Dollar Loses Ground, U.S. Futures Lift

The dollar is paring back some overnight gains as sentiment modestly improves, with the clarification by S&P and Moody's on the U.S. rating welcomed news. However, despite the modest rise in European stocks, eurozone spreads continue to widen, with Spanish yields higher after this morning's auction.

Get alerts before Link and Cramer make every trade

Spain sold 2.9 billion euros of three-months bills at an average yield of 5.11%, up from 2.29% at the last auction in October. Adding to the pressure was the fact that a German official sees no new bazooka in debt crisis and confirmation of Elio Di Rupo's departure from Belgium's government may lead to a reaction from the rating agencies. Elsewhere, USD-INR is making a new record high, due to twin deficits, high inflation and the Reserve Bank of India mulling possible action. In the North American session, while many will remain focused on developments in the eurozone, the market will look to guidance from the Fed minutes about the potential for additional easing measures. The minutes could provide insight into how close the FOMC came to adopting the suggestion that the Fed should strengthen its forward-looking guidance by pledging to leave its policy rate at near zero until the unemployment rate had fallen below a certain threshold. The minutes might also highlight the level of support for QE3. Despite the likelihood that dovish Fed policy will be with us for quite some time, near-term FX price action continues to be dominated by events in the EZ, and with no end of the crisis in sight we expect the dollar to remain bid. Support remains near 1.34, with resistance seen near 1.3641. In Europe, Swiss policymakers are likely to be encouraged by the October trade data, which was after the SNB established the EUR/CHF floor at 1.20. The October merchandise trade surplus widened to CHF2.15 billion from CHF1.85 billion and was driven by exports, which rose to CHF17 billion from CHF16.7 billion, while imports only saw a marginal gain. However, GDP contributions from net trade has receded in Q3 and is expected to turn lower in 2012, as the impact from the rise in trade-weighted CHF weighs more heavily on exporters. From here, some observers continue to expect the SNB to react to the potential for deflationary pressures by raising the EUR/CHF 1.20 floor. In Mexico Q3 GDP data is expected to show a pickup in growth to 3.9% year-over-year from 3.3% in Q2. Recent strength in U.S. data suggests the Mexican economy might surprise on the upside. Despite decent fundamentals, MXN (like BRL) continues to underperform during periods of market stress and so we look for a break of the October high in USD/MXN around 14.14.

>To order reprints of this article, click here: Reprints

Building A Do-It-Yourself Dividend Portfolio Part 4: Consumer Discretionary

We Are DIY Investors ... Just Like You

By way of background, Parsimony Investment Research is a group of Do-It-Yourself investors that whole-heartedly believe that individuals can and should educate themselves and manage their own money. That is, of course, if you are willing to dedicate the time and patience necessary to do so. In today's low interest rate environment, paying even modest fees to a financial advisor can significantly eat into your profits. At the end of the day, it's YOUR money and you alone are the best shepherd of your capital.

We started Parsimony to share our experiences, strategies and research with fellow DIY investors. At the end of the day, we are all in the same boat … so let's set sail and preserve and grow our wealth together!

Building A DIY Dividend Portfolio

Over the course of the next few weeks, we are going to highlight our top-ranked dividend stocks within each of the sectors below (see links for previous articles):

• Part 1: Consumer Staples
• Part 1b: Consumer Staples "Buy Zones"
• Part 2: Utilities
• Part 2b: Utilities "Buy Zones"
• Part 3: Healthcare
• Part 4: Consumer Discretionary
• Part 5: Financials
• Part 6: Technology
• Part 7: Industrials
• Part 8: Materials
• Part 9: Energy

Our goal is to provide fellow investors with a diversified pool of high-quality dividend stocks that we feel have the potential to be a core holding in your DIY Dividend Portfolio.

Rating Methodology

We use a combination of fundamental and technical analysis to determine which stocks to buy and when to buy them. For dividend stocks in particular, we have a proprietary rating system that ranks over 700 U.S. dividend stocks on a weekly basis.

Our composite rating is derived by ranking each stock based on 28 key fundamental and technical data points in five sub-rating categories:

Risk-Reward Profile (e.g., current yield, Calmar ratio)

Financial Stability (e.g., sales and EPS growth, ROE, leverage)

Dividend History (e.g., historical dividend stability and growth)

Future Dividend Potential (e.g., payout ratio, EPS estimates)

Relative Strength (e.g., 12-month total return and trends)

It should be noted that we also believe that patience is a virtue. Just because a stock has a high Parsimony composite rating, it doesn't necessarily mean that you should run out and purchase it that day. We scan the charts of our top-rated stocks daily looking for strong levels of support and resistance, which ultimately helps us determine a target "Buy Zone" for each stock. We believe that patiently waiting for a low-risk entry point for a given stock will drastically improve your long-term investment results.

Part 4: Consumer Discretionary

The Consumer Discretionary sector as a whole has performed relatively well over the past 5 years, with a total return of 18.2% (which is the 3rd highest among the nine S&P 500 sectors). The sector is considered to be cyclical in nature and it has the 4th highest average beta (1.11) of all the sectors. You can actually see the high beta in full effect in the chart below. The sector has underperformed the broader market to the downside and overperformed to the upside.

Below is a list of our top-rated dividend stocks in the Consumer Discretionary sector. Note that our composite rating ranges from 0 (lowest) to 99 (highest).

The sector is really made up of a mixed bag of industries, from restaurants and retail to media and auto components. That said, there are many stocks in the sector that you could argue are more of a "staple" than a true discretionary stock. As you can see from the table above, our top-rated stocks in the sector all have a beta under 1.00 and each has significantly outperformed the sector as a whole, averaging a 5-year total return of 92.7%!

There are actually two stocks in the sector that carry the coveted "99" Parsimony rating (which s the highest rating in our system): McDonalds Corp. (MCD) and Sturm, Ruger & Co (RGR). Both of these stocks act more like a "staple", and you could argue that their industries are almost counter-cyclical in nature (fast food and guns). As a matter of fact, with the exception of Darden Restaurants (DRI), we think all of these top-rated stocks have a counter cyclical component to them. Home Depot (HD), the home improvement retailer geared toward DIY-ers, has done exceptionally well in the wake of a stagnant economy and housing market. The same can be said for Genuine Parts Co. (GPC), which distributes automotive and industrial replacement parts. When consumers and businesses are weary about the economic outlook, they tend to try to make due with what they have and shy away from making new purchases.

As shown in the table above, the top-rated stocks have pretty consistent ratings among all the sub-categories and we believe all of these stocks would make a nice addition to your DIY Dividend Portfolio.

Conclusion

Any DIY Dividend Portfolio should include several stocks from the Consumer Discretionary sector. However, picking the right stocks in the sector has clearly made all the difference for investors. The key takeaway here is that many of the broader sectors have sub-industries that perform much better than the sector as a whole. This is part of the reason why we developed the Parsimony rating system. If you rank all of the stocks in a sector against their peers on a consistent basis, it becomes clear which companies are the strongest and which offer the best investment opportunities going forward.

Note to readers: We will detail our specific "Buy Zones" for these top-rated Consumer Discretionary stocks in a future article. Also, we will highlight our top-rated stocks in the Financial sector in Part 5 of this series.

Disclosure: I am long MCD, HD.

Earnings Preview: China MediaExpress

China MediaExpress (CCME), a stock I have been in since I wrote on it at $7.50when the symbol was still TMI, will report financial results for the fourth quarter and year-ended December 31, 2009, on Tuesday, March 23, 2010 before the stock market opens. Following is what I think the results may look like and is my opinion only based on facts that are available.

Being a new listing by way of a SPAC, it is important to note that CCME does not have any analyst estimates to hit or miss right now. So that headline risk does not exist for them on March 23rd. They do however, need to show growth and have a bullish outlook on 2010. Then I believe the analyst coverage and upgrades will follow.

Let's address both the growth and then potential for a bullish outlook.

Growth 2009 vs. 2008:

The last earnings information was the Q3 report for the CCME business.Revenue and Net Income for the first 9 months of 2009 exceeded Revenue and Net Income for all of 2008.

Financial Highlights – Third Quarter 2009 vs. Third Quarter 2008

• Net revenues increased 65% to $26.1 million in the 2009 period compared to $15.8 million;
• Gross margin for the 2009 period was 67% of net revenues;
• Operating income increased 83% to $15.5 million in 2009 compared to $8.5 million; and,
• Net income increased 83% to $11.7 million compared to $6.4 million.

Financial Highlights – Nine Months 2009 vs. Nine Months 2008

• Net revenues increased 38% to $64.0 million in the 2009 period compared to $46.2 million;
• Gross margin for the 2009 period was 64% of net revenues;
• Operating income increased 45% to $37.2 million in 2009 compared to $25.6 million;
• Net income increased 43% to $27.4 million compared to $19.2 million.

Now as far as Q4 2009, the Company has an internal target of $42mfor which management has incentive to hit both because they will receive 1m shares if they hit it and they will be penalized if they miss it due to the recent financing deal they signed with Starr International.

Since this Starr International deal was signed after 2009, I am going to make the assumption that CCME made more than 42M net income for 2009 and did not sign an agreement that they knew would penalize them because the net income target was already a miss. That would mean 14.5M+ net income in Q4. The net income comparison for Q4 2008 is 7.2m(see page 56 for 2008 numbers). That would mean 100% year over year net income growth for Q4 2009 over Q4 2008! That would be a strong headline, whether they strongly beat the 42m target or even come close to it.

In the Q3 press release the CEO made this comment about Q4 --- Mr. Cheng concluded, “Historically, our fourth quarter is seasonally our best quarter. It appears that the 2009 fourth quarter will be no exception.”

And in a press release on Feb 8, 2010, the CFO said this about Q4 - Jacky Lam, CME’s Chief Financial Officer stated, “As anticipated, we believe our 2009 fourth quarter was exceptionally strong."

CCME had approximately 24m shares outstanding and approximately 10m warrants with a strike price of $5.50 at the end of 2009. Estimated, fully diluted shares outstanding according to GAAP using the treasury method will be approximately 29m at the end of 2009. EPS for 2009 should be approximately $1.45 if they hit the 2009 $42m net income target. CCME was a SPAC and they acquired the CCME business in Q4 2009. Recently another SPAC reported earnings and used the GAAP treasury method to calculate EPS. (CCME has approximately 38.5m shares outstanding here in March 2010 so it would be approximately $1.09 EPS if you choose to look at it in a non-GAAP manner for comparison.)

Growth 2010 v.s. 2009:

The 2010 net income target for management is $83.5m. This would represent 99% growth over 2009 net income assuming they hit the 42m target. Management has strong incentive to hit this target as they would receive 7m shares! The penalty on the Starr deal would be if they have less than 55m net income in 2010.

On March 8, 2010 (last week), the CFO said they expect to have 50% organic growth and then seek an additional 50% growth from acquisitions with their cash war chest of $100m. Listen to webcast at 22:40 into it. Just last week the CFO said 50% organic growth in 2010 and another 50% growth from acquisitions. Does that sound like a Company about to warn for 2010?

No, the outlook for 2010 was given at that conference and it was bullish 50-100% growth. CCME should have approximately 39.5m shares outstanding (assuming they hit the 42m net income). If they hit just the 50% organic growth that would be approximately $1.60 EPS for 2010. (42 X 1.5 / 39.5m). If they achieve the $83.5m net income target that would be approximately $2.11 EPS for 2010. (83.5 / 39.5)

Reasons why CCME deserves a high P/E multiple of 15 - 20 :

1) Growth - 100% YOY Net income growth 2009 over 2008 and potential to do 50-100% again in 2010 over 2009.

2) Barriers to entry - CCME has an exclusive license from China's Minestry of Transportation to install in-vehicle television systems on buses traveling on highways nationwide. (Page 12 of the March 9 presentation)

3) Extremely high Gross Profit and Net Income margins - 64% Gross Profit and 43% Net Income for first 9 months of 2009.

4) Strong cash flows - $30m cash flow generated from operations for first 9 months of 2009.

5) $100m of cash and no debt.

CCME with only 50% organic growth in 2010 and EPS of $1.60 :

• 10 P/E would be $16 price per share (would be very low P/E for this type of growth - shown to illustrate that CCME is currently undervalued).
• 15 P/E would be $24 price per share.
• 20 P/E would be $32 price per share.

CCME with 100% targeted growth in 2010 and EPS of $2.11 :

• 10 P/E would be $21 price per share (would be very low P/E for this type of growth - shown to illustrate that CCME is currently undervalued).
• 15 P/E would be $31.65 price per share.
• 20 P/E would be $42.20 price per share.

Lastly, here is another Chinese bus competitor (although they are more inner-city and not public in US) and this is how they are doing and what they said for 2010.

Disclosure: I am long CCME.

Zuckerberg Donates Facebook Stock Worth Nearly $500 Million

Facebook (NASDAQ: FB  ) co-founder and CEO Mark Zuckerberg has taken holiday giving to another level. On Tuesday, the 28-year-old technology titan announced that he had given 18 million Facebook shares -- or $498.78 million worth at yesterday's closing price -- to the Silicon Valley Community Foundation. More than 191,000 Facebook users had "liked" his announcement by 12:30 p.m. Wednesday.

According to its website, the foundation "advances innovative philanthropic solutions to challenging problems" and has championed causes ranging from education reform to social equity to environmental awareness.

This is not Zuckerberg's first act of philanthropy. Two years ago he committed to The Giving Pledge, a movement spearheaded by Warren Buffett and Bill Gates to get the country's wealthiest people "to give the majority of their wealth to philanthropy." In 2010, Zuckerberg gave $100 million to launch the nonprofit Startup: Education, with the goal of improving Newark, N.J.'s public schools.

In a Facebook post on Tuesday announcing his most recent charitable contribution, the young billionaire also reflected on the progress Startup: Education has made. He said he was "really proud of the work we've done there," lauding what he called "the most progressive teachers contract in our country."

link

Top Stocks For 2011-12-22-13

Cleantech Transit, Inc. (CLNO)

There are various categories of biomass material, out of which there are five main basic materials,
1. Wood: Mainly obtained from forests and arboricultural activities.
2. Crops: Grown especially for energy conservation, these crops are found in massive amounts amongst vast rural fields.
3. Agricultural residues: Wastes produce from harvesting and processing.
4. Food: All the wasted food from industries during manufacturing process and also post consumer waste.
5. Industrial Waste: The natural or organic wastes coming from industries during manufacturing process.

Cleantech Transit Inc. was founded to capitalize on technology advances and manufacturing opportunities in the growing clean energy public transportation sector. The Company has expanded its focus to invest directly in specific green projects. Recognizing the many economic and operational advances of converting wood waste into renewable sources of energy, Cleantech has selected to invest in Phoenix Energy (www.phoenixenergy.net). This project could benefit the Company’s manufacturing clients worldwide.

Cleantech Transit, Inc. (CLNO) is pleased to announce it has met its funding requirement to secure the Company’s ability to earn in 25% of the 500KW Merced Project.

The Company is in the final stages of closing its initial interest in the Merced Project and is currently working on completing the necessary documentation and expects closing the transaction soon. As previously announced Cleantech has the option to earn up to 40% of the Merced Project and the Company plans to continue to work towards increasing its interest in the Merced Project as they move ahead.

For more information about Cleantech Transit, Inc. visit its website www.cleantechtransitinc.com

JetBlue Airways Corporation (Nasdaq:JBLU) announces the resignation of Ed Barnes, Chief Financial Officer. Mr. Barnes joined JetBlue in 2006 as Vice President, Cost Management and Financial Analysis, and was promoted to CFO in 2008.

JetBlue Airways Corporation provides passenger air transportation services in the United States. As of December 31, 2010, it operated 650 daily flights to 63 destinations in 21 states, Puerto Rico, and Mexico; and 10 countries in the Caribbean and Latin America through a fleet of 115 Airbus A320 aircrafts and 45 EMBRAER 190 aircrafts.

SunOpta Inc. (Nasdaq:STKL) announced that it will issue its financial results for the third quarter ended October 1, 2011 on November 8, 2011, after the close of the stock markets.

SunOpta Inc. manufactures and markets natural, organic, and specialty foods and natural health products. It specializes in sourcing, processing, and packaging of natural and organic food products.

8×8 Inc. (Nasdaq:EGHT) announced the launch of a powerful new web portal designed to streamline subscribers’ customization and management of their 8×8 cloud communications services.

8×8, Inc. develops and markets telecommunications services for Internet protocol (IP), telephony, and video applications.

Barnes & Noble Beats Up on Analysts Yet Again

Barnes & Noble (NYSE: BKS  ) reported earnings on Nov. 29. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Oct. 27 (Q2), Barnes & Noble met expectations on revenues and exceeded expectations on earnings per share.

Compared to the prior-year quarter, revenue was unchanged and GAAP earnings per share grew.

Gross margins increased, operating margins contracted, net margins expanded.

Revenue details
Barnes & Noble recorded revenue of $1.88 billion. The five analysts polled by S&P Capital IQ foresaw sales of $1.88 billion on the same basis. GAAP reported sales were 0.4% lower than the prior-year quarter's $1.89 billion.

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

EPS details
EPS came in at -$0.04. The seven earnings estimates compiled by S&P Capital IQ predicted -$0.08 per share. GAAP EPS were $0.04 for Q2 versus -$0.20 per share for the prior-year quarter.

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

Margin details
For the quarter, gross margin was 25.5%, 60 basis points better than the prior-year quarter. Operating margin was 0.4%, 10 basis points worse than the prior-year quarter. Net margin was 0.1%, 40 basis points better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $2.55 billion.

Next year's average estimate for revenue is $7.30 billion.

Investor sentiment
The stock has a one-star rating (out of five) at Motley Fool CAPS, with 306 members out of 664 rating the stock outperform, and 358 members rating it underperform. Among 179 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 66 give Barnes & Noble a green thumbs-up, and 113 give it a red thumbs-down.

Is Barnes & Noble the right retailer for your portfolio? Learn how to maximize your investment income and "Secure Your Future With 9 Rock-Solid Dividend Stocks," including one above-average retailing powerhouse. Click here for instant access to this free report.

• Add Barnes & Noble to My Watchlist.

Dial In Profit With Frontier Communications

Despite the three-day rally in stocks, recessionary fears have many investors scrambling to find stable stocks that might still
turn a profit.

I�ve uncovered a select group of potentially �recession-proof� stocks that offer an attractive dividend � and have been doing so for years. These blue-chip companies are backed by solid charts and strong fundamentals.

Last week, I highlighted 100-year-old blue-chip utility Southern Co. (NYSE:SO). �This week, I�d like to turn your attention
to one of the highest-yielding stocks in the S&P 500, Frontier Communications (NYSE:FTR).

The largest rural telecom provider in the U.S. (as measured by customers), Frontier offers an annual dividend of 75 cents — an outstanding forward annual yield of around 10.7%.

Frontier provides landline, high-speed Internet and digital TV services to customers across 27 U.S. states. Its services doubled in size in mid-2010 after it acquired millions in access lines from phone provider Verizon (NYSE:VZ).

From a technical outlook, the acquisition had an overall positive impact on the stock. Shares rose from a pre-acquisition low near $6.16, in early 2010, to a post-purchase high of $9.15 by early 2011.

Although the stock has been in a slump in recent months, it was able to bounce off a major support level, around $6.20. Since support — which often acts as a floor, holding a stock steady — is likely to prevent the stock from falling further, FTR may be near its low. As a result, now could be a potentially attractive entry point to take a position and ride the stock higher.

Investors should be aware, however, that if the $6.20 support level is definitively, the stock could quickly drop much further.

From a fundamental perspective, Frontier�s revenue and earnings appear solid, meaning the company�s dividend is stable.

Due to the Verizon acquisition, revenue in the first six months of 2011 exploded 157% to $2.7 billion, from $1.04 billion in the first half of 2010.

For the full 2011 year, the 17 analysts following the company expect revenue will expand 38.5% to $5.3 billion, compared to $3.8 billion last year.

While earnings fell markedly in the first half of 2011, there are three mains reasons for the drop. First, operating expenses soared, due to increased severance pay and early retirement costs brought on by the Verizon purchase. Second, interest expenses nearly doubled. Third, as a result of the acquisition, 679 million new shares were issued to Verizon, tripling Frontier�s number of shares outstanding to 679 million, and as a result substantially reducing Frontier�s earnings-per-share figure.

For these same reasons, analysts project full-year 2011 earnings will drop to 26 cents a share, from 48 cents a share a year earlier.

Nonetheless, the company�s dividend appears secure, due to its free cash flow balance. For the first half of 2011, Frontier�s free cash flow was $484.2 million and it paid out $373.2 million, resulting in a sustainable payout ratio of 77%.

Furthermore, Frontier�s Chairman and CEO, Maggie Wilderotter, has assured shareholders the company is committed to maintaining its dividend. Over the next two years, Frontier plans to add 575,000 customers to its current base of 1.7 million subscribers. This addition should increase cash flow, helping to further support the company�s dividend.

Because this rural telecom provider has such an attractive dividend, Frontier is a viable pick to ride out these volatile times.

At the time of writing, Deborah O�Malley did not hold a position in any of the stocks mentioned in this article.

 

Top Mining Stocks in 2012: First Majestic Silver

As New Year's Eve quickly approaches, and we prepare to make our 2013 investing resolutions, it's a good time to reflect on the materials sector in the year that was 2012. In this December series, our writers will be recapping some of the most popular, highest-performing stocks in this sector. We'll examine whether the gains these companies provided their shareholders in 2012 are sustainable, or whether they merely can be attributed to one-time events or fizzling trends. Consider these pieces as gifts to benefit our Foolish, long-term investors seeking exposure to the materials sector. Enjoy, and Fool on!

When you are simply at the top of your game, and your business is mining, then you just might be a rock star. Silver miner First Majestic Silver (NYSE: AG  ) has launched into superstardom as the company's astonishingly consistent execution in the pursuit of low-cost production growth has rewarded shareholders handsomely over the years.

As of Friday's close, First Majestic's shares had mined and milled their way to a peer-leading 36% advance year to date. Not even the most-recognized name in silver -- Silver Wheaton (NYSE: SLW  ) -- has climbed high enough to surpass that mark this year. The relevant benchmark, Global X Silver Miners ETF (NYSEMKT: SIL  ) , meanwhile, has seen a corresponding gain of only 10%, while bullion proxy iShares Silver Trust (NYSEMKT: SLV  ) added 16%.

But just as I sought to offer my readers a look back at another brilliant performance in 2012, the rock-star duo of CEO Keith Neumeyer and COO Ram�n Davila released another brand new hit that's destined to be a chart-topper. Over the weekend, First Majestic announced the friendly acquisition of Orko Silver (NASDAQOTH: OKOFF  ) in a share-based transaction valued at $393 million. First Majestic's shares shed more than 7% Monday morning in the wake of the announcement, presenting what I consider an extremely compelling entry point for discerning silver investors.

This is a huge win for First Majestic and its shareholders, in my opinion, adding one of the world's largest undeveloped silver deposits -- the aptly named La Preciosa -- to the company's already-glistening asset portfolio. And clearly, with the bonus of a healthy 69% premium, it's also a major victory for Orko shareholders in the wake of Pan American Silver's (NASDAQ: PAAS  ) surprise departure from the project earlier this year. At the deal's implied value of $2.76 per share, Fools who heeded my recommendation of Orko Silver as a top stock for 2012 could close the year with better than an 80% gain.�Happy holidays!

3 giant leaps for First Majestic in 2012
Steady growth trajectories like the one that First Majestic continues to build involve meaningful achievements through all aspects the company's operations, but for this year-end retrospective I would like to highlight three watershed developments in particular.�

Although the producing La Guitarra mine and its surrounding development targets were acquired through a far smaller-scale transaction than the recently announced bid for Orko Silver, there is nothing small about the potential for this property package to add meaningful shareholder value.�I had the pleasure of visiting the La Guitarra mine last month during a tour of several First Majestic operations, and I was struck by the sheer speed with which the company has streamlined operations to yield dramatically lower operating costs. Meanwhile, the bigger picture involves an array of very exciting exploration targets, and even an opportunity for a second standalone mine on the property. I believe that the market has scarcely begun to account for the full value of La Guitarra, and therefore I view this important acquisition as a likely contributor to continued outperformance for the stock during 2013.

Throughout 2012, the successful completion of an ambitious mine and mill construction at the emerging flagship Del Toro mine remained First Majestic's dominant priority; and it shows! What will begin very shortly as an initial 1,000-ton-per-day operation has been intelligently designed with the necessary footprint for the mine's subsequent throughput of 4,000 tpd slated for 2014. Following a very respectable output of 3.6 million silver-equivalent ounces during 2013, First Majestic projects that Del Toro alone will produce 7.2 million SEOs beginning in 2014. That represents a near-doubling of the company's consolidated production over the next two years and is likely to be a key catalyst behind the stock's splendid performance during 2012.�

A view of the milling and grinding circuit at Del Toro, as it appeared during the author's visit to the construction site in November. First production from Del Toro is now imminent, adding to the long list of First Majestic's beautifully executed achievements in the company's ceaseless quest for growth. Photo by Christopher Barker.

In its initial response to the third major development for First Majestic Silver during 2012, I believe the market is completely out of whack. Although the proposed Orko Silver acquisition outlined above can't yet be considered among the developments that boosted share performance during 2012, we Fools can nonetheless stand in awe of the phenomenal shareholder value that this team of expert operators is bound to unlock from this world-class silver deposit. La Preciosa is ideally situated in convenient range of the company's base of operations in Durango, and close to the miner's La Parilla and Del Toro mines. More importantly, the project's timeline fits like a glove with the company's existing project schedule, presenting the next major construction project to follow ramp-up activities at both La Guitarra and Del Toro.

As each of the high-quality silver assets underlying the three major developments for First Majestic Silver in 2012 is further cultivated by the company's outstanding management and skilled personnel, I look forward to continued outperformance of these shares over those of their silver-mining peers over an extended time horizon. Accordingly, First Majestic remains a core position within my own investment portfolio, and it will find a spot among my forthcoming recommendations for the top silver investments in 2013.

To stay tuned for my 2013 recommendations, please�bookmark my article list�or�follow me on Twitter. In the meantime, enjoy The Motley Fool's in-depth analyst report�on another superstar of the silver industry:�Silver Wheaton.

Stock Futures Tumble on “Plan B” Failure

In Friday morning trading in Asia, stock-index futures are tumbling not because of hysteria over the supposed apocalypse predicted by the Mayans but the rising risk of the U.S. economy taking a header over the fiscal cliff.

House Republicans canceled a vote on its so-called Plan B for lack of support, which never had a chance of enactment anyway. The Senate wasn’t going to take it up and President Obama vowed to veto the scheme to continue the Bush-era tax rates for those making less than $1 million a year.

Standard & Poor’s 500 futures were down some 1.4% in Asian trading as the confidence bordering on complacency that some solution to avert massive tax increases and spending reductions would be reached by year-end was shaken by the lack of progress between the White House and the GOP-led House.

Futures Offer a Fast and Liquid Market

Options on futures. In some ways, they just about replicate the �Regular Stock Option Experience� but there are some really profitable ways to use futures if you know what to look for.

All options give you the right, but not the obligation, to buy (if calls) or sell (if puts) a specified quantity of some underlying instrument. An option on a stock or exchange-traded fund is quite simple in this regard. Say in mid-July you owned 1 August 135 call in SPY — the SPDR S&P 500 ETF (NYSE:SPY) that tracks the S&P 500 Index. The SPY was one-tenth the value of the S&P 500, so it would be trading around $135 if the index was near 1,350.

As a call option owner, you had the right (but not the obligation) to buy 100 shares of SPY at $135 sometime between mid-July and August expiration, which occurs at the close of the third Friday of August (Aug. 19 this year). Obviously if SPY closed above $135 on expiration, you would have exercised your right to buy SPY at $135, or you might sell your call. Given the market�s turmoil, however, you would have let your call expire without acting on it — eating your fee, but not wiping out your portfolio as the SPY crashed as low as $112 in August 2011.

A SPY call, or a call on anything for that matter, has a nice risk/reward backdrop. Your gains are theoretically boundless, whereas your losses are limited to the amount you paid for the call. This gets into two important distinctions of being long an option and being long the stock or ETF. First, options are cheaper than the underlying, giving the holder greater leverage. Second, the careful holder can get in and out of his position without taking ownership of the underlying security.

There are a number of trading vehicles linked to the S&P 500 Index because of its influence and popularity. One of the most active is CBOE S&P 500 Index Options (CBOE:SPX). The SPX is 10 times the price of the SPY. In many ways, SPY tracks SPX, and the two pretty much move exactly in line. If SPX moves up 10 points, SPY moves up one, and if SPX drops 10, SPY drops 1.

The Futures Advantage

But the options on SPX are very different from the options on SPY. They are futures options, and here�s the advantage of this product over standard options:

Instead of getting delivery of a stock (or basket of stocks in this case) you theoretically get delivery of the corresponding SPX future. Except the future itself simply cash settles. So if you had owned 1 SPX August 1350 Call, and SPX closed above $1,350 — say $1,355 — you would have collected the $5 cash difference. You need no extra money to settle the SPX call and you have no residual position once SPX expires.

In contrast, if you had exercised that SPY August 135 Call and taken delivery of SPY, you would have needed to put up the bucks to own the basket of stocks in the index, or more precisely, the percentage of stock that each makes up of the S&P 500 Index.

That might be a choice for an institutional investor, but few of the rest of us are interested in that. (Just to be clear, few SPY options traders decide to take delivery but instead sell their profitable long position and pocket the profits.)

One solid resource for futures products is the CME Group, the exchange that lists many of the most liquid futures products. It products include futures on metals, a slew of energy and oil products, foreign currencies and interest rates.

The Futures Negative

The pitfalls for retail investors around any cash-settled option like SPX often come back to settlement and expiration.

For instance, SPX options stop trading on the close of Thursday, then settle on the open of Friday, so you run the risk of a market move between Thursday’s close and Friday’s open. This can work against or for the investor, depending on the move, but you are left somewhat helpless overnight.

SPX futures and options settle on the opening “print” on expiration Friday. This is a calculated price based on the opening quote in each of the 500 stocks that comprise the index. This is another unpredictable number that can work for or against the investor.

To me, these are both outsized bets on a rather random outcome — one I would never make. I would close out before the options stop trading and let someone else roll the dice.

Testing the Waters

Keep in mind this article is just one narrow comparison of futures to “regular” options. Futures options come in many shapes and sizes and have all sorts of unique mechanisms. As a general rule, it comes down to the terms of the futures themselves.

If it�s gold and the future gives you delivery of a troy ounce of gold somewhere, so will the options on that future. These trading products are all pretty unique, and nowadays just about all have an ETF or ETN alternative, so use the product that fits your needs the best.

You may want to test the waters and compare futures options on say, gold, crude oil, and Treasury bonds to ETFs and ETNs like the SPDR Gold Trust (NYSE:GLD), the U.S. Oil Fund (NYSE:USO) and the iShares Barclays 20 Year Treasury Bond (NYSE:TLT).

This is a good opportunity to see how the game is played — and if it�s something that appeals to you, you can start opening your own contracts to meet your own investment style.

Follow Adam Warner on Twitter at @agwarner.

Top Stocks For 12/15/2012-19

DALLAS, Aug. 5, 2010 (CRWENEWSWIRE) — The Federal Home Loan Bank of Dallas (Bank) is pleased to announce that it is making available, through its member institutions, $225,000 in partnership grant funds to assist eligible community-based organizations.

Partnership grants are offered through the Bank’s member institutions on a first-come, first-served basis. The grants provide funding for the operational needs of community-based organizations involved in affordable housing activities. The Bank matches, at a 3:1 ratio, its members’ cash contributions of $500 up to $5,000 to a community-based organization. The maximum matching contribution from the Bank is $15,000, allowing a community-based organization to receive $20,000 from the Bank and the sponsoring member.

More information on the grant, including the criteria and the application, are available on the Bank’s web site at www.fhlb.com/community/ahp_partnership.html. The Bank will begin accepting applications on September 1, 2010. Any applications received prior to that date will not be considered.

All applications must be accompanied by a 501(c)(3) nonprofit designation from the Internal Revenue Service, a commitment letter from the member institution that is providing the matching funds, and a 2010 “Certificate of Good Standing” from the community-based organization’s state of incorporation.

Since the start of the Partnership Grant Program (PGP) in 1996, the Bank has awarded $2.94 million in partnership grants through its member institutions. The funds have been used for computer software purchases, marketing, and administrative costs, among other purposes.

A list of the Bank’s member institutions is available on its web site at www.fhlb.com/member/.

About the Federal Home Loan Bank of Dallas

The Federal Home Loan Bank of Dallas is one of 12 district banks in the FHLBank System created by Congress in 1932. The Bank, with total assets of $57.1 billion as of June 30, 2010, is a member-owned cooperative that supports housing and community development by providing competitively priced loans and other credit products to more than 900 members and associated institutions in Arkansas, Louisiana, Mississippi, New Mexico, and Texas. For more information, visit the Bank’s web site at www.fhlb.com.

Contact:

Federal Home Loan Bank of Dallas
Corporate Communications
(214) 441-8445
www.fhlb.com

 

 

Poor Recovery: The Problem Is Institutional

Harold Meyerson, Op Ed Columnist at The Washington Post, has hit the nail right on the head, in the opinion of GEI. Meyerson says the debate about whether the recession and poor recovery is a cyclical problem or a structural problem is misguided. He says the problem is institutional - - - and is he ever right!

In a column last week, Myerson points out that the devastation of The Great Recession has fallen disproportionately on the blue collar population, those without a college degree. And he traces the rolling over of median family income in this century, not just in the downturn, but since the turn of the century. Even at the peak, in 2007, median family income was less than in 2000.

What Meyerson doesn't point out is that average incomes have faired better in the 21st century and in all of the past 50 years. In fact, average family income has risen more than 2.5 times as much and median income over the last 30 years. Why is this important? Because the more there is a fat tail of ever higher incomes for a few, the greater the difference between average and median income becomes.

Myerson says:

The great sociologist William Julius Wilson has long argued that the key to the unraveling of the lives of the African American poor was the decline in the number of "marriageable males" as work disappeared from the inner city. Much the same could now be said of working-class whites in neighborhoods that may not look like the ghettos of Cleveland or Detroit but in which productive economic activity is increasingly hard to find.

This grim new reality has yet to inform our debate over how to come back from this mega-recession. Those who believe our downturn is cyclical argue that job-creating public spending can restore us to prosperity, while those who believe it's structural - that we have too many carpenters, say, and not enough nurses - believe that we should leave things be while American workers acquire new skills and enter different lines of work. But there's a third way to look at the recession: that it's institutional, that it's the consequence of the decisions by leading banks and corporations to stop investing in the job-creating enterprises that were the key to broadly shared prosperity.

Since Meyerson has chosen income disparity as a cornerstone of his argument, let's look at how incomes have grown over the last 50 years. These are shown in the following graph, not adjusted for inflation.

click to enlarge images

Real median income and average income seem to grow similarly in the 1950s and 1960s, the growth of average income starts to pull away in the mid-1960s and appears to continue to gain gound for the the next 40+ years. The more average income deviates from median income the more money is found in the high income tail on the distribution curve. This is often called a "fat tail", which is very appropriate in this discussion because that is where the fat cats are. The fat tail has not gotten so because ten times as many people equaled the incomes of the former fat cats, but more because a few fat cats have received 10 times the income. This is exemplified by the often quoted statistic that average CEO salaries were 40x average worker pay 50 years ago and today are more like 400x.

The change income distribution that seems to be appearing in the above graph becomes more apparent in the following graph where real income gains are shown for the last six decades starting with the ten years from 1949 - 1959 (the 1950s) and ending with 1999 - 2009 (the 2000s).

The 1950s and 60s were real boom years. Starting with the 1970s a lower level of income growth was established, but even that lower level could not be maintained in the 2000s.

After the 1950s every decade has seen average real income grow more than the median. The fat tail has gotten fatter over the past half century in every decade, without exception. Yes the average did decline in the 2000s, but the median declined 76% more!

The most dramatic pattern of change is evident when the data is divided into two halves: 1949 to 1979 and 1979 - 2009. This is done in the following graph:

For thirty years after World War II the wealth of the country increased in a balanced manner. The average income containing the greater contribution from the top earners of the day, grew at a rate very similar to the income growth of the broader population, represented by the median.

Yes there were "fat cats" and they had significantly larger incomes than the bulk of the population. And these top incomes grew over those three decades, but at almost the same rate as the majority of the populace.

Then something happened. From 1979-2009 it appears that the American pie suddenly got smaller. In the later three decades the real median income growth was less than 10% of the rate seen from 1949 to 1979. And as the pie got smaller, the fat cats took a much larger share. The average income grew at a rate 254% that of the median income. You might say that, as the cow gave less milk, the top of the economic ladder skimmed more and more cream off the top.

Meyerson identifies the force majuere to be corporate America:

Our multinational companies still invest, of course - just not at home. A study by the Business Roundtable and the U.S. Council Foundation found that the share of the profits of U.S.-based multinationals that came from their foreign affiliates had increased from 17 percent in 1977 and 27 percent in 1994 to 48.6 percent in 2006. As the companies' revenue from abroad has increased, their dependence on American consumers has diminished. The equilibrium among production, wages and purchasing power - the equilibrium that Henry Ford famously recognized when he upped his workers' pay to an unheard-of $5 a day in 1913 so they could afford to buy the cars they made, the equilibrium that became the model for 20th-century American capitalism - has been shattered. Making and selling their goods abroad, U.S. multinationals can slash their workforces and reduce their wages at home while retaining their revenue and increasing their profits. And that's exactly what they've done.

Meyerson doesn't get into some of the other areas that might be brought to bear on the current condition of the American economy:

• He doesn't address the fact that the U.S. ranks below some third world countries in education.
• He doesn't discuss the increasing burden of health care, both because costs have been running out of control and because an ever increasing portion of the population is kept from making the contribution they might have otherwise because of poor health.
• He doesn't discuss the capture of much potential domestic capital by financial engineers who find it much easier to get rich in a rigged casino than to make money the old fashioned way.

Part of the problem is that Americans have fallen into the way of the easiest path, where, either by credit card or by making quick trades, the desires of the moment are satisfied with no seemingly current cost.

It seems that few want to think about the needs of tomorrow. This is true starting with the masses who kiss off the idea of working hard in school to prepare for what they will need 20 years down the road. This is also true of the "capitalist" who finds that skimming a few percent off each of many deals a year to get quick, large quarterly returns is much easier than investing and building something that will will make much larger returns extending over decades and producing things of real economic utility.

There are a number of things that Meyerson does not address, but if you want to hit one nail at a time, I think he has picked the baddest nail in the plank. He finishes his column thusly:

Our economic woes, then, are not simply cyclical or structural. They are also - chiefly - institutional, the consequence of U.S. corporate behavior that has plunged us into a downward cycle of underinvestment, underemployment and under-consumption. Our solutions must be similarly institutional, requiring, for starters, the seating of public and worker representatives on corporate boards. Short of that, there will be no real prospects for reversing America's downward mobility.

If we were to address all the other issues I mentioned previously and did not address the institutional problem Meterson has identified, we would not ultimately solve our economic puzzle.

Disclosure: I am long SPY, QQQQ.

Top Stocks For 12/15/2012-18

All financial figures are in Canadian dollars unless noted otherwise.
CALGARY, Aug. 5 /CRWENewswire/ - Pembina Pipeline Income Fund (”Pembina” or the “Fund”) announced today that it generated increased revenue, net operating income, net earnings and cash flow from operating activities during the second quarter of 2010 compared to the second quarter of 2009. While Pembina’s Gas Services business, which was acquired in 2009, was the primary driver of the improved financial results, diligent cost control in Conventional Pipelines also contributed to increased net earnings and cash flow from operations.

“Our focus on operational excellence is paying off,” said Bob Michaleski, President and Chief Executive Officer. “We’re boosting revenue through expansion and providing customers with reliable and highly competitive services. Safe work practices and a comprehensive integrity management system enable us to operate responsibly.”

Revenue, net of product purchases, during the second quarter of 2010 was $129.9 million, compared to $121.1 million during the same period in 2009. During the first six months of 2010, Pembina generated revenue, net of product purchases, of $261.4 million, compared to $237.2 million in the first six months of 2009.

Operating expenses were $39.1 million during the second quarter of 2010, compared to $35.8 million during the same period in 2009. The increase reflects Pembina’s expanded operations - the addition of Gas Services - as well as higher power costs in the Oil Sands & Heavy Oil business. Reduced maintenance and labour costs in the Conventional Pipelines business offset this increase. During the first six months of 2010, operating expenses were $77.4 million, compared to $79.9 million during the first half of 2009.

Net operating income was $90.8 million during the second quarter of 2010, compared to $85.3 million during the same time period in 2009. Year-to-date net operating income totaled $184.0 million, up from $157.3 million generated during the six months ended June 30, 2009.

Net earnings were $41.2 million ($0.25 per Trust Unit) in the second quarter of 2010, compared to $36.2 million ($0.25 per Trust Unit) during the second quarter of 2009. The increase in net earnings reflects higher revenues and decreased depreciation and amortization offset by higher operating expenses. For the six months ended June 30, 2010, net earnings totaled $92.2 million, compared to $64.5 million during the same period in 2009.

Cash flow from operating activities during the second quarter of 2010 was $68.1 million, compared to $49.2 million the year before. Year-to-date cash flow from operating activities was $135.4 million, compared to $90.4 million during the same six months in 2009.

Distributable cash per Trust Unit during the second quarter of 2010 was $0.39 compared to $0.41 during the second quarter of 2009. On a year-to-date basis for 2010, distributable cash per Trust Unit was $0.81, an increase over the $0.78 generated during the first six months of 2009.

Distributed cash was $63.7 million during the second quarter of 2010, representing a quarterly payment of $0.39 per Trust Unit ($0.13 per Trust Unit monthly), compared to $57.5 million in the second quarter of 2009 (no change in per Trust Unit payments). Distributed cash year-to-date totaled $126.6 million compared to $110.7 million during the first six months of 2009. At its annual general and special meeting held May 7, 2010, unitholders voted in favour of the recommendation to convert Pembina from an income trust to a corporation. Following corporate conversion, Pembina expects to maintain its current cash distributions in the form of a dividend of $1.56 per share per year ($0.13 per share monthly) through 2013.

Growth Update

Strong operational performance during the first half of the year is expected to provide a firm financial foundation to support Pembina’s growth strategy. “We’re on track to expand our service offering to customers and invest in new assets which support and enhance long-term value for our investors,” said Michaleski.

Nipisi and Mitsue Pipeline Projects

On July 13, 2010, Pembina announced it had received approval from the Energy Resources Conservation Board (”ERCB”) to construct and operate the Nipisi and Mitsue Pipelines. Approval to proceed with construction of the pipeline projects was granted by the ERCB without a public hearing, as all stakeholder objections were resolved through the consultation process.

The Nipisi Pipeline, designed to initially transport 100,000 barrels per day (”bbls/d”) of diluted heavy oil, will originate north of the Town of Slave Lake, Alberta and run south to Judy Creek, Alberta. From there it will connect to Pembina’s existing pipeline system that delivers products to the Edmonton area. The Nipisi Pipeline is designed such that it can be expanded to a capacity of approximately 200,000 bbls/d. The Mitsue Pipeline is designed to transport approximately 20,000 bbls/d of condensate (a light hydrocarbon used to dilute heavy oil) from Whitecourt, Alberta to producers operating north of the Town of Slave Lake, Alberta. The Mitsue Pipeline is designed such that it can be expanded to a capacity of approximately 45,000 bbls/d.

Piping fabrication for the pump stations will commence in August and pump station construction is expected to begin in September. Right-of-way clearing is also anticipated to start in September in preparation for pipeline construction, which is planned to begin in early December. Approximately 800 to 1,000 temporary positions are expected to be created during construction. All engineering, construction and procurement contracts have been awarded.

Both projects, which Pembina estimates to cost a combined total of $440 million, are scheduled to be completed in mid-2011. Based on certain assumptions, Pembina’s internal projections estimate the two projects combined will generate approximately $45 million per annum in net operating income (see “Forward-Looking Statements and Information” on page 4).

Enhanced NGL Extraction at Cutbank Complex

Pembina is negotiating long-term fee-for-service agreements to provide producers with enhanced natural gas liquids (”NGLs”) processing at its Cutbank natural gas gathering and processing facility. Assuming such long-term commitments are obtained, Pembina plans to expand the Cutbank Complex to extract up to 15,000 bbls/d of incremental NGLs (primarily ethane).

Regulatory approval for the project, which includes constructing an ethane extraction facility as well as a 10-kilometre pipeline that will deliver the product to Pembina’s Peace Pipeline system, has been granted. Project engineering is approximately 35 percent complete and pending the completion of customer agreements, construction is scheduled to begin in the fall of 2010. Commissioning is expected to begin in mid-2011.

Located about 100 kilometres southwest of Grande Prairie, the Cutbank Complex is a fully interconnected sweet gas gathering and processing complex consisting of three gas plants and 300 kilometres of gathering systems. Total gross processing capacity at the Cutbank Complex is 360 million cubic feet per day (”mmcf/d”) (of which 305 mmcf/d is net to Pembina).

“Pembina’s priority is to pursue investments that are located near long-life economic hydrocarbon reserves that can generate strong returns in both the near-term and the long-term,” said Michaleski. “This region has significant supply potential and new technologies are driving production costs down and recovery rates up, while multi-year, fee-for service contracts increase cash flow certainty for Pembina and further reduces our exposure to commodity price risk.”

“This is a good project on a standalone basis but there is additional integration value as well. Our Conventional Pipelines business will transport the NGLs, while there may be future opportunity for our Midstream & Marketing operations to provide terminal, storage and hub services,” added Michaleski.

Corporate Conversion

Pembina’s Board of Directors plans to complete the conversion of the Fund into a dividend-paying corporate entity on October 1, 2010 and the Toronto Stock Exchange (”TSX”) has conditionally approved the listing of the common shares and convertible debentures of Pembina Pipeline Corporation (”PPC”) following conversion. As a result, Pembina expects the common shares and convertible debentures of PPC will commence trading on the TSX on or about Tuesday, October 5, 2010 under the symbols “PPL” and “PPL.DB.B”, respectively. The Fund’s trust units and convertible debentures are expected to be de-listed by the TSX that same day.

The decision to convert to a corporate entity results from a Government of Canada decision in 2006 that introduced legislation designed to change the taxation of income trusts. By converting to a corporation, Pembina can avoid the imposition of specified-investment flow through (”SIFT”) tax applicable beginning in 2011. Pembina expects conversion to provide greater access to capital markets, improved liquidity and greater flexibility to pursue growth and expansion.

Conference Call & Webcast

Pembina will host a conference call and webcast on Thursday, August 5, at 2 p.m. MT (4 p.m. ET) for interested investors, analysts, brokers and media representatives to discuss the second quarter financial and operating results.

The conference call dial-in numbers for Canada and the U.S. are 647-427-7450 or 888-231-8191. A recording of the conference call will be available for replay until August 11, 2010 at 11:59 p.m. ET. To access the replay, please dial either 416-849-0833 or 800-642-1687 and enter the password 89676088.

A live webcast of the conference call can be accessed on Pembina’s website at www.pembina.com under Investor Information, Calendar of Events, or by entering http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3159640 in your web browser. Shortly after the call, an audio archive will be posted on the website for 90 days.

For further information

Glenys Hermanutz, Vice President, Corporate Affairs, Pembina Pipeline Corporation, (403) 231-7500, 1-888-428-3222, e-mail: investor-relations@pembina.com

 

Buy: Southwest Airlines

Some investors believe high oil prices will continue to hurt Southwest Airlines (LUV) ; its stock is down more than 20 percent over the past year, as oil prices have surged. However, the slowly improving economy -- and the pickup in air travel that often goes along with it -- should provide a good tailwind for the Dallas-based airline, says Matt Collins, an analyst for Edward Jones. Thanks to consolidation in the industry, airlines can pass along some fuel costs through higher airfares, says Collins. Southwest is adding bigger, more-fuel-efficient planes and has kept many consumers happy by not charging fees for up to two checked bags. And in an industry with a reputation for earnings misses and bankruptcies, Southwest has posted a profit for 39 straight years.

Sell: Old Dominion Freight Line

This trucker specializes in "less-than-truckload" freight (it consolidates the shipments of several customers on one truck), and it's one of the strongest in the industry. But the Thomasville, N.C., firm's stock trades at 17 times this year's expected earnings, one of the higher valuations in the industry, says Matthew Young, an equity analyst for Morningstar. Old Dominion (ODFL) has been able to pass along fuel surcharges, but paradoxically, the improving economy might bring more rival trucks back on the road. The company says it works to be efficient when oil prices are high.

Hold: Dollar General

Shares of this Goodlettsville, Tenn., retailer have surged 50 percent in the past year. Sales in 2011 were $14.8 billion, up 14 percent from a year earlier. Rising gas prices could persuade consumers to shop more at Dollar General (DG), says David White, a financial planner in Bloomfield Hills, Mich. Still, investors might wonder why some shareholders sold 25 million shares this spring at $45 a share, just beneath the stock's 52-week high. At the time of the sale, Dollar General said it didn't receive any proceeds from the transactions.

AstraZeneca Uses Local Partners to Expand Impact of China R&D

Editor's Note: Steve Yang, PhD, of AstraZeneca (AZN), where he is vice-president and head of R&D for Asia, was recently interviewed by EBD Group, our partner in the ChinaBio Partnering Forum. His remarks on AstraZeneca's China R&D operations and the company's China partnering strategies were printed in EBD's online publication partneringNews (see site). We reprint the interview in full below.

partneringNEWS (pN): AstraZeneca has a long history in China, beginning with its first joint venture in 1993. How have the Chinese business and research environments changed since then and where are they heading?

Steve Yang: I am glad you recognized our long history in China which we're very proud of. Our decision to set up here in 1993 makes us one of the most established multinational pharmaceutical companies in the country and this "early mover" status has allowed us to work and partner with a wide range of local healthcare providers and government ministries for almost twenty years.

In terms of changes, certainly more multinational companies like AstraZeneca are now coming to China and the Asia region. Our point of view from an R&D perspective is that we need to have a significant physical presence here to be closer to the patients we serve and the scientists and medical professionals we collaborate with. Also, being here on the ground allows us to access the great local talent. Chinese culture has a strong history of innovation and the people we've tapped into locally help support and drive our innovative R&D efforts. We access the R&D innovation and capabilities available externally, which is a great way to augment our internal capability. We are already working with many talented partners here in China and are always looking for potential new collaborations.

pN: At ChinaBio you are discussing capturing innovation. Where do you see innovative opportunities in China for AstraZeneca?

Steve Yang: We see those opportunities coming from three fronts, two of which I mentioned earlier: the world-class talent pools we can tap into, and being physically close enough to external partners to meaningfully collaborate with them. The third component is our focus on the specific diseases that are important to patients in China and the rest of Asia.

Let me address each of those in turn.

We believe that China's innovation heritage is set to continue and that it and Asia as a whole will play an increasingly important role in innovation globally, not just in Asia. It is important to recognize that this is already happening as both China and Asia are important to AstraZeneca's current drug development programs and overall global R&D strategy.

As far as collaborations go, we've put in place a strong, collaborative network with leading academic institutions not only in China but also in Japan, Korea and Singapore, across which we also collaborate with local biotech companies to expedite the availability of diagnostic tools that will benefit local patients.

When it comes to disease focus we aim to develop the most meaningful, innovative products and therapies to meet the unmet medical needs of Asian people in particular, such as stomach and liver cancer which are more prevalent in Asians. Some of the data behind these conditions highlight huge disease burdens: more than half of newly diagnosed stomach cancers arise from East Asia and over 75% of world's liver cancer patients are in this part of the world.

pN: How do you see your presence in China five years from now?

Steve Yang: Our investments in China and more broadly, in Asia, are set to continue. I can't stress this enough, this is clearly based on our belief that the talent in this part of the world can drive innovation for us and also that it is in Asia and the so-called emerging markets where the industry will experience significant growth. Using China as a specific example, the growth of its pharmaceutical market is on a scale we don't see anywhere else. In 2004, it was worth USD 10 billion. Within five years, it tripled. China is now the fifth largest market worldwide, worth USD 30 billion with growth rates projected to exceed 20% annually. The fact that it is estimated to be a USD 80 billion market by 2014 and will be ranked only behind the United States and Japan is incredible.

For us at AstraZeneca, we expect to continue our strong performance in China with double-digit growth rates in the years ahead. We more than doubled our sales here between 2004 and 2009, and in 2010 revenue grew to over USD 1 billion, a 28% increase (at constant exchange rates).

pN: What is your partnering strategy for China? (What types of organizations interest you and how may they best approach you?)

Steve Yang: A central plank of our global R&D strategy — not just in China and Asia — is to collaborate with highly talented, best-in-class, external academic and medical institutions that have complementary in-depth expertise. We fully recognize that adopting a more collaborative approach to R&D helps us achieve more than we ever could alone and as such, we always aim to collaborate based on a "win-win" principle.

More broadly and irrespective of location, we're forming creative, unexpected partnerships with other key players in the healthcare arena. Around the world, we have the opportunity to go beyond the traditional pharma-biotech collaborations and bring academia, governments, NGOs, patient advocacy groups, venture capitalists, and other thought leaders to the table. By drawing on the unique strengths of different organizations and individuals, we can deliver the greatest impact while consistently pushing the boundaries of medical science for the benefit of patients.

Anyone interested in reaching our network of Strategic Partnering and Business Development people should look up Shaun Grady, based in our Kingdom Street office in London, U.K. and Chris Yochim, who's in our Wilmington site in the US. Shaun and Chris are seasoned leaders and should be anyone's "first port of call." Both of them would be happy to put potential partners in touch with the right teams.

pN: In 2007 AstraZeneca opened the Innovation Center (ICC) China in Shanghai, focused on translational medicine. Tell me about its work now. How is it contributing to the development of indigenous products? (What type of work is underway, how advanced is it, have any products emerged?)

Steve Yang: The Innovation Center China is one of AstraZeneca's key global R&D centers and we're very proud of its accomplishments to date. You're absolutely right when you mention translational science being our focus and quite specifically our efforts in developing knowledge about Chinese and Asian patients' specific biomarkers and genetics, all of which, ultimately, will help develop the most meaningful products and therapies for Asian people.

At its simplest, we are aiming to answer the question "Why, on occasion and seemingly inexplicably, are there diseases and conditions that are more prevalent in Asians?" For some of these diseases we have a pretty good idea as to why this is the case but for others, we simply don't know. To address this we have three main approaches at the ICC: first, we want to make sure patients in this part of the world can benefit most from our existing products; second, we want to make sure that any new products we're developing will take Asia's unmet medical needs into consideration; third, we aim to discover and develop new drugs specifically designed for Asian patients and diseases that are more prevalent in Asia.

So far the outcomes have been promising, with our rapidly expanding team of 80 highly talented scientists and staff seeing their scientific rigor, hard work and team spirit result in three new compounds going into clinical trials which address gastric cancer and liver cancer. Those candidates are progressing well through the early, major stages of their clinical trial programs (Phases I and II). In the future, we're looking to maybe expand ICC's scope to include other therapy areas and have already started work in the area of respiratory diseases.

pN: What other strategies is AstraZeneca using to encourage and access Chinese innovation?

Steve Yang: Collaborations with the best external institutions, recruiting and retaining the best talent, and working on a truly international basis internally are the pillars of our approach. That applies equally to China as it does for other parts of the world where we have R&D operations with innovation always being at the core of whatever we do.

pN: How is AstraZeneca approaching the differing growth opportunities of the China and global pharma markets?

Steve Yang: As I mentioned earlier, the growth opportunities in China are unlike any other country at the moment. At the same time, the global growth rate for our industry is slowing down, due to well documented changes in the way that our industry as a whole and healthcare providers need to operate. From an R&D point of view we've certainly identified Asia and China as being important parts of our global network, alongside other emerging markets such as Brazil, India and Russia.

In terms of overall, worldwide growth we believe we're well positioned for success and to make a real difference as our portfolio and R&D focus are both well matched to meet medical needs across therapy areas such as cardiovascular, gastrointestinal, oncology, infection, neuroscience, respiratory and inflammation. These cover some of the world's most serious illnesses and represent major worldwide disease burdens such as Alzheimer's disease, cancer, chronic obstructive pulmonary disease and Type 2 diabetes.

From an Asian and China perspective, in addition to those lung, gastric and liver diseases which we've already identified as being more prevalent in this region, there's also a marked increase in diseases that are typically viewed as being endemic in the West such as diabetes. The New England Journal of Medicine expects that the Asia Pacific region will be home to more than 60% of the 380 million diabetes cases globally by 2025 with India and China having the highest number of diabetes cases worldwide. These are truly staggering figures and even now more than 92 million adults in China have diabetes, making it the diabetes capital of the world. India follows second, with an estimated 50 million cases — up from 28 million in 2007. Again, our portfolio and research focus are well aligned to address this and other significant burdens affecting Asian people.

pN: What are your goals for the ChinaBio Partnering Forum?

Steve Yang: We're always on the lookout for best-in-class partners to collaborate with, and the ChinaBio Partnering Forum starting May 11 represents some great opportunities to meet with potential future partners as well as existing colleagues and friends. We've been partnering for more than 30 years now, working not only with people in the realm of R&D but across a whole range of other businesses in addition to academia, governments, NGOs, patient groups and venture capitalists. Every year we enter into hundreds of collaborations worldwide and in the last three years alone, we've sealed more than 60 significant deals which were individually designed to meet the needs of our partners and ourselves. So, making even initial contact with people who in the long run turn out to be the right partners at the right time for the right deal would be a definite success.

Disclosure: None.

Gazprom Holds Key To Meeting Global Energy Needs

I’ve been bullish on Russia long before the market appeared on the radar screens of most investors. I believe that Russia, with its vast treasure trove of resources, is one of the main beneficiaries of Asia’s emergence as an engine of global economic growth.

Heading into 2012, the Russian economy seems well-positioned for growth, and its stock market is cheap enough to attract more attention from investors. Most important, the majority of foreign investors are either underweight the market or have no presence at all in Russia.

Historically, these conditions have allowed the Russian market to outperform global indexes, and the same should be true next year, especially if oil prices do not collapse in 2012. Given that the Russian market currently trades at a little over 6 times earnings, I believe that the risk-reward trade-off is quite appealing.

Given my less-than-sanguine outlook for Europe in 2012, Russian exports should be weak next year. Europe remains Russia’s key trading partner, and I expect a European recession to slow Russian economic growth in 2012. Nevertheless, Russia should be able to match the global economy’s growth of about 3.5 percent. Indeed, Russia’s status as a high-beta market could allow it to grow even faster than the global economy.

Consumer demand and domestic investment will be the two pillars of Russian economic growth next year. Unemployment remains relatively low in Russia at about 6.4 percent, down from about 9 percent in 2010.

Source: Bloomberg

Furthermore, wages have grown at about 5 percent per year, which will support consumer spending. As the chart below indicates, retail sales in Russia have been growing by close to 9 percent per year, and I expect consumer spending to continue along this trajectory.

Source: Bloomberg

Like many emerging markets, Russia has grappled with high levels of inflation for some time. However, prices are on a downtrend. Although the current inflation rate of 6.8 percent remains above the central bank’s target of 6 percent, it’s fallen significantly from 2008, when inflation clocked in at 15 percent. I believe that inflation will continue to moderate along with a weaker economic outlook, and will fall below 6 percent in the first half of 2012.

Source: Bloomberg

The second piece of the puzzle is domestic investment and public spending. Russia is in the midst of an infrastructure boom. Infrastructure investment last year came in at USD111 billion, representing more than 7 percent of GDP. More important, infrastructure-related investment remained above USD 100 billion per year throughout the global economic crisis. By contrast, in 1999 only about USD7 billion–representing about 3.5 percent of GDP–was allocated to infrastructure-related investments.

Russia’s strong fiscal position and a debt-to-GDP ratio of about 8 percent allowed it to make the most out of strong oil prices. The country has sought to modernize its infrastructure by focusing on projects related to power, telecommunications, ports and airports. In the future, I expect funds to flow to projects that concentrate on power, railways and roads.

Of course, energy remains the linchpin of the Russian economy; the country is second only to Saudi Arabia in terms of total oil production.

The US Energy Information Administration estimates that every $1 rise in the price of oil boosts the Russian government’s receipts by 0.35 percent of GDP. Additionally, most estimates suggest that the oil and gas industries account for about 20 percent of Russia’s GDP. These industries generate nearly two-thirds of export revenues and comprise close to a third of foreign direct investment (FDI) inflows into Russia.

With domestic consumption of crude oil running at just 2.7 million barrels per day, Russia is also a huge net exporter of crude oil; the country had about 7 million barrels per day available for export in 2006.

Russian oil production over the past 20 years has exhibited an unusual U-shape. During the Soviet era, the government mandated that producers pump oil as quickly as possible. These surges in production meant that, in the early to mid-1980s, Russian production was as high as 12.5 million barrels per day.

But those surges came with a cost, as aggressive production damaged many reservoirs. Furthermore, during the waning days of the Soviet Union, Russian producers simply didn’t invest what was needed in oil-related infrastructure. Pipelines fell into disrepair and producers didn’t perform necessary maintenance on wells.

But since the late 1990s, Russia’s production growth has been impressive. Two factors have conspired to bring about that shift. First, oil prices have risen sharply, increasing incentives to produce and generating capital to be reinvested in growing production. Second, Russia has modernized its infrastructure, adopting more modern technologies imported from the West to squeeze more production out of maturing fields.

Russian gas monopoly Gazprom (OGZPY.PK) is my favorite Russian energy stock. Gazprom is Russia’s largest company by a wide margin and controls almost 85 percent of the country’s total natural gas production. The company alone accounts for nearly 20 percent of global gas production.

Europe remains the company’s main market; Gazprom supplies about 25 percent of Europe’s natural gas. The recently completed Nord Stream pipeline that connects Russia to Germany is the clearest sign of Russia’s importance to meeting Europe’s energy needs. The USD10 billion 760-mile pipeline runs under the Baltic Sea and is expected to carry about 970 billion cubic feet of natural gas per year. A second leg of the pipeline through the Baltic Sea is expected to be completed next year.

Gazprom’s stock trades at a little more than 3 times estimated 2011 earnings, which makes it one of the cheapest energy companies in the world. It’s true that Gazprom is not a high-beta stock, and the company’s deep ties with the Russian government makes Gazprom a complicated investment. Nevertheless, the current valuation represents a good opportunity for long-term investors.

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

Does Starbucks Have a Flop on Its Hands?

Verismo sounds a bit like "very slow," and that may be just how well Starbucks' (NASDAQ: SBUX  ) single-serve espresso maker is selling.

"Tell Santa he can save $50 on Verismo," promises the java giant on its website's landing page.

Indeed.

Between now and Jan. 1, Starbucks is shaving $50 on the entry-level Verismo 580 brewer. The 25% price cut takes it down to $149. The higher-end V-585 model is actually getting a larger $100 haircut to $299.

Hear that, Santa?

Investors sold shares of Green Mountain Coffee Roasters (NASDAQ: GMCR  ) earlier this year, fearing that having Starbucks throw its hat into this ring would dent the company's Keurig empire. We really don't know if that's happening or not, but it sure is suspicious to see a $50 price cut for a product that hit the market only three months ago.

Anecdotal evidence seems to point at Verismo as a bit of a flop. Starbucks.com allows customers to review the products they're buying, and it has just five reviews so far for what is now the $299 V-585 model. Making matters worse is that four of the five reviews rate the brewer just two out of five stars. The owners are complaining about the poor build quality, product malfunctions, and misrepresented features.

It probably doesn't help that they are just seven coffee varieties available. How can Starbucks let buyers choose from four different colors on the exterior of the 580 model but still only give them a small handful of options? The original Keurig doesn't make espresso, but at least it now has more than 200 K-Cup flavors to choose from.

We'll see what happens come Jan. 1. It seems highly unlikely the that high-end model can justify its original $399 price tag, and we'll have to see if going from $199 to $149 on the more accessible 580 model will break through to consumers.

Santa, we've got a problem.

Brew-ha-ha
There are many great American companies exporting their products and business models. A special report identifies three American companies set to dominate the world. It's free, but it won't be available forever. Check it out now.

There's also a premium report on Green Mountain, exploring the Keurig champ's challenges and opportunities. A free year of updates is included, so click here to get up to speed on the company.

Is using 401k to pay off mortgage a good idea?

Money Watch, a personal finance column that runs every Saturday, features a financial planner from the National Association of Personal Financial Advisorsanswering reader questions about saving, protecting and growing your money. To submit a question, e-mail USA TODAY personal finance reporter Christine Dugas at: cdugas@usatoday.com.

Q: I will be 59� in August. I would like to withdraw about $56,000 from my 401(k) savings of $380,000 to pay for my home mortgage as well as to pay for the 20% tax. The pay-off would save me over $4,500 from the 4.75% interest rate. And I will use my mortgage payment for the 401(k) catch-up contribution. Should I do that or just stay the course?

A: By cashing in part of your 401(k) in order to pay off your mortgage you're trading off a reduced retirement account for lower future loan expenses. To determine whether this makes sense for you consider these factors:

� What is the cost of withdrawing from your retirement account?

Assuming your contributions were all pretax, your withdrawal will be taxed as ordinary income at the federal, state and local rates.

You've estimated your tax rate will be 20%, but individuals with higher incomes and local taxes could owe 40% or more on a retirement distribution. Anyone under 59� must add a 10% penalty to that tax bill.

� Will you be able to rebuild your retirement portfolio?

You're considering a significant reduction in your future standard of living, especially if the 401(k) is your only pool of funds for retirement. Repaying such a large sum may not be possible at this stage of your life.

Need personal finance help?

Money Watch, a new column that will run every Saturday, features a financial planner from the National Association of Personal Financial Advisors answering reader questions about saving, protecting and growing your money.

• Send us your question

If you plan to retire at age 65 you'll have fewer than six years to pay yourself back. Will you save enough on mortgage payments to make this work?

And will you have the discipline to direct all of the extra savings to your retirement plan? If you think you might spend all or some of the mortgage money, it is better to pass on paying it off.

� What is the real cost of your mortgage?

Even with the recession we've just been through the S&P 500 has averaged 4% returns over the past 10 years; over the past three years the average annual return has been over 16%.

Is your 401(k) invested in a portfolio that you expect to return more than the cost of your mortgage over its remaining years? If so, you may again be better off staying the course.

� Do you have other, more costly debt you should pay off first?

Credit card interest rates are typically much higher than mortgage rates. Withdrawing from your retirement plan to pay credit card debt is a bad idea, but paying it down with any extra cash you get your hands on should be your highest priority.

Annette Simon,NAPFA-registered financial adviser

Garnet Group, Bethesda, Md.

Read previous Money Watch columns:

Brocade: UBS Skeptical That The Company Will Be Acquired

Brocade (BRCD) shares this morning are giving back some of yesterday’s takeover rumor driven 11% gain. One reason for the reversal: UBS analyst Nikos Theodosopoulos this morning writes that he finds a “low probability” of the company being acquired.

The UBS analyst said Brocade could be a takeout candidate given its modest valuation – it has a $3.5 billion enterprise value – but he thinks its low-growth profile and troubled integration of its Foundry Networks acquisition make it “a low probability deal.” He says that IBM, Hewlett-Packard, Juniper and Dell all would “unlikely” to bid for Brocade. Oracle (ORCL), he says, is a “wild card.”

• HP, he says, considered buying BRCD before buying 3Com, but given that deal and subsequent acquisitions of 3Par and ArcSight, HP now seems like an unlikely buyer.
• JNPR, he says, is an unlikely bidder given “incompatibility” on a growth and margin basis.
• Dell, he says, is more likely to partner than acquire.
• Oracle, he says, is a wild card, noting its history of “seeking broken firms with good technology.”

Theodosopoulos keeps his Neutral rating and $5.50 target on the stock.

BRCD this morning is off 17 cents, or 2.7%, to $6.09.

Developing A Passive Management Investment Strategy

Passive investing is intellectually appealing to the investor willing to shun Wall Street propaganda and hype from a 200-billion-dollar industry. Just to be clear, we concede there are, and will be, active money managers who outperform their benchmark. However, as the years go by the winners dwindle in number and it is very difficult to select which managers will be successful thirty or forty years from now.

Try identifying the next Warren Buffett, Michael Price, Max Hein or Charlie Munger. What actively managed mutual fund will best the market index over the next ten years? The probability of selecting the top performing funds is extremely remote. Mathematically, it makes sense to take the index route to portfolio construction.

So you are going to manage your own portfolio through stock selection (not encouraged). If this is the investment path of choice, here are a few guidelines to keep in mind.

• Establish a benchmark that is appropriate for your portfolio. If you are investing in small-cap stocks, don't use the S&P 500 as it is an inappropriate benchmark. The S&P 500 has unfortunately become the default benchmark for nearly all portfolios. If your portfolio holds a significant percentage in bonds, and that may well be appropriate for your situation, the S&P 500 is not the standard to use.
• Know how to accurately calculate the Internal Rate of Return (IRR) for both the portfolio and benchmark.
• Set up an appropriate benchmark for your portfolio.
• Know what risk is involved in the portfolio makeup and measure it accurately. Use a semi-variance measurement model instead of the standard mean-variance model.

Individuals who do not measure the performance of their portfolio and benchmark are engaged in self-deception as they don't have a clue how well they are doing. "You can't manage what you don't measure."

The Five-Step Process to Passive Investing

Lay out an investment plan.

• The portfolio has an objective. Is this a college fund portfolio or is it set up for retirement? Think through the circumstances for which this portfolio is designed.

Select the asset classes.

• The maximum number I use is seventeen including cash. At a minimum include; U.S. Equities, Developed International Markets, Emerging Markets, Domestic REITs, and Domestic Bonds. Then considering adding Commodities, International REITs, and International Bonds.

Determine the percentage to invest in each asset class.

• As mentioned many times on this blog, this is the most difficult decision of investing. No plan fits all investors so build your own customized portfolio to fit your situation. There are many asset allocation plans provided on this blog. Pick one that seems to best fit your situation knowing you can adjust later. Read William J. Bernstein and others to pick up additional ideas. Continue to adjust the asset allocation to fit your personal situation. This ties back to step number one above.

Choose index funds or non-managed index ETFs to populate the asset classes.

• My preference is to use index ETFs as they are tax efficient and 101 are commission free to TD Ameritrade clients. Commission free ETFs are of great benefit to investors starting out with very small initial investments. It becomes easier to build a well diversified portfolio at no cost other than money you saved.

Monitor the portfolio.

• Search this blog for benchmarks or benchmarking portfolio. There is a category for benchmarking so read those posts. While somewhat time consuming, portfolio monitoring is essential if you are serious about investing.

Investing in Silver Dollars – What Are Your Coins Worth?

If you have made the decision to invest in silver, the next step is to learn all you can about your options. Silver coins are always in high demand with collectors and investors and typically net higher premiums than bars. Which would you rather have: a Kennedy half dollar minted in 1964 or one minted in 1965?

Would you rather have an’ early” dollar or a Morgan dollar? Silver investors know that silver dollars vary greatly in their worth, and they know what to look for. Before you begin investing, make sure you are aware of what to look for in your silver dollar coins and how to determine what they are worth. Here are some tips.

Be aware of the availability of the coin. Because the US Mint issues Silver Eagles and they are also issued by private mints, they are easy to find. They have a full ounce of silver and can be purchased relatively inexpensively. The ounce of silver is then worth whatever the spot price for silver is at the moment. By contrast, though, the rare 1840 silver dollars are worth hundreds of dollars because they are very difficult to find. Their worth is increased by the rarity of the coin.
Be aware of the silver content. Before, I asked what the difference was between a 1964 and a 1965 Kennedy half dollar. The answer is either a 90 percent silver content or a 40 percent silver content. The year of issue has a great deal to do with the amount of silver found in these dollar coins. Those minted before 1965 have much higher silver contents, making them more valuable for investors. Silver Eagles have a 99.9 percent silver content and contain a full ounce. These will be worth more than the 90 percent silver dollars, but both are a good investment.
Know how much silver is worth per ounce. If you have a coin, you can determine an approximate value by knowing how much silver can be netted from the coin. For instance, 10 pre-1965 silver coins equals one ounce of silver. You can determine the value of these coins by knowing how much silver is currently selling for.

Whether you purchase full one-ounce coins or silver half dollars with high silver contents, you can easily build security into your portfolio. Get started today with our Free Guide.

8 Very Affordable Stocks Yielding At Least 4%

In what could be a summer filled with volatility and anxiety over the eurozone financial crisis, both conservative and income investors should take a look at the following stocks. Not only do they carry 4% yields, but they are considered to be very affordable, with P/E ratios under 24.

American Electric Power Company (AEP): Founded in 1906 and based in Columbus, Ohio, AEP currently trades in a 52-week range of $33.09/share (52-week low) and $41.98/share (52-week high). AEP currently yields 4.8% ($1.88) and trades at a P/E ratio of 9.70. Investors looking to establish a position in AEP should do so from an income-based standpoint, because the company has been pretty flat in terms of earnings announcements over the last four quarters.

American Software, Inc. (AMSWA): Founded in 1970 and based in Atlanta, Ga., AMSWA currently trades in a 52-week range of $5.91/share (52-week low) and $9.84/share (52-week high). AMSWA currently yields 4.4% ($0.36) and trades at a P/E ratio of 21.57. Investors looking to establish a position in AMSWA should do so from both an income-based standpoint and an earnings standpoint, because the company has been pretty impressive over the last four quarters in terms of surpassing Street estimates.

Anworth Mortgage Asset Corporation (ANH): Founded in 1997 and based in Santa Monica, Calif., ANH currently trades in a 52-week range of $5.63/share (52-week low) and $7.74/share (52-week high). ANH currently yields 12.4% ($0.84) and trades at a P/E ratio of 7.97. Investors looking to establish a position in ANH should do so from an income-based standpoint, because the company has missed earnings estimates over the last four quarters.

Avon Products (AVP): Founded in 1886 and based in New York, N.Y., AVP currently trades in a 52-week range of $15.60/share (52-week low) and $28.96/share (52-week high). AVP currently yields 5.8% ($0.92) and trades at a P/E ratio of 17.16. Investors looking to establish a position in AVP should do so from an income-based standpoint, because the company has missed earnings by an average of 26.8% over the last four quarters.

Big 5 Sporting Goods (BGFV): Founded in 1955 and based in El Segundo, Calif., BGFV currently trades in a 52-week range of $5.34/share (52-week low) and $11.59/share (52-week high). BGFV currently yields 4.7% ($0.30) and trades at a P/E ratio of 15.06. Investors looking to establish a position in BGFV should do so from an income-based standpoint, because the company has missed earnings estimates over the last two quarters by very wide margins.

B&G Foods, Inc. (BGS): Founded in 1996 and based in Parsippany, N.J., BGS currently trades in a 52-week range of $15.29/share (52-week low) and $25.64/share (52-week high). BGS currently yields 4.3% ($1.08) and trades at a P/E ratio of 23.02. Investors looking to establish a position in BGS should do so from an income-based and earnings-based standpoint, because the company has been in line with earnings estimates over the last three quarters.

Bristol-Myers Squibb (BMY): Founded in 1887 and based in New York, N.Y., BMY currently trades in a 52-week range of $25.69/share (52-week low) and $35.44/share (52-week high). BMY currently yields 4.0% ($1.36) and trades at a P/E ratio of 15.35. Investors looking to establish a position in BMY should do so from an income-based and growth-based standpoint, because the company has surpassed earnings estimates in three of the last four quarters.

Cherokee, Inc. (CHKE): Founded in 1988 and based in Van Nuys, Calif., CHKE currently trades in a 52-week range of $10.15/share (52-week low) and $17.45/share (52-week high). CHKE currently yields 6.7% ($0.80) and trades at a P/E ratio of 15.93. Investors looking to establish a position in CHKE should do so from an income-based standpoint, because EPS has fallen year over year in the last three comparable quarters.

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

The Biggest Surprise of 2012

We asked some of our top analysts: "What was the biggest surprise of 2012?"

Their responses start off with not one, but two South Korean phenomena.

Alex Dumortier, CFA: Biggest surprise of 2012? How about a Korean pop song -- Gangnam Style -- becoming the most popular YouTube video of all time, garnering close to a billion views in the process? There are two lessons here:

• Just as Asia is gaining global market share economically, we should expect it to become increasingly influential culturally. Certain youth "tribes" in the U.S. already follow Japanese and Korean popular culture closely, but cultural imports like "Gangnam Style" could become increasingly mainstream.

• The numbers involved show the astonishing speed at which the web can open up -- indeed, create -- a global market for certain products. I'm not particularly a fan of Facebook (NASDAQ: FB  ) , and I tend to think the shares remain overvalued today, but it has been tremendously successful at harnessing that dynamic (it is, of course, a powerful agent of the same dynamic). How else does a company go from zero to being valued at tens of billions of dollars in less than a decade? Creating wealth at that rate was simply unfeasible a generation ago.

Anders Bylund: As if Psy's Gangnam Style wasn't enough, South Korea played host to yet another revolution.

A year ago, Apple (NASDAQ: AAPL  ) ruled the tablet computer market with an iron fist. iPads stood for a commanding 60% of global tablet shipments, according to research firm IDC. Today, the iPad slice of the tablet pie has shrunk to just 50.4%. The Android army is stealing Apple's market share, led by Korean giant Samsung, which more than quadrupled its tablet sales year over year.

I'm a longtime Android user and occasional Apple critic, but I did not see this coming. The iPad looked set to rule the tablet roost for another couple of years, leaving Androids to fight for the smartphone segment instead.

Is the iPad simply losing its premium luster, or have Samsung and friends figured out how to make, market, and sell credible competitors? You tell me. Either way, maybe it's no coincidence that Samsung runs this global threat from headquarters in the Gangnam district of Seoul.

Dan Caplinger: Stock market volatility defied expectations by remaining tame all year long. Even during the spring, when concerns about Europe reached their peak and markets fell sharply, the S&P 500 Volatility Index (VOLATILITYINDICES: ^VIX  ) didn't rise nearly as much as it had during similar bouts of uncertainty in 2011, and during the year's rallies, volatility has fallen to levels not seen since before the 2008 financial crisis, crushing investors in the volatility-tracker iPath S&P 500 VIX Short-Term ETN (NYSEMKT: VXX  ) .

With the fiscal cliff looming, Europe's problems still unresolved, and emerging markets still suffering slowdowns, the lack of volatility is especially surprising. With so much complacency, investors seem more greedy than fearful, and to me, that suggests it's time to start looking at ways to protect your portfolio from the next downturn -- whenever it comes.

Alex Planes: I don't think I'm the only one who's been surprised by the all-but-total irrelevance of the Occupy movement in 2012. Occupy captured everyone's attention in 2011 as ever-greater numbers camped out in New York's Zucotti Park and in other cities around the country. Protests in other countries even started chanting Occupy's "we are the 99%" rallying cry. The Fool devoted front-page coverage to Occupy throughout the fall, which included our managing editor visiting Zucotti Park to understand what was driving the movement.

After the police cleared Zucotti last November, the movement more or less disintegrated into self-parody. The first big Occupy action of 2012, "Occupy Congress," barely merited media attention. A reunion of sorts on Occupy's six-month anniversary was thinly attended and notable only for frequent arrests. A reboot focused on debt forgiveness has done virtually nothing. Protests organized against Wal-Mart (NYSE: WMT  ) for the holiday season have looked laughably ineffective. I expected leadership to stand up and declare a new focus, but no one has been willing to assume leadership -- and if anyone did, the Occupy mind-set might simply reject them, anyway.

Meanwhile, media discussion of the 1% has been focused in 2012 almost entirely on whether the highest earners should see their taxes return to Clinton-era rates, which is probably not what Occupy had intended to highlight with its protests in the first place. Feeble antibusiness efforts, including "strikes" against small businesses as well as protests against multinational corporations, are also muddying the original message of economic fairness. This message is certainly worth debate as our feeble recovery drags on into its fifth year, but Occupy hasn't been the right messenger.

Rich Smith: The big surprise for me in 2012 is... still surprising me today. It's the fact that despite debt defaults in Europe, and continual threats of more of the same (and not just Europe), despite 92 out of 500 companies in the S&P 500 having already lowered their earnings guidance for Q4 (versus just 25 raising guidance), despite worries over an approaching fiscal cliff and the risk of sequestration, the stock market is actually up 12% so far this year.

Talk about climbing a wall of worry!

Tim Beyers: When Robert Downey Jr. agreed to play armored superhero Iron Man in a film of the same name, no one really knew what to expect. Even after the film made more than $300 million at the domestic box office, some doubted the superhero meme would live on in theaters for more than a year or two.

Fast-forward to this summer. Downey once again reprised his role as the armored avenger, his third time on screen in that capacity. Only this time, the results more than pleased audiences. This time, an ensemble cast set a new box office record (i.e., the largest weekend gross in history) on the way to $1.5 billion in ticket sales. That's how big Marvel's The Avengers was this year.

No one saw it coming. No one, that is, except for Walt Disney (NYSE: DIS  ) chief executive Bob Iger, whose $4 billion purchase of Marvel Entertainment in 2008 today looks like the sort of steal you only get in a heist film.

Morgan Housel: Exactly a year ago I interviewed half a dozen well-known economists, investors, and journalists. I asked each one what worried them most as we headed into 2012. Without fail, every one said Europe, Europe, Europe. It was hard to argue with them.

What's surprised me the most about 2012 is that, unless you lived in a periphery European country, the region's fiscal madhouse hasn't been much of an issue for global markets. There was a deep scare in the late summer, but for most of the year I think policymakers handled the issue much better than nearly anyone imagined. This story is far from over and could change any day, but it was a good lesson in realizing that what seems obvious and a sure thing sometimes isn't.�

Selena Maranjian: Biggest surprise of 2012? President Obama's re-election and how right political statistician Nate Silver turned out to be, when he trusted numbers. It shouldn't have surprised anyone, though, because of... math.

There's a lesson here for investors as well as election-watchers. Numbers matter. If you're excited about a company you're reading about and think it's headed to the moon, be sure to ground your hopes in a review of some of its numbers. Are its revenue and earnings numbers rising briskly -- or, gulp, are its debt and share-count numbers doing so? Profit margins and price-to-earnings (P/E) multiples are simple ratios. Fat profit margins suggest pricing power. Low P/E ratios (relative to a company's peers or its past numbers) suggest an attractive valuation.

Meanwhile, are you basing your retirement on savings in CDs? Have you run the numbers, to see what 2% growth over 20 years will do for you? It won't even double your money. Add long-term stocks to the mix, and if you average 7% growth over 20 years, you'll nearly quadruple your money. Look beyond stock stories and financial dreams to the numbers. They can tell you a lot.

Chuck Saletta: The biggest surprise of 2012 has to be the dramatic increase in U.S. domestic oil production. According to the U.S. Energy Information Agency: "The expected 760,000 barrel-per-day increase in U.S. crude oil production this year is the largest rise in annual output since the beginning of U.S. commercial crude oil production in 1859." With the increase, U.S. crude oil production has reached 6.5 million barrels per day, a rate not seen since 1998, nearly 15 years ago.

Much of that increase can be attributed to non-conventional shale reserves and hydraulic fracturing -- or "fracking", as it's often called. There's an old saying that "The cure for high prices is high prices." As this year's increase in U.S. oil production�has shown, that saying has more than a small kernel of truth in it.

link