Best Wall St. Stocks Today: PEG,MSFT

From Ticker Sense

Below is our list of the S&P 500 stocks currently experiencing the longest winning and losing streaks.  Public Service Enterprise Group (PEG) leads the list of consecutive up days with 8, and Microsoft (MSFT) leads the down list with 8 straight losing days.  In the past 3 years, this has happened to MSFT one other time, and it went down again on the ninth day (9/23/05) for a loss of 28 bps.

Starbucks (SBUX) Juice Bars Where High Hopes Meet Poor Economics

The princess of coffee, Starbucks (SBUX), kissed a little juice frog, Evolution Fresh. But the question is: Will the frog turn into a prince? They dropped the words �Starbucks coffee� from their new logo and made its siren figure larger, signaling that, after the kiss, it's not all about the coffee anymore.

If only judging by stock performance, it seems that investors are cheering Starbucks� recent acquisition of Evolution Fresh and its historic march into juice. But Starbucks may have some serious problems keeping the juice fresh. Just like all the other struggling juice bars, Starbucks may not have the magic to convince the public that the juices from street-corner bars are indeed fresh.

A juicy marriage

On Nov. 10, 2011, Starbucks announced that it paid $30 million cash for fresh juice company Evolution Fresh Inc. (San Bernadino, Calif.) at about one times revenue. Founded in 1993, Evolution Fresh Inc. produces and markets fruit and vegetable products including grapefruit, orange, organic grapefruit, organic orange, and tangerine juices, fresh-cut vegetables and fruits, soups, and salsas and dips.

�We are not just acquiring a juice company,� says Starbucks CEO Howard Schultz. �We are using this acquisition to position ourselves, in a broad way, to build a multibillion health and wellness business over time.�

�Our intent is to build a national Health and Wellness brand leveraging our scale, resources and premium product expertise,� stated Channel Development President Jeff Hansberry.

Evolution Fresh founder Jimmy Rosenberg, who also started Naked Juice (an American brand of national fruit juice drinks made with no artificial flavors, added sugar or preservatives), will remain with the company. In 2007 he sold his Naked Juice to PepsiCo (PEP) for an undisclosed sum. In 2001, another player in the fresh juice sector, Odwalla, was acquired by Coca-Cola (KO) for $181 million.

It seems Starbucks did not ! overpay for the deal. And it is a good sign that Evolution Fresh�s founder is persuaded to stay.

High-pressure pasteurization technology is not exclusive

What did Starbucks see in juice? They stressed the competitiveness of high-pressure pasteurization (HPP), a technology to pasteurize fruit juice without heat, thereby preserving nutritional content and freshness taste while increasing shelf life. Starbucks believes HPP technology is not widely used and because most of Evolution Fresh's competitors still rely on thermal or heated pasteurization, it should have room to grow in the U.S. market.

However, Evolution Fresh doesn�t own the patent to this technology; there is no barrier for competitors like Coca-cola (KO) and PepsiCo (PEP) to match up and defend their market share. Avure Techonolgy, one of the largest commercial-scale HPP equipment manufacturers, says they designed a system that can produce approximately 2,000 liters per hour, and it costs around $2 million per system.

Evolution Fresh juice is already carried on the West Coast in grocery stores such as Safeway (SWY), Costco (COST) and Whole Foods (WFM), and Starbucks plans to extend the brand to more retailers, including its own cafes. Starbucks also plans to open juice bars next year that will sell the Evolution Fresh brand as well as health foods.

Packaged juice is more like diary milk

Let's first talk about packaged juice. Although Starbucks has done well at brand building, packaged juice is a different beast. Unlike coffee and tea, juice is mostly consumed like diary milk in the U.S: Customers buy it in the grocery store, and brand name hardly matters.

Yes, the packaged soft drink business has higher margin, and Starbucks was already well recognized after the success of Frappuccino. But it is obvious that Coca-Cola and PepsiCo have already spent more in this market segment and will invest more to defend their positions in juice. W! ithout m assive marketing effort and huge capital expenditure, a niche market position in juice could be the best thing Starbucks can hope for.

On the other hand, Starbucks may not have to spend as much on traditional marketing as other food manufacturers, since it can use its stores as advertisements. Getting a product in front of the 60 million customers who frequent Starbucks stores around the world each week could be equivalent to airing a commercial on the top three television shows weekly. But will coffee drinkers pay attention to the juice cans sitting silently on store shelves?

The juice bar business model is questionable

How about the juice bar? Starbucks� success was built on good beans, cozy cafes and cute advertisements. These elements worked in the coffee business. But to build up a juice brand, they need to do more than simply cut and paste their old tricks. In addition to bright interior decoration and Caribbean music, they need to build up a fleet of refrigerator trucks for fruits and yogurt. It can be expensive to support a nation-wide purchase and supply chain for juice while at the same time ensuring every store gets fresh fruit.

The juice bar business is highly seasonal. Would you yearn for an icy cup of $5 fresh juice during winter? Consumers may also have some doubts about the quality of fresh juice bought in bars. Will they change their behavior just because it�s from Starbucks? What is the cost of keeping the juice fresh? Coffee is additive to many. Will people start to become addicted to fresh juice?

It has been hard to make money in juice bars. Just take a look at a key player in the juice bar business, Jamba Inc. (JMBA), which has 752 juice stores in the U.S. The economics are not pretty. Can Starbucks change the fundamental nature of a lousy business?

Mr. Schultz says Starbucks' business model will help it succeed wh! ere othe rs have failed because it can test new products in its stores before introducing them to supermarkets, as it did when it introduced Via instant coffee in 2009. Via is now sold in more than 70,000 outlets worldwide and rang up sales of $250 million in fiscal 2011. But Via is a packaged good. Juice bars are different. Still, Starbucks may eventually find solutions to all the problems with juice bars. But, what�s the cost?

The excitement about Starbucks juice could be premature

Starbucks says that the Evolution Fresh acquisition can help them catch up with the healthy food trend but the fact is, the same amount of juice contains more sugar than Coke.

By adding a different type of drink that won't burn consumers' tongues in summer, Starbucks could reduce their profit seasonality even more after their brilliant introduction of ice coffee and coffee ice cream. However, before they can really explore the potential of this juice deal, a new strategy and a lot of capital expenditure may be required. The responses from McDonald�s (MCD), Coca-cola and PepsiCo. are unpredictable as well.

Venturing into the difficult juice bar business, Starbucks� Evolution Fresh may not taste as sweet as investors are hoping for.

By Yunlang Liu and Brian Zen
Disclosure: Brian Zen owns shares in Starbucks.
Tickers in the article:

Romney: "I'm not concerned about the very poor"

NEW YORK (CNNMoney) -- Mitt Romney says he isn't worried about those living in poverty since they have government assistance programs to fall back on. Instead, he wants to focus on helping the middle class.

But not everyone is so sure that the nation's lifelines are truly protecting those who need it.

Saying the nation had a "very ample safety net," Romney cited Medicaid, food stamps and housing vouchers as examples of government programs that protect the poor.

"I'm not concerned about the very poor," the Republican presidential candidate said on CNN Wednesday morning. "There's a safety net there, and if it needs repair I'll fix it. I'm not concerned about the very rich, they're doing just fine. I'm concerned about the heart of America, the 95% of Americans who are right now struggling."

The federal government spends hundreds of billions of dollars to feed, shelter and care for those in poverty, which hit a record 46.2 million people in 2010. Demand has skyrocketed as a result of the Great Recession.

A record number of people are now receiving government assistance. Roughly 1 in 6 Americans depend on public programs, with the largest two being Medicaid and food stamps.

Spending on all the government's income-based programs, such as food stamps, has increased by one-third to $900 billion under President Obama, according to the Heritage Institute.

Federal outlays on Medicaid was an estimated $275 billion in fiscal 2011, according to the Congressional Budget Office. On average, some 56.3 million people received Medicaid benefits each month that year, though millions more who qualify don't sign up.

Romney, one of the richest candidates to run for president, supports turning Medicaid into a block grant and letting states control the funds. But advocates for low-income Americans worry that could result in lower federal support for the program and, ultimately, cuts in benefits and eligibility.

As for food stamps, the feder! al gover nment spent more than $75 billion in fiscal 2011, according to the U.S. Department of Agriculture. Nearly 45 million people got help buying food, receiving an average monthly benefit of $134.

Still, about one-quarter of those eligible for food stamps don't receive them, experts say. And for many, the monthly check is not enough to cover all their nutrition needs.

Housing vouchers cost the government another $18.3 billion in fiscal 2012. This program, which shelters 2.1 million households, is the largest federal rental aid initiative. Overall, the government puts a roof over the heads of 5 million Americans through various rental assistance efforts at a cost of $34 billion.

Wall Street bets big on Romney

But unlike food stamps and Medicaid, housing assistance is not an entitlement. The amount is limited by the funding granted by Congress.

Only one-quarter of eligible families receive federal housing aid, according to Doug Rice, senior policy analyst at the Center on Budget and Policy Priorities, a left-leaning group.

So while lifelines do exist for the poor, more can be done to assist the needy, experts said.

"It is a common misconception that we don't have to worry about the very poor because they are covered by existing programs," Elizabeth Lower-Basch, senior policy analyst at CLASP, which advocates for low-income Americans. "In fact, our safety net has many holes." 

Three Turnarounds to Watch: Jones Soda (JSDA), Sino Clean Energy (SCEI), James River Coal (JRCC)

While it's easy and fun to jump into a rally that's clearly on motion, the big bucks are made by traders with the foresight - and guts - to step into budding uptrend that aren't so certain. Sino Clean Energy Inc. (NASDAQ:SCEI), Jones Soda Co. (NASDAQ:JSDA), and James River Coal Company (NASDAQ:JRCC) are three such possibilities. Though each is still dealing with some sort of liability, charts as well as the underlying stories for JRCC, JSDA, and SCEI are starting to look juicy. Take a look.

In early January it looked like Jones Soda Co. had shrugged off a terrible 2011 and was ready to roll in 2012. The stock punched its way out from underneath a bearish trend line, and made a beeline for the 200-day moving average line (green) at $0.87 following the release of its Q4 results... which were quite encouraging. As is the case with most any stock though, no amount of good news was going to circumvent the profit taking that was setup after JSDA doled out a 137% move in a little over a week. Sure enough, shares were back to the $0.45 three weeks later.

In the shadow of that fake-out move, today's 12% surge from JSDA is something a lot of traders are ignoring. That's a mistake though. While it's subtle, that small move has also carried the stock back above several key moving average lines. And, though they didn't hold onto the January gains, that big move then still verifies that Jones Soda Co. has more fans out there than it may superficially seem. Pair that up with a string of progressive news and a reloaded war chest, and what you've got is a stock that's probably past its worst.

The 13% rally from James River Coal Company today may feel insignificant considering the move doesn't even come close to undoing the recent damage inflicted on the stock. There's actually more going on - in a good way - with this chart of JRCC than it may seem like on the surface. Specifically, after three months of trying, the bears finally pushed the stock under a key floor at $6.19... the perfect opportunity for the sellers to take the ball and run with it. They just couldn't. Although there are still some ceilings ahead, this may well be the beginning of better days.

Why? It's not evident on the chart of JRCC (at all), but this company is causing a big stir within the trading community today.... the print/web media, message boards, and chat room - a group that has more collective influence than most investors might imagine. To see this much interest for a name that's usually not that big of a deal may mean James River Coal Company is 'in play'. Surprisingly, the collective market is right about stocks more often that its participants may realize.

Finally, Sino Clean Energy Inc. has in all likelihood set up a pullback with today's 44% rally; the opening gap only exacerbates the problem. Yet, the move from SCEI has pretty much cemented in place a key technical move that up until today had been in doubt. What's that? a move above the all-important 200-day average line (green) at $1.45. Even with a pullback, as long as the bullish crossover holds up (and it appears as if it will) this new uptrend will remain intact.

As the name implies, Sino Clean Energy Inc. is neck-deep in the clean energy industry in China. It provides a coal-water slurry fuel, and though the company's legitimacy has been hotly debated, it's clear there's enough legitimacy to give the stock a big boost since October; today's pop stems from confirmation that the balance sheet numbers it provided in its latest SEC filing is indeed accurate. While the ! trailing P/E of 1.15 would imply that traders didn't believe it until now, that ridiculously-low valuation for SCEI suddenly seems like an opportunity rather than a liability.

Romney's Rivals Fizzle in South Carolina

Florence, S.C.

Different state, same old story. And Mitt Romney is smiling.

Even before the first votes of this nomination fight, the Republican presidential rivals to Mr. Romney were pointing to South Carolina. Iowa would be a scrum, they explained, and New Hampshire a foregone Romney conclusion. But South Carolina, well . . . watch that space. The Palmetto State would be the opportunity for one candidate to break out, unite all those South Carolina conservatives, and make this a race.

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GOP candidates Mitt Romney (left), Ron Paul, Newt Gingrich and Rick Perry.

Someone might want to tell South Carolina. For all the bickering among the campaigns about how real Mr. Romney's lead is here, there is one polling fact that is undeniable: No one Romney opponent is breaking out. The non-Romney vote is as split as ever, and for that the non-Romneys have only themselves to blame. They're botching it.

WSJ's Neil King reviews Monday's Republican presidential debate in Myrtle Beach, South Carolina. Photo: EMMANUEL DUNAND/AFP/Getty Images


Some 30 years after Ronald Reagan assembled his winning coalition, the task of any candidate who wants to unite conservatives remains largely the same: Run on a message that brings together economic libertarians, defense hawks and social conservatives. That's the game here, the first-in-the-South primary, a state with sizable contingents of limited government, military and evangelical voters.

Newt Gingrich, who as recently as last month held a 20-point lead here, initially seemed to understand that job. His closing Iowa argument was that voters faced a choice between a "Massachusetts moderate" and a candidate born to a "bold Reagan conservatism" that highlighted economic growth and opportunity. Whether that message would have rescued Mr. Gingrich from his sliding poll numbers, we'll never know.

He couldn't stick with it. Mr. Gingrich is a gifted and knowledgeable politician, traits that have also given rise to a certain egoism and lack of discipline. Even before the Iowa caucuses, he was wandering off message, and his bitter, fourth-place finish inspired a vendetta against Mr. Romney. The optimistic Gingrich growth campaign quickly gave way to the opportunistic Gingrich Bain assault.

Running for a Republican nomination as an anticapitalist is not the smartest politics. Doing it even as you acknowledge taking $1.6 million from taxpayer ward Freddie Mac is the opposite of smart. The Gingrich team was betting it could tap into populist anger against wealthy Americans, but it misjudged its South Carolina audience.

This is the state that for the past year has been the epicenter of the debate on the merits of a free market because of President Obama's National Labor Relations Board attack on Boeing. The voters here get creative destruction, and when Mr. Gingrich brought up Bain at a forum in Charleston on Saturday, he was booed.

By Sunday, at an event in Georgetown, S.C.—a town that had once had a steel mill shut by Bain—he'd dro! pped the Bain line altogether and returned to his "Reagan conservatism" argument, insisting he's the best choice to counter "Obama radicalism." But it's arguably a little late for a refocus.

Focus has not been a problem for Rick Santorum, whose late Iowa surge was on the back of evangelical support, and who remains focused on that constituency here. The economy may be in the tank, Iran may be threatening, but the former Pennsylvania senator doesn't want to talk about that. He's making the pure pitch to social conservatives.

At an event here in Florence—a regional business hub in this state's coastal plain—Mr. Santorum spent an hour talking about his faith, "strong families" and America as a "moral enterprise." He cast the general-election stakes as a choice of two radically different cultural visions of America, and he boasted he was the only candidate who would openly fight on issues like abortion. It won him applause from certain quarters. But it left many attendees wondering when Mr. Santorum was going to talk about his tax plan, or his views on national defense. Save for responding to questions, he never really did.

Yet South Carolina voters want to hear about these issues, and in depth. If Iowa showed anything, it is that in this age of Obama and high unemployment and terror threats, even cultural conservatives are voting on more than faith. That explains the growing fight over whether Mr. Santorum should have won the recent endorsement of a group of 150 social conservative leaders—or whether the nod should have gone to Mr. Gingrich. The social right is as split as anyone.

Lurking, too, in South Carolina minds are doubts about Mr. Santorum's economic credentials. Ron Paul has been running an ad noting Mr. Santorum's vote against federal right-to-work legislation, which would restrict unions from forcing membership and dues. Voters are also aware of his past votes for acts like Davis-Bacon, which requires taxpayers to pay union rates in government-funded! contrac ts and disadvantages nonunion companies in right-to-work South Carolina. Voters are open to Mr. Santorum's reassurance, and the former senator has the smarts and skills to offer it. But he's not bothering.

Ron Paul has likewise pursued a narrow approach, pitching himself to small-government economic conservatives. That purity arouses great passion in a certain core following, but it leaves Americans who are concerned about foreign policy and social issues cold.

Rick Perry, for his part, has yet to figure out who he is courting: One minute he's slamming Mr. Obama's "war on religion," the next smacking "vulture capitalism," the next flogging his "energy jobs" plan. His herky-jerky campaign has underlined his lack of preparation.

And so, while the Romney rivals now openly exhort voters to hurry, to unify, to stop the Romney march, too few may be listening. The four main opponents to the former Massachusetts governor are, among them, splitting almost 60% of the vote.

Related Election 2012 News

  • GOP Race Intensifies
  • Capital Journal: Splintered Factions
  • South Carolina GOP Debate Highlights
  • ELECTION 2012: Complete coverage

Mr. Romney has steadily motored on, pounding at his two themes of competence and electability. He's been running ads since last year slamming the Obama administration for its Boeing assault, while enlisting South Carolina Gov. Nikki Haley to act! as his local surrogate. The Bain attacks have, if anything, helped solidify some of his support. And Jon Huntsman's withdrawal and endorsement will throw a few more voters his way. Should Mr. Romney win a clear victory here, the nomination may be over but for the balloons and confetti.

Messrs. Gingrich, Paul, Santorum and Perry can't argue that they haven't had a shot. Super PACs have assured they have had the money to compete in South Carolina, despite varying prior performances. South Carolinians have hardly rallied behind the flawed Mr. Romney—his polling average in this state remains at 30%—and they remain open to a compelling alternative.

They just haven't seen anything compelling enough to unite them. And the non-Romneys are running out of time.

Ms. Strassel writes the Journal's Potomac Watch column.

Buy, Sell, or Hold: Dow Chemical

Dow Chemical (NYSE: DOW  ) is a huge U.S. chemical maker with a market capitalization of over $40 billion. Let's put this company through the wringer to see what you should do with its stock now -- buy, sell, or hold it.

Excellent diversification:
Dow scores high points for its business as well as regional diversification. Apart from chemicals, its business portfolio includes producing electronic materials, agriscience products, plastics, and more. That helps smooth Dow's results, as weakness in one area -- say lower chemical sales volumes, as is currently evident -- can be easily offset with strength in another, such as high demand for agriculture products.

Similarly, Dow has benefited from geographical diversification, as lower sales in Europe have been offset by rising sales in emerging economies. Dow's revenue from emerging markets reached record highs last year and added 30% to total sales. This is particularly good when rival DuPont (NYSE: DD  ) is also going all out to get more from these markets, as DuPont and Dow have many businesses in common.

Looking beyond the ordinary: Tremendous opportunities lie ahead as Dow taps into growing alternative-energy trends. Dow is expanding its lithium-battery business and looking to power auto giant Ford's trucks with its batteries. The company also plans to buy millions of gallons of innovative algae-based fuel from Solazyme (Nasdaq: SZYM  ) over the next few years. This fluid will be Solazyme's first big chemical product for industrial use.

Dow bet big on bioplastics last year, and introduced its revolutionary solar roofing shingles in collaboration with leading homebuilder D.R. Horton (NYSE: DHI  ) . It is also building one of the world's largest petr! ochemica l facilities with Saudi Arabia-based oil company Saudi Aramco. Dow expects to cash in on the agriculture boom through more product launches, which should help it catch up with DuPont's growing agribusiness. It also is trying to develop its own technology to produce essential feedstocks.

Smashing performance, solid dividends: Performance-wise, sales touched a record high of $60 billion last year. Revenue and net income grew 12% and 19%, respectively, in the past year. The company has consistently generated impressive net income and free cash flows over the last five years. It has made investors a happy lot by keeping dividends at the top of its cash-deployment list. Dow is one of the best dividend-paying companies, having a 100-year history of dividends paid out in every quarter. It currently yields a handsome 3%.

Debt woes:
Dow's total debt-to-equity ratio, at 92%, is a concern. A dividend payout ratio of 46% is uncomfortable for such high debt levels. If the chemical market hits a bump because of an economic downturn, a dividend cut is a possibility (Dow did it in 2009). In such situations, its payout ratio will become critical.

Too volatile: Conservative investors may find the volatility in Dow's share price hard to handle. Sample this zigzag path: A low of nearly $7 in March 2009 was followed by a peak of around $31 by January 2010. Shares then dipped to less than $23 within the next seven months. It again took the ladder up to hit $41 in May last year, and was back to below $22 by October. This stock's not for the weak-hearted!

If you can handle the wild swings in share price, Dow's getting bigger and better by the day. And I'll give you one more reason to stay put. Dow is reportedly trying to lock in low fuel prices through hedging programs. If Dow does that, its shares might get a lift. More important, the company's costs would stay low for the foreseeable future, thereby improving long-term ! margins.

My verdict
Dow looks like an attractive stock for an investing portfolio. Its shares have shown a tendency to recover pretty quickly from lows. Click here to add Dow to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

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

Best Wall St. Stocks Today: USO,OIH

We have just seen another build in crude oil inventories according to the Department of Energy data.� The build is not in finished products, but the increase in crude oil inventories was +5.6 million barrels to 366.7 million in the U.S.�� Gasoline levels fell by -0.9 million barrels to 216.5 million barrels and distillates fell by -1.2 million barrels to 139.6 million barrels.� This is putting the heat on the United States Oil (USO) and Oil Services HOLDRs (OIH) funds.

If you think this is not demand destruction causing the build-up, guess again.� We have outlined issues with refineries, and that is being shown here as well.� A week ago we had 81.8% capacity, but this week we saw 80.4% capacity.

This looks like it is now the 5th week in a row of a build up in crude oil products.� This also looks like it is getting close to�very recent�highs in crude levels.

United States Oil (USO) is now down around $29.00 after being at $29.55 before the news. The Oil Services HOLDRs (OIH) also saw a drop to under $84.00 after being around $84.50 before the news.


DuPont Fabros Shares Dropped: 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 data-center REIT DuPont Fabros Technology (NYSE: DFT  ) were getting pummeled by investors today, falling as much as 11% in intraday trading before closing down 4.5%.

So what: The results for DuPont's fourth quarter looked good, if not better than good. Earnings per share clocked in at $0.12, up 20% from the prior year, while revenue increased 13% to $74.4 million. Analysts were looking for $0.10 in per-share profit on revenue of $74.8 million. Funds from operations, a key cash-flow measure for REITs, climbed 12% from 2010 to $0.37.

Now what: While the results from the past quarter were what investors wanted to see, the expectations for the upcoming quarter and year weren't quite as spiffy. For the first quarter, management projected that funds from operations would fall to a range of $0.31 to $0.35, while full-year FFO is seen finishing between $1.31 and $1.51. The primary drivers of the lower FFO are lower capitalized interest resulting from the lack of new development starts planned and higher financing costs.

Want to keep up to date on DuPont Fabros? Add it to your watchlist.

The Price of Options Trading Success

If you went to three different grocery stores, you’d probably see three different prices for a simple gallon of milk. No doubt you’d give your business to the store that charges the least for this product. And thanks to the fact that there are multiple stock and options exchanges, the same kind of “shopping around” happens every day on the open markets.

If you look at any major financial information site for any stock, you’ll find the price at which the security most recently traded. You’ll also find the “bid” and “ask” prices at which buyers and sellers have declared the price they wish to pay (or collect for) a position.

Options investors must be especially mindful of what each price means when reviewing options premiums. There’s a reason why each price is listed, and knowing what they represent can help you to make better trades.

The current price shown is the price of the most recent trade that was completed for the stock or option. This is the market value of the security. This may seem straightforward enough, but it’s important to remember that it’s not necessarily the price you would pay or receive for an option if you placed an order at that exact moment.

The price of the most recent trade can be deceiving, for two reasons. One, depending on the Web site where you are visiting to find options trading quotes, the figure can be delayed by 15 to 20 minutes and, therefore, doesn’t accurately reflect what might be happening at that very moment. Secondly, the price itself can be sort of a misnomer, as the most recent trade that took place could have been 15 minutes or even 15 DAYS earlier!

If a stock or option isn’t liquid — that is, if there aren’t a lot of shares or contracts available for trading and/or not too many people are interested in trading them — then a security’s price can remain un! changed for several months due to inactivity.

To determine the price you would pay or receive if you submitted your order immediately, you need to look at the “bid” and “ask” prices, which are never the same but do share a common purpose in giving you an accurate trading range for the option you may be interested in buying (or selling). The difference between the prices is called the “spread” and the smaller that spread, the more-liquid the option is.

The asking price, sometimes called the “offer price,” is the lowest price at which a market-maker (or, someone who owns the option) is prepared to sell the option at any given time. As an options buyer, you are looking for the best “ask,” or the lowest price for which you can buy an option.

The asking price is always higher than the bid price, which reflects orders at the level where bidders want to purchase the option. It doesn’t mean that the order will get filled — the bidder may have to eventually pay the asking price if no sellers are willing to honor the bid price.

Remember that the bid, the smaller number, is the price at which a market-maker is willing to buy a security from you. And for your selling purposes, you may want to take the highest bid price for which you can sell the option, or else you can try to “ask” for your desired price and see whether anyone bites.

The bid/ask spread is as simple as applying the law of supply and demand. The market-makers want to take more money from you by selling to you at a higher “ask” price, while giving you less money for options you want to unload by buying at a lower “bid” price.

In fact, market-makers make money on the difference between the bid price and the ask price. That difference is called the “spread.”

The bid/ask spread, then, represents the highest price a buyer wants to pay for an option and the lowest price a seller is willing to a! ccept fo r it. The delicate balance of an option’s premium always depends on a simple formula: how little the seller will accept and how much the buyer is willing to pay.

Market-makers are the ones who set the width of the spread, so it can be anywhere from a few cents to a few percentage points, depending on the asset’s value. These dealers work independently of brokerages and match up buyers and sellers by handling the buy and sell orders. This involves taking on a great deal of risk but serves to ensure that the individual or entity’s orders are not only filled, but also protected.

It’s always important to keep in mind that there are fundamental differences between stocks and options. Only the stocks that are listed on the Nasdaq (NASD) have bid and ask prices available; stocks on the S&P 500 (SPX) or Dow (DJI) do not. However, all options — regardless of which index the underlying stock resides on — are shown with bid and ask prices.

Still, sometimes options traders will find that the bid and ask fields show zeros for all of the available strike prices of a particular underlying stock or index. Why is that? Again, we can turn to the market-makers to solve the mystery.

The market-makers will often remove the previous day’s prices to wipe the slate clean before the opening bell, especially if the pricing hits psychological price points — but not always.

Occasionally, options chains will show yesterday’s bid and ask prices before the open. So, a market order entered based on these prices could be filled at a much-different price if the stock or index opens higher or lower. So, you must stay aware of price changes so that you don’t get into an option trade for far more than you planned to pay — likewise, you don’t want to accept significantly less than you think the option is worth, if you’re a seller.

No doubt that if you’ve followed a favorite stock and its correspondin! g option s, you know that investors tend to follow like lemmings — if the price goes up with volume (or increased buying), then they buy. If the price drops, they head for the exits in droves. Basing your buy or sell decisions on what everyone else is doing can be a very costly way to decide when to take your profits.

Sometimes, though, this overreaction can create opportunities for investors who are willing to run against the pack — such as, buying a stock when it has been temporarily depressed or selling when a stock’s price has been elevated for no apparent reason.

For this reason, some traders attempt to watch bid and ask prices to time their selling, but because prices move constantly (especially for actively traded positions) and also given the quote delays, you can’t know what price you will get if you are a buyer or a seller unless you use specific limit orders (that is, you set the highest level you want to pay to buy or the lowest amount of money you’re willing to accept to sell).

This underscores the importance of following a trusted expert in the field, instead of the crowd, who has insight and data that generate proper buy and sell signals, along with market/limit order perimeters.

Each option chart may show several different prices, but the most important one is the price that offers you the best return for your money.

If you enjoyed this article, check out Ken Trester’s “Take Options Losses in Stride” and “Trade Options with ‘Fun’ Money.”

Investment News Briefs

Gaining 13.07% ($0.40) this morning in early trading is PAETEC Holding Corp., (PAET) currently trading on the Nasdaq in the $3.46 range. PAET has a new market cap of $501 million. PAET has a 3-Month average daily trading volume of 601,244 shares and it topped 1,685,475 shares traded three hours into today's session.

PAET management today gave new full year guidance for the Company's the fiscal year ending December 31, 2009 noting, "Continued strong cash flow and new sales have provided stability for PAETEC and we are pleased to guide investors for the remainder of 2009." ��

And just to keep investors informed, PAET Chairman and CEO Arunas A. Chesonis said, "We anticipate addressing 2009 full year guidance during our third quarter earnings call in November and providing full year guidance for 2010 during our fourth quarter and fiscal year-end earnings call the early part of next year."

Now that's staying in touch.

PAET management said FY09�adjusted EBITDA is $245-255 million FY09 revenues are $1.575-1.585 billion. PAET's revenue and adjusted EBITDA expectations for the full year 2009 assume, among other matters, that there is no further significant decline in economic conditions and that there are no significant changes in the competitive or regulatory environments.

PAET offers network services, including local telephone services and domestic and international long distance services; and data services comprising broadband Internet access services and virtual private network services, as well as related services, which include Internet Protocol (IP) traffic classification, network storage, PC back-up, and virtual NXX services. As of March 1, 2009, PAET had 170,213 digital T1 transmission lines for approximately 47,000 business customers; and broadband network and facilities spanned approximately 19,100 local route miles. The company also operated 120 switching f! acilitie s that provide traditional voice and Internet Protocol capabilities and had approximately 4,560,000 access line equivalents in service.

At $3.46, PAET is pennies off its 52-week high of $3.55 set on 05-11-09 and is above its 52-week low of $0.76 set on 10-10-08. At $3.46, PAET is ahead of both its 50-day and 200-day moving averages. PAET has trailing twelve month revenues of $1.6 billion. PAET is widely held by institutions. Its shares out versus float ratio is close enough to parity not to raise any red flags about stability.

The market never ceases to amaze me: a $3.46 stock with $1.6 billion in revenues in a calendar year. Amazing.

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PowerShares' high-beta funds not for faint of heart

Some thrill-seekers are happy to pay the price of admission to ride a roller coaster. And some investors are equally happy to pay a modest expense to experience high-octane investments with the potential for soaring gains.

Of course, it�s worth noting that these funds can often crash just as hard.

Some new funds for thrill seekers are about to hit Wall Street. Invesco (NYSE:IVZ), through its PowerShares brand, is offering a pair of new exchange-traded funds playing on high-beta (read: volatile) stocks.

For some, a high beta is a sign of high potential for profits. For others, a high beta signifies a risky bet akin to an all-out gamble. Make sure you know what kind of investor you are before even entertaining the notion of buying these funds.

The PowerShares S&P Emerging Markets High Beta Portfolio (NYSE:EEHB) and the PowerShares S&P International Developed High Beta Portfolio (NYSE:IDHB), launching Friday, will track similarly named indices comprised of 200 high-beta stocks from their respective regions. The most sensitive stocks get the highest weights.

Short of investing in leveraged ETFs, which try to generate two or three times the returns of a given asset class, it doesn�t get any more volatile than that.

While these funds� holdings won�t be available until their launch, investors wanting an idea of what to expect can look to PowerShares� existing high-beta ETF, the S&P 500 High Beta Portfolio (NYSE:SPHB), started May 5, 2011.

Click to Enlarge Off the bat, performance isn�t great, with the SPHB down nearly 8.9% in its young life, vs. a positive 2% return for the S&P 500. However, the ETF is up 17% year-to-date, steadily ahead of the S&P�s strong 8% return. All told, a look at the chart indicates that it exaggerates the S&P�s gains, but exaggerates the losses even more. That�s to be expected, of course! , since that�s what the fund is built for. But it�s worth pointing out again just so investors are clear what they are getting into.

While this high-beta fund does spread the wealth across 100 companies, SPHB�s greatest sector allocation is financials, at almost 35%. A savvy investor might not be surprised by this, since bank stocks have had a lot more �wiggle� than the rest of the market lately. And the fund�s movement pretty much reflects both the shellacking financials took in 2011 and their strong YTD returns in 2012.

We�ll see if EEHB and IDHB are constructed similarly, but even if they�re lighter on the financials, their launch comes at what seems like a poor time. The markets have been cruising higher for months, with almost every technical analyst preaching that we�re at least due for a correction in the short term. Plus the global worry trifecta of European debt, a Chinese slowdown and Iranian oil threats lurk in the shadows, ready to give equities a good kicking at a moment�s notice.

So it stands to reason that volatile, high-beta funds could take it on the chin more than any other investment if and when the market stumbles.

As is the case with leveraged ETFs, these high-beta funds have the potential to enhance your returns. But they also can hurt you just as badly, and the risk inherent in these high-beta funds is greater than most investors care to indulge in.

Kyle Woodley is the assistant editor of As of this writing, he did not hold a position in any of the aforementioned securities. Follow him on Twitter at @KyleWoodley.

Israeli company makes a chip that boosts flash drive performance

Here are your Apple rumors and AAPL news items for Tuesday:

Apple to Buy Flash Memory Company: A Tuesday story originating at The Calcalist (via Reuters) said Apple (NASDAQ:AAPL) is negotiating a $400 million to $500 million acquisition of Israeli flash memory technology company Anobit. Anobit’s claim to fame is a chip that enhances flash drive performance, which is used in the iPhone, iPad and Macbook Air. Among Anobit’s core clients is Samsung (PINK:SSNLF), a company with a contentious relationship with Apple. Apple is both a client and competitor of Samsung. A purchase of Anobit is logical for Apple considering the ever-increasing importance of flash memory storage technology to Apple’s products. The Cupertino, Calif.-based company accounts for more than half of all flash memory purchases in the world.

CarrierIQ Claims “Bug” Caused Text Message Collection in Privacy Fiasco: Mobile phone software maker CarrierIQ still is trying to recover from its recent lambasting over privacy issues. A Tuesday 9 to 5 Mac report said the company now claims text messages recorded by the company’s software were recorded because of a “bug,” and that the data never was decoded or used by the company. This contradicts a previous statement by Andrew Coward, CarrierIQ vice president of marketing, saying the company’s software “does not record, store, or transmit that contents of SMS (text) messages.” Apple rushed to defend itself on Dec. 2 after it came out the company was using CarrierIQ technology in the iPhone. CarrierIQ’s data-collecting software has been used predominantly by telecoms to track user information, including personal information, text messages and keystrokes — but for the purpose of diagnosing technical problems.

iTunes Business Flying South for the Wint! er: Years after its initial opening, iTunes remains growing business for Apple. According to a Tuesday press release issued by the company, iTunes is opening for business in 16 countries throughout Central and South America. Brazil is the first of those countries to get the store, but it will be joined by other nations in the coming weeks.

As of this writing, Anthony John Agnello did not hold a position in any of the aforementioned stocks. Follow him on Twitter at�@ajohnagnello�and�become a fan of�InvestorPlace on Facebook. For more from the company, check out our previous Apple Rumors stories.

Public Procurement As A Green Investment Incentive In EU Member States

On 18 January 2012, the Irish Government announced its first Green Public Procurement Action Plan. And while there is already some criticism of the “Green Tenders” in cash-strapped Ireland, the action plan is a reminder that public procurement has an environmental side as well since it is a way to promote environmentally friendly enterprises and stimulate more sustainable production. And, according to the EU Environmental Commissioner, green public procurement (GPP) also plays an important role in EU efforts to become a more resource-efficient economy.

Generally, GPP refers to the selection of products, works and services with a reduced environmental impact throughout their lifecycle. GPP is usually applied due to environmental considerations such as the reduction of greenhouse gas emissions; however, in some cases GPP can also have an economic slant, since some green products and services are less costly in terms of maintenance and disposal.

In the case of Ireland, the purpose of the “Green Tenders” action plan is to assist the Irish public authorities to implement GPP. According to the website of the Irish Department of the Environment, Community and Local Government, public authorities in Ireland spend approximately €14 billion annually on goods, services and works. The idea of the Green Tenders is to use this purchasing power to stimulate the green economy in the country. Among the priority sectors for the Irish GPP action plan are construction, energy, food and catering services as well as ICT. In consequence, companies working in those sectors will have an added incentive for investment in green technologies, so that they qualify to participate in public tenders.

Despite the positive influence that the Irish GPP plan is expected to have as regards resource efficiency and the promotion of eco-friendly products and services, the Irish initiative has received a mixe! d reacti on. As an example, according to, the Irish Bioenergy Association (IRBEA) complained that the plan did not outline the role of the public sector in meeting Ireland’s renewable energy targets. Nevertheless, the plan is likely to boost green investment enterprises in the country by promoting eco-innovation.

In addition, on a European level, GPP is considered to be an important voluntary instrument for ensuring sustainable consumption and production. Indeed, the European Commission is itself promoting GPP practices, with the current Procurement Directives offering a number of opportunities for the implementation of GPP.

Naturally, the benefits of GPP are more visible from the broader EU perspective. According to the European Commission’s handbook “Buying green! A Handbook on green public procurement”, public authorities in Europe spend some €2 trillion each year, which is equivalent to 19 percent of the EU’s GDP. With public expenditure of that magnitude, GPP compliance has the potential to make an impressive impact. Among the green contract examples provided in the Commission handbook are energy efficient computers, office furniture from sustainable timber and electricity from renewable energy sources. The Commission also views GPP as a driver for eco-innovation, especially in those sectors of the economy where public purchasers represent a large share of the market, such as construction and health services.

In order for GPP to be really effective, the criteria that apply to the selection of the relevant goods and service providers need to be developed very carefully. The EU has already set out GPP criteria for a number of different product and service groups, with those criteria now being reviewed and updated on a regular basis. The objective is for the EU Member States to be able to insert the criteria directly into tender documents. Besides the importance of GPP criteria with regards to tender procedures, they can also be used as workflo! w guidel ines by green investment companies.

The United Nations has a somewhat different procurement approach to that applied across the EU. The UN has adopted Sustainable Public Procurement (SPP), which addresses the three pillars of sustainable development – economic, social and environmental – whereas the EU Member States seem to focus mostly on the environmental aspect of SPP. Nevertheless, there are some public authorities in the EU which try to implement GPP as a part of a broader sustainable procurement strategy.

In any case, with GPP, governments in the EU Member States are in effect using market power to promote cleaner technologies and green investment enterprises. In addition, when paying for goods and services produced in an environmentally friendly manner, public institutions also raise environmental awareness and provide a valuable example to other consumers.

Great Lakes Dredge & Dock Beats on the Top Line

Great Lakes Dredge & Dock (Nasdaq: GLDD  ) filed its 10-K on March 9. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q4), Great Lakes Dredge & Dock missed estimates on revenue and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue dropped and GAAP earnings per share stayed the same.

Gross margin dropped, operating margin expanded, and net margin grew.

Revenue details
Great Lakes Dredge & Dock chalked up revenue of $158.6 million. The three analysts polled by S&P Capital IQ predicted sales of $167.9 million on the same basis. GAAP reported sales were 7.8% lower than the prior-year quarter's $172.1 million.


Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $0.12. The three earnings estimates compiled by S&P Capital IQ predicted $0.08 per share. GAAP EPS of $0.12 were the same as the prior-year quarter.


Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 11.6%, 290 basis points worse than the prior-year quarter. Operating margin was 4.1%, 90 basis points better than the prior-year quarter. Net margin was 4.3%, 40 basis points better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $160.0 million. On the bottom line, the average EPS estimate ! is $0.10 .

Next year's average estimate for revenue is $684.8 million. The average EPS estimate is $0.47.

Investor sentiment
The stock has a five-star rating (out of five) at Motley Fool CAPS, with 168 members out of 180 rating the stock outperform, and 12 members rating it underperform. Among 48 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 43 give Great Lakes Dredge & Dock a green thumbs-up, and five give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Great Lakes Dredge & Dock is buy, with an average price target of $7.75.

Over the decades, small-cap stocks like Great Lakes Dredge & Dock have provided market-beating returns, provided they're value-priced and have solid businesses. Read about a pair of companies with a lock on their markets in "Too Small to Fail: Two Small Caps the Government Won't Let Go Broke." Click here for instant access to this free report.

  • Add Great Lakes Dredge & Dock to My Watchlist.

Energy Sector Continues Rally: Eagle Rock (EROC), Warren Resources (WRES) and Ivanhoe Energy (IVAN) Gain

Energy stocks Eagle Rock (EROC), Warren Resources (WRES) and Ivanhoe Energy (IVAN) were all posting significant gains in early trading today as Energy shares rode the strong tide of a 5-Day rally in the sector. While broad markets continue their upswing, the gains have been modest to say the least; pancake flat to be more prolific. But the Energy Sector has been strong since last Friday even though oil hasn't moved too far to the left or right of the $72 mark.����

And even though FedX boosted its Q1 earnings guidance today (indicating small business is moving again) the bulls seem too tired after 5 straight days of modest gains to make a run up any size hill and the bears are in hibernation, waiting for something, anything to get them stirred up. So with an essentially flat broad market at the open, let's once again look to a few SmallCap gainers in the strong, 5-Day Energy Sector rally.

No news is good news...

Whether it's the opportunity of a short trading week, short-sellers covering or institutional support shoring up aggregations and value, the following three companies have posted significant gains today with no official news released and no analyst upgrades.

Gaining 8.19% ($0.29) today is Eagle Rock Energy Partners, L.P., (EROC) currently trading on the Nasdaq in the $3.81 range. EROC has a new market cap of $287 million. EROC has a 3-Month average daily trading volume of 343,455 shares and topped 673,390 shares traded by mid-session.

EROC is one of those remarkable stocks: $3.81 a share with trailing twelve month revenues of $1.21 billion. Remarkable.

The EROC August 4 Q2 09 filing was filled with good news and bad news. The EROC adjusted EBITDA totaled $44 million, a 9% increase over the previous quarter and its cash flow increased 10% to $28! million over the previous quarter. The bad news was the net loss of $74 million over the previous quarter. Still, it was sizably less than the Q2 08 net loss of $227 million.

EROC is in the Natural Gas business primarily in the Texas Panhandle, the east Texas/Louisiana area, and in South Texas, West Texas, and the Gulf of Mexico. EROC has pipelines (the literal type) that include: The West Panhandle System with approximately 2,643 miles of natural gas gathering pipelines and 3 natural gas processing plants; 1 propane fractionation facility; and 1 condensate collection facility. EROC also owns the East Texas/Louisiana pipeline which is approximately 1,145 miles of natural gas gathering pipelines and 2 cryogenic processing plants; 5 JT processing plants; and a 19-mile NGL pipeline and the South Texas operations that consist of approximately 279 miles of natural gas pipeline; a compressor stations; and 3 processing stations and the Gulf of Mexico operations that include approximately 40 miles of natural gas gathering pipelines and 2 cryogenic processing plants.

At $3.81 a share, EROC is far below its 52-week high of $14 set on 09-22-08 and is above its 52-week low of $2.65 set on 07-13-09. At $3.81, EROC is ahead of its 50-day moving average and behind its 200-day moving average. SROC has a trailing twelve month diluted EPPS of $3.57. It is widely held by insiders and institutions. The EROC shares out versus float ratio is near-parity.

Another energy company flying high as the Energy Sector soars is Warren Resources Inc., (WRES) gaining 12.79% ($0.33) today in early trading. WRES is currently trading on the Nasdaq in the $2.82 range with a market cap of $163 million. WRES has a 3-Month average daily trading volume of 361,732 shares and it surpassed 1,023,173 by mid-session.

WRES also posted mixed results in its Aug 5 Q2 09 filing. In the red ink was a net loss of $9.2 million, or $(0.16) per dil! uted sha re. WRES Q2 results included a non-cash unrealized mark-to-market loss of $9.8 million from oil and gas hedges entered into in early 2009. Q2 08 net earnings were $17.7 million, or $0.30 per diluted common share. The WRES Q2 09 oil and gas revenues decreased 56% to $15.2 million compared to Q2 08 gain of $34.2 million.

But in the black ink for WRES in Q2 09 was the fact its oil and gas production increased to 2.4 billion cubic feet of gas which represented an 8% increase over Q2 08. Also for Q2, WRES only suffered a slight downturn in oil production and a gain in natural gas production: WRES produced 237,000 net barrels of oil and 930 net million cubic feet of natural gas in Q2 09 compared with 252,000 net barrels of oil and 657 net million cubic feet of natural gas in Q2 08.

WRES is an independent energy company. It primarily develops coalbed methane and natural gas properties located in the Rocky Mountain region; and waterflood and tertiary oil recovery programs in the Wilmington field within the Los Angeles Basin of California. As of December 31, 2008, Warren Resources owned natural gas and oil leasehold interests in approximately 175,725 gross acres; estimated net proved reserves of 129 billion cubic feet equivalent of natural gas; and interests in 435 producing wells.

At $2.82, WRES is well below its 52-week high of $10.96 set on 09-25-08 and is far above its 52-week low of $0.40 set on 03-03-09. At $2.82, WRES is ahead of both its 50-day and 200-day moving averages. WRES has trailing twelve month revenues of $77 million. WRES is widely held by institutions (50%). Its shares out versus float ratio is near-parity.

And not to be outdone in its percentage gain today...

Ivanhoe Energy Inc., (IVAN) picked up as much as 14.35% ($0.26) in early trading today. IVAN is currently trading in t! he $2.02 range on the Nasdaq with a new market cap of $567 million. IVAN has a 3-Month average daily trading volume of 537,660 shares and by mid-session, had topped 5 times that amount, posting 3,002,873 shares traded by mid-session.

IVAN also posted mixed numbers in its recent quarterly filing. Its Aug 10 Q2 09 report had an oil revenue increase of 5% compared to the previous quarter (reflecting higher benchmark crude oil prices) but for Q2, lost $0.04 diluted EPS.

The gross production rate at IVAN's Dagang Project in China at the end of June 2009 was 1,681 gross barrels of oil per day from 39 wells, compared to 1,840 gross barrels of oil per day from 37 wells at the end of March 2009. A couple more wells and a little less oil quarter-to-quarter is nothing in terms of overall production.

IVAN is truly a global concern. Not are they only producing oil on-site in oil-starved China, during Q2 they received authority to initiate operations on the Pungarayacu field in Ecuador. In Q2, IVAN also upgraded its Tamarack facility in Canada which produces 20,000 barrels a day.��

IVAN is an independent oil producer. IVAN also trades on the TSX (Toronto Stock Exchange) with the symbol IE. At $2.02, IVAN will set a new 52-week high today beating its previous high of $1.85. Its 52-week low is $0.30. Its shares out versus float ratio is near-parity.

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eBay: Kaufman Turns Cautious; Sees Growth Below Forecasts

Kaufman Bros. analyst Aaron Kessler this morning cut his rating on eBay (EBAY) to Hold from Buy, asserting that recent data points from various market research firms suggest the company is seeing slower-than-expected growth in gross merchandise value in the U.S. market.

Kessler also says that foreign exchange is “beginning to become a headwind.”

And he adds that the stock is now “more fairly valued” at 16x 2010 pro forma EPS. “While we remain positive on recent eBay changes,” including listing fee adjustments that went live March 30, “we believe shares may already be anticipating some of these positive expected benefits with shares up over 20% since mid-February. He keeps his $31 price target on the stock.

EBAY this morning is down 49 cents, or 1.8%, to $26.36.

Learn More About Heat Pumps

Heat pumps can provide energy efficient methods of warming homes and businesses. These units extract energy from the atmosphere and transfer it into the interior ob buildings. While low temperatures outside require the units to work harder they remain an energy efficient method to warm the home and are far more efficient than resistance heating.

The pump uses an exchanger outside a home to gather warmth from the air. Refrigerant transports that heat inside to the boiler or geyser to warm the water. The warm water in turn is pumped through the radiators in a home to keep temperatures comfortable on the coldest of days.

When homeowners depend on heated water to warm the interior they will find this method of heating can lower energy bills. Electricity is not used to actually provide warmth, but to transfer it from the outside of a home to the inside.

Units work like air conditioning, only in reverse. With the air conditioning, the warmth that builds up in the home is removed and transferred to the outside, where it is released into the atmosphere. With these units the warmth that is in the air from the sun on the coldest of days is concentrated and brought inside one’s home to keep residents comfortable.

The energy that is concentrated from the air can be used for purposes other than controlling the temperature of the air. For example, units might be connected to a residential water heater to provide warm showers using a more energy efficient heat source. In industrial settings, the device could be used to provide energy to water baths.

In some locations, these units are used with forced air systems. A fan forces air through a second exchanger inside the house and through ducts into the rooms. These systems offer the advantage of both heating and cooling the air in the home and work well in areas of hot summers and cold winters.

It is important that systems be maintained regularly. The refrigerant level should be balanced to ensure proper transfer of energy to t! he home. Exterior units need to be kept clean and free of debris. Any vegetation that starts growing on or too close to the unit should be trimmed and removed.

Heat pumps offer an energy efficient method of heating buildings used for homes or businesses. They may be used with hot water or steam systems as well as forced air units. In addition, they can provide hot water for residential or commercial use.

Check out our website for complete details about the benefits and advantages of using heat pumps, now. You can also find information about a reliable supplier of Firefly heat pumps, today.

Global Investing Roundup

Investors lucky enough to hold shares in a company before it's acquired by another can snag some hefty profits - and this year has been one of the hottest on record for deals.

Global merger and acquisition (M&A) activity in the first quarter topped $799.8 billion, the most since 2007's pre-crash frenzy, according to a recent report in Forbes magazine. Looking forward, most M&A analysts now predict well more than $3 trillion in takeover activity for all of 2011.

The question is, how can you spot a likely takeover target before the announcement of a potential deal hits the news?

Hunting Takeover Targets from the Top Down

There are a couple of ways to identify potential buyout candidates - one sort of a "top-down" approach and the other more of a "bottom-up" analysis.

In the "top-down" approach, you first identify companies with resources sufficient to engineer a major buyout. If the news stories don't tip you off, most stock screeners can help you find firms with high cash holdings or a high level of free cash flow, a frequent indicator that a company can afford to do a deal. Also look for low levels of existing debt and a stock price that's been moving steadily upward or has hit a series of new highs - a condition that will facilitate stock-denominated acquisitions.

For a clue to smaller deals, look for strong regional companies that appear ready to expand into a new geographic area or go national, as well as firms with an existing line of products or services that has a "hole" in it. It's usually easier to buy an existing sales base in a new region than to build your own while competing with those already there.

Same with a new product or service - buying an existing firm with the product you want is almost always cheaper and quicker than developing your own. (A hypothetical example might be a successful small-appliance maker that! doesn't have a microwave. Far easier to buy a specialty company that makes a good microwave than invest in the technology, plant and sales networks needed to create a new brand.)

Finally, check out resource-intensive companies - e.g., those in oils, minerals, metals and the like - that might find it cheaper to buy a company with existing reserves than explore for new ones of their own.

Once you've identified some potential buyers and the needs they have, go on the search for companies that would fill those needs - and that also offer attractive valuations. If you find a small company that looks like it might be a bargain for a richer, hungrier giant, then its stock could be a bargain for you, too - not to mention a potential bonanza.

Up From the Bottom

Conversely, with the "bottom-up" approach, you start by trying to identify companies that are attractive takeover targets in their own right, without respect to a specific potential buyer. There are a number of items you can look at in making such a determination, beginning with a ratio based on a couple of purely financial factors.

Consider the The Enterprise Value (EV)-to-EBITDA Ratio. This is a favorite of accountants because it takes in most financial aspects in a single formula.

The calculation begins by finding the company's "Enterprise Value," which is its market capitalization (shares outstanding x share price), plus the value of its preferred or closely held stock (if any), plus its outstanding debt, minus any excess cash or cash equivalents. (The excess cash is particularly important because, while not in the same league as the old leveraged buyouts [LBOs], cash in a deal can help a buyer offset the cost of acquiring the company.)

The second step is to determine the "EBITDA," which is "Earnings Before Interest, Taxes, Depreciation and Amortization," a figure nearly always found in the financial statistics section of any of the quote se! rvices, such as Google Finance. Once you have it, you divide it into the Enterprise Value, and that gives you the ratio (some websites actually report the ratio itself).

What those numbers tell you, in short, is how effective the company is at generating profits relative to its size (or worth). Since most potential buyers target companies that provide large profits relative to their size, you want to look for a relatively small EV/EBITDA ratio.

Once you get beyond the numbers, there's a wide assortment of other elements that can make a company attractive to potential corporate buyers (or private equity buyout firms). Without going into a lot of detail, some key things to look for include:

  • Top management or research staff - A company moving into a new region or new product line might buy a company just to get the experts needed to succeed in that market.
  • A unique product - As mentioned earlier, it's often cheaper to buy a successful existing product than it is to develop a competing product of your own. This is particularly true if the product in question has a strong or widely recognized brand name.
  • A specific service specialty - Same logic as with the unique product.
  • An established sales or distribution network - Ditto.
  • Dominance in a desirable market or geographic area - A buyout provides quick, cost-effective growth for the acquiring company.
  • A company up against a growth ceiling - Sometimes a successful small company could grow rapidly if only it could get financing. Setting itself up for a takeover is one way to attract the needed money.
  • Excess debt that a larger company could refinance - Sometimes servicing debt is the difference between a loss and profitability, and a buy! out coul d erase the debt service that's stifling growth.
  • A history of increasing shareholder value - Stockholders of a potential corporate buyer are unlikely to look favorably on a deal if the target company hasn't done well by its own stockholders in the past.
  • A clean legal history - This is more of a concern in some industries than others - pharmaceuticals and toxic materials, to name just a couple. Nobody wants to buy a lawsuit waiting to happen - especially one that might be triggered by a sudden shot at deeper pockets.
  • Potential for increased efficiencies of scale - Combining two entities can often reduce overall costs, thus increasing operating margins - and profits.
Having listed all those positive attributes, it should also be noted that takeovers sometimes occur even when the target company is burdened by bad characteristics. This usually goes back to the issue of executive ego - cases where the strong leaders of an acquiring company are certain they can turn a weak business around by using better management techniques and providing superior leadership.

News and Related Story Links:

  • Money Morning: How to Profit from Hottest M&A Activity Since 2007 (video)
  • Money Morning: Mergers & Acquisitions Are Set to Accelerate in 2011 Following Their Best Start in a Decade
  • Money Morning:
    U.S. Companies Spending Record-High Cash Piles on Everything But Jobs
  • Money Morning: Stock Exchange Mergers: The Real Story
  • Money Morning Archives: Investors' Hopes Riding on Surge in M&A Activity
  • Wikipedia:Mergers and acquisitions
  • Wikinvest: Acquisition! s
  • Investopedia:
    Trademarks of a Takeover Target
  • Wikipedia: Encyclopedia entry: Free cash flow
  • Wikinvest: Enterprise Value to EBITDA
  • Big Fat Finance Blog: M&A Activity - and Risks - Expected to Increase

Equity Futures Arbitrage Trading

What is Arbitrage Trading?

Equity Futures Arbitrage Trading is to exploit the differences between two financial markets. It is sometimes known as Margin or Hedge Trading or a another variation of Pairs Trading.

A common arbitrage trading strategy is to trade the S&P500 against the S&P500 futures but it can be used as a strategy in Forex and Commodities trades or stock equity futures as well as in indexes.

Using the S&P500 and the S&P500 Futures example, a long trade on one whilst shorting the other could guarantee a profit if done properly.

Fair Value

The key to this type of trade is understanding Fair Value and how Futures are priced. A common misconception is that if say the S&P500 Futures are currently 6 points below the current cash price, all you would have to do is enter along on the Futures contract whilst shorting the Cash……

…..In actual fact this type of trade may be locking in a loss rather than a guaranteed profit……you have no way of knowing whether the Futures are actually priced at a premium or are discount compared to the cash markets, without first calculating its Fair Value.

Arbitrage Trading

Arbitrage trading can be done profitably but the margins on the previous example are likely to only be fractions of a point and last for only a short time until the natural buying and selling forces in the market force prices into realignment.

Arbitrage trading related instruments can offer a guaranteed return on an investment but as a rule the margins involved in these trades are so tight that it is not a practical trading strategy for most traders as spreads are just too wide and do not have the means of trading fast enough to take advantage of the opportunities as they arise.

Pairs Trading

What most traders refer to as Pairs trading is a much more accessible Arbitrage trading strategy bu! t does n ot offer the guaranteed returns offered in the previous example. Pairs trading is the same type of trade where one is matched against the other but involves trading related or different markets as opposed to two instruments related to the same market.

This type of arbitrage trading may not offer guaranteed returns but it can reduce risk to the traders portfolio. This can be done if the pairs are properly matched as one will do better at times when the other is doing less well, thereby producing an overall balanced portfolio.

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All of these stocks get an 'A' or a 'B' from my Portfolio Grader

For many folks, a cold beer or a fizzy cola is the definition of a consumer staple. This doesn�t just go for Americans but also for emerging-market consumers who are part of a rising middle class. As folks get a little more cash to spend, soft drinks and alcohol are some of the first things they add to their shopping lists.

I watch more than 5,000 publicly traded companies with my Portfolio Grader tool, ranking companies by a number of fundamental and quantitative measures. And this week, I’ve highlighted six beverage stocks to buy.

Each one of these stocks gets an �A� or �B� according to my research, meaning it is a �strong buy� or �buy.� Here they are:

Anheuser-Busch (NYSE:BUD) is the world-famous brewing company that has more than 200 beer brands. BUD stock has posted a gain of 26% in the last year, compared to a 10% gain for the Dow Jones. BUD stock gets a �B� grade for operating margin growth, an �A� grade for earnings growth, a �B� grade for earnings momentum, an �A� grade for its ability to exceed the consensus earnings estimates on Wall Street, a �B� grade for the magnitude in which earnings projections have increased over the past months, a �B� grade for cash flow and a �B� grade for return on equity. For more information, view my complete analysis of BUD stock.

Diageo (NYSE:DEO) is the producer of Smirnoff, Johnnie Walker, Baileys Original Irish Cream, Captain Morgan, Tanqueray and Guinness. In the past year, DEO has posted a gain of 27%. Diageo stock gets a �B� grade for the magnitude in which earnings projections have increased over the past months, a �B� grade for cash flow, and an �A� grade for return on equity. For more information, view my complete analysis of DEO stock.

Companhia de Bebidas das Americas (NYSE: ABV) is a Brazilian beverage company that has posted a gain of 48% since last March. ABV stock gets a �B� grade for operating margin gro! wth, a � B� grade for the magnitude in which earnings projections have increased over the past months and an �A� grade for return on equity in my Portfolio Grader tool. For more information, view my complete analysis of ABV stock.

Coca-Cola (NYSE:KO) is perhaps the most famous international beverage company, and it licenses more than 500 nonalcoholic beverage brands. In the past year, Coca-Cola stock has climbed 10%. KO gets an �A� grade for return on equity. For more information, view my complete analysis of KO stock.

Fomento Economico (NYSE:FMX) is a Mexican holding company that is integrated by a Coca-Cola bottler, OXXO convenience stores and its investments in Heineken. FMX stock has outpaced the broader market with a gain of 33% in the last 12 months. FMX stock gets a �B� grade for operating margin growth, a �B� grade for the magnitude with which earnings projections have increased over the past month and a �B� grade for cash flow. For more information, view my complete analysis of FMX stock.

Brown-Forman (NYSE:BF.B) is best known for its brands Jack Daniels, Finlandia and Southern Comfort, among others. Brown-Forman rounds out the list with a 19% gain in the last year. BF stock gets a �B� grade for operating margin growth and an �A� grade for return on equity in my Portfolio Grader tool. For more information, view my complete analysis of BF.B stock.

Get more analysis of these picks and other publicly-traded stocks with Louis Navellier�s Portfolio Grader tool, a 100% free stock-rating tool that measures both quantitative buying pressure and eight fundamental factors.

FOREX-Yen slides to multi-month lows, euro extends gains – Reuters UK

Trading Point
FOREX-Yen slides to multi-month lows, euro extends gains
Reuters UK
(Updates prices, adds comment) * USD/JPY rises to highest level since July 2011 * Importers buying dollars, stops triggered above 80.41 yen * Euro hits 2-1/2 month high vs dlr on short covering rally By Nia Williams LONDON, Feb 24 (Reuters) – The yen
WORLD FOREX: Euro Hits Multi-month Highs Vs Dollar, Pound, YenWall Street Journal
FOREX: US Dollar May Extend Losses As Risk Appetite
Forex Asia Review � USDJPY rises higher to new 7-1/2 month highTrading Point

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Is Kraft Doomed to Repeat Kellogg's Mistake?

The following video is part of our "Motley Fool Conversations" series, in which technology editor/analyst Andrew Tonner and consumer goods editor/analyst Austin Smith discuss topics across the investing world.

In today's edition, Andrew and Austin discuss Kraft's decision to lay of 1,600 employees. This spelled bad news for another food company in the past, and they wonder if Kraft is doomed to repeat the same mistake.

Many of us around the office have been eying international growth as a way for retailers to supercharge their performance going forward. There are three companies we're particularly bullish on, and you can uncover them in our special free report: "3 Companies Set to Dominate the World." The report won't be available forever, so I invite you to enjoy a free copy today. You can access it by clicking here. Enjoy, and Fool on!

Best Wall St. Stocks Today: SII,HAL,WFT,SLB

Well drilling and completion services just aren’t paying off for anyone this reporting season. Smith International Inc. (NYSE:SII) reported diluted EPS of $0.44 on revenues $2.41 billion. After deleting a restructuring charge of $34.8 million, EPS reaches $0.52. First quarter 2008 EPS was $0.87 on $2.37 billion in revenue.

Like its brethren oilfield services providers Halliburton Company (NYSE:HAL), Weatherford International Ltd. (NYSE:WFT), and Schlumberger Ltd. (NYSE:SLB), lowered targets didn’t rescue Smith.

In the last quarter of 2008, Smith’s EPS reached $0.91 on revenues of $3.06 billion. For the 2009 first quarter, analysts had been expecting EPS of $0.57 and revenues of $2.56 billion. Not very aggressive, but still out of reach.

Smith’s shares haven’t traded yet in pre-market. The company’s closing price on Friday was $27.77, and its 52-week range is $18.23-$88.40. It could be a long time before that top is reached again.

Paul Ausick
April 27, 2009

Best Wall St. Stocks Today: YHOO,TWX,MSFT,GOOG

During December, Yahoo!  (YHOO) had 131.4 million unique visitor in the US. The Time Warner (TWX)Network finished second with 121 million unique followed by Microsoft (MSFT) at 116.5 million  and Google (GOOG) at 112.8 million.

The surprises on the Comscore Top 50 list are Gorilla Nation Media at 25.4 million unique visitors and Photobucket at 16.7 million. It is an IPO waiting to happen.

Douglas A. McIntyre can be reached at He does not own securities in companies that he write about.

JPMorgan Beats First Quarter Estimates, Continues Bank Earnings Rally

Here is an actual sheet of stocks with a history of rising dividends of more than five years but not more than nine years (Dividend Challengers). Out there are 202 companies that have fulfilled these criteria. In addition, the companies should have a price-earnings to growth ratio of less than one as well as a dividend yield of more than 3 percent. Twelve shares remained of which four are high yields.

Here are the three top dividend stocks by market capitalization:

Microsoft Corporation (MSFT) has a market capitalization of $215.27 billion. The company employs 90,000 people, generates revenues of $69,943.00 million and has a net income of $23,150.00 million. The firm�s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $29,927.00 million. Because of these figures, the EBITDA margin is 42.79 percent (operating margin 38.83 percent and the net profit margin finally 33.10 percent).

The total debt representing 10.97 percent of the company�s assets and the total debt in relation to the equity amounts to 20.88 percent. Due to the financial situation, the return on equity amounts to 44.84 percent. Finally, earnings per share amounts to $2.75 of which $0.64 were paid in form of dividends to shareholders last fiscal.

Here are the price ratios of the company: The P/E ratio is 9.29, Price/Sales 3.07 and Price/Book ratio 3.74. Dividend Yield: 3.14 percent. The beta ratio is 0.99.

BHP Billiton (BBL) has a market capitalization of $156.64 billion. The company employs 40,757 people, generates revenues of $71,739.00 million and has a net income of $23,946.00 million. The firm�s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $37,927.00 million. Because of these figures, the EBITDA margin is 52.87 percent (operating margin 44.35 percent and the net profit margin finally 33.38 percent)! .
< br />The total debt representing 15.46 percent of the company�s assets and the total debt in relation to the equity amounts to 28.02 percent. Due to the financial situation, the return on equity amounts to 44.92 percent. Finally, earnings per share amounts to $8.55 of which $2.02 were paid in form of dividends to shareholders last fiscal.

Here are the price ratios of the company: The P/E ratio is 6.70, Price/Sales 2.54 and Price/Book ratio 2.79. Dividend Yield: 3.40 percent. The beta ratio is 1.56.

Intel Corporation (INTC) has a market capitalization of $118.69 billion. The company employs 99,900 people, generates revenues of $43,623.00 million and has a net income of $11,464.00 million. The firm�s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $20,101.00 million. Because of these figures, the EBITDA margin is 46.08 percent (operating margin 35.45 percent and the net profit margin finally 26.28 percent).

The total debt representing 3.35 percent of the company�s assets and the total debt in relation to the equity amounts to 4.28 percent. Due to the financial situation, the return on equity amounts to 25.16 percent. Finally, earnings per share amounts to $2.31 of which $0.63 were paid in form of dividends to shareholders last fiscal.

Here are the price ratios of the company: The P/E ratio is 10.07, Price/Sales 2.80 and Price/Book ratio 2.68. Dividend Yield: 3.50 percent. The beta ratio is 1.10.

Take a closer look at the full table of cheap Dividend Challengers in terms of growth. The average price to earnings ratio (P/E ratio) amounts to 10.53 while the forward price to earnings ratio is 9.14. The dividend yield has a value of 4.53 percent. Price to book ratio is 2.05 and price to sales ratio 2.23. The operating margin amounts to 31.07 percent.

Related stock ticker symbols:
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� 6 High Yielding Dividend Challengers Close To 52-Week High

� Best Yielding Low Beta Dividend Challengers

� 14 Cheap Dividend Challengers

� 20 High Yield Dividend Contenders

Tickers in the article:

Best Wall St. Stocks Today: ORCL,MSFT,IBM,SAP,CRM

Oracle (NASDAQ: ORCL) earnings missed almost all Wall St. estimates and its shares fell 8%. The company has been among the most successful in the tech sector for years. Was the report a sign that Oracle has lost momentum, or has the entire enterprise software industry faltered?

Oracle�s sales rose only 2% in the quarter that ended November 30 to $8.29 billion. EPS was $0.43, compared to $0.37 last year. Hardware system revenue fell 10% to $1.58 billion.

Oracle is the world�s largest enterprise software company. In the past two years, it has faced more aggressive competition from Microsoft (NASDAQ: MSFT), IBM (NYSE: IBM), SAP (NASDAQ: SAP) and (NYSE: CRM) in particular. Each has had a chance�to examine Oracle�s strength as it grows, primarily through acquisition. Oracle is a particularly attractive target, as most market leaders are.

There is no evidence that IT departments�at large companies and government enterprises�have sharply curtailed their activity to upgrade essential systems. That likely will mean that Oracle has lost market share, and it probably will continue to do so. Competition has found weak spots in Oracle�s product and service lines.

Oracle has been successful in large part because CEO Larry Ellison has been particularly talented in his choice of buyout targets and his ability�to almost seamlessly integrate these firms into his company. The integration process usually has kept sales from the new operations while effectively dropping costs.

One quarter does not mean Ellison�s miracle is over. A second weak quarter would.

Douglas A. McIntyre

The Stock That Could Make a Fortune Saving Lives

According to a recent Economist article, South Africa is "home to 0.7% of the world's population, but 17% of all HIV/AIDS sufferers." South Africa's HIV/AIDS infection rate alone is 17%, triple that of other sub-Saharan countries and more than 20 times higher than the global average. Those are outrageous numbers. Furthermore, Africa is home to some of the highest fertility rates in the world.

But while a morality debate about contraception rages in America, a change is starting to take hold in Africa. Surveys have shown that young South African men who reported using condoms shot up from 20% in 1999 to 75% in 2009, leading to a fall in new HIV infection rates. In a similarly dramatic move, contraceptive use in Malawi rose from 17% of women in 1998 to 42% in 2010.

The increased use of contraception and barrier protection bodes well for Female Health (Nasdaq: FHCO  ) , a stock I've been monitoring for a long time, and one on which I'm ready to put my own money and make an outperform CAPScall. The company holds the only FDA-approved patent for a female condom, which offers certain advantages to other forms of contraception. Unlike the birth-control pill, it is relatively inexpensive, can be used whenever needed, and, most importantly, protects against a host of diseases. In some cases it's more effective than a male condom.

And because it can used hours ahead of time, it puts more of the decision to use protection into the woman's hands, in a part of the world where men are often still culturally resistant to the decision themselves.

Heads of state, doctors -- no one is too great to partner with
While sub-Saharan Africa is the largest region for sales, this is a global company with ties to large aid agencies, including the United Nations Population Fund and John Snow (not the Game of Thrones character), which provides services for the United States Agency for International Development. Th! ese two customers account for more than 50% of Female Health's sales.

No other customer accounts for more than 10% of sales, but they are mostly other ministries of health, local governments, and non-government organizations, many of which require FDA approval for the products they distribute.

In the United States, Female Health has close relationships with Planned Parenthood, and public health departments in major cities including New York, Washington, and San Francisco have run campaigns to promote use of the company's second-generation FC2 condom.

Unfortunately, this means that Female Health's earnings tend to be a bit lumpy. As we've seen with the recent debate in America, laws can change and funding can suddenly be cut off even for things like women's health. Fortunately for Female Health, this usually doesn't result in a loss of sales, but it does mean orders can be delayed almost indefinitely. Two large orders from the Brazilian and South African governments were repeatedly delayed all last year and are now expected to finally ship in the 2012 fiscal year.

Because these large orders were delayed so long, trailing-12-month figures are abnormally low. Even so, the company has shown incredible growth over the past few years, from a consistently unprofitable, fledgling operation to one that commands a 24% operating margin, far higher than other contraceptive makers such as Church & Dwight (NYSE: CHD  ) and Pfizer (NYSE: PFE  ) .

In fact, because of Female Health's small size as a company, if either of those larger condom and birth-control companies wanted to expand their portfolio of products, it would probably be easier for them to simply acquire Female Health than to try to innovate around their patents.

Let's talk about investing
I hope Female Health doesn't get acquired. The stock sports a 4% dividend that I'd rather not part with, but! I'd als o rather stick with the company for the long term as it profits from the trends and benefits of society at the same time.

Add Female�Health to My Watchlist to stay updated on any delayed shipments or changing trends in Africa.

There are of course other great ways to play the international growth story. You can learn about them in our special free report: "3 American Companies Set to Dominate the World." It's totally free. Learn more.

Equity Rally Fades

Wall Street backed off early-session gains, as the currency market gave in to some profit-taking, lifting the dollar off a 15-month low, and blunting some of the sense of easy money that’s been at the heart of equities’ march to highs for the year.

Market averages remained narrowly in the black with about a half hour to go in the trading session. But the retreat from the highs meant that one market measure – the S&P 500 Index (GSPC)?-?may have failed?at yet another attempt to get over a key milestone. The index crept over the 1100-point mark – its high for the session registered 1105 – intraday before falling back. The index made a previous run at the 1100-point mark?last month, but?couldn’t close over that level. The market found itself subsequently subject to a modest correction that took about 6% off the highs of last month before a recent recovery.

The session started out affirmatively for the bulls, after?several Federal Reserve officials?indicated that the central bank has no intention of raising interest rates anytime soon, despite the fallout that its monetary policy?has subject the U.S. currency to. The dollar had declined?to 15-month lows in overnight trading, but has recorded a modest improvement?during the session. Mostly, the change seemed to be the result of currency investors booking some profits from higher-yielding securities.

Economic weakness has been an element in the session’s intraday reversal,?as investors evidence some hesitation about the retailing sector’s prospects for recovery. Shares of Macy’s (M)?retreated 8% on the day, after?a disappointing profit forecast from the department store operator.?This week marks something of the high-water point for the third-quarter earnings statements from the retailing group.