Saturday, February 28, 2015

Strike, warehouse work reports mar Amazon holiday

Amazon.com is expected to be the top destination for online holiday shopping again this year. But a strike in Germany and unfavorable reports about working conditions in the company's giant distribution warehouses are spoiling the festive mood.

About 1,000 workers at two of Amazon's German fulfillment centers went on strike Monday demanding a wage agreement similar to what's on offer elsewhere in the country's retail and mail-order sectors.

Officials at Ver.di, a big services union in Germany, warned that there may be more strikes during the holiday season unless Amazon negotiates -- something the company has said it does not plan do to.

Amazon's German business, its second largest after the U.S., has suffered from bouts of labor unrest since a TV documentary earlier this year showed seasonal workers brought in to help with the holiday rush being harassed by security guards.

Amazon quickly cut ties with the security firm in question and the company has defended the working conditions at its warehouses. However, the strike highlights the tension between Amazon's push for fast shipping and low prices and the experience of employees at its distribution centers.

The strike also sparked concern that Amazon may not be able to handle German customer orders as well this holiday.

"Amazon needs to make sure they have ample labor supply for the holiday rush," Colin Sebastian, an analyst at RW Baird, said.

The company is also in defensive mode in the U.K. after the BBC ran a TV program this week in which an undercover reporter worked at an Amazon fulfillment center there and ended a 10.5 hour night shift "absolutely shattered."

"We strongly refute the charge that Amazon exploits its employees in any way," the company said in a new section of its U.K. website which highlights the benefits of working in its fulfillment centers.

Amazon moved to a four-day, 10 hours-per-day, work week at its U.K. fulfillment centers recently. The company used to run on a five-day, 8 ! hour schedule.

An Amazon spokesman said the change was not made under pressure from critics of its warehouse work conditions. However, he said the move has been popular with warehouse workers because they get an extra day off and do not have to commute as much.

Amazon's approach to running its fulfillment centers is also coming under scrutiny in the U.S. Industry news website EcommerceBytes published a blog Tuesday from an unidentified person who it said got hired as a seasonal worker for three months at an Amazon warehouse in the U.S.

The person said that, despite regularly working out, they were unprepared for the physical challenge of working in a busy Amazon fulfillment center during the holidays.

"Now that we've gone to five 10 hr work days I've discovered my legs aren't in as good a shape as I thought," the person wrote. "By day two of this week my ankles are swollen and painful. By day four I'm down to the drug store talking about support stockings. I'm becoming concerned that standing for long hours on concrete floors is doing damage to my venous system."

Some newer seasonal workers have started to complain about the push for better production numbers from Amazon's floor managers, the person added in the blog.

"Many people have quit already." the person added. But on Monday another 60 or so new seasonal workers arrived for training, the person noted.

Friday, February 27, 2015

Morningstar: City Pensions in Good Shape, Sort Of

Morningstar states the obvious in its latest report on the pension liabilities of largest U.S. cities, but seeing the numbers behind it brings the municipal burden into stark relief, and in the largest of the large (New York City and Chicago), it ain’t pretty.

“Overall, 22 of the largest 25 cities have the majority of their pension liabilities tied to single employer, agent multiple-employer, or cost-sharing multi-employer (CSME) plans in which the city is the majority participant,” says the report, “The State of City Pension Plans 2013: A Deep Dive Into Shortfalls and Surpluses.”

The report means that the pension liability will have to be funded either solely or mainly by the city. Large cities also tend to have greater autonomy in terms of pension benefits and, in many cases, funding decisions, Morningstar notes.

“Funding these plans can be a substantial burden to these governments, often accounting for a larger portion of annual spending than debt service. In rare cases, this has even led to municipalities filing for bankruptcy.”

The report finds that while some cities are adequately managing their aggregate pension liabilities, many municipal pension systems “are coming under duress.” The fiscal solvency and management of these plans vary greatly, according to two key drivers of Morningstar’s pension analysis: the funded ratio and the unfunded actuarial accrued liability (UAAL, or unfunded liability) per capita.

“In aggregate, the cities’ pensions are 66.4% funded, with an unfunded liability of $3,776 per capita,” it says. “However, the median ratios are markedly better, at 76% and $1,556 unfunded liability per capita. Some of the largest cities, most notably New York City and Chicago, are poorly funded, with large unfunded liabilities, skewing the overall data.”

For comparison, Morningstar recently found that state pension plans currently have an aggregate funded level of 72.6%, with a UAAL per capita of roughly $2,600.

While New York City and Chicago fared poorly, Washington is the strongest among the selected cities, with its pension plans funded at over 100%, leading to a negative unfunded liability. Seven cities have funded ratios of at least 80%, which is considered to be strong by Morningstar and recommended by the Government Finance Officers Association.

In the table below, ordered by population, note that Funded ratio percentage column. Seven cities fall below Morningstar’s fiscally sound threshold of a 70% funded ratio.

Aggregate pension data; cities ranked by population. Source: Morningstar

Suvey: Americans do not like to discuss finances

American families may not be saving enough for retirement but even worse, they're not talking about it with each other, show the findings of a new study out Monday.

"Family & Retirement: The Elephant in the Room," a representative survey of 5,400 adult Americans conducted by Merrill Lynch and consulting firm Age Wave in August shows 70% over the age of 25 have not had a discussion with their parents about retirement.

More than half -- 56% -- of parents over the age of 50 have not discussed key financial issues, including wills, health directives, inheritance plans or where they plan to retire, with their children.

Time is running short for Baby Boomers, now 47 to 67 years old. Even without health care complications, they're worried about life after they stop working. One-third of people surveyed age 50 and older say they feel well prepared for retirement if everything goes as they expect.

Less than one in four surveyed over the age of 50 say they would be prepared financially if they or their spouse were forced to retire early due to health issues. But, according to the new study, a third of all people who retire early do so because of health problems.

"It will not be uncommon for people to live to 80, 90, 100 -- unfortunately, our health span isn't lined up with our life span," Age Wave CEO Ken Dychtwald said.

Not discussing these emotionally delicate topics is preventing many Americans from facing the facts together as a family. More than 90% say they would not be prepared financially if an aging parent or close relative needed long-term care. And just 37% of people age 50 or older believe they'll need long-term care before they die. The reality: 70% eventually will need the costly services, the new study says.

What's already happening is that many Americans have boomerang children, adults who have moved back home or are financially dependent on their parents, at the same time as they're being confronted with the financial pressures of their aging parents.

AARP expert Amy Goyer, 52, has spent her career advising people on retirement savings -- but she hasn't been able to save a penny for years. Her mother had a stroke decades ago, and her father's Alzheimer's prevented him from caring for her. Goyer moved across the country to live with and care for her elderly parents.

"I know I need to be saving, but it's a dollar-and-cents thing that I haven't been able to do," Goyer laments. She's not alone.

There's no shortage of generosity. The past five years, 62% of Americans age 50 or older have given an average of almost $15,000 to family members -- older and younger relatives, the new study shows.

Often, it's parents giving to their adult children. More than two-thirds-- 68% -- of parents age 50 or older have provided some form of financial support to their adult children the past five years. Of those who know where the money went, 20% say it was to pay the mortgage or rent, 18% went to pay cell phone bills, 17% helped pay for a car, 15% contributed to health care expenses and 11% helped pay back student loans.

"Within families, if you work hard and take some lucky breaks, you may be the person who's got a grandchild thinking of going to private college for four years -- and it might be you paying for it," Dychtwald said. "Someone [in our survey group] said 'I was expected to support the college fund; now I am a college fund."

In Granbury, Tex., Gene Berrier, 87, paid for not only his daughter's college education, but also the college degrees of two grandchildren. Their father had been killed when they were children, and their mother couldn't afford to send them to college.

"I've wondered a lot of times why I did it," he said. "I guess eventually they became mine."

Just as often, children shoulder the financial responsibilities of their parents. Nadia Allaudin, 37, has been financially helping her parents for nearly 20 years. The child of Pakistani immigrants and a father who abused her mother, the Merrill Lynch s! enior vic! e president spends about 25% of her income providing for her mother.

Allaudin started saving for retirement early, so her care-giving responsibilities mostly affect discretionary spending decisions, such as whether to buy a second home.

When people don't anticipate these expenses, "their own needs get pushed to the side" and they have to dig into their retirement savings -- often with detrimental consequences, Allaudin said.

AARP spokesperson Nancy Thompson points out that caregivers who can only work part-time or quit a full-time job early because of their responsibilities are reducing what they contribute to Social Security. They'll have less to spend later on in life.

Goyer and Thompson say the upcoming holidays that create a reason for extended family get-togethers offer an opportunity to broach the subject of long-term financial planning. They also recommend hiring an accountant and using the services of AARP long-term care planners, budget planners and online self-help programs such as one called "Decide, Create, Share."

Dychtwald is grieving the loss of his father, who died six weeks ago. Because his family had discussed "everything" years ago, they could focus solely on "sharing [their] love and final words," he says.

Monday, February 16, 2015

US Stock Futures Flat Ahead Of Durable-Goods Data

Pre-open movers

US stock futures were mostly flat in early pre-market trade, ahead of economic data. Data on durable goods orders for September will be released at 8:30 a.m. ET, while the Reuter's/University of Michigan's consumer sentiment index for October will be released at 9:55 a.m. ET. Data on wholesale inventories for August will be released at 10:00 a.m. ET. Futures for the Dow Jones Industrial Average fell 1 point to 15,453.00, while the Standard & Poor's 500 index futures declined 1.10 points to 1,747.40. Futures for the Nasdaq 100 index gained 5.75 points to 3,376.75.

A Peek Into Global Markets

European markets were mostly lower today, with the Spanish Ibex Index dropping 0.65%, London's FTSE 100 index rising 0.13% and STOXX Europe 600 Index declining 0.10%. German DAX 30 index fell 0.03% and French CAC 40 Index declined 0.13%.

Asian markets ended mostly lower today. Japan's Nikkei Stock Average tumbled 2.75%, China's Shanghai Composite fell 1.45% and Hong Kong's Hang Seng Index declined 0.60%. Australia's ASX/S&P500 rose 0.22% and India's Sensex declined 0.20%. Japan's core consumer price index increased 0.7% y/y in September, versus a 0.8% rise in August. The consumer price index rose 0.1% on a monthly basis.

Broker Recommendation

Analysts at JP Morgan downgraded United Continental Holdings (NYSE: UAL) from "neutral" to "underweight." The target price for United Continental Holdings has been lowered from $32.50 to $25.

United Continental's shares fell 1.76% to $30.75 in pre-market trading.

Breaking news

Weyerhaeuser Co (NYSE: WY) reported a 34% rise in its third-quarter profit. Weyerhaeuser's quarterly profit surged to $157 million, or $0.27 per share, from $117 million, or $0.22 per share, in the year-ago period. To read the full news, click here. Sorrento Therapeutics (NASDAQ: SRNE) announced the pricing of an underwritten public offering of 4,150,000 shares of common stock at an offering price of $7.25 per share. To read the full news, click here. Live Nation Entertainment (NYSE: LYV) has acquired Voodoo Music & Arts Experience, New Orleans' critically-acclaimed music festival. To read the full news, click here. B/E Aerospace (NASDAQ: BEAV) today announced that its Board of Directors has appointed Werner Lieberherr, who is currently President and Chief Operating Officer of B/E Aerospace, Inc., as co-Chief Executive Officer of B/E Aerospace, Inc. effective as of January 1, 2014. To read the full news, click here.

Posted-In: JP Morgan US Stock FuturesNews Eurozone Futures Global Pre-Market Outlook Markets

(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Partner Network   Around the Web, We're Loving... Learn to Use Trading Platforms Like Hedge Fund Traders do Rumsfeld: Denial of Benefits to Fallen Soldiers' Families 'Inexcusable' Come See How the Pro's Trade in this Exclusive Webinar Facebook, Baidu Lead Big Caps Beating Shutdown What Should You Know About AMZN? Most Popular UPDATE: Jefferies Downgrades Exelon Corporation on Valuation Earnings Scheduled For October 24, 2013 Apple Rumored To Ship 10 Million iPad Air Units In Q4 Icahn Makes a Big Profit on Netflix, Offers Lesson in Selling 3 Small Caps With Dividends over 4% That Could Grow Even Bigger Top Tweets From Stocktoberfest 2013 Related Articles (BEAV + LYV) US Stock Futures Flat Ahead Of Durable-Goods Data Live Nation Entertainment Acquires Voodoo Music & Arts Experience B/E Aerospace Names Werner Lieberherr Co-CEO His Name Is Kid Rock, Detroit Is His City UPDATE: Canaccord Genuity Initiates Coverage on B/E Aerospace as 2014 Acceleration is Expected Across All Segments Benzinga's Top Initiations View the discussion thread. Partner Network #marketfy-ae-block { display: none; border: 2px solid #0a3f75; overflow: hidden; width: 300px; height: 125px; text-align: center; background-color: #45719E; position: relative; z-index: 1; } #marketfy-ae-block a { display: block; width: 300px; height: 125px; position: relative; z-index: 2; color: #ffffff; text-decoration: none; } #marketfy-ae-block-countdown-text { color: #f9fc99; padding: 0px 0 0 0; font-size: 19px; font-weight: bold; line-height: 19px; } #marketfy-ae-block-countdown-text-start { font-size: 12px; } #marketfy-ae-block-countdown { padding: 5px 0 5px 0; font-size: 26px; } #marketfy-ae-block-signup { padding: 5px 47px; } #marketfy-ae-block-signup:hover { background-color: #457a1a; } #marketfy-ae-block #marketfy-ae-block-logo { display: block; padding: 3px 0 0 0; margin: 0; } #marketfy-ae-block-logo { text-indent: -9999px; } #marketfy-ae-block-free { display: block; position: absolute; top: 7px; right: -23px; width: 80px; height: 16px; line-height: 16px; text-align: center; opacity: 1; -webkit-transform: rotate(45deg); -moz-transform: rotate(45deg); -ms-transform: rotate(45deg); transform: rotate(45deg); font-size: 13px; font-weight: normal; color: #333333; background-color: yellow; z-index: 500; text-shadow: 1px 1px #999999; } #marketfy-ae-block-arrow { position: relative; width: 60px; height: 60px; z-index: 10; margin: -80px 0 13px -21px; } #marketfy-ae-block-arrow img { height: 60px; width: auto; }

Friday, February 13, 2015

When's The Best Time To Get Back To Out Of Favor Stocks

Facebook Facebook, Sears, Best Buy Best Buy, and J. C. Penney are in different kinds of business. But they have something in common: Their stocks were out of favor at some point in the last two years.

The problem? They all had a broken business model. Facebook failed to monetize effectively its huge membership. Sears tried to become a real estate trust rather than a retailer, Best Buy became a showroom for Amazon.com Amazon.com. And J.C. Penney tried to be more like Apple Apple than Macy's.

In the last six months, Facebook and BestBuy's stocks have rebounded nicely, while Sears and J. C.Penney are still struggling. What has made the difference is this: Facebook and Best Buy have managed to fix their business model and regain momentum, while J.C. Penney and Sears are still working on it.

Here is how it happened.

Facebook

After being out of favor with Wall Street for more than a year, Facebook 's (FB) stock recently rebounded nicely. The catalyst? Strong Q2 results that beat analyst estimates by a wide margin (on the top line). Most notably, Facebook saw a big jump in mobile users and ads, areas where the company has been weak in the past.

Facebook successfully addressed two issues every web-based company faces. The first issue is size — that is membership and traffic. With hundreds of millions of members around the globe, Facebook is unquestionably the largest social site, providing the company both economies of scale (the benefits associated with a larger organization) and economies of networking (the benefits associated with a larger and larger number of people using a certain product or service).

The second issue is monetization of membership and traffic. With revenues exceeding $1.81 billion for last quarter, Facebook demonstrated that it could be a highly profitable company.

Best Buy

Once upon a time—before Amazon.com expand into the consumer electronics market—Best Buy was getting bigger and better, capitalizing on benefits associated with the opening of bigger stores in prime locations. Its revenues, profits and stock soared, catching the attention of business strategists and stock analysts.

After Amazon.com threw its hat in the ring, however, the game changed. Best Buy continued to get bigger, but not better. Its assets—location and scale—turned to liabilities.

In what has come to be known as "show-rooming," customers did their window-shopping at Best Buy, but did their actual shopping at Amazon.com — which offered better prices than Best Buy.

Best Buy's revenues, profits, and stock headed south. Business strategists and stock analysts were concerned about the future of the company.

In recent months, Best Buy seems to be getting its business model right, as reflected in its recent earnings reports. The company is capitalizing again on the benefits of scale and location, in two ways.

Can Tesla Help Awful Electric Car Sales?

Electric cars have only one problem. No one wants to own one. That might change because of the wildly positive publicity around the success of Tesla Motors Inc. (NASDAQ: TSLA). But the sales of a car that costs about $80,000 may do nothing for vehicles priced only half as much. The rich may have tastes that the middle class does not. Perhaps other electric vehicles (EVs) are just not very good cars.

General Motors Co.’s (NYSE: GM) Chevy Volt and Nissan’s Leaf should be considered the pioneers of the electric car movement. However, neither has flourished. Volt sales through July were only 28,989, slightly down from last year. Leaf sales only reached an abysmal 11,703. That was up sharply from the year before, but still pathetic at such a tiny level.

GM finds itself so desperate for Volt sales that it cut the car’s sticker to $5,000 for 2013 models. Purists would not call it a true electric car anyway because of its gas-powered generator. However, for most of the unschooled public, it is electric enough.

The Leaf bills itself as fully electric. If so, demand for the fully electric class counts as worse than the Volt. Nissan customers can get 0% financing on a Leaf for a 36-month loan.

A few other manufacturers, including Ford Motor Co. (NYSE: F) and Honda Motor Co. Ltd. (NYSE: HMC), have entered the EV sector. Neither sells more than a handful of these cars a month.

Compared to these cheap vehicles, Tesla has several advantages. First is the breathlessly positive reviews the car has received for safety, style and remarkable handling. The more modest-priced EVs have not received accolades that even approach these. Car researchers have been lukewarm about the balance of the vehicles in the class.

Tesla also has benefited from the lack of available cars. When so many people want the same thing, demand can appear tremendous. The last major product that enjoyed such a supply-and-demand balance was early versions of the Apple Inc. (NASDAQ: AAPL) iPhone. In contrast to Tesla, cheaper electric cars are easy to find.

Electric car sales have been a failure since the launch of the Volt and Leaf in late 2010. Without the Tesla’s fantastic speed, reviews and safety reports, lower priced EVs have been unable to crack the market. None has been able to draft behind Tesla’s success.

Tuesday, February 10, 2015

Flash Memory Provider Spansion Lowers Guidance

Based on a review of "preliminary financial results," embedded systems solutions provider Spansion (NYSE: CODE  ) has lowered its second quarter 2013 revenue and earnings guidance, the company announced today.

Spansion's Q2 revenues, scheduled to be released "on or around July 31, 2013," were expected to range between $200 million and $220 million. However, due in large part to market weakness in Japan, according to Spansion, revenue expectations have been revised downward, and should fall between $193 million to $197 million for the quarter.

Non-GAAP, second quarter earnings estimates are now expected to range from $0.25 to $0.27 per share, as opposed to earlier guidance suggesting Spansion's Q2 earnings per share would fall between $0.16 and $0.23. The revised earnings for the recently concluded quarter are adjusted for "two one-time items related to foreign exchange and taxes that add approximately $0.10 to earnings per share," Spansion said.

Monday, February 9, 2015

The Good, Bad, and Ugly for Microsoft This Past Week

I'm a Microsoft (NASDAQ: MSFT  ) shareholder, and after dealing with a few years of nearly zero return rates from the stock, I've been thrilled with the its performance year-to-date. The stock is up 28.72% this year, while the Dow Jones Industrial Average (DJINDICES: ^DJI  ) has risen just 15% during the same time frame. I've been waiting for the other shoe to drop and for the price fall back down into the mid-$20 range, but this week I read a few articles that will make me pay especially close attention to the stock. One article highlighted something the company is doing well, another mentioned something that was sort of bad, and a third compared Microsoft with an ugly mistake another company recently made.

So let's look at the good, the bad, and the ugly for Microsoft this past week.

The good
My Fool colleague Evan Niu wrote about how Microsoft had overtaken BlackBerry (NASDAQ: BBRY  ) this past quarter in smartphone market share. Microsoft's push into the world of mobile devices and its Windows 8 operating system, which was built for mobile devices, has really paid off for the company. Evan pointed out that over the course of a year, Microsoft grew its mobile operating system market share from 3.8% to 5.6% as it rose to the No. 3 spot on the worldwide stage. During that time frame, previous No. 3 BlackBerry fell from 5.3% market share all the way to its current 0.7%. The mobile market is a great place for Microsoft to continue to grow in the coming years, and it seems that is exactly what the company plans to do. 

The bad
Microsoft is releasing a new gaming console in the coming months, but only in the U.S. in 2013 and not in the Asian markets until late 2014. Meanwhile, the Xbox One's biggest competitor, Sony's PlayStation 4, will hit the markets worldwide before the Christmas shopping season -- and for $100 cheaper than the Xbox One. Giving Sony a one-year head start already puts the Xbox One behind the 8-ball, and it just adds insult to injury to have it rolling out $100 more expensive than the competitor's device. Microsoft needs to reconsider its timeline for delivery in Asia and take a deeper look at the long-term value that each Xbox One sold will bring in. It might also want to adjust the sales price to bring in more of those high-value, long-term gamers.  

The ugly
The worst news I read about the company this week was the comparison my colleague Anders Bylund make between Windows 8 and Netflix's (NASDAQ: NFLX  ) historic Qwikster disaster. Anders noted that while Netflix made a big mistake with the Qwikster idea, it heard the complaints from its customers and made changes to make them happy. But he didn't see Microsoft doing the same thing with Windows 8, which has sparked a number of complaints over significant changes to the operating system. A Windows 8 update is coming, but Anders doesn't think it goes far enough and believes it will leave customers disappointed. It's true that Windows 8 for PCs has been a disaster so far. Microsoft relies on Windows for a large portion of its annual revenue, and unless the newest version really wows customers, the company may have trouble in the coming quarters.

More Foolish insight
It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In a new premium report on Microsoft, a Motley Fool analyst explains that while the opportunity is huge, so are the challenges. The report includes regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.

Sunday, February 8, 2015

For Netflix, Binge-Viewing Isn't the Answer

I'm an Arrested Development fan. I really did love those first three seasons and have watched them more than once. So it would make sense that I should be excited for the new season just out on Netflix (NASDAQ: NFLX  ) . But honestly, I've been more skeptical than anything else. 

To be a skeptic
I'll chalk my skepticism up to any number of reasons. Seven years have passed since the series wrapped up, which is a long time. Part of the genius of the show from the beginning for me was the writing, and I just have a hard time coming to grips with the new season being anything more than simply an effort to get a few more episodes out. For me the hurdle was very high to begin with; sometimes it's OK to just pull a Paul McCartney and let it be. 

I'm not one to pay much attention to critics, but when I read in The New York Times, "If you truly loved (the first three seasons of 'Arrested Development'), it's hard to imagine being anything but disappointed with this new rendition," I realized that I was thinking that before it ever even came out. Ay caramba indeed.

I'm sure I'll end up checking it out at some point or another, but it'll be awhile. I'm not even a Netflix subscriber. Netflix has nothing I want or need, so why subscribe to it? No, I haven't seen House of Cards. I've been busy watching Time Warner's HBO. But this all leads me to my greater point: Netflix may want to seriously rethink their binge-viewing strategy, as it could most certainly come back to bite them.

Trouble in binge-ville?
Here's the thing: Binge-viewing does work... for some shows. Older shows that have already been around the block are perfect for binge-viewing if that's your thing. But if Netflix's strategy is to develop more original content in order to differentiate themselves (and I agree with this move... they need to do something because they are becoming less and less special every day given the competition that's growing out there), they are going to need to think ab! out stretching out the lives of these things. 

House of Cards is a good example. I'm sure the show is fine. It certainly received great reviews. But that's over now. Nobody's talking about it anymore. Anywhere. Viewers are going to have to wait until, like, next March to see new episodes. That takes the entire life out of the show as far as I can see it. It was like a season in a week. Doneski.

Let's look at other end of the spectrum. Game of Thrones (or we can go with Breaking Bad, Sons of Anarchy, American Horror Story, Boardwalk Empire, Downton Abbey -- you get my point). These shows are living long and healthy lives as linear shows on a weekly schedule. Of course, you can binge-view older seasons. You can also just wait for the new stuff to eventually come out on Netflix, Amazon's Prime service or Apple's iTunes. And there's no question that some shows have benefited from being on these platforms as they've become accessible to many who might not have seen them otherwise.

But Game of Thrones et al are shows that actually benefit from the linear schedule. It gives them (and hence their developers) longer lives; it keeps people interested and tuned in longer. People talk about these shows every week in my office. House of Cards, not so much. Given the following that Downton Abbey continues to grow, it certainly makes Amazon's move to gain exclusive rights to that show look shrewd indeed.

This is the point, right here
If I can watch all of Arrested Development in one night, then bam! -- it's over. One freaking night and an entire season of "original" (and not cheap) content is done. So what this potentially leads Netflix to is having to produce more stuff. A lot more stuff. And it costs a lot of money to produce a lot of stuff (at least stuff worth watching). This works out great for subscribers because, hey, they're getting more stuff and paying a measly $7.99 a month. But investors may be getting the short end of the stick here. The company will issue more debt to produce more stuff, and when they release it all at once, then they'll need to make even more stuff. Again, great if you're a subscriber paying $7.99 per month. But all things considered, I've got zero interest in investing in Netflix, particularly at today's prices. And by the way, I am calling it now: They will be issuing more debt within the year.

Two things to take away
I wholeheartedly admit that I could be totally wrong about all of this. CEO Reed Hastings knows a heck of a lot more about this business than I do. Netflix is a good business and Hastings is a smart guy with some great ideas. But Netflix needs to do two things in my estimation (and that may not be all). It needs to start seriously thinking about how it can raise prices and it needs to seriously rethink releasing all of its original content at once. It's just a nasty pace to have to keep up with and I wouldn't want to count on being able to do it indefinitely. Again, great for subscribers; but scary as hell for investors.

The Motley Fool has released a premium report on Netflix. Inside, you'll learn about the key opportunities and risks facing the company, as well as reasons to buy or sell the stock. The report includes a full year of updates to cover critical new developments; click here and claim your copy today.

Saturday, February 7, 2015

How Will Chesapeake Handle the Post-McClendon Era?

On Wednesday, Chesapeake Energy (NYSE: CHK  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Chesapeake has been a major natural gas and oil producer for years, but it has faced several controversial episodes with its founder and former CEO Aubrey McClendon along the way. Now that McClendon has stepped down, investors are wondering which direction the company will move. Let's take an early look at what's been happening with Chesapeake Energy over the past quarter and what we're likely to see in its quarterly report.

Stats on Chesapeake Energy

Analyst EPS Estimate

$0.25

Change From Year-Ago EPS

39%

Revenue Estimate

$2.80 billion

Change From Year-Ago Revenue

15.6%

Earnings Beats in Past 4 Quarters

1

Source: Yahoo! Finance

Can Chesapeake Energy keep growing under new leadership?
Analysts have gotten a lot more optimistic over the past few months about Chesapeake's earnings prospects. They've raised their estimates for the just-ended quarter by $0.03 per share as part of a larger $0.08 upgrade on their 2013 EPS consensus. The stock's response has been muted, however, with gains of less than 5% since late January.

As much attention as Chesapeake's executive office has gotten recently, investors have been just as worried about the company's financial situation. Low natural-gas prices have made it a lot more challenging for Chesapeake to maintain its substantial debt, and the company has had to sell off assets as a result. The company has also had to cut back on its capital expenditures, seeking to keep its spending this year under $6 billion.

Chesapeake is still seeking to raise more cash through further asset sales this year. In February, Chesapeake sold a 50% interest in some of its Mississippi Lime acreage to China's Sinopec (NYSE: SHI  ) . Then, earlier this month, Chesapeake said it's looking to sell further acreage in the Utica Shale play in the U.S. Midwest. Motley Fool contributor Tyler Crowe believes that Chevron (NYSE: CVX  ) might be a natural buyer for Chesapeake's Utica property, given its recent commitment to focusing on unconventional domestic energy plays for further growth.

The problem that Chesapeake faces is that other companies are following the same strategy to try to get through the tough times for natural gas. In particular, SandRidge Energy (NYSE: SD  ) has followed Chesapeake's road map toward greater production of oil and natural gas liquids, and with so little interest in dry-gas assets, no company selling them off will get full value from a buyer. If the recent recovery in natural-gas prices can take root, then and only then will interest in those assets start to build up again.

The key to Chesapeake's quarterly report will be for the company's new leadership team to present a viable strategy for the company going forward. With the potential for a leadership vacuum to reduce investors' confidence in the energy company, Chesapeake needs to quash those concerns and move forward aggressively with its plans.

Energy investors would be hard-pressed to find another company trading at a deeper discount than Chesapeake Energy. To learn more about Chesapeake and its enormous potential, you're invited to check out The Motley Fool's brand-new premium report on the company. Simply click here now to access your copy.

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

Friday, February 6, 2015

Hartford Financial Services Group Inc.'s Q3 2014 Earnings: 4 Key Takeaways

Hartford Financial Services Group Inc. (NYSE: HIG  ) is roaring ahead in 2014. With a solid earnings and revenue beat, a 25% year-over-year increase in core earnings per diluted share, and strong insurance metrics, Hartford Financial Services makes a convincing case to woo investors.

Though shares of the property and casualty insurance company are up only 4% so far this year, investor sentiment toward Hartford Financial Services could very well change after robust third-quarter results.

Here are the most important takeaways with respect to Hartford Financial Services' Q3 2014 earnings.

1. Earnings and revenue beat
Hartford Financial Services, just like The Travelers Companies last week, benefited from healthy underwriting results and improving net investment income in the third quarter.

As a result, Hartford Financial Services reported earnings per diluted share of $0.86 per share, which compares against a consensus estimate of $0.83. Net income per share also increased a respectable 43% year over year from $0.60 in Q3 2013.

At the same time, core earnings per diluted share increased 25% year over year to $1.06, driven by higher core earnings in Hartford Financial Services' commercial property and casualty business, as well as a lower share count compared with last year.

From a revenue perspective, Hartford Financial Services could present a beat as well: Revenue for the third quarter was reported at $4.77 billion, which compares against analyst expectations of $4.70 billion.

2. Strong commercial property and casualty business driving core earnings
Hartford Financial Services' 15% increase in total core earnings was predominantly driven by strong results in its commercial P&C business. Core earnings in commercial property and casualty increased from $176 million last year to $268 million in the most recent quarter, which represents a whopping 52% year-over-year increase, mostly a result of lower-than-expected catastrophe losses.

Though written premiums in Hartford's commercial property and casualty segment increased only 1% year over year to $1.58 billion, the insurance company was able to squeeze out an $151 million underwriting gain, which compares against an underwriting profit of only $30 million in the year-ago quarter.

Since lower catastrophe losses have an immediately positive impact on key cost ratios, Hartford Financial Services reported a combined ratio in its commercial property and casualty insurance unit of 90.4%, versus 94.2% in the previous quarter, and versus 98.1% in the year-ago quarter.

Hartford expected total after-tax third-quarter catastrophe losses of $87 million, whereas only $26 million in after-tax losses were realized, which largely explains Hartford Financial Services; significant combined ratio improvements.

3. Robust net investment income growth on a sequential basis
Insurance companies take the premiums they receive on a recurring basis from their policyholders and invest them in securities, mostly fixed-income products such as investment grade-rated corporate bonds, U.S. government bonds, mortgage securities, and alternative investments to earn an investment return.

Investment returns, therefore, can play a huge role in boosting an insurance company's short-term profitability, especially if certain asset classes such as alternative investments or equities have a good run.

For the most recent quarter, Hartford Financial Services reported solid net investment income growth (presented on a pre-tax basis in the following chart), which was derived from higher returns from limited partnerships/alternative investments.

Third-quarter net investment income increased to $810 million, up 5.5% on a sequential basis, and contributed to Hartford's sturdy earnings.

4. Book value keeps growing
Given the robust increase in core earnings year over year, it comes as no surprise that Hartford Financial Services was once again able to increase its book value per share.

Investors often look at an insurance company's book value as a proxy for its intrinsic value, though the book value probably understates the true intrinsic value of a business because of conservative and prudent accounting principles.

In any case, Hartford Financial's book value increased 1.6% quarter over quarter to $39.82 per share.

At a P/B ratio of just 0.87, Hartford Financial Services is hardly too expensive. In fact, the insurance company appears to be still on sale, considering its much higher book valuation in the past.

The Foolish takeaway
Hartford's third-quarter results have once again shown that core earnings are driven by its dominant commercial property and casualty business, while higher net investment income also contributed to earnings momentum.

Improved combined ratios, lower catastrophe losses, and a low valuation (by historical standards) further add to the appeal of Hartford Financial Services as a long-term insurance investment.

The smart way to get more income in retirement
Getting a part-time job is one way to increase your income in retirement, but it isn't the smart way. In a brand-new free report, our retirement experts explain a straightforward strategy that people are already using to get more income in retirement. The method is so simple you'll be shocked you didn't think of it yourself. To access this free report instantly, simply click here now.

Thursday, February 5, 2015

Tax Inversion Deals: DC Blames Wall Street for Its Mess

Democrats and Republicans alike in Washington are unhappy about the increasing number of so-called tax inversion deals, but instead of blaming Wall Street they need to look at the real cause of the problem - themselves.

tax inversion deals chartA tax inversion deal is a merger between a U.S and a foreign company specifically designed to allow the U.S. company to move its headquarters out of the United States to escape America's high corporate tax rate.

Several recent high-profile tax inversions, such as AbbVie Inc.'s (NYSE: ABBV) merger with Ireland-based Shire Plc. (Nasdaq ADR: SHPG) and Medtronic Inc.'s (NYSE: MDT) deal to buy Ireland-based Covidien Plc. (NYSE: COV), have resulted in much wailing and gnashing of teeth in our nation's capital.

Walgreen Co. (NYSE: WAG) is thought to be considering a deal, while Pfizer Inc.'s (NYSE: PFE) attempt via a deal with Britain's AstraZeneca Plc. (NYSE ADR: AZN) fell apart.

Over the past 10 years about 50 U.S. companies have reincorporated overseas via tax inversion to tax-friendly countries like Ireland, about half of which are in the Standard & Poor's 500, but the practice has accelerated in recent years.

And it's not surprising that the federal government doesn't like it; the Joint Commission on Taxation has said corporate tax inversion could cost the Treasury as much as $20 billion in tax revenue over the next decade.

President Barack Obama has returned to the topic several times over the past week or so, but urged "closing this unpatriotic loophole for good" in his budget proposal earlier this year.

"Even as corporate profits are as high as ever, a small but growing group of big corporations are fleeing the country to get out of paying taxes," President Obama said in his weekly radio address on Saturday. "They're keeping most of their business inside the United States, but they're basically renouncing their citizenship and declaring that they're based somewhere else, just to avoid paying their fair share."

tax inversion deals

Democratic leaders like Sen. Chuck Schumer, D-N.Y., have gone a step further, calling for legislation that would not only prevent future tax inversions, but include retroactive language to deprive the sought-after tax breaks to any company that executed such a deal after May 8.

That would affect the AbbVie and Medtronic deals, and create uncertainty among other U.S. companies that might be considering a tax inversion themselves.

But for all the political hot air, the law now being discussed in Washington treats the symptom, not the disease. What the politicians seem to forget is that their own failure to reform the corporate tax laws is the root cause of this problem...

Why Tax Inversion Deals Are Washington's Fault

The fact is the U.S. has the highest corporate tax rate in the world - 35%. Worse still, the U.S. taxes all profits a company makes, no matter where they are earned. Other major economies only tax profits earned domestically.

This punitive combination strongly incentivizes the use of loopholes like tax inversion deals.

It's also the reason that so many U.S. multinational corporations refuse to repatriate some $2 trillion worth of profits made overseas.

And companies have gotten very good at using these loopholes to the point that many pay an average of only about 12% of profits in taxes, and some pay zero or near zero. Overall, corporate tax loopholes cost the U.S. about $150 billion annually.

So the rules that were intended to maximize revenue instead have had the opposite effect.

But while this is easy for politicians to spin this as "unpatriotic" corporate behavior, the truth is every company has a fiduciary responsibility to their shareholders to minimize all taxes.

It's a silly accusation, and one that the politicians know is silly.

You see, when they're not insinuating that U.S. corporations are tax cheats, both Democrats and Republicans acknowledge that what's really needed is a major overhaul of the corporate tax code.

Both parties also agree that something needs to be done as soon as possible about the tax inversion loophole to stop the bleeding.

And yet, despite the urgency, it's unlikely Congress will do anything, as partisan bickering over how to fix any part of the problem - tax inversions specifically or the corporate tax code in general - quickly bog down on the details.

That leaves a status quo that's not good for anybody - U.S. companies will continue to be forced to find increasingly creative ways to get relief from a burdensome tax code, while the Treasury watches tax revenue from corporations dry up.

"My concern is that tax reform is moving slowly, inversions are moving rapidly and that is a prescription for chaos," Finance Committee Chairman Ron Wyden, D-Ore., told The Wall Street Journal.

How do you feel about tax inversion deals? Do you blame corporations for trying to minimize their tax burden, or Washington for not reforming the corporate tax code? Let us know on Twitter @moneymorning or Facebook.

UP NEXT: At least the worst thing you can say about Congress and the corporate tax code is that they've failed to fix it. When it comes to their own stock trading habits, however, things get a good bit uglier. After promising to behave as recently as 2012, some members of Congress, well, haven't...

Related Articles:

The Wall Street Journal: Congress Is Split on Taxing of Corporate Inversions The Economist: How to Stop the Inversion Perversion MarketWatch: Slim Chances Seen for Tax 'Inversion' Clampdown, Analysts Say Associated Press: Obama: Offshore 'Tax Inversions' Are Unpatriotic

Wednesday, February 4, 2015

Ford Bulls Rolling as Shares Gain

By Mike Yamamoto of OptionMonster

NEW YORK -- Ford (F) popped on strong China sales at the end of last week, and bullish option traders are rolling with the move.

OptionMonster's tracking system detected the purchase of 45,000 September 18 calls for 26 cents and the sale of an equal number of September 17 calls for 62 cents on Friday. Volume was below open interest at the lower strike, so it appears that a winning position was closed and rolled higher.

The adjustment allows the trader to collect 36 cents while staying in the trade for more potential gains, though the new long calls will lose value if the stock remains below $18 through mid-September. They expire well after the auto maker's new CEO takes charge on July 1. These calls lock in the price where shares can be purchased, allowing investors to acquire a stock with limited risk or to ride a rally without ever owning it. Traders can profit by selling contracts before expiration or swap them from one strike to another, which is what happened Friday. Ford ended the session up 2.4% to $17.08 after reporting that Chinese sales rose by almost one-third. The move follows bullish option activity in rivals General Motors (GM) and Toyota (TM) earlier in the week. Overall option volume in Ford was almost seven times greater than its daily average for the last month, with calls accounting for a bullish 84% of the total. Yamamoto has no positions in F.

Tuesday, February 3, 2015

What Would It Take to Pay Back Mom for All She Does?

young mother and son in kitchen ... BlueOrange Studio/Shutterstock One day out of 365, we pay homage to our sainted mothers. Those of us who are members of this long-suffering, uncomplaining, self-sacrificing class may get some soggy French toast in bed, (don't worry, kids; mom will clean up the kitchen), a chance to read in peace, or perhaps time to indulge in a long, hot bath. Bringing Home the Bacon If you really want to pay back mom for all she's done, get ready to pony up big. A card and some carnations (the official flower of Mother's Day, who knew?) just won't cut it. The cost of replacing mom as nurturer, nurse, cleaner and cook -- according to Insure.com's 2014 Mother's Day salary index -- would run you $62,985 a year, up from $59,862 in 2013. Breaking down the price of having someone else handle her various duties: Cooking and cleaning, $12,230 Child care, $21,736 Homework help, $7,290 Chauffeur, $5,672 Shopping, yard work, party and activity planning, finances, etc., $15,019 And my personal favorite, finding out what the kids are up to (paid in the equivalent value of a private detective), $1,036. Salary.com placed a higher value on moms in its 2014 Mother's Day salary survey, concluding that stay-at-home moms were worth $118,905 and working moms worth $70,107 (this does not include any paid salary from their job), with both groups putting more than 56 hours of overtime at home. These numbers are all up from last year's survey. Cooking It Up in a Pan Mom helps to pay for other things, too. Thanks to the Department of Agriculture, you can see what it costs to raise a child in the U.S. to 18. As of August 2013, the average cost is $241,080. This does not cover college, and hopefully dear old dad is contributing. In 2012, there were 10.3 million single U.S. mothers with children under 18, and one-third of women who gave birth in 2012 were single moms. By becoming moms, women give up time to do other things, what economists call an "opportunity cost." Particularly if your mother stayed at home when you were young, there are years or decades of lost wages, lost contributions to her Social Security, and missed chances at career advancement.Forbes used the example of a public school teacher, comparing her financial outcomes if stayed home or continued teaching. Becoming a stay-at-home mom would cost her an aggregate $700,000 in work benefits, and halve her Social Security benefit. The Census Bureau says 76 percent of moms are working moms, and that the number of stay-at-home mothers has slightly declined since 2008. Mothers, Priceless This year is the 100th anniversary of Mother's Day in America. A gesture by Anna Jarvis to remember her dear departed mother has escalated into an annual sales boon for businesses, small to large. Florists like FTD Companies (FTD) and 1-800-Flowers.com (FLWS) rank Mother's Day second only to Christmas, accounting for 25 percent of flowers and plants bought for holidays, surprisingly ahead of Valentine's Day. On average, Americans spent $168.94 on their moms last year and, according to the National Retail Federation annual Mother's Day Consumer Spending survey, are expected to spend $162.94 this year. Two thirds of us will buy flowers; 81 percent will give her a card; and a third will buy her apparel, with outings, books, housewares and jewelry among other popular gifts. Almost $20 billion will be spent. What Moms Really Want Of course, mom doesn't expect you to pay her back for all those years and dollars spent on you. Moms only want for us to be happy, healthy and appreciative: A mention in your Oscar speech like Jared Leto's beautiful tribute to his single mom, a moving quotation a la Abraham Lincoln ("All I am, or hope to be, I owe to my angel mother") or a dedication in your best-selling novel. If you can't pull those off, I suggest you go to Salary.com's mom salary wizard to print out a pretend check for Mom for the real-world equivalent of all she does for you. Slip it -- along with a gift card -- into the prettiest greeting card you can find, and let Mom know you truly understand what she's worth. It's the least you can do. More from Annalisa Kraft-Linder
•I Own 3,000 E-Books. I Paid $0: How to Build an E-Library Free •What 'Mad Men' Teaches Us About Money •I've Won Big in Sweepstakes, and You Can, Too

Time to Bury These Myths About Credit

Credit score chart low bad negative bad credit number 615 low credit score paper document breakdown credit history impact paymen Cassandra Hubbart/AOL Some credit myths refuse to die. Let's go over three major myths that you should stop believing today. You Only Have One Credit Score Reality: This myth likely exists because we want it to be true. Credit scores would be so much easier to understand and cause less stress if we received the same scores from each lender. However, the reality is that you actually have many credit scores.

Sunday, February 1, 2015

Weekend Edition – The Power of Reading

Einstein described compound interest as the “8th wonder of the World.” I certainly won’t quibble with Einstein, because, well, he’s Einstein. But I think, perhaps, the 9th (10th? 11th?) wonder of the world, is the compound power of lifelong learning. The same concept is applicable as to why the power of compound interest is so great – as you learn more, your knowledge compounds exponentially. Learning can be accomplished in a lot of ways; however, one tried and true method is being a consistently fanatical reader.

“In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time – none, zero.”

- Charlie Munger

This isn’t a novel thought from Charlie Munger. In fact, it’s been around since the written word itself. Knowledge is power and one way knowledge can be attained is via reading. From Wikipedia:

“In most languages, writing is a complement to speech or spoken language. Within a language system, writing relies on many of the same structures as speech, such as vocabulary, grammar and semantics, with the added dependency of a system of signs or symbols, usually in the form of a formal alphabet. The result of writing is generally called text, and the recipient of text is called a reader.”

I repeat, called a reader.

Writing (the pre-cursor to reading) is so important in the evolution of mankind that historians make a distinction between “history” and “pre-history.” History–as defined by historians–is the period of time after the written word. In other words, “History” really only dates back to our ability to read and write.

The Love of Reading

At Dividend.com, we love reading and do it every day of every week of every month of every year. While our reading schedule on the analyst team varies across different personal interests beyond investing alone, we have a voracious and focused desire to consume information about dividend stocks, the market, economics, geo-politics and personal investing behaviour. We’re all lucky to live in such a glorious time to consume information via the complex web of links known as the Internet. Reading has become easier than ever before. Within two clicks you can find almost anything you want, if you know what you’re looking for, and that’s the crux. While the accessibility of information has skyrocketed over the past 15 years with the explosion of the Internet, it has brought with it disproportionate mountains of useless reading.

Need A Plumber?

The paradoxical nature of good and bad information online reminds me of the story about the guy with a leaky pipe in his basement. Yes, a leaky pipe, bear with me a second. The gentleman can’t figure out how to stop the leak, so, naturally he calls a plumber. The plumber shows up at his door and the man shows him to the basement and more specifically points to the