Hot Financial Companies To Own For 2014

The S&P 500 (SNPINDEX: ^GSPC  ) has soared in the past four years, leading many to fear that the index is long overdue for a major correction. In times of trouble, value investors often look to stocks that trade at low valuations compared with their peers to provide a margin of safety from a potential downturn.

Yet judging stocks on a single valuation metric can lead to misleading conclusions that can prove costly. Today, let's take a look at some of the least expensive stocks in the S&P on a price-to-book value basis, with an eye toward understanding why book value might not be the best way to judge whether these stocks are truly cheap.

The cheapest stocks in the S&P
On a book-value basis, financial stocks have had low book values for a long time. Genworth Financial (NYSE: GNW  ) trades at just one-third of book value, while plenty of other insurance companies and banks offer price-to-book ratios of between 0.5 and 0.75. Yet during the financial crisis, investors learned just how inaccurate book values were. Massive writedowns of toxic assets proved necessary to reflect the actual value of those assets, and as a result, price-to-book ratios temporarily soared even as stock prices plunged.

Hot Financial Companies To Own For 2014: Guthrie Gts Ltd (G33.SI)

Guthrie GTS Limited, an investment holding company, engages in property, engineering, and leisure businesses in Singapore, Indonesia, and internationally. The company operates through three segments: Property, Engineering, and Leisure. The Property segment engages in the investment, development, and management of retail, commercial, and residential properties; and project management, as well as retail planning, consultancy, marketing, leasing, and mall management. The Engineering segment is involved in undertaking engineering contracts, and trading related products; and the provision of professional services to the transport, telecommunications, air-conditioning, electrical, and fire protection, as well as building and facility management sectors. The Leisure segment invests in, and operates hotels and a golf resort, which comprise the Mercure Vientiane hotel in Laos, the Pullman Jakarta Indonesia hotel in Jakarta, the Novotel Bali Benoa hotel in Bali, and the Indah Puri G olf Resort in Batam. It also offers warehousing facilities; and marketing services to golf clubs and hotels. The company was formerly known as Mulpha (Singapore) Ltd. and changed its name to Guthrie GTS Limited in 1988. Guthrie GTS Limited was founded in 1821 and is headquartered in Singapore.

Hot Financial Companies To Own For 2014: American Select Portfolio Inc.(SLA)

American Select Portfolio Inc. is a close ended fixed income mutual fund launched and managed by FAF Advisors, Inc. It is co-managed by Nuveen Fund Advisors, Inc. and Nuveen Asset Management, LLC. The fund invests in the fixed income markets of the United States. It primarily invests in mortgage-related assets that directly or indirectly represent a participation in or are secured by and payable from mortgage loans. The fund has an overall credit quality of BBB. It benchmarks the performance of its portfolio against the Lehman Brothers Mutual Fund Government/Mortgage Index. The fund will not invest in inverse floaters, principal-only securities, interest-only securities, inverse interest-only securities, Z-bonds. American Select Portfolio Inc. was formed on September 21, 1993 and is domiciled in the United States.

Top Clean Energy Companies To Invest In Right Now: The Wharf (4)

The Wharf (Holdings) Limited is an investment holding company. It has four segments: property investment, which includes property leasing and hotel operations, and its properties portfolio consists of retail, office, service apartments and hotels, and is primarily located in Hong Kong and Mainland China; property development, which involves activities relating to the acquisition, development, design, construction, sale and marketing of its trading properties primarily in Hong Kong and Mainland China; logistics, which includes the container terminal operations undertaken by Modern Terminals Limited (Modern Terminals), Hong Kong Air Cargo Terminals Limited and other public transport operations, and communications, media and entertainment (CME), which comprises pay television, Internet and multimedia and other businesses operated by its non-wholly-owned subsidiary, i-CABLE Communications Limited and also includes the telecommunication businesses operated by Wharf T&T Limited.

Hot Financial Companies To Own For 2014: ARMOUR Residential REIT Inc (ARR)

ARMOUR Residential REIT, Inc.( ARMOUR), incorporated on February 5, 2008, is an externally-managed Maryland corporation managed by ARMOUR Residential REIT, Inc. The Company invests primarily in hybrid adjustable rate, adjustable rate and fixed rate residential mortgage backed securities (RMBS). These securities are issued or guaranteed by a United States Government-sponsored entity (GSE), such as the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac), or are guaranteed by the Government National Mortgage Administration (Ginnie Mae) collectively, Agency Securities. From time to time, a portion of its portfolio may be invested in unsecured notes and bonds issued by United States Government-chartered entities, collectively, Agency Debt. As of December 31, 2012, Agency Securities account for 100% of its portfolio.

The Company seeks long-term investment returns by investing its equity capital and borrowed funds in its targeted asset class of Agency Securities. The Company�� assets have been invested in Agency Securities or money market instruments, primarily deposits at federally chartered banks. The Company borrows against its Agency Securities using repurchase agreements. Its borrowings generally have maturities that may range from one month or less, up to one year, although occasionally it may enter into longer dated borrowing agreements to more closely match the rate adjustment period of its Agency Securities.

Advisors' Opinion:

• [By Amanda Alix]

  All mREITs are taking it on the chin
  The agency crew, led by heavy hitters Annaly Capital (NYSE: NLY  ) , American Capital Agency (NASDAQ: AGNC  ) , and Armour Residential (NYSE: ARR  ) , have all been close to hitting 52-week lows, but the blood-letting hasn't stopped there. Even hybrid mortgage REITs, which also buy some non-agency paper, have plunged, as well. Two Harbors (NYSE: TWO  ) , which enjoyed such a nice lift post-earnings about a month ago, recently sunk to new lows, and Invesco Mortgage Capital (NYSE: IVR  ) has also slipped, even after its CIO's recent show of faith, making a sizable insider purchase�of stock less than two weeks ago.

• [By Zain Zafar]

  In terms of book value loss, Hatteras' performance can be compared to that of ARMOUR Residential (NYSE: ARR  ) , whose book value per share declined by 19% from the previous quarter. However, ARMOUR Residential follows a strategy of investing primarily in long-duration fixed-rate MBSes, which can carry much larger interest rate risk.

• [By Amanda Alix]

  Mortgage REITs begin their plunge
  It didn't take long for investors to show their concern, and by mid-afternoon yesterday, Annaly Capital (NYSE: NLY  ) and fellow agency players American Capital Agency (NASDAQ: AGNC  ) and Armour Residential (NYSE: ARR  ) had dropped sharply after the opening bell. By the market's close, each fell by 0.69%, 0.87%, and 1.23%, sequentially.

• [By Thomas Bradshaw]

  Armour Residential REIT (ARR) is an interesting REIT that was set up to invest in Agency residential mortgage backed securities. It seems like quite a simple model: buy mortgages that are primarily guaranteed by Fannie Mae (even throw in some Freddie Mac and Ginnie Mae) and hold those to maturity, collecting coupons on the way. Since the assets would be held to maturity, no need to worry about the market value of the securities because we know what the fixed income stream will be and the face value of the securities won't change over time.

Hot Financial Companies To Own For 2014: Susquehanna Bancshares Inc.(SUSQ)

Susquehanna Bancshares, Inc., through its subsidiaries, provides retail and commercial banking, and financial services in the mid-Atlantic region. Its retail banking services include checking, savings, and club accounts, as well as check cards, debit cards, money market accounts, certificates of deposit, individual retirement accounts, home equity lines of credit, residential mortgage loans, home improvement loans, automobile loans, personal loans, and Internet banking services. The company?s commercial banking services comprise business checking accounts, cash management services, money market accounts, land acquisition and development loans, commercial loans, floor plan, equipment and working capital lines of credit, small business loans, and Internet banking services. It also offers commercial, property, and casualty insurance; and risk management programs for medium and large sized companies. In addition, it provides traditional trust and custodial services, as well a s acts as an administrator, executor, guardian, and managing agent for individuals, businesses, and non-profit entities. Further, the company offers investment advisory, asset management, and brokerage services for institutional and high net worth individual clients; and provides retirement planning services. Additionally, it engages in the equity management of assets for institutions, pensions, endowments, and high net worth individuals; and provides consumer vehicle financing services. The company operates 221 branches and 26 free-standing automated teller machines. Susquehanna Bancshares, Inc. was founded in 1982 and is based in Lititz, Pennsylvania.

Advisors' Opinion:

• [By Rich Duprey]

  Financial services holding company�Susquehanna Bancshares (NASDAQ: SUSQ  ) announced yesterday its third-quarter dividend of $0.08 per share, the same rate it paid last quarter after raising the payout 14%, from $0.07 per share.

Jabil Circuit, Inc. (JBL) Analyst Day Preview: All Eyes On Blackberry Ltd (BBRY) Update

Jabil Circuit, Inc. (NYSE: JBL) is holding its analyst day on Oct. 30 in Boston followed by an afternoon event in Clinton where investors will get to see Nypro's facilities first hand.

Based in St. Petersburg, Florida,  Jabil Circuit is the third-largest provider of electronic manufacturing services (EMS) to global OEMs. The company's principal markets include computing and storage, networking, telecommunications, mobility, industrial, medical, mobility, and consumer electronics.

Jabil has historically been a top performer in the EMS space. The company is currently above peak operating margins and has seen considerable growth over the past few quarters.

Subsequent to Jabil's most recently reported results, a number of EMS peers have reported, suggesting a more muted outlook for the December.

"We believe this could suggest a modest cut to guidance, although we expect F1Q-14 guidance was overly conservative to account for BBRY uncertainty," Deutsche Bank analyst Sherri Scribner wrote in a note to clients.

Jabil's near-term challenge is navigating its exposure to BlackBerry Ltd. (NASDAQ: BBRY), a 12 percent customer in fiscal 2013. Jabil is expected to disengage with Blackberry as it has been decreasing its production of BlackBerry handsets and is likely to end its relationship with BlackBerry as soon as practicable.

At its analyst day, the company is expected to provide an update on current demand trends and a preliminary fiscal 2014 outlook which factors in the Nypro acquisition, as well as the impact of the BlackBerry business.

Outside of BlackBerry, Apple, Inc. (NASDAQ:AAPL) has grown to 19 percent of sales, an exposure that it would also need to manage gradually. Nypro's addition bolsters Jabil's HC business while also expanding into packaged goods serving brands like P&G, Clorox, Coke.

More detail on restructuring actions following probable BlackBerry disengagement is expected at the event. In fact, a major topic of discussion during Jabil's fo! urth quarter 2013 call was the company's possible disengagement from BlackBerry given the uncertain revenue outlook.

In anticipation of lower-than-expected sales from BlackBerry, Jabil suggested it would take additional restructuring actions in the range of $35 million to $85 million, aimed at resizing the HVS segment.

"Given the decision was in the early stages of discussion at the time of JBL's F4Q-13 earnings call, we would expect more detail on JBL's plans with BBRY and for its underutilized equipment, as well as the margin impact of a possible disengagement over the next few quarters," Scribner said.

Meanwhile, Jabil may provide additional information on its fiscal 2014 outlook as well as more detail on Nypro, which represented $1 billion of fiscal 2013 revenue. As is typical, management should provide an update on its long-term outlook for its business, including growth expectations given the probable loss of Blackberry, which accounted for $2.2 billion in revenue in fiscal 2013.

Margins will be another area of focus, given the different moving parts. On its fourth quarter call, Jabil updated its fiscal 2014 EPS expectations to be roughly $2.48 (down from $2.77), and the Street would expect further detail on strategies over how the company reaches that goal.

"The impact of Nypro in particular will be a focus, and we would expect an update and more detail on when Nypro will become accretive to JBL's margins in FY-14, including when DMS margins return to target ranges of 5.5-7.0%," Scribner said.

Moreover, the company may be asked over the operating margin leverage, which may offset positive trends of improved margins and potential return of growth rates to more normal levels over the next year. In future quarters, the market sees more difficult revenue growth in some of its segments and the same concerns would be shared with the company at the event.

"In contrast to his predecessor, we believe new CEO Mondello will likely place a greater emphasis on growth ! and ROIC,! rather than specifically on margins. We see M&A playing a greater role complementing existing markets, technologies, and increasing Jabil's value-add with key customers," UBS analyst Amitabh Passi said in a client note.

In this scenario, the right strategy is to diversify further into non-technology markets with longer design and product cycles, especially in healthcare, industrial, A&D, and packaged goods.

JBL shares, which trade times its 2014 consensus estimate, have gained 30 percent in the last year,. Given near-term uncertainties with BlackBerry, the stock likely remains in a holding pattern for the next quarter or two until there is greater clarity on how the BlackBerry situation ges resolved.

Federal Reserve prolongs stimulus

Ben Bernanke's top goal -- substantial improvement in the job market -- is still eluding him.

NEW YORK (CNNMoney) Call it QE-Indefinitely.

There's still no end in sight for the Federal Reserve's stimulus program -- known as quantitative easing -- after the central bank met this week and decided to continue buying $85 billion in bonds each month.

In a statement released after the conclusion of its policy meeting, the Fed pointed to fiscal policy (a.k.a. government spending cuts, the shutdown and debt ceiling debate) as "restraining economic growth."

While the Fed continued to characterize the overall economy as expanding at a "moderate pace" -- the same as at its prior meeting -- it did downgrade its assessment of the housing market slightly.

"The housing sector slowed somewhat in recent months," the statement said.

The central bank has been buying $85 billion in bonds every month since September 2012, and has said it will continue to do so until the job market improves "substantially." The program is now nearing $1 trillion in total, yet that goal remains elusive.

Sure, the unemployment rate, at 7.2% is slightly lower than it was, but so too is the country's labor participation rate. Only 63% of Americans ages 16 and over either have a job or are looking for one -- the lowest level since 1978.

Meanwhile, hiring is stuck in slow motion, averaging 185,000 news jobs added in each of the last 12 months. Overall, not much has changed in the job market since last year.

What about 'tapering'?

Investors had previously thought the Fed would begin slowing its stimulus plan by now, in a gradual wind-down process dubbed "tapering." Fed Chairman Ben Bernanke said as much back in June, when he remarked "We anticipated that it would be appropriate to begin t! o moderate the monthly pace of purchases later this year."

But Bernanke has also said the Fed's decision will depend on the economic data.

That's been a problem since the October government shutdown delayed some economic reports and is expected to muddle some of the data in the coming months, and the debt ceiling standoff could still resurface early next year, weighing on the economy once again.

Add in the Fed's leadership transition, as Bernanke's term ends in January, and Fed watchers largely think the central bank has to wait until at least its March 2014 meeting, before making any major policy changes.

"I don't think Federal Reserve Board members would feel very comfortable about beginning the tapering process until we're closer to 200,000 jobs added each month. We're a long way from there -- in fact we're moving in the wrong direction," said Mark Zandi, chief economist for Moody's Analytics.

  Why there isn't a bond bubble

Others even predict the job market weakness will persist so long, the Fed might opt to continue bond purchases at full strength, through at least June.

If these predictions come true, this round of QE is likely to total more than either of its two predecessors: QE1 totaled $1.5 trillion and the second round of stimulus added up to about $600 billion.

What does this mean for interest rates?

Before the Great Recession, the Fed's main tool was its short-term interest rate. Lowering the rate made it cheaper to borrow money, which aimed to stimulate the economy.

But the central bank has already kept that rate near zero since December 2008, and that's one reason it is resorting to more unconventional policies like quantitative easing.

The hope is by buyin! g all the! se bonds, the Fed will lower long-term interest rates too. Mortgage rates are one noticeable area where consumers may notice the effect.

The average rate on a 30-year mortgage fell as low as 3.4% in April, but then started rising during the summer, as investors predicted the Fed would cut back on stimulus. Now that the Fed is standing pat, the rate has been falling again, and as of last week, it was 4.1%.

The longer the Fed continues QE, the lower rates could fall.

Not everyone is happy...

QE remains a controversial policy. At every meeting this year, Kansas City Fed President Esther George has been voicing concerns that the Fed could be overstimulating the economy and even risk inflating a bubble.

She voted against the decision, citing "the risks of future economic and financial imbalances."

She was the only dissenter among the Fed's 10 voting members.

Sector Watch: US Asset Management Stocks, High-Yield ARCC and BKCC

The U.S. asset management sector currently lists 25 stocks out of 132 on a 52-week low, and the sector low ratio is 0.19. GuruFocus research shows that billionaires are avoiding most of these 25 companies on a low, but here are three companies held by billionaires and insiders.

Check out these sector highlights, screened for billionaire investors, high yield, and recent insider trading.

U.S. Asset Management Sector

Highlight: Ares Capital Corporation (ARCC)

The share price is currently around $17.57 or 5.9% off the 52-week high of $18.67. Its yield is 8.60%.

Up 1% over 12 months, Ares Capital Corporation has a market cap of $4.73 billion and is traded at a P/E of 8.30.

Founded in 2004, Ares Capital Corporation is a closed-end, non-diversified management investment company that primarily invests in non-syndicated senior debt, mezzanine debt and non-control equity. The company invests in U.S. middle-market companies, defined as businesses with annual EBITDA between $10 million and $250 million.

Guru Action: Four gurus hold ARCC shares as of June 30, 2013, and there is recent insider buying.

As of Sept. 30, 2013, Scott Black holds 425,346 shares or 0.16% of shares outstanding. He increased his position by 0.4% in the third quarter of 2013, buying 1,711 shares at an average price of $17.51 per share, for a gain of 0.6%.

Across a five-year trading history, he averaged a gain of 7% on 428,571 shares bought at an average price of $16.52 per share. He gained 5% selling 3,225 shares at an average price of $16.84 per share.

Tracking share price, revenue and net income:

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Highlight: BlackRock Kelso Capital Corporation (BKCC)

The share price is currently $9.62 or 11.1% off the 52-week high of $10.82. Its yield is 10.80%.

Down 4% over 12 month! s, BlackRock Kelso Capital Corporation has a market cap of $713.5 million and is traded at a P/E of 12.50.

Incorporated in 2005, BlackRock Kelso Capital Corporation provides middle-market companies with flexible financing solutions, including senior and junior secured, unsecured and subordinated debt securities and loans, and equity securities. The company is organized as an externally-managed, non-diversified closed-end management investment company.

Guru Action: One guru holds BKCC shares as of June 30, 2013, and there is recent insider selling.

Jeremy Grantham is the sole guru stakeholder, holding 32,000 shares or 0.04% of shares outstanding. He reduced increased his position by 5.88% in the second quarter of 2013, selling 2,000 shares at an average price of $9.77, for a loss of 1.6%.

In five losing quarters, Jeremy Grantham averaged a loss of 4% on 34,000 shares bought at an average price of $10.05 per share. He also lost 2% selling 2,000 shares at an average price of $9.77 per share.

Tracking share price, revenue and net income:

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Highlight: Harris & Harris Group Inc. (TINY)

The TINY share price is currently $3.07 or 22.1% off the 52-week high of $3.94. The company does not pay a dividend.

Down 10% over 12 months, Harris & Harris Group Inc. has a market cap of $95.7 million and is traded at a P/B of 0.70.

Incorporated in 1981, Harris & Harris Group Inc. is an early-stage venture capitalist investing in transformative nanotechnology companies. Its portfolio is comprised of companies in the life science, energy and electronics sectors.

Guru Action: Chuck Royce is the sole guru shareholder, as of June 30, 2013, and there is recent insider buying.

Chuck Royce currently holds 1,293,086 shares or 4.15% of shares outstanding. Royce increased his position by 5.9% in the second quarter of 2013, buying 72,084 shares at an average price of $3.27 per ! share, fo! r a loss of 6.1%.

Royce's five-year trading history shows all losing quarters. He averaged a loss of 26% on 1,421,586 shares bought at an average price of $4.15 per share. He also lost 41% selling 128,500 shares at an average price of $5.23 per share.

Tracking share price, revenue and net income:

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Today’s After Hours Earnings: AFLAC Incorporated, Tanger Factory Outlet Centers Inc., More (AFL, SKT, AMP, More)

After the closing bell on Tuesday, there were a number of big-name dividend-paying companies that announced quarterly earnings. Below, we highlight the most important earnings information for dividend investors.

Aflac Posts Lower Earnings and Revenue; Misses Estimates

Aflac (AFL) announced third quarter revenues that fell 14% to $5.89 billion from $6.8 billion in 2012′s Q3. The company attributed the loss to the weak yen/USD exchange rate. Net earnings for the company came in at $702 million, or $1.50 per share, which was down from $1 billion, or $2.16 per share, a year ago. Not including one-time items, AFL’s EPS came in at $1.47, which missed analysts’ estimates of $1.48. Revenues barely missed analyst views of $5.9 billion. The company announced its 2014 share buyback program being in the range of $800 million to $1 billion.

Ameriprise Financial Beats Earnings Views, Misses Revenue Estimates

Financial planning and services company Ameriprise Financial (AMP) announced earnings of $381 million, or $1.86 per diluted share, which was up from last year’s Q3 earnings of $174 million, or 79 cents per diluted share. The company’s operating revenue increased to $2.7 billion. AMP beat analysts’ estimates of $1.79, but missed revenue views of $2.78 billion.

IAC Interactive Beats EPS Estimates, but Misses on Revenue

New York-based IAC Interactive Corp. (IACI

Have Times Changed For News Corp?

With shares of News Corp. (NASDAQ:NWSA) trading around $14, is NWSA an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

News Corp. was a diversified global media company that operates in six segments: Cable Network Programming; Filmed Entertainment; Television; Direct Broadcast Satellite Television; Publishing; and Other. The company was involved in programming distribution through cable television systems and direct broadcast satellite operators; live-action and animated motion pictures distribution and licensing; operation of broadcast television stations and the broadcasting of network programming and in direct broadcast satellite business through its subsidiary, SKY Italia. However, News Corp. has officially split.

The entertainment arm of the company is now known as 21st Century Fox (NASDAQ:FOXA) while the publishing arm will keep the company's name. News Corp needs to prove that it can be profitable in its own right, as the company's publishing businesses have struggled. The company distributes information and entertainment through just about every medium possible which reinforces a powerful presence. As companies and consumers continue to search for entertainment and information at increasing rates, look for companies like News Corp. to see rising profits. However, it will be interesting to see what the company does to improve their publishing engagement.

T = Technicals on the Stock Chart are Weak

News Corp. stock was on a powerful path towards higher prices, until yesterday. The spinoff news has sent the stock to lose just about half of its price. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, News Corp. is trading below its key averages which signal neutral to bearish price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of News Corp. options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
News Corp. Options	38.74%	96%	95%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
July Options	Steep	Average
August Options	Steep	Average

As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bearish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on News Corp.’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for News Corp. look like and more importantly, how did the markets like these numbers?

	2013 Q1	2012 Q4	2012 Q3	2012 Q2
Earnings Growth (Y-O-Y)	221.05%	140.48%	235.71%	273.83%
Revenue Growth (Y-O-Y)	13.54%	5.01%	2.22%	3.87%
Earnings Reaction	4.48%	-2.33%	1.60%	0.21%

News Corp. has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with News Corp.’s recent earnings announcements.

P = Weak Relative Performance Versus Peers and Sector

How has News Corp. stock done relative to its peers, Time Warner (NYSE:TWX), Viacom (NASDAQ:VIA), Walt Disney (NYSE:DIS), and sector?

	News Corp.	Time Warner	Viacom	Walt Disney	Sector
Year-to-Date Return	-41.40%	22.89%	26.87%	29.44%	12.54%

News Corp. has been a weak relative performer, year-to-date.

Conclusion

News Corp. will not only engage in the publishing business as it has announced a spinoff of the entertainment side of the business. The stock was on a strong run towards higher prices. However, its stock price has been cut in half yesterday. Over the last four quarters, earnings and revenue figures have been on the rise which has pleased investors in the company. Relative to its peers and sector, News Corp. has been a weak year-to-date performer. WAIT AND SEE what News Corp. does in coming quarters.

Jim Cramer's 'Mad Money' Recap: Who's Sorry About Apple Now?

Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener.

NEW YORK (TheStreet) -- You're only as good as your most recent quarter, Jim Cramer reminded "Mad Money" viewers Monday as he opined on the results from Apple (AAPL), a stock he owns for his charitable trust, Action Alerts PLUS.

Cramer said that Wall Street has a notoriously short memory. Despite Apple making fortunes for investors in years past and having an ungodly large amount of cash on hand to prove it, when the company's gross margins turned south last year Wall Street abandoned the stock, sending its price plummeting to a low of $385. Back then, expectations were too high, so high that even a quality operator such as Apple was unable to achieve them.

Fast forward to today, when Apple was able to post $8.26 a share in earnings, a full 32 cents a share more than expectations. Revenue rose 4.2% and gross margins expanded to 37%. Apple's holiday lineup looks even better and the company raised its revenue estimates for the rest of the year. Cramer said he'd still be a buyer of Apple, even at today's levels, given the strength of its balance sheet and its products for the holiday season. He was also bullish on the consumer staple stocks including Hershey (HSY) and Clorox (CLX), which are benefiting from a falling dollar and input costs. Cramer's 10-Point Plan The markets will always have an appetite for growth, Cramer told viewers, but how should investors choose which growth stock to add to their portfolio? Cramer unveiled his 10-point plan for choosing the best growth stocks. His method is simple: 10 criteria, each with a possible 10 points, for a total score up to 100. Cramer's candidates for this exercise are two specialty retailers that blew away the estimates, Tractor Supply (TSCO) and Lumber Liquidators (LL). 1. Multiyear growth. Cramer said while both companies have years of expansion, Liquidators has more room to expand. He gave seven points to Tractor Supply and 10 to Liquidators. 2. Total addressable market. Both companies have huge opportunities ahead. Eight points Tractor, nine points Liquidators. 3. Competitiveness. Cramer said both companies are incredibly competitive in their respective industries. Nine points a piece.

4. Shareholder capital return. Tractor Supply offers a small dividend and a buyback while Liquidators is reinvesting every penny it makes. In this case, that's OK, said Cramer, but for this scale it's three points to Tractor and zero for Liquidators.

5. International. Neither company has any plans for international expansion, but either could if they wanted. Five points each.

6. Balance sheet strength. Cramer said both stocks offer very strong balance sheets. Nine points and 10 points, as Liquidators has no debt.

7. Out-year valuation. Both stocks trade at deep discounts to their earnings potential in a few years, with Liquidators a little more so. Eight points and 10 points, respectively. 8. Management. Again, strong executives at both companies, but a little more tenure at Liquidators. Eight points to nine. 9. Cyclical? Cramer said Liquidators is more beholden to the housing market, giving Tractor Supply the win with eight points to six. 10. Gross margins. A strong finish for both companies, but with Liquidators edging a win once again. Eight points for Tractor Supply to 10 for Liquidators. Add up all the scores and Cramer said both companies are terrific, but Lumber Liquidators edged out Tractor Supply 78 to 73, making it the more compelling name. Who's Better? Some managements simply do a better job than others, Cramer said. To show the perfect example of how much execution matters to a company's bottom line he compared Polaris Industries (PII) to Arctic Cat (ACAT), two makers of snowmobiles and all-terrain vehicles and accessories there were both up big on the year going into earnings season. Polaris was able to post a three-cents-a-share earnings beat on a stellar 25% rise in revenue, while Arctic Cat posted one of the worst quarters seen anywhere, a 26-cents-a-share earnings miss on lower-than-expected revenue that sent shares plunging 15%. Looking into the results, Cramer said it was easy to see how Polaris was just eating Cat's lunch. While Polaris saw strength in every segment, Cat saw declines in parts, accessories and garments. Those areas that saw growth did so only with heavy promotional activity. Polaris saw gross margins expanding while Cat's were shrinking. Furthermore, Polaris management called out Europe as a bright spot for the quarter, but Arctic Cat saw a "challenging" European environment. Given that Polaris trades at 20 times earnings with a 16% growth rate, compared to Arctic Cat at 14 times earnings with a 20% growth rate, investors may be tempted to think Arctic Cat is the better value. But Cramer said after reviewing the quarters, it's clear to see Polaris deserves its higher multiple as the company's management is hitting it out of the park. Lightning Round In the Lightning Round, Cramer was bullish on Rite Aid (RAD), Google (GOOG), Automatic Data Processing (ADP) and Paychex (PAYX). Cramer was bearish on Celldex Therapeutics (CLDX) and Yandex (YNDX). Executive Decision: Debra Cafaro In the "Executive Decision" segment, Cramer sat down with Debra Cafaro, chairman and CEO of Ventas (VTR), the senior living real estate investment trust that's now yielding 4% thanks to an 18-point drop in its shares since May. Ventas just posted an earnings beat of 2 cents a share on an 11.5% rise in revenue. Cafaro said Ventas aims to be a stable and consistent earner for its shareholders and has been delivering on that goal. She said the company just purchased another $1.3 billion worth of assets, borrowing for as little as 3% for the next 12.5 years. When asked whether Ventas deserves to trade on the whims of the Affordable Care Act, Cafaro noted that 84% of Ventas' tenants are private payers of their services, making them largely unaffected by Obamacare. Additionally, she said what matters most is America's demographic trends, all of which point to years of growth, with a high demand for senior living services and medical office buildings. Cramer called Ventas the best performer in its class. No Huddle Offense In his "No Huddle Offense" segment, Cramer said there's a new swing factor in company's earnings reports and it's called Europe. Cramer explained that after getting hit big by a faltering Europe that accounted for a big chunk of their earnings, many industrial and tech companies have learned their lessons and have aggressively cut costs and right-sized their operations. With expectations now set very low, he said these companies' earnings could pop big and the time to buy in is now, ahead of the strength that's expected in 2014. To watch replays of Cramer's video segments, visit the Mad Money page on CNBC. To sign up for Jim Cramer's free Booyah! newsletter with all of his latest articles and videos please click here. -- Written by Scott Rutt in Washington, D.C. To email Scott about this article, click here: Scott Rutt Follow Scott on Twitter @ScottRutt or get updates on Facebook, ScottRuttDC

At the time of publication, Cramer's Action Alerts PLUS had a position in AAPL. Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for TheStreet.com, Inc., and CNBC, and a director and co-founder of TheStreet.com. All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of TheStreet.com or its affiliates, or CNBC, NBC Universal or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither TheStreet.com, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or TheStreet.com is related to the specific opinions expressed by him on "Mad Money." None of the information contained in "Mad Money" constitutes a recommendation by Mr. Cramer, TheStreet.com or CNBC that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. You must make your own independent decisions regarding any security, portfolio of securities, transaction, or investment strategy mentioned on the program. Mr. Cramer's past results are not necessarily indicative of future performance. Neither Mr. Cramer, nor TheStreet.com, nor CNBC guarantees any specific outcome or profit, and you should be aware of the real risk of loss in following any strategy or investments discussed on the program. The strategy or investments discussed may fluctuate in price or value and you may get back less than you invested. Before acting on any information contained in the program, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser. Some of the stocks mentioned by Mr. Cramer on "Mad Money" are held in Mr. Cramer's Action Alerts PLUS Portfolio. When that is the case, appropriate disclosure is made on the program and in the "Mad Money" recap available on TheStreet.com. The Action Alerts PLUS Portfolio contains all of Mr. Cramer's personal investments in publicly-traded equity securities only, and does not include any mutual fund holdings or other institutionally managed assets, private equity investments, or his holdings in TheStreet.com, Inc. Since March 2005, the Action Alerts PLUS Portfolio has been held by a Trust, the realized profits from which have been pledged to charity. Mr. Cramer retains full investment discretion with respect to all securities contained in the Trust. Mr. Cramer is subject to certain trading restrictions, and must hold all securities in the Action Alerts PLUS Portfolio for at least one month, and is not permitted to buy or sell any security he has spoken about on television or on his radio program for five days following the broadcast.

Should Costco Be In Your Portfolio?

With shares of Costco (NASDAQ:COST) trading around $109, is COST an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Costco is engaged in the operation of membership warehouses in the United States and Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Australia, and through majority-owned subsidiaries in Taiwan and Korea. The company’s depots receive container-based shipments from manufacturers and reallocate these goods for shipment to its individual warehouses, generally in less than 24 hours. Costco’s typical warehouse format averages approximately 143,000 square feet, where many consumable products are offered for sale in case, carton, or multiple-pack quantities only. Offering a large selection of bulk products at affordable prices makes Costco a go-to location for many shopping needs. Look for Costco to continue to provide the products, at sizes and prices, that consumers and companies demand.

T = Technicals on the Stock Chart are Strong

Costco stock has seen an explosive move higher in its stock price. The stock is now digesting gains from a recent bullish run so it may pause here for a breather. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Costco is trading slightly above its rising key averages which signal neutral to bullish price action in the near-term.

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(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Costco options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Costco Options	21.42%	90%	88%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
July Options	Flat	Average
August Options	Flat	Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Costco’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Costco look like, and more importantly, how did the markets like these numbers?

	2013 Q1	2012 Q4	2012 Q3	2012 Q2
Earnings Growth (Y-O-Y)	18.18%	37.78%	30.14%	29.13%
Revenue Growth (Y-O-Y)	4.86%	8.29%	9.65%	14.34%
Earnings Reaction	1.35%	0.85%	3.3%	3.07%

Costco has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with Costco’s recent earnings announcements.

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P = Excellent Relative Performance Versus Peers and Sector

How has Costco stock done relative to its peers, Target (NYSE:TGT), Wal-Mart (NYSE:WMT), Pricesmart (NASDAQ:PSMT), and sector?

	Costco	Target	Wal-Mart	Pricesmart	Sector
Year-to-Date Return	11.24%	19.59%	10.77%	8.92%	10.85%

Costco has been a relative performance leader, year-to-date.

Conclusion

Costco provides products and services in sizes and prices that have really impressed investors in recent years. The stock has witnessed an explosive move higher in its stock prices that has taken it to all-time high prices. Over the last four quarters, earnings and revenue figures have been rising which has really pleased investors. Relative to its peers and sector, Costco has been a year-to-date performance leader. Look for Costco to OUTPERFORM.

Hot Heal Care Stocks To Invest In 2014

The real estate market has been one of the strongest pillars of the economy following the greatest financial downturn since the Great Depression. Amid low interest rates and a great deal of intervention from policymakers, home buyers received an added incentive to purchase a home. Meanwhile, sellers enjoyed low inventory levels and rising prices. However, a new survey finds that sellers might be losing their control on the market.

In the third quarter, 72% of real estate agents said now is a good time to sell a home, down from 86% in the previous quarter, and the first drop of the year, according to Redfin, an online estate brokerage. On the other side of the closing table, 55% of agents said now is a good time to buy, up from 46% at the beginning of the year. Thirty percent of agents also said that sellers are having difficulties getting their home to appraise for the contract purchase amount.

Hot Heal Care Stocks To Invest In 2014: SemiLEDS Corporation(LEDS)

SemiLEDs Corporation engages in the development, manufacture, and sale of light emitting diode (LED) chips and LED components. Its products are used primarily for general lighting applications, including street lights and commercial, industrial, and residential lighting, as well as in backlighting, medical, automotive, and ultra violet (UV) applications. The company markets blue, green, and UV LED chips under the MvpLED brand name primarily to customers in China and Taiwan, as well as in Russia and North America. It sells LED chips to packagers and distributors, who in turn sell to packaging customers. SemiLEDs Corporation was founded in 2005 and is based in Miao-Li County, Taiwan.

Advisors' Opinion:

• [By Stock Investor]

  Next up I will look at SemiLEDs Corporation (LEDS). This company is based in China, typically a red flag from the start. In the last year LEDS posted almost $26m in revenue with a net cash balance of approximately $36m. The market cap here is a small $42m, much cheaper than RVLT. LEDS has an average quarterly cash burn of about $5m, leaving them ample funding for the next two years at current spend rates. So far the financials here suggest that LEDS is undervalued, especially when compared to RVLT. Usually, however where there is smoke there is fire. In 2012 LEDS lost a patent infringement suit against CREE Inc (CREE). The settlement prevents LEDS from selling it product in the US, a major red flag. This is also the likely reason for such a large drop in sales over the last year of almost 40%. Revenue for the second quarter of fiscal 2013 was $4.8 million, a 39% decrease compared to $7.9 million in the second quarter of fiscal 2012. It is disconcerting that a company in a sector that is supposedly experiencing record growth, is seeing its sales drop this much. A major red flag for investors. While the cash position is a positive, investors should note that this is a China based company. Accurate financials are not something Chinese companies are know for.

Hot Heal Care Stocks To Invest In 2014: COLT TELECOM GROUP S.A. ORD EUR1.25(COLT.L)

Colt Group S.A., together with its subsidiaries, provides business communications and information technology (IT) solutions and services in Europe. The company operates in three segments: Enterprise Services, Communication Services, and Data Centre Services. The Enterprise Services segment provides a range of technical solutions, including managed networking, managed IT services, and unified communication solutions through its information delivery platform to medium and large sized corporates in the financial, public, media, and professional services sectors. The Communication Services segment offers a range of voice, broadband, and data communications services, such as IT and network services for fixed and mobile network operators, Internet service providers, and telecoms and IT resellers through indirect sales channels. The Data Centre Services segment serves enterprises and corporates that require data centre space to support their compute infrastructure. This segment d esigns, builds, and operates data centers. The company offers its services through resellers, agents, and franchises. COLT Group S.A. was founded in 1992 and is headquartered in Luxembourg.

Top 5 Low Price Companies To Watch In Right Now: Wee Hur Holdings Ltd. (E3B.SI)

Wee Hur Holdings Ltd., an investment holding company, engages in the construction and property development businesses in Singapore. The company offers various construction services, including new construction, additions and alterations of existing buildings, refurbishment and upgrading of existing buildings, and restoration and conservation of heritage buildings to customers. Its projects comprise residential projects, such as condominiums, apartment buildings, landed housing, and public housing; commercial projects, which include office buildings, hotels and shopping complexes; institutional projects comprising schools, tertiary institutions, community clubs, and hospitals; industrial projects consisting of factories and warehouses; religious buildings that include churches and temples; and heritage and conservation buildings. The company is also involved in the property investment and property development activities, such as property related investments, the holding of i nvestments in property related assets, and trading in and the development of property. In addition, it engages in the construction and sale of residential and commercial properties. The company was founded in 1980 and is based in Singapore.

Hot Heal Care Stocks To Invest In 2014: MIPS Technologies Inc.(MIPS)

MIPS Technologies, Inc. provides industry-standard processor architectures and cores for digital home, networking, and mobile applications primarily in the United States, Japan, the Pacific Rim, and Europe. The company licenses embedded processor intellectual property in the form of architectures and implementations. It develops and licenses industry-standard MIPS32 and MIPS64 instruction-set architectures, application specific extensions, core designs in synthesizable and process-optimized forms, and other related intellectual property to semiconductor companies and system original equipment manufacturers. The company also offers various embedded processors that scale across various markets in standard, custom, semi-custom, and application-specific products; and MIPS-Based Systems on Chips for embedded systems. Its technology is used in digital televisions, set-top boxes, Blu-ray players, broadband customer premises equipment, WiFi access points and routers, networking in frastructure and portable/mobile communications, and entertainment products. MIPS Technologies, Inc. owns approximately 580 patent properties worldwide on various aspects of its technology. The company was founded in 1984 and is headquartered in Sunnyvale, California.

Hot Heal Care Stocks To Invest In 2014: Valley National Bancorp(VLY)

Valley National Bancorp operates as the bank holding company for Valley National Bank that provides various commercial, retail, trust, and investment services. The company?s deposit products include savings accounts, negotiable order of withdrawal accounts, money market accounts, time deposits, certificates of deposit, and non-interest-bearing accounts. Its loan portfolio comprises floating and adjustable rate commercial and industrial loans, as well as fixed rate owner occupied and commercial real estate loans; and consumer loans, such as residential mortgage, automobile, home equity, and credit card loans, as well as lines of credit. The company also provides fixed rate investments, trading securities, and federal funds; and international banking services, such as standby letters of credit, documentary letters of credit, and related products, as well as ancillary services. In addition, it offers asset management advisory services that comprise investment services to ind ividuals and small to medium sized businesses; trust services, such as living and testamentary trusts, investment management, custodial and escrow services, and estate administration primarily to individuals; brokerage services; and title insurance agency and asset-based lending support services. Further, the company provides property and casualty, life, and health insurance; financing for general aviation aircraft, and servicing for existing commercial equipment leases; health care equipment and other commercial equipment leases; and owns real estate related investments. Valley National Bancorp also offers automated teller machines, telephone and Internet banking, overdraft facilities, drive-in and night deposit services, and safe deposit facilities. As of December 30, 2011, it operated 211 branches in 147 communities serving 16 counties throughout northern and central New Jersey, Manhattan, and Long Island. The company was founded in 1927 and is headquartered in Wayne, New Jersey.

Real cost of lawmaker squabbles: 1.75M jobs, 2% economic output

Bloomberg News

The mounting polarization of U.S. politics imperils the U.S. economy, robbing it of jobs and investment.

So warns economist Marina Azzimonti of the Federal Reserve Bank of Philadelphia, who created an index to measure the tone of political debate and its impact on hiring, investment and general economic growth.

“Polarization significantly discourages investment, output and employment,” she said in the study released last week by the regional Fed bank. “Moreover, these declines are persistent, which may help explain the slow recovery since the 2007 recession ended.”

(More: 5 ways the government shutdown affected investment portfolios)

Ms. Azzimonti's political polarization index is based on a search of news stories to measure the coverage of lawmaker disagreement from January 1981 to April 2013. It climbed after the recession ended in 2009 and peaked toward late 2012. At the time, politicians were trying to resolve the so-called fiscal cliff, which would have inflicted tax increases and spending cuts on the economy.

The index rose from about 75 in 1981 to about 200 at the end of last year. The project didn't include the recent government shutdown or fight over raising the debt ceiling.

Using the period 2007 to 2012, over which the index jumped 64 points, the Azzimonti model found that employment decreases in conjunction with a surge in political infighting, with a peak loss of 1.75 million jobs after six quarters. Investment decreases as much as 8.6% after five quarters, and output shrinks 2%.

Political clashes increase the volatility of fiscal policy, spurring uncertainty in economic policies. That in turn cools activity, she wrote.

The index also spikes around election dates, be they for the president or Congress. It tends to be lower around military conflicts or national security threats, such as the Sept. 11 attacks.

“This suggests that American politics are very polarized regarding economic policy or private-sector regulation reforms, but less divided when it comes to national defense issues,” said Ms. Azzimonti.

(Bloomberg News)

Like what you've read?

3 Comeback Stocks of 2013

Movies aside, you don't see underdog comebacks too often. But the stock market is another story. There are easily dozens of public companies -- even widely followed ones -- that investors give up on each year, only to see them come surging back.

In December I highlighted three such stocks from 2012: Green Mountain Coffee Roasters, Facebook, and GameStop (NYSE: GME  ) . Each had sent shareholders running for the exits at some point in the year, but finished with gains of more than 60%. That run has kept up into 2013 for two of the three. While Facebook is running even, Green Mountain and GameStop are up by more than 70%.

This year is only half done, but the stock swings are already piling up. Here are three of the biggest comebacks so far.

Streaming back
Netflix (NASDAQ: NFLX  ) started the year at less than $100 a share. That was before it announced a huge fourth quarter that sent the stock soaring toward a 200% return over the last 52 weeks. Despite worries about rising content spending and a new debt offering's potential as a "red flag," Netflix hasn't looked back.

That's mainly thanks to the streamer's successful gamble on original content, which is making it easier to gain new subscribers and to keep the existing ones. Netflix has approved second seasons of almost all of its exclusive shows, putting it well ahead of Amazon.com's Prime streaming service, which won't introduce its first batch of original programming until later this year.

Charging ahead
Tesla Motors (NASDAQ: TSLA  ) has had plenty of detractors this year. It started 2013 as one of the most shorted stocks on the market, with 53% of its float representing bearish bets.

But since early January the stock is up better than 200%. Tesla notched some big wins lately, including reaching companywide profitability, ramping up production of its Model S, and seeing that car receive Consumer Reports' highest review rating. But is that enough to justify a huge premium over other carmakers? Not according to many investors, as Tesla is still among the most hated stocks in the market, with 26% of the float sold short.

Trading up
GameStop's wild ride has earned it another spot on the list. The video game retailer's shares hit a 2013 low in January, at $23, while its industry continued to shrink. Then, after surging to touch $40 on optimism over new game consoles, the stock tanked over fears that those devices would destroy the market for used video games. Now it's back near a five-year high.

GameStop can thank Microsoft for a lot of that volatility. The tech giant rolled out its Xbox One console in June. And despite huge warning signs, the system specs included a restrictive digital rights management system that didn't sit well with gamers. Microsoft has since responded to the complaints and removed those restrictions, leaving GameStop's lucrative trade-in and resale business intact.

Foolish bottom line
Each of these companies could see investor sentiment turn sharply negative again. The stakes are particularly high as they report second-quarter earnings in the coming weeks. However, GameStop, Tesla, and Netflix are sitting on huge year-to-date returns, and that was difficult to imagine just a few months ago.

We're always on the lookout for stocks with potential for breakout runs like these. The Motley Fool's chief investment officer has selected his No. 1 stock for this year. Find out which stock it is in the special free report "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.

Senator: Finra too weak to go after deadbeat brokers

Sen. Edward J. Markey, D-Mass., is pushing the SEC and Finra to tighten the screws on rogue brokers. Bloomberg News

The lawmaker who 20 years ago wrote the legislation that led to the creation of a database containing background information about brokers is calling on financial regulators to crack down on brokers who violate securities rules and continue to practice.

In a letter Friday, Sen. Edward J. Markey, D-Mass., told Securities and Exchange Commission Chairman Mary Jo White that the commission should take “remedial regulatory action” to address what he calls weaknesses in the Financial Industry Regulatory Authority Inc.'s ability to protect investors from “unscrupulous brokers.”

Mr. Markey said that it is too easy for brokers to clear their records of disciplinary actions in the BrokerCheck database and avoid paying arbitration awards to harmed investors.

“Plainly, the Finra rules need to be strengthened,” Mr. Markey wrote. “[A]ll arbitration awards and settlements should be reported by BrokerCheck. Expungement should truly be rare, and arbitrators should not be allowed to decide that an award should be expunged. Rather, Finra should establish an internal process that determines whether a particular award or settlement meets stringent expungement criteria.”

The SEC, which has authority over Finra, also should prevent brokers from wiggling out of paying arbitration awards by shutting down their operations or declaring bankruptcy. He cited Finra statistics which show that $51 million in arbitration awards from 2011 have not yet been fulfilled.

“Current regulations allow brokerages to open with far too little capital — certainly not enough to pay an arbitration award,” Mr. Markey wrote. “The SEC needs to investigate these deadbeat brokers and amend existing or promulgate new rules to address this problem.”

In calling for the reforms, Mr. Markey highlighted a recent report in the Wall Street Journal which said that more than 5,000 brokers who worked for firms thrown out of the industry by Finra are still practicing. He also referred to a recent study by the Public Investors Arbitration Bar Association that showed that expungement was granted more than 90% of the time it is requested by brokers in arbitration cases that were settled from 2007 through 2011.

“If brokers with that number of disciplinary disclosures are allowed to continue practicing, Finra needs to revise its disciplinary system,” Mr. Markey wrote.

Mr. Markey sent letters to both Finra and the SEC on Friday. The SEC declined to comment. Finra did not immediately respond to a request for comment.

(Read Mr. Markey's letter to Finra here.)

In response to the PIABA study earlier this month, Finra released a statement saying that the regulator granted 838 expungements following court orders between 2007 and 2011, or le! ss than 5% of the 17,635 arbitration cases filed during that period.

Bryan Ward, a partner at Sutherland Asbill & Brennan LLP, said it's difficult for brokers to get arbitration claims removed from their records. Their requests are reviewed by arbitrators and then have to be approved by a court.

“It seems like a lot of commotion without a single instance of expungement having been granted improperly,” Mr. Ward said, referring to Mr. Markey's letter. “It seems to be used appropriately, given the numbers.”

Mr. Ward also said it's not practical to remove arbitrators from the expungement process.

“The point of the Finra arbitration system is to allow arbitrators to make findings of fact rather than Finra itself,” Mr. Ward said. “It would certainly be a burden on Finra to be making those decisions.”

Nearly every client agreement at brokerages includes a clause requiring mandatory arbitration of investor disputes. Finra operates the arbitration system.

In a statement, Mr. Markey said the investor-protection rules regarding broker disciplinary disclosure that emanated from his legislation more than 20 years ago need to be updated.

“It is unacceptable that some brokers have been able to conceal significant disciplinary information from the public,” Mr. Markey said. “Even worse, it is unacceptable that once a consumer has won an award against a brokers by a securities industry arbitration panel, that some brokers have failed to pay the award that has been ordered. I will continue to call for a most rigorous tracking and disciplinary system.”

Today’s 3 Worst Stocks

The first week of earnings season was more than kind to the S&P 500 Index (SNPINDEX: ^GSPC  ) , and the benchmark ended at another all-time closing high on Friday. It didn't hurt that the Fed promised to continue buying $85 billion in bonds each month until the economy gets on better footing, but corporate profits were strong on their own merits. Wall Street closed the day looking forward to more results next week, with the S&P adding five points, or 0.3%, to end at 1,680. That said, negative developments in three of the index's components weren't easily ignored, and shareholders had little choice but to sell them off.

Firstly, the United Parcel Service (NYSE: UPS  ) saw shares tumble 5.8% as the mail-delivery service reduced its second-quarter and full-year outlook. UPS officially reports second-quarter results on July 23, but it went ahead and told markets not to expect anything spectacular; the company's looking for earnings between $4.65 and $4.85 per share for the year, compared to Wall Street estimates of nearly $5.00 per share. Not only that, but UPS sees the downtrend to continue into the foreseeable future.

In a textbook example of a situation where you can expect nothing but a steep stock sell-off, Boeing (NYSE: BA  ) shares fell 4.7% after one of its 787 Dreamliners caught fire at London's Heathrow Airport. Luckily, no one was injured, and the plane was unoccupied at the time. Sound familiar? That's because a fire broke out on a Dreamliner back in January at Boston's Logan Airport, an event that caused the model to be grounded for months, as technical and safety tweaks were made. In short, today's events amounted to downright hellish deja vu for shareholders.

Lastly, iron ore and coal miner Cliffs Natural Resources (NYSE: CLF  ) shed 3.5% Friday. It's a shame, because the stock had been on a tear this week, a much-needed bullish run investors have rarely seen in the last year, as the market cap took a 60% haircut. The struggling miner announced its CEO, Joseph Carrabba, will be stepping down at the end of the year, along with the immediate departure of its global operations chief.

The Motley Fool's chief investment officer has selected his No. 1 stock for this year. Find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.

Record-Low H.K. Home Sales Spur Realtor Loss: Chart of the Day

The tumble in Hong Kong's home sales to a record low signals further declines in Midland (1200) Holdings Ltd., the city's largest listed realtor, according to Bocom International Holdings Co.

The CHART OF THE DAY shows the three-month average of residential transactions in Hong Kong fell to 3,693 units in September, the lowest since at least 1996, according to government data compiled by Bloomberg. Sales have plunged even as Centaline Property Agency Ltd.'s housing-price gauge holds within 3.1 percent of a record high. The lower panel shows Midland had 9,576 employees at the end of June, according to the latest company statement, the most ever and triple the amount a decade ago, alongside the company's stock price.

Shares of Midland, which arranges about 30 percent of all property sales in Hong Kong, slid 67 percent since April 2010. The company had a net loss of HK$95 million ($12 million) in the six months to June 30, the biggest since the second half of 2008, as operating expenses exceeded sales. The stock will continue to be under pressure unless the property market recovers, said Alfred Lau, an analyst at Bocom in Hong Kong.

"This year will likely be loss-making for the company and that would eat into cash flow and the company's ability to pay dividends," said Lau, who has a sell rating on the stock and a 12-month target price that's 14 percent below yesterday's close.

Residential sales have declined as government taxes and the prospect of rising interest rates deter buyers in the world's most expensive property market. The number of real estate agents in Hong Kong surged 68 percent to 36,225 in September from January 2008 as home prices doubled, according to government data. The number of Midland employees in the city has fallen by "double digits" this year through September, Deputy Chairman Angela Wong said by phone.

Midland's managers "have to cut jobs and they have to cut shops," said Nicole Wong, a property analyst at CLSA! Asia-Pacific Markets in Hong Kong. "There is no other way out." Brokerages from UBS AG to Bank of America Corp. and Jefferies Group LLC predicted this month the city's home values will fall at least 20 percent through next year.

Ford Motor Company (F) Q3 Earnings Preview: Another Beat On The Cards?

Ford Motor Company (NYSE: F) would release its preliminary 2013 third quarter results at 7 a.m. (EDT) on Oct. 24. Alan Mulally, Ford president and chief executive officer, and Bob Shanks, Ford executive vice president and chief financial officer will host a conference call on the same day at 9 a.m. (EDT) to discuss quarterly results.

Dearborn, Michigan-based Ford is one of the world's largest auto manufacturer offering cars, trucks, and other vehicles primarily under the Ford and Lincoln brands.

Wall Street expects the automaker to earn 37 cents a share, according to analysts polled by Thomson Reuters. The consensus view implies a drop of 7.5 percent from last year's earnings of 40 cents.

Ford may like to continue with its positive earnings momentum as it has surpassed Street estimates in all of the past four quarters, with upside surprise ranging from 10.8 percent to 33.3 percent.

Analysts have become more bullish over Ford's earnings in recent times, with the consensus view improving by 3 cents over the past 90 days. Four analysts have raised their earnings estimate in the last month.

Quarterly revenue is expected to rise 13 percent to $34.18 billion from $30.25 billion in the corresponding quarter last year.

Ford had a strong quarter in terms of auto and truck sales, and even reported record Ford F-150 truck sales, in August and September 2013. In U.S., the F-Series keeps delivering as it recorded its fifth-straight month surpassing the 60,000-vehicle mark and continuing as one of America's best-selling vehicles. North American sales, pre-tax profits and margins should be a focus for investors.

Ford's progress in consolidating vehicles onto global platforms would improve profitability across the company's vehicle mix, and it has maintained good traction with customers in the important North America market.

Meanwhile, investors will keep a keen eye on European performance as the company lost over $1.7 billion in Europe last year, triggering a massiv! e restructuring by CEO Alan Mulally last fall.

Now, those restructuring moves have started to bear fruit as Ford is showing improvement in European sales volumes, driven by strong demand for the new B-MAX, Kuga and Transit Custom. Ford also confirmed that it is significantly accelerating the number of new vehicle introductions in Europe, where it reported a retail share of 8.4 percent in the second quarter.

The Ford's restructuring efforts and recent gains in retail market share suggests that region could return to eventual profitability.

Also, China have started contributing to sales and profits as Fords new offerings in the country have been doing very well, and its Fusion (called Mondeo) sold about 9000 units in the first full month.

Among the key developments in the quarter, Standard & Poor's Ratings Services raised its issuer credit ratings on Ford to 'BBB-' from 'BB+', and revised the outlook to stable from positive.

The market could look at how Ford expects to perform in the remaining part of the year, eyeing its guidance for 2013. In July, Ford said it expects 2013 total company pre-tax profit to be equal to or higher than 2012, Automotive operating margin to be about equal to 2012. In 2012, the company had a pre-tax profit of $8 billion and automotive operating margin of 5.3 percent.

For the second quarter, Ford's net earnings attributable to the company rose to $1.23 billion or 30 cents a share from $1.04 billion or 26 cents a share in the year-ago period. Excluding special- items, adjusted earnings for the quarter were 45 cents a share, topping the Street view of 37 cents.

Revenues for the quarter grew 14 percent to $38.1 billion from $33.3 billion in the prior-year quarter. Analysts had a consensus revenue estimate of $35.24 billion.

Since reporting its second quarter earnings, shares of Ford have gained only 1 percent, but rose 33 percent year-to-date. The stock, which trades about 10 times its forward, traded between $9.97 and $17.77 duri! ng the pa! st 52-weeks.

HTC Just Broke Google's Promise

In the face of escalating criticism over platform fragmentation, Google (NASDAQ: GOOG  ) made a promise more than two years ago at Google I/O 2011 about Android:

So today we're announcing that a founding team of industry leaders, including many from the Open Handset Alliance, are working together to adopt guidelines for how quickly devices are updated after a new platform release, and also for how long they will continue to be updated. The founding partners are Verizon, HTC, Samsung, Sprint, Sony Ericsson, LG, T-Mobile, Vodafone, Motorola and AT&T, and we welcome others to join us. To start, we're jointly announcing that new devices from participating partners will receive the latest Android platform upgrades for 18 months after the device is first released, as long as the hardware allows ... and that's just the beginning.

The search giant was collaborating with carrier and OEM partners to ensure that new Android devices would receive software updates for at least 18 months after launch, with the disclaimer that the hardware would support it. These middlemen have always held back Android software updates, and Google wanted them to commit to improving their ways.

HTC and Samsung are among the two most prominent Android vendors right now. While HTC has fallen hard on the times at the hands of Samsung's marketing barrage, the Taiwanese company is looking to cut costs. As part of that, HTC has now backtracked on its plans to upgrade its One S to the newest version of Android, 4.2.2 Jelly Bean -- just months after promising to upgrade the device. In February, HTC said it would be upgrading a slew of devices, including the One S.

The One S was launched just 14 months ago, and HTC's confirmation that the device will stay on an older version of Android and HTC's Sense overlay falls short of the 18-month commitment that it made with Google. The company doesn't make any excuses about the hardware not being able to handle it, which wouldn't be believable considering how recently HTC was planning on upgrading the One S. The One S has respectable specs anyway. This is purely a cost-saving move.

The situation shows how difficult it is for Google to manage Android's fragmentation, despite its best efforts. Nexus and Google Editions aren't be plagued by these issues, as software updates will be delivered directly from Google, but when it comes to the more common subsidized Android models Google can't always keep its promise through no fault of its own.

The Motley Fool's chief investment officer has selected his No. 1 stock for this year. Find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.

What's Fueling Alcoa's (AA) 11% Gain?

Updated from 3:31 p.m. EDT to include aluminum price projections in the fourth paragraph. 

NEW YORK (TheStreet) -- Alcoa (AA) closed 8.8% higher to $9.36 after an 11.6% spike mid-afternoon. Flat in the early portion of the day, the stock hit its stride at midday to reach a new 52-week high.

Fueling the spike is an across-the-board rally for aluminum producers and a series of positive announcements from the company's management.

Alcoa far surpassed the industry in share price growth, followed by Century Aluminum  (CENX) which gained 8.1%, Aluminum Corp of China (ACH) up 3.7%, Australia-based producers BHP Billiton (BHP) and Alumina Limited (AWC) climbing 3.2% and 2.4% respectively, and Noranda Aluminum Holding  (NOR) 4.7% higher. Kaiser Aluminum  (KALU) lagged the group, gaining 0.94%. Bloomberg credits speculation on future aluminum prices as spurring an industry rally, noting aluminum for delivery in three months rose 2.2% on the London Metal Exchange. The publication also said that investors closing out stock short options could have been a trigger to its meteoric rise.  Also influencing Alcoa's gains, the New York-based company announced it has partnered with Russia's VSMPO-AVISMA to provide high-end titanium and aluminum to aircraft manufacturers internationally. "The agreement marks an important step in leveraging Alcoa's and VSMPO-AVISMA's strengths in innovation and manufacturing to capture opportunities in the high-growth aerospace market," said CEO Klaus Kleinfeld in a statement. "This alliance will enhance Alcoa's competitiveness and position our global aerospace business for continued profitable growth." The joint venture, expected to be operational in 2016, will take advantage of the burgeoning aerospace market, an industry Alcoa forecasts will grow 9% to 10% in 2013 alone. The creator of forged aluminum wheels said it has improved upon its invention, developing a product lighter and stronger than the industry standard. The new alloy designed for use in trucks will increase fleet payload and improve fuel efficiency. Alcoa expects to introduce the alloy to market by early 2014. Alcoa's Engineered Products and Solutions division, which developed and will manufacture the product, contributed 25% of the company's $5.8 billion in total third-quarter revenue. TheStreet Ratings team rates Alcoa Inc as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about its recommendation: "We rate Alcoa Inc (AA) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, impressive record of earnings per share growth and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, weak operating cash flow and poor profit margins." Highlights from the analysis by TheStreet Ratings Team goes as follows: The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Metals & Mining industry. The net income increased by 116.8% when compared to the same quarter one year prior, rising from -$143 million to $24 million. Alcoa Inc reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, Alcoa Inc reported lower earnings of 17 cents a share vs. 52 cents a share in the prior year. This year, the market expects an improvement in earnings (35 cents vs. 17 cents). Net operating cash flow has decreased to $214 million or 18.63% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, Alcoa Inc has marginally lower results. AA has underperformed the S&P 500 Index, declining 6.43% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry. You can view the full analysis from the report here: AA Ratings Report

Netflix CEO: Settle down about our stock

Netflix's stock is up a jaw-dropping 430% over the past year, but CEO Reed Hastings isn't at all happy about it.

NEW YORK (CNNMoney) Netflix's stock is up a jaw-dropping 430% over the past 12 months, but CEO Reed Hastings isn't too happy about it.

Shares jumped by as much as 10% Tuesday morning before falling into negative territory later in the day following Netflix's great third-quarter earnings report. But the company dedicated part of its quarterly letter to shareholders warning investors about the "euphoria" around the stock.

"We do our best to ignore the volatility in our stock," the company wrote in a letter to shareholders. The letter compared the 2013 run-up to Netflix's stellar run a decade ago, when it was the highest performing stock on the Nasdaq.

"We had solid results compounded by momentum-investor-fueled euphoria," Netflix (NFLX) said. "Some of the euphoria today feels like 2003."

Netflix also highlighted "the huge swings" in the price of its shares since the company's 2002 initial public offering: $8 to $3 to $39 to $8 to $300 to $55 to $330.

Related story: RIP television, hello mobile gaming

Just in case that wasn't clear enough, Hastings hammered the point home on a post-earnings conference call with analysts late Monday.

"Momentum investors" are "driving the price more than we like normally," he said -- adding that share price movements are out of the company's control.

There is reason for investors to be excited about the company, however. Netflix's third-quarter earnings of 52 cents a share were well above the 49 cents that analysts polled by Thomson Reuters were expecting. Sales came in at $1.1 billion, in line with estimates.

Beyond that, Netflix also topped expectations with its prediction for the current quarter. Netflix expects earnings of 47 cents to 73 cents per share for the fourth quarter. That's an extremely wide range -- which is common for Netflix's outlook -- but it's far above the 46 cents a share that Wall Street expected.

Top Trends: Income and ETFs

Money manager and income specialist Dave Fabian discusses four important current trends that income-oriented ETF investors need to consider; he also highlights the top funds to take advantage of these opportunities.

Steve Halpern: We're here with Dave Fabian. How are you doing Dave?

Dave Fabian: I'm doing very well, Steve, thanks so much for having me back.

Steve Halpern: Since the last time we spoke, you changed the name of your money management company from Fabian Capital to FMD Capital. Could you update us on the change?

Dave Fabian: Absolutely, we're actually really excited about it. The name change really came about because we're expanding our brand more on a national stage.

We're starting to do quite a bit more institutional research and the like, and we thought it would be better for a lot of our followers and clients to have a little bit of a different name change out there in the marketplace, and of course, along with that we also introduced a new portfolio that we're really excited about for our money management clients.

I focus exclusively on high-yield closed-in funds that's picking up a lot of interest as well. We're really excited about the changes, and at the end of 2013 and 2014 are going to be some really exciting times for both equity and income investors.

Steve Halpern: Congratulations.

Dave Fabian: Thank you so much.

Steve Halpern: You note that you don't subscribe to the theory that all bonds are bad, even in the face of rising interest rates. In fact, you suggest there are always opportunities out there for income investors. Could you expand on that?

Dave Fabian: Absolutely. Well, 2013, you know, has really seen probably the most volatility in the interest rate space since the mid-90s. Really, we've seen a huge spike in interest rates from a low in the 10-year of about 1.65% to over 3% in a period of about four or five months.

Since, though September, the Federal Reserve came out and said that they are not going to taper their asset purchase programs, and so, we saw a big fall in interest rates, which, of course, translates into a rise in bond prices. Really, now what we're seeing is some additional interest starting to come back into the bond market.

There were huge outflows in the early part of the month, of course, funds like PIMCO, and the like, garnered all of these headlines about how they are losing billions of dollars in assets, but really what we're starting to see is money come back into certain areas of the bond market, and there's some really excellent opportunities out there for income investors.

Of course, we don't subscribe to the theory that all bonds are bad, even in the face of some of these rising interest rates, there have been some areas of the bond market that have performed extremely well, so it's really about positioning your portfolio into the areas that are doing well, and letting go of some of the losers and the like.

Steve Halpern: In your latest research report, you outline four high-yield ETF trends that investors need to focus on today, so let's go through them. First, you look at short duration, high-yield bonds, and in particular, you recommend them because of low volatility. Can you tell us a little about that?

Dave Fabian: Absolutely. High-yield has been excellent space for income investors over the last several years. They've put up fantastic returns.

High-yield bonds have had very low default rate, they're a great income stream and of course, what we've been recommending over the last several years is for people to start transitioning their portfolios, specifically in high-yield, from longer duration to shorter duration.

The shorter average duration in an ETF or a mutual fund means that you're going to have less sensitivity to interest rates.

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Visualizing Nokia's and BlackBerry's Turnarounds

Over the past few years in the cutthroat smartphone market, Nokia (NYSE: NOK  ) and BlackBerry (NASDAQ: BBRY  ) were completely blindsided. Once innovative market leaders, both were caught off guard by Apple and Google. iOS and Android have emerged as an unstoppable duopoly, powering 92.3% of all smartphones sold in the first quarter. That's up from the "just" 54.4% combined market share they enjoyed only two years ago.

Source: IDC.

The fight's not over yet though, as Nokia and BlackBerry have both been embarking upon their respective turnarounds. Each company has entrusted a new CEO with a turnaround. Each company has also bet its future on a new operating system platform; Nokia partnered with Microsoft (NASDAQ: MSFT  ) Windows Phone, and BlackBerry is hoping BlackBerry 10 can last a decade.

Nokia goes first
Nokia's Lumia brand includes all of its Windows Phones. The Finnish company began its transition well before BlackBerry, releasing the first Lumia in Q4 2011. Meanwhile, it has abandoned Symbian, whose market share has now fallen to a meager 0.6%.

Source: Nokia. Fiscal quarters shown.

At this point, the company's smart device business is almost entirely reliant on Windows Phone, for better or for worse. Lumia units now comprise 92% of total smart device shipments. Nokia calls its lower-end Asha lineup smartphones, but doesn't include them in its smart devices category.

BlackBerry goes second
It wouldn't be until early this year that BlackBerry would launch BlackBerry 10 after numerous delays. The Canadian company just reported its full first quarter of BB10 device sales, which include the Z10 and Q10. After selling approximately 1 million BB10 devices in the fiscal fourth quarter, it sold 2.7 million BB10 units this quarter.

Source: BlackBerry. Fiscal quarters shown.

BB10 units were 40% of total smartphone volume, and BlackBerry's turnaround timeframe lags Nokia's in that respect. Unlike Nokia, BlackBerry isn't abandoning its previous platform. BlackBerry 7 devices still sell well in emerging markets (the same markets that Nokia is targeting with Asha), and the company confirmed today that it would release a new BlackBerry 7 phone later this year.

BlackBerry's transition to its new BB10 platform won't be as swift as Nokia's all-in move to Windows Phone.

If you had to pick
Of the two, Nokia has a better chance of pulling off a successful turnaround. Not only did the company begin sooner, but also, Windows Phone has just overtaken BlackBerry in global market share to become the No. 3 platform for the first time ever. This is largely a function of rising Lumia volumes, which account for 80% of all Windows Phones sold. It's also worth remembering that smart devices are just one of Nokia's segments. The HERE mapping segment is relatively small at less than 4% of revenue, and the network equipment business is mostly stable.

Windows Phone is also a more refined mobile operating system. The third major release, Windows Phone 8.1, is due out later this year. In contrast, BlackBerry 10 is essentially an entirely new platform for BlackBerry, built on QNX, and with few ties to BlackBerry 7. Microsoft also isn't hurting for cash, so continued development of Windows Phone is assured. BlackBerry still has over $3 billion in cash, and remains operating cash flow positive, but a few more bad quarters like the one just reported could make short work of that.

When it comes to a prospective turnaround, Nokia has a first-mover advantage over BlackBerry.