Best Japan Stocks For 2013, Best Japan Stocks To Buy For 2013: August 2013

When Warren Buffett folded up his investment partnership more than 40 years ago he recommended one fund to his investors: the Sequoia Fund, which was managed by his friend Bill Ruane.

Here we are 40 some years later and the Sequoia Fund is still beating the market, and still holds a significant position in Buffett's Berkshire Hathaway (BRK.A)(BRK.B).

Interestingly, in 2011 it seems that the main challenge that the Sequoia Fund had was being overwhelmed by inflows from new investors after Morningstar named them fund manager of the year in 2010.

You would think that the 40-year track record of Sequoia would have been more interesting to potential investors than being named manager of the year for one trip around the sun.

The 10 largest positions in the Sequoia Fund represent over 50% of invested assets, so the fund is still managed in a concentrated value style like it was by Bill Ruane years and years ago.

To the Shareholders of Sequoia Fund, Inc.

Dear Shareholder:

Sequoia Fund's results for the quarter and year ended December 31, 2011 appear below with comparable results for the S&P 500 Index:

To December 31, 2011	Sequoia Fund	Standard & Poor's 500*
Fourth Quarter	12.58%	11.82%
1 Year	13.19%	2.11%
5 Years (Annualized)	4.30%	-0.25%
10 Years (Annualized)	5.57%	2.92%

The performance shown above represents past performance and does not guarantee future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Current performance may be lower or higher than the performance information shown.

* The S&P 500 Index is an unmanaged, capitalization-weighted index of! the common stocks of 500 major U.S. corporations. The performance data quoted represents past performance and assumes reinvestment of distributions. The investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Year to date performance as of the most recent month end can be obtained by calling DST Systems, Inc. at (800) 686-6884.

The Fund outperformed the S&P 500 Index for the fourth quarter and the year. While the stock market posted modest gains in 2011, an investor in the Index still would not have recovered his losses from 2008, when the Index declined 37%. Over the past five years, the Index has generated a slightly negative overall return while Sequoia has compounded at a 4.3% annual rate, net of fees.

Sequoia has generated this return while operating with roughly 15% to 20% of our assets in cash for most of the past four years. We were pleased with the 13.2% gain in the Fund for the year but recognize that our performance would have been better had we been fully invested in the stocks we already owned.

The high concentration of cash in the Fund in 2011 was not by design. We entered 2011 with a 21% cash position, but were quite active buying securities during the year. Sequoia ended 2010 with 34 stocks in the portfolio. We added a net of 12 positions in 2011, bringing us to 46 stocks. Overall, the Fund began the year with a bit less than $3.5 billion of assets under management and was a net purchaser of $643 million of equities during the year.

However, we were surprised by the inflow of money into the Fund that occurred after we were named last January as domestic equity fund managers of the year for 2010 by Morningstar. In 2011 investors contributed $930 million to Sequoia, net of withdrawals. We thought the inflow that began immediately after the award would prove temporary, but it remained steady all year. It became a problem in the fourth quar! ter. Stoc! k market valuations rebounded strongly at the end of the year and our buying activity slowed in response. Yet Sequoia took in more than $275 million during the quarter.

Thus, despite our best efforts we finished 2011with more than $1 billion in cash in the Fund and roughly the same 21% cash weighting as we had at the start. Faced with what are, for now, limited options for deploying capital, we elected in early January to close the Fund to new investment from financial services platforms such as Charles Schwab, TD Ameritrade and E*Trade, as they were accounting for the overwhelming majority of our inflows.

Turning to performance, we experienced broad-based strength from our equities in 2011. Nine of the 10 largest positions in Sequoia outperformed the 2.1% return of the S&P 500 Index.

At year-end, the 10 largest holdings in Sequoia represented 52.8% of the Fund's assets and nearly two-thirds of our investments in securities. As always, we endeavor to concentrate Sequoia in our best ideas. Though we finished the year with a record number of companies in the Fund, we remain comfortable with our overall level of concentration in the top 10 positions.

As we reported to you last year, we have been steadily adding to our research staff over the past decade. As a result, we have broadened our reach and begun studying dozens of businesses for the first time. In 2011, we added 14 new positions to the Fund and sold two, leaving us with a net addition of 12 securities. As recently as 1999, we had fewer than 12 stocks in the Fund in total.

It is a bit of a paradox that we're holding so much cash at a time when we own more stocks than ever before. However, we have been cautious buyers and that has resulted in a somewhat lopsided portfolio. The 12 smallest positions in the Fund cumulatively amount to 1.5% of our holdings. Similarly, we made quite a few investments in 2011, but none of them at year-end amounted to more than 1% of the Fund's assets.

There are several reas! ons why w! e hold so many stocks that cumulatively amount to a non-material portion of the Fund's assets. While we bought a lot of stocks last year, with benefit of hindsight it appears we were a bit too cheap. As stock prices zigged and zagged, we tried to remain disciplined purchasers. We ended up buying tiny amounts of a number of stocks that briefly touched our buy prices and then quickly moved higher. We presumed continued market volatility would create more chances for us to buy shares. Too frequently, however, we ended up bottom-ticking the shares and owning immaterial amounts of stock. In most cases, we've opted to continue holding these small positions in the hope that we may get a chance to buy more shares in the future.

Sequoia investors should be prepared to own a portfolio of 50 or more stocks and should not be surprised if a number of these positions amount to "rounding errors." We like following and owning smaller, more entrepreneurial companies but these stocks can be difficult to buy. It can take weeks of trading to accumulate a full position. As we will not sacrifice price discipline to acquire a stock in size, there will be times when we end up with fractional positions.

Even as the portfolio grows, we expect that a relatively small number of holdings will continue to represent the lion's share of Sequoia.

Looking ahead, we humbly submit that we have no idea what the stock market will do in 2012. The reader is no doubt aware of the budget situations in the United States, Europe and Japan, and the threat they pose to long-term economic growth in the developed world. The faster growing economies of the emerging world suffer from their own structural inefficiencies that could disrupt their upward path. At the same time, corporate America arguably has never been stronger: profit margins are high, balance sheets are healthy, labor productivity continues to improve faster than wages.

Rather than try to guess what might happen next, we think it more prudent to own ! a portfol! io of market-leading companies that earn high returns on capital, boast strong balance sheets and self-fund their growth. We try to invest in high-quality management teams and to identify businesses with many years of growth ahead of them.

Throughout our history we have preferred to speak to our investors directly and clearly. We meet with Sequoia shareholders once a year, usually in May, and answer questions for several hours. Otherwise, we do not court publicity. We have no marketing arm. As a result, we were perhaps unprepared for the impact the Morningstar award had on the Fund. To our new investors, welcome. Our goal today is the same as it has always been: to own a portfolio of businesses that have been vigorously researched and carefully purchased, which consequently can outperform the broader stock market over many years. We have a proud history but we are looking forward, always.

You should be aware that our large cash position could act as an anchor on returns in a prolonged bull market. Conversely, in a bear market the cash might cushion the blow to stocks and provide us with flexibility to make new investments. Investors should remember that a concentrated portfolio of stocks will not track the results of the S&P Index from year to year. Over time, a well-selected portfolio should outperform the Index. We believe the current portfolio will generate satisfactory returns over time for Sequoia shareholders.

Management's Discussion of Fund Performance (Unaudited)

The total return for the Sequoia Fund was 13.2% in 2011. This compares with the 2.1% return of the S&P 500 Index. Our investment philosophy is to make concentrated commitments of capital in a limited number of companies that have superior long-term economic prospects and that sell at what we believe are attractive prices. Because Sequoia is deliberately not representative of the overall market, in any given year the performance of the Fund may vary significantly from that of the broad market indices.
The tabl! e below shows the 12-month stock total return for the Fund's major positions at the end of 2011.

The outperformance vs. the Index in 2011 was driven by strong performance of the Fund's equity holdings. Nine of the Fund's 10 largest holdings outperformed the Index, and these 10 holdings constituted 52.8% of the Fund's assets under management at year-end. During the year, investors committed $930 million of cash to the Fund, net of withdrawals. As a result, some securities which performed well during the year declined as a percentage of the Fund's assets as we failed to buy more shares as cash flowed into the Fund.

At year-end, the Fund was 78.5% invested in common stocks and 21.5% invested in cash and Treasury Bills.

Our largest holding, Valeant, had a busy year. Many of its end markets and products grew nicely. Overall, we believe Valeant generated about 8% organic revenue growth in 2011, led by its U.S. Dermatology unit that grew more than 20%. Full year numbers have not been reported yet, but we estimate that the European, Canada/Australia, and Latin America divisions will also generate double digit organic growth in 2011. This growth was partially offset by declines in the U.S. Neurology and Other division, led notably by a double digit decrease in sales of the antidepressant Wellbutrin XL.

On the acquisition front, Valeant (VRX) was involved in several transactions including PharmaSwiss, Sanitas, Ortho Dermatologics, Dermik, and iNova. The PharmaSwiss and Sanitas acquisitions should increase Valeant's European business to well over $600 million in revenues in 2012, which would put Europe at close to 20% of the total business. Ortho Dermatologics and Dermik will help Valeant become one of the leading dermatology companies in the world with over $1 billion in revenues. iNova increased Valeant's presence in Australia and helped it establish footholds in South Africa and Southeast Asia. Management is optimistic that the new positions in Southeast Asia, South Africa and Russia represent future growth platforms for Valeant.

As we discussed in last year's re! port, we ! like Valeant's approach to the pharmaceutical business. In an industry marked by heavy spending on unproductive research and development, Valeant over a period of years has acquired a stable of older branded drugs, generic and OTC drugs. Many of its drugs are steady sellers in niche categories of dermatology or neurology. In our view, Valeant is essentially a value investor in pharmaceutical products.

Berkshire Hathaway's look-through earnings likely improved only slightly in 2011, but this may mask a more impressive increase in earnings power. Berkshire's sometimes volatile insurance underwriting profits declined sharply due to record global catastrophe losses, with two devastating earthquakes in New Zealand and Japan, record floods in Thailand, and heavy losses from US tornados.

Despite these unusually high catastrophe losses, Berkshire's underlying performance improved. GEICO's voluntary auto policy sales increased at double digit rates and retention was up, a medical malpractice unit was acquired, and Gen Re bid for an Asian life company, all building a platform for stronger future results. Outside the insurance units, Berkshire spent more than $10 billion to buy Lubrizol and an additional 16.5% interest in Marmon, both of which will add to future earnings power. We think the investment portfolio grew in size. While $11 billion of high-yielding securities in Goldman Sachs, GE and Swiss Re were called away, Berkshire spent an equal amount on IBM common generating look-through earnings equal to the lost investment income.

The rest of the company's profits rose at a mid-teens rate as the large non-insurance units — the Burlington Northern railroad, IMC Metalworking, the mini-conglomerate Marmon, and Midamerican Energy — all generated fine results. Operating profits were boosted by the partial-year ownership of Lubrizol and the larger share of Marmon. At year-end, Midamerican spent $3 billion for two Western solar facilities that have long-term contracts to sell elec! tricity t! o California utilities at premium prices. Berkshire also bought back shares to take advantage of an historically low valuation.

We have held shares of TJX (TJX) in the Fund for 11 years. The company has been a very good performer for a long time, but earnings growth has accelerated in recent years. TJX is the largest off-price apparel and home goods retailer in the United States, Canada and the UK and has a presence in Poland and Germany. The long-term struggle of U.S. department stores to remain relevant to shoppers has been a boon to TJX. As apparel vendors search for new channels for growth, off-price retailers have become increasingly powerful in the marketplace. TJX not only continues to source high-quality goods from a vast roster of vendors, it has enjoyed steadily rising margins for several years as it buys goods on favorable terms. In 2007, TJX earned $0.84 per share. We believe earnings per share for 2011, which will be reported later in February, will approach $2.00, accounting for a recent stock split. This would represent a four-year growth rate of 24%. We don't expect this kind of growth to continue indefinitely, but TJX earns extremely high returns on capital, enjoys ample free cash flows and returns most of that free cash to its owners in the form of dividends and stock buybacks. We believe there is room to grow the store base by roughly 5% per year for several more years, and the company typically repurchases 4% – 6% of its shares annually, leaving it well-positioned to keep growing earnings at low-double digit rates.

We have held shares in Fastenal (FAST), a broad-line industrial distributor with a specialty in industrial fasteners, for 11 years. Fastenal's 2011 results provided a worthy encore to its outstanding performance in 2010. Revenue increased by 21.9%, and Fastenal's exceptionally energetic and frugal management team leveraged that result into a 34.8% increase in net income. At the end of 2011, Fastenal operated 2,585 branch locations, and as the law of l! arge numb! ers takes hold, the company relies less and less on new store openings to drive its growth. However, the company continues to find creative ways to invest in its store base so that its branches grow faster than GDP for many years after they are opened. In 2009, the company embarked on an effort to automate the sale of certain industrial products by installing vending machines and automated lockers at customer work sites. These machines make the sales process more efficient and save money for Fastenal's customers by reducing waste at the point of sale. In the first two years of the program, Fastenal installed 1,925 machines at customer locations. In 2011, it installed 5,528 machines and built the capacity to install 10,000 annually in the future. Though still in its early stages, Fastenal's automated solutions initiative shows enormous potential, and Fastenal's large branch network enables it to stock and service the machines more efficiently than its competitors. Though Fastenal's results will fluctuate with the industrial economy, its prospects for continued rapid growth in 2012 are excellent.

At the end of 2011, Advance Auto Parts (AAP) and O'Reilly Automotive (ORLY) were the fifth- and tenth-largest positions in the Fund, respectively, and together constituted 6.2% of our assets. Auto parts retail is a difficult business for all but the most efficient players. An auto parts retailer must carry literally thousands of hard parts for hundreds of models of cars. Not many people walk in the door needing an alternator for a 1994 Ford, but the person who does is probably experiencing a crisis. The retailer who can manage a substantial investment in slow-turning parts inventory is able to earn a high margin on sales.

Faced with a proliferation of parts, even commercial garages are increasingly relying on the neighborhood auto parts store to act as their local warehouse. As Americans are keeping their cars longer than before, the volume of repairs and accompanying demand for parts rise! s steadil! y.

We've always liked O'Reilly for its industry-leading distribution network, allowing for wide inventory coverage and prompt delivery of parts to commercial garages. The company is led by a talented and experienced team dedicated to growing the store base, expanding parts coverage, and returning excess cash to shareholders through stock buybacks. O'Reilly continues to do an excellent job integrating CSK, a Western auto parts chain it acquired in 2008. The company has a solid balance sheet and generates ample free cash flows, which should enable it to grow its store base by 3%-4% annually while sustaining stock buybacks.

We bought Advance Auto Parts in 2009 after a new management team had taken over. The company has executed an impressive turnaround since then. Looking ahead, management is focused on improving its service to commercial garages. Advance Auto Parts bought back stock worth 14% of its market capitalization in 2011 while maintaining a strong balance sheet. We think Advance can expand its store base by 3% – 4% annually and continue to buy back substantial amounts of stock.

Idexx (IDXX) performed well in 2011, generating solid revenue growth and high-teens earnings growth thanks to a slight recovery in the veterinary end market, the ramp up of its new ProCyte hematology instrument, continued share gains in reference laboratories and one-time gains from production animal disease eradication programs in Europe. While we continue to like the company's prospects and are impressed with its execution in a still sluggish market for animal healthcare, we trimmed our position in 2011 at prices we found attractive given our expectations for the business.

As a major producer of floor coverings, the fortunes of Mohawk Industries (MKK) are tied to housing and commercial construction. In 2011, total sales for Mohawk rose about 5% as home remodeling spending grew only fitfully. For the year, commercial sales were stronger than residential. Much of Mohawk's gains came f! rom highe! r prices, as the company was able to pass along raw material cost increases. We believe Mohawk gained market share in nearly all of its product categories and geographies, thanks to new products and superior distribution. Management continued to cut costs, resulting in operating earnings that handily outpaced the increase in sales. If market conditions improve in 2012, Mohawk's leaner cost structure should allow it to generate strong earnings leverage on sales growth.

The fiscal year of Precision Castparts (PCP) ends in March. Through the first nine months of the fiscal year, sales advanced 16% and EPS grew 18%. The company is on track to earn about $8.40 for fiscal 2012, up from $7.01 a year ago. Precision has deployed its prodigious cash flow on acquisitions. It created a new platform in aerospace structural components with the $800 million-acquisition of Primus International. In addition, it beefed up its fastener and forgings businesses with two small acquisitions and added to its technical capability in oil & gas pipes with two other acquisitions. The deal making in the oil patch paid off in September when it won a large order to supply specialty pipe to Saudi Aramco with a unique offering that allows customers to pump more oil in less time. Precision has since won an order even larger than the first. We expect more growth from Precision this year as Boeing and Airbus raise production rates. Despite last year's activity, Precision still has more cash than debt on its balance sheet, giving it plenty of flexibility to make more acquisitions.

At Rolls-Royce (RYCEY), new CEO John Rishton had a busy and fruitful start to his tenure. Most importantly, Rishton began to focus Rolls on areas where the company stood to improve, including cash generation, cost structure and customer service. He also successfully extracted the company from its legacy narrow body civil engine joint-venture with Pratt & Whitney (IAE) for an attractive price, positioned Rolls as exclusive supplier for the Airbus! A350-100! 0, further secured the company's strong position on the A350 program, and closed the tricky Tognum acquisition which will begin to bear fruit in 2012. While Rolls had not released its 2011 results as of the writing of this letter, both we and the markets expect the company to report mid-to-high single digits revenue growth and low-to-mid-teens earnings growth in the year past.

The Fund made a number of new investments in 2011, adding 14 new securities to the Fund while parting with two holdings. However, none of the new purchases amounted to more than 1% of assets of year-end. Our largest investment during the year was in Corning (GLW), the glass maker. We were attracted to Corning's dominant position in the lucrative business of supplying glass for the liquid crystal displays found in flat-screen TVs, computer monitors, and mobile phones. Only three other companies in the world are capable of producing this highly specialized glass in any volume. Unfortunately, the reality of consumer electronics is that as gadgets get cheaper every year component suppliers face constant deflation, too. As sales growth of flat-screen TVs slowed in 2011, glass manufacturers reduced inventory under severe price pressure. It also suffered from a customer defection at one of its joint ventures. Consequently, net income fell by 21%. Going forward, the company's performance will chiefly turn on its ability to moderate glass price declines. In the meantime the business is highly cash generative and management has the chance to deploy the proceeds in constructive ways such as its recently initiated stock repurchase plan.

We added to a number of our existing holdings during the year as new cash flowed into the Fund. We did not exit any significant positions during the year.

http://www.sec.gov/Archives/edgar/data/89043/000114420412011491/v300527_n-csr.htm

Conoco to Farm-out in Kashagan - Analyst Blog

Texas-based ConocoPhillips (COP) has validated that it is on the receiving end of a formal notification by the Kazakhstan Ministry of Oil and Gas. The Ministry is exercising its right under the Subsoil Law of Kazakhstan to pre-empt ConocoPhillips' proposed sale of its 8.4% interest in the North Caspian Sea Production Sharing Agreement (Kashagan) to ONGC Videsh Limited.

As part of such notice, the Ministry of Oil and Gas has nominated KazMunayGas (KMG) as the body that will obtain ConocoPhillips' interest in Kashagan. The asset is located in the Kazakhstan sector of the Caspian Sea.

Under the pre-emption, the proceeds received by ConocoPhillips will remain unchanged at about $5 billion, including customary adjustments.

Subsequently, KMG will proceed on finalizing all essential approvals, which will include a consent from the Kazakhstan Anti-Monopoly Agency. The transaction is likely to conclude in the fourth quarter of 2013.

The latest sale of the company's interest in Kashagan forms part of ConocoPhillips' strategy to enhance shareholder value through portfolio optimization as well as focused capital investments. These will likely lead to growth in production and cash margins, superior returns on capital and a compelling dividend.

ConocoPhillips remains on track with its divestment program, with a total of over $12 billion completed. The company has generated $1.1 billion in proceeds from asset sales during the quarter and expects to raise an additional $8.5 billion from the disposition program by the end of 2013. In this regard, ConocoPhillips is trying to shed part of the Surmont and APLNG projects this year. This would enable ConocoPhillips to generate a healthy cash surplus in 2013.

ConocoPhillips carries a Zacks Rank #3 (Hold). However, Zacks Ranked #1 (Strong Buy) stocks – PetroQuest Energy Inc. (PQ), Ocean Rig UDW Inc. (ORIG) and Hornbech! Offshore Services, Inc. (HOS) – are expected to perform impressively over the short term.

Thursday, August 29, 2013

Kraft Foods Retained at Neutral - Analyst Blog

On Jul 9, we maintained a Neutral recommendation on Kraft Foods Group, Inc. (KRFT) despite solid first-quarter results as we await a more sustained improvement in top line.

Why the Neutral Recommendation?

On May 2, 2013, Kraft Foods announced solid first-quarter 2013 results beating the Zacks Consensus Estimate for both revenues and earnings on the back of solid innovation and stepped-up advertising spend behind its biggest brands.

Adjusted earnings of this consumer packaged food and beverage company stood at 88 cents, flat year-over-year as gains from strong top-line growth and cost savings were offset by high interest expense and increased share count. Both total and organic revenues grew 2.1% in the quarter driven by volume gains, improved product mix and favorable Easter timing which offset headwinds from lower pricing and product pruning.

Kraft Foods' adjusted operating income (excluding restructuring charges) increased 16.6% in the first quarter. The increase was driven by volume gains, improved product-mix and strong productivity gains and cost savings making up for double-digit increase in the advertising costs. The company also stood by its full-year 2013 outlook and expects to invest its cost savings more heavily on brand building investments in upcoming quarter.

Overall, we are encouraged by Kraft Foods' aggressive cost-reduction and efficiency-improvement initiatives which will provide more cash to invest in stronger innovation, brand building and marketing initiatives. Kraft Foods also aims to maximize cash flows which will be used to pay strong and competitive dividends.

However, though Kraft Foods' first-quarter top-line performance and cost-savings efforts look encouraging, it needs to show sustained improvement in the top line. Moreover, challenging industry conditions and lack of exposure outside the U.S. also keep us on the sidelines.

Other Stocks to Consider

Kraft Foods carries a Zacks Rank #2 (Buy). Other stocks in t! he food industry that are currently performing well and have a bright outlook include Flower Foods Inc. (FLO), Campbell Soup Company (CPB) and B&G Foods Inc. (BGS). While BGS and FLO carry a Zacks Rank #1 (Strong Buy), CPB carries a Zacks Rank #2 (Buy).

Wednesday, August 28, 2013

Barclays Wins Dismissal of NCUA Case - Analyst Blog

Barclays PLC (BCS) heaved a sigh of relief when the U.S. District Judge in Kansas City dismissed a case by National Credit Union Administration (NCUA) – the U.S. regulator for credit unions. The lawsuit had accused the company of selling risky mortgage based securities (MBS) worth approximately $555 million from 2006–2007.

While dismissing the case, the U.S. District Judge stated that the NCUA had waited too long to file the case against Barclays. The chargesheet should have been lodged within 3 years (by Mar 20, 2012) of the NCUA being named the conservator of credit unions. However, the case was filed in Sep 2012.

Barclays was accused of selling MBS to 2 corporate credit unions – the U.S. Federal Credit Union and the Western Corporate Federal Credit Union – leading to their failure in 2009. Since then, the NCUA has been trying to recover the losses.

The dismissal of the case is a setback for the NCUA. The regulator had sued 10 major global banks on similar charges.

Out of these, Bank of America Corporation (BAC), Deutsche Bank AG, HSBC Holdings plc (HBC) and Citigroup Inc. settled their respective cases with the NCUA, thereby enabling the regulator to recover roughly $335 million. However, Credit Suisse Group, Goldman Sachs Group Inc., Wells Fargo & Company, JPMorgan Chase & Co. (JPM) and UBS AG continue to face similar charges from the NCUA.

The dismissal of the case removes a legal headwind for Barclays. However, the company still faces a number of lawsuits related to its conduct during the financial crisis. Though the London Interbank Offered Rate (LIBOR) manipulation scandal led to a fine of £290 million ($453 million) in Jun 2012, Barclays has moved forward to regain investors' confidence through various transformational initiatives.

Currently, Barclays carries a Zacks Rank #3 (Hold).

Tuesday, August 27, 2013

Mylan Faces Aptalis Challenge - Analyst Blog

Mylan Inc. (MYL) recently announced that it has been sued by the privately held Aptalis Pharma. The patent challenge follows Mylan's filing of an abbreviated new drug application (ANDA) as it seeks to market its generic version of Aptalis Pharma's ulcerative proctitis drug Canasa (mesalamine).

Mylan believes it may be the first-to-file an ANDA for a generic version of Canasa – if this is the case, Mylan would be entitled to 180 days of exclusivity on gaining approval from the US Food and Drug Administration (FDA) for its candidate. As per IMS Health data, Canasa sales in the US were $153 million for the twelve months ended Mar 31, 2013.

Mylan, one of the largest players in the global generics market, has a presence in more than 140 countries. As of Jul 11, 2013, the company had 173 ANDAs pending FDA approval, representing $82.9 billion in annual sales. These include 35 first-to-file opportunities.

Generic third-party net sales, derived from sales in North America, Europe, the Middle East & Africa and Asia-Pacific, came in at $1.41 billion in the first quarter of 2013, accounting for bulk of the company's total revenues. Mylan's generics business has been consistently performing well.

Mylan's generic unit has seen quite a few launches over the past few months. One of the important recent launches includes the company's generic version of Pfizer Inc.'s (PFE) erectile dysfunction drug Viagra. Dr. Reddy's Laboratories Ltd. (RDY) too has been making multiple generic launches over the past few months.

Mylan carries a Zacks Rank #2 (Buy). Simcere Pharmaceutical Group (SCR) appears to be equally attractive.

U.S. Banks Stock Outlook - Aug. 2013 - Industry Outlook

U.S. banks are showing signs of strength despite being compelled to meet strict regulatory standards. Though it's too early to be confident about the sector's growth prospects, the progress seen in the first half of 2013 indicates a brighter future for those depending less on risky activities and resorting to other profit-making ways.

Nonstop expense control, sound balance sheets and lesser credit loss provisions are the key drivers of this advancement. Moreover, a favorable equity and asset market backdrop, falling unemployment, a progressive housing sector and flexible monetary policy have been making the road to growth smoother.

Yet top-line growth remains uncertain due to continued sluggishness in loan growth, pressure on net interest margins from the sustained low rate environment and less flexible business models owing to stringent risk-weighted capital requirements (Basel III standards). However, banks have been gradually easing their lending standards and trending toward higher fees to dodge the pressure on the top line.

Now that the interest rate environment is reversing, net interest margins are likely to improve and support the top line significantly. But revenues from mortgage fees will lessen as the boom in mortgage refinancing fizzles out. But whether the loss of fee revenue will be compensated by gains from interest rate spreads can be said only in the course of time.

However, it's good to see that U.S. banks are taking legal and regulatory pressure in their stride, indicating their ability to encounter impending challenges. But with the economy in disarray, we don't see the sector returning to its pre-recession peak anytime soon.

Overall, structural changes in the sector will continue to impair business expansion and investor confidence. Several dampening factors -- asset-quality troubles, mortgage liabilities and tighter regulations -- will decide the fate of the U.S. banks in the quarters ahead. But entering the new capital regime will ens! ure long-term stability and security for the industry.

Zacks Industry Rank

Within the Zacks Industry classification, U.S. banks are broadly grouped in the Finance sector (one of 16 Zacks sectors) and are further sub-divided into six industries at the expanded level: Banks-Major Regional, Banks-Midwest, Banks-West, Banks-Northeast, Banks-Southeast and Banks-Southwest. The level of sensitivity and exposure to different stages of the economic cycle vary for each industry.

We rank all the 260-plus industries in the 16 Zacks sectors based on the earnings outlook and fundamental strength of the constituent companies in each industry. To learn more visit: About Zacks Industry Rank.

As a guideline, the outlook for industries with Zacks Industry Rank of #88 and lower is 'Positive,' between #89 and #176 is 'Neutral' and #177 and higher is 'Negative.'

The Zacks Industry Rank for Banks-Major Regional and Banks-Midwest is #26, Banks-West is #36, Banks-Northeast and Banks-Southeast is #40 and Banks-Southwest is #61. Considering the Zacks Industry Rank of the six banking industries, one could safely say that the near-term outlook for the group is 'Positive.'

Earnings Trend of the Sector

The broader Finance sector, of which U.S. banks are part, remains in excellent shape with respect to earnings. So far, 83.3% of the sector participants have reported second-quarter results, which have been very strong in terms of both beat ratios (percentage of companies coming out with positive surprises) and growth.

Both earnings and revenue beat ratios were pretty robust at 73.8% and 61.5%, respectively. Also, total earnings for the companies that have reported so far have shown an impressive 29.8% year over year increase on 8.6% growth in revenues. This compares with a substantially lower earnings improvement of 7.4% on 5.1% growth in revenues in the first quarter of 2013.

The consensus earnings expectations for the rest of the year also depict a fairly stron! g trend. ! Though earnings growth is expected to slowdown to 8.0% in the third quarter, a stupendous improvement of 27.9% is expected in the fourth quarter. Overall, the sector is expected to register full-year growth of 16.1%.

For a detailed look at the earnings outlook for this sector and others, please read our weekly Earnings Trends reports.

Banks Show Potency

While 16.7% of the companies in the Finance sector are yet to come out second-quarter 2013 results, all major banks have already reported. Surging profits of the mammoths such as JPMorgan Chase & Co. (JPM), Wells Fargo & Company (WFC) and Citigroup, Inc. (C) were primarily backed by loan loss reserve releases. Similar to the last few quarters, banks set aside less money for bad loans this quarter. So, the core earnings power of the sector is still lacking.

Overall results of the mega banks show that top line still needs to improve for assured strength in performance. However, the positive developments of the sector and better macroeconomic elements helped most of the business segments of banks report improved results. A boom in investment banking in recovering financial markets led to good numbers.

The Federal Deposit Insurance Corporation (FDIC) has yet to release the second-quarter results for FDIC-insured commercial banks and savings institutions. But the progress seen in the first quarter is a clear growth indicator.

FDIC-insured institutions earned $40.3 billion in the first quarter, up 15.8% from the year-ago quarter. This marked the 15th straight quarter of year-over-year earnings increase.

Besides contraction in provisions for credit losses and cost containment, marked recovery in the bond and equity markets and consequent growth in noninterest income helped most of the banks report higher-than-expected earnings. Given the solid results by the mega-banks in the second quarter, the improvement is likely to have further gained ground.

Bank Failures and Problem Institutions
!
Duri! ng the second quarter of 2013, the failure of FDIC-insured banks increased to 12 from only 4 in the first quarter. However, 16 bank failures in the first half of the year compare favorably with 31 in the year-ago period.

The reduced pace of bank failures indicate continued improvement in the sector. Though fewer banks are expected to fail in 2013 compared to 2012 (51 bank failures), the industry is still to see an average failure of just four or five banks annually, which would indicate maximum strength in the industry.

Moreover, as of Mar 31, 2013, the number of banks on the FDIC's "problem list" declined from 651 to 612. The continued decline in problem banks indicates a nonstop recovery of the industry. The latest positive trends in the industry are expected to further shorten the FDIC's "problem list" for the second quarter of 2013.

Bottom Line Growth: Still a Challenge

We don't expect reduction in provisions for credit losses to significantly help earnings growth in the upcoming quarters, as the difference between loss provisions and charge-offs is gradually decreasing.

Banks will definitely try to look at other areas -- interest income, non-interest income and operating costs -- to maintain earnings growth, but there will be limited opportunities given regulatory restrictions and sluggish economic recovery.

Efforts to cut interest expenses and take additional risks to improve net interest margins could be marred by a still-flat yield curve. Further, shifting assets to longer maturities for strengthening net interest margin could backfire with the expected increase in interest rates.

Though rising interest rates will help improve net interest margins -- the key source of bank's profitability -- revenues from mortgage fees will reduce significantly. The prolonged low-rate environment encouraged many people to refinance their mortgages, which resulted in hefty fees for banks. Now the rising interest rates will lessen mortgage refinancing ! and conse! quently fee revenues.

Conversely, increasing revenues through non-interest sources -- prepaid cards, new fees, higher minimum balance requirement on deposit accounts and pushing credit cards -- could be hampered by regulatory actions, economic volatility and soaring overhead. However, with a rebound in capital market activity, the propensity to invest in the market has increased, which may lead to more non-interest revenue sources. So, non-interest income can support total revenue to some extent.

Eventually, banks will have to take resort to cost containment through job cuts and reduced size of operations to stay afloat. So, any cost-cutting measure will act as a defense. The industry witnessed more than half a million layoffs over the last five years, and the story continues.

Balance Sheet: Recovery Underway

Steady deposit growth from lack of low-risk investment opportunities is quite possible, but high charge-offs and delinquency rates plus weak demand could keep loan growth under pressure through the remainder of the year. Though banks are easing lending standards to accelerate loan growth, credit quality concerns are likely to mar the effort.

Moreover, though growth in gross domestic product (GDP) and reducing unemployment will help banks strengthen their balance sheets, expected unrealized losses on underlying securities due to rising interest rates will act as dampeners.

However, banks are trying to reorganize risk management practices to address potential solvency issues due to rising interest rates. Efforts are also being given to address asset-quality troubles by divesting nonperforming assets. However, we don't expect balance-sheet strength to return anytime soon.

Basel III: A Major Concern

The implementation of Basel III requirements from this year will boost minimum capital standards. But adjusting liquidity management processes will cause a short-term negative impact on the financials of U.S. banks.

This will ultimatel! y make cr! edit costlier and reduce employment. But a greater capital cushion will help larger banks withstand internal and external shocks over the long run.

Macro Backdrop Still Uncertain

Improved economic data such as higher consumer spending and GDP, improving housing market and declining unemployment rate point towards optimism, but the current low-rate environment and an expected increase show a bumpy road map toward growth.

The European debt crisis, which is still not over, could make the situation worse. Though U.S. commercial banks appear to have significant direct and indirect exposure to Europe, potential costs are expected to be manageable. There are some signs of hope, but if the crisis deepens further, global capital markets will face a big blow, and the U.S. will not go unscathed.

OPPORTUNITIES

Though improved performances by banks seem already priced in and significant concerns remain, the sector is unlikely to disappoint investors in the upcoming quarters.

Specific banks that we like with a Zacks Rank #1 (Strong Buy) include BankUnited, Inc. (BKU), Enterprise Financial Services Corp. (EFSC), First Interstate Bancsystem Inc. (FIBK), East West Bancorp, Inc. (EWBC), Glacier Bancorp Inc. (GBCI), Metro Bancorp, Inc. (METR), OFG Bancorp (OFG), Webster Financial Corp. (WBS), Farmers Capital Bank Corporation (FFKT), Virginia Commerce Bancorp Inc. (VCBI) and Prosperity Bancshares Inc. (PB).

Stocks in the U.S. banking universe with a Zacks Rank #2 (Buy) currently include JPMorgan Chase & Co., Wells Fargo & Company, Citigroup, Inc., Comerica Incorporated (CMA), State Street Corporation (STT), KeyCorp. (KEY), BofI Holding, Inc. (BOFI), TriCo Bancshares (TCBK), Center Bancorp Inc. (CNBC), Community Bank System Inc. (CBU), Synovus Financial Corporation (SNV), City Holding Co. (CHCO) and First Financial Bankshares Inc. (FFIN).

WEAKNESSES

Difficulty in liquidity management due to regulatory restrictions will restrict top-line growth of b! anks in t! he quarters ahead.

Specific banks that we don't like with a Zacks Rank #5 (Strong Sell) include Eagle Bancorp Montana, Inc. (EBMT), CNB Financial Corp. (CCNE), Financial Institutions Inc. (FISI), Malvern Bancorp, Inc. (MLVF), First Community Bancshares, Inc. (FCBC) and Peoples Financial Corporation (PFBX).

Monday, August 26, 2013

Weekend Roundup: Dow’s Slump Hits Three Weeks, S&P 500 Bounces Back, Consol Energy Rallies

In a week that was dominated by the discussion surrounding the minutes from the FOMC’s July meeting, the Dow Jones Industrials fell 0.5% to $15,010 and extending its slide to a third week, the longest since November. The S&P 500, however, gained 0.5% to 1,663.50, ending its two-week losing streak.

Bloomberg

The mixed market is a perfect symbol of the confusion in the market right now. Will the Fed begin tapering in September or in December? Will rising Treasury yields be good or bad for the stock market? Are stocks expensive or cheap?

None of those questions were answered this week, and don’t expect much to change next week either. Earnings season, for all intents and purposes is over. Wall Street is on vacation. Even the Fed’s annual conclave at Jackson Hole this weekend, which in past years has been the precipitating event that sent stocks shooting higher in 2011, could be a nonevent with a lame-duck Ben Bernanke taking a pass on speaking this year.

So where might markets be headed? How about nowhere? Citigroup’s Tobias Levkovich explains:

We believe that 2H13 may prove more challenging for equities given optimistic back half Street EPS estimates that may need trimming, the impact of likely Fed tapering and a search for new sector leadership. Credit conditions are not sending warning signs weaker emerging economies and Europe are holding back the hoped for second half market leadership handoff from US-oriented names to more global cyclical ones…Valuation remains attractive, while implied long-term earnings growth expectations have stayed subdued. Buyback activity has stepped up and money has begun to flow into equity funds. Hence, the market may be range-bound until year-end, but the index could hit 1,825 by mid-2014. Accordingly, we remain generally constructive with some nearer term caution.

Despite the defensive tone to the market, however, defensive sectors underperformed. Consumer staples, for instance, were the worst performing sector this week, as Archer-Daniels-Midland (ADM) fell 2.6% to $36.28 and Kroger (KR) dropped 1.9% to $37.53.

The best-performing sector, meanwhile was the “riskier” materials, which gained 1%. The sector was led higher by coal-miner Consol Energy (CNX), which gained 8.1% to 33.23 this week, and Dow Chemical (DOW) which rose 5% to $38.74.

AMR (AAMRQ) bounced back a bit this week. Its shares gained 15% after losing more than half its value last week. After the close today, the judge who will preside over the trial said he will hold a scheduling hearing next week. AMR wants it to start in November; the Justice Department in February 2014 September.

Sunday, August 25, 2013

5 Stocks With Big Insider Buying

DELAFIELD, Wis. (Stockpickr) -- Corporate insiders sell their own companies' stock for a number of reasons.

They might need the cash for a big personal purchase such as a new house or yacht, or they might need the cash to fund a charity. Sometimes they sell as part of a planned selling program that they have put in place for diversification purposes, which allows them to sell stock in stages instead of selling all at one price.

Other times they sell because they think their stock is overvalued and the risk/reward is no longer attractive. Some even dump their own stock because they have inside knowledge that a competitor is eating their lunch and stealing market share.

But insiders usually buy their own shares for one reason: They think the stock is a bargain and has tremendous upside.

The key word in that last statement is "think." Just because a corporate insider thinks his or her stock is going to trade higher, that doesn't mean it will play out that way. Insiders can have all the conviction in the world that their stock is a buy, but if the market doesn't agree with them, the stock could end up going nowhere. Also, I say "usually" because sometimes insiders are loaned money by the company to buy their own stock. Those loans are often sweetheart deals and shouldn't be viewed as organic insider buying.

At the end of the day, its large institutional money managers running big mutual funds and hedge funds that drive stock prices, not insiders. That said, many of these savvy stock operators will follow insider buying activity when they agree with the insider that the stock is undervalued and has upside potential. This is why it's so important to always be monitoring insider activity, but it's twice as important to make sure the trend of the stock coincides with the insider buying.

Recently, a number of companies' corporate insiders have bought large amounts of stock. These insiders are finding some value in the market, which warrants a closer look at these stocks. Here's a look at several stocks that insiders have been doing some big buying in per SEC filings.

Tessera Technologies

One technology player that insiders are snapping up a large amount of stock in here is Tessera Technologies (TSRA), which, through its subsidiaries, develops, licenses and delivers miniaturization technologies and products for electronic devices worldwide. Insiders are buying this stock into decent strength, since shares are up 19% so far in 2013.

Tessera Technologies has a market cap of $1.06 billion and an enterprise value of $641 million. This stock trades at a reasonable valuation, with a forward price-to-earnings of 12.15. Its estimated growth rate for the next quarter is 237.5%, and for next year it's pegged at 374.6%. This is a cash-rich company, since the total cash position on its balance sheet is $380.51 million and its total debt is zero. This stock currently sports a dividend yield of 2.1%.

A director just bought 400,000 shares, or about $7.57 million worth of stock, at $18.79 to $19.11 a share.

From a technical perspective, TSRA is currently trending below its 50-day moving average and above its 200-day moving average, which is neutral trendwise. This stock has been downtrending for the last month and change, with shares dropping from its high of $22.59 to its recent low of $18.62 a share. During that downtrend, shares of TSRA have been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of TSRA have started to rebound off that $18.62 low and it's starting to move within range of triggering a near-term breakout trade.

If you're bullish on TSRA, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $18.62 to its 200-day at $18.14 and then once it takes out its 50-day at $20.77 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action of 341,611 shares. If we get that move soon, then TSRA will set up to re-test or possibly take out its 52-week high at $22.59 a share. If that level gets taken out with volume, then TSRA could easily hit $25 a share.

Leucadia National

Another holding company that insiders are loading up on here is Leucadia National (LUK), which invests in beef processing, manufacturing, telecommunications, gaming, real estate, energy, medical product development and winery operations. Insiders are buying this stock into notable strength, since shares are up 12.6% so far in 2013.

Leucadia National has a market cap of $9.7 billion and an enterprise value of $11.2 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 8.34. This is not a cash-rich company, since the total cash position on its balance sheet is $18.82 billion and its total debt is $20.20 billion. This stock currently sports a dividend yield of 0.90%.

A director just bought 40,000 shares, or about $1.06 million worth of stock, at $26.55 per share.

From a technical perspective, LUK is currently trending just below its 50-day moving average and just above its 200-day moving average, which is neutral trendwise. This stock has been consolidating for the last month, with shares moving sideways between $27.98 on the upside and $26.38 on the downside. A high-volume move above the upper-end of its recent sideways trading chart pattern could trigger a big breakout trade for shares of LUK.

If you're in the bull camp on LUK, then look for long-biased trades as long as this stock is trending above its 200-day at $26.30 or above more support at $25.61, and then once it breaks out above some near-term overhead resistance levels at $27.42 to $27.98 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 1.34 million shares. If that breakout triggers soon, then LUK will set up to re-test or possibly take out its next major overhead resistance levels at $31.78 to $32.36 a share.

Halcon Resources

One energy player that insiders are active in here is Halcon Resources (HK), which is engaged in the acquisition, development, exploitation, exploration and production of oil and natural gas properties. Insiders are buying this stock into notable weakness, since shares are off by 22% so far in 2013.

Halcon Resources has a market cap of $1.99 billion and an enterprise value of $4.71 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 112.50 and a forward price-to-earnings of 12.56. Its estimated growth rate for this year is 900%, and for next year it's pegged at 79.2%. This is not a cash-rich company, since the total cash position on its balance sheet is $3.06 million and its total debt is $2.71 billion.

A director just bought 200,000 shares, or about $1.02 million worth of stock, at $5.10 per share. A beneficial owner also just bought 5.2 million shares, or about $26.44 million worth of stock, at $5.10 per share.

From a technical perspective, HK is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the last six months, with shares moving lower from its high of $8.12 to its recent low of $4.92 a share. During that downtrend, shares of HK have been making mostly lower highs and lower lows, which is bearish technical price action. That said, this stock has started to find some buying interest off some previous support areas at $4.92 to $5.10 a share.

If you're bullish on HK, then look for long-biased trades as long as this stock is trending above some key near-term support levels at $5.10 to $4.92 and then once it breaks out back above its 50-day at $5.67 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average volume of 5.14 million shares. If that breakout triggers soon, then HK will set up to re-test or possibly take out its next major overhead resistance levels at $6.11 to $6.54 a share. Any high-volume move above those levels will then give HK a chance to tag $6.75 to $6.84 a share.

Hansen Medical

One health care player that insiders are active in here is Hansen Medical (HNSN), which develops, manufactures and markets new generation of medical robotics for accurate positioning, manipulation and stable control of catheters and catheter-based technologies. Insiders are buying this stock into relative weakness, since shares are off by 19.2% so far in 2013.

Hansen Medical has a market cap of $113 million and an enterprise value of $118 million. This stock trades at a premium valuation, with a price-to-sales of 7.13. Its estimated growth rate for this year is -3%, and for next year it's pegged at 36.2%. This is not a cash-rich company, since the total cash position on its balance sheet is $21.08 million and its total debt is $29.57 million.

A beneficial owner just bought 8.1 million shares, or about $9.96 million worth of stock, at $1.23 per share.

From a technical perspective, HNSN is currently trending above its 50-day and just below is 200-day moving average, which is neutral trendwise. This stock recently spiked up sharply from its low of $1.14 to its recent high of $1.96 a share with big upside volume. Since that move, shares of HNSN have pulled back and started to consolidation between $1.77 and $1.60 a share. This stock is now starting to bounce higher and move within range of triggering a near-term breakout trade.

If you're bullish on HNSN, then look for long-biased trades as long as this stock is trending some key near-term support levels at $1.60 to its 50-day at $1.51, and then once it breaks out above some near-term overhead resistance levels at $1.77 to $1.96 a share high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average volume of 530,653 shares. If that breakout hits soon, then HNSN will set up to re-test or possibly take out its next major overhead resistance levels at $2.15 to $2.23 a share. Any high-volume move above those levels will then give HNSN a chance to tag $2.50 to $2.75 a share.

McDermott International

One final stock with some decent insider buying is McDermott International (MDR), an engineering, procurement, construction and installation company engaged on designing and executing complex offshore oil and gas projects. Insiders are buying this stock into big time weakness, since shares are off by 33.3% so far in 2013.

McDermott International has a market cap of $1.74 billion and an enterprise value of $1.35 billion. This stock trades at a reasonable valuation, with a forward price-to-earnings of 13.56. Its estimated growth rate for this year is -140.7%, and for next year it's pegged at 254.3%. This is a cash-rich company, since the total cash position on its balance sheet is $427.71 million and its total debt is $95.64 million.

The CEO just bought 74,180 shares, or about $499,000 worth of stock, at $6.74 per share.

From a technical perspective, MDR is currently trending well below both its 50-day and 200-day moving averages, which is bearish. This stock recently gapped down sharply from $9 to $6.68 with heavy downside volume. Following that move, shares of MDR have started to rebound sharply and trend higher, with the stock making higher lows and higher highs. This move is quickly pushing shares of MDR within range of triggering a near-term breakout trade.

If you're bullish on MDR, then look for long-biased trades as long as this stock is trending above some key near-term support at $7.19 or $6.68 and then once it breaks out above some near-term overhead resistance at $7.74 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action of 4.48 million shares. If that breakout triggers soon, then MDR will set up to re-fill some of its previous gap down zone that started near $9 a share.

To see more stocks with notable insider buying, check out the Stocks With Big Insider Buying portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

Saturday, August 24, 2013

Top Portfolio Products: iShares Offers Colombia ETF

New products introduced over the last week include a new Colombia ETF from iShares; a new global short-term, high-yield bond fund ETF from Invesco PowerShares; a new index universal life insurance product from Genworth; and a new share class from Manning & Napier.

In addition, Alger launched two new funds; Security Benefit launched a new crediting strategy; and NASDAQ OMX and Accretive Asset Management announced a partnership on BulletShares indexes.

Here are the latest developments of interest to advisors:

1) iShares Launches an ETF to Access Colombia, The ‘New Brazil’

BlackRock announced Thursday that its iShares ETFs business has launched the iShares MSCI Colombia Capped ETF (ICOL). ICOL is designed to track the MSCI All Colombia Capped Index, a broad-based Colombia equity market index that includes companies headquartered or listed in Colombia and with the majority of their operations based in Colombia.

The index applies certain investment constraints that are imposed on regulated investment companies (RICs) under the current U.S. Internal Revenue Code, where no single group entity can exceed 25% of the index weight and all group entities with weights above 5% cannot exceed 50% of the index weight. As of May 29, 2013, the largest sector weightings of the index included financials (34.17%), energy (31.58%) and utilities (14.99%).

2) Invesco PowerShares Lists Global Short-Term, High-Yield Bond Portfolio

Invesco PowerShares Capital Management announced Thursday the launch of the PowerShares Global Short Term High Yield Bond Portfolio ETF (PGHY), which is based on the DB Global Short Maturity High Yield Bond Index.

PGHY aims to provide investors with access to short-term U.S. dollar-denominated, high-yield debt that is issued globally; including sovereign, quasi-government and corporate bond securities. PGHY has an expense ratio of 0.35% and is expected to issue monthly distributions.

PGHY generally will invest at least 80% of its total assets in bonds included in the index, which tracks the performance of U.S. dollar-denominated, short-term, non-investment grade bonds with three years or less to maturity that are issued by U.S. and foreign corporations, as well as by supranational, sovereign or sub-sovereign government entities. PGHY and the index are rebalanced quarterly and reweighted annually.

3) Genworth Launches Its First Index Universal Life Insurance Product

Genworth recently announced the launch of its first Index Universal Life (IUL) insurance product, which combines a death benefit with tax-deferred cash accumulation and an optional accelerated benefit rider for long-term care services.

The new Asset Builder IUL combines a death benefit for beneficiaries with the following features: the opportunity for greater policy value growth by linking the crediting strategy with the S&P 500 Index; protection from market downside (even if the percentage change in the S&P 500 Index is negative, the minimum crediting rate is 0%; monthly charges and fees will continue regardless of the crediting rate and will reduce policy value); supplemental income for retirement (if the policy generates sufficient cash values later in life, policy owners can take withdrawals and policy loans to supplement their income); and an optional accelerated benefit rider for LTC services that is available at an additional cost.

To help financial professionals, Genworth has also launched the Index Institute. This virtual resource offers financial professionals the education, tools and support they need to better counsel their clients on how index products work and the role they can play in helping them fulfill their insurance needs and financial objectives.

4) Manning & Napier Adds New Class With Zero-Revenue Share

Manning & Napier, Inc. recently announced the launch of a new zero-revenue share Class U for its Pro-Mix Collective Investment Trust (CIT) fund family. The new unit class helps plan sponsors to clarify administrative costs paid by participants, and recognizes the increasing trend toward more transparent, fee-conscious offerings.

The Manning & Napier Pro-Mix CIT Funds are a suite of actively managed, fully diversified collective investment trust funds that offer professional management solutions to qualified plan participants. Class U is being offered across the entire fund family, including the conservative, moderate, extended, and maximum term CIT funds. The Pro-Mix CIT Funds are also offered in Class S to address the ongoing need for various plan cost structures.

5) Alger Launches International Growth and Global Growth Funds

Fred Alger Management, Inc. recently announced the launch of the Alger International Growth Fund (ALGAX) and the Alger Global Growth Fund (CHUSX), open-end mutual funds. The strategies are also available for institutional separate accounts.

ALGAX seeks long-term capital appreciation by following an investment strategy that focuses its investments in non-U.S. developed markets, with the flexibility to invest in emerging markets. It has the ability to invest in any company analysts believe has growth potential, regardless of market capitalization, while currently maintaining an anchor in large cap. Pedro Marcal, the portfolio manager, also manages the Alger International Growth Strategy, which has a three-year track record.

CHUSX seeks long-term capital appreciation by following a three-pronged investment strategy that invests in international developed markets, emerging markets and U.S. markets. Similar to ALGAX, CHUSX currently plans to maintain an anchor in large cap but has the ability to invest in any company, regardless of market capitalization.

CHUSX previously maintained a China-U.S. focus; it continues to be managed by Dan Chung, CEO and chief investment officer, and Deborah Vélez Medenica, head of the emerging markets team. Pedro Marcal will join the current portfolio managers and is responsible for investing in international developed markets.

6) Security Benefit Launches Alternative Crediting Strategy

Security Benefit Life Insurance Company has announced the introduction of a new interest-crediting option for its Total Value Annuity (TVA). The new crediting option, the Transparent Value Blended Index Account, based on the Transparent Value Blended Index (TVBI), uses a dynamic, highly disciplined asset allocation process to blend a large-cap stock index and a U.S. Treasury index to reduce the impact of equity market volatility while increasing diversification and the potential to receive interest credits.

TVBI utilizes a proprietary process known as Required Business Performance (RBP) methodology to allocate assets among 100 stocks to the Transparent Value Large-Cap Defensive Index selected from the 750 stocks that comprise the Dow Jones U.S. Large-Cap Total Stock Market Index.

A second index, the S&P 2-Year U.S. Treasury Note Futures Total Return Index, is then blended with the Transparent Value Large-Cap Defensive Index to reduce volatility. Selection and weighting of individual stocks are driven by the RBP Methodology, which makes a mathematical assessment of the probability that management can deliver the revenue growth needed to support a company's current stock price.

7) NASDAQ OMX and Accretive Asset Management Announce Partnership on BulletShares Indexes

The NASDAQ OMX Group, Inc. and Accretive Asset Management, LLC have announced a new partnership involving Accretive's BulletShares Corporate Bond Index family. NASDAQ OMX and Accretive have agreed to co-brand the indexes and work jointly to promote the BulletShares concept around the world.

The NASDAQ BulletShares Indexes represent the performance of an investment in a diversified, held-to-maturity portfolio of fixed income securities with a common year of maturity. Accretive developed the BulletShares methodology in 2009 with the objective of combining the benefits of individual bonds and bond funds.

The indexes are now co-branded under NASDAQ and BulletShares and plans for new versions are already under development. The existing lineup includes 20 indexes covering the investment grade and high-yield corporate debt markets.

The high-yield indexes are: NASDAQBulletShares USD High Yield Corporate Bond 2013 Index; NASDAQBulletShares USD High Yield Corporate Bond 2014 Index; NASDAQBulletShares USD High Yield Corporate Bond 2015 Index; NASDAQBulletShares USD High Yield Corporate Bond 2016 Index; NASDAQBulletShares USD High Yield Corporate Bond 2017 Index; NASDAQBulletShares USD High Yield Corporate Bond 2018 Index; NASDAQBulletShares USD High Yield Corporate Bond 2019 Index; NASDAQBulletShares USD High Yield Corporate Bond 2020 Index; NASDAQBulletShares USD High Yield Corporate Bond 2021 Index; and NASDAQBulletShares USD High Yield Corporate Bond 2022 Index.

The corporate bond indexes are: NASDAQBulletShares USD Corporate Bond 2013 Index; NASDAQBulletShares USD Corporate Bond 2014 Index; NASDAQBulletShares USD Corporate Bond 2015 Index; NASDAQBulletShares USD Corporate Bond 2016 Index; NASDAQBulletShares USD Corporate Bond 2017 Index; NASDAQBulletShares USD Corporate Bond 2018 Index; NASDAQBulletShares USD Corporate Bond 2019 Index; NASDAQBulletShares USD Corporate Bond 2020 Index; NASDAQBulletShares USD Corporate Bond 2021 Index; and NASDAQBulletShares USD Corporate Bond 2022 Index.

Read the June 15 Portfolio Products Roundup at AdvisorOne.

***

For direct insights on the role of ETFs in client portfolios from multiple experts—including Rick Ferri, Ron Delegge, Skip Schweiss and more—we invite you to register for AdvisorOne’s premiere advisorcentric Virtual ETF Summit, which starts July 23 (and get multiple hours of CFP Board CE).

Citigroup Beats Q2 Earnings Consensus; Joint Venture Results Disappoint

Citigroup reported a stronger-than-expected 26% rise in adjusted quarterly profits, thanks to stronger home prices, which reduced losses on mortgages, and better trading revenue.

Adjusted net income rose to $3.89 billion, or $1.25 per share, in the second quarter, from $3.08 billion, or $1 per share, a year earlier, the bank said Monday. (The adjusted results exclude changes in the value of the company's debt.)

Adjusted revenue jumped 8% to $20 billion. Sales in the fixed-income unit improved 18% to $3.37 billion, and equity market revenue grew 68% to $942 million.

“Generating consistent and quality earnings is a key priority and this quarter met that goal,” Citi CEO Michael Corbat said in a statement.

Morgan Stanley Smith Barney Venture

Citi Holdings, which includes Citi’s remaining interest in the Morgan Stanley Smith Barney joint venture, reported negative revenues of $20 million for its brokerage and asset management business versus sales of $87 million a year ago.

Citi also acknowledged that it had completed the sale of the final 35% stake it held in the venture over the past few weeks. With $131 billion in assets, Citi Holdings now includes about 7% of total company assets.

(Morgan Stanley plans to report its wealth management and other earnings on Thursday.)

“Our businesses performed well during the quarter … We also continued to make progress in several critical areas," Corbat said. "We reduced the earnings drag caused by Citi Holdings, where we saw the largest percentage reduction of assets since 2010.”

Friday, August 23, 2013

Best Casino Companies To Invest In 2014

When one thinks of gambling "sin stocks," one ordinarily thinks about large casino stocks. But casino resorts are what they are in part due to the availability of gambling related machines and hardware. I am going to look at a few of the leading companies in that industry today.

WMS Industries - Independence at an end

We are likely approaching the last time I will be reporting on WMS Industries (WMS), the former Williams Electronics. It has agreed to be acquired by Scientific Games (SGMS) for $26 per share, plus the assumption of WMS' modest debt. The deal is scheduled to close by the end of this year. On its own, WMS is having a dismal fiscal year, which ends June 30. For this year, the company, no doubt with distracted management, earnings are likely to end at about $0.90 per share, compared with fiscal 2012's $1.31 per share. Helping drive earnings lower are additional measures the company is taking to drive up revenues, which remain well below last decade's peak. WMS' stock has flat lined the past few months at within three percent of the $26 price. There is virtually no upside, though there is downside if the deal collapses. I see no reason to get invested in WMS.

Best Casino Companies To Invest In 2014: Wynn Resorts Limited(WYNN)

Wynn Resorts, Limited, together with its subsidiaries, engages in the development, ownership, and operation of destination casino resorts. The company owns and operates Wynn Las Vegas casino resort in Las Vegas, which includes approximately 22 food and beverage outlets comprising 5 dining restaurants; 2 nightclubs; 1 spa and salon; 1 Ferrari and Maserati automobile dealership; wedding chapels; an 18-hole golf course; meeting space; and foot retail promenade featuring boutiques. Wynn Las Vegas casino resort also features approximately 147 table games, 1 baccarat salon, private VIP gaming rooms, 1 poker room, 1,842 slot machines, and 1 race and sports book. It also owns and operates an Encore at Wynn Las Vegas resort, a destination casino resort located adjacent to Wynn Las Vegas that features a 2,034 all-suite hotel, as well as a casino with 95 table games, 1 sky casino, 1 baccarat salon, private VIP gaming rooms, and 778 slot machines. In addition, the company operates Wyn n Macau casino resort located in the Macau Special Administrative Region of the People?s Republic of China. Wynn Macau casino resort features approximately 595 hotel rooms and suites, 410 table games, 935 slot machines, 1 poker room, 1 sky casino, 6 restaurants, 1 spa and salon, lounges, meeting facilities, and retail space featuring boutiques. Further, it operates Encore at Wynn Macau resort located adjacent to Wynn Macau. Encore at Wynn Macau resort features approximately 410 luxury suites and 4 villas, as well as casino gaming space, including a sky casino consisting of 60 table games and 80 slot machines, 2 restaurants, 1 luxury spa, and retail space. The company was founded in 2002 and is based in Las Vegas, Nevada.

Advisors' Opinion:

[By Roberto Pedone]
One gambling player that's starting to move within range of triggering a near-term breakout trade is Wynn Resorts (WYNN), a developer, owner and operator of destination casino resorts. This stock has been trending hot so far in 2013, with shares up 24%.

If you look at the chart for Wynn Resorts, you'll notice that this stock has been uptrending strong for the last two months, with shares moving higher from its low of $120.96 to its intraday high of $140.82 a share. During that uptrend, shares of WYNN have been consistently making higher lows and higher highs, which is bullish technical price action. Shares of WYNN have been consolidating for the last few weeks, moving between just below $137 to just above $140 a share. A high-volume move above the upper-end of its recent sideways trading chart pattern could trigger a big breakout trade for shares of WYNN.

Traders should now look for long-biased trades in WYNN if it manages to break out above some near-term overhead resistance at $140.82 to its 52-week high at $144.99 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 1.30 million shares. If that breakout triggers soon, then WYNN will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $160 to $165 a share, or even $170 a share.

Traders can look to buy WYNN off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $132.51 a share. One can also buy WYNN off strength once it takes out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.
[By Jeanine Poggi]
Wynn Resorts'(WYNN) run up of more than 55% this year has caused Wall Street to question its valuation.

Currently, eight analysts have a buy rating on Wynn, 16 say hold, two rate it underperform rating and one says to sell the stock.

"With little on the growth horizon in the intermediate term, new competition from Cotai coming in 2011 and 2012 ... and the unclear timing of a true recovery in Las Vegas, we see few catalysts not yet priced-in to pull valuation higher than current levels," Bain wrote in a note following its third-quarter earnings report.

During the quarter, Wynn lost $33.5 million, or 27 cents a share, compared with a profit of $34.2 million, or 28 cents, in the year-ago period. The loss was attributed to charges related to servicing its debt. On an adjusted basis, Wynn actually earned 39 cents, matching Wall Street's outlook.

Total Revenue grew to $1 billion from $773.1 million, better than the $990.8 million analysts predicted.

In Macau, Wynn reported a 50% surge in revenue to $671.4 million, while EBITDA was $198 million, up 54.5% from $128.2 million in the third quarter of 2009. Earlier in the year the company opened its $600 million Wynn Encore Macau, which added 414 rooms to the market.

Looking ahead, Wynn expects to break ground on its Cotai development in early 2011. The $2 billion to $3 billion project is slated to open in 2015, and management said it would provide additional details following its fourth-quarter earnings report.

In Las Vegas, CEO Steve Wynn says the Strip is on the road to recovery. "I believe we have seen the bottom in Las Vegas," he said during the company's third-quarter conference call. "I don't know how fast it is going to get better but it isn't going to get any worse."

Las Vegas revenue inched up 3.1% to $334.5 million during the three-month period, and EBITDA grew 9.3% to $76.5 million.

Wynn also issued a cash dividend of $8 a share payable on Dec. 7 to sharehold! ers of record on Nov. 23.

Best Casino Companies To Invest In 2014: MGM Resorts International(MGM)

MGM Resorts International, through its subsidiaries, primarily owns and operates casino resorts in the United States. The company?s resorts offer gaming, hotel, dining, entertainment, retail, and other resort amenities. It also owns and operates golf courses and a golf club. As of December 31, 2010, the company owned and operated 15 properties located in Nevada, Mississippi, and Michigan; and has 50% investments in 4 other casino resorts in Nevada, Illinois, and Macau. In addition, MGM Resorts International has an agreement with the Mashantucket Pequot Tribal Nation, which owns and operates a casino resort in Connecticut, to carry the ?MGM Grand? brand name. The company was formerly known as MGM MIRAGE and changed its name to MGM Resorts International in June 2010. MGM Resorts International was founded in 1986 and is based in Las Vegas, Nevada.

Advisors' Opinion:

[By Hawkinvest]
MGM Resorts International (MGM) is one of the world's largest hotel and casino companies, based in Las Vegas. Since December, MGM shares have been trading in a range of about $9, to almost $15 per share. The stock is now at the upper limit of the recent trading range which means that the risk of holding or buying this stock right now, could be elevated. MGM shares have rallied with the markets but appear extended and vulnerable to a sell-off. The company has a heavy debt load and it has been reporting losses. The balance sheet has about $13.45 billion in debt and only about $1.97 billion in cash. MGM could be impacted by higher oil prices because many consumers could cut back on spending if they go to Las Vegas, and some might decide not to go at all, and instead opt for a "staycation." With MGM facing challenges and the shares near recent highs, it could make sen se to sell now and buy on dips later this year.

Here are some key points for MGM:

Current share price: $14.18

The 52 week range is $7.40 to $16.05

Earnings estimates for 2011: a loss of 53 cents per share

Earnings estimates for 2012: a loss of 39 cents per share

Annual dividend: none

Top 10 Small Cap Stocks To Invest In Right Now: Pinnacle Entertainment Inc.(PNK)

Pinnacle Entertainment, Inc. owns, develops, and operates casinos, and related hospitality and entertainment facilities in the United States. It operates casinos, such as L'Auberge du Lac in Lake Charles, Louisiana; River City Casino and Lumiere Place in St. Louis, Missouri; Boomtown New Orleans in New Orleans, Louisiana; Belterra Casino Resort in Vevay, Indiana; Boomtown Bossier City in Bossier City, Louisiana; and Boomtown Reno in Reno, Nevada. The company also operates River Downs racetrack in southeast Cincinnati, Ohio. As of May 26, 2011, it operated seven casinos and one racetrack. The company was formerly known as Hollywood Park, Inc. and changed its name to Pinnacle Entertainment, Inc. in February 2000. Pinnacle Entertainment, Inc. was founded in 1935 and is based in Las Vegas, Nevada.

Advisors' Opinion:

[By Jeanine Poggi]
Pinnacle Entertainment(PNK) was the great transition story of 2010, with shares spiking about 45% this year.

The regional casino operator's most impressive story has been in its gross margins, as management, under the leadership of new CEO Anthony Sanfilippo, is in the process of increasing the company's operating efficiencies and prudently allocating capital. Analysts believe Pinnacle is in the early stages of this process, and will continue to drive revenue growth.

In its third quarter, Pinnacle reported a surprise profit of 10 cents a share on an adjusted basis, better than consensus estimates of a loss of 7 cents. Revenue grew 15% to $287.8 million, while property-level margins reached 23.4%, also ahead of forecasts.

Last month, Pinnacle purchased Cincinnati's River Downs Racetrack for $45 million. The deal includes 155 acres, 35 of which are still undeveloped. The transaction is expected to close by the end of the first quarter of 2011.

This deal could generate significant returns in the event that Ohio decides to legalize video lottery terminals at racetracks, Santarelli said.

Pinnacle is also in the process of looking for a buyer of its oceanfront land in Atlantic City, where it originally intended to build a $1.5 billion casino, before squelching plans. The casino operator bought the land in 2006 for $270 million from groups affiliated with Carl Icahn and later added another piece of land for $70 million.

While the land's currently value is $38 million, Pinnacle insists it will not sell it on the cheap, holding out for the best deal.

Pinnacle currently has $228 million in cash and $375 million of availability under its revolver.

Best Casino Companies To Invest In 2014: (XTRN)

Las Vegas Railway Express Inc. focuses to re-establish a conventional passenger train service between the Las Vegas and Los Angeles metropolitan areas. It plans to establish a ?Vegas-style? passenger train service. The company is based in Las Vegas, Nevada.

Best Casino Companies To Invest In 2014: Boyd Gaming Corporation(BYD)

Boyd Gaming Corporation, together with its subsidiaries, operates as a multi-jurisdictional gaming company in the United States. As of December 31, 2011, the company owned and operated 1,042,787 square feet of casino space, containing approximately 25,973 slot machines, 655 table games, and 11,418 hotel rooms. It also owned and operated 16 gaming entertainment properties located in Nevada, Illinois, Louisiana, Mississippi, Indiana, and New Jersey. In addition, the company owns and operates a pari-mutuel jai-alai facility located in Dania Beach, Florida, as well as a travel agency in Hawaii. Further, it holds a 50% controlling interest in the limited liability company that operates Borgata Hotel Casino and Spa in Atlantic City, New Jersey. Boyd Gaming Corporation was founded in 1988 and is headquartered in Las Vegas, Nevada.

Advisors' Opinion:

[By Hesler]
Boyd Gaming(BYD) posted a bigger-than-expected drop in its second-quarter earnings, citing weak performance in Las Vegas, the Midwest and the South.

During the quarter, the casino operator earned $3.4 million, or 4 cents a share, a 73% plunge from $12.8 million, or 15 cents, in the year-ago period. Adjusted earnings came in at 5 cents a share, significantly lower than the 10 cents Wall Street predicted for Boyd.

Boyd's revenue fell 6% to $578.4 million, also short of the consensus of $588 million.

"The lingering effects of the recession have left consumers unusually sensitive to shifts in the economy, and they now react more quickly to economic data and other developments, such as fluctuations in the stock market," said CEO Keith Smith, in a statement. "Although conditions remain uncertain, we believe long-term stabilizing trends are still in place, and that year-over-year growth is achievable by the end of 2010."

In the Las Vegas locals market, the rate of decline in earnings before interest, taxes, depreciation and amortization rose to 16.2% from 10.8%, J.P. Morgan analyst Joseph Greff wrote in a note. Boyd previously reported a 9.9% decline for its Borgata property in Atlantic City. Revenue came in at $186.9 million, a 2.4% decrease from the year-ago period.

"We think second-quarter results are less important than the coming operating results in the second-half of 2010, when the Atlantic City market faces increased regional competitive pressures from tables in Pennsylvania and West Virginia and the first Philadelphia casino opens this summer," J.P. Morgan analyst Joseph Greff wrote in a note.

Greff reaffirmed his underweight rating on Boyd, given increasing competition in Atlantic City, a weak recovery in the Las Vegas locals market and stagnant regional gaming trends.

While there is no doubt the Atlantic City gaming market remains one of the most depressed, Borgata continues to dominate the market and gain share. Atlant! ic City saw gaming revenues plunge 11.1% in June to $286.8 million. Boyd co-owns Borgata with MGM Resorts, which is currently in the process of divesting its 50% stake.

Best Casino Companies To Invest In 2014: Penn National Gaming Inc.(PENN)

Penn National Gaming, Inc. and its subsidiaries own and manage gaming and pari-mutuel properties in the United States. It operates approximately 27,000 gaming machines; 500 table games; and 2,000 hotel rooms in 23 facilities in 16 jurisdictions, including Colorado, Florida, Illinois, Indiana, Iowa, Louisiana, Maine, Maryland, Mississippi, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, West Virginia, and Ontario. The company was formerly known as PNRC Corp. and changed its name to Penn National Gaming, Inc. in 1994. Penn National Gaming, Inc. was founded in 1982 and is based in Wyomissing, Pennsylvania.

Advisors' Opinion:

[By Quickel]
Penn National Gaming(PENN) squeaked past its guidance through improved cost controls, and investors praised its efforts.

But expectations were low, and its upbeat outlook shouldn't be viewed as a message that regional markets are recovering. "Going forward, we project soft regional gaming revenue results over the next three to six months, as we do not expect to see a significant increase in consumer spending patterns given the uncertain economic environment," J.P. Morgan analyst Joseph Greff wrote in a note.

Penn National raised its full-year earnings guidance to $1.18 from $1.13 a share, and up its revenue outlook by $26 million to $2.44 billion from $2.41 billion.

During the second quarter, the company earned $9.2 million, or 9 cents a share, compared with $28.5 million, or 27 cents, in the year-ago period. Excluding items, Penn actually earned 29 cents a share, a penny higher than estimates.

Revenue rose 3% to $598.3 million, higher than the $597.1 million Wall Street projected. The upside was driven by both better revenues and margins and was generally broad-based across many properties, especially larger venues in Charlestown, Lawrenceburg and Grantville, Pa.

Penn National rolled out table games in West Virginia and Pennsylvania during the quarter, which should be a growth catalyst moving forward. The company also plans to open a slot facility in Maryland on Sept. 30 and expects its Toldeo, Ohio, location to open in the first-half of 2012. Its Columbus project is slated to open in the second-half of 2012.

The company repurchased 409,000 shares during the quarter. "[This] sends a message to investors on the value of its equity, but perhaps indicating the lack of near-term acquisition opportunities," J.P. Morgan analyst Joseph Greff wrote in a note.

Monday, August 19, 2013

How Inflation can break your retirement

How does this affect your retirement?
Let's look at some numbers to help bring out the effect.


Position	% of assets 12/31/11	Total return	% of assets 12/31/10
Valeant Pharmaceuticals	10.8	65.0	9.2
Berkshire Hathaway	10.0	-4.7	10.7
TJX	6.8	47.4	6.3
Fastenal	6.2	48.5	6.0
Advance Auto Parts	3.6	5.7	2.9
Idexx Laboratories Inc.	3.3	11.2	6.4
Mohawk Industries	3.3	5.4	4.3
Precision Castparts	3.2	18.5	3.8
Rolls-Royce	2.9	19.4	3.5
O'Reilly Automotive	2.7	32.3	2.9

Current Age	Retirement Age	Current Mthly Exp	Assumed Inflation Rate (pre and post retirement)	Expected Return Post Retirement	Life Expectancy	Retirement Corpus required (approx)
30	60	Rs. 50,000	8% p.a.	8% p.a.	85 years	Rs. 15.09 cr
35	60	Rs. 50,000	8% p.a.	8% p.a.	85 years	Rs. 10.27 cr
40	60	Rs. 50,000	8% p.a.	8% p.a.	85 years	Rs. 6.99 cr
45	60	Rs. 50,000	8% p.a.	8% p.a.	85 years	Rs. 4.76 cr

If you look at the table above, you'll notice a few things:
Firstly, all assumptions have been kept constant, the only change is the current age. So basically this situation applies to somebody who wants to retire at 60, currently spends Rs. 50,000 per month, has a life expectancy of 85 years, will put his investments into safe fixed income instruments earning 8% per annum post retirement (post tax). This person might be 30, 35, 40 or 45 years old.

Secondly, you'll notice that the inflation rate post retirement is 8%, and so is the investment return rate post retirement. This means that any investments made will generate the same rate of return as the rate of wealth erosion due to inflation. So the real value of your investments will remain the same.

Thirdly, you'll notice that for a 30 year old spending Rs. 50,000 a month, who wants to retire at 60, the retirement corpus required is Rs. 15.09 crores approximately.

With all the same assumptions, a 45 year old has to accumulate Rs. only 4.76 crores by the age of 60 a comparatively much smaller corpus.

Why is this? The answer is simple.

A 30 year old has 30 years to go before he retires. His pre retirement expenses inflate continuously for 30 years. By the time he retires, his Rs. 50,000 monthly expenses will cost him more than Rs. 5 lakhs per month. That's a 10 fold increase, just to maintain his standard of living.

The 45 year old does not face this level of inflation. To maintain his standard of living at the age of 60, he has to shell out Rs. 1.58 lakhs per month only a 3 fold increase.

And that's what inflation can do to your retirement. The good news is that with the right kind of disciplined financial planning, both goals are achievable. But as with all successfully achieved tasks, the first step is often the hardest.

Use our Retirement Calculator to see what Your retirement number is and then call an unbiased expert financial planner to help you achieve this goal and all your other life goals.

PersonalFN is a Mumbai based Financial Planning and Mutual Fund Research Firm.

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Best Casino Companies To Invest In 2014

Best Casino Companies To Invest In 2014: Wynn Resorts Limited(WYNN)

Best Casino Companies To Invest In 2014: MGM Resorts International(MGM)

Top 10 Small Cap Stocks To Invest In Right Now: Pinnacle Entertainment Inc.(PNK)

Best Casino Companies To Invest In 2014: (XTRN)

Best Casino Companies To Invest In 2014: Boyd Gaming Corporation(BYD)

Best Casino Companies To Invest In 2014: Penn National Gaming Inc.(PENN)

Monday, August 19, 2013

How Inflation can break your retirement