Who Would You Rather... Tyson Foods or Pilgrim's Pride?

Hot Bank Companies To Buy Right Now

Americans consume a lot of chicken. It estimated that Americans consume about 81 pounds of poultry per year, per capita. With there being upwards of 310 million people living in the United States, it is no wonder why poultry production is big business. Two of the biggest names in poultry production are Tyson Foods (NYSE: TSN) and Pilgrim's Pride (NASDAQ: PPN).

In recent years Tyson's has been the number one chicken producer in the U.S. with 10.1 percent of the market in 2010. Pilgrim's Pride is the number two producer of chicken and came in at 6.5 percent in 2010. So, when it comes to the country's largest producers of chicken –who'd you rather - Tyson or Pilgrim's Pride?

Tyson food is not the kind of flashy company that many people will think about when considering the biggest companies in the world. Despite this, Tyson Foods has quietly been building its brands and networks throughout the world, and is now a company which sees approximately $26 billion in annual sales.The United States is not the company's only market.

Related: Who Would You Rather... Home Depot or Lowe's?

Tyson Foods is present across the world, and has grown to be the largest meat producer in the world. In fact, Tysons has entered rarified territory as being one of Forbes' 100 most valuable companies in Unite States.

Tyson Foods stock has been having a pretty good year. The stock price started the year at $19.92, and has since climbed to over $30.00 per share, better than a 50 percent jump.

Pilgrim's Corp, still popularly known as Pilgrim's Pride, is the second largest chicken producer in the United States and Puerto Rico, though some sources put it at number one. The company has had its problems over the years, including an embarrassing recall in 2002 and a 2009 bankruptcy. Pilgrim's Crop is now a subsidiary of the world's second largest meat processor – Brazilian JBS.

Despite these setbacks, Pilgrims is a large industrial operation, reportedly with the capacity to process over nine billion chickens per year for consumption. 2012 sales were $8.1 billion, which is made possible by the company's 38,000 strong workforce.

Pilgrim's started the year at about $7.68 and has since traded up significantly to $15.66 in recent trading. This represents a 100 percent increase for those who were fortunate enough to have bought at the beginning of the year and held.

The chicken business, and meat production in general, faces numerous challenges. Growing awareness of meat factory conditions and meat production methods have caused many consumers to look for healthier and less environmentally impactful alternatives. Additionally, consumers are increasingly aware of the living conditions of food animals before they are slaughtered.

Time will tell if these factors will have a significant impact on the poultry business. But for now, these are the two big boys in chicken production and processing. So, who'd you rather – Tyson or Pilgrim's Pride?

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The Secret to Unlocking Huge Auto-Tech Profits – Today

As a tech investor, I pay a lot of attention to the key trends reshaping our world and setting us up for massive gains.

I've also found that sometimes you can boil down great investment opportunities into a number. In this case its 11.4...the average age of a car on U.S. roads today.

Compared with the new connected car, that's like driving something out of the Flintstones.

See, the connected car is both web and Bluetooth enabled. It's also loaded with complex sensors, sophisticated software, and advanced semiconductors.

This embedded tech ecosystem is one of the big reasons why the industry sold some 15.6 million vehicles last year, in no small part because drivers want their smartphones and cars to stay connected to each other.

Here's the thing. As much as I believe in the connected car, there are many, diverse tech-related ways to cash in on the millions of new vehicles rolling off the assembly lines this year.

The secret to finding the best auto-tech plays is to understand foremost their positioning in this booming sector.

Some companies have arisen on the back of auto-technology, but lack the fundamentals to last...

Others have names as old as the industry itself, yet their technology outpaces much newer, and ostensibly higher-tech, companies...

And then there are some right in-between.

Today, I'll show you three very diverse companies...

Yet for their different niches, they fit our one criterion: Perfectly positioned in the auto-tech sector to deliver market-crushing results...

Driving the Web for Record Sales

From a high-tech standpoint, AutoNation Inc. (NYSE: AN) ranks as an intriguing hybrid play.

To be sure, it is heavily rooted in the physical world. After all, the company operates some 267 auto dealerships around the United States, making it the industry's largest new-car retailer.

But its savvy use of the Web presents the company to potential new clients as more of an Internet buying service than a standard auto dealer.

For instance, when I recently logged onto the company's website, it knew automatically that I am located in Oakland, Calif. Much like you'd find at an independent broker, AutoNation's website prompts you to search for a vehicle by type, make, and model.

The home page also tells visitors it provides "hassle-free" dealing and offers to appraise their vehicles and give them a guaranteed trade-in value.

In this regard, the first impression you get is that of a company using the web to make car shopping much easier, rather than promoting any existing dealer or nameplate.

Its sophisticated use of the web is one of the reasons why the company continues to register huge sales gains. Both last November and December, the company had the highest sales for each of those months since 2001.

For last year's third period, AutoNation reported its fourth consecutive record earnings per share from continuing operations, a 14% increase from the previous year to $0.75. Total sales also increased 14% in the quarter to $4.5 billion.

With a market cap of $5.9 billion, the stock trades at $48 a share with a forward PE of 14.5. It's priced at only .35 times sales and has a PEG ratio of just .65, well below the "fair price" ratio of 1.

The Sweet Sound of Profits

To say that I've followed the development of one of the nation's leading car audio firms for more than 30 years is no exaggeration.

Fact is, the first stereo I bought out of college was made by Harman Kardin. I loved that stereo so much it got me kicked out of a couple of apartments.

And as a long-time audio enthusiast, I've tracked the company through its many changes over the years. Expanding through a combination of organic growth and mergers, the company's nameplates also include JBL and Infinity, two highly respected global brands.

With all that momentum behind it, Harman now sells sophisticated audio components and systems to most of the world's major car makers, including BMW, GM, Subaru, Toyota, and Volvo.

More to the point, Harman International Industries Inc. (NYSE: HAR) has moved beyond its audio roots and now ranks as a bona fide tech powerhouse.

In fact, over the last several years, Harman has ramped up its offerings of high-tech auto infotainment systems that provide navigation, multi-media, and audio control from the dashboard.

Top 5 Blue Chip Stocks To Buy Right Now

These are not only an integral part of the connected car; they are becoming big business for Harman. In its Fiscal 2013, Harman received new infotainment awards totaling $1.8 billion, compared with $1.2 billion for car audio.

It's a powerful one-two punch. Harman says that some 25 million vehicles on the road today feature its audio-infotainment systems that also integrate GPS and navigation.

Actually, Harman gives investors exposure beyond the new-car boom. The company has expanded into accessories that support the mobile revolution and also ranks as a leader in the professional audio-video market.

With a market cap of $6 billion, the stock trades at roughly $89 a share with a forward PE of about 17, in line with the overall market. In its first fiscal quarter 2014 ended Sept. 30 sales rose 17% to nearly $1.2 billion as non-GAAP earnings per share climbed 21% to $0.95.

Tweaking Materials and Fuel Economy

This sure ain't your granddad's Ford Motor Co. (NYSE: F).

Indeed, the firm is making huge sales gains because it has embraced a wide range of tech systems.

Ford has unveiled a breakthrough hybrid car and made steady advances in safety. With its EcoBoost engines, the firm is ahead of the curve on fuel economy.

And it's even tweaking materials science to produce a novel truck...

Ford recently unveiled a new version of its popular pickup, the F-150. To boost fuel economy while maintaining power, Ford decided to make the body and load bed almost completely of aluminum, marking the first high-volume vehicle to do so.

That's just the beginning...

Earlier this week, the Detroit-area automaker announced a new partnership with MIT and Stanford to develop a fully autonomous car by 2025. That effort builds on Ford's status as a leader in tech integration.

Its SYNC in-dash infotainment system is among the most advanced of any mass-market auto firm. Internal research shows it factors in the decision for 70% of buyers who go with Ford over a competing brand.

And Ford's C-MAX Hybrid is no slouch. With its sleek design, the model has become the darling of mass-market electrics. Ford quadrupled its slice of the U.S. electric-vehicle market nationally in the past year to a 16% share.

All of which translates into great sales figures. For 2013, Ford sold 2.5 million vehicles in the U.S, a 14% increase from the year before. The company also reported a 14% sales increase in Europe, and a stunning 49% increase in China.

With a market cap of $64 billion, the stock trades at around $16.40 a share with a forward PE of just 11. The company has a 28% return on equity and a PEG ratio of .89, with anything below 1 considered a discount.

The one thing that makes all three of these stocks great investments in the auto boom is that the firms involved fully grasp that cars are today as much about high tech as they are transportation. And they understand perfectly how to position themselves.

And in the next few years, this trend will only accelerate, giving each of these three even more chances to rack up new sales and profits for investors...

New Housing Starts, Building Permits Hit Doldrums

The U.S. Census Bureau and the Department of Housing and Urban Development reported this morning that new housing starts in August rose to an annual seasonally adjusted rate of 891,000, an increase of 0.9% from the upwardly revised July rate of 883,000, and a gain of 19% above the August 2012 rate of 749,000. The consensus estimate from a survey of economists expected a rate of around 915,000.

The seasonally adjusted rate of new building permits fell to 918,000, which is 3.8% below the upwardly revised July rate of 954,000 and 11% higher than the July 2012 rate of 827,000. The consensus estimate called for 950,000 new permits.

Single-family housing starts rose to an annualized rate of 628,000 in August, up 7% from the downwardly revised July rate of 587,000.

Permits for new single-family homes rose 3% in August to an adjusted annual rate of 627,000 from an upwardly revised total of 609,000 in July.

Information on multifamily housing is sketchy for August because the Census Bureau's data does not meet the agency's standards for reliability on buildings of two to four units. Starts on buildings with five or more units fell 9.4% month-over-month in August, but remain 22.9% higher than August 2012.

3 Heavily Shorted Stocks to Buy Anyway

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Investors who have shorted stocks in recent years have gotten clobbered due to the five-year bull market.

At the end of December, according to Bespoke Investment Group, not a single S&P 1500 sector had more than 8% short interest as a percentage of float; that’s the first time this has happened since 2007.

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The contrarian in me thinks now's the time to go short when everybody's long. However, as they say, the trend is your friend. For this reason I've picked three (out of a list of 26) heavily shorted stocks to buy now that I expect to provide market-beating returns in 2014 and beyond.

Stocks to Buy – KB Home (KBH)

Short interest: 28% of float

The only homebuilder on the list of 26 stocks with short interest is KB Home (KBH). Its short interest at the end of December was 23 million shares. KBH stock took a breather in 2013, delivering a respectable total return of 16.3%, almost double the residential construction industry, but well behind the S&P 500.

Zacks had some positive things to say about KBH in early January, stressing that both the company and the industry as a whole are getting stronger, making KBH and homebuilders good stocks to buy.

The KBH Q4 earnings results show a company on the mend. As CEO Jeff Metzger points out, "Our fourth quarter results provided a solid finish to 2013 with both revenues and profits up from the prior year. We also posted full-year net income for the first time in several years." Actually, 2013 was its best financial performance since 2006.

After six years of losses, insiders will gladly take the $40 million profit and build on the momentum. With higher average selling prices in all of its regions combined with healthier gross margins, it's no wonder analysts are upping estimates seemingly on a monthly basis. I agree with Zacks. This is one of the best shorted stocks to buy now.

Stocks to Buy – Outerwall (OUTR)

Short interest: 40% of float

The manufacturer of the Coinstar and Redbox kiosks has a short interest of 8.5 million shares. Investors have become skeptical of its future plans in large part because it can't seem to provide consistent earnings guidance.

OUTR stock started the year projecting core diluted earnings per share from continuing operations in 2013 of at least $4.91. In Q1 that increased by 14 cents to $5.05, another 71 cents to $5.76 in Q2, and then boom — the floor fell out in September when it announced updated fiscal 2013 guidance that cut EPS by 18% to $4.72. By mid-December, that number was back up to $5.44 as OUTR discontinued its Rubi, Crisp Market and Star Studio ventures.

In the span of five months, Outerwall’s business hit the proverbial skids only to rebound slightly due to the exclusion of EPS losses from its three discontinued ventures. On the surface, it might appear to be nothing more than an accounting gimmick but none of these ventures had any real promise, so it makes sense to cut and run.

By far the most promising new venture is its ecoATM automated kiosk that buys old cell phones, MP3s, tablets, etc., for cash and then safely recycles them. Outerwall paid $341 billion to acquire the San Diego-based company that developed the machine and expects ecoATM to be accretive to earnings in 2014.

That savvy acquisition — and the fact that it generates free cash flow on a consistent basis — are the reasons that OUTR stock is on my stocks to buy list.

Stocks to Buy – Green Mountain Coffee Roasters (GMCR)

Short interest: 46% of float

In March GMCR shareholders will approve Green Mountain Coffee Roasters’ (GMCR) name change to Keurig Green Mountain Inc. The new name will reflect the importance of its Keurig single-serve coffee system to its overall business but also to signal that its future goes beyond coffee. GMCR hired former Coca-Cola (KO) executive Brian Kelley to make this happen.

In a July interview in Fortune, Kelley made his plans crystal clear, stating:

"Over time we have a simple mission, which is to get a brewer in every home and in every place of work, and then have a beverage for every occasion. We know that there's opportunity for us to use Keurig brand-name and platform to be able to offer more beverages then what we offer today."

Of the 26 stocks on the most heavily shorted list, this is the one I feel could benefit most from a short squeeze because there are still a lot of investors who seem to think this company is a flash in the pan — including myself. Two years ago, I called it a "fading fad."

Boy was I wrong.

Kelley was set to take the helm of Coca-Cola Refreshments before GMCR persuaded him to think bigger. Over the next 2-3 years, investors will reap the rewards. Coke's loss is definitely Keurig Green Mountain's gain. With GMCR up 7.8% year-to-date through Jan. 22, I wouldn't count on immediate gains. Rather, it will start to move up once more information leaks out about its own version of SodaStream (SODA).

Of my three picks, GMCR is the best of the stocks to buy — period.

As of this writing, Will Ashworth did not own a position in any of the aforementioned securities.

The Procter & Gamble Company: What to Watch For in Friday's Earnings Report

Procter & Gamble (NYSE: PG  ) will release its quarterly report on Friday, and investors have watched the stock hit new all-time record highs in November before falling back in the past two months. Despite the optimism, Procter & Gamble earnings face pressure from international giant Unilever (NYSE: UL  ) as well as domestic rivals Colgate-Palmolive (NYSE: CL  ) and Kimberly-Clark (NYSE: KMB  ) . The question facing investors is whether P&G can sustain its longtime competitive advantages against its rivals and bolster its growth.

Procter & Gamble has a place in billions of households around the world, with a huge stable of billion-dollar-selling brands in its consumer-products arsenal. Yet despite the promise of global growth from a rising middle class in emerging-market economies, P&G has had to deal with sluggish revenue gains from its core business. How can the company make the most of the huge opportunities it has? Let's take an early look at what's been happening with Procter & Gamble over the past quarter and what we're likely to see in its report.

Stats on Procter & Gamble

Analyst EPS Estimate	$1.20
Change From Year-Ago EPS	(1.6%)
Revenue Estimate	$22.35 billion
Change From Year-Ago Revenue	0.8%
Earnings Beats in Past 4 Quarters	3

Source: Yahoo! Finance.

Can Procter & Gamble earnings start growing faster again?
In recent months, analysts have pulled back on their views about Procter & Gamble earnings, cutting their fourth-quarter estimates by $0.03 per share and their full-year fiscal 2014 and 2015 projections by a penny per share each. The stock is essentially unchanged from mid-October levels, despite having been up significantly earlier in the quarter.

Procter & Gamble's third-quarter results gave investors new hope that the company can restore its strength through global growth. Organic sales in emerging markets grew by 8%, well outpacing its domestic organic growth of 2%. By contrast, Unilever, which has had a much better history in recent years in capitalizing on emerging markets, had relatively weak performance there, suggesting some customer shifting of demand toward P&G. It appears likely that P&G's strategy to narrow its focus on just 10 key emerging nations has paid off by helping the company better address specific needs of certain demographic groups. More broadly, the company's revenue gained 2%, leading to an 8% jump in net earnings per share with solid results from the Fabric Care and Home Care segment as well as the Baby, Feminine, and Family Care business.

Still, some investors believe that smaller rivals Kimberly-Clark and Colgate-Palmolive have more growth potential. The problem, though, is that P&G stock looks most attractively valued even considering its growth prospects, with superior profit margins and a healthier balance sheet than either of its two domestic competitors. Kimberly-Clark, by contrast, has taken a higher-risk profile with its more concentrated portfolio of paper-based personal-care products. That has paid off thus far, but P&G's more diversified approach could make it a safer play going forward.

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Moreover, Procter & Gamble has made efforts to restructure its operations to improve efficiency. That's been a necessary response to similar efforts at Unilever and Colgate-Palmolive, with Unilever having boosted its personal-care exposure while Colgate has bought a key European oral-care company to strengthen its namesake dental brand. For Procter & Gamble, expanding its worldwide beauty and grooming business to incorporate a more focused product line addressing baby products, beauty, health and grooming, and fabric and home care on a global basis could give it more international growth power.

In the Procter & Gamble earnings report, watch to see whether the company is able to sustain superior organic growth compared to its rivals. With investors worrying about the stock's price, a dose of growth power could restore confidence and send the stock to new record highs once again.

Does Procter & Gamble make the final cut?
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

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

Puerto Rico Investors Bracing For Default

The clock is ticking towards a default by Puerto Rico on its massive municipal bond debt.

According to a report last week in the Financial Times, some creditors met in New York City to discuss a possible restructuring of Puerto Rico's massive $70 billion debt with "restructuring specialists."

The specialists, it was reported, said that a restructuring "appears increasingly likely".

The outlook for Puerto Rico bondholders is grim, according to the FT's Henny Sender.

"Puerto Rico's status as an unincorporated territory makes a Chapter 9 filing for bankruptcy protection for local governments, such as the Detroit municipal filing last July, impossible," Sender reported. "That situation complicates any negotiations with creditors."

He continued: "The territory's debt service burden requires it to pay between $3.4 billion and $3.8 billion each year for the next four years. As doubts grow about the ability of the commonwealth to service that debt, the cost of doing so will inevitably rise."

"The numbers are untenable," one restructuring adviser told Sender. "To issue new debt the yield would have to rise and where they can't raise new money they will have to stop paying."

He concluded that, "if Puerto Rico was forced to take that step, the effects would probably ripple through the entire $4 trillion municipal bond market."

The plot thickened when, apparently in reaction to the FT's report, Puerto Rico officials quickly denied the speculation that a restructuring of its debt was being considered, according to the Bond Buyer's Robert Slavin. "Puerto Rico will take every step necessary to continue honoring its obligations," a government statement said.

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The grim outlook for Puerto Rico municipal bond investors is nothing new. In fact, UBS, the leading underwriter and enabler of Puerto Rico bond offerings and UBS closed-end funds, reported over a year ago that the firm expected "more downside than upside momentum" to Puerto Rico's credit. It also reported that Puerto Rico's "reliance on regular access to the capital markets to finance a diminishing structural deficit constitutes the most pronounced credit risk for investors."

The clock is also ticking on a downgrade to "junk" status by the three rating agencies, Moody's Standard & Poor's and Fitch, which have had Puerto Rico on "negative watch" for more than a month. The island commonwealth is facing a potential downgrade by the end of this quarter.

While the Puerto Rico government is scrambling to rearrange the deckchairs on its Muni Bond Titanic, the powerful Teachers Union said that they will not bear the brunt of economic cuts to their pension system and have gone to court to stop the cuts.

There is even talk about federal government renewing a tax on Puerto Rican rum to help balance the budget deficit. If a default occurs, it may be that there isn't enough rum on the island to drown investors sorrows.

Zamansky LLC are securities and investment fraud attorneys representing investors in federal and state litigation against financial institutions. For more information about Zamansky LLC, please visit http://www.ubspuertoricofunds.com/.

 

Best Cheap Companies To Invest In 2014

Chipotle Mexican Grill (NYSE: CMG  ) has a plan to boost its moribund comps.

The fast-growing restaurant chain will be adding premium margaritas -- handmade with Patron silver tequila, triple sec, agave nectar, and fresh lime -- to more than half of its restaurants next week.

These drinks won't be cheap, priced between $6.50 and $8 apiece.�

The allure may be obvious. Average ticket prices could head higher as customers trade up from sodas and beers. However, McDonald's (NYSE: MCD  ) also thought that it could boost sales and woo new customers by adding premium beverages. It hasn't exactly worked out well lately. Comps turned negative in October for the first time in a decade, and customer complaints are growing.�

Is Chipotle biting off more of this tequila worm than it can chew?

In this video, longtime Fool contributor Rick Munarriz wonders if Chipotle's new product may result in confusion and slow-moving lines. There's also the fear that Chipotle's value proposition gets blurred. What do you think? Check out the video, then chime in with your thoughts in the comment box below.�

Best Cheap Companies To Invest In 2014: MEDIWARE Information Systems Inc.(MEDW)

Mediware Information Systems, Inc., together with its subsidiaries, engages in the design, development, and marketing of software solutions targeting specific processes within healthcare institutions. The company offers software systems consisting of company's proprietary application software, and third-party licensed software and hardware. It licenses, implements, and supports clinical and performance management, blood donor, and blood and biologic management products in the United States; and medication management solutions in the United States, the United Kingdom, Ireland, and South Africa. The company?s blood and biologics management solutions include HCLL Transfusion and HCLL Donor, which address blood donor recruitment, blood processing, and transfusion activities for hospitals and medical centers; BloodSafe suite of hardware and software that enable healthcare facilities to store, monitor, distribute, and track blood products; LifeTrak software for blood centers; a nd BiologiCare, a bone, tissue, and cellular product tracking software. Its medication management products comprise WORx, a pharmacy information system to manage inpatient and outpatient pharmacy operations; MediCOE, a physician order entry module; MediMAR, a nurse point-of-care administration and bedside documentation module; MediREC, which assists in achieving compliance with a Joint Commission mandate; and pharmacy management and electronic prescribing systems. The company?s performance management products include InSight software that tracks performance metrics to assist healthcare managers to manage performance. It also provides software installation and maintenance services, as well as billing and collection services to home infusion and home/durable medical equipment markets. The company markets its products primarily through its direct sales force. Mediware Information Systems, Inc. was founded in 1970 and is headquartered in Lenexa, Kansas.

Advisors' Opinion:

• [By CRWE]

  Mediware Information Systems, Inc. (Nasdaq:MEDW) plans to acquire the assets of Indianapolis-based Strategic Healthcare Group LLC (SHG), a leading provider of blood management consulting, education and informatics solutions.

Best Cheap Companies To Invest In 2014: AeroVironment Inc.(AVAV)

AeroVironment, Inc. designs, develops, produces, and supports unmanned aircraft systems (UAS), and efficient energy systems for various industries and governmental agencies. Its UAS provide intelligence, surveillance, and reconnaissance, including real-time tactical reconnaissance, tracking, combat assessment, and geographic data to the small tactical unit or individual war fighter. The UAS wirelessly transmit critical live video and other information generated by their payload of electro-optical or infrared sensors directly to a hand-held ground control system, enabling the operator to view and capture images during the day or at night on a hand-held ground control unit. AeroVironment also provides spare equipment, alternative payload modules, batteries, chargers, repair services, and customer support for the UAS. In addition, the company produces industrial productivity and clean transportation solutions for commercial and government customers, develops potential clean t ransportation solutions, and performs contract engineering services; offers PosiCharge electric vehicle charging systems for industrial electric material handling fleets, electric vehicle charging systems for passenger and fleet vehicles, and power cycling and test systems for developers and manufacturers of plug-in electric and hybrid vehicles, as well as battery packs, electric motors, and fuel cells; and supplies power cycling and test systems to research and development organizations that focus on developing electric propulsion systems, electric generation systems, and electricity storage systems. It supplies its UAS primarily to the organizations within the United States department of defense. AeroVironment, Inc. was incorporated in 1971 and is headquartered in Monrovia, California.

Advisors' Opinion:

• [By Rich Smith]

  AlamyA US Navy X-47B Unmanned Combat Air System aircraft is towed into the hanger bay aboard the aircraft carrier USS George H.W. Bush -- the first aircraft carrier to successfully catapult launch an unmanned aircraft from its flight deck. With a fiscal 2013 defense budget of nearly $614 billion, the United States is widely known to be a big spender on defense. By some estimates, U.S. defense spending accounts for nearly 60 percent of the $1.19 trillion the top 10 military powers spent on defense in 2011. In fact, our country allocates more than five times more money to defense than does its closest spending rival, China. And that's not the half of it. In the cutting-edge field of military unmanned aerial vehicles, the United States has such a huge lead over its rivals that it makes their combined UAV fleets look like a rounding error in a world that's essentially 100 percent dominated by U.S. drones. Pax Americana As The Wall Street Journal recently reported, the U.S. military commands a fleet of 429 "large drone" aircraft such as the General Atomics Predator and Northrop Grumman (NOC) Global Hawk. Meanwhile, America's smaller drones, built by everyone from Boeing (BA) to Textron (TXT) to tiny AeroVironment (AVAV), maker of the ubiquitous Raven man-portable UAV, number in the thousands. In contrast, the military of the United Kingdom, not even a U.S. rival but a close ally, boasts a fleet of precisely 10 large drones, most of which we built for them, and the rest imported from Israel. Italy has nine, France, four, and Germany has three. As a result, when allied forces need a drone to "put eyes" on a target, more often than not, they have to ring up the U.S. military to get one. Who You Gonna Call? For allied nations, that has to be embarrassing -- but it's a situation unlikely to change soon. As the Journal reports, European defense giant European Aeronautic Defence & Space (EADSY), the parent company of Airbus, is only just now beginning to test a

• [By Rich Smith]

  AeroVironment (NASDAQ: AVAV  )
  Shifting over the implications of this news for automotive investments, the key attraction for AeroVironment investors (aside from selling UAVs into an Afghan war that's winding down) has been the company's "PosiCharge" electric-car battery recharging technology. AV says it beats all comers with the ability to recharge a lithium ion battery pack in mere minutes. But if Khare's invention bears fruit, and battery recharge times begin getting measured in seconds, AV's raison d' etre could vanish.

• [By Rich Smith]

  California-based AeroVironment (NASDAQ: AVAV  ) continues its relentless march -- or the airborne equivalent of a march -- to raking in every last cent of the $65.5 million the Pentagon has awarded it to produce unmanned aerial vehicles (UAVs) for the U.S. Army.

Top Canadian Stocks For 2014: Oracle Corporation(ORCL)

Oracle Corporation, an enterprise software company, develops, manufactures, markets, distributes, and services database and middleware software, applications software, and hardware systems worldwide. It licenses of database and middleware software, including database management software, application server software, service-oriented architecture and business process management software, data integration software, business intelligence software, identity and access management software, content management software, portals and user interaction software, development tools, and Java; and applications software comprising enterprise resource planning, customer relationship management, enterprise performance management, supply chain management, business intelligence applications, enterprise portfolio project management, Web commerce, and industry-specific applications software. The company also offers customers with rights to unspecified software product upgrades and maintenance releases; Internet access to technical content; and Internet and telephone access to technical support personnel. In addition, its hardware systems products consist of computer server and hardware-related software, including the Oracle Solaris Operating System; and storage products, such as tape, disk and networking solutions for open systems and mainframe server environments. Its hardware systems support solutions include software updates for the software components. Further, the company offers consulting solutions in business and IT strategy alignment, enterprise architecture planning and design, initial product implementation and integration, and ongoing product enhancements and upgrades; cloud services, including Oracle Cloud Services and Advanced Customer Services; and education solutions comprising instructor-led, media-based, and Internet-based training in the use of its software and hardware products. The company was founded in 1977 and is headquartered in Redwood Ci ty, California.

Advisors' Opinion:

• [By Anders Bylund]

  Likewise, Oracle (NYSE: ORCL  ) isn't likely to find a spot on the Dow until at least one of the five pure-play hardware and software businesses drops out. That's another limiting factor for Apple and Google, by the way.

• [By Dan Caplinger]

  Microsoft (NASDAQ: MSFT  ) climbed 1.4% on a pair of interesting announcements. One report involved Microsoft making its video games available for rival smartphone platforms, including those running the iOS and Android operating systems. But arguably the more important news involves Microsoft teaming up with fellow tech giant Oracle (NYSE: ORCL  ) to offer various Oracle software on cloud-based installations using Microsoft's Windows Azure or Server Hyper-V platforms. As even the biggest companies collaborate, it's clear that cloud computing has in some ways leveled the playing field among tech companies, with the largest companies still having to work hard to keep up with advances from smaller, nimbler rivals.

• [By Inyoung Hwang]

  Bellini now has buy recommendations on Facebook Inc. (FB) and Oracle Corp. (ORCL)

  Reassessing Private Equity

  Credit Suisse (CSGN)�� Chen took a new look at publicly listed private-equity firms, including Apollo Global Management LLC, Blackstone Group LP (BX) and Carlyle Group LP. (CG) Investors are still struggling to properly value them, he says.

Best Cheap Companies To Invest In 2014: TII Network Technologies Inc.(TIII)

Tii Network Technologies, Inc., together with its subsidiaries, designs, manufactures, and sells products for use in the networks to service providers in the communications industry in the United States. It provides network interface devices (NID), including overvoltage surge protectors, digital subscriber line (DSL) service splitters, and customer bridge modules; building entrance terminals; and accessories comprising station protectors, customer wiring modules, electro-magnetic interference filters, and line test modules. The company also offers broadband products, such as DSL electronic products that include xDSL plain old telephone service splitters to isolate voice and data signals; Outrigger, an outdoor intelligent residential gateway; HomePlug technology that enables networking of voice, data, and audio devices through the consumers? AC power lines. In addition, it provides connectivity products consisting of connector block and terminal block products; voice over I nternet protocol products; switchable voice NID products; voice intercom systems for use in multi-dwelling units; and wire terminals and other connectivity products. Further, the company offers fiber optic products which comprise wall mount enclosures, rack mount enclosures, OSP fiber enclosures, cable assemblies, miscellaneous fiber accessories, and optic network terminals installation accessories. Additionally, it offers overvoltage surge protection products, including two and three electrode gas tubes; station overvoltage surge protectors; protector modules; and protector packs and cat 5 cat 6 protection products, as well as other surge protection products comprising a 75 ohm coaxial protector for cable networks; a 50-ohm coaxial protector for wireless service providers? cell sites; a gel-sealed Ethernet data protector; and power line/data line protectors for personal computers and home entertainment systems. The company was founded in 1964 and is headquartered in Edgewoo d, New York.

Best Cheap Companies To Invest In 2014: Cloud Peak Energy Inc(CLD)

Cloud Peak Energy Inc., through its subsidiaries, engages in coal mining operations in the Powder River Basin of the United States. It produces sub-bituminous steam coal with low sulfur content for electric utilities and industrial customers. The company owns and operates Antelope surface coal mine located to the south of Gillette, Wyoming; the Cordero Rojo surface coal mine located to the south of Gillette, Wyoming; and the Spring Creek surface coal mine located in Montana. It also owns a 50% interest in the Decker surface coal mine located in Montana. As of December 31, 2010, it had approximately 970 million tons of proven and probable reserves. The company was founded in 1993 and is headquartered in Gillette, Wyoming.

Advisors' Opinion:

• [By Johanna Bennett]

  As for specific stocks, the Goldman analysts issued five ratings changes:

  Upgrade CONSOL Energy to Buy given strong production growth at its E&P segment, improving cash flow from the coal business and potential for asset sales/restructuring to help realize its SOTP value. Downgrade Arch Coal to Sell due to high leverage, peak valuations and low free cash flow levels. Neutral Ratings on Cloud Peal Energy (CLD), Alpha Natural Resources (ANR) and Walt Energy (WLT): Goldman downgrade Cloud to a Neutral given a lower production outlook and a reduced PRB price forecast. The firm upgraded Alpha and Walt to Neutral from Sell, predicting that met coal prices have bottomed.

  Arch Coal has fallen 5.7% to day to $4.26, followed by Cloud Pearl, down 3.4% to $14.68, and a 3% drop by Walt Energy to $14.10. Alpha Natural dropped 2.8% to $6.10. And CONSOL fell 0.9% to $33.46.

Best Cheap Companies To Invest In 2014: Sirius XM Radio Inc.(SIRI)

Sirius XM Radio Inc. provides satellite radio services in the United States and Canada. It broadcasts a programming lineup of approximately 135 channels of commercial-free music, sports, news and information, talk and entertainment, traffic, and weather on subscription fee basis through two satellite radio systems in the United States; and holds an interest in the satellite radio services offered in Canada. The company also simulcasts music and selected non-music channels over the Internet; and offers applications to allow consumers to access its Internet services on mobile devices. As of December 31, 2010, it had 20,190,964 subscribers. In addition, the company designs, establishes specifications, sources or specifies parts and components, and manages various aspects of the logistics and production of satellite radios; licenses its technology to various electronics manufacturers to develop, manufacture, and distribute radios under various brands; and imports radios distri buted through its Websites. The company?s satellite radios are primarily distributed through automakers, retailers, and its Websites. Further, it provides music services for commercial establishments; a satellite television service to offer music channels as part of certain programming packages on the DISH Network satellite television service; music and comedy channels to mobile phone users through mobile phone carriers; Backseat TV, a service offering television content designed primarily for children in the backseat of vehicles; Travel Link, a suite of data services that include graphical weather, fuel prices, sports schedules and scores, and movie listings; and real-time traffic and weather services. The company was formerly known as Sirius Satellite Radio Inc. and changed its name to Sirius XM Radio Inc. in August 2008. Sirius XM Radio Inc. was founded in 1990 and is headquartered in New York, New York.

Advisors' Opinion:

• [By Selena Maranjian]

  Finally, Robeco's biggest closed positions included Starz�and Sirius XM Radio (NASDAQ: SIRI  ) . Sirius did post disappointing earnings recently, but revenue and earnings are still growing at a double-digit rate, so things aren't that dire. In fact, a strong report from Ford�bodes well for the company, as its radios are embedded in many vehicles, and many are bullish about the company's new personalized radio service, MySXM. It's worth noting that while Robeco sold out of Sirius, it added shares of the company's majority stakeholder, Liberty Media.

• [By Jason Moser, Eric Bleeker, CFA, and Chris Hill]

  Streaming Internet radio provider Pandora (NYSE: P  ) has been clashing with artists recently over the amount it pays them to use their content. Artists such as Pink Floyd�have penned widely read editorials criticizing the size of the paychecks artists are receiving for the millions of streams of their songs on Pandora. The company has fired back, noting the wide disparity in the percent of revenue it pays to artists relative to terrestrial radio or Sirius XM� (NASDAQ: SIRI  ) . Currently, Pandora pays roughly half of its revenue in song royalties while terrestrial radio pays out closer to 1.7% of its revenues. Convoluting matters is that the recent announcement of iTunes Radio included per-song rates that were slightly higher than what Pandora plays.�

• [By WALLSTCHEATSHEET.COM]

  Sirius XM Radio provides audio entertainment and information services via subscription services to a growing listener base. The stock has been moving higher in recent times but is now consolidating gains so it may need a bit of time. Over the last four quarters, earnings and revenue figures have improved which has really sat well with investors in the company. Relative to its peers and sector, Sirius XM Radio has been a poor performer year-to-date. WAIT AND SEE what Sirius XM Radio does this coming quarter.

Best Cheap Companies To Invest In 2014: Bank of America Corporation(BAC)

Bank of America Corporation, a financial holding company, provides banking and nonbanking financial services and products to individuals, small- and middle-market businesses, large corporations, and governments in the United States and internationally. The company?s Deposits segment generates savings accounts, money market savings accounts, certificate of deposits, and checking accounts; and Global Card Services segment provides the U.S. consumer and business card, consumer lending, international card and debit card services. Its Home Loans & Insurance segment offers consumer real estate products and services, including mortgage loans, reverse mortgages, home equity lines of credit, and home equity loans. It also provides property, disability, and credit insurance. The company?s Global Commercial Banking segment offers lending products, including commercial loans and commitment facilities, real estate lending, leasing, trade finance, short-term credit, asset-based lending, and indirect consumer loans; and capital management and treasury solutions, such as treasury management, foreign exchange, and short-term investing options. Its Global Banking & Markets segment provides financial products, advisory services, settlement, and custody services; debt and equity underwriting and distribution, merger-related advisory services, and risk management products; and integrated working capital management and treasury solutions. The company?s Global Wealth & Investment Management segment offers investment and brokerage services, estate management, financial planning services, fiduciary management, credit and banking expertise, and asset management products. Bank of America Corporation serves customers through a network of approximately 5,900 banking centers and 18,000 automated teller machines. It was formerly known as NationsBank Corporation and changed its name on October 1, 1998. Bank of America Corporation was founded in 1874 and is based in Charlott e, North Carolina.

Advisors' Opinion:

• [By Dan Caplinger]

  Past confiscation fears
  Constitutionally, the idea that the government could simply confiscate your retirement savings without compensation goes directly against the due process and takings clauses of the Fifth Amendment. More skeptical analysts will note that retirement accounts make up trillions of dollars in assets that major banks Bank of America (NYSE: BAC  ) and Wells Fargo (NYSE: WFC  ) and many other major financial institutions use to drive profits, giving them a huge incentive to use their political power to ensure that those assets don't disappear instantaneously.

• [By John Maxfield]

  Shares of Bank of America (NYSE: BAC  ) are soaring today after an analyst at Morgan Stanley raised her price target on the nation's second largest bank by assets. While Betsy Graseck had previously issued a $13 target, in a note to clients this morning, she raised it to $16, equating to a 37% upgrade.

Best Cheap Companies To Invest In 2014: Advance Auto Parts Inc(AAP)

Advance Auto Parts, Inc., through its subsidiaries, operates as a retailer of automotive aftermarket parts, accessories, batteries, and maintenance items. It operates in two segments, Advance Auto Parts (AAP) and Autopart International (AI). The AAP segment operates stores, which primarily offer auto parts, including alternators, batteries, chassis parts, clutches, engines and engine parts, radiators, starters, transmissions, and water pumps; accessories comprising floor mats, mirrors, vent shades, MP3 and cell phone accessories, and seat and steering wheel covers; chemicals consisting of antifreeze, freon, fuel additives, and car washes and waxes; and oil and other automotive petroleum products. This segment also provides battery and wiper installation, battery charging, check engine light reading, electrical system testing, video clinics and project brochures, loaner tool programs, and oil and battery recycling services; and sells its products through online. The AI segm ent operates stores that offer replacement parts for domestic and imported cars, and light trucks to customers in northeast and mid-Atlantic regions, as well as to warehouse distributors and jobbers in North America. As of January 1, 2011, the company operated 3,369 AAP stores, including 3,343 stores located in the northeastern, southeastern, and Midwestern regions of the United States under the Advance Auto Parts and Advance Discount Auto Parts trade names; 26 stores situated in Puerto Rico and the Virgin Islands under the Advance Auto Parts and Western Auto trade names; and 194 stores under the Autopart International trade name in the United States. It serves do-it-yourself, do-it-for-me, or commercial customers. The company was founded in 1929 and is based in Roanoke, Virginia.

Advisors' Opinion:

• [By Ben Levisohn]

  Autozone has dropped 0.3% to $413.22 �, while�Pep Boys (PBY) has gained 0.2% to $12.19 , Advanced Auto Parts�(AAP) has risen 0.3% to $80.35, and O’Reilly Automotive (ORLY) has advanced 0.3% to $124.42 .

• [By Ben Levisohn]

  Investors really like Advance Auto Parts (AAP) deal to buy a chain of repair shops–so much so that a stock that finished yesterday in the low 80s is now trading in the mid-90s.

  Agence France-Presse/Getty Images

  Reuters has the details on the deal:

  Advance Auto Parts Inc will buy 1,418 outlets of the Carquest chain to boost its auto repair operations to complement its car parts business, sending its shares up as much as 20 percent to a record high.

  Advance Auto, which sells products such as batteries, air fresheners and engine parts, said it would buy General Parts International Inc for just over $2 billion, creating the largest North American retailer of auto parts.

  General Parts is the biggest operator of the Carquest chain, which runs auto repair shops and car parts stores. General Parts also owns Worldpac, the No.1 supplier of replacement parts for imported car and truck brands.

  Reuters notes that the finished product will be the largest supplier of auto parts by sales, just beating out Autozone (AZN).

  Credit Suisse analyst Simeon Gutman and team call the deal a “smart strategic acquisition.” They write:

  The acquisition would solve two important issues for AAP. First, it has struggled in the DIFM segment, primarily due to a weaker and less accessible distribution network. General Parts has one of the most established distribution networks in the country (~40 DCs vs. AAP’s 10) and long standing relationships with mechanics nationwide. More importantly, WORLDPAC (estimated $1 billion in sales) is the leader in foreign parts with AAP owning the number three player and we see synergies from AI flooding into WORLDPAC.

  A meaningfully positive aspect of the transaction is targeted annual cost savings of roughly $160 million within three years (~6.1% of acquired sales). This seems relatively consistent with previous DIY Auto deals. The deal is expected to be 20%+ accretive to FY 14 ca

• [By John Udovich]

  Auto parts retailers like large cap O'Reilly Automotive Inc (NASDAQ: ORLY) and mid cap Advance Auto Parts, Inc (NYSE: AAP)�along with small cap auto parts stock Federal-Mogul Corp (NASDAQ: FDML) have been a bright spot on the economy as consumers try to stretch the lives of their automobiles or vehicles in the bad or uncertain economy. In fact, Investors Business Daily has recently noted that the�average age of cars on the road is about 11.5 years and that�� of course good news for auto parts retailers while�any uptick in sales or production of auto parts in general�will be good for companies like Federal-Mogul Corp. With that in mind, here�is a look at�how these three auto parts retailers or auto parts stocks are taking investors for a ride in a good way:

Yale Professor’s Fiduciary Threat Has Retirement Execs Fuming

Retirement planning officials are warning plan sponsors about a Yale law school professor’s threat that he plans to release a study next spring asserting that they have breached their fiduciary duties with respect to plan costs and investments. Still, some in the industry caution that the study relies on old data.

The yet-to-be released study by Ian Ayers, William K. Townsend professor at Yale Law School, and Quinn Curtis, associate professor of law at the University of Virginia School of Law, is creating a firestorm of opposition among retirement planning executives. They argue that while the professors’ evaluation of the data used in the study is flawed, it is sure to spark inquiries from Congress and clients.

The Yale professor has sent letters to approximately 6,000 sponsors of 401(k) plans claiming that many of them may have breached their fiduciary duties by sponsoring a “potentially high-cost plan,” and that they consider improving their fund lineup and doing away with more expensive fund offerings, according to Fred Reish (left), partner and chair of the financial services ERISA team at Drinker Biddle & Reath.

Ayers threatens in his letter to plan sponsors that the study results—which he says are based on data compiled from Forms 5500 for the year ending Dec. 31, 2009, as well as BrightScope data—will be given to The New York Times and the Wall Street Journal, as well as disseminated via Twitter, with a separate hashtag for each company’s results.

In a July 23 Client Bulletin, Reish and his colleagues warn that while the Yale professor’s data evaluation is questionable, and “may not be accurate or relevant to their plans,” plan sponsors should take it seriously.

Indeed, Eric Ryles, managing director of Judy Diamond Associates, publisher of retirement and employee benefits industry prospecting tools and plan data, says that the professors’ analysis is based on dated information. “The study is based on very outdated information from 2009,” Ryles says. “There are currently 79,000 or so 2011 filings which should meet the same basic criteria as [the Yale professor’s survey] sampling. There are approximately 1,500 or so 2012 filings which would do the same.”

The study also uses information from the annual 5500 forms that is “likely incomplete and in many instances is not reflective of a plan’s true costs,” argue the Drinker Biddle lawyers in their client bulletin.  

Further, the Drinker Biddle attorneys argue that the Yale prof’s study “fails to consider relevant factors about the services being obtained for the indicated costs, the structure of the plans and the extent to which the costs are attributable to plan services that justify the cost because, for example, they help participants to achieve favorable outcomes.”

As a measure of fiduciary performance, the “comparison of plans based solely on cost is at best incomplete and misleading,” as a fiduciary’s duty “is to ensure that costs are reasonable in light of the services being provided, not to provide the cheapest plan,” the Drinker Biddle attorneys say.

Furthermore, for those plan sponsors that have already taken action to reduce plan costs and provider compensation from 2009 levels under ERISA 408(b)(2) fee disclosure rules, “the letters (and the study) are moot,” the Drinker Biddle attorneys argue.

While the study does have flaws, given the heightened focus on plan expenses by the Department of Labor as well as in “class-action litigation” plan sponsors who received a letter “have a right to be concerned,” the Drinker Biddle attorneys say, as do plan sponsors who haven’t received a letter.

Reish urges record keepers, advisors and plans sponsors to brace for the study’s release and take the following steps:

Is Yahoo Well-Positioned for the Future?

With shares of Yahoo (NASDAQ:YHOO) trading around $40, is YHOO an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock's Movement

Yahoo is a technology company that provides search, content, and communication tools on the web and on mobile devices worldwide. It operates Yahoo.com, which offers Yahoo Search, Yahoo News, Yahoo Sports, Yahoo Finance, Yahoo Entertainment and Lifestyles, and Yahoo Video. Being such a large content provider, Yahoo is able to reach a significant amount of consumers across the globe. As the internet attracts an increasing number of participants, look for Yahoo to continue to be a major player.

Since taking the helm at Yahoo in July 2012, Marissa Mayer has made some dramatic and expensive moves. Her latest decision to discharge the company's second in command, chief operating officer Henrique de Castro, can be counted among them. In an internal memo obtained by the tech website Re/code, Mayer reflects on her pride in the company's achievements throughout 2013 as well as her optimism for the year ahead. "During my own reflection," she writes, "I made the difficult decision that our COO, Henrique de Castro, should leave the company."

The tides at Yahoo have certainly turned. It was just over a year ago that Mayer pilfered de Castro from Google — her old stomping grounds – to serve as the company's "top ad executive and liaison to marketers on Madison Avenue," reports the Wall Street Journal. But apparently, he couldn't deliver. In 2013, Facebook overtook Yahoo as the second largest seller of digital ads worldwide, according to a report by eMarketer. Yahoo's percentage of total digital ad share worldwide also tumbled from 3.37 percent in 2012 to 2.87 percent in 2013. No matter how you shake it, Mayer's change of heart will be costly. According to the Journal, de Castro's severance package could be worth as much as $42.1 million, which includes $41.5 million in restricted shares, $600,000 in cash severance and $7,672 worth of continued health benefits.

T = Technicals on the Stock Chart Are Strong

Yahoo stock has been exploding to the upside in the last several months. However, the stock is currently trading sideways and may need time to consolidate before heading higher. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Yahoo is trading above its rising key averages, which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Yahoo options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Yahoo options	34.83%	83%	80%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
February Options	Flat	Average
March Options	Flat	Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let's take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Yahoo's stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Yahoo look like and more importantly, how did the markets like these numbers?

	2013 Q3	2013 Q1	2013 Q1	2012 Q4
Earnings Growth (Y-O-Y)	-6.67%	66.67%	52.17%	-2.15%
Revenue Growth (Y-O-Y)	0.33%	-6.78%	-6.62%	1.64%
Earnings Reaction	-0.86%	10.34%	-0.37%	-3.00%

Yahoo has seen mixed earnings and revenue figures over the last four quarters. From these numbers, the markets have had conflicting feelings about Yahoo's recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has Yahoo stock done relative to its peers, Google (NASDAQ:GOOG), AOL (NYSE:AOL), Microsoft (NASDAQ:MSFT), and sector?

	Yahoo	Google	AOL	Microsoft	Sector
Year-to-Date Return	-0.57%	3.25%	12.98%	-2.22%	4.36%

Yahoo has been an average relative performer, year-to-date.

Conclusion

Yahoo is an Internet bellwether that provides a multitude of services to consumers and companies worldwide. Marissa Mayer latest decision to discharge the company's second in command, chief operating officer Henrique de Castro will be costly as his severance package could be worth as much as $42.1 million. The stock has been moving higher in recent quarters, but is now trading sideways. Over the last four quarters, earnings and revenues have been mixed, which has produced conflicting feelings among investors. Relative to its peers and sector, Yahoo has been an average year-to-date performer. Look for Yahoo to OUTPERFORM.

Pipeline Setback for Roche - Analyst Blog

Roche (RHHBY) recently suffered a setback when it announced the termination of its phase III trial, AleCardio, on pipeline candidate aleglitazar.

The decision to terminate the trial came after the independent Data and Safety Monitoring Board (DSMB) recommended the company halt the trial due to safety signals and lack of efficacy following a regular safety review.

We note that the trial was being conducted to evaluate the efficacy and safety of aleglitazar in patients with a recent acute coronary syndrome event and type II diabetes.

In addition to scrapping the AleCardio trial, Roche said that it has terminated all other trials related to aleglitazar.

We note that aleglitazar was designed to provide balanced dual peroxisome proliferator-activated receptor (PPAR) alpha/gamma activation.

We remind investors that companies like AstraZeneca (AZN) and Bristol-Myers Squibb (BMY) had also attempted to develop a diabetes drug using this dual mechanism but failed.

We remind investors that Roche had suffered a setback in 2012 as well when it terminated its phase III trial on dalcetrapib after the independent DSMB cited lack of efficacy.

The trial was evaluating dalcetrapib's efficacy and safety when added to the existing standard of care for the treatment of patients with stable coronary heart disease (CHD) following an acute coronary syndrome.

Nevertheless, Roche has another candidate, tofogliflozin in phase III, which is being developed to increase renal glucose excretion in patients with type II diabetes.

We expect investor focus on tofogliflozin henceforth.

Roche currently carries a Zacks Rank #4 (Sell). Right now, Santarus, Inc (SNTS) looks attractive with a Zacks Rank #1 (Strong Buy).

Will a Recent Addition Boost Netflix?

With shares of Netflix (NASDAQ:NFLX) trading around $220, is NFLX an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock's Movement

Netflix is an Internet subscription service streaming television shows and movies. The company's subscribers can watch unlimited television shows and movies streamed over the Internet to their televisions, computers, and mobile devices. In the United States, subscribers can also receive DVDs delivered to their homes. Netflix has revolutionized the television and movie industry with its services.

Recently, a deal was struck with Dreamworks (NASDAQ:DWA) that is fueling demand for Netflix stock as the streaming service is ramping-up its original programming menu with popular choices from the maker of Shrek, Madagascar, and Kung Fu Panda. Consumers in the United States and around the world look to access their favorite shows and movies via Internet mediums at increasing rates. Look for Netflix's increasing popularity to lead it to rising profits.

T = Technicals on the Stock Chart are Strong

Netflix stock has witnessed powerful moves up and down over the last few years. The stock is now surging higher and looks to have previous all-time highs in its crosshairs. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Netflix is trading slightly above its rising key averages which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Netflix options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Netflix Options	63.30%	96%	95%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
July Options	Flat	Average
August Options	Flat	Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let's take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Netflix's stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Netflix look like and more importantly, how did the markets like these numbers?

	2013 Q1	2012 Q4	2012 Q3	2012 Q2
Earnings Growth (Y-O-Y)	162.50%	-78.96%	-88.79%	-91.27%
Revenue Growth (Y-O-Y)	17.72%	7.96%	10.13%	12.75%
Earnings Reaction	24.28%	42.22%	-11.87%	-25.01%

Netflix has seen mixed earnings and rising revenue figures over the last four quarters. From these numbers, the markets have been very excited with Netflix's recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Netflix stock done relative to its peers, Amazon (NASDAQ:AMZN), Comcast (NASDAQ:CMCSA), Outerwall (NASDAQ:OUTR), and sector?

	Netflix	Amazon	Comcast	Outerwall	Sector
Year-to-Date Return	17.84%	13.18%	10.12%	15.86%	14.27%

Netflix has been a relative performance leader, year-to-date.

Conclusion

Netflix provides entertainment through its video streaming subscription service. The company continue to add programming that consumers across the nation enjoy. The stock has moved swiftly up and down and seems ready to head towards previous all-time high prices. Over the last four quarters, earnings have been mixed while revenue figures have been on the rise which has really impressed investors in the company. Relative to its peers and sector, Netflix has been a year-to-date performance leader. Look for Netflix to continue to OUTPERFORM.

Show Me the Money, United Stationers

Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.

Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.

Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on United Stationers (Nasdaq: USTR  ) , whose recent revenue and earnings are plotted below.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.

Over the past 12 months, United Stationers generated $111.1 million cash while it booked net income of $110.6 million. That means it turned 2.2% of its revenue into FCF. That doesn't sound so great.

All cash is not equal
Unfortunately, the cash flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash flows are of high quality. What does that mean? To me, it means they need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).

For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable for the short term) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it's ordinary in recessionary times, and you can only increase collections so much. Finally, adding stock-based compensation expense back to cash flows is questionable when a company hands out a lot of equity to employees and uses cash in later periods to buy back those shares.

So how does the cash flow at United Stationers look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar.

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

When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.

With questionable cash flows amounting to only 0.6% of operating cash flow, United Stationers's cash flows look clean. Within the questionable cash flow figure plotted in the TTM period above, stock-based compensation and related tax benefits provided the biggest boost, at 5.1% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed 25.2% of cash from operations.

A Foolish final thought
Most investors don't keep tabs on their companies' cash flow. I think that's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated home-run stocks that provide the market's best returns.

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The Case for a Correction in Stocks

BALTIMORE (Stockpickr) -- Up, up and away has been Mr. Market's modus operandi in recent months, shoving its way to new all-time highs as this past year came to a close. And all the way up, the bulls and bears have been arguing over why the rally was justified -- or why it wasn't.

So far, the bulls have been right. Very right.

But that doesn't mean that now's the time to jump into stocks. Instead, markets look overdue for a meaningful move lower this month.

Yes, I realize those two ideas sound contradictory. How can stocks be headed lower if they're also headed higher? But bear with me, and I'll show you how a correction this month could provide a big opportunity for your long-term stock portfolio.

Expecting long-term upside isn't the same thing as saying that stocks are going straight up from here ad infinitum. Corrections are a necessary part of a healthy market rally, as risk-averse early investors take gains off the table, and later investors jump into shares at relative lows.

And right now, there are a handful of fundamental and technical factors that point to a correction happening sooner rather than later.

Stocks Are Expensive-ish

When investors talk about stocks being cheap or expensive, it's not an absolute term. Obviously, with the big indices sitting at new highs, stocks in general cost more than ever before. But what makes a stock cheap or expensive is its cost relative to what you get for that price tag: metrics such as earnings or assets.

With a price-to-earnings ratio of 18.88 in the S&P 500, stocks still aren't truly expensive. But they are starting to look expensive-ish.

In the last year, the P/E ratio for the more growth-oriented Nasdaq 100 Index has increased 31%. Basically, that indicates that investors are paying a lot more for the same earnings power than they were just 12 months ago. Two things can happen to make stocks look cheaper again based on P/E: either share prices drop, or earnings increase.

It's important to remember that, on a historical basis, the P/E ratios on the market averages aren't at insane levels right now. The S&P would need to rally to 3,115 tomorrow to reach the peak P/E ratio the index hit during the dot-com bubble. 


But valuation metrics have moved far enough and fast enough to warrant a correction.

As I mentioned, the other side to that valuation equation is earnings -- and with earnings season officially kicking off this week, there's a big multi-month catalyst that could help take some of the froth off of valuations in 2014. If stock prices let off some steam and earnings best analysts' expectations, stocks could suddenly look cheap again.

Technical Time to Correct

While the fundamentals can tell us a lot about whether stocks look cheap or expensive right now, aren't as useful at timing where and when important price changes are likely to occur. For that, we need to add technicals into the equation.

From a technical analysis standpoint, it doesn't get much more textbook than the rally we've seen in the S&P 500 for the last year and change. Take a look:

The S&P has been bouncing higher in an uptrending channel, with corrections that came down to test support in between each rally leg. It's notable that we haven't seen a full correction back down to trendline support since all the way back in October -- the most recent leg down stopped at the 50-day moving average thanks to a Santa Claus rally and intervention from the Fed. That makes this the second-longest stretch since this rally began in 2012 where we haven't had a pullback to the bottom of the channel.

Even though the S&P hasn't touched trendline resistance yet, shares have remained in the upper-third of the channel long enough to warrant a return to support.

This is very much a "buy the dips" market. Jumping into stocks at each test of support has been a lucrative strategy all the way up -- and it's likely to remain that way as we get deeper into 2014. That fact makes a correction in the S&P a critical buying opportunity for investors waiting for a good chance to get in.

A break of the RSI uptrend line is likely to be an early warning sign that we're going to get our correction. A timing model I've been using with success for the last year and change puts the correction this month. Barring some catalyst that surprises the market in the next few weeks, a push to new highs before the month is out looks unlikely.

The next buy signal for stocks comes on a bounce off of trendline support.

How to Win When Stocks Correct

You don't have to just hang on and take downside as the S&P heads into corrective mode. Instead, it makes sense to actively position yourself to profit from it.

Why bother re-allocating your portfolio if a stock correction is likely to only last a few weeks? In short, it's because the names that thrive during pullbacks are the same ones that rocket when equities go back into rally mode.

But there's nothing wrong with defense. After all, that covers the fundamental side of the correction equation. And believe it or not, there are still some names on the market today that you can buy at a big discount.

Look at Garmin (GRMN) for example. The GPS maker currently trades for a P/E ratio of 15.2, but that number does a poor job of conveying just how cheap GRMN is right now. It doesn't factor in the $2.79 billion in cash and investments on Garmin's balance sheet (and zero debt), which is enough to pay for nearly 32% of GRMN's outstanding shares at current price levels. Take out cash from that P/E ratio, and it suddenly drops to a measly 10.

Better, Garmin's dividend yield currently comes in at more than 4%. Calling Garmin a defensive name is an understatement.

Most people think that the best way to position yourself for downside is by focusing on defensive names -- but that's not the only way to cut downside risks. Statistically, it's the momentum names, not the defensive ones, that provide the most upside potential.

When the big indices are correcting, relative strength becomes the single most important metric in your toolbox. Relative strength is the ratio between a stock's price and its benchmark. When the line is rising, the stock is outperforming.

More important, rising relative strength statistically tends to lead to more stock outperformance. In other words, it's the gauge that tells you which stocks are going to work the best.

Big relative strength names right now include Micron Technology (MU), Alcatel-Lucent (ALU) and Herbalife (HLF). What most relative strength winners lack in deep value, they make up for in upside momentum. After all, who cares if a stock is expensive as long as it gets more expensive before you sell it? Just remember to keep tight stops in place.

So don't fear the coming correction. Owning a combination of defensive names and stocks with uptrending relative strength puts you best positioned for the pullback that's on the way. This is still very much a "buy the dips market." We've just got to wait for the next dip.

-- Written by Jonas Elmerraji in Baltimore.

RELATED LINKS:

>>3 Big-Volume Chinese Stocks to Watch
>>3 Stocks Under $10 Making Big Moves
>>5 Stocks Rising on Unusual Volume

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author was long HLF.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

Follow Jonas on Twitter @JonasElmerraji

Barnes & Noble's Tablet Failure Claims a Casualty

Someone's head had to roll. Just weeks ago, Barnes & Noble (NYSE: BKS  ) finally gave up its ambitions in the tablet market. The surrender came amid slow unit sales for its Nook device and the Nook segment, which includes content sales, saw revenue fall by 34%. B&N ate an inventory charge of $133 million related to the heavy discounting it did to get units moving, and the company said that it was changing its strategic plans as a result of the indigestion.

Nook's failure has now claimed a casualty in CEO William Lynch, who has just resigned effective immediately. Lynch had spearheaded B&N's digital and tablet strategy, after becoming CEO in early 2010. The company made no mention of a replacement CEO, but instead divvied up responsibilities among other executives, all of which will report directly to Executive Chairman and founder Leonard Riggio.

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Source: SEC filings.

Michael Huseby, who joined up as CFO just over a year ago, will become the CEO of the Nook Media subsidiary. He'll be the leader held accountable to minority investors Microsoft and Pearson if the digital-only business similarly stumbles. On one hand, getting out of tablet hardware will help Barnes & Noble reduce its losses. On the other hand, the company's adoption of Google Play as a content store concedes that B&N isn't happy with digital sales through its own Nook platform.

In fairness, digital content sales performed better than unit sales. Digital content sales were up 16.2% for the full year, and the company had said weak hardware sales contributed to an 8.9% decline in content sales in the fourth quarter. B&N was also facing a tough Q4 comparison, since last year was particularly strong thanks to the The Hunger Games and Fifty Shades of Grey trilogies that sold well a year prior.

Nook's future is up in the air. Co-branded Nook tablets made by third-party OEMs are a curious possibility, since manufacturers have more promising platforms like Android to partner with. Growing a Nook content platform that's secondary to other platforms is also an uphill battle. Nook may have claimed its first casualty, but it might not be the last.

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A Fool Looks Back

Netflix (NASDAQ: NFLX  ) had a good week. It started when the company teamed up with DreamWorks Animation (NASDAQ: DWA  ) to expand their relationship, and it culminated in an announcement that the Netherlands will be its next expansion market for the leading video service.

The deal with DreamWorks Animation comes at an important time. Many young families are still venting about the Nickelodeon and Nick Jr. content that was removed from Netflix's streaming platform late last month. Offering 300 hours of original programming from DreamWorks Animation -- primarily in the form of new shows that the computer-animation studio will create based on its growing arsenal of characters -- will give young viewers more reasons to keep checking out Netflix by next year.

This is also an important evolutionary step at Netflix. Subscribers need to understand that, unlike optical discs, streaming licenses don't last forever. Content goes both ways, and Netflix has more often than not found a way to make it up to subscribers when popular shows leave its digital vault.

The other big move by Netflix was to announce that it will go Dutch later this year. Pushing into the Netherlands makes sense. Netflix now has more than 6 million subscribers for its streaming service outside the United States.

Yes, Netflix is still losing a lot money overseas, but its international operating loss narrowed in its latest quarter to the lowest that it's been in more than a year.

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Keep those passport stamps coming, Netflix.

Briefly in the news
And now let's take a quick look at some of the other stories that shaped our week.

Nokia (NYSE: NOK  ) was the subject of not one, but two rumored buyout reports. Things have been rough for the handset giant in recent years, but sometimes a stock gets too cheap to ignore. Idenix Pharmaceuticals (NASDAQ: IDIX  ) shed 31% of its value on Friday, after the FDA requested more information on the biotech's preclinical hepatitis-C drug candidate. Indenix will need to address those concerns before moving on to the critical human trials. The payoffs are huge when a young biotech can get a treatment on the market, but the approval process isn't for the faint of heart. Microsoft (NASDAQ: MSFT  ) backtracked on some of the controversial Xbox One features that were introduced a week earlier. It will no longer require users to go online every 24 hours, and gamers will be able to keep selling or lending their disc-based games.

Now look ahead
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