Apple: Now FBR Concurs With JP Morgan iPad Warning

Following the chatter this morning by analysts debating the outlook for Apple’s (AAPL) iPad, FBR Capital semiconductor analyst Craig Berger weighs in with his own thoughts based on his “checks” of the supply chain: he agrees with JP Morgan that there are production cuts for the iPad.�

Berger writes that Apple is acknowledging some global economic concern. After increasing orders previously to squeeze price concessions out of Hon Hai Precision and Apple’s component suppliers, Apple is now, he thinks, succumbing to distressing economic trends out of China and elsewhere, he speculates. (Data from the purchasing manager’s survey last week showed some softness in�China’s economic trends.)

Writes Berger:

Largely consistent with a competitor’s equity research report this morning regarding Hon Hai, our contacts saw an interim cut to both iPhone and iPad production estimates. In short, our contacts say that 3Q11 iPhone production estimates have decreased from 26.1M to 23.7M units (+13% QOQ), while 4Q11 estimates now reflect 32M units (+35% QOQ), better than our prior 30M unit estimate, and with some room for upside capacity if necessary. For the iPad, 3Q11 builds were revised down slightly from 16.8M to 16.0M units (+48% QOQ), and 4Q11 iPad builds were revised down by 24% from 17.2M to 13.0M units (-19% QOQ) as iPad 2 WiFi builds were cut by 2M units, and as the prior 1M units of the new ‘iPad 2 Plus’ were eliminated as continuing retina display manufacturing challenges push this product launch towards March 2012.

Mind you, Berger adds a caveat to all this: “Importantly, 4Q11 hasn�t even started yet so if demand/sell-through are good this iPad forecast can again move higher (and very well may move higher).”

Berger’s principal concern is not Apple but its suppliers, and in particular,�
Broadcom (BRCM) and Qualcomm (QCOM). He says not to worry, as any slowdownl would be already reflected in their shares. He rates both stocks Outperform.�

China oil giant buys into North America

NEW YORK (CNNMoney) -- A major Chinese oil producer expanded its footprint in North America's energy market with a $15.1 billion acquisition of a Canadian company.

Calgary-based Nexen Inc. said Monday that it has agreed to be acquired by China's CNOOC Ltd. in a cash transaction. The deal values Nexen (NXY) shares at $27.50 each, a 61% premium from Friday's closing price of $17.06.

Nexen's assets in North America include exploration and development in the Gulf of Mexico and shale oil development in British Columbia.

The company also has operations in the North Sea off the coast of Great Britain and off the coast of Nigeria.

Nexen said the deal will require the approval of regulators, including those in the United States. The deal is expected to close by the end of the year.

China paying billions for oil deals in the Americas

Shares of Nexen rose over 50% in early trading to within $2 of the proposed acquisition price.

The deal adds to string of recent North American energy purchases by Chinese oil firms.

In 2010, CNOOC (CEO) paid $2 billion for stake in Chesapeake's Texas oil fields. Last year, it spent $2 billion to purchase Canadian oil sands operator OPTI Canada.

CNOOC is a familiar name to Americans. In 2005, Congressional pressure ended a bid by the company to buy California's Unocal, which was ultimately sold to Chevron (CVX, Fortune 500).

CNOOC isn't alone.

In 2011, China National Petroleum Corp. paid over $5 billion for a joint venture in Canadian shale gas properties held by Encana (ECA), and Sinopec (SHI) put down $7 billion for a share in Brazil's deepwater oil assets.

Earlier this year, there was talk of PetroChina (PTR) buying an old refinery on Aruba owned by American refining giant Valero (VLO, Fortune 500). China is also said to be interested in building a pipeline to carry 300,000 barrels a day of Colombian oil to the Pacific Coast.

The acquisitions are being driven by two factors: a boom in North and South American energy production that requires significant investment, and a desire by Chinese companies to become global players in energy businesses. 

Has Netflix Become the Perfect Stock?

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

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

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

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

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

Factor	What We Want to See	Actual	Pass or Fail?
Growth	5-year annual revenue growth > 15%	26.2%	Pass
�	1-year revenue growth > 12%	41.2%	Pass
Margins	Gross margin > 35%	37.4%	Pass
�	Net margin > 15%	8%	Fail
Balance sheet	Debt to equity < 50%	70.4%	Fail
�	Current ratio > 1.3	1.33	Pass
Opportunities	Return on equity > 15%	83.6%	Pass
Valuation	Normalized P/E < 20	27.20	Fail
Dividends	Current yield > 2%	0%	Fail
�	5-year dividend growth > 10%	0%	Fail
�	�	�	�
�	Total score	�	5 out of 10

Source: S&P Capital IQ. Total score = number of passes.

When we looked at Netflix last year, it had the same score of 5. But thanks to the recent controversy, the company has seen its normalized earnings multiple shrink by more than half, even while returns on equity and revenue growth have risen dramatically.

Until recent months, Netflix seemed to be firing on all cylinders. The company was seeing increased interest in its streaming service, and with plans to expand to 43 more countries throughout Latin America, global domination seemed like a distinct possibility for Netflix.

But then all hell broke loose. The company announced a pricing plan that imposed a 60% increase on customers who wanted to keep both DVD-by-mail and streaming service. Then, Netflix said that it would break up the service into two parts, forcing customers to maintain two distinct accounts to manage streaming and DVDs separately. The company quickly backed away from the Qwikster fiasco, but fears remain that the damage has been done.

Now, many believe that competitors have the upper hand. On one hand, Redbox operator Coinstar (Nasdaq: CSTR  ) and Blockbuster bankruptcy-buyer DISH Network (Nasdaq: DISH  ) can reap the benefits of Netflix's apparent disdain for the DVD side of its business. At the same time, streaming competitors like Amazon.com (Nasdaq: AMZN  ) , which entered the market with a streaming add-on to its Amazon Prime service, could see greater traction just from the general ill will that Netflix's moves generated.

More importantly in the long run, though, are the challenges that Netflix and its peers face in getting streamable content. Although Liberty Starz (Nasdaq: LSTZA  ) dropped out of negotiations to renew its deal with Netflix, the streamer made a deal with DreamWorks Animation (Nasdaq: DWA  ) that gives Netflix rights to films and TV specials.

The future for Netflix depends on whether customers will actually abandon the service or are just blowing smoke with their complaints. If customers realize that alternatives are still more expensive, they'll probably stick around -- and that should help restore Netflix to at least some of its former glory.

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

Click here to add Netflix 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."

FedEx to Deliver Higher Prices in 2010

FedEx (FDX) announced late today that it would raise U.S. prices next year.

As of January 4th, the package delivery titan will raise standard list rates for FedEx Ground and FedEx Home Delivery service by 4.9% on average. FedEx previously said it would boost shipping rates for FedEx Express by 5.9%.

Shares edged higher by 69 cents, or 0.8% after the close of regular trading, to $86.63.

Barron’s argued last month that FedEx should produce strong earnings and reward shareholders as the economy recovers (see related Barron’s video).

Netflix: Pac Crest Sees Slighty Lower International Costs

Pacific Crest’s Andy Hargreaves this afternoon reiterates a Sector Perform rating on shares of Netflix (NFLX) while raising his 2012 and 2013 earnings per share estimates on what the prospect of a more profitable international roll-out than he’d prevoiusly expected.

Canada is set to generate a profit for Netflix’s streaming operations in 2013, Hargreaves opines, while Latin America, the U.K. and Ireland are not likely to be profitable until 2014.

But the costs for those markets turn out to be slightly less than he had feared, although the revenue may be slightly lower than he’d thought.

After rolling up estimates for each international market, Hargreaves now sees revenue of $3.61 billion next year and profit of 25 cents, as compared to a prior forecast for $3.63 billion and only 21 cents per share. For 2013, he now sees revenue of $4.26 billion and profit of $3.55 per share versus a prior view of $4.3 billion and $2.78 per share.

Despite confidence that Netflix has several “key competitive advantages” and “a very compelling service,” Hargreaves wants to see subscribers return to the service before he recommends the stock: “If we gain increased confidence that the company has returned to sustainable subscriber growth and can drive meaningful long-term margin expansion, we would likely upgrade our rating on the shares.”

Netflix shares are up $1.22, or 1.8%, at $70.64.

EUROPE, CHINA JITTERS

NEW YORK (CNNMoney) -- U.S. stocks were poised for a lower open Monday on concerns over European political uncertainty and another sign of a slowdown in the Chinese economy.

The Dow Jones industrial average (INDU), S&P 500 (SPX) and Nasdaq (COMP) futures were all down about 1%. Stock futures indicate the possible direction of the markets when they open at 9:30 a.m. ET.

French President Nicolas Sarkozy, one of the architects of the European agreement to avert sovereign debt default, finished in second place in the initial round of French presidential elections Sunday. He will now face Socialist candidate Francois Hollande in a May 6 run-off vote.

Meanwhile, Dutch Prime Minister Mark Rutte is expected to resign, prompting new elections in the Netherlands, after one of his coalition partners in the government withdrew -- due to negotiations over the 2013 budget. This could place the Netherlands' AAA credit rating at risk, according to Kathleen Brooks, research director of Forex.com.

"Holland was once considered a 'safe' triple A nation, however, that may not be the case," she wrote in a note to clients Monday. "The Netherlands has overtaken France as the largest political risk this week."

The latest reading on eurozone manufacturing also fell unexpectedly Monday to the lowest level since November, a sign that the 17-nation block has fallen further into recession.

Worries that the problems in Europe are still not over were further driven home by Christine Lagarde, the managing director of the International Monetary Fund. Lagarde warned at meetings of the IMF and World Bank over the weekend that the "dark clouds on the horizon" for the global economy threatened the "light recovery blowing in a spring wind."

Fueling investor concerns about the global economy was a preliminary reading on Chinese manufacturing released early Monday, showing a contraction in for the second straight month.

China's economic growing pains

On the domestic front, Monday will begin one of the biggest weeks for corporate earnings, as a number of telecoms, tech firms and energy companies will weigh in during the week with first-quarter numbers.

In the U.S., No. 1 retailer Wal-Mart (WMT, Fortune 500) was hit by allegations in the New York Times over the weekend that top executives in its Mexican division attempted to conceal a widespread bribery scheme from the company's headquarters. Shares fell 4% in premarket trading. The company says it is investigating.

In other corporate news, two deals were announced early Monday. Dow component Pfizer (PFE, Fortune 500) reached agreement to sell its baby formula business to Nestlé (NSRGF) for $11.85 billion in cash. And AstraZeneca (AZN) announced it is buying Ardea Biosciences (RDEA), a California-based biotechnology company, for $32 a share or $1.3 billion -- a 54% premium from Friday's closing price.

U.S. stocks finished mostly higher Friday, as investors welcomed another round of strong earnings from corporate America and positive news out of Europe. However, the tech-heavy Nasdaq finished lower for a third straight week.

World markets: European stocks were sharply lower in morning trading. Britain's FTSE 100 (UKX) fell 1.9%, while the DAX (DAX) in Germany lost nearly 37% and France's CAC 40 (CAC40) dropped 2.2%.

Europe: 'Dark clouds on the horizon'

Asian markets ended lower across the region. The Shanghai Composite (SHCOMP) shed 0.8%, the Hang Seng (HSI) in Hong Kong closed down 1.8% and Japan's Nikkei (N225) slid 0.2%.

Economy: Annual reports on the financial health of Social Security and Medicare are due Monday.

Companies: Corporate earnings season continues, with Xerox (XRX, Fortune 500) and ConocoPhillips (COP, Fortune 500) releasing first-quarter data ahead of the opening bell.

Xerox reported adjusted earnings of 23 cents a share, unchanged from a year earlier and matching forecasts. Its shares gained 4% in premarket trading following the report.

But while ConocoPhillips posted improved earnings of $2.02 a share, it fell short of forecasts of a $2.08 a share. Its shares lost 2.2% in pre-market trading.

After the closing bell, Netflix (NFLX) will release first-quarter data. Analysts expect the company to post a loss of 27 cents per share.

Currencies and commodities: One piece of good news for the U.S. economy is that average gas prices continued to retreat farther away from the $4 level.

Gas prices keep easing away from $4

The biweekly Lundberg Survey marked its first decline of the year, while the daily survey from AAA showed its seventh straight decrease, further raising hopes that gas prices might have already peaked for the year.

Oil for June delivery fell 95 cents to $102.93 a barrel.

The dollar gained strength against the euro and the British pound, but slipped against the Japanese yen.

Gold futures for June delivery lost $11.80 to $1,631.00 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury edged lower, pushing the yield up slightly to 1.97%.  

Equity Futures Point Lower on Heightened Eurozone Concerns

This morning. Equity futures are lower, as eurozone sovereign debt concerns and Friday’s poorer than expected jobs report weigh on equities. On Friday, U.S. equity markets closed narrowly lower on decreased volume. Markets are in a confirmed uptrend. Distribution days (which track index losses of more than 0.25% on increased volume) number four for the Nasdaq, three on NYSE composite, one for the SPX, and none for the DJI in the past 25 trading days. March SPX futures are at 1262.70, down 4.70 points after fair value adjustment. Next SPX resistance is at 1278.32. Next support is at 1263.19.

American Express Opens $100M Start-Up Fund

American Express (AXP) plans to start with word on the street to figure out which start-ups are worthy of its investment for innovations in digital commerce.

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The company could invest up to $100 million, says Harshul Sanghi, who was appointed a managing partner of the card company's Enterprise Growth Group in September.

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The multiyear initiative looks to invest in companies improving on the company's loyalty and reward programs, point-of-sale technology in management and fee-based services, security and fraud detection, cloud-based services and data analysis. American Express plans to contribute minority investments to these companies. It does not have plans to acquire the start-ups, a spokeswoman says. The initiative will be managed by Sanghi, who is already developing partnerships with technology and venture communities. He was in a similar role at Motorola(MOT). American Express formed the group last year to focus on expanding its traditional card and travel businesses further into alternative mobile and online payments. "As we enter the next chapter in our history, we recognize the need to work with emerging technology companies to inspire change, encourage innovation and ultimately deliver the best products and services to our customers," said Dan Schulman, group president, in a statement. The company plans to focus initially on technology companies in North America, but will expand that to a global search over time. "This is one of those moments where we feel the landscape of payments is changing and we look at ourselves playing in the broader digital commerce space. There is a lot of convergence taking place," Sanghi says.Asked how start-up companies can submit their business plans, Sanghi replied that the company will look first at word-of-mouth referrals through various network channels and in the venture community. Over time American Express will likely establish more direct forms of communication with companies. Until then, "I'm in the Valley and pretty accessible," he adds. To follow Laurie Kulikowski on Twitter, go to: http://twitter.com/#!/LKulikowskiTo submit a news tip, send an email to: tips@thestreet.com.

RELATED STORIES: >>How to Prep Your Web Site for Cyber Monday>>How to Beat the Big Guys on Black Friday>>Mom and Pops Expect Higher Holiday Sales

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Top Stocks For 2011-12-1-7

Leading semiconductor companies worldwide use Magma’s electronic design automation (EDA) software to produce chips for a wide variety of vertical markets including tablet computing, mobile devices, electronic games, digital video, networking, military/aerospace and memory. Silicon One, Magma’s technology solutions for emerging silicon, address time to market, product differentiation, cost and performance while making silicon more profitable. Magma products include software for digital design, analog implementation, mixed-signal design, physical verification, circuit simulation, characterization and yield management. The company maintains headquarters in San Jose, Calif., and offices throughout North America, Europe, Japan, Asia and India.

Magma Acquisition to Provide Customers With State-of-the-Art Mixed-Signal, Digital and Analog Design Solutions That Enable More Profitable Silicon

Magma Design Automation Inc. (Nasdaq:LAVA), a provider of chip design software, announced the company has entered into a definitive agreement to be acquired by Synopsys, a world leader in software and IP used in the design, verification and manufacture of electronic components and systems headquartered in Mountain View, Calif. The combination of the two companies’ technologies, development capabilities, support teams and sales channels will provide chip designers with greater access to state-of-the art electronic design automation (EDA) solutions that enable more profitable silicon.

Under the terms of the merger agreement, Synopsys will acquire Magma for $7.35 per Magma share in cash, resulting in a transaction value of approximately $507 million net of cash and debt acquired. The closing of the merger is subject to customary conditions, including approval by Magma stockholders as well as U.S. regulators.

More about LAVA at www.magma-da.com.

Global Hunter (GBLHF.PK)

Copper is a ductile, malleable, reddish-brown metallic element that is an excellent conductor of heat and electricity and is widely used for electrical wiring, water piping, and corrosion-resistant parts, either pure or in alloys such as brass and bronze. Copper is classified as a “Transition Metal” which are located in Groups 3 - 12 of the Periodic Table. An Element classified as a Transition Metals is ductile, malleable, and able to conduct electricity and heat.

Global Hunter’s focus is on strategic and base metals, with an advanced stage copper oxide project in Chile and a highly prospective molybdenum property in British Columbia, Canada. GBLHF teams are working on developing the Corona de Cobre property in Chile and the Rabbit south property in British Columbia.

Global Hunter Corp. (GBLHF.PK) is pleased to announce initial assay results from its previously announced surface sampling program. The results are encouraging with new gold showings as well as very positive copper oxide assays over wide-spread areas.

Highlights of the entire program
9 mineralized shear and/or alteration zones sampled total of 13.5 kilometers of strike length along know copper bearing shear and alteration zones tested with 205 rock chip samples
Good grades of soluble copper (oxide) over a significantly large area have been identified, however they represent only about 50% of the total copper grade indicating a mixed oxide-sulphide zone. Numerous iron oxide structures have also been mapped but no iron assays have been received to date.

The Company is planning to re-assay samples for iron to determine if iron is present in significant quantities to represent another target

For more information http://www.globalhunter.ca/homeabout.html

Anadarko Petroleum Corporation (NYSE:APC) announced that Senior Vice President, Worldwide Operations, Charles Meloy, will present at the Jefferies 2011 Global Energy Conference in Houston, Texas on Thursday, Dec. 1, 2011 at 9 a.m. CST. Meloy will also present at the Capital One Southcoast 6th Annual Energy Conference in New Orleans, La. on Tuesday, Dec. 6, 2011 at 8 a.m. CST. Links to the webcast presentations will be available at www.anadarko.com. The replays and slide presentations also will be available on the company’s Web site for approximately 30 days following the event.

Anadarko Petroleum Corporation engages in the exploration and production of oil and gas properties primarily in the United States, the deepwater of the Gulf of Mexico, and Algeria.

3M Co. (NYSE:MMM) recently awarded a multi-year contract to provide retro-fit cable pathways in support of Australia’s National Broadband Network (NBN). This national initiative will provide a new, wholesale-only, open access high-speed broadband network to all Australia residents. NBN estimates the contract to be worth $20 million over five years.

3M Company, together with subsidiaries, operates as a diversified technology company worldwide.

Kinder Morgan Energy Partners LP (NYSE:KMP) announced that it will invest approximately $210 million to construct seven tanks with a storage capacity of 2.4 million barrels for crude oil and condensate at its Edmonton Terminal in Strathcona County, Alberta. Kinder Morgan Canada Terminals has entered into long-term contracts with customers to support the project. Kinder Morgan subsidiary Trans Mountain Pipeline previously received National Energy Board approval to construct merchant and regulated tanks at the Edmonton facility and intends to commence construction early in 2012 following receipt of other supporting permits. It is anticipated that the new tanks will be placed in service in late 2013.

Kinder Morgan Energy Partners, L.P. owns and manages energy transportation and storage assets.

Should Investors Buy Wal-Mart This Season?

The stock of Wal-Mart (WMT) has been breaking out lately, but it has been range-bound over the last decade between a low of $42 and a high of $63 per share. Wal-Mart is currently trading at the upper end of its 10-year long trading range. Is it finally getting ready to break out and begin a new major up-leg?

12 Month Chart of Wal-Mart (WMT)

Click to enlarge

When I am not managing money and writing research reports, I am an avid baseball fan, even though I rarely have much to cheer about here in San Diego. Nevertheless, there is nothing like a major league baseball game on a nice evening in America's finest city.

When an opposing player comes to bat, the first thing I do is check out the players track record (stats) on the scoreboard. I want to know the players age, batting average, home run record and how many RBIs he has driven in. Generally speaking, after glancing at the player's track record, I know right away what kind of player is currently in the batter's box.

Likewise, when analyzing a stock, I want to know the company's track record. It has always amazed me that track record is so critical to most in mutual fund analysis, yet many times completely overlooked in stock analysis.

Let's take a look at the current track record of Wal-Mart and see how it stacks up against the rest of the league:

Data From Best Stocks Now App

As you can see from the stock chart of Wal-Mart and the short-term track record, the stock has had a fairly good run as of late. The stock has outperformed the S&P 500 over the last one-month, three months, and one year. Believe it or not, this $204 billion market cap company actually earns a momentum grade of B+ when compared to 2,700 other stocks.

Wal-Mart has underperformed the market over the last three years, handily outperformed the market over the last five years, and has just barely outpaced the market over the last decade. Wal-Mart earns an overall performance grade of C+ when compared to rest of the market.

It should be noted that Wal-Mart did very well with a positive return of 20% in the year 2008, when the market was down a whopping 38.5%. Wal-Mart is definitely a good defensive stock during hard times, and it also currently pays a dividend yield of 2.5%.

Overall, I have a hard time getting too excited about the track record of this mega-cap stock. It is very difficult for a company that has grown this large to deliver alpha to its investors.

After examining the track record, I next like to examine the valuation of the stock.

Wal-Mart is expected to report earnings per share of $0.98 per share for the quarter ended October 31, 2011. For the next year, Wal-Mart is expected to earn $4.91 per share.

Wal-Mart's earnings have been growing at a 9% pace over the last five years, and the consensus analyst estimate for the next five years is 9.8% per years. At this pace, Wal-Mart would be earning $7.13 per share five years from now.

What would an appropriate multiple be for the stock at that time, if it indeed it is able to meet analyst estimates?

Wal-Mart currently has a PE ratio of 14, and over the last four quarters the PE ratio of Wal-Mart has ranged between 11-14, and over the last five years the PE of Wal-Mart has averaged 14.7.

I am using a multiple of 13 on those potential earnings of $7.13 and also adding in the results of a 2.5% dividend over the next five years. My earnings and dividend based valuation formula calculates just 68% upside potential for the stock over the next five years.

I like to buy stocks that have 80-100% or more upside potential. Wal-Mart falls far short of that at its current price. Here is a snapshot of my valuation on Wal-Mart at the current time:

Data From Best Stocks Now

Overall, Wal-Mart only scores a C- value grade. The stock's performance grade was a little better at C+, and the safety grade is a very good B+. My roster (portfolio) only has room for about 25 players (stocks) on it. I want to own the very best 25 that I can find. Wal-Mart currently comes in at a very mediocre ranking of 1,045 out of 2,700 stocks.

Much will be made about Wal-Mart's earnings report. Many analysts will weigh in on Wal-Mart's prospects for the coming holiday season. I benched Wal-Mart a long, long time ago, and I don't see it returning to my lineup any time soon. What would I buy instead? Check out some of my recent articles. There are plenty of all-stars to have in your starting lineup right now.

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

What the Oil Majors’ Earnings Reveal

When it comes to energy production, the integrated oil majors are truly in a league of their own. Among the world’s largest corporations, the group holds huge oil and gas reserves and is responsible for the bulk of the planet’s energy production. Their huge scale provides cost savings and other advantages many smaller firms could only dream of.

No wonder investors pay so much attention these giants’ earnings announcements. Generally, how the majors perform is a good indication for the rest of the sector and indicative of trends affecting the industry. With BP�s (NYSE:BP) latest quarterly numbers now in, most of the energy giants have reported.

And the more things change, the more they stay the same. Many of the same issues that plagued the sector last year and the previous quarter have continued. But there have also been plenty of exciting developments. This is a good time for investors to look back to get an idea of where we�re going. Here are some highlights from the oil patch�s latest quarter and some potential outcomes for the future.

Pain Keeps Flowing Downstream

BP�s recent lower-than-expected earnings announcement continues to highlight a growing trend for many of the integrated giants — terrible refining margins. While rising cost per barrel is great for exploration and production (E&P) revenues, it wrecks havoc on downstream refining profits. With crack spreads (the price difference between crude oil and refined products) under constant pressure, the refiners, especially those on the East Coast, are seriously hurting.

The British firm said the global benchmark, Brent crude, averaged around $118.45 a barrel in the first quarter, compared with $105.52 a year earlier. Profit in its refining and marketing division slipped to $2.3 billion from $4.4 billion a year earlier. While global margins have begun to improve since March, they still aren�t great. BP already has plans to dispose of its Texas City and Carson refineries by the end of this year.

That echoes similar moves by Chevron (NYSE:CVX), which sold all of its Spanish refining assets, as well as ConocoPhillips (NYSE:COP), which spun off its downstream unit into Phillips 66 (NYSE:PSX). Overall, refining continues to be a �goldilocks� situation, with firms needing nearly perfect conditions to produce a real profit — not too hot, not too cold. The majority of market strategists predict that 2012 will be a tough year for the sector, and Moody�s (NYSE:MCO) continues to keep its outlook on the global downstream industry at negative.

This is now the sector’s quarter of poor downstream results. With Brent forecast to remain high for the next few months, it�ll be interesting to see how many energy firms engage in sales or spin-offs of their refining assets in coming quarters. Even some smaller downstream-focused players are announcing spin-offs of their own. Marathon (NYSE:MPC) has plans to bundle some of its pipeline operations into a master limited partnership to separate itself even further.

Lower Production

The latest earnings announcements show another continuing another trend among the majors: Production continues to drift lower. The world�s biggest energy company, Exxon Mobil (NYSE:XOM) reported its biggest output drop since 2008. Likewise, Chevron, BP and Royal Dutch Shell (NYSE:RDS-A, RDS-B) all produced less oil than before.

Several factors are keeping the majors from pumping more oil and gas. Legacy fields continue to show their age and produce less as they get older. In addition, new wells and fields are tougher and more expensive to find and extract from. At the same time, many of the newest and biggest finds are located in nations that want to keep much of their oil revenue at home. Argentina�s recent nationalization of YPF (NYSE:YPF) is just one — albeit extreme — example.

This helps explain the recent high capital spending announcements this year. Overall, exploration efforts like Eni�s (NYSE:E) and Exxon�s forays into the Russian Arctic, and Shell�s Chinese shale gas ambitions will eventually bear fruit and become profitable. These moves will take time to realize their full potential, but are necessary for long-term survival. BP, on the other hand, continues to realize lower production based on its massive asset sales meant to help pay for its legal woes.

Despite the lowered production, the bulk of Big Oil saw higher earnings. Higher crude prices helped offset any difficulties with refining and production drops. Upstream operations continue to be the majors’ big money-maker. Even Exxon, which saw an 11% drop in profits managed to earn $9.45 billion. That’s mainly because it was able to sell oil for higher prices around the world and saw a 16% gain in international natural gas prices.

The end lesson for investors is that while production is dwindling, what’s produced is fetching a much higher price.

Returning More to Shareholders

More of the majors’ profits are also making their way back to shareholders. Buyback programs and dividends continue to expand. Exxon recently boosted its dividend by 21%, to $2.28 a year, the largest increase since it 1975. Not to be outdone, rival Chevron announced an 11.1% hike in its payout to $3.60 annualized.

Additionally, while Conoco has announced a post-spin-off slowing of its buyback program, it should yield a growing 4%. Shell also recently announced a slight increase to its interim dividend.

In the end, these dividend raises help underscore the fact the majors are cash-generating machines. Higher long-term profits will ultimately boost the firms’ bottom lines as well as investors.

A Mixed Quarter

All in all, it was an uneven period for the integrated energy firms. While all of them saw profits, the level varied dramatically, and some, like Exxon, reported less-than-stellar results. However, oil prices should remain high on both Mideast tensions and strengthening global demand. That�ll be bullish for E&P sector.

For investors, the majors often set the tone for the rest of energy world. Overall, lower production and issues with the refining and downstream segments remain the chief pressures on earnings. Look for similar results from smaller firms.

As of this writing, Aaron Levitt doesn’t own any shares mentioned here.

Is Cedar Fair Slowing Down?

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

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

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

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

To calculate the cash conversion cycle, add days inventory outstanding to days sales outstanding, then subtract days payable outstanding. Like golf, the lower your score here, the better. The CCC figure for Cedar Fair for the trailing 12 months is 19.8.

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

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

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

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

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

On a 12-month basis, the trend at Cedar Fair looks less than great. At 19.8 days, it is 6.2 days worse than the five-year average of 13.5 days. That small change isn't likely to matter much given Cedar Fair's continued, quick CCC, but it does bear watching. The biggest contributor to that degradation was DSO, which worsened 8.2 days when compared to the five-year average.

Considering the numbers on a quarterly basis, the CCC trend at Cedar Fair looks good. At 7.8 days, it is 19.5 days better than the average of the past eight quarters. With quarterly CCC doing better than average and the latest 12-month CCC coming in worse, Cedar Fair gets a mixed review in this cash-conversion checkup.

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

• Add Cedar Fair to My Watchlist.

Did SodaStream Just Hit a Home Run?

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

In today's edition, Austin talks about the two SodaStream home runs everyone is talking about. He thinks its earnings were a huge success but that some people are placing a bit too much emphasis on SodaStream's distributing agreement with Wal-Mart. While the world's largest retailer will no doubt give the company a larger presence domestically, the deal also has a few risks associated with it, and SodaStream already has a strong domestic retail presence.

SodaStream was a multibagger for those investors that played their cards right a few years ago, but don't worry, there are more opportunities out there. You can "Discover the Next Rule-Breaking Multibagger" in our analysts' new special free report. It's a company that works off the razor blade/razor model that Sodastream is built off, only their service is a bit more essential.� Click here to read all about it.

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Hedge Funds Underperformed in November But Should Outperform in 2010

Hedge funds underperformed the broader market last month but should beat broader indexes next year, reports the Hennessee Group, a consultant and adviser to direct investors in hedge funds.

The Hennessee Hedge Fund Index rose 1.8% in November compared with a 5.3% gain for the Standard & Poor�s, a 6.5% advance for the Dow Jones Industrial Average and a 4.9% increase for the Nasdaq Composite. The Barclays Aggregate Bond Index rose 1.3%.

Year-to-date, however, hedge funds are up 22.2%, ahead of the S&P 500 with its 20.8% advance and the Dow, which has gained 17.9%. The Nasdaq is the best performing index, having gained 36% this year. The Barclays bond index is up 7.6%.

Charles Gradante, Co-Founder of Hennessee Group, said in a prepared statement:

�Hedge funds underperformed the broad markets in November as momentum continued to push security prices higher. We believe the market is close to entering the next phase, where stock prices will be driven by earnings, rather than multiple expansion.� This would be a better environment for hedge funds, and we expect them to outperform in 2010.�

Sectors for Offense and Defense

In August, the stock market situation has turned extremely volatile, and this has made Sector Analysis more difficult. In response to this, I have evolved a sector strategy comprising two groups of sectors: Sectors for Offense and Sectors for Defense. (for Current Macro Market Video Comments -- click here)Right now, we are officially overweight two sectors -- Energy (XLE), and Technology (IYW), as readers know. These sectors continue to perform well, particularly on up days in the market. We show charts below, and ask readers to notice how these have fared vs. the SPY, especially with reference to the June low.In addition, there are many stocks in these sectors that are outperforming the SPY. We show four charts below as examples, and there are others.  

Yet, these two sectors may be too aggressive for market conditions -- especially should the market conditions become appreciably worse, and for longer than we expect. For example, what if the retest of the August low is NOT successful -- what will perform best then? And, my allocation is more suited to aggressive accounts -- how should ultra conservative accounts be positioned?

To answer these questions we have some defensive sector ideas: XLP (Consumer Staples), and IYZ (Telecom). To an extent, XLU (Utilities) could also serve, but we have interest rate concerns -- rates could rise sharply should there be favorable economic news, and if bonds decline abruptly XLU could also decline. This is why we are officially underweight Utilities, and would recommend them only to the very nimble. We show some charts below.

While IYZ is farther below the June lows, stocks in this sector have above average yields that should help them should the market trade worse than generally expected. Also note this ETF has recently been impacted by adverse AT&T/T-Mobile news -- AT&T has declined sharply, but may rebound in the weeks ahead. XLP is traditionally defensive, and some of the holdings here have been strong out performers. XLU has performed well, and some of the names are good for income. We show some stocks on the next page by way of illustration.

One big challenge advisers may have is switching between offense and defense over the next few months, as market conditions clarify. For now, the sectors discussed look to be the most attractive for either scenario. >To order reprints of this article, click here: Reprints

APKT Plunges 18%: Cuts Q4 View on Telco Issues

Shares of networking equipment vendor Acme Packet (APKT) were halted just before the company announced its Q4 results will fall short of prior expectations as a result of “uncertainty” among its telco customers in North America.

Acme now sees 2011 revenue in a range of $308 million to $310 million, down from the prior range of $315 million to $320 million. Analysts have been modeling $318 million. That includes revenue of $84 million to $86 million in Q4, and 26 cents to 28 cents a share in profit, on a non-GAAP basis, versus analysts’ estimate of $93 million and 37 cents.

CEO Andy Ory said the company “continues to perform well” outside of North America.

Acme shares are set to resume trading at 4:50 pm, Eastern time.

Update: Acme shares have resumed trading and are now down $5.86, or over 18%, at $26.00.That’s a new 52-week low for the stock.

HTC Q1 Outlook Weak, Vows ‘Renewed Focus’

Taiwan’s HTC (2498TW) this morning reported Q4 revenue and profit below analysts’ estimates and warned the current quarters revenue will miss consensus sharply.

Revenue in the three months ended in December fell 2.5% to $101.4 billion, in New Taiwan dollars, yielding EPS of $13.06.

Analysts had been modeling $108.7 billion and $14.42 per share.

The sales result is below the $104 billion the company forecast when it slashed its Q4 outlook back on November 23rd as a result of weaker demand and rising competition.

For the current quarter, the company sees revenue in a range of $65 billion to $70 billion in New Taiwan dollars. That is below the consensus $87.8 billion.

Gross margin is expected to decline to about 25% from 27% last quarter.

Sales in January fell almost 53%, to $16.62 billion, the company said. That was below some estimates. For example, Sanford Bernstein’s Pierre Ferragu last week estimated January sales of $22 billion.

CEO Peter Chou remarked, “While short term performance may not meet the results as expected, we have gained further experience and advancement in the areas of brand management and product innovation. These fundamental strengths and the groundwork we have laid will take us into 2012 with a renewed focus and determination.�

Shares of HTC fell $30 in New Taiwan dollars from Saturday’s close, or 5%, to $551 before the report was released.

Finding Value in Mid-Atlantic Regional Banks

Last month, I took a look at some regional banks, breaking them down by region. When I looked at the Mid-Atlantic region, I found seven banks that I thought would be good investments. Now that earnings season is mostly over, I thought it would be a good time to see whether the quarter helped any banks move or enter the rankings. Regional banks might also see an increase as customers of larger banks vote with their feet and move to local banks.

What is the Mid-Atlantic?
When looking at the regional banks, it's important to note that some of the regions have a certain amount of overlap. The Mid-Atlantic region spans primarily from South Carolina to Pennsylvania, but some Pennsylvania banks are also included in the Northeast region. Region-leading WesBanco (Nasdaq: WSBC  ) expands outside its West Virginia home and has branches in Ohio, which is usually included in the Midwest region.

Screening factors
As I did previously, I will rank the banks based on four factors: P/E ratio, P/B ratio, dividend yield, and net income margin. Only banks with a market cap over $300 million will be included.

Profitability is important, so I first eliminated all banks without earnings over the past 12 months, looking for the cheapest bank according to this metric. My second factor is the P/B ratio. In the banking industry, a value of 1.5 is reasonable, and the adage I like is "buy at half, sell at two." Only banks that pay a dividend will be included -- the higher the payout, the better. Finally, net income margin will be used as another method of comparing the banks' profitability.

My most recent screening resulted in 11 banks, but I have included only the top seven:

Company	P/E Ratio (TTM)	P/B Ratio	Dividend Yield	Net Income Margin
WesBanco	11.3	0.78	3.5%	19%
City Holding (Nasdaq: CHCO  )	11.7	1.49	4.4%	27.9%
United Bankshares (Nasdaq: UBSI  )	14.9	1.27	4.9%	24.9%
Sandy Spring Bancorp (Nasdaq: SASR  )	11.5	0.87	2.5%	22.3%
Towne Bank (Nasdaq: TOWN  )	16.7	0.73	2.6%	15.4%
First Citizens Bancshares (Nasdaq: FCNCA  )	8.6	0.89	0.7%	15.4%
BB&T (NYSE: BBT  )	14.0	0.87	2.9%	13.5%
�	�	�	�	�
Regional Averages	11.7	0.70	1.5%	(6.3%)

Source: FinViz.com; TTM = trailing 12 months.

Quarterly results cause changes
Region-leading WesBanco's strong quarterly earnings, in which net income increased 31% over last year, helped keep it at the top of the region's rankings. Only a recent uptick in share price has caused its ratios to go up and its yield to go down. Leaving the rankings was SCBT Financial, which was replaced by the more profitable Towne Bank. Although all banks on the list are more expensive than the average Mid-Atlantic bank, they are also much more profitable, and six of the seven have a higher yield.

Regional opportunities abound!
While the real lesson from Bank Transfer Day will be learned in the coming months, regional banks offer a better investment in the months ahead. Keep an eye on Mid-Atlantic leader WesBanco by adding it to your free, personalized version of the Fool's My Watchlist today.

Greenlight exits Dell, Best Buy after weak quarter

SAN FRANCISCO (MarketWatch) � David Einhorn�s Greenlight Capital Inc. reported a loss of 3.2% in the second quarter, due in part to the ongoing European crisis and bad calls on Dell Inc. and Best Buy Co.

�It is hard to blame the current European leaders for their inability to solve a crisis that has no real solution. Even the very best options range from awful to awful, so no one should be surprised when the political choice is �None of the above. Let�s put out a communique and hope that no one notices,�� Greenlight said in an investor letter posted on ValueWalk, a website dedicated to hedge-fund news.

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During the same period, the S&P 500 SPX �dropped 3.3% while the Dow Jones Industrial Average DJIA �fell 2.5% and the Nasdaq Composite COMP �retreated 5.1%.

Greenlight also exited both Dell DELL �and Best Buy BBY �at a loss.

�Dell proved to be a disappointment. We had thought that the growth in the non-PC business would be enough to offset the deterioration in the PC business. The non-PC growth was smaller than we�d hoped and the PC deterioration was worse than we anticipated,� said Greenlight.

Describing Best Buy as �particularly irksome,� Greenlight said the retailer saw a deterioration in both its domestic and international performance and may undergo more disruptions as it attempts to identify a new strategy.

Greenlight, meanwhile, said some of its best performers from the first quarter such as General Motors Co. GM �and its position in the Japanese yen were the biggest laggards in the second quarter.

Marvell Technology Group MRVL �was another big loser but Greenlight increased its stake in the company, noting that Marvell may use its excess cash to aggressively buy back shares.

Greenlight revealed substantial short positions in the managed care sector, most notably Cigna Corp. CI �and Coventry Health Care Inc. CVH .

�The entire sector has been battered in anticipation of Obamacare,� said Greenlight, referring to the 2010 health-care legislation known as the Affordable Care Act.

�They [Cigna and Coventry] have no exposure to the European currency crisis, a possible Chinese slowdown or other cyclical headwinds,� it noted.

Notwithstanding a dismal quarter, Greenlight still posted a net return of 3.4% for the year.

The Only Chinese Stock Worth Buying Right Now

Here at StreetAuthority, we don't talk about Chinese stocks very much. They've proven too risky, and more than a few have blown up in the face of major accounting scandals. In short, the risk usually seems to outweigh the reward when it comes to investing in the world's fastest-growing major economy. Yet I've been watching one stock, quarter after quarter, and I'm now increasingly convinced that it's not just another Chinese house of cards waiting to topple over. It has solid auditors that have been in place for quite some time, has been steadily growing for many years, and just as important, is now quite inexpensive. I'm talking about 7 Days Group (NYSE: SVN), which is one of the leading hotel brands in mainland China. Chinese tourism has exploded during the past five years, and this company has the numbers to prove it. And though Chinese domestic tourism is booming, it's still in the early innings. Consider that there are currently 0.5 hotel rooms per 1,000 people in China, compared with 2.5 rooms per citizen in the United States. The industry is led by Home Inns & Hotels Management (Nasdaq: HMIN) with roughly 16% market share. 7 Days is the second-largest player with 9%, and Jin Jiang Hotels, China Lodging (Nasdaq: HTHT) and Motai round out the top five. The industry is heavily concentrated in the Beijing and Shanghai regions, and further expansion is expected to come from major cities in the country's interior. 7 Days has rapidly expanded during the past five years, and now owns, leases or manages 2,000 hotels in roughly 150 cities. 7 Days focuses on the economy end of the lodging market, catering to Chinese consumers that have only recently entered the middle class and are just beginning to travel, primarily to domestic destinations. It's also become an increasingly popular choice for other travelers as the Chinese economy has slowed. "Business and leisure travelers with increasingly tight budgets have switched out from 3- and 4-star hotels. This makes the [economy segment] particularly more attractive than the general lodging industry," note analysts at Brean Murray. 7 Days differentiates itself by seeking out locations close to –- but not inside -- the prime real estate of a particular city. That lowers development and operating costs, enabling it to pursue aggressive pricing. It also spends less than others on advertising or travel agents, instead capturing consumers through its website, which is the leading hotel site in China. The company's growth has mirrored the expansion of the Chinese tourism sector, as sales grew from $40 million in 2007 to more than $300 million in 2011. Yet, as that sales base expands, robust growth will be harder to achieve. Analysts expect sales to grow 30% in 2012 to above $400 million, and less than 25% in 2013 to just above $500 million. That slowing growth may be what scared off investors. Shares have fallen from the low $20s in early 2011 to around $8.50. Management now appears more committed to expanding the bottom line than before, slowly migrating the base of hotels from company-owned to franchises. This "asset light" approach is expected to boost EBITDA margins from the historical rate in the high teens to the low 20s this year, and perhaps the mid-20s by mid-decade. Looking ahead to 2013, analysts expect operating profits to expand roughly 45%, or nearly twice the rate of sales growth. The move to a franchising model should also free up cash, which management intends to use in a share buyback. The current $25 million buyback authorization should shrink the share count by around 5%, though management may expand that program when second-quarter results are released in early August.

The buyback comes at a good time. Shares are trading for less than five times projected 2012 EBITDA and less than four times projected 2013 EBITDA, according to Brean Murray. The firm stands by its $25 price target, representing nearly 200% upside, even as other investors have cooled on Chinese stocks in general, and lodging stocks in particular. Risks to Consider: Chinese stocks like this have been slumping badly in anticipation of further economic weakness in China in the quarters ahead. Recent stimulus moves by the government may blunt those concerns. Tips>> Brean Murray's $25 price target reflects a world where investors embrace Chinese stocks and few are concerned about the possible fallout from a slowing Chinese economy.

Will the US Economy Face Recession in 2011 Again?

Where is the US economy headed?

No doubt, recovery expectations have risen over the past few months, mostly on the back of stimulus packages and proactive stance of the government. But this doesn’t seem to be a long term fix to the situation as debt is rising and soon it will build up as a mountain of worries. Everyone is aware of the situation but all efforts are being made to keep the economy running in the shorter term.

Is the Debt Problem Really Intense in US?

It’s really hard to say if the economy will collapse in 2011, but it’s almost certain that if the government continues to spend on temporary relief packages to stimulate the economy, the mountain of increasing debt will lead to the biggest financial disaster ever witnessed by mankind. At present US government, businesses nationwide and American consumers are all sailing on the same boat, which is headed for an iceberg. If you do not agree to what is being said here, then read on to know hard facts.

Will the Housing Market Recover in 2011?

Mortgage defaults are still appearing fresh in the market, keeping the housing prices near record lows. Defaults have been record high and still increasing since mid 2007. What if housing prices fail to show considerable recovery going into 2011? Well, many economists are of the view that housing market may not show any sign of improvement till the end of next year. Now, this could result in a second wave of foreclosures, which will make the cracks much wider and hopes of recovery will be shattered for long. Is Consumer Spend and Employment Situation still a Threat? Ideally, a recession is a temporary blip in economic activity, but this time around it has stayed much longer. This is evident from the employment situation, as the unemployment data is not improving despite so much quantitative and qualitative easing by the monetary authorities. Latest stimulus package has provided a support to the financial markets as investors believe that this money will help in creating jobs in the system, and as an end result consumer spend will once again pick up. But, so far things have not worked as they were expected by the Fed, and same could be the case yet again.

Are the Americans Broke?

There is no hiding from the fact that more and more American citizens are filing for personal bankruptcy. In such scenarios, how can authorities expect the demand to surface again, when people are high on debt?
America simply needs jobs, and it needs them at a much higher pace than anticipated. The recent recession, which is now officially over, may have been an indicator of an upcoming depression in the system, as it was much more than what a recession is. Now, if we again slip back to negative growth, which cannot be ruled out so early, then the economic chaos will spread its wings globally, and the world will spend a decade with a flat growth.

Investors and traders should remain prepared such financial turmoil anytime soon. Even saving up on brokerage costs, by opting for cheap online discount brokers, can help in maximizing returns in such uncertain times.

Read More:
Future of US Economy

Compare Online Brokers at http://www.comparebroker.com We can assist you in opening an investment account with a leading brokerage. Visit our site for latest reviews of offers and promotions from different brokers. Our blog section is regularly updated with informative write-ups for traders and investors.

Coal Stocks Rebound as CEO Touts Chinese Demand

Coal stocks have frequently made large daily percentage moves in the past few months, in part because many of the stocks are so beaten down. When your shares are worth $1.25, a 10-cent move is worth 8% of your market cap. Today, coal stocks jumped following comments from Peabody Energy (BTU) CEO Gregory Boyce claiming that demand in China has been on the upswing in recent months.

“We project they will reach a record 285 million tons in 2012 as the country increasingly looks to the seaborne coal markets,” Boyce said at an investor conference, according to the Associated Press. “We expect global metallurgical coal use to increase 25 percent by 2016, translating to an additional 250 million tons of demand growth, with the bulk of increases led by China and India.”

The global growth should offset a decline in coal use in the U.S. as some power plants switch to natural gas, Boyce said.

Peabody jumped 5.5% on the news. Alpha Natural Resources (ANR) rose 6%, Arch Coal (ACI) was up 8.7% and Patriot Coal (PCX) rose 18%.

OECD: Europe Tilting Toward Recovery

Canada, France, Italy, Germany and the U.K. are showing signs tending “more strongly to recovery” said the Organization for Economic Cooperation and Development, according toThe Wall Street Journal’s Paul Hannon. Europe’s “leading indicators” turned to 101.4 in October from 100.4 in September, OECD said. OECD’s leading indicators have had a good track record of presaging pickups and slowdowns going back to the 1980s, Hannon notes. The U.S.’s leading indicators turned to 99.8 from 98.8.

PDP: Leading The Strategy Indexing Revolution?

By Mike Moody

Strategy indexing is hot, according to John Prestbo of Dow Jones. In a recent interview carried in Index Universe, he discussed what he meant by strategy index:

[Index Universe editor Olivier] Ludwig: What are we talking about here? Things like what Rob Arnott’s up to, or to those smart-beta indexes that have proliferated in the last 12 months?

Prestbo: That’s exactly what I’m talking about. I group them all together into a broad category called “strategy indexes,” where the index is not tracking a traditional segment of the market so much as it’s tracking a way of approaching the market. A lot of people want to get the best return they can, and they are willing to put in the time and effort to be flexible and manipulate their portfolio among various offerings. They combine the benefits of semi-active investing with the lower costs that come with it. The cost may be higher than the plain-vanilla indexes, but they are lower than an active manager.

I added the italics. The Technical Leaders indexes must have been far ahead of the wave, since Powershares launched PDP more than five years ago, not in the last 12 months! Academic factor models, like Carhart’s four-factor model suggest that there is a return premium (above inflation) available from:

• the market itself
• small-cap stocks
• value stocks
• momentum stocks (relative strength)

There are hundreds of ETFs that can give you market exposure, and many more focusing on small-cap and value stocks. If you look hard enough, you can probably find even ETFs for small-cap value stocks in almost every market.

To my knowledge, for many years, only the Technical Leaders ETF family focused on relative strength. PDP was launched in March 2007. Developed (PIZ) and emerging markets (PIE) were added later, in December 2007. Russell now has a couple of momentum indexes out, although they are less than 12 months old.

Here’s a quiz for you: Of Carhart’s four factors, which has the largest return premium? Maybe the graphic below will help you answer the question.

(Click to expand)

Which factor has the largest return premium?

Source: Mercer Advisors

The best returns belong to the return factor that has been most neglected: relative strength. It is a source of continuing amazement to everyone in our office that PDP has $500 million in assets, rather than billions like some of its competitors, especially given its performance. Perhaps value investing sounds more sophisticated and small-cap investing is racier, but historically it’s been relative strength that has provided the biggest raw returns.

Good investing requires education, so maybe PDP is just ahead of the curve. We’re hoping that, over time, there will be more discussion of relative strength as a return factor and that it will get a more prominent (and well-deserved) place within investor portfolios.

Should You Love This Dow Stock?: Hewlett-Packard

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

In today's edition of the Fool's series "Should You Love This Dow Stock?" Andrew and Brendan look at tech heavyweight Hewlett-Packard. The company in many ways remains rudderless, having no clear path to keep it a viable innovator in the years to come. However, new CEO Meg Whitman has pledged to right the ship and return this once-iconic company to its former glory. However, that will take plenty of innovation, and it remains unclear how the company plans to achieve this in the big picture. With effectively zero presence in mobile, HP needs to make serious inroads into the major growth areas in order to avoid its slide into irrelevance. Watch to see if HP has what it takes in this video article.

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Big tech names might gather a lot of investor attention, but the truth is that they're playing second fiddle to an even larger revolution in technology. To better prepare investors for this new revolution, The Motley Fool has just released a free report on mobile named "The Next Trillion Dollar Revolution" that details a hidden component play inside mobile phones that also is a market leader in the exploding Chinese market. Inside the report, we not only describe why the mobile revolution will dwarf any other technology revolution seen before it, but we also name the company at the forefront of the trend. Hundreds of thousands have requested access to previous reports, and you can access this new report today by clicking here -- it's free.

Poll Misses Point: Washington and Wall Street Partners in Blame for Bad U.S. Economy

"Who do you blame more for the bad U.S. economy, Washington or Wall Street?" asked a recent USA Today/Gallup poll.

Wrong question.

In fact, it's the sordid relationship between the U.S. government and the big financial institutions that plunged the U.S. economy into turmoil in 2008 and has hampered its recovery ever since.

"They are brothers-in-arms against the greater good of the American public. They are conspirators," said Money Morning Capital Waves Strategist Shah Gilani. "Who is to blame, is it Wall Street for giving money to Washington to clear a path for their schemes, or is it Washington pandering to Wall Street for money to wage their campaign battles to put themselves in place to repay their paymasters?"

In the USA Today/Gallup poll, 64% of Americans blamed the federal government more for the bad U.S. economy, with just 30% pointing a finger at big financial institutions.

But the poll also indicated that the American public is extremely unhappy with both groups, with 78% saying that Wall Street bears a great deal or fair amount of the blame for the bad U.S. economy; 87% say that of Washington.

"You see the frustration that there's some serious things wrong with capitalism in America, but you also see the conundrum - how do we change it?" Terry Madonna, a political analyst and polling expert at Franklin and Marshall College told USA Today.

Close to half of Americans - 44% - also see the system as unfair to them, with some groups, such as people without a college degree (49%), feeling more mistreated than others.

Gilani couldn't agree more.

"Calling the "system' unfair is like calling the Grand Canyon a ditch," he said. "It's massively, incomprehensively unfair. It's unfair first and foremost on the macro level. The system favors the few at the expense of the masses. If there is class warfare stress in this country, it's because the nexus of Wall Street Washington manufactured it."

That Washington's efforts to fix the bad U.S. economy - very loose monetary policy on the part of the U.S. Federal Reserve and billions in stimulus spending from U.S. President Barack Obama and the U.S. Congress - have changed little is no doubt part of the reason why people remain disgruntled with government.

"The Fed is part of the problem, not part of the solution," Gilani said. "They did what they had to do to save us from going over the financial chasm, but they also helped us get there."

How to Fix ItGilani had several suggestions on what should be done to make the system more fair as well as to prevent another financial crisis like we had in 2008:

• Break up all the "too- big-to-fail" banks.

• Regulate derivatives and determine what limitations need to be put on their use, by who, and when.

• Reconvene the Glass Steagall Act. Make regulations simpler but make penalties stiffer -- including jail time.

• Change the Federal Reserve. They need only one mandate, manage money supply commensurate with economic growth.

• Institute mandatory term limits for Congress and put an end to their going to work for companies they either regulate, oversee, or have in any way made more profitable, for five years after leaving office.

One more thing regarding Wall Street - an area with which Gilani is familiar as a former hedge fund manager - is that the American public needs to understand what really goes on inside those executive suites.

"There is a club, in a very real sense, of powerful players who have their hands firmly on the pulse of financial innovations," Gilani said. "It's the men at the top of all those organizations that work to turn profit centers on trading desks into economy-moving - and sometimes economy-ruining - schemes."

Occupy Wall StreetAlthough the USA Today poll results are telling, one needs only watch the news to see that anger and frustration with the bad U.S. economy and Wall Street's outrageous behavior has already spilled into the streets with the Occupy Wall Street protests.

Gilani discussed the movement in a recent column for Money Morning, in which he outlined several points of agreement he had with the protesters, who say they believe the big banks are ruining the economy and unfairly influencing the politicians in Washington.

Now he has additional advice for the Occupy Wall Street movement and anyone thinking of joining it.

"Protesting is a good start. But what they really need to do is create a platform and a political movement, not unlike what the Tea Party did," Gilani said. "There's only one thing that can trump billions of dollars in back-room funding to pay for political power, and that's the raw power of ticked off people -- millions of them."

You can read more of Shah Gilani's inside perspectives on the workings of Wall Street - and how you can profit from it, instead of being a victim of it - on his new Website, Wall Street Insights & Indictments. And you can sign up for his free report, "Blast Profits In the Eye of the Storm: 5 Ways To Trade the Coming EU Crisis - And Make A Killing," by clicking here.

News and Related Story Links:

• Money Morning: These Three Men Represent Everything That's Wrong with Wall Street
• Money Morning: The Insidious Truth About Federal Reserve Policy
• Money Morning:
  The New Abnormal: Permanently Engineered Market Volatility
• Money Morning:
  The Bank of America Settlement: The Latest Travesty in the U.S. Banking System
• Web site: Wall Street Insights and Indictments
• Gallup.com:
  Most Americans Uncertain About "Occupy Wall Street" Goals
• USA Today: Poll: Washington to blame more than Wall Street for economy

Will the Chesapeake Spinoff Unlock Value?

Rising demand for energy around the globe has made discovery of new sources of oil and natural gas imperative, providing a big opportunity to the oil-field services business. New resources would mean increased drilling activities and site maintenance, and increased business for oil-field services companies. Chesapeake (NYSE: CHK  ) recently announced that it had decided to focus on its oil-field services business by spinning it off in 2012.� �

Enhancing value
By spinning off its oil-field services business, Chesapeake expects to increase value for investors. According to the CEO, the spin-off can increase the $5 billion oil-field services business to $10 billion in a few years. Chesapeake is expected to keep an 80% stake in the spun-off company.

The spinoff presents a perfect opportunity for Chesapeake to tap the market and may result in massive growth in its revenue from oil-field services, which currently forms less than 4% of the top line. Moreover, the business has a special place in Chesapeake's strategy whereby it first secures drilling licenses and then sells minority stakes to fund drilling.

Post-spinoff, Chesapeake, an active driller in U.S. shale fields, will become one of the biggest oil-field services company in the U.S. with 114 drilling rigs, a huge trucking fleet, and a big hydraulic-fracturing business.

The bigger picture
Depleting global oil and natural gas reserves has made it mandatory for oil companies to explore, drill, and develop new oil fields. This coupled with the high-demand scenario for oil and natural gas, especially in emerging economies, has inspired the search for new resources, especially natural gas. Natural gas requires complex drilling machines and new technologies to make the process smoother and less polluting. The presence of new reserves in North America shale plays together with the introduction of new drilling technology has boosted the oil-field services business to a great extent.

Foolish takeaway
Chesapeake has significant shale field expertise. If the oil-field services business lives up to its promise of supporting new energy reserves, Chesapeake is in a good position to increase both production and field life, and in turn unlock greater value for investors. What say, Fools? Click here to follow all the news and views on Chesapeake.

Is It Time to Buy "Safe" Assets?

No matter how aggressive an investor you are, at some point, you're going to want to invest in something safe. The big question, though, is whether there'll be any truly safe assets left when you need them.

The International Monetary Fund released figures yesterday that define a major threat to those trying to invest conservatively. According to the IMF, the weakening financial health of various sovereign governments around the world could shrink the available pool of assets it deems safe by a sixth by 2016. The IMF sees the potential impact of a safe-asset shortage as creating volatility in financial markets and impeding the free flow of capital around the world and within national economies.

What's "safe"?
As compelling as the IMF's argument is, one interesting element of it is how the IMF defines safe assets. The definition focuses on two areas: debt securities from both governments and the private sector, and gold. With gold representing $8.4 trillion or about 11% of the total, the vast bulk of the safe-asset pool -- about $66 trillion -- comes in the form of bonds.

If you're pickier about what constitutes safety than the IMF is, then you have an even narrower set of securities to choose from. Government bonds that receive AAA or AA ratings make up just half of the overall debt pool, at $33.2 trillion. Yet the IMF includes a bunch of other investments that certainly aren't risk-free, including everything from investment-grade corporate debt to mortgage-backed securities.

Once and future disruptions
We've actually already seen plenty of disruptive activity in these safe-asset markets. The rise in gold prices over the past decade has surprised many analysts in its magnitude. But as big emerging markets like China and Russia have become frustrated with holding foreign reserves in currencies that lose their value, the appeal of gold has risen dramatically, pushing prices up. In addition, the convenience that bullion funds iShares Silver Trust (NYSE: SLV  ) and Central Fund of Canada (AMEX: CEF  ) have given those who want to invest in precious metals has turned those funds into economic forces in their own right.

Similar demand shifts have occurred in bonds. For instance, mortgage REITs Annaly Capital (NYSE: NLY  ) and American Capital Agency (Nasdaq: AGNC  ) have snatched up an increasingly large amount of U.S. mortgage-backed securities in their quest to gain leverage and provide outsized returns based on the current shape of the yield curve. But with these entities using "safe" assets for decidedly unsafe leveraged purposes, the supply of remaining asset-backed securities is correspondingly smaller. If credit downgrades cause remaining issues to lose their safe status, then those who have to have high-quality assets could find themselves facing an insurmountable problem.

Of course, there is some hope that an economic revival could boost safe-asset supply somewhat. For instance, Ford (NYSE: F  ) has had junk bond status for years, but the company has worked hard to try to regain an investment-grade bond rating. If Ford eventually gets that expected upgrade, it won't just mean lower borrowing costs for the company -- it'll also bring a new supply of investment-grade debt back to the market.

Let's be careful out there
Perhaps worst of all, any shortage of investment opportunities that are perceived as safe could actually cause the crisis of confidence that would in turn endanger more national economies, leading to credit downgrades and a further contraction in available safe assets. That's a vicious circle that no one wants to see start spinning.

Nearly everyone needs at least some safe investments in their portfolios. The need for liquidity and preservation of capital drives allocations to safe assets and explains why bonds have been more popular than ever despite their low interest rates. But with prices already at elevated levels, loading up on safe assets now in the hopes of cashing in on a future shortage could well do you more harm than good in the long run.

You can't afford to rely solely on safe investments. Let The Motley Fool's special report on retirement point you in the direction of three promising stocks for long-term investors. They aren't risk-free, but they have better prospects for strong returns. Best of all, the report is free. But don't wait; get your copy today while it's still available.

Will Wal-Mart Be the Next Amazon?

When you think of online shopping, Wal-Mart (NYSE: WMT  ) is likely the last site on your mind. That�s a reality that the discount retailer hopes to change -- at least in China. Wal-Mart said on Monday that it would up its stake in Chinese e-commerce company Yihaodian. The move to buy 51% of Yihaodian will give Wal-Mart a controlling stake in one of China�s leading online shopping businesses -- a bold move that�s long overdue.

The deal should be welcome news for Wal-Mart shareholders as the company searches for new revenue streams. Wal-Mart, which has more than 350 physical stores open in China, hopes to capitalize on the country�s growing e-commerce industry. With China�s population soaring to 1.3 billion people, 173 million of whom are already shopping online, an increasing number of American retailers are making inroads to China. Even U.S. e-tailer Amazon.com (Nasdaq: AMZN  ) has a presence in the foreign nation.

In 2008, Amazon purchased Joyo, China�s largest retailer of books and media for $75 million. Today, Amazon may be the world�s biggest online retailer, but its market share in China is smaller than many of the country�s other business-to-consumer sites. Wal-Mart�s arrangement with Yihaodian will put it in direct competition with Amazon in the Chinese market. (Although, as far as U.S. e-commerce is concerned, Amazon is the clear leader.)

Smart strategy, difficult market
Wal-Mart�s play to grow its online presence in China comes at a time when the retailer is struggling to keep up with competitors on the home front. New format and branding strategies from rivals such as Target (NYSE: TGT  ) are certain to turn up the heat on Wal-Mart, a company that has relied on sales at the lowest price to outgrow competitors.

Target�s recent partnership with top-selling electronics brand Apple (Nasdaq: AAPL  ) will bring mini-Apple stores to 25 Target locations beginning this year. While Wal-Mart won�t be featuring Apple-staffed stores at its locations, the retailer does sell Apple products online. However, that may change for Wal-Mart�s online stores in China. Apple recently pulled its iPad 2 devices from Amazon�s Chinese site, as well from other online storefronts that were not authorized to sell the tablets. While Apple denied the removal was related to ongoing trademark issues in China, it could indicate future setbacks for the Mac maker as well as online sellers of its products in the country.

Risky business
Obvious advantages exist for retailers expanding into the fastest-growing market in the world, but that goes double for the risks. Daily deal site Groupon (Nasdaq: GRPN  ) is an example of a Web-based business that failed to understand the Chinese market. The company�s GaoPeng joint venture in the country fell flat, reportedly forcing Groupon to close at least 10 offices within China last year.

Wal-Mart should have better luck in the tough market given that its new partner, Yihaodian, is one of the fastest-growing companies in China. The company currently runs logistics operations in Shanghai, Beijing, Guangzhou, Wuhan, and Chengdu -- areas in which its 5,400-strong workforce makes same-day and next-day deliveries to customers. A network of established logistics and a clear understanding of Chinese culture should play to Wal-Mart�s advantage as it attempts to be the Amazon.com of China.

U.S. companies face a steep learning curve as they attempt to control the retail environment in China. The country�s growing retail market is driving billions in foreign investment. But it isn�t always easy knowing which companies will thrive and which ones won�t survive. For that reason, I encourage you to read The Motley Fool�s updated free report titled "3 American Companies Set to Dominate the World." This free guide will show you how to tap into three U.S. stocks that are quickly becoming leaders in emerging markets. Click here for instant access to the special report -- it�s free.

Why Kodak Needs to Declare Bankruptcy

It's never a happy time when a cultural icon is brought to its knees. However, in the case of photography pioneer Eastman Kodak (NYSE: EK  ) , it's the only play left in the book. Long gone are the days of photographic film rolls, and with them the reputation of a once-great company. After frantic attempts to sell or license the company's vast portfolio of patents, it seems bankruptcy is the only option.

Enough's enough
It's not surprising that Kodak hasn't been able to lock down a buyer for its large collection of digital patents. With the company's grim financial condition all over the news, potential bidders would rather wait for a more favorable bankruptcy auction of the patents. For this reason, Kodak filing for protection under Chapter 11 is not only imminent, but also necessary.

Big names such as Apple (Nasdaq: AAPL  ) may be interested in Kodak's suite of patents, which could be valued between $2 billion and $3 billion. Apple buying the rights to these patents would be somewhat of a "Kodak moment," as Kodak once filed a suit against the Mac-maker for patent infringement.

Apple wasn't the only patent litigation filed by Kodak. In recent years it's seemed Kodak's new business model was to leverage their intellectual property by winning patent cases against industry peers. Unfortunately that strategy hasn't panned out that well.

Fading away
As my Foolish colleague John Maxfield discussed, Kodak's fall from grace is the result of the innovator's dilemma, a misfortune in which a company can no longer keep up with disruptive technologies in its industry. However, the lack of product innovation wasn't the only drain on the company. Failure to successfully reinvent itself in new industries like printers was also at fault.

By filing for bankruptcy, Kodak will undoubtedly sell its nearly 1,100 patents and close the final chapter in its more than a century-long history. Is seeking protection under Chapter 11 a card Kodak should have played years ago? Let us know your thoughts on the matter in the comments section below.

• Add�Eastman�Kodak�to My Watchlist.
• Add�Apple�to My Watchlist.

Research In Motion Loses One

Remember when I said Research In Motion (Nasdaq: RIMM  ) needed a four-letter word? With the company's latest development, there probably won't be any shortage of four-letter words being uttered at RIM's Waterloo, Ontario, headquarters.

The beleaguered BlackBerry maker was the target of a trademark infringement suit over the name of its ambitious new unified operating system, BBX. Built using the $200 million purchase of QNX from Harman International Industries (NYSE: HAR  ) last year, it will eventually power all future BlackBerry smartphones and PlayBooks.

Well, the gavel has fallen in the trademark suit brought on by BASIS International, a small software developer that's based in New Mexico and owns the trademark to "BBx." BASIS had promptly sent RIM a cease-and-desist letter after Research In Motion initially unveiled its new OS at its developer conference, but the company brushed aside the concerns, saying, "we do not believe the marks are confusing, particularly since our respective companies are in different lines of business."

The federal court in Albuquerque has granted a temporary restraining order, barring RIM from using the BBX name and rejecting its protests. The court said that "despite the fact that the two companies are not direct competitors, the parties' respective BBX products are highly related and target the same class of consumers, that is, business application software developers," and that "the alleged infringement is likely to cause customers and prospective customers to wrongly believe that the software applications created using BASIS's development tools are only compatible with RIM's BBX operating system."

In response to the decision, the company is now changing the name of its next-generation OS from BBX to BlackBerry 10. For those who are counting, you may notice that the most recent version of the BlackBerry OS is BlackBerry 7. BlackBerry 8 and 9 are missing in action. By skipping a few notches, RIM is trying to highlight the significance of the new OS.

The company is betting the farm on BlackBerry 10 and hoping it will help regain market share from the likes of Apple iOS and Google Android. With next quarter shaping up to be a disappointment, Research In Motion needs all the help it can get.

Add these smartphone stocks to your Watchlist to see whether BlackBerry 10 helps RIM.

• Add�Research�In�Motion�to My Watchlist.
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