1 Thing Microsoft Stock Investors Need to Watch

It's not a great time to be a Microsoft (NASDAQ: MSFT  ) stock investor. The stock has taken a few hits over the past six months, Windows 8 has received plenty of negative feedback, and the company is still trying to find its bearings in mobile.

On the heels of Microsoft's latest quarterly earnings release last week, the company is about to pursue a new area that will hopefully help Microsoft stock investors -- a smaller tablet. It's anything but a sure bet for a company that's struggled in the mobile space, but it's definitely a move in the right direction.

Betting on small
IDC came out with some numbers earlier this month showing that PC sales had dropped almost 14% year over year, almost double what had been forecasted. It was the fourth consecutive quarter of year-on-year declines and the worst PC sales quarter since the company started tracking the data in 1994.

Obviously, things aren't looking good for the PC industry, but that's not really news.

What Microsoft investors need to be concerned about is how the company is going to pivot away from a dying PC trend into a solid tablet position. So far, the company is making some slow progress. The Surface RT launched back in October, followed by the Pro in January, and estimates for Surface shipments in Q1 2013 are at about 3 million.

But while the Redmond company has been busy trying to sell its full-sized tablets, small tablets have become the mobile market's latest trend. IDC numbers show that half of all tablets shipped in Q4 2012 were smaller than 8 inches. Apple (NASDAQ: AAPL  ) launched the iPad Mini back in October 2012 and has sold about 12.5 million units in Q2 2013 alone. Devices running on Google's (NASDAQ: GOOG  ) Android OS also dominate the tablet market, and Google itself even sells its own Nexus tablet. Amazon.com's (NASDAQ: AMZN  ) modified Android tablets currently take third place for tablet shipments.

Here's a look at the latest tablet market share figures (including both regular tablets and small tablets) from Strategy Analytics:

Tablet OS

Q1 2013

Apple iOS	48.2%
Android	43.4%
Windows	7.5%
Others	1%

Source: Strategy Analytics.

Although Microsoft is making some inroads in the tablet operating system market, it's clear that it has a long way to go. Microsoft executives said on the latest investors conference call that a new device will be available in the coming months. Meanwhile, the major tablet players have already solidified their positions. Microsoft stock investors shouldn't be pleased that the company is behind yet another mobile trend.

With the company's forthcoming release of Windows Blue in addition to a smaller tablet, it's possible Microsoft could lure more consumers away from Android and iPad tablets, but investors will need to see improvements to Microsoft's mobile OS to see that happen. Software sells mobile devices, and despite the company's strong history in software, Microsoft is still falling far behind Apple and Google's operating systems. The smaller tablet market isn't a lost cause for the company, but it's going to pose yet another challenge to the company's upward mobile battle.

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Is BAE Systems an Exciting Emerging Market Play?

Why Multimedia Games Shares Soared

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of gaming machine manufacturer Multimedia Games (NASDAQ: MGAM  ) surged 19% today after its quarterly results and guidance easily topped Wall Street expectations.

So what: Multimedia's second-quarter results -- EPS growth of 29% on an 18% jump in revenue -- and full-year outlook were so strong that analysts have no choice but to raise their growth estimates yet again. In fact, operating margins spiked to 29.9% from just 16.9 in the year-ago period, reinforcing optimism about its overall product mix and competitive position going forward.

Now what: Management now sees full-year 2013 EPS of $0.98-$1.02, up significantly from its prior view of $0.79-$0.84 and well ahead of Wall Street's estimate of $0.83. "Our success in the first half of fiscal 2013 has positioned the company for continued progress in the second half of the year as the awareness and availability of our products in a larger portion of the domestic marketplace continues to expand," said CEO Patrick Ramsey. Of course, with the stock now up a whopping 110% over the past year and trading at about 3.5 times sales, much of that optimism might already be baked into the valuation.    

Interested in more info Multimedia Games? Add it to your watchlist.[%sfr%}

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Why Heckmann Is Poised to Outperform

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, wastewater disposal specialist Heckmann (NYSE: HEK  ) has earned a coveted five-star ranking.

With that in mind, let's take a closer look at Heckmann and see what CAPS investors are saying about the stock right now.

Heckmann facts

Headquarters (founded)	Coraopolis, Pa. (2007)
Market Cap	$1.0 billion
Industry	Oil and gas equipment and services
Trailing-12-Month Revenue	$352.0 million
Management	CEO Mark Johnsurd (since 2012) CFO Jay Parkinson (since 2012)
Return on Equity (average, past 3 years)	(1%)
Cash/Debt	$16.2 million / $566.1 million
Competitors	Basic Energy Services Key Energy Services Schlumberger

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 97% of the 552 members who have rated Heckmann believe the stock will outperform the S&P 500 going forward.   

Just yesterday, one of those Fools, Googlespooch, succinctly summed up the Heckmann bull case for our community:

With fracking on the rise, it should seem that the US government will not block its continuation. I say this because it would be one of the most disastrous policy decisions in a long time if the government really did block fracking. Despite this, however, it is important to consider that fracking is still ecologically damaging. It produces filthy water, damaged soil layers, etc. It should seem, then, that the EPA may begin to require more of the fracking companies in terms of environmental regulation. Enter [Heckmann]! [Heckmann] already recycles fracking water in addition to a few other services that the company provides. Were the EPA to bring in increased environmental regulation, it should not seem farfetched to consider Hekkman as a big winner considering water treatment would be one of the top regulation targets. With established infrastructure and know-how, Hekkman would be poised to handle EPA regulations very well.

If you want market-thumping returns, you need to put together the best portfolio you can. Of course, despite a strong four-star rating, Heckmann may not be your top choice.

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Thermo Fisher Wins $233.6 Million Pentagon Contract

Cheaper iPhone Confirmed?

Ever since The Wall Street Journal broke the story that Apple (NASDAQ: AAPL  ) was finally ready to release a cheaper iPhone to take on Google (NASDAQ: GOOG  ) Android and Nokia's (NYSE: NOK  ) Lumia line that utilizes the Microsoft (NASDAQ: MSFT  ) Windows Phone 8 OS, speculation has been plentiful. During Apple's recent earnings call, CEO Tim Cook alluded to new products and the analysts are buzzing.

In the video below, Fool.com contributor Doug Ehrman discusses the outlook for the release of a new, cheaper iPhone for emerging markets, and what it could mean for Apple.

There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

Is AstraZeneca the Ultimate Stock Picker's Share?

LONDON -- I use a market statistics to identify shares for further research. Whatever the market conditions, stock-picking software will always identify a share worth buying.

AstraZeneca  (LSE: AZN  ) (NYSE: AZN  ) is the 12th biggest company in the FTSE 100. It is a true blue chip. According to a large number of investment strategies, the shares should be bought today.

What's to love?
AstraZeneca shares satisfy selection criteria that makes them attractive to three different types of investor. AstraZeneca currently ticks the boxes for value, income, and momentum strategies.

A value play
Investors have long been skeptical of the company's ability to develop new drugs. Perhaps as a result of this, AstraZeneca shares made no progress at all in the three years ending 2012.

Today, AstraZeneca trades on a 2013 P/E of just 9.6 times 2013 forecasts. AstraZeneca's rating is in the bottom 10% of the entire index. Low valuations like that are usually the result of masses of negative sentiment.

If AstraZeneca can convince the markets that its earnings are not about to enter a prolonged decline, then I would expect the shares to rise significantly.

Income credentials
According to the consensus of broker forecasts, AstraZeneca trades on a prospective yield for 2013 of 5.5%. The 2014 forecast dividend yield amounts to an impressive 5.6%. The payout is almost twice covered by earnings, meaning that there is little risk of a cut.

Few companies have a record of paying a dividend of such size. Another factor to attract investors is the fact that AstraZeneca has not cut its dividend in more than ten years.

By my calculations, only Shell is currently cheaper on both a P/E and yield basis.

Strong share price
Many investors won't buy unless they see some signs of share price revival. So far this year, AstraZeneca shares are up 14.1%. That's well ahead of the FTSE 100, which is up 9% in the same period. This upturn in AstraZeneca's share price means that the shares have now come to the attention of momentum investors.

Momentum investors believe that a company's shares are more likely to rise if they have some gains behind them. For AstraZeneca to get back to the kind of rating enjoyed by the average FTSE 100 company, the shares would need to rise more than 30%.

Pharmaceutical shares like AstraZeneca have long been considered a good home for long-term investment. To highlight five more investment opportunities for the long run, our analysts have prepared a free report, "5 Shares To Retire On." This report is totally free and comes with no further obligation. To get our analysts' insights on these five companies, click here to get the report delivered to your inbox immediately.

AFLAC Beats on Both Top and Bottom Lines

AFLAC (NYSE: AFL  ) reported earnings on April 24. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended March 31 (Q1), AFLAC beat slightly on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue dropped slightly. Non-GAAP earnings per share dropped slightly. GAAP earnings per share grew.

Gross margins dropped, operating margins grew, net margins grew.

Revenue details
AFLAC logged revenue of $6.21 billion. The eight analysts polled by S&P Capital IQ expected a top line of $6.12 billion on the same basis. GAAP reported sales were the same as the prior-year quarter's.

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 $1.69. The 21 earnings estimates compiled by S&P Capital IQ averaged $1.62 per share. Non-GAAP EPS of $1.69 for Q1 were 2.9% lower than the prior-year quarter's $1.74 per share. GAAP EPS of $1.90 for Q1 were 13% higher than the prior-year quarter's $1.68 per share.

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 21.9%, 750 basis points worse than the prior-year quarter. Operating margin was 21.9%, 240 basis points better than the prior-year quarter. Net margin was 14.4%, 170 basis points better than the prior-year quarter. (Margins calculated in GAAP terms.)

Looking ahead
Next quarter's average estimate for revenue is $6.10 billion. On the bottom line, the average EPS estimate is $1.56.

Next year's average estimate for revenue is $24.54 billion. The average EPS estimate is $6.28.

Investor sentiment
The stock has a five-star rating (out of five) at Motley Fool CAPS, with 1,973 members out of 2,056 rating the stock outperform, and 83 members rating it underperform. Among 580 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 562 give AFLAC a green thumbs-up, and 18 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on AFLAC is outperform, with an average price target of $58.88.

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Will Yamana Gold Beat These Analyst Estimates?

Yamana Gold (NYSE: AUY  ) is expected to report Q1 earnings on April 30. Here's what Wall Street wants to see:

The 10-second takeaway
Comparing the upcoming quarter to the prior-year quarter, average analyst estimates predict Yamana Gold's revenues will wither -0.2% and EPS will drop -24.0%.

The average estimate for revenue is $558.7 million. On the bottom line, the average EPS estimate is $0.19.

Revenue details
Last quarter, Yamana Gold chalked up revenue of $629.5 million. GAAP reported sales were 11% higher than the prior-year quarter's $568.8 million.

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

EPS details
Last quarter, non-GAAP EPS came in at $0.26. GAAP EPS of $0.22 for Q4 were 83% higher than the prior-year quarter's $0.12 per share.

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

Recent performance
For the preceding quarter, gross margin was 67.1%, 150 basis points worse than the prior-year quarter. Operating margin was 40.2%, 180 basis points worse than the prior-year quarter. Net margin was 26.9%, much better than the prior-year quarter.

Looking ahead

The full year's average estimate for revenue is $2.69 billion. The average EPS estimate is $0.96.

Investor sentiment
The stock has a three-star rating (out of five) at Motley Fool CAPS, with 3,696 members out of 3,836 rating the stock outperform, and 140 members rating it underperform. Among 525 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 485 give Yamana Gold a green thumbs-up, and 40 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Yamana Gold is outperform, with an average price target of $23.93.

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With Apple, HBO Could Win Cable's "Game of Thrones"

Several services are already offering synchronized viewing across devices. Netflix (NASDAQ: NFLX  ) , YouTube, and now Apple (NASDAQ: AAPL  ) all offer bookmarking -- start a show on one device, pick up where you left off on another. HBO is a rare exception because of its cable ties.

It doesn't have to be this way. In January, Bloomberg reported that HBO and Apple were working on adding the HBO GO iOS app to Apple TV, which would allow for bookmarking and seriously challenge Netflix, says Tim Beyers of Motley Fool Rule Breakers and Motley Fool Supernova in the following interview with The Motley Fool's Erin Miller.

This sort of arrangement is central to Apple's TV strategy: enable the widest arrangement of content anywhere via iTunes and aggregated services, and then sell a ton of devices to users who want access. Tim says to expect it to pay off.

Please watch this short video to get his full take, and then leave a comment to let us know whether you'd buy, sell, or short Apple stock now and why.

Want even more Apple information? Allow me to introduce you to The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, who has the skinny on the various reasons to buy or sell Apple right now. Click here to get his latest thinking on the stock  and what opportunities are left for Apple (and your portfolio) going forward.

Golf Clap for Hubbell

Hubbell (NYSE: HUBB  ) reported earnings on April 19. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended March 31 (Q1), Hubbell met expectations on revenues and met expectations on earnings per share.

Compared to the prior-year quarter, revenue increased slightly. GAAP earnings per share grew.

Gross margins contracted, operating margins dropped, net margins grew.

Revenue details
Hubbell logged revenue of $740.1 million. The seven analysts polled by S&P Capital IQ predicted a top line of $742.7 million on the same basis. GAAP reported sales were the same as the prior-year quarter's.

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 $1.10. The eight earnings estimates compiled by S&P Capital IQ forecast $1.10 per share. GAAP EPS of $1.10 for Q1 were 4.8% higher than the prior-year quarter's $1.05 per share.

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 31.9%, 40 basis points worse than the prior-year quarter. Operating margin was 13.2%, 90 basis points worse than the prior-year quarter. Net margin was 8.9%, 20 basis points better than the prior-year quarter. (Margins calculated in GAAP terms.)

Looking ahead
Next quarter's average estimate for revenue is $801.7 million. On the bottom line, the average EPS estimate is $1.32.

Next year's average estimate for revenue is $3.19 billion. The average EPS estimate is $5.44.

Investor sentiment

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Hubbell is outperform, with an average price target of $98.57.

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Apple Welcomes Chat Heads From Facebook

Facebook (NASDAQ: FB  ) recently announced that it plans to roll out a new functionality dubbed Chat Heads that would make integrating messaging even more seamless. Not only will Chat Heads be part of the company's new meta app FB Home on Google (NASDAQ: GOOG  ) Android, but it will be available as part of the Facebook app in Apple's (NASDAQ: AAPL  ) iOS. The functionality may be critical to Apple, depending on what level of traction FB Home is able to achieve.

In this video, Fool.com contributor Doug Ehrman discusses the specifics of Chat Heads for Apple and how their integration may shift the smartphone landscape permanently, particularly if FB Home becomes a full option on Microsoft's (NASDAQ: MSFT  ) Windows Phone as well.

After the world's most hyped IPO turned out to be a dunce, most investors probably don't even want to think about shares of Facebook. But there are things every investor needs to know about this company. We've outlined them in our newest premium research report. There's a lot more to Facebook than meets the eye, so read up on whether there is anything to "like" about it today, and we'll tell you whether we think Facebook deserves a place in your portfolio. Access your report by clicking here.

Michael Kors Had Better Look Out

At the very beginning of this year, Gap (NYSE: GPS  ) decided to drop $130 million to pick up a little chain of stores called Intermix. The brand has only 32 locations in North America and no international footprint. It sits well outside Gap's other brands, offering $2,000 dresses and jeans for hundreds of dollars.

Gap is expecting good things from Intermix, though. The brand has very little online presence and no international offerings. Last week, management highlighted the potential for Intermix, no doubt hoping to capitalize on some of the success that Michael Kors (NYSE: KORS  ) has seen recently.

High-end, high-margin
In its first foray into high fashion, Gap decided to purchase a non-designer. Intermix doesn't make its own clothing; it's a boutique for other designers. That means that Gap was able to get into the business without having to acquire excess production and design capabilities. The boutiques don't carry Kors but do have offerings from designers such as Jimmy Choo and Fendi.

While the product offering is similar to Kors', the operating model is closer to The Buckle's. Buckle also carries other brands -- though there is a Buckle line. The company used that middleman status to run a 27% operating margin last quarter. Gap would love to have that pulling its operating margin up, as last year it managed only 12%.

The competition
Kors isn't going to go quietly along with Gap's growth plan, though. The company has been pushing sales up at a crazy pace over the past nine months. Comparable sales are up 41% across the brand, and total revenue was up 71%. Kors' brand strength has never been higher, and it's quickly becoming the go-to brand for big names.

If Intermix wants to compete, Gap is going to have to scale up quickly and expansively. Thirty-two locations can't compete with Kors' 388 stores. But even if Gap can't beat Kors, it still has a chance to break into a profitable new market. High-end customers have bounced back faster than Middle America from the crisis, and sales at many luxury stores have been strong.

If Intermix can tap into that segment, it should be able to help generate extra cash for Gap and bring that operating margin up slightly. That will give the company more room to run with its secondary brands, such as Athleta.

In the next three years, as Intermix speeds up and Kors slows down, the fight is going to get hotter. Be on the lookout for an Intermix near you soon, and watch Kors' margins to see whether the company has to dip into discounting to fight off the new threat from Gap.

Michael Kors is one of today's hottest high-end fashion brands, and that's translated into one of the best-performing stocks in retail -- since its debut on the market in late 2011, the share price has more than doubled. But with all that growth, has the stock finally become too expensive, or is there still room left to run? The Motley Fool's new premium report on Michael Kors gives investors all the information they need to make the right decision. We cover the key must-watch areas, opportunities, and threats to the company that investors need to know. To claim your copy, simply click here now for instant access.

Energy Is a Top Investment Sector in 2013

According to a recent Morgan Stanley investor poll, the energy sector trails only technology as the favorite place to put investment dollars in 2013. Energy stocks can be complicated at first blush, but they are certainly worth a closer look if you don't already own some.  In this video, Fool.com contributor Aimee Duffy makes three key points for investors who may be new to the energy industry to consider before they jump in.

There are many different ways to play the energy sector, and The Motley Fool's analysts have uncovered an under-the-radar company that's dominating its industry. This company is a leading provider of equipment and components used in drilling and production operations and is poised to profit in a big way from it. To get the name and detailed analysis of this company that will prosper for years to come, check out the special free report: "The Only Energy Stock You'll Ever Need." Don't miss out on this limited-time offer and your opportunity to discover an under-the-radar company before the market does. Click here to access your report -- it's totally free.

How Almost Always Being Wrong Has Changed the Wall Street Analyst

In hindsight, everyone saw the financial crisis coming. The crazy lending, the high leverage, the soaring home prices. It all made so much sense.

In reality, few did. Some saw troubles, or imbalances. But very, very few truly foresaw the magnitude of what would occur in 2008.

And the surprise of 2008 wasn't ... a surprise. Wall Street analysts and economists have missed nearly every significant market turning point for as long as anyone can remember. In an interview two years ago, Yale economist Robert Shiller told me:

In particular, if you look at the Great Depression of the 1930s, nobody forecasted that. Zero. Nobody. Now there were, of course, some guys who were saying the stock market is overpriced and it would come down, but if you look at what they said, did that mean a depression is coming? A decade-long depression? That was never said.

I have asked economic historians, give me a name of someone who predicted the depression, and it comes up zero.

The proof of how bad we are can be just sad. Economists Ron Alquist and Lutz Kilian once looked at all the fancy math models and forecasts analysts use to predict the price of oil one month, one quarter, and one year out. They found that simply assuming that whatever the price of oil is today is what it will be in the future is one of the best predictive strategies. Is it a good strategy? No. But it was better than most forecasting techniques highly paid analysts and consultants use.

In another study, Dresdner Kleinwort looked at Wall Street's predictions of interest rates over a 15-year period and compared them with what interest rates actually did in, with the advantage of hindsight. It found an almost perfect lag. If interest rates fell, Wall Street would wait six months and then predict that interest rates were about to fall. When interest rates rose, Wall Street would wait six months and then declare that interest rates were about to rise.

"Analysts are terribly good at telling us what has just happened but of little use in telling us what is going to happen in the future," the report concluded.

From 2003 to 2007, Standard & Poor's predicted that 0.12% of a certain type of mortgage bond would default. In reality, 28% did.

In 2008, analysts predicted the S&P 500 (SNPINDEX: ^GSPC  ) would earn $94 per share. In reality, it earned $15 per share.

In 2008, oil giant Gazprom's CEO predicted that oil would soon hit $250 a barrel. Instead, it soon hit $33.

For more fails, see here and here and here and here.

We live in a world engulfed by predictions and forecasts. Yet very few ever stop to ask the pertinent question, "What is the evidence that we're any good at it?"

Those who have looked at it invariably come to the same answer: There is none. But we still lap predictions up, putting our faith in them to make important decisions. Philip Tetlock, a psychologist who has done more work on the science of predictions, put it best: "We need to believe we live in a predictable, controllable world, so we turn to authoritative-sounding people who promise to satisfy that need."

Here's what I want to know: How has being wrong so often changed the role of the Wall Street analyst?

I asked Liz Ann Sonders, chief investment strategist of Charles Schwab. Here's what she had to say. (A transcript follows.)

Morgan Housel: So how has the role of the Wall Street research analyst changed in the past 13 years, given the two crashes we had? Very few analysts saw it coming. Are analysts more humble today? How has their process changed?

Liz Ann Sonders: I don't know that they're necessarily more humble; in general, I think there are fewer of them. There's been a lot of consolidation in the traditional institutional equity side of the business. There are, I think, probably fewer analysts out there. A lot of the more boutique and medium-sized firms have either disappeared or been swallowed up by some of the larger firms.

We certainly don't have the unbelievably famous, big-name analysts typically as much as we did 10 or 15 years ago that through a single utterance could move a stock to a significant degree, and I think that is partly function of the fact that maybe people just aren't reacting to the analyst community as much.

We're somewhat biased, and I'm somewhat biased, sitting in a seat as someone working at Charles Schwab, because we don't have fundamental analysts that make buy and sell decisions in a traditional way. We have Schwab equity ratings; we rate over 3,000 stocks, and it's an A, B, C, D, F grading system. It's got a lot of the fundamental inputs that an individual analyst would use, but it's done a bit more quantitatively, so again, I'm speaking from the perspective of somebody at Schwab, but we certainly don't feel like to give us an edge, we need a couple of high-profile analysts touting stocks, that there's probably a better mousetrap, and we think we have one of the best in that. So yeah, I think in general the fame associated with the analyst community of the '80s and '90s is maybe not dead, but is certainly ill compared to where it was.

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Is Ford CEO Alan Mulally Overpaid?

Over the past 30 years, the U.S. has seen CEO compensation rates increase quicker than ever. Intense debates have raged throughout the country over CEOs who were setting their own outrageous pay scales. It's an especially a hot topic when companies fail under terrible management, as was the case with General Motors (NYSE: GM  ) and Chrysler. Ford (NYSE: F  ) avoided bankruptcy and a taxpayer-funded bailout, but does that justify Alan Mulally's $20.8 million compensation?

Comparisons
To put that figure in perspective, let's look at other CEOs across Detroit. GM CEO Dan Akerson received $11.1 million in 2012, barely over half of Mulally's pay. In fact, if you combine the three top salaries at GM -- $11.1 million, $6.6 million, $5.4 million -- you still barely top Mulally's pay alone.

The story is similar at Chrsyler, where the CEO hasn't taken a cash salary since he came on board in 2009. If you go down the list of other top executives at Chrysler, you find that Mulally's pay is almost double that of the top three salaries combined. There is a caveat here, as Chrysler's CEO gets a big paycheck from also being the Fiat CEO -- for a combined total of $22.2 million in compensation. That's right in the realm of what Mulally received. 

Part of the reason GM's CEO pay looks so much lower is that the U.S. Treasury -- and rightfully so -- has to approve the pay scales of GM's top executives. The government will lift the pay restrictions when its remaining shares of GM are sold off.

Worth every penny
As a shareholder in both Ford and GM -- as well as a taxpayer -- I strongly believe Mulally deserves to be paid much more than his counterparts. Consider that the U.S. government is likely to lose around $11.5 billion out of the nearly $50 billion spent to save GM. Thanks to Mulally and his decisions, there's no such situation with Ford. 

When Mulally came on board in 2006, he took out a huge loan to help fund the company's restructuring. It was a lifeline that Ford soon needed, as the automaker would lose $12.6 billion that year -- nearly a $2,000 loss for every vehicle sold. When taking out the loan, Mulally said he wanted to make sure the company could survive unforeseen events -- like a recession. As we all know, there was indeed a huge recession waiting right around the corner. 

Through Mulally's "One Ford" strategy, Ford was able to fix its massive losses and returned to profitability by 2009. It was an incredibly quick turnaround for a company that had long been producing terrible vehicles. That's what a good leader and CEO does, and those results will get you paid -- and handsomely. In reality, Mulally's compensation isn't that outlandish and doesn't even rank him in the top 50 on Forbes' 2012 CEO compensation list.

Bottom line
When investing, the most important thing -- in my opinion -- is finding proven and talented management. Ford's executive team is second to none in Detroit and has positioned Ford to succeed for many years to come. Ford is led by the industry's best CEO, and I'd be thrilled to give him a large raise -- if only he would agree to delay his retirement.

Yes, Mulally makes a lot of money, but he's earned every penny.

Worried about Ford?
If you're concerned that Ford's turnaround has run its course, relax -- there's good reason to think that the Blue Oval still has big growth opportunities ahead. We've outlined those opportunities in detail, in the Fool's premium Ford research service. If you're looking for some freshly updated guidance to Ford's prospects in coming years, you've come to the right place -- click here to get started now.

Northrop Unveils New Bomb-Disarming Robot

Northrop Grumman (NYSE: NOC  ) has a new warbot.

To great ballyhoo, the defense contractor announced Friday that its latest-generation "unmanned ground vehicle," or UGV, the CUTLASS, will be on display at the Counter Terror Expo in London this week.

Northrop says the CUTLASS, described as primarily an explosive ordnance disposal, or bomb-disposal bot, "is more dexterous, cost effective, and, as a package, four times faster than any other UGV" in its class. CUTLASS is equipped with a three-fingered, "state-of-the-art gripper and has nine degrees of freedom for greater movement and agility inside limited spaces," the company notes. Unlike other bomb-bots, such as iRobot's (NASDAQ: IRBT  ) ubiquitous PackBot, the CUTLASS runs on wheels rather than tracks, enabling it to reach speeds of up to 12 kph (about 7 miles per hour).

Northrop now has some 2,000 UGVs in operation around the world. It designed the CUTLASS specifically for use in the United Kingdom, where Northrop's UGV business is based.

In addition to the CUTLASS, Northrop makes the following other UGV models:

The 700-plus pound Wheelbarrow tracked bot. The smaller, 485-pound, wheeled-and-tracked Andros. The even smaller, 185-pound, tracked Caliber.

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Pentagon Funds "Glide Bombs" and Satellite Jammers

After a busy week, during which the Department of Defense handed out literally dozens of contracts worth a combined $1.9 billion, the generals found their wallets near empty come week-end. By the time Friday rolled around, the Pentagon could only muster up a bare two contracts to award. Here they are:

Raytheon (NYSE: RTN  ) won a $12.7 million cost-plus-fixed-fee delivery order against a previously issued basic ordering agreement for the development and integration of its AGM-154C-1 Joint Standoff Weapon (JSOW) into the operational flight program software of the Boeing F/A-18E/F fighter jet. Raytheon is expected to complete work on this contract by February 2015.

The JSOW is a Raytheon-designed 1000-lb. "glide bomb." Dropped from a fighter at high altitude, it can travel as far as 78 miles to strike a target, guided en route by GPS signals.

Harris Corp (NYSE: HRS  ) was awarded a modification to a firm-fixed-price contract requiring it to supply two counter communications system (CCS) Block 10 increment 1 system upgrades by July 25, 2014.

CCS is a land-based system designed by Northrop Grumman, the purpose of which is to jam an enemy's satellite communications.

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Is a Pharmaceutical Company the Same as a Biotech?

Is Royal Dutch Shell the Cheapest Share in the FTSE 100?

LONDON -- Royal Dutch Shell  (LSE: RDSB  ) (NYSE: RDS-B  ) is the bluest of blue-chip shares. The company employs 90,000 people worldwide. It is a true global titan with over a century of history.

Today, Shell trades at the kind of valuation that one might expect from a weaker company with worse prospects. Yet, the oil giant looks as strong as ever.

Dividend yield
Shell's dividend is a thing of beauty. Year in, year out, Shell keeps paying up. In dollar terms, the dividend has not been cut since the second World War. Not only is the yield high, the cash payout is enormous. In 2011, Shell paid out more cash in dividends than any other U.K. company. It is expected to do the same again this year.

The average FTSE 100 share is forecast to yield 3.2%. This year, the market is expecting Shell to pay $1.84 in dividends. That equates to a forecast yield of 5.4%. Analysts expect Shell's dividend to increase 4.3% in 2014.

Only a handful of shares could likely yield more in 2013.

Price-to-earnings ratio
Today, Shell trades on just nine times last year's earnings per share. With 8.4% of earnings growth forecast for 2013, the P/E for this year is 8.3 times expected earnings.

The average FTSE 100 company trades on a historic P/E of 16.7. Average forecast earnings growth is slightly higher among other FTSE 100 constituents, at 9.5%. While Shell is cheaper than nearly all FTSE 100 companies, it is expected to grow more slowly than most.

This perception could be a result of recent falls in the price of crude oil. In the last three months, crude prices have fallen by around 9%. In that time, shares in Shell are off by 3%. While the price of oil will affect Shell's earnings, it has historically had little correlation with the company's share price.

Even if Shell is the cheapest share in the FTSE 100 today, that doesn't mean that the shares will go on to post huge rises. Our analysts here at the Motley Fool believe that they have found a better growth prospect. Like Shell, their top pick has a long history and is a dominant player in its markets. If you want to learn all about the opportunity that our team's top growth pick presents, get the free Motley Fool report, "The Motley Fool's Top Growth Share For 2013." This reserach is completely free and will be delivered to your inbox immediately. Just click here to get your copy today.

5 Rules That Make the Roth 401(k) Different

Just as important as what companies you invest in are the tools you invest with. As more and more employers offer a Roth 401(k), you may have come across this option, and wonder how it differs from the Traditional 401(k). Additionally, you may wonder how a "Roth" 401(k) differs from a Roth IRA. Here are five key facts that will keep your head straight, and maximize your retirement dollars.

1. No income restrictions for Roth 401(k)
Whether you're a millionaire or a pauper, it doesn't matter. You can contribute to a Roth 401(k) no matter what your adjusted growth income (AGI) is. That's completely unlike the Roth IRA – which taxpayers can only contribute to if they have a certain AGI (less than $112,000 for single filers and $178,000 for joint filers in 2013). The only real question to whether you can contribute to a Roth 401(k) is if your employer offers it. And to find that answer, all you need to do is shoot a quick email to human resources.

2. Forced distribution age is in-line with "Traditional" accounts
Roth 401(k)s require contributors to start withdrawing funds at age 70 1/2. The penalty for not doing so is 50% of your minimum distribution. The Traditional 401(k) and Traditional IRA follow similar rules.

Unlike the rest, the Roth IRA has no forced distribution age.

3. "Roth" = "Post-tax"
Similar to the Roth IRA, Roth 401(k) contributions are taxed post-tax. Meanwhile, contributing to Traditional 401(k) and Traditional IRA are pre-tax.

What does that mean? Well, post-tax means you'll pay tax when you take distributions (withdraw) at retirement. Meanwhile, pre-tax means that you pay your tax now, but any future distributions -- hopefully after growing your investments -- are tax-free.

How does that affect you? Well, if you're young, not making much, but expect to earn a greater salary as you near your retirement, then a Roth 401(k) may be the best choice for you. If you expect to be in a lower tax bracket by retirement, then the Traditional 401(k) may be best for you. This may feel like it's going over your head, but luckily, Fool contributor Dan Caplinger has 401(k) tax planning covered.

4. "Roth" = 5 Year "Seasoning" Period
Similar to both IRAs and Traditional 401(k)s, Roth 401(k) contributors can begin distributions at age 59-½ or if you become disabled. However, with the Roth 401(k), you also have to wait five years before you can start your distributions if you want to get its full benefits.

The same is true of those who have contributed to a Roth IRA.

So, if you're nearing your retirement and want to contribute to a Roth 401(k), you may be better off going traditional if you're going to need the money very soon.

5. "Roth" stays a "Roth"
When you leave your employer, you have the option to rollover your 401(k) to an IRA. Now, if you have a Traditional 401(k), rejoice! You have two options: You can roll it over to either a Traditional IRA or a Roth IRA.

On the other hand, contributing to a Roth 401(k) limits your rollover option to just the Roth IRA.

Roth 401(k): Another tool in your retirement kit
While it may be arduous at times, learning all the ins and outs of all the retirement accounts can be fun. Just think: If you minimize your taxes and penalties, you're creating a bigger nest egg. And, if you plan it right, you may get to lie on that Caribbean beach overlooking the crystal ocean a bit sooner.

To make sure you're making the right choices, it helps to figure out what others are doing wrong. With most people chronically under-saving for their retirement, it's clear that not enough is being done. Don't make the same mistake as the masses. Make sure you have enough for retirement now. Learn about The Shocking Can't-Miss Truth About Your Retirement. It won't cost you a thing, but don't wait, because your free report won't be available forever.

Stillwater Mining Reacts to Shareholder Advisory Services' Recommendations

Stillwater Mining (NYSE: SWC  ) says it disagrees with a shareholder advisory service's support of some of the board candidates put forth by a dissident shareholder. However, the company said in a press release today that it takes heart from some of the service's conclusions about shortcomings in the attempt by Clinton Group to force change at the company.

Platinum group metals miner Stillwater Mining announced today that in its ongoing engagement with dissident shareholder Clinton Group, prominent independent shareholder advisory service Glass Lewis has come out in favor of electing three of the slate of eight candidates Clinton Group is running, though it doesn't believe Clinton Group has "made a strong enough case that their nominees as a whole have superior skills or experience to direct the Company more effectively than the current leadership team."

Stillwater said it appreciates the advisory service acknowledging the shortcoming the slate offers, but disagrees with the recommendation to elect three of the candidates, as it has the potential to turn over effective control of the company to a shareholder that only recently acquired just 1.3% of Stillwater's outstanding shares.

Stillwater chairman and CEO Frank McAllister was quoted as saying, "We disagree with Glass Lewis' recommendation to elect three of Clinton Group's nominees, but we are encouraged that Glass Lewis also identifies serious shortcomings with the dissident platform and slate as a whole. We urge shareholders to vote the white proxy to elect all of Stillwater's nominees, who are committed to serving the best interests of all Stillwater shareholders."

Proxy service Institutional Shareholder Services also weighed in on the board of director nominee issue last week and recommended voting on the dissident's proxy card, which Stillwater spoke against. The miner notes it has received the support of the United Steelworkers union representing its employees and the Good Neighbor Agreement Councils.

Stillwater Mining is the only U.S. producer of palladium and platinum, and the largest primary producer of platinum group metals outside South Africa and Russia. The annual meeting will be held May 2.

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Has Verizon Hired Advisors for Buyout of Verizon Wireless?

LONDON: Following reports that Verizon Communications (NYSE: V  )  has hired advisors on a bid to buy out its stake in Verizon Wireless, Vodafone (LSE: VOD  ) (NASDAQ: VOD  )  soared in trading today, pushing 200p -- a height not previously seen since December 2001.

Reuters claimed that the U.S. telecoms Goliath has hired both banking and legal advisors to act on a possible £80bn cash and stock bid for Vodafone's 45% interest in the joint venture, citing two sources "familiar with the matter." 

It is thought that Verizon is yet to put the proposal to the British telecoms company, but if true, then these actions show significant intent. If friendly discussions at a scheduled meeting next week do not proceed in the manner that the U.S. company hopes for, then aggressive measures look likely to be taken in the form of a public bid.

Last week, management at Verizon played down one of the main stumbling blocks that could prevent such a bid, namely, Vodafone incurring a huge capital gains tax bill, with chief financial officer Francis Shammo commenting: "We are extremely confident that such a transaction could be accomplished in a manner that is very tax efficient and would not result in a tax on the gain in that stake."

Vodafone's shares had previously reached an end-of-trading high of 193.20p in April, as the market appeared to have new-found hope for the stock. And, on a price-to-earnings ratio of below 12, and a consensus forecast of a 5.4% yield, well above the FTSE 100's average of around 3%-3.5%, it's not hard to see why.

If you're looking for opportunities in the FTSE 100 outside of Vodafone, though, this exclusive wealth report reviews five particularly attractive alternatives.

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1 Important Way T-Mobile May Be Ahead of AT&T and Verizon

Sometimes it pays to be fashionably late. That's the case that T-Mobile is making with regards to its young LTE network. Since the magenta carrier is the far behind its larger rivals with deploying an LTE network, that could actually bode well for its ability to roll out newer technologies.

Specifically, T-Mobile believes it has a leg up over AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) Wireless with LTE-Advanced because its networking gear is newer than Ma Bell's or Big Red's. That's what T-Mobile network exec Yasmin Karimli told VentureBeat in an interview last week, saying that rivals with more mature networks also have older hardware that could be two years old. The bigger players may subsequently need to "rip and replace" networking equipment accordingly when the times comes for LTE-Advanced to be deployed.

T-Mobile's new LTE network currently only covers seven cities. In comparison, Verizon Wireless now covers over 491 cities with its LTE footprint, while AT&T still lags with 181 markets. In an emailed statement, Verizon Wireless spokesman Thomas Pica said:

We are actively involved with our technology partners on LTE-Advanced. When LTE-Advanced is ready for prime time, Verizon Wireless will lead the deployment charge, as we have done with 4G LTE.

Pica added that Verizon is "taking the first steps in deploying small cell technology this year, which are part of [Verizon's] LTE-Advanced plans."

Last year, AT&T said it will roll out LTE-Advanced in the 2013, but hasn't elaborated much recently.

LTE-Advanced is the next evolution of LTE, and includes important technologies like carrier aggregation. With spectrum becoming increasingly scarce and valuable as carriers blanket the airwaves, carrier aggregation can more efficiently utilize spectrum by combining separate chunks of frequency bands. Current technologies require contiguous blocks of spectrum.

Regulators believe that AT&T and Verizon hold a disproportionate amount of spectrum relative to rivals, particularly in low-frequency bands. That's why the Department of Justice's Antitrust Division recently recommended that the Federal Communications Commission structure an upcoming auction to favor the two smaller national carriers, Sprint and T-Mobile.

There's also opportunity for baseband chip providers in LTE-Advanced. Sequans Communications just introduced an LTE-Advanced chip; Broadcom did likewise. Most analysts are still confident that market leader Qualcomm will be able to maintain its edge, though, since the company is already on its third generation of chipsets while most rivals are still on their first.

T-Mobile may be able to move quicker to LTE-Advanced, but AT&T and Verizon still have awfully deep pockets to beef up their networks with.

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You're Tall Enough to Ride Amusement Park Stocks

Six Flags (NYSE: SIX  ) hit an all-time high yesterday, a day after posting better-than-expected quarterly results in a blowout performance. Revenue climbed 32% to $87.5 million, fueled by a 41% spike in attendance. The regional amusement park operator's net loss narrowed to $1.23 a share. Analysts were buckled in, braced for a deficit of $1.46 a share on $68.2 million in revenue.

Now let's hit the brakes for a reality check. Why were analysts aiming so low? Many schools that had spring break vacations in April of last year shifted to March this time around. Six Flags attributes the shift in school holidays for half of its attendance gains.

It's also important not to get too excited here. This is a regional amusement-park operator, and most of its properties were closed during the quarter. The real test for Six Flags and rival Cedar Fair (NYSE: FUN  ) -- which reports in two weeks -- will be the next two quarters as summer kicks in.

Six Flags is still doing a lot of things right. It has repurchased 6.1 million shares -- or 11% of its shares outstanding -- so far this year. This may inflate the first quarter's loss on a per-share basis, but it's going to have a similar impact in propping up earnings during the balance of the year.

Buybacks and keeping a healthy payout -- Six Flags is currently yielding 5.1%, rivaling Cedar Fair's generous 6% rate -- do come at a price. Net debt at Six Flags has ballooned to nearly $1.3 billion.

However, with the economy improving, it's easy to understand why Six Flags is comfortable with its leveraged situation. Last week's well-received SeaWorld Entertainment (NYSE: SEAS  ) IPO and a fresh all-time high for theme-park juggernaut Disney (NYSE: DIS  ) today validate the attractiveness of buying into park operators these days.

Expectations are high that this will be a strong summer for all of its players. The market may be overreacting to Six Flags' healthy first-quarter performance, but the bullish sentiment is spot-on.

Photo: El Toro at Six Flags Great Adventure by K Whiteford.

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Oil Above $91 on Hope for Europe Rate Cut

NEW YORK (AP) -- Oil was headed for its biggest gain in nearly a month as oil supplies rose less than expected in the U.S. and speculation built that the European Central Bank will cut interest rates.

Benchmark oil for June delivery rose $1.94 to $91.12 a barrel in Wednesday afternoon trading on the New York Mercantile Exchange.

Oil rose as expectations mounted among investors for a rate cut next week from the ECB following another weak business survey in Germany, Europe's biggest economy. The gains grew after the U.S. Energy Department said crude oil supplies rose by 900,000 barrels, or 0.2 percent, to 388.6 million barrels last week. Analysts expected an increase of 1.4 million barrels.

A big decline in gasoline supplies was also positive for oil prices, indicating that demand picked up somewhat, although it was still down 1.7 percent over the four weeks ended April 19.

At the pump, the national average for a gallon of gasoline held steady at $3.52. That's 33 cents cheaper than a year ago.

Brent crude, which is used to price oil used by many U.S. refiners, rose $1.28 to $101.59 a barrel on the ICE futures exchange in London.

In other energy futures trading on the Nymex:

Gasoline rose 2 cents to $2.74 per gallon. Heating oil added 3 cents to $2.83 a gallon. Natural gas fell 7 cents to $4.17 per 1,000 cubic feet.

Is It Time to Refinance Again?

Many homeowners have already taken advantage of low interest rates to refinance their mortgages at some point in the past few years. But with rates still edging downward, it may make sense for some homeowners to consider refinancing again.

In the following video, Motley Fool investment planning editor Lauren Kuczala talks with longtime Fool contributor and financial planner Dan Caplinger about making a smart refinancing decision. As Dan points out, low rates have come about due in part to Federal Reserve intervention, but with the economy finally starting to pick up steam, this may be your last chance to lock in rock-bottom rates. He also notes that while banks have gotten stricter about lending standards, they're also scrambling to keep their profits up, giving them an incentive to find a way to help you refinance. Dan closes by explaining how to decide whether the benefits of refinancing outweigh the costs involved.

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EnerSys Passes This Key Test

There's no foolproof way to know the future for EnerSys (NYSE: ENS  ) or any other company. However, certain clues may help you see potential stumbles before they happen -- and before your stock craters as a result.

A cloudy crystal ball
In this series, we use accounts receivable and days sales outstanding to judge a company's current health and future prospects. It's an important step in separating the pretenders from the market's best stocks. Alone, AR -- the amount of money owed the company -- and DSO -- the number of days' worth of sales owed to the company -- don't tell you much. However, by considering the trends in AR and DSO, you can sometimes get a window onto the future.

Sometimes, problems with AR or DSO simply indicate a change in the business (like an acquisition), or lax collections. However, AR that grows more quickly than revenue, or ballooning DSO, can, at times, suggest a desperate company that's trying to boost sales by giving its customers overly generous payment terms. Alternately, it can indicate that the company sprinted to book a load of sales at the end of the quarter, like used-car dealers on the 29th of the month. (Sometimes, companies do both.)

Why might an upstanding firm like EnerSys do this? For the same reason any other company might: to make the numbers. Investors don't like revenue shortfalls, and employees don't like reporting them to their superiors.

Is EnerSys sending any potential warning signs? Take a look at the chart below, which plots revenue growth against AR growth, and DSO:

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. FQ = fiscal quarter.

The standard way to calculate DSO uses average accounts receivable. I prefer to look at end-of-quarter receivables, but I've plotted both above.

Watching the trends
When that red line (AR growth) crosses above the green line (revenue growth), I know I need to consult the filings. Similarly, a spike in the blue bars indicates a trend worth worrying about. EnerSys's latest average DSO stands at 76.2 days, and the end-of-quarter figure is 75.1 days. Differences in business models can generate variations in DSO, and business needs can require occasional fluctuations, but all things being equal, I like to see this figure stay steady. So, let's get back to our original question: Based on DSO and sales, does EnerSys look like it might miss its numbers in the next quarter or two?

I don't think so. AR and DSO look healthy. For the last fully reported fiscal quarter, EnerSys's year-over-year revenue shrank 2.9%, and its AR grew 1.4%. That looks OK. End-of-quarter DSO increased 4.4% over the prior-year quarter. It was down 3.2% versus the prior quarter. Still, I'm no fortuneteller, and these are just numbers. Investors putting their money on the line always need to dig into the filings for the root causes and draw their own conclusions.

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Add EnerSys to My Watchlist.

Airline Service Improves, But Delays Still Possible

NEW YORK (AP) -- A day after flight delays plagued much of the nation, air travel was smoother Tuesday, but the government warned passengers that the situation could change by the hour as thousands of air-traffic controllers are forced to take furloughs because of budget cuts.

Meanwhile, airlines and members of Congress urged the Federal Aviation Administration to find other ways to reduce spending. Airlines are worried about the long-term costs late flights will have on their budgets and on passengers.

"I just can't imagine this stays in place for an extended period of time. It's just such terrible policy," US Airways (NYSE: LCC  ) CEO Doug Parker said. "We can handle it for a little while, but it can't continue."

The delays are the most visible effect yet of Congress and the White House's failure to agree on a long-term deficit-reduction plan.

Transportation Secretary Ray LaHood said no one should be surprised by the problem, noting that he warned about it two months ago.

His solution: Blame Congress for the larger budget cuts that affected all parts of government, including a $600 million hit to the Federal Aviation Administration.

"This has nothing to do with politics," LaHood said. "This is very bad policy that Congress passed, and they should fix it."

Critics of the FAA insist the agency could reduce its budget in other spots that would not inconvenience travelers.

Sens. John D. Rockefeller IV, a West Virginia Democrat, and John Thune, a Republican from South Dakota, sent a letter to LaHood on Monday accusing the FAA of being "slow and disturbingly limited" in response to their questions. They suggested the FAA could divert money from other accounts, such as those devoted to research, commercial space transportation and modernization of the air-traffic control computers.

Others in Congress urged the Obama administration to postpone the furlough for at least 30 days.

In the past five years, the FAA's operating budget has grown by 10.4 percent while the number of domestic commercial flights has fallen 13 percent.

"There's no cause for this. It's a cheap political stunt," said Michael Boyd, an aviation consultant who does work for the major airlines.

The FAA says the numbers aren't so clear cut. In that time, the government has signed a new, more expensive contract with air traffic controllers, added 400 new aviation safety inspectors and beefed up its payroll to deploy a new air traffic-control computer system.

So given the budget cuts, FAA officials say they now have no choice but to furlough all 47,000 agency employees -- including nearly 15,000 controllers -- because salaries make up 70 percent of the agency's budget. Each employee will lose one day of work every two weeks.

Planes will have to take off and land less frequently, so as not to overload the remaining controllers on duty.

About 400 delays piled up Sunday and another 1,200 Monday that were linked to the furloughs. The FAA did not predict the number of delayed flights Tuesday but warned of possible problems in New York, Los Angeles, Dallas, and Las Vegas.

Travel has not yet reached the levels the FAA warned about where some airports -- like those in Atlanta or New York or Chicago -- could see delays of more than three hours. Mother Nature has so far cooperated.

"Bad weather would make this much worse," Parker added.

There's also potential that passengers will be scared away by fears over delays. Many families are now planning summer vacations and might choose a driving trip instead.

If the FAA staffing shortage persists into the summer, airlines will also have less flexibility to ease passengers' pain.

For instance, Delta Air Lines (NYSE: DAL  ) canceled about 90 flights Monday because of worries about delays. Just about every passenger was rebooked on another Delta flight within a couple of hours, according to Ed Bastian, Delta's president.

In the busy summer travel months, the airline might not have enough empty seats to accommodate passengers from canceled flights.

Summer also brings thunderstorms, which are the biggest source of airline delays. Unlike snowstorms, which are forecast days in advance, thunderstorms can develop quickly and are unpredictable.

"This is just the beginning of what promises to be a huge economic disruption," the National Air Traffic Controllers Association warned in a statement Tuesday. "This is no way to run the world's safest, most efficient national airspace system. Controllers continue to do their best every day to keep the system running. It's time policymakers show the same amount of effort and dedication."

The federal budget cuts are also eating into the company's bottom line, with defense company employees cutting their flight budgets by 20 percent in the last month.

Unlike Delta, US Airways didn't cancel flights in advance.

"It's really difficult to do because we don't know where the issues are going to be until the issues are there," said the airline's president, Scott Kirby.

US Airways operates a hub at Washington National airport, and government business accounted for 3 percent of its revenue last year. Government revenue dropped 37 percent in March because of the spending cuts and the timing of Easter, Kirby said.

"As long as the sequester stays in place, I expect that government-related demand will continue to be depressed," he said.

Bank of America Stock Soars After Price Target Raised to $16

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

"You don't get a lot of second chances in life and so we are taking advantage of this one," Graseck wrote, according to TheStreet.com. "[Bank of America] is about to deliver on a significant expense reduction over the next several quarters, which should fall to the bottom line and boost EPS. Also, we expect [the bank] will be largely through significant litigation risk by [the end of] 2013."

The news comes as a welcome relief to many Bank of America investors. The Charlotte-based lender has seen its shares plummet after announcing first-quarter earnings at the beginning of last week. For the three months ended March 31, it earned $0.20 per share compared to the consensus estimate of $0.22 per share.

In light of the post-earnings fall, it'd be tempting to conclude that Bank of America had a horrible quarter. But as I've noted before, I couldn't disagree with this assessment more.

There are two factors holding Bank of America back. The first is litigation risk. Since the financial crisis, the bank has paid tens of billions of dollars to settle lawsuits related principally to the origination of faulty mortgages by Countrywide Financial. Of the remaining cases, the biggest outlier is a collection of securities fraud actions before a federal judge in California. While I had previously estimated that the damages from these cases could range anywhere from $5 billion to $15 billion, we learned in Bank of America's earnings release that the figure will be much smaller thanks to a $500 million settlement that resolves upwards of 80% of the outstanding securities fraud cases.

The second factor is costs. If you dig into Bank of America's financial results, you'd see that the principal operational culprit behind the bank's uninspiring profitability is its mortgage-servicing division. Thanks to higher regulatory requirements and lower quality mortgages, Bank of America has found itself throwing money in this direction. Thus, the faster it can shrink the affiliated operations, the better. And that's exactly what Bank of America has done, reducing the size of its mortgage-servicing portfolio by nearly 30% on a year-over-year basis.

At the end of the day, in turn, while I don't usually pay much attention to analyst upgrades and/or downgrades, I think Graseck may be onto something, here.

Want to learn more about Bank of America?
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8 Things Apple Investors Could Have Bought With What They've Lost

After peaking at $705 last September, Apple (NASDAQ: AAPL  ) shares broke below $400 this past week for the first time since December 2011. That $305 per share loss translates into $286 billion in market cap lost in a matter of months. That's an astounding amount to have evaporated in such a short period of time, mostly resulting from growth deceleration, high-end market saturation, and -- most of all -- fear.

The value that Apple investors have lost in aggregate since September could buy an awful lot of things. What could shareholders have purchased or paid for with $286 billion?

1 Microsoft and 3 Netflixes
With longtime rival Microsoft's (NASDAQ: MSFT  ) entire valuation currently under $250 billion, Apple investors could have theoretically swallowed the software giant whole with as much as they've lost. With the change left over ("can you break a 286 billion dollar bill?"), the Mac maker could have also scooped up Netflix (NASDAQ: NFLX  ) three times over just for good measure. Buying the dominant online video streamer has been entertained before.

Almost 2 International Space Stations
With development beginning in 1994, the International Space Station has cost an estimated total of $150 billion over the past 19 years to build, operate, and maintain. Only approximately $100 billion has been borne by the U.S., with other countries pitching in to help foot the bill. For $286 billion, Apple investors could have nearly financed two orbital research facilities.

14 million discouraged European workers
One of the European Union's research agencies, Eurofound, conducted a study late last year that estimated the cost of Europe's "lost generation," 14 million out-of-work and discouraged young Europeans. Aged 15 to 29, these individuals are not employed and not pursuing education and training, in part because of difficult macroeconomic conditions across the pond. The report estimates that this group altogether is costing the EU approximately 3 billion euros per week in state welfare and lost production, which translates into 153 billion euros annually. That translates into $200 billion of annual costs, well under our imaginary budget.

4 Hurricane Sandys
Easily the worst climate disaster to hit the Northeast last year was Hurricane Sandy. Economic losses, damages, and other costs related to the superstorm have been estimated at $65 billion. Apple shareholders could have covered those damages more than four times and still had money left over.

Nearly 3 iPad Minis for every person in America
With the entry-level iPad Mini starting at $329, Apple could have handed out 869 million of the devices with its market-cap losses. That would be enough for nearly three small tablets for each of the 315 million people in the U.S. today.

1 Japanese tsunami
The horrific tsunami that struck Japan in 2011 resulted in approximately $210 billion in damages. That figure covered only the first nine months of 2011 and has inevitably climbed since those estimates. With the $76 billion Apple shareholders have left over, they should be able to cover the rest, too.

8 NFLs
Forbes recently came out with its 2012 valuations of all 32 teams in the NFL. Adding up every single team's franchise value sums up to $35.4 billion, meaning Apple's lost value could cover eight entire NFLs. However, in this case, Apple could be getting something in return, since all teams combined generated an estimated $8.8 billion in revenue last year. With eight NFLs, that would be $70.4 billion in annual revenue, which still wouldn't match the iPhone business alone, which has generated $85.4 billion in sales over the past year.

371 Mona Lisas
The Mona Lisa is, of course, priceless, but that hasn't stopped people from trying to figure out its worth. The main way people have attempted to value the historic painting is through a 1962 insurance assessment, which pegged its value at $100 million at the time. Adjusting for inflation using the CPI translates that total into $770 million, making the Mona Lisa probably the most valuable painting in the world. Even so, Apple shareholders could theoretically purchase 371 of Leonardo Da Vinci's timeless masterpiece.

There's more where that came from
Of course, the list of things that $286 billion could pay for is well beyond the scope of this article. If Apple falls further, its market cap losses from the peak could easily approach or top $300 billion. What would you buy with what Apple shareholders have lost?

Can Apple ever recover all or some of its market-cap losses? That's a key question on the minds of every Apple shareholder right now, and The Motley Fool hopes to answer it in our new premium research service on Apple. Senior technology analyst Eric Bleeker, CFA, and I have produced numerous extensive reports on a wide range of topics, all of which dig into Apple's core fundamentals. Get started by clicking here.

Why Windows XP Still Matters

Although Microsoft (NASDAQ: MSFT  ) Windows XP may be long in the tooth, it hasn't stopped businesses from keeping it around. According to CLSA, 35%-40% of businesses are still using Windows XP, a 12-year old operating system! Motley Fool contributor Steve Heller believes that the number of businesses running Windows XP could decline by the end of the year. Check out the video below to hear his thoughts on the topic.

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

Who Will Revolutionize the TV Market First: Apple or Google?

The smart-TV market could be a $100 billion opportunity for such tech companies as Apple and Google. In this video, Andrew Tonner looks at both companies and what they may roll out in the future.

Apple is likely to introduce its iTV first, Andrew says. The company has brand strength and premium pricing abilities, so this could be the next chapter of innovative (and profitable) products Apple is known for. A successful launch wouldn't hurt the stock price, either. Google, meanwhile, will probably roll out a low-cost alternative based on its Android system after Apple rolls out iTV. 

Another interesting development is Google's slow but relentless expansion of its fiber technology around the country. The continuing rollout could dovetail with its smart-TV offering and challenge the iTV. Andrew says both companies will almost certainly bring disruptive technology to the TV market and reward investors accordingly.

There's no doubt that Apple is at the center of technology's largest revolution ever and that longtime shareholders have been handsomely rewarded, with more than 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

Drilling Down Into LINN Energy's Cash Flow

Over the past few weeks I've been drilling down into LINN Energy's (NASDAQ: LINE  ) recent response (link opens a PDF) to short seller comments about its business practices. The goal here is to better understand what the company is trying to relay to investors. Today, I want to drill down into what the company has to say about its cash flow.

The issue is that some investors and analysts don't like how LINN accounts for the puts it bought as part of its hedging strategy. As I'm sure you know, hedging is an integral part of the thesis of an investment in LINN. It the main reason why I think its distribution is safer than its peers.

There are many ways to hedge production and each way has pros and cons. For the most part, LINN hedges with swaps which are fixed price contracts. However, in the past the company has bought puts on a portion of its production which had an immediate cost but left that production open to upside if prices improved. Some investors have questioned the way LINN accounted for the cost of these puts. With so many other hedging options at its disposal, LINN decided to do away with buying puts because they simply are not worth the hassle.

The main concern that analysts had was that the purchases of puts were of such a recurring nature that it appeared to be a maintenance capital expense. LINN has always viewed the puts as capital costs, not just maintenance capital, and therefore the premiums it paid were an investment in its business. At issue is the company's true cash flow picture which brought into question the sustainability of the distribution.

LINN's practice when it purchases an oil and gas asset is to buy puts that are valued at around 10% of the purchase price. For example, when LINN bought the Jonah Field from BP (NYSE: BP  ) for roughly a billion dollars, the company pointed out that it had hedged 100% of the net expected oil and natural gas production through 2017. That means that the company spent an estimated $100 million over the purchase price in put premiums as part of the overall hedging strategy.

Here's where analysts are questioning how LINN is accounting for these puts. Including the Jonah Field, LINN acquired $2.85 billion in assets last year. However, the company spent $583 million on derivative premiums, as you can see in the chart below:

Source: LINN Energy Investor Presentation

Which makes it appear as though some of the premium spent was to purchase puts to replace expired puts, hence, the recurring nature.

Because LINN views the puts as an investment, it doesn't account for the purchase of puts as detracting from its distributable cash flow. Nor does the company view the put purchases as creating an unsustainable distribution. This is where the company's business model can create confusion.

The oil and gas business is a capital-intensive business. A well does not steadily produce after it's drilled. Instead, it begins to decline so that its production needs to be made up elsewhere. It's a constant flow of capital into and then out of the business.

In LINN's case, a decent portion of the capital is flowing back to investors. In order to keep that cash both flowing and growing, LINN and its peers need to tap the capital markets to invest in new wells or acquire producing assets. LINN, together with its affiliate LinnCo  (NASDAQ: LNCO  ) , is known to be a serial acquirer, as evidenced by their recent deal to acquire Berry Petroleum (NYSE: BRY  )

What's worried some investors is that LINN is using the capital market not only to buy oil and gas assets but to buy puts as well. If you go back to the chart above you'll see that since 2009 the company has generated $325 million in cash flow after distributions and maintenance capital. However, it's that $325 million that's being called into question because the company has paid $931 million to purchase derivatives over that same time frame. Some investors view that $600 million difference as a shortfall, whereas the company views it really as part of the cost of an asset it's acquiring.

Because of all this confusion, and because the company has a number of other hedging options, it's simply not going to bother purchasing puts this year. What's being risked is the upside if commodity prices rise above the cost of the puts. While I side with the company's accounting of its put purchases, an investment in LINN isn't one in the upside of oil and gas prices. It's an investment in the cash flow from oil and gas production assets. That's why I think the company is making the right move in simply locking in its cash flow with other hedging mechanisms. That enables LINN to simply continue to do what it does best, which is acquiring cash-gushing oil and gas assets and sending that cash back to investors.  

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Should Wall Street go Back to the Partnership Model?

Most Wall Street investment banks used to be partnerships. They were owned by the firm's senior employees, who invested their own money to fund the bank's balance sheet. When the bank screwed up, it came right out of their own pockets. Lisa Endlich's 1999 book, The Culture of Success, describes just how aligned the partners were with the bank's performance:

In a private partnership none of the assets of partners are shielded from liability, and the individual partners are exposed down to the pennies in their children's piggy banks ... The actions of a rogue trader could spell personal bankruptcy ...

That's changed over the last three decades. Investment banks transitioned into public companies, where the capital was largely owned by outside investors, and partners no longer held unlimited liability. That opened the doors to take new risks. Today, the last remaining big investment banks, Goldman Sachs (NYSE: GS  ) and Morgan Stanley (NYSE: MS  ) , partake in practices that never would have been considered under the old partnership model.

Which raises the question: Should we go back to the old partnership model?

It's a question I've addressed before.

Last week, I asked David Cowen, CEO of the Museum of American Finance and a financial historian, what he thought. Have a look (transcript follows):

Cowen: "When those investment houses were partnership owned, it was their own capital on the line, and yeah, the commercial banks, they were always public, but now the investment banks go public and that gives them the opportunity to potentially lever lot more. If you take a look at a Lehman Brothers, and they're still in the process of unwinding all that, but 30, 35 times, 40 times possibly even leverage, would that have happened if it was the partner's money? And we know back in the day, the partners had much less leverage or capital that they've deployed in case something went wrong." 

More Expert Advice from The Motley Fool

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Is Now the Time to Buy Legal & General Group?

LONDON -- I'm always searching for shares that can help ordinary investors like you make money from the stock market.

So right now I am trawling through the FTSE 100 and giving my verdict on every member of the blue-chip index. Simply put, I'm hoping to pinpoint the very best buying opportunities in today's uncertain market.

Today I am looking at Legal & General  (LSE: LGEN  ) (NASDAQOTH: LGGNY  ) to determine whether you should consider buying the shares at 168 pence.

I am assessing each company on several ratios:

Price/Earnings (P/E): Does the share look like a good value when compared against its competitors?

Price earnings growth (PEG): Does the share look good value factoring in predicted growth?

Yield: Does the share provide a solid income for investors?

Dividend cover: Is the dividend sustainable?

Let's look at the numbers:

Stock Price 3-Yr. EPS Growth Projected P/E PEG Yield 3-Yr. Dividend Growth Dividend Cover

Legal & General	168p	0%	11.4	1.4	4.6%	61%	1.8

The consensus analyst estimate for next year's earnings per share is 14.8 pence (8% growth) and dividend per share is 8.3 pence (9% growth).

Trading on a projected P/E of 11.4, Legal & General appears cheaper than its peers in the Life Insurance sector, which are currently trading on an average P/E of around 12.7.

Legal & General's P/E and high single-digit growth rate give a PEG ratio of around 1.4, which implies the share is slightly expensive for the near-term earnings growth the firm is expected to produce.

Offering a 4.6% yield, the group's dividend income is greater than the insurance sector average of 3.9%. Furthermore, Legal & General has a three-year compounded dividend growth rate of 61%, implying the yield will continue to stay above that of its peers.

Indeed, the dividend is nearly twice covered by earnings, giving the firm plenty room for further payout growth.

So, now the time to buy Legal & General?
As I have written in the table above, growth has been slow at this life insurance provider over the past few years. However, I believe that now could be the time to buy.

You see, life insurance is a product that is highly resistant to the economic climate. Indeed, I understand demand for life insurance products is influenced more by the ageing population and government welfare cuts than economic conditions, which should give Legal & General a very defensive nature.

Furthermore, due to the structure of life insurance products, where the client pays a recurring premium for a payout in the future, Legal & General enjoys a predictable and dependable cash flow.

In particular, this dependable cash flow has translated into dependable dividend payouts for shareholders, as the company has steadily increased its dividend by 60% over the past 10 years, despite the credit crisis in 2008.

That said, the firm did reduce its payout slightly in 2008 and 2009 -- which in hindsight proved a good buying opportunity as my calculations show the shares back then offered a dividend yield of around 6%.

However, I remain positive on the share, and based on the company's solid dividend yield and that P/E discount to the sector, I believe now looks to be a good time to buy Legal & General at 168 pence.

More FTSE opportunities
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In the meantime, please stay tuned for my next verdict on a FTSE 100 share.

The Best Way to Contact Loved Ones During a Disaster

Bill Greene/The Boston Globe via Getty Images Women desperate to hear from loved ones can't enter the scene at Boylston and Massachusetts Avenue after two explosions went off near the finish line of the 117th Boston Marathon on April 15. As the details of the Boston Marathon bombing emerged Monday, I noticed that one of my coworkers was speedily typing, texting, and monitoring all his lines of communication. It wasn't hard to figure out what was going on: a Massachusetts native, he was checking up on his friends and family.

I could easily relate: Six years ago today, I was doing the exact same thing.

I was an instructor at Virginia Tech when the 2007 shootings happened. That morning, after the university canceled classes and the police put the school on lockdown, my thoughts went to my 93 students, and I spent the remainder of the day tracking them down, either through e-mails, phone calls, or -- in a few heart-stopping instances -- by finding them quoted in news reports. One by one, I checked them off a master list made up of all my class lists.

Monday, it was easy to see the communications change that those six years had wrought. On April 16, 2007, I spent my day writing e-mails and tying up land lines. On April 15, 2013, people instinctively went to their cell phones, quickly overwhelming the local cell network. As with Hurricane Sandy last year, wireless carriers advised people to text rather than call, as it ties up less network bandwidth. A Sprint representative, speaking with Salon, noted that the average wait time for a phone call during an emergency is 180 seconds, during which someone with fast thumbs could send dozens of texts.

And texts weren't the only low-bandwidth tools that Bostonians could use to get the word out. According to reports, many people on the scene used Instagram and Twitter to notify their social groups that they were safe.

Google also helped get the word out, rapidly launching a "Person Finder" for the disaster, offering a central clearinghouse for information about people who may have been affected. As of press time today, it contains 5,400 records, offering a limited, but effective, checklist of people who were located along the marathon route. Google originally created the program for the 2010 Haiti earthquake and occasionally sets up pages for other disasters, based on their severity.

Given how quickly cell networks were overwhelmed after the Boston bombs went off, it's clear that there's still room for improvement when it comes to disaster notification. On the other hand, as the events of the day also demonstrated, the myriad tools now available for reaching out to loved ones are useful for more than sending out quick snapshots and pithy commentary: In an instant, they can also provide comfort, love and reassurance.

Should I Invest in Schroders?

LONDON -- To me, capital growth and dividend income are equally important. Together, they provide the total return from any share investment, and as you might expect, my aim is to invest in companies that can beat the total return delivered by the wider market.

To put that aim into perspective, the FTSE 100 has provided investors with a total return of around 3% per annum since January 2008.

Quality and value
If my investments are to outperform, I need to back companies that score well on several quality indicators and buy at prices that offer decent value.

So this series aims to identify appealing FTSE 100 investment opportunities, and today I'm looking at Schroders  (LSE: SDR  ) , the fund management company.

With the shares at 2169 pence, Schroders' market cap. is 5,876 million pounds.

This table summarizes the firm's recent financial record:

Year to December 2008 2009 2010 2011 2012

Revenue (millions of pounds)	936	769	1439	1,502	1,425
Net cash from operations (millions of pounds)	134	371	1,067	427	489
Adjusted earnings per share	75.5p	56.7p	111.8p	115.9p	104.7p
Dividend per share	31p	31p	37p	39p	43p

Last year, Schroders earned 97% of its revenues in asset management fees and just 3% from private banking. The firm, which describes itself as a global asset management company, saw a net inflow of funds under management of 9.4 billion pounds during the year, taking the total to 212 billion pounds.

That's a big chunk of money invested by institutions and individuals from around the world upon which Schroders can charge a handling fee. In fact, 86% of revenue came from such management fees last year, with just 2% earned by performance fees, and 12% from other sources.

So the company doesn't derive its current prosperity from investment performance at all. Given the volatility of markets, that's reassuring. However, the funds-under-management metric is important to monitor because Schroders' earning power depends on it.

Given the current low base, any improvement in fund performance could provide a welcome boost to earnings via performance fees, but it's not the flour and raisins, just the frosting on top!

Schroders' total-return potential
Let's examine five indicators to help judge the quality of the company's total-return potential:

1. Dividend cover: adjusted earnings covered last year's dividend around 2.4 times. 4/5

2. Borrowings: net gearing is about 2% with net debt around 12% of operating profits. 4/5

3. Growth: rising cash flow well-supports flat revenue and earnings. 3/5

4. Price to earnings: a forward 15 or so compares well to growth and yield forecasts. 4/5

5. Outlook: year-on-year profits down recently and the outlook is cautiously optimistic. 3/5

Overall, I score Schroders 18 out of 25, which encourages me to believe the firm has some potential to out-pace the wider market's total return, going forward.

Foolish summary
Strong cash flow backs good dividend cover, and the firm has little debt. Although the outlook is cautious, the net inflow of client funds is encouraging. The valuation seems undemanding given forecasts for growth and a dividend yield expected to be around 2.5% in 2014 at the current share price.

That growing yield looks attractive, but I'm more likely to buy a share idea from the Motley Fool's top value investor who has discovered what he believes is the best income generating share-play for 2013. He set's out his three-point investing thesis in a report called "The Motley Fool's Top Income Share for 2013," which I recommend you download now. For a limited time, the report is free so, to download it immediately, and discover the identity of this dividend-generating star, click here.