be detrimental to your previous employer. Hecould be the interviewer's golfing partner.

Example question: Why do you want this job?

Your answer: Your answer should be: more responsibility orbetter opportunity or similar. Not: because it is closer to homeor the gym. Example question: What are your strengths? Youranswer: Should highlight accomplishments and experiences thatrelate to the position for which you are applying. Also giveexamples of situations where your strengths have beendemonstrated. Example question: What are your weaknesses?

Your answer: Should not be a list of deficiencies. Don't mentionanything that could make the interviewer question your abilityto do the job, for example "I! am alwa ys late for everything."Instead, discuss a weakness that could also be a strength suchas "I am a workaholic!"

More Examples of Interview Questions

Tell me a little bit about yourself.

Describe your current / most recent position.

What made you want to make this change?

What do you most enjoy doing in your current /most recentposition? Describe your future ambitions. How would you describeyourself?

Questions for you to ask

Asking questions at interview has a number of positive effects:It helps you find out more about the company and the position.It can be used to divert the interviewer away from a subject youmay wish to avoid. It can help build a rapport with theinterviewer. It demonstrates an interest in the job and thecompany. The questions must be about the position and thecompany. Avoid questions about salary, benefits and facilitiesuntil after you have been offered the job. You should alreadyhave researched the company and it's products and services. Yourquestions should demonstrate knowledge of the company's history,successes and problems. If the interviewer is a representativeof the personnel department the questions should relate to thecompany and be general. Specific questions relating to theposition should be kept for the line manager who will have amore detailed knowledge.

Example questions relating to the position What are the mainresponsibilities of the job? What are the most difficult aspectsof the job? How did the vacancy arise? What is the career pathrelating to this position? How will my work be assessed?

Example questions relating to the company What is the companyhoping to achieve in the next 12 months? What new products arethe company planning to introduce in the future? Are any majorchanges planned for the department/company? Who are your biggestcompetitors?

Where to find company information Information relating tocompanies, financial data, industries and business trends isavailable in business magazines which often pub! lish on the WorldWide Web and allow you to order Annual Reports relating tospecific companies. Companies often have their own web site.Newspapers - search on-line press reports including archivedarticles. Local library

Presentation Tips Obviously you should be clean and smart inappearance but you should also dress appropriately for theposition, for example: a student placement that is moreexpensively dressed than the Managing Director may have anegative impact. Clothes should be on the conservative side,which is more acceptable to people of all ages, cultures andbackgrounds. After all, you are asking to be accepted into thecompany. Therefore always avoid extremes in hair, clothes,make-up and jewellery. Taking trouble over your appearance showsthe employer that the job is important to you.

Travel tips Arrive 15 minutes early. Make sure you have thecorrect address and know how you will get there: Parking? Publictransport access? Do a dummy run if you are not sure. Make sureyou have a mobile phone and a telephone number so that you canring ahead if circumstances beyond your control are making youlate. Be polite to everyone you speak to, it could be theManaging Director's cousin! Have a copy of your CV with you.

Summary You should show interest in all aspects of the job andthe company especially if shown around the premises. Do yourhomework on the company and the nature of its business. Takecare in how you dress for the interview. First impressions stillcount!

Some of the main influences on the interviewer are: Yourexperience in other employment or life situations Your personalpresentation. How your personality comes across in the interviewYour background and references Your enthusiasm for both the joband the organisation. Relevant qualifications for the position.

E & O E - Copyright 2005

Investors Betting Hard Against Fidel Castro’s Health

When you see diversified investment plays that are regional special situation investments going parabolic, you have to wonder how high it can go and how long it can last.

Herzfeld Caribbean Basin Fund Inc. (CUBA-NASDAQ) is doing just that.  This is one of the few ways that investors can try to bet on the eventual reopening of Cuba, and for that to happen the world’s longest ruling leader (Castro) has to pass away.  Even then, it is unknown if his brother will open it up and try to normalize US-relations.

We noted this just on Tuesday as a backdoor play into Cuba as one of the only legal ways that US investors could even try to invest this scenario.  It was at $14.71 then, and now it sits at $17.90.  We first pointed this out back in Augustwhen shares were around $7.05 or so.

You should visit the website at get more information.  The fund recently gave a $1.00 dividend of long-term capital gains payable on January 12, 2007 and Thomas Herzfeld sold almost 30,000 shares at the end of December.

The new annual report is not yet out, but investors should know that the semi-annual report with a peg-date of June 30, 2006 from the company listed the net asset value at $8.08.  That was up from $7.33 in the prior report.

If you would like to subscribe to our free email reports that are notalways posted on the web site for other SPECIAL SITUATIONS, BAIT SHOPREPORTS, Backdoor Investment Plays, IPO’s and more please send in anemail to jonogg@247wallst.comand title it SUBSCRIBE.  We value privacy and do not share our email lists with any third parties.

Jon C. Ogg
January 18, 2007

Preparing For the Next Asia

[Editor's Note: This interview was adapted from a recent issue of the McKinsey Quarterly, the business Journal of McKinsey & Co. It is reprinted with McKinsey's permission.]

Asia has proven comparatively resilient against the current downturn, but hurdles still lie ahead. In order to maintain robust growth rates in the face of weak U.S. demand, the region's dynamic economies must stoke domestic consumption and embrace environmentally sustainable development policies, says Stephen Roach, chairman of Morgan Stanley Asia (NYSE: MS) and author of "The Next Asia: Opportunities and Challenges for a New Globalization."

Clay Chandler, Asia editor with McKinsey & Co.'s publishing group, spoke with Roach in Hong Kong recently. During the interview, Roach analyzed the prospects for increased integration and cooperation between the region's economies; explored the pitfalls and potential for countries like India and Japan; and considered whether the "Asian Century" has finally arrived.

Here is the text of that interview.

Clay Chandler: Steve, thank you for being with us. You've been watching and writing about the dynamism in this region for many decades now. In your new book, "The Next Asia: Opportunities and Challenges for a New Globalization," you write about how the region in the next 20 years will be much different than in the past 20 years. What's driving that change?

Stephen Roach: Well, Clay, I think the Asia of the past 30 years has done an extraordinary job �C especially China, but, increasingly, the rest of the region �C in lifting standards of living well beyond anything we've seen in the annals of economic development. But the drivers have been primarily export-led. And there's been a lot of investment in the export platform that has been required to get that ex! port mac hine to the state that it's at.

But this model is close to having outlived its usefulness. The ��Next Asia' will be more consumer-led, will have a growth dynamic that places greater emphasis on the quality of the growth experience, especially in terms of environmental protection and pollution control.

Clay Chandler: If I'm the chief executive of a Fortune 500 company and I'm thinking about my global strategy, how do I need to be thinking differently about Asia than I might have been before the crisis?

Stephen Roach: I think global multinationals have, up until now, primarily viewed developing Asia �C and China in particular �C as an offshore-production platform. The offshore-efficiency solution is still an attractive option. But what really could be powerful would be a growing opportunity to tap the region's 3.5 billion consumers. This has been the dream all along of the Asian potential. But the consumer dynamic has largely been missing in action. And now, as it comes online, this is an extraordinary bonanza for global multinationals, as well.

Clay Chandler: In [your book], "The Next Asia," you strike a very optimistic tone. You note that Asia has always embraced change and that that's really been the secret of Asia's dynamism in years past. But the same thing was said in the wake of the Asian financial crisis in 1997. And yet, by and large, most Asian economies went right back to the model that worked so well for them before the Asian financial crisis, a model that was heavily focused on exports and government-led investments. What's different about the economic scene today?

Stephen Roach: The external demands that underpin the export model are now in trouble. So even if Asia is the best and most efficient producer that anyone has ever seen, the external demand is not going to be there the way it was. So if Asia wants to keep growing, if Asia wants to ke! ep devel oping, if it wants to keep raising the standard of living for its three-and-a-half-billion consumers, it's got to depend more on its own internal demand. So it really boils down to the fact that Asia's options have been narrowed in terms of economic development as never before. And it has no choice but to become more internally, rather than externally, dependent.

Clay Chandler: Let's talk for a moment, if we could, about India, the other big, growing economy in the region.

Stephen Roach: I think the micro has always been very positive in India: a large population of world-class competitive companies; a well-educated, English-speaking, IT-competent workforce; pretty good market institutions; relatively stable financial institutions; rule of law; democracy. The micro has never been the problem.

What's really been the problem for India has mainly been the macro: Inadequate savings; relatively limited foreign direct investment �C especially when compared with China �C and, of course, the horrible infrastructure. The macro has actually gotten better. In the last three to four years, India's savings rates have moved from the low 20s nationwide to the mid-to-high 30s, which is still short of China, but a huge improvement for India.

Foreign direct investments accelerated dramatically �C again, not up to Chinese standards, but a huge acceleration vis-��-vis where India has been historically.

And the third leg of the stool is politics. The mid-May election, by sweeping the Communist Party out of this new coalition, gives the reformers an opportunity to finally deliver on the promises they made five-and-a-half years ago, when they first took power. I think that India actually could be the real sleeper in Asia over the next few years. Just at a time when everybody is all lathered up and excited over a China-centric region.

Clay Chandler: You can't really talk about Asia's futu! re, with out also considering the trajectory of its largest economy. That, of course, is Japan. The story there has been almost unrelentingly gloomy for years. But now we've got a new government.

Stephen Roach: Well, you know, Japan is an example of what happens when you take a very prosperous economy and allow it to experience the post-bubble aftershocks of a massive asset-led implosion.

But here Japan sits, 20 years into the post-bubble era, and it's not clear that it has really awoken from its long slumber, as you aptly put it. This is an economy that remains very much export-dependent. Its two largest export markets, the U.S. and China, are not providing much sustenance. The Japanese consumer is very constrained by demography, by unfunded pension liabilities. It still has a very high predisposition toward saving. There has been some capital-spending impetus in recent years but, again, it has largely been driven by a new export linkage into China, and that's on hold right now. And then, finally, Japan has a horrific leadership problem. So the combination of structural problems, this long post-bubble hangover, leadership issues �C it's hard to be too constructive on the Japanese economy going forward, I'm afraid.

Clay Chandler: How about prospects for greater integration and cooperation in Asia as a whole? In your book, you talk about the emergence of what you call a "pan-Asian" economic framework. What will that framework look like?

Stephen Roach: Well, I think the building blocks of that framework are starting to fall into place. There's been increased integration in a China-centric supply chain, with most of the large economies in the region �C from Japan, to Korea, to Taiwan �C now more dependent on exports to China than any of their other major trading partners, including Europe or the United States. So the logistics of an increasingly China-centric supply chain are starting to fall into pla! ce.

But here, again, I would say that the real challenge for a pan-regional economic integration would be to shift the structure increasingly away from one that's externally led to one that's internally led. When the Asian consumer starts to rise and is sourced increasingly by the Asian producer, that'll be the real, powerful synergy that I think can take this region to the next place.

Clay Chandler: Is it fair, do you think, to say that the Asian Century has finally arrived?

Stephen Roach: The central premise of my book, "The Next Asia," is that it's a little early to crack out the champagne and declare the onset of the Asian Century. It's the stuff of great headlines and possibly documentary films, but the next Asia �C an Asia which is more balanced, one that brings the Asian consumer into the equation �C that's what the Asian Century needs. The Asian Century, in my view, is not a sustainable image if it's an Asia of producers or exporters selling things to others. The Asian Century is one where Asia produces to its home markets, rather than just to markets around the world. And until we see that, I think, again, that champagne is going to have to stay on ice for awhile.

[Editor's Note: Stephen S. Roach is chairman of Morgan Stanley Asia, a position he was appointed to in June 2007. Before that, Roach spent 25 years as a Morgan Stanley economist, ultimately becoming the company's chief economist. During that time, Roach established himself as one of the most influential thought leaders on Wall Street. His recent research has focused on globalization, the emergence of China and India, and the capital market implications of global imbalances. He has written about these topics extensively and his views are widely quoted in the financial press and other media.

Before joining Morgan Stanley in 1982, Roach was vice president for economic analysis for the Morgan Guaranty Trust Co. He also se! rved in a senior capacity on the research staff of the Federal Reserve Board in Washington, and was a research fellow at the Brookings Institution in Washington. Roach holds a Ph.D. in economics from New York University and a Bachelor's degree in economics from the University of Wisconsin. His book �C "The Next Asia" �C was published in September by John Wiley & Sons, and is available from

McKinsey Quarterly is the business journal of McKinsey & Co., one of the world's top management consulting firms. Articles are written by McKinsey consultants. These pieces are based on the firm's experiences with the world's largest companies, its close ties to academia and its proprietary research. The goal is to stimulate new ways of thinking about management challenges in the public, private and non-profit sectors. For more information on the newsletter, please click here.]

What the Consumer Press Says About Advisors¡¯ Fees

Will it be fees, commissions, fees plus commissions or something else altogether? The Wall Street Journal applauds the number of options now available for advisors to get paid, but the paper takes a hard look at each one, and evaluates the pros and cons for the investing public.

In an effort to ensure you’re prepared if the topic is raised in your next client meeting, we run through what it has to say.  

Asset-Based Fees

The Journal quotes AdvisorOne contributors FA Insight in noting that original, and still most common, compensation plan for advisors brings in 85% of advisory-firm revenue last year.

“The advantages are easy to see,” the paper reports. “Advisers have a strong incentive to boost client returns, because their fees increase as the assets grow–and fall if the assets decline.”

But the Journal takes issue with what it calls “perhaps the most serious caveat,” which is “the many conflicts of interest.” It claims advisors may be “tempted to take undue risks to grow their clients' accounts and thereby boost their own fees. They might also be tempted to discourage moves that benefit the client, but take assets out of the account. For instance, an advisor might be tempted to advise a client not to buy life insurance because that would mean less money to manage.”

Fee Plus Commission

The paper describes the perpetual fee-based versus fee-only debate in the following way:

“Fee advisors don't take commissions on products they sell, so they won't be swayed to recommend a product because it will pay them more. But many advisors combine some type of fee with commissions. This model has come under criticism and the scrutiny of regulators. Critics say it generally adds more costs and conflicts of interest–often without the client realizing it.”

They also wade into the fiduciary issue, noting that “while acting as a registered investment advisor, the advisor is a fiduciary, required to act in the client's best interest. But the advisor isn't a fiduciary when working as a broker ... advisors juggle the two roles by giving only general planning advice as fiduciaries.”

Whether investors understand all this is the real question, the Journal says, adding that commissions aren't always obvious. Brokers aren't required to disclose the amount of their commission at the point of sale, though it is included in a confirmation letter sent to the client.

Flat Fee

Explaining the attempt to bring financial planning to more Americans by making it more affordable, the Journal says a flat fee works well for investors with limited assets and/or limited needs. A payment of a low monthly fee is usually how it works.

“This might be an attractive option for investors who don't need ongoing advice, as well as young clients who haven't accumulated a lot of assets. But investors should consider what they're getting for the price.” it said.

The paper quotes NAPFA chair Susan Johns in warning that “clients should be sure they're clear at the onset about what's included. They're not paying for comprehensive financial planning. And while they may be entitled to seek advice via telephone or email, they should understand that if such queries become excessive, the adviser may want to add more charges.”

Net Worth and Income

Similar to asset-based pricing, this relatively new model has investors paying a portion of their net worth or income, a chunk of their assets

every year or a combination of the two. The Journal claims it “opens the door to people who don't have a lot of investable assets but might have a high income or assets that aren't liquid, like a home or a 401(k) plan.”

“The setup also helps people who wouldn't ordinarily qualify for asset-only payment plans. In theory, these models remove the conflicts in asset-based pricing," the Journal says. "Because an advisor is charging a percentage of entire net worth, there's no incentive to advise clients against moves that make sense but deplete assets under management.”

Hourly Fee

Hourly fees are exactly what they sound like: Clients pay their advisors a set fee for every hour they work, which the Journal says is easy to understand and ensures that investors pay only for the advice they need.

“But it can be hard to get this deal. Hourly fees are still quite rare among advisers, though asset-based advisers occasionally offer them to children of clients. Some experts warn that advisers may try to keep the meter running, or start it by raising opportunities that aren't appropriate,” the paper says.

Chinese Investors Drive Gold Imports Five Times Higher on Inflation Fears

The gold rush in China accelerated during the first 10 months of 2010 as investors seeking protection from looming inflation drove imports of the yellow metal up nearly five times more than the amount brought in all of last year.

Gold imports rose to 209 metric tons compared with 45 tons for all of 2009, Shen Xiangrong, chairman of the Shanghai Gold Exchange told a conference held in Shanghai yesterday (Thursday).

"The government hasn't officially said that China is encouraging private gold investments, but we in the industry suspect it. And you can see the big jump in the delivered gold imports through the exchange has to be approved by them," Albert Cheng, managing director of the World Gold Council's Far East department, told Bloomberg News in an interview.

"The central bank may now be approving all gold import" applications, he said.

Government efforts to keep the property market from overheating and a stock market swoon sparked investment demand for gold during the first half of the year. About 70% to 80% of the imports in the first 10 months were made into mini-gold bars, which are favored by Chinese investors, Shen said.

"Given China is the world's biggest gold producer, the sharp increase in its imports is a big surprise," Hiroyuki Kikukawa, general manager of research at IDO Securities Co. in Tokyo, told Bloomberg. "People there need to buy gold to hedge against inflation as the country's tightening monetary policy drives investors from stocks and properties to gold."

Consumer prices in China rose 4.4% in October, the fastest rate in two years and well above the government's stated goal of 3%. China's central bank responded by raising interest rates in October and ordered banks to increase their capital reserves on Nov. 10 and Nov. 19.

"The expectation for higher ! inflatio n has fueled great interest among investors to hold physical gold, which led to higher imports," the gold exchange's Shen said. The exchange traded 5,014.5 tons of gold in the first 10 months, up 43% from a year ago.

Retail investment and jewelry demand could double China's gold market in the next decade, the World Gold Council said on Nov. 3. Consumption may climb as high as 900 tons in the same period, Wang Lixin, the council's Greater China general manager told Bloomberg.

Investment demand for gold could hit 150 tons this year, up from 105 tons last year, compared to 3 to 4 tons 10 years ago, World Gold Council's Cheng told Bloomberg.

China, the world's largest producer and second-biggest user, doesn't regularly publish gold-trade figures and rarely comments on its reserves.

China stunned the gold market last year when the State Administration of Foreign Exchange, part of the People's Bank of China, revealed that State reserves had jumped to 1,054 tons since the last such announcement in 2003, when it had 600 tons.

Sun Zhaoxue, general manager of China National Gold Corp, said on Wednesday that China should use its foreign exchange reserves to further boost its gold holdings. That reflects the view of many officials who have said China should buy more gold with its foreign exchange reserves, which totaled $2.648 trillion at the end of September.

As governments continue to debase their currencies in order prop up their ailing economies, the majority of global gold demand is now coming from investors instead of traditional jewelry and industrial applications.

Worldwide investment demand for gold totaled 1,901 tons last year, surpassing jewelry consumption of 1,759 tons for the first time in 30 years, according to London-based GFMS Ltd. In fact, net retail investments in this year's third quarter set a record at $9.6 bill! ion - a whopping increase of 60% over the same period in 2009, Bloomberg reported.

Worldwide, investment demand for gold will be up in 2011, led by China, India, Russia, and Turkey. "Bar hoarding" is on the rise, too, increasing 44% over 2009 as investors increasingly take physical delivery of their merchandise, reports the World Gold Council.

As Contributing Editor Peter Krauth wrote yesterday in Money Morning's annual "Outlook" on gold prices for 2011, investors will react to a classic supply demand squeeze by driving the price of the shiny metal to record highs next year.

"Before 2011 closes out, I predict that each ounce of the prized "yellow metal" will be trading at $1,900 - an increase of about 37% from yesterday's (Wednesday's) closing price of about $1,390 an ounce," Krauth wrote.

Krauth noted that investors who bought in 2001 have experienced a fivefold investment in the "metal of kings." That works out to compounded return of better than 20% a year.

But he's confident that there's more to come.

"Precious metals -and gold in particular - have been the asset class of the decade. But it's not too late to climb aboard - there's still plenty more growth to come," he wrote.

News & Related Story Links:

  • Bloomberg: Gold Imports by China Soar Almost Fivefold as Inflation Spurs Investment
  • Gold Matters: China's gold production and gold reserves set to rise
  • Money Morning: Gold Price Forecast: Four Reasons the "Yellow Metal" Will Hit $1,900 an Ounce in 2011
  • Money Morning Archives:
    Gold Category

Off to a Rocky Start (CEG, BRK-A)

Constellation Energy Group, Inc. (NYSE:CEG) missed analysts’ estimates by a mile.

Fourth quarter EPS was $0.03 compared Wall Street consensus estimates of $1.24. For the full year, Constellation was expected to earn $4.84, but came in at $3.54. Revenue for the fourth quarter was lower than a year ago by about $400 million, and annual revenue was down by about $1.38 billion. Not a very good showing.

On a GAAP basis, the merger dance with Berkshire Hathaway Inc.(NYSE:BRKA) subsidiary Mid-American Holdings and Electricite de France cost shareholders $6.72/share for 2008. Constellation also took an impairment charge of $3.04/share on its upstream properties, merchant energy goodwill, and “other investments adversely impacted by events in the financial markets.”

Going forward, the company set EPS guidance for 2009 at $2.90-$3.20, and for 2010 at $3.05-$3.45. According to MarketWatch, the average estimate for 2009 EPS is $3.30. Constellation expects the EDF deal to close in the third quarter of this year. The earlier sales of its international commodities unit and its gas trading platform in Houston are expected to close in the second quarter.

Constellation apparently believes that it has positioned itself for the coming year by shedding all that value in the fourth quarter. That seems counter-intuitive, but maybe its right. The stock is trading up more than 2.5% in pre-open trading.

Paul Ausick
February 18, 2009

A Hidden Reason That Group 1 Automotive's Earnings Are Outstanding

It takes money to make money. Most investors know that, but with business media so focused on the "how much," very few investors bother to ask, "How fast?"

When judging a company's prospects, how quickly it turns cash outflows into cash inflows can be just as important as how much profit it's booking in the accounting fantasy world we call "earnings." This is one of the first metrics I check when I'm hunting for the market's best stocks. Today, we'll see how it applies to Group 1 Automotive (NYSE: GPI  ) .

Let's break this down
In this series, we measure how swiftly a company turns cash into goods or services and back into cash. We'll use a quick, relatively foolproof tool known as the cash conversion cycle, or CCC for short.

Why does the CCC matter? The less time it takes a firm to convert outgoing cash into incoming cash, the more powerful and flexible its profit engine is. The less money tied up in inventory and accounts receivable, the more available to grow the company, pay investors, or both.

To calculate the cash conversion cycle, add days inventory outstanding to days sales outstanding, then subtract days payable outstanding. Like golf, the lower your score here, the better.

Here's the CCC for Group 1 Automotive, alongside the comparable figures from a few competitors and peers.


TTM Revenue


Group 1 Automotive $5,892 ?51
CarMax (NYSE: KMX  ) $9,882 ?36
Asbury Automotive Group (NYSE:! ABG  ) $4,237 ?41
AutoNation (NYSE: AN  ) $13,400 ?54

Source: S&P Capital IQ. Dollar amounts in millions. Data is current as of last fully reported fiscal quarter. TTM = trailing 12 months.

For younger, fast-growth companies, the CCC can give you valuable insight into the sustainability of that growth. A company that's taking longer to make cash may need to tap financing to keep its momentum. For older, mature companies, the CCC can tell you how well the company is managed. Firms that begin to lose control of the CCC may be losing their clout with their suppliers (who might be demanding stricter payment terms) and customers (who might be demanding more generous terms). This can sometimes be an important signal of future distress -- one most investors are likely to miss.

While I find peer comparisons useful, I'm most interested in comparing a company's CCC to its prior performance. Here's where I believe all investors need to become trend-watchers. Sure, there may be legitimate reasons for an increase in the CCC, but all things being equal, I want to see this number stay steady or move downward over time.


Source: S&P Capital IQ. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.

Because of the seasonality in some businesses, the CCC for the TTM period may not be strictly comparable to the fiscal-year periods shown in the chart. Even the steadiest-looking businesses on an annual basis will experience some quarterly fluctuations in the CCC. To get an understanding of the usual ebb and flow at Group 1 Automotive, consult the quarterly period chart below.


Source: S&P Capital IQ. Dollar amounts in millions. FQ = fiscal quarter.

On a 12-month basis, the trend at Group 1 Automotive looks very good. At 50.8 days, it is 7.1 days better than the five-year average of 58 days. The biggest contributor to that improvement was DIO, which improved 7.2 days compared to the five-year average. That was partially offset by a 0.5-day increase in DSO.

Considering the numbers on a quarterly basis, the CCC trend at Group 1 Automotive looks good. At 47.9 days, it is 4.5 days better than the average of the past eight quarters. With both 12-month and quarterly CCC running better than average, Group 1 Automotive gets high marks in this cash-conversion checkup.

Though the CCC can take a little work to calculate, it's definitely worth watching every quarter. You'll be better informed about potential problems, and you'll improve your odds of finding the underappreciated home run stocks that provide the market's best returns.

To stay on top of the CCC for your favorite companies, just use the handy links below to add companies to your free watchlist.

  • Add Group 1 Automotive to My Watchlist.
  • Add CarMax to My Watchlist.
  • Add Asbury Automotive Group to My Watchlist.
  • Add AutoNation to My Watchlist.