Another Little-Known Stock Jumps on the iPhone and iPad's Coattails

The iPhone is a phenomenon unto itself.

The top-shelf smartphone is responsible for nearly half of Apple's (Nasdaq: AAPL  ) sales these days. A fairly large industry has formed around this single product line: Well-known component suppliers such as TriQuint Semiconductor (Nasdaq: TQNT  ) and Cirrus Logic (Nasdaq: CRUS  ) rise and fall by ridiculous amounts on any iPhone-related news or even rumors; OmniVision Technologies (Nasdaq: OVTI  ) jumps and crashes even quicker because Apple bends over backwards and inside out to hide the identity of each iPhone's camera sensor chips.

This phenomenon has gone so far that we've compiled a special report on the hardware cottage industry around the iPhone market, and how to invest in it. The report is totally free -- get your copy right here to learn more. But there's always one more way to skin the same cat. Now a band of networking specialists have found yet another way to piggyback on Apple's magical mystery tour.

Aruba Networks (Nasdaq: ARUN  ) just reported first-quarter results, beating its own revenue guidance with sales of $119 million and landing non-GAAP earnings at $0.14 per share, right where the company expected them. But that wasn't Aruba's biggest news of the day. The company also announced its intention to buy privately held Avenda Systems, an expert in creating secure business-class connections to whatever devices you might bring into your company's network.

And that's where Apple comes in. As more and more corporate employees bring their own networked gadgets such as iPhones and iPads to work, businesses need to manage the potential security risks in this Bring Your Own Device, or BYOD, phenomenon.

Trying harder to make Apple deices wor! k for bu siness is not exactly new to Aruba; it has already built special iOS-enabling features into its wireless gateways. But Avenda lets Aruba take the concept further and faster. "Avenda allows us to expand our reach to all kinds of devices, not just Apple IOS devices, which is what we initially supported with the MOVE architecture and the MDAC service," explains CTO Keerti Melkote.

The Avenda buy is small enough that financial details of the deal weren't disclosed. But it could be a game-changer in the long term as Aruba saddles up to ride the iPhone like never before. Aruba shares may look expensive at 39 times trailing earnings, but the growth runway in front of it looks clear for takeoff. I'm giving Aruba a thumbs-up vote in CAPS right now. Feel free to follow along.

DELL - A Brief Look

The business of selling computers is now a tough one to be in and everyone knows it including DELL. Selling basic computers to individuals and businesses with windows software preinstalled was once a thriving business for DELL, but as things now stand in order to achieve future growth the company is expanding its offerings.

Yesterday the company announced it is developing a smartphone in China using a software platform developed by Chinese search-engine operator Baidu Inc (BIDU). The smartphone is expected to hit the shelves in China early next year, after which DELL will look to launch the smartphone in other markets. DELL is shifting its focus not only to smartphones and tablets, but it has also been growing its enterprise solutions and service business materially in recent quarters.

Quality Rating


DELL has grown its EPS from $0.46 to $1.35 over the past 10 years, representing an annual compounded increase of 11%. Over that time it has achieved a return on retained earnings of 8% which is not a great result. A company that cannot achieve a decent return on its retained earnings should consider the introduction of a dividend.

The formula to derive the Free Cash Flow score includes a provision for Free Cash Flow growth, which explains why DELL only scores 4 on its Free Cash Flow. Its Free Cash Flow generation over the last 10 years has been extraordinary, albeit at a small growth rate. It has generated over $33B in Free Cash Flow over the past 10 years versus total net earnings over the same period of over $24B.

Intrinsic Value


DELL in its recent results �C both annual results issued in Jan 2011 as well as the 3 quarterly results sin! ce then �C have silenced their critics. They are producing some great numbers, making the forecast Intrinsic Value even more attractive than the existing. But the market still has its doubts �C a decent Margin of Safety is currently on offer.

Coming out of the dot com bubble, DELL remained well over-valued. The share-price has gone sideways since then while the value tries to catch up. As can be seen, DELL��s performance suffered while it was slowly reacting to the challenges facing its simple PC business. But in fiscal 2011 the company started what looks to be a turnaround. Since the GFC in 2008, DELL��s share-price has been reasonably depressed and this year market has not given the company enough credit yet for its fiscal 2011 performance.

Investment Grade Score

With a Margin of Safety of 33 and a Quality Rating of 55, DELL achieves an Investment Grade Score of 33 x 55 �� 100 = 18. This places DELL at number 99 on the Investment Grade Table.

Capital Management

If DELL struggles to achieve a decent return on retained earnings, the company may introduce a dividend. Let��s look at 2 scenarios, and let��s assume the fiscal 2011 EPS performance can be maintained into the future.

  • Scenario 1: A Payout Ratio of 50%: The dividend yield based on the current share-price of $14.68 would be 4.6%.

  • Scenario 2: A Payout Ratio of 75%: The dividend yield based on the current share-price of $14.68 would be 6.9%.

Similar value would be created if the company used the money in the above examples to buy back shares. The company has a history of repurchasing shares.


With declining PC prices, and stiff competition to its traditional business model, DELL is starting to reinvent itself with its new offerings. The company is a! chieving significant growth in its enterprise solutions and service offerings, and is entering the tablet and smartphone markets, all providing encouraging upside potential. And the company generates extraordinary Free Cash Flow which limits the downside risk (cash flow provides flexibility for a company - pay dividends, buy back shares, acquire other businesses etc). Many investors will find the downside risk versus upside potential for DELL attractive at current prices.

What’s On Deck This Thursday In The Markets

Stocks are directionless this morning ahead of jobless claims and ahead of tomorrow’s payrolls data.? DJIA and S&P futures are flat this morning in early indications. In Europe, the FTSE is up 0.3%, the DAX is up 0.3%, and the CAC is up 0.6%.? In Asia, Japan’s NIKKEI was up 1.7% and Hong Kong closed flat%.

Nymex WTI crude is lower around $82.20 per barrel; Gold is higher around $1,196.00 per ounce.

Treasury bond prices were soft with the yield on the 10-Year at 2.96% is and the yield on the 30-Year was 4.08%.

Thursday morning’s major media headline snapshot from Reuters, WSJ, NYTimes, FT, Bloomberg, and more is available here.

These are today's top economic data:

  • 8:30 AM EST Weekly Jobless Claims (est. 455K)
  • 10:30 AM EST Weekly EIA Nat Gas Inventory
  • 4:30 PM EST Foreign Central Bank Holdings of U.S. securities

At NOON EST we have Treasury Secretary Geithner, HHS Secretary Sebelius, and Labor Secretary Solis holding a press briefing on Social Security and Medicare.


Gordman Stores Inc. (GMAN) is coming public today with 5.4 million shares at $11 per share.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.


A bad economy isn't the only thing plaguing this retailer

While many retailers remain on pins and needles about how their holiday receipts will stack up, there��s no mystery at Sears Holdings (NASDAQ:SHLD). The company that operates Sears and Kmart department stores has been losing customers and bleeding red ink forever — and the past few months were no exception.

So Sears wasted no time announcing a huge cutback on its store count. Between 100 and 120 Sears and Kmart stores will be closed. The company says $140 million to $170 million will be made as the inventory is shuffled out at fire-sale prices.

But more disturbing isn��t the store closures — it��s the context. Sears is losing money, and no profits are expected anytime soon. It makes you wonder if this really is just the beginning of the end for the once-iconic department store.

How bad is it? Well, consumers should know first-hand just by visiting their local Kmart or Sears locations. Fallen flagship brands like Craftsman tools and Kenmore appliances used to be quality names for many Americans but have little currency with shoppers today.

Even more damning is the tarnish on the stores themselves — aging stores ideally could use a fresh design and at the least need a good cleaning and repair job.

Hedge fund manager Edward Lampert and his cronies merged Sears with Kmart in 2005. Lampert began focusing on online boondoggles such as an online marketplace in the vein of eBay (NASDAQ:EBAY) rather than acknowledging the power of its legacy brands at physical stores. You can��t fault the logic, since online retail is crushing brick-and-mortar sales. But the result is online efforts have failed to bear fruit yet, and existing stores present customers with a rather disappointing experience.

It��s a lose-lose situation that has cost Sears dearly.

That��s just from a taste perspective, however. The harshest reality for the company is the poor sales numbers that have! plagued Sears and Kmart for some time. Sears Holdings has lost money in five of the past six quarters. Even worse: November marked a stunning 19 straight quarters of sales declines!

The icing on the cake is that Wall Street estimates for the company project consecutive quarterly losses in each period through all of fiscal 2013. That means if you��re being charitable, Sears will continue to lose money for another year-and-a-half.

But let��s be honest — the reality is that forecasters aren��t looking past 2013 because that��s too far down the road. There��s a very good chance that a year from now, the outlook might be just as grim.

Sears has yet to determine which stores will be closed, or how many jobs will be lost. Management is casting the store closures as an unfortunate event prompted by a bad economy — and that is indeed partly true. Many big retailers like Wal-Mart (NYSE:WMT) have struggled to find their way as consumers have cut back and are more savvy about getting the best deals. It might sound counterintuitive that the king of low-priced retail would be hurting, but Wal-Mart has suffered for a few years now as smaller discounters like Dollar General (NYSE:DG) connect with customers and sometimes even undercut pricing at the big guys.

It is indeed challenging for retailers. But Sears is in a class of its own when it comes to losing customers and losing money in the retail space. And it��s worth noting that some retailers are booming.

Sales at the company have dropped every single year since Lampert took over in 2005. No wonder shares are off almost 50% year-to-date in 2011 and almost 70% from the 2010 peak of SHLD stock.

To be clear, bankruptcy might not be an immediate concern. Sears doesn��t have the crippling debt load that drives companies directly into bankruptcy. But it��s certainly on its way. Unless Sears can streamline its operations and find a good way to use funds from this inventory liquidation, it��s likely we! will se e only more store closures in the future and a race to the bottom for this once-storied retail brand.

Not everyone is bearish on Sears. Jonathan Berr thinks a new focus on licensing deals — such as a Sears partnership with the Kardashians — can help the company.

But it��s going to take more than star power to right this sinking ship.

Jeff Reeves is the editor of Write him at editor@investorplace??.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. Jeff Reeves holds a position in Alcoa, but no other publicly traded stocks.

Here's Why the U.S.-China Tire Tiff Could Lead to Great Depression II

HealthSpring, Inc (NYSE:HS) achieved its new price of $54.69 where it was opened at $54.68 up +0.20 points or +0.37% by closing at $54.56. HS transacted shares during the day were over 5.64 million shares however it has an average volume of 2.68 million shares.

HS has a market capitalization $3.66 billion and an enterprise value at $2.93 billion. Trailing twelve months price to sales ratio of the stock was 0.73 while price to book ratio in most recent quarter was 2.17. In profitability ratios, net profit margin in past twelve months appeared at 5.16% whereas operating profit margin for the same period at 9.02%.

The company made a return on asset of 11.90% in past twelve months and return on equity of 18.74% for similar period. In the period of trailing 12 months it generated revenue amounted to $5.00 billion gaining $80.31 revenue per share. Its year over year, quarterly growth of revenue was 83.60% holding 46.90% quarterly earnings growth.

According to preceding quarter balance sheet results, the company had $1.06 billion cash in hand making cash per share at 15.73. The total of $335.45 million debt was there putting a total debt to equity ratio 19.95. Moreover its current ratio according to same quarter results was 1.21 and book value per share was 25.06.

Looking at the trading information, the stock price history displayed that its S&P500 52 Week Change illustrated 1.37% where the stock current price exhibited up beat from its 50 day moving average price of $45.56 and remained above from its 200 Day Moving Average price of $42.32.

HS holds 67.11 million outstanding shares with 63.66 million floating shares where insider possessed 9.56% and institutions kept 87.50%.

Trading Alert – Q2 Sales Push Taylor Devices into the Green

Taylor Devices Inc. (NASDAQ: TAYD) reported a dip in its profits for the second quarter as compared to the comparable period last year; net earnings for the second quarter were $122,975, a dip from last year’s second quarter earnings of $501,891.

The company reported second quarter sales of $4,525,002, an increase from last year’s second quarter sales of $3,488,797.

The company reported six-months sales of $8,801,825, an increase from last year’s sales of $8,502,470. The net earnings for the first six months were $307,613, a drop from last year’s earnings of $822,688.

“Pundits continue to declare that our recession ended months ago, however, the U.S. construction markets remain very constricted,” Douglas P. Taylor, president of Taylor Devices stated in the press release. “While profit levels are lower due to a shift in products shipped away from aerospace towards seismic, we remain committed to maintaining profitability throughout the year.”? Taylor concluded, “Our firm order backlog is now at $13 million, up significantly from the $11.4 million level that we reported this time last year.”

Taylor Devices is currently trading at $5.75. The stock is up 18.29% from its previous close. Taylor Devices stock touched the high of $6.46 and lowest price in today's session is $5.61. The company stock's beta is 1.47.

The company stock has traded in the range of $4.50 and $6.85 during the past 52 weeks. The company's market cap is $18.63 million.

Taylor Devices engages in the design, development, manufacture and marketing of shock absorption, rate control and energy storage devices for use in various types of vehicles, machinery, equipment and structures.? The company continues to achieve growth in the developing seismic protection field and in the isolation of wind-induced vibrations.

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Investing in Video Game Stocks: A How-To Guide

2011 was a big year for the video game industry. Activision Blizzard's (Nasdaq: ATVI  ) Call of Duty franchise released "Modern Warfare 3," grossing a record-breaking $400 million on the first day.

Facebook games developer Zynga (Nasdaq: ZNGA  ) debuted onto stock exchanges with a highly anticipated initial public offering, or IPO.

And Electronic Arts (Nasdaq: EA  ) stock rose over 30% as it released "Star Wars: The Old Republic" and entered into social media with games like "The Sims Social."

Despite the lingering effects of the recession, the video game industry is seeing impressive demand. If you're interested in investing in video game stocks, here are some things to keep in mind when comparing companies:

  1. Recent stock performance: Stocks that have been going up in value may continue to do so as more investors agree with the positive sentiment, whereas poorly performing stocks probably have some headwinds investors are concerned about. But investors can get carried away -- if they are too negative on a company, eventually the stock will rise to correct its price to its "true value."
  2. Who's buying (or selling) the stock: There are certain investors that must report when they buy and sell stocks. One group is institutional investors, which include hedge fund managers and mutual fund mangers. They are considered "sophisticated investors" whose experience and access to research makes their trade decisions interesting to the rest of the market. If they are buying a stock, it is probably for a good reason, although keep in mind there is usually a time lag between when they purchase a stock and when they report that purchase.
  3. What products are coming out, and on what platform: Do you think Facebook will continue to be a solid platform for Zynga? Will Activision'! s "Diabl o 3" sell as well as everyone thinks, or could it possibly beat estimates? These are important questions to ask when considering a video game maker.

Business section: Investing ideas
To help you in answering some of these questions about video game stocks, we ran a screen on the industry for stocks seeing the highest net purchases from institutional investors over the last three months. ("Net purchases" are the number of purchases less sales.) We express this number as a percent of the share float, or number of shares trading on the stock exchange, to standardize it.

Do you think these stocks are poised to do well in 2012?

List sorted alphabetically. (Click here to access free, interactive tools to analyze these ideas.)

1. Activision Blizzard: Publishes online, personal computer (PC), console, handheld, and mobile games of interactive entertainment worldwide. Net institutional purchases in the current quarter at 18.6M shares, which represents about 4.1% of the company's float of 453.28M shares.

2. (Nasdaq: CYOU  ) : Develops and operates online games in the People's Republic of China. Net institutional purchases in the current quarter at 321.9K shares, which represents about 3.21% of the company's float of 10.04M shares.

3. Shanda Games (Nasdaq: GAME  ) : Engages in the development and operation of online games in the People's Republic of China. Net institutional purchases in the current quarter at 4.0M shares, which represents about 5.7% of the company's float of 70.22M shares.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.

Data compiled by Eben Esterhuizen, CFA. Kapitall's Alexander Crawford and Alexander Crawford do not own any of the shares mentioned above. Institutional data sourced from Fidelity.

Pfizer: Some Patients Still Want Lipitor

Normally patients cant wait for big-selling, popular prescription medications to go generic. And who can blame them. After all, insurers charge lower co-payments for generic drugs, lowering the outof-pocket cost for patients. But Pfizer (PFE) executives told reporters today that one-third of patients now taking Lipitor want to stay on the brand-name version of the drug even after generic forms of the pill hit the market starting tomorrow. Pfizer has embarked on an ambitious plan to keep sales of brand-name Lipitor alive after the U.S. patent protecting Lipitor expires on Nov. 30, striking bargains with pharmacy benefit managers and insurers to keep dispensing Lipitor for the next six months at generic prices. And some analysts expect brand-name Lipitor to hold onto 40% of prescriptions written for Lipitor or atorvastatin (Lipitors generic name).

Dow Avoids Junk Bond Fears (DOW)

The ratings agencies may have missed all the blow-ups in mortgage ratings and financial ratings ahead of The Great Recession.? But the upgrades for corporate debt ratings are still on the rise even as the economic growth slows.? Dow Chemical Co. (NYSE: DOW) just escaped the risk of heading into junk bond territory today after Standard & Poor’s Ratings Services boosted its outlook on the chemicals giant to “Positive” from “Stable.”? Normally this might not be a huge upgrade or bias change.? The difference here is that Dow Chemical has a BBB- rating by S&P, which is the lowest investment grade rating.? Had today’s review changed the outlook to “Negative,”? Dow Chemical would have likely seen its bond spreads widen out.? That would in turn raise the cost of its borrowing at a time that its balance sheet remains leveraged from the $18.4 billion acquisition of Rohm & Haas.? Long-term debt is now (as of June 30) at $18.108 billion and “Other Liabilities” and “Deferred Long Term Liability Charges” are $11.97 billion.

S&P noted its second quarter profits and higher revenues.? Despite having missed some targets, S&P expects? modest revenue growth in 2011.? Thomson Reuters’s 2010 revenue estimate is $52.56 billion versus $55.05 billion expected in 2011.? S&P is also looking for capacity improvements, pricing gains, a better product mix, and additional cost cuts.

This will bring lower borrowing costs via debt spreads at the same time that Treasury yields are extremely low.? The “Stable” rating did not imply that a downgrade was close.? This just moves the needle away from any junk bond territory as this sets S&P in the position that it can raise the debt rating to a solid “BBB.”? Shares were negative but Dow’s stock is now up 0.3% at $26.08 versus a 52-week range of $19.75 to $32.05.


Tips To Buying Cars On E Bay Motors

There are many terrific advantages to buying vehicles on e bay Motors, together with a price that the you get to bargain,lower insurance and the absence of a automotive cost each month when you pay in full. In the event you plan on shopping for used automobiles on e bay Motors in the near future, here are a number of tricks to make sure that you get the best deal.

Evaluate with your local vehicle insurance coverage agent before deciding buying on a used car. If the price of auto insurance is an important deciding factor, be aware that SUVs shall be costlier than a car. Regardless, nevertheless, a used car will have more insurance costs than a new one.

Request a CarFax report. This information is available for a reasonable fee and includes information regarding the car’s history, including whether or not it has been flooded or if it has ever been involved in any type of accident. In addition, the number of previous owners and whether or not the title is clear should also be included in a CarFax report.

Take a look at the car’s value with Kelly Blue Book. This is one of the most trusted in terms of providing new or used automobile costs. By entering certain info into the website, car shoppers can learn what that particular vehicle should be bought for. This can assist potential buyers understand whether they are getting an excellent deal or not.

Think about fuel mileage. A SUV will sometimes use more gasoline than a compact automobile, which is vital if the price of fuel is a serious deciding factor about your purchase.Choose a used automotive with good mileage as far as possible. This should imply that the car has a better life and hasn’t been used excessively.

And finally, when buying cars on e bay motors, make sure that the automobile you choose is one that fits your lifestyle. For example, a family would likely be more comfortable in a van or SUV, while a single person or a married couple may be perfectly happy with a compact car. The design of an auto! mobile t hat you may consider buying on e bay motors will ultimately depend on your intended use and how many people you are in your family.

Looking to find the best deal on ebay, then visit to find the best advice on ebay motors for you.

3 Stocks Near 52-Week Highs Worth Selling

The new year has started off with a bang and plenty of what I would deem "unworthy" stocks are creeping up on new 52-week highs. For optimists, these rallies may seem like a dream come true. For skeptics like me, they're opportunities to see whether these companies have actually earned their current valuations.

Keep in mind that some companies do deserve their current valuations. Tech giant Google (Nasdaq: GOOG  ) deserves every bit of praise it has received of late for its game-changing Android and corporate initiatives. The company has had two straight huge quarterly beats. Valued at only 15 times forward earnings yet sporting a five-year expected growth rate of 19%, the stock is still cheap by my standards.

Still, other companies might deserve a kick in the pants. Here's a look at three companies that could be worth selling.

Powering down
As a former resident of California, I firmly recall when Edison International (NYSE: EIX  ) nearly collapsed under the weight of its debt and California's energy deregulation in 2001. Since that incident, I've never quite trusted the electrical powerhouse, despite the fact that it distributes electricity to nearly 14 million residents of the state.

The primary issue for me continues to remain Edison's debt load, which currently weighs in at $13.6 billion. With a debt-to-equity ratio of 113%, I'd want to see revenue growth of more than 3% per year if I were to take a flier on this stock. On top of this, according to estimates on Yahoo! Finance, Edison's profits are expected to fall in 2012 by 12%. In my eyes Edison will always be that struggling utility that will never regain its former glory. I'd suggest looking elsewhere for an income-producing utility.

It don't mean a thing if you ain't got that... profit!
Shares of RAM Energy Resources (NYS! E: RAM  ) have been on fire over the past two weeks (to put it mildly). The stock has climbed 179% following news that former Petrohawk CEO Floyd Wilson and his company, Halcon Resources, are going to invest $550 million in RAM. Although I'm not from Missouri, I'm always about the "Show Me" state -- and RAM isn't showing me enough to support this valuation.

For one, RAM is expected to bring 200 million shares to market to close the $550 million investment, which could mean heavy dilution for shareholders at its current lofty price. Secondly, estimates of RAM's revenue are heading in the wrong direction -- not exactly something to take lightly when faced with a forward P/E of 145 and a price-to-book of nearly 14. Until I see RAM's assets turned into tangible results, there's simply no reason for the hype.

Investing disconnection
Earlier in the week, I looked at South Korean mobile operator SK Telecom (NYSE: SKM  ) and labeled it a very cheap foreign telecom that also packs a solid dividend punch. On the flip side of the foreign telecom trade, we have Philippine Long Distance Telephone (NYSE: PHI  ) , which is trading in many respects at twice the valuation of SK Telecom and is starting to look like a perfect sell candidate.

Whereas SK Telecom has had a long run of increasing revenue over the past decade and trades at a forward multiple of just 7, Philippine Long Distance's revenue has been flat over the past three years and its operating margin has fallen sharply since 2007. Valued at more than 12 times forward earnings and a not-so-cheap six times book value, I'd gladly trade this one in for SK Telecom -- or just about any other large domestic carrier -- in a heartbeat.

Foolish roundup
This week, I offered three companies that, while profitable, aren't exactly leaders in their field, either due to excessive debt, unpro! ven expe ctations, or a premium valuation relative to their peers. I'm so confident that these three will underperform the S&P 500 going forward that I'm going to make a CAPScall and add them to my CAPS portfolio. The question now: Would you do the same?

Share your thoughts in the comments section below and consider adding Edison International, RAM Energy Resources, and Philippine Long Distance to your free and personalized watchlist to keep up on the latest news with each company.

Earnings Watch: 7 Companies With Strong Sources of Profits

Results are starting to come in for the 2011 4Q performance of U.S. companies, beginning with Alcoa this past Monday. The aluminum maker surprised the market with higher than expected revenue and a bullish outlook for 2012. Do you have a watchlist for the other companies soon reporting?

Earnings season is always a big stock price mover. Every quarter, companies release their earnings over the last quarter, their revenues, and their outlooks for the future. Analysts use these reports as a way to reassess their target prices on the companies and their outlooks on the economy. Investors pay close attention too for any signs of unexpected change.

Business section: Investing ideas
For ideas on how to create a watch list, we ran a screen on next week's reporting companies. We screened these stocks for those with strong sources of profitability, measured by DuPont analysis on return on equity (ROE).

DuPont analyzes return on equity (or net income/equity) profitability by breaking ROE up into three components:

= (Net Profit/Equity)
= (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)
= (Net Profit margin)*(Asset turnover)*(Leverage ratio)

We therefore focus on companies with the following positive characteristics: Increasing ROE along with:

  • Decreasing leverage, i.e., decreasing Asset/Equity ratio
  • Improving asset use efficiency (i.e., increasing Sales/Assets ratio) and improving net profit margin (i.e., increasing Net Income/Sales ratio)

Companies with all of these characteristics are experiencing increasing profits due to operations and not to increased use of financial leverage.

Do you think these companies' profitability will continue through this earnings season?

List sorted by increase in ROE. (Click here to access free, interactive tools to analyze these ideas.)

1. General Electric (NYSE: GE  ) : Operates as a technolog! y, servi ce, and finance company worldwide. Market cap of $199.11B. Earnings to be announced on 01/20. MRQ Net Profit Margin increased to 9.12% from 5.81% year-over-year, Sales/Assets increased to 0.0479 from 0.0466, while Assets/Equity decreased to 5.93 from 6.57.

2. Meridian Bioscience: Develops, sells, and distributes diagnostic test kits. Market cap of $773.66M. Earnings to be announced on 01/16. MRQ Net Profit Margin increased to 16.23% from 14.97% year-over-year, Sales/Assets increased to 0.27 from 0.23, while Assets/Equity decreased to 1.12 from 1.13.

3. Intuitive Surgical (Nasdaq: ISRG  ) : Designs, manufactures, and markets da Vinci surgical systems for various surgical procedures, including urologic, gynecologic, cardiothoracic, general, and head and neck surgeries. Market cap of $17.60B. Earnings to be announced on 01/19. MRQ Net Profit Margin increased to 27.40% from 25.15% year-over-year, Sales/Assets increased to 0.16 from 0.15, while Assets/Equity decreased to 1.16 from 1.17.

4. Parker Hannifin: Manufactures fluid power systems, electromechanical controls, and related components. Market cap of $11.91B. Earnings to be announced on 01/16. MRQ Net Profit Margin increased to 9.18% from 8.74% year-over-year, Sales/Assets increased to 0.31 from 0.26, while Assets/Equity decreased to 2.06 from 2.19.

5. Skyworks Solutions (Nasdaq: SWKS  ) : Offers analog and mixed signal semiconductors worldwide. Market cap of $3.35B. Earnings to be announced on 01/19. MRQ Net Profit Margin increased to 15.96% from 14.94% year-over-year, Sales/Assets increased to 0.21 from 0.20, while Assets/Equity decreased to 1.17 from 1.19.

6. Union Pacific (NYSE: UNP  ) : Provides rail transportation services in North America. Market cap of $52.89B. Earnings to be announced on 01/19. MRQ Net Profit Margin in! creased to 17.72% from 17.65% year-over-year, Sales/Assets increased to 0.11 from 0.10, while Assets/Equity decreased to 2.43 from 2.47.

7. Western Digital (NYSE: WDC  ) : Engages in the design, development, manufacture, and sale of hard drives worldwide. Market cap of $7.89B. Earnings to be announced on 01/18. MRQ Net Profit Margin increased to 8.87% from 8.22% year-over-year, Sales/Assets increased to 0.32 from 0.31, while Assets/Equity decreased to 1.48 from 1.56.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.

Data compiled by Danny Guttridge. Kapitall's by Alexander Crawford, and Danny Guttridge do not own any of the shares mentioned above. Accounting data sourced from Google Finance.

Solar Stock Review; JA Solar Jumps with Solar Industry on Japan Nuclear Developments

JA Solar Holdings Co., Ltd. (ADR) (NASDAQ: JASO) shares jumped more than 6% this morning, moving with the broader solar industry on positive sentiment of alternative energy sources in light of Japan’s nuclear reactor concerns. The sentiment outweighed a Piper Jaffray downgrade of the stock? from “neutral” to “overweight” on a forecast of cuts in solar demand for 2011.

JA Solar recently signed a strategic investment agreement with the city of Hefei, in China’s Anhui province, to set up a new state-of-the-art photovoltaic production facility for solar cells and photovoltaic (PV) products. The facility is expected to be located in the Hefei High-Tech Industrial Development Zone in the City of Hefei. The construction is expected to take place over a multi-year period and, when fully completed, the facility is expected to have a manufacturing capacity of 3GW of solar cells and PV products. The first phase of construction will begin in 2011, with production expected to commence in 2012.

The company reported strong fourth-quarter results with record shipments of 463MW, an increase of 11% sequentially and 100% year-over-year.

The company reported fourth-quarter revenues of $584.3 million, an increase of 6.6% as compared to $548.3 million reported in the third quarter of 2010 and an increase of 137% from $246.5 million reported in the fourth quarter of 2009. The total shipments in the fourth quarter of 2010 were a record 463MW as compared with third quarter shipments of 418MW, representing sequential growth of 11%. Last year same period, the shipments grew 100% from 231MW.

Operating income reported was $89.5 million as compared with $101.4 million in the third quarter of 2010 and $37.4 million in the fourth quarter of 2009. Operating margin was 15.3% in the fourth quarter of 2010 as compared with 18.5% in the third quarter of 2010 and 15.2% in the fourth quarter of 2009. The earnings per diluted ADS in the fourth quarter of 2010 were $0.59, an increas! e of 24% as compared with $0.48 in the third quarter of 2010 and an increase of 366% compared with $0.13 in the fourth quarter of 2009.

For the full year, the company reported revenue of $1.8 billion, an increase of 211% as compared with $572.5 million in full year 2009. The operating income for full year was $299.6 million as compared with $14.2 million in full year 2009. The net income per diluted ADS was $1.61 as compared with a net loss per diluted ADS of $(0.18) in full year 2009.

The company expects total cell and module shipments to exceed 2.2GW in 2011, representing an increase of approximately 50% compared to 2010. The module shipments are expected to be approximately 500MW to 600MW for the year. The sales contracts signed for 2011 delivery amount to more than 2GW, representing approximately 90% of the company’s expected shipments for 2011.

The company stock has traded in the range of $4.22 and $10.24 during the past 52 weeks. The company's market cap is $1.12 billion.

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Asia Markets 1/26/2007 Softbank Up, China Mobile Down


Markets in Asia were down with the Hang Seng off sharply.

The Nikkei was off .2% to 17,422. Bridgestone was up .2% to 2590. Canon was down .5% to 6500. Fuji Film was down 1.1% to 4700. Hitachi was down 1.8% to 815. Honda was down 1% to 4740. NEC was flat at 619. NTT was down 1% to 617000. Docomo was down .5% to 188000. Sharp was down 1.5% to 2000. Softbank was up 2% to 2590. Sony was up 1.4% to 5800. Toshiba was down 1.1% to 797. Toyota was down .4% to 7980. Yahoo Japan was down 1.7% to 47450.

The Hang Seng was down 1.9% to 20.281. Cathay Pacific was up .1% to 20.55. China Mobile was down 4.6% to 72.85. China Netcom was down 3.7% to 18.9. China Unicom was down .7% to 10.78. HSBC was down .3% to 143.6. PCCW was down .2% to 4.67.

The KOSPI was down .8% to 1,371.

The Straits Times was down .9% to 3,081.

The Shanghai Composite was up .9% to 2,883.

Data from Reuters

Douglas A. McIntyre

Tractor Supply Jumps on Surprise EPS, Revenue Gains

Tractor Supply (TSCO) rose 4% after hours following the release of a business update that showed revenue growing in the fourth quarter more than analysts had expected.

Tractor Supply said revenue rose to $1.24 billion from $1.03 billion in the prior year, ahead of analysts’ expectations for $1.20 billion.

The company also said its 2011 EPS would “range from $2.97 to $2.99 per diluted share compared to its previous guidance of $2.85 to $2.89 per diluted share.” Analaysts were expecting $2.91. Chairman and CEO Jim Wright said in a statement:

“While we are still in the early stages of the year-end financial closing process, we felt it was important to provide an update on expected results given such strong performance in the fourth quarter of 2011. These results are reflective of the structural improvements we have made to our business in recent years, including a focus on C.U.E. merchandise, improved inventory management and merchandise allocation and regionalization, all of which have continued to reduce our dependence on weather trends. Sales growth in the fourth quarter of 2011 was driven by continued strong transaction count and a year-over-year increase in average ticket, with added tailwinds from both the 53rd week and inflation. We are very pleased that we have maintained the momentum in our business and are confident in our ability to deliver continued profitable growth.”

Judge Rakoff Berates SEC Again in Citigroup Case

The SEC is battling in federal court to save its deal with Citigroup. The SEC is battling in federal court to save its deal with Citigroup.

Federal Judge Jed S. Rakoff is not pleased with the Securities and Exchange Commission again. Nor is he happy with Citigroup, as he accused both the agency and the financial institution late Thursday of making an end run around his decision not to delay the court case against Citi by its regulator.

As previously reported by, Rakoff threw out the SEC’s $285 million settlement with Citi over a $1 billion mortgage fund, saying that he could not tell whether the settlement was “fair, reasonable, adequate and in the public interest,” as legally required, since the agency claimed, but did not prove fraud on the part of Citigroup. He ordered the case to go to trial after issuing a stinging rebuke of the SEC for its customary handling of such cases, which does not require admission of wrongdoing and assesses penalties Rakoff feels are inadequate.

The SEC appealed the ruling, both with Rakoff and later, on Tuesday morning, with an emergency appeal filing in the 2nd U.S. Circuit Court of Appeals in Manhattan. However, the agency, and Citigroup, both apparently failed to mention that fact to Rakoff in a phone conversation on Tuesday afternoon, shortly before both the judge and the appeals court issued their rulings.

A mere 78 seconds before Rakoff's ruling against the SEC was issued, the appeals court granted a two-week delay. Rakoff was not pleased.

He issued a written order that berated the SEC for its action, saying that the agency and Citigroup had called him around 3:30 Tuesday afternoon to discuss the case, without mentioning the fact that the SEC had also filed an emergency appeal in appeals court. He blasted the SEC and said that it and Citigroup had potentially misled the court. The ruling of the appeals court essentially negated all the work that Rakoff had done over the holiday weekend to provide the SEC with a ruling as quickly as he could, and also voided his ruling itself, issued 78 seconds too late.

Saying that he had "spent the intervening Christmas holiday considering the parties' positions and drafting an opinion, so that [the court] could file it on Dec. 27, i.e. the first business day after the Christmas holiday," Rakoff also forestalled any future attempts to circumvent him, ordering both the SEC and Citigroup to "promptly notify" him of any filings they make in the appeals court. 

Darden 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 restaurant operator Darden Restaurants (NYSE: DRI  ) sank 10% on Tuesday after the company slashed its full-year 2012 outlook.

So what: Darden's cut was so big -- management now sees 2012 EPS growth of 4%-7% versus its prior view of 12%-15% -- that Wall Street has no choice but to lower its valuation estimates on the stock. Same-stores sales declines at its Olive Garden chain continue to hit Darden particularly hard, so it's no surprise that the shares are once again flirting with their 52-week lows.

Now what: I wouldn't be so quick to pounce on today's plunge. Margin-pressuring promotions, rising food costs, and lower traffic should continue working against Darden in the short term, while its clear lack of moat makes it an easy pass for the long term. Although they operate in the same fickle space, casual dining picks like Panera Bread (Nasdaq: PNRA  ) and Buffalo Wild Wings (Nasdaq: BWLD  ) can at least offer some tasty growth potential.

How the U.S.-China Trade Spat is Jeopardizing Energy Sector Development

Usually, a government decision to subsidize clean energy alternatives would be applauded by others.

Not so when the government is Beijing, and Washington politicians halfway around the world are busy looking for votes.

This tiff could be filed away as just another tempest in a teapot... if it were not for the other important projects it could derail along the way. Those projects just happen to have a major impact for American natural gas technology and the companies likely to benefit from its foreign introduction.

If the two countries can get it together, it could mean profitable new opportunities for both.

The Heat Is Rising in U.S.-China Relations

First, China's support for its currency - the yuan - has been castigated inside the American beltway as an unfair trade subsidy.

Then, late last month, U.S. Sens. Charles Schumer, D-NY, and Jon Kyl, R-AZ, complained in a letter to Secretary of State Hillary Clinton that Chinese energy companies are continuing to aid Iran in its nuclear program by supplying Tehran with gasoline. The senators argue Beijing should be penalized for violating the U.S., E.U., and U.N. sanctions signed into law in July.

Over the weekend, the latest disagreement involving Chinese government subsidies to clean energy industries exploded into a full-scale disagreement.

Anybody who has been to Beijing or Shanghai recently can vouch for the need to do something about pollution. It is getting worse as the country continues to rely on low-grade coal for the bulk of its power generation.

What's at issue is official support for clean energy in the form of Chinese-produced wind turbines, solar energy products, energy-efficient vehicles, and what are termed "technologically advanced batteries."

The United Steelworkers (USW) union filed a complaint last month with the office of the U.S. Trade Representative, claiming that China w! as ignor ing rules that prohibit excessive subsidies.
The trade office agreed to conduct an inquiry, generally the first step toward filing formal charges. Those charges, in turn, could end up being the basis for a World Trade Organization (WTO) case certain to divide Beijing and Washington even further.

The spat over the subsidies has already produced a very unusual reaction from a top Chinese official. Zhang Guobao, head of China's National Energy Administration and vice chair of the National Development and Reform Commission, is Beijing's most important spokesman on energy. It is very unusual for an official this high up to convene a hastily prepared session with the media to condemn U.S. actions in very stark terms.

But that is exactly what he did.

Zhang held a press conference on Saturday (Oct. 16th) and called Washington's decision to accept the USW filing a blatant attempt to "win votes," rather than to have a serious trade discussion.

U.S. officials respond that they are responsible for applying WTO and other trade regulations.
Beijing also is irate over what it sees as a particularly grating American duplicity. The Obama administration has itself proposed billions of dollars in subsidies to clean energy companies and has even placed provisions stating that only products made in the United States can be part of government-funded programs.

It remains to be seen whether the Chinese practices of providing land, low-interest loans (essentially soft loans, often with no genuine payback expectations), and raw materials from state-held stockpiles would comprise violations of WTO provisions.

But the increasing rancor over clean energy subsidies runs the risk of derailing some far more important bilateral initiatives.

One just happens to be a major initiative in unconventional gas production... and that one involves me.

New Opportunities in Shale Gas - If We Can Keep Our Cool

Last November brought the formation of! a U.S.- China Shale Gas Resource Initiative. The accord calls for joint activity in applying American expertise and technology to the development of major shale gas deposits in China.

Since then, experts from Baker Hughes Inc. (NYSE: BHI), Occidental Petroleum Corp. (NYSE: OXY), and Anadarko Petroleum Corp. (NYSE: APC) have been over in China, identifying likely first locations for development. And last month, the U.S. Department State expanded the initiative to include a team advising on broader policy implications.

And that is where I came in.

In "China's Backdoor Push into Our Front Yard" (May 25th, 2010), I talked about China's interest in shale gas. Since then, Chesapeake Energy Corp. (NYSE:CHK) - the largest American independent natural gas producer and a leader in shale gas extraction - has fashioned a joint venture with China National Offshore Oil Corp. (CNOOC) (NYSE ADR: CEO), China's third-largest oil company, for the Eagle Ford shale play in Texas. Chesapeake seems intent on bringing Chinese investment into its extensive Marcellus Shale holdings in Pennsylvania.

Similarly, Chinese majors China Petroleum & Chemical Corp. (Sinopec) (NYSE ADR: SNP) and China National Petroleum Corp. (CNPC) have signaled their interest in other unconventional gas approaches, such as coal bed methane (by spending time in the Powder River Basin in northeastern Wyoming) and tight gas (with several trips to the Piceance Basin in Colorado).

The Chinese have less interest in acquiring a percentage of American shale gas production than in understanding the technology involved.

It is here that a major opportunity emerges for U.S. companies - both for operators and a wide range of service and support outfits, equipment manufacturers, and high-end technical providers.

The United States leads the world in shale gas production, technology, and operations. Beijing needs what we have and has been rather aboveboard in constructing ways to t! ap our k now-how.

Both sides acknowledge the threat to the shale gas initiative created by the acrimony - the most recent example of which threatens to derail one energy opportunity because of disagreement over acceptable subsidies on another.

Action to Take: Keep an eye on U.S.-China relations. If the United States follows through with sanctions against China, or trade protectionism between the two countries escalates, the energy sector could be one of the first to suffer the consequences.

The likelihood, though, is that anti-China rhetoric in the United States will cool down after the midterm elections in November. Once it does, greater cooperation between China and U.S. gas companies will likely develop - leading to significant profit opportunities.

Consider subscribing toThe Energy Advantage, the advisory service run by Dr. Moors, to ensure that you benefit from any further developments.  At the very least, sign up for Moors' free newsletter: "The Oil & Energy Investor."

Dell Reportedly Plans 5-, 7-, 10-Inch “Streak” Android-Based Tablets

The Apple (AAPL) iPad may be the first serious move into the tablet market, but it won’t be the last.

Dell (DELL), for one, is reportedly developing a line of tablets branded as “Streak.” The blog Engadget has been gradually ferreting out information on what Dell is up to, and on Friday wrote that the company is apparently walking on versions of the Android-based products in 5-inch, 7-inch and 10-inch sizes.

The post contends that the Streak 5 is coming this summer, to be followed by a 7-inch version later this year, and a 10-inch version in early 2011.

A Stock-Pickers Paradise

Last week Goldman Sachs (GS) reported that its earnings jumped 79% last quarter. Whereas Bear Stearns (BSC) reported that its earnings plunged 61% in the same quarter.

Think about that. Two companies that are in the same industry working in the same environment and facing the same obstacles but had earnings that came to radically different results.

How could this have happened?

The answer is very complicated, but I’ll give you the short version. Goldman made some very smart moves and Bear made some very dumb moves. Sometimes business is as simple as that.

This is an important lesson for all investors. Being in the right sector isn’t enough. You need to own fundamentally superior stocks as well.

In my Blue Chip Growth Letter, that’s exactly what I show investors how to do. I’ve been able to beat the market for over 20 years by focusing on leading companies in all kinds of sectors.

I don’t care if it’s health care or tech or even selling animal feed in Saskatoon, I’ll go anywhere to find a great stock. Actually, one of my favorite stocks does sell animal feed in Saskatoon! Subscribers to my Blue Chip Growth service are sitting on a nice gain in Canada’s Potash Corp. (POT). Sure, the company doesn’t carry with it a lot of glitz and glam, but as long as it’s fundamentally superior, I like it. Potash is a great stock with enormous growth potential. It also doesn’t hurt that the Canadian dollar is at a 30-year high against the U.S. dollar.

My advice to you is, don’t be fooled by sector investing. Lots of times a company can look great on the outside, but that’s simply because it’s in a hot sector. Wall Street tends to behave like a manic crowd. If something is hot, they’ll keep buying. That is, until earnings come out and investors learn what it is they’ve been buying.


Since March 2004, shares of Sprint Nextel (S) have been basically flat. Yet, I looked at the same sector and found a great stock. The hitch is that I found it outside the United States. In March 2004, I recommended America Movil (AMX) to my Blue Chip Growth subscribers, and the stock has been up over 430% since then.

Every sector has a diamond and a lump of coal. Learn to tell the difference!

Most new investors are surprised to learn that strong companies in lousy sectors can be great investments. It’s true, and I’ll give you a perfect example. In 2002, Money Magazine celebrated its 30th anniversary, so the company wanted to find out what was the best-performing stock during the last three decades.

You would think the winner was some high-tech outfit, right? Some Silicon Valley hi-flier that invented the 12th dimension maybe. Nope. The top-performer was Southwest Airlines (LUV). The best stock not only came from a boring sector, it came from the worst sector imaginable! Nearly every day a new airline is either entering, or promising to leave, bankruptcy. Yet Southwest was able to follow its simple business plan of offering no frills service and the public responded.

Keeping one’s eyes open for fundamentally superior stocks is a lesson for every investor, and it’s especially important in this market. The current market is ideal for my style of investing because I’m a stock-picker. Last Tuesday, the Federal Reserve gave us stock-pickers a green light by slashing interest rates by 0.5%. The market responded by soaring 412 points in two days. I expect more rate cuts before the end of the year, so more good news is sure to come our way. I love this market, and I’m so excited by the great stocks I see.

Another stock with huge potential from my href="/order/?pc=8SU241"target="_blank">Blue Chip Growth Buy List is CSX Corp. (CSX), the railroad. Thanks to the! weak do llar, the export sector of the economy is booming, and that means all those commodities need to be moved around—and that’s where CSX comes in. In July, CSX stunned Wall Street by reporting earnings that were seven cents a share above consensus estimate. Best of all, the shares are still going for just 13 times next year’s earnings. I can’t wait for the company’s next earnings report on October 16.

Next week will be the final week of the third quarter. I can’t believe 2007 is nearing the back stretch! Soon, the third-quarter earnings reports will start to come out, and I expect to see a lot more surprises on Wall Street.

Hold on tight because this is an exciting time to be a stock-picker!

Navellier’s Blue Chip Growth Letter recommendations have returned more than 188% from 1998 through 2006, according to The Hulbert Financial Digest, an independent tracker of investment newsletters. Get in on the profits now. Click here now try Blue Chip Growth today, risk-free.

And don’t miss Navellier’s new book, The Little Book That Makes You Rich. It’s a steal for less than $20!

How This New Lawsuit Could Affect This Tech Giant

What's happening in the headlines can affect you as an investor. Here's what's going on, what you need to know, and what you should do.

The cold, hard facts
The Financial Times is reporting that U.K. telecom company BT has commenced legal action against search giant Google (Nasdaq: GOOG  ) for patent infringement, touching on a number of areas crucial to the company's products and services, including map, music, search, and the Android smartphone operating system.

Some context
BT is alleging infringement of one or more of its patents and has asked for a trial by jury, as well as unspecified damages. In a statement, Google said BT's claims were "without merit" and that it will defend itself "vigorously against them." In its own statement, BT said it had made "a well-considered claim" and that there was "a strong case of infringement."

BT has a worldwide portfolio of about 5,600 patents and applications. During the past year, BT filed for patent protection on 62 inventions. Google is currently involved in a number of patent disputes with companies such as Apple (Nasdaq: AAPL  ) , Microsoft (Nasdaq: MSFT  ) , and Oracle (Nasdaq: ORCL  ) over its Android platform.

What you need to know
Patent issues in any industry can be very complicated, but few can match the complexity and ambiguity at play in the telecom sector, with cases often coming down to finely nuanced and highly subjective interpretations of what a piece of hardware or software does or doesn't do.

The fast-growing and hugely profitable smartphone industry has only raised the patent stakes further, enticing companies to comb through their patent vaults to see what may or may not be being "infringed" upon. Some call th! is "trol ling," others a perfectly defendable right of any business to guard, and gain remuneration for, its hard inventive work and R&D dollars spent.

What's next
The steady stream of lawsuits between players in the mobile arena shows how high the stakes are to win the mobile batter. This area is poised to undergo incredible growth over the next decade and beyond, and investors need to know which stocks will fare the best. Fortunately, The Motley Fool recently compiled a research report detailing 3 Hidden Winners of the iPhone, iPad, and Android Revolution and made it totally free to our readers. The mobile boom, much like the Internet revolution before it, will usher in an entirely new set of big-time winners. I invite you to grab your free copy of this report today.

With most charts at apex of ascending triangles, market should reveal its next move soon

The holiday respite ended yesterday as bad news from Europe shook investors from their five-day focus on an improvingU.S.economy. The euro fell to a 14-month low, which reflects investors�� lack of confidence after the European Central Bank accepted $590.72 billion from its member banks — an indication that the banks have lost confidence in each other.

The lack of confidence inEurope��s financial system drove the U.S. dollar and U.S. Treasuries higher and the S&P 500 to a loss for the year. The Dow Jones Industrial Average fell 140 points to 12,151, the S&P 500 lost 16 points, closing at 1,250, and the Nasdaq fell 35 points to 2,590. Volume on the NYSE totaled 542 million shares. The Nasdaq traded 283 million. Decliners outnumbered advancers by 4-to-1 on both exchanges.

The euro made a new low yesterday, and that could spell trouble for U.S. stocks and commodities. But despite a new stochastic sell signal, the currency is extremely oversold and a bounce back to above $1.30 is needed to show confidence in its recent financial pacts.

But if the dollar, as illustrated by the PowerShares DB US Dollar Bullish Fund (NYSE:UUP), follows through from yesterday��s rally and closes above its high at $22.70, the recent rally in stocks will likely turn into a bull trap with stocks retreating to the October/November trading zones.

The U.S. indices are on shaky ground as depicted by the possible false breakout of the S&P 500. Yesterday��s retreat to under its 200-day moving average and the bearish resistance line drawn from the June/July tops is a weak technical signal, as is the arching down of the fast line of the stochastic.?

Yesterday��s failure to hold above its recent high was also confirmed by the more speculative issues. The Russell 2000 shows a clear reversal from a triple-top, along with a new stochastic sell signal. Thus, yesterday��s turn down was not confined to just the broad-based, quality-oriented indices.


The D ow transports are linked directly with economic activity since they represent the movement of goods. Thus the index��s possible failure to follow through casts a shadow on the predictions of an economic recovery in 2012. Yesterday it closed slightly below the important support line at 4,975, its 200-day moving average. A failure to regain ground would be another negative indication.?

Conclusion: Just as investors were putting the woes of Europe��s mess behind them, theOld World��s economic stresses surfaced to spoil the holiday mood. Therefore, it would be wise to hold back on new positions, except for hedges, until the market reveals its next move. With most charts at the apex of ascending triangles, it shouldn��t be long before that direction is known.

If you��re looking for fast profits in the new year, my colleague Joe Burns just closed a BIDU trade for a 158% profit, a FSLR trade for 143.75%, and a GOOG trade for 80%. Get in on his new trades now.

GLG Partners (GLG) acquired by Man Group for US$1.6 billion

By Michael Bogan

GLG Partners Inc. (NYSE: GLG) announced an agreement to be acquired by London-based Man Group plc. The acquisition by the 226-year-old hedge fund firm represents a cash-and-stock deal valued at approximately US$1.6 billion. Combined assets will total approximately US$63 billion.

Man's swap of its ordinary shares for GLG common shares at a 1.0856 exchange ratio equates to US$3.50 per GLG shares, a 20 per cent premium above Friday's US$2.91 closing price.

Additional terms of the agreement include a cash purchase of outstanding warrants at Friday's closing price of US$0.129 per warrant. Following the completion of the merger, warrants will become fully excersizable at the price of the merger consideration.

"This is a transformational step for GLG," said Noam Gottesman, Chairman and Co-CEO of GLG. "We have known Man for many years and can be certain that our two businesses are highly complementary, both focused on delivering long-term performance but each with differing client bases and uncorrelated investment strategies. The combination of Man’s outstanding distribution and structuring capabilities together with our industry leading investment teams will benefit all stakeholders, particularly investors in our funds whose interests will be exceptionally well served from within the combined group. The independent committee of our Board has unanimously recommended acceptance of the cash merger to our shareholders, and as a management team we are looking forward to working with our new colleagues at Man following the close of this transaction."

The deal comes amid growing concerns among investors and the hedge fund community of asset value volatility during an historic time of unwinding decades-long global debt and currency imbalances between the major economies of the United States, Japan, UK and EC nations and their major emerging competitors of China, India, Brazil and Russia.

Dramat! ic redem ptions in the hedge fund industry has closed many firms, with consolidations and mergers expected by industry analysts in wake of steep losses reported since the fall of Bear Stearns in 2008.

Man said it intends to "expand its business across a broad range of hedge fund styles" in an effort to appeal to a wider range of investors. Since 1984, Man has expanded its alternative investment business to thirteen countries through investments made in world-class hedge fund subsidiaries located in the United States, United Kingdom and Switzerland.

The hedge fund industry is estimated to be worth US$1 trillion worldwide.

About is committed to producing the highest-quality insight and analysis of small cap stocks, emerging technology stocks,hot penny stocks and helping investors make informed decisions. Our focus is primarily on the underserved OTC stocks market, or "penny stock" market, which has traditionally been shunned by Wall Street. We have particular expertise with renewable energy stocks, biotech stocks, oil stocks, green energy stocks and internet stocks. There are many hot penny stock opportunities present in the OTC market everyday and we seek to exploit these hot stock gains for our members before the average daytrader is aware of them.

Amass a Fortune With These Stocks

You don't need the?investing acumen of Warren Buffett?or the riches of a trust-fund baby to achieve financial success.

Small sums of money invested monthly in undervalued small-cap stocks?offer hope for your greatest returns. They offer the best growth opportunities for growth because the big investors mostly ignore them.

Here I'll screen for stocks with less than $3 billion in market cap that offered earnings surprises of 15% or more in the previous quarter, with long-term earnings growth forecasted to be at least 15%. We'll then filter our findings through the collective investing wisdom of the 180,000 members in our?Motley Fool CAPS?community.

Here are some of the stocks this simple screen found.


Market Cap

EPS Actual vs. Estimated

Average Analyst 5-Year EPS Estimate

CAPS Rating (out of 5)

MIPS Technologies (Nasdaq: MIPS  )

$236 million




VirnetX Holdings (AMEX: VHC  )

$1.26 billion




Sources: and Motley Fool CAPS. NM = not meaningful; VirnetX posted an $0.11-per-share profit for the quarter, beating analyst expectations for a loss of $0.06 p! er share .

Of course, this is?not?a list of stocks to buy -- just a starting point for more research. We need to look more closely at these companies to see whether?analysts' faith?in them is well founded.

Good humor, man
When Google (Nasdaq: GOOG  ) released its Ice Cream Sandwich mobile operating system, it was heralded as a unifying force between smartphones and tablet computers. It was also suggested as the gateway for Google to introduce a Nexus tablet, giving new life to the Android platform.

Maybe it won't jump-start the brand, but MIPS Technologies and Ingenic Semiconductor have unveiled a sub-$100 tablet computer that could spur big sales for the chip designer. Available right now only in China, it will be available internationally in a few months.

A year ago, MIPS was in a situation that found it overpromising and underdelivering. That might have bought it some time, but when some new contracts failed to come through, the stock was punished. One of its largest shareholders, Starboard, was also dissatisfied with the current board of directors and offered a slate of candidates to replace them, as they've steered a course of value destruction since the IPO. It was time for a new direction. MIPS ultimately placed two new independent directors on its board.

This could all help explain why 93% of the CAPS members rating MIPS now see it outperforming the broad indexes. Along with improving financials, it marks a change of fortunes for the chip designer. Tell us on the MIPS Technologies CAPS page whether you think the new tablet and the fresh blood mark a new opportunity for the company, and then add MIPS to your watchlist to see how it turns out.

Stopping short
The new year brings the prospect of some big victories for 4G security specialist VirnetX Holdings, at least in the legal arena if not in the marketplace. It has patent-infringement lawsuits against Apple (Nasdaq: AAPL  ) , Cisco, and others, with the Markman hearings in the cases scheduled to begin this month. It has better standing now after the U.S. patent office denied Apple's request?to re-examine VirnetX's '180 patent. Markman hearings iron out interpretations of various patent claims before a trial begins.

While having a valid patent puts it in a better position, it's not a guarantee of a win. Earlier in 2011, it had scored a major victory against Microsoft (Nasdaq: MSFT  ) that saw the software giant settle the lawsuit for $200 million. Similar wins against Apple and Cisco could be just as lucrative and the start of a licensing avalanche of its 4G security patents to other major players in the mobile industry. Heady growth would only be just around the corner.

For the CAPS community, that's a few too many "ifs" for their liking. Only 58% of the nearly 200 members rating the 4G specialist think it can beat the market and All-Star member GundersonGroup instead sees the downside mounting: "Losing money for the foreseeable future, >14x TBV, chart and overall market are bearish."

Add VirnetX Holdings to your watchlist, and tell us on the VirnetX CAPS page or in the comments section below whether you think the patent cases give it a secure future.

Foolish final thoughts
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Targacept Inc. (TRGT) Says AstraZeneca will Advance Alzheimer¡¯s Drug

Targacept Inc. (Nasdaq: TRGT)?currently has five mid-to-late-stage drug candidates using innovative NNR Therapeutics for difficult to treat diseases and disorders of the nervous system. NNR Therapeutics selectively modulates the activity of specific neuronal nicotinic receptors, which are unique proteins that regulate vital biological functions.

The company today reported AstraZeneca has informed Targacept that it plans to progress the development of Targacept's product candidate AZD1446 as a treatment for Alzheimer's disease. AZD1446 is a selective modulator of the alpha4beta2 neuronal nicotinic receptor that arose out of a research collaboration between the two companies.

The two companies signed a collaborative research and license agreement in 2005. Under terms of this agreement, AstraZeneca is responsible for conducting and funding the development and potential commercialization of AZD1446.

The next clinical trial of AZD1446 is expected to be a Phase 2 study as an adjunct treatment to donepezil in patients with mild to moderate Alzheimer's disease. This study will complement the ongoing Phase 2b study of another of Targacept's drugs, AZD3480, being used as a sole therapy for treatment of Alzheimer's disease.

For further information about Targacept and its pipeline of drugs, please visit the company's website at

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Cash Register Rings for Macy’s, Luxury Retailers

Retail stocks were generally trading higher on Monday, along with the rest of the market, but a few names stood out. Macy’s (M), for one, said its Black Friday crowd in Manhattan was 40% larger than normal (hey, they had a commercial featuring Justin Bieber). Shares rose 4.7% on Monday.

Luxury retailers also had a strong day Monday. Saks (SKS) rose 5%, Tiffany (TIF) was up 5.9% and Coach (COH) jumped 6.7%.

Department stores and lower-priced retailers didn’t do quite as well, with Target (TGT) rising just 0.8%.

Cyber Monday, the day of online shopping deals, was also apparently a hit this year, with retailers expected to post $1.2 billion in sales, against $1.02 billion last year, according to comScore.

Citi Reiterates a ‘Buy’ on Microsoft (MSFT) After NY Analyst Meeting

Citi reiterates a ‘Buy’ rating and $22 price target on Microsoft (Nasdaq: MSFT) following yesterday’s analyst meeting. The firm said Mr. Softie is well positioned to outperform in a recession due to its diversified product set, cash-rich balance sheet and free cash flow generation.

Citi analyst says, “MSFT’s mid-year update this morning offered no new guidance, with management reiterating themes from its recent earnings call. Management expects conditions to remain difficult for the 2H of their FY and believes the downturn may last longer than perhaps consensus expectations. MSFT is managing its cost structure accordingly, reiterating its strategy to hold OPEX flat y/y at $27.5B in FY10, with CAPEX down y/y

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