HomeAway Continues Growth and Celebrates 1 Million Paid Listings

HomeAway (NASDAQ: AWAY  )  -- a leading online marketplace for vacation rentals worldwide -- reported second-quarter results after the market closed last Thursday churning in solid top-line, listings, and free cash flow growth. In addition, the company unveiled a new marketing strategy aimed to drive growth in the coming years. 

Highlights from a strong quarter
Total revenue for HomeAway increased 31.9% year-over-year to $114.3 million, of which listing revenue increased 28.7% to $114.3 million. Most notably, however, was the significant growth in HomeAway's "other revenue" segment, which grew 49.7% year-over-year to $19.7 million thanks to increased customer adoption of the company's owner, manager, and traveler product add-ons.

Average revenue per subscription listing was $473 in the quarter, a year-over-year increase of 13.7%, boosted in large part by the increased adoption of HomeAway's add-on products. Paid listings at the end of the second quarter totaled 1.04 million, up 34.2% year-over-year. Approximately 72% of these were subscription listings (paid in advance by property owners), with the remaining 28% made up of performance-based listings (where property owners only pay commissions on traveler bookings, fees, or traveler inquiries). 

HomeAway's performance held up closer to the bottom line as well, as  adjusted EBITDA increased 32.7% year-over-year to $33 million. Meanwhile, operating cash flow expanded 110.6% year-over-year to $45.9 million.

The renewal rate of HomeAway's subscription listings was 72.8% at the end of the second quarter, up slightly from the 72.4% renewal rate at the end of the second quarter in 2013 but still down from the 73.1% renewal rate at the end of the first quarter of 2014. "Renewal rates in the U.S. are steady," said co-founder and CEO Brian Sharples, "while Europe has seen some pressure in a few markets."

Finally, HomeAway's websites attracted 229.5 million visits during the quarter, an increase of 14.2% year-over-year. This was a strong quarter for HomeAway in terms of growth of revenue, revenue per subscription, and overall paid listings. 

An expanding marketing strategy 
On July 24, the same day second-quarter earnings were released, HomeAway announced the hiring of Mariano Dima as chief marketing officer -- a new executive position at HomeAway. Dima brings more than 20 years of experience with Visa Europe, PepsiCo Latin America, Levi Strauss & Co., and Vodafone. In the second quarter conference call, Sharples shared his vision for what Dima brings to the table for HomeAway: 

Mariano is a seasoned marketing leader who understands the value of developing a consistent and impactful global integrated marketing program to enhance traffic, brand awareness and conversion, including a combination of brand advertising, performance marketing, SEO [search engine optimization], PR and database marketing. He's also highly experienced globally and particularly in Europe, which is one of our most important and certainly one of our most competitive markets.

In 2013, Europe accounted for 36.5% of HomeAway's total sales. An across-the-board expansion of HomeAway's marketing efforts, guided by Dima, will be taking place over the next several years. The reasoning behind this, as shared by Sharples on the conference call, is that over the past several years HomeAway has particularly focused on investing in the development of its vacation rental formula and technology. "With much of that work behind us," said Sharples, "we're now planning to invest a good portion of that operating leverage in integrated marketing." 

Dima -- who officially comes on board as chief marketing officer in  September -- will help develop an integrated marketing strategy aimed to expand HomeAway's brand equity, improve customer conversion, and increase customer traffic in a profitable manner. Sharples believes that this marketing campaign can occur without denting HomeAway's margins in a significant way, although he did warn that the company may see some margin compression in the second part of 2014 and 2015.

The key question for investors is whether these ramped up marketing initiatives will lead to strong top-line and bottom-line growth. Remember that Sharples has been with HomeAway as co-founder and CEO since 2004. Carl Shepherd, HomeAway's second co-founder, also remains with the company as chief strategy & development officer. These two have been with HomeAway for the long haul since the company's inception, and I don't anticipate that changing anytime soon. There is a long-term vision and strategy at work here.

Foolish final thoughts 
HomeAway's mission, in the words of Sharples, is "to make booking a vacation rental as easy as booking a hotel." There is no question that the business itself continues to expand in the areas that count, including listings and revenue per subscription. HomeAway carries a total of $792.5 million in cash and short-term investments, well offsetting the $307.4 million of debt on the company's books, providing ample fuel for the company to continue its expansion strategy in the coming years.

HomeAway has built an effective platform, now with over 1 million total listings, that appears poised to expand even further thanks to a coordinated marketing effort set to take off in the remaining months of 2014. Investors will want to watch closely to be sure that these marketing efforts are indeed paying off with higher sales growth, listings, and revenue per subscription in the coming years.

Based on the stock's nearly 9% jump following earnings, the market certainly liked what it saw this quarter. While the stock looks somewhat pricey trading at a price/sales ratio around 8, should the company's marketing strategy succeed HomeAway will likely be able to deliver market-beating returns to investors over the next three to five years.

More from The Motley Fool: Warren Buffett Tells You How to Turn $40 into $10 Million

Can Amazon, Microsoft, Google Profit From $100B Cloud Market?

Just because a market is enormous, it doesn't mean it's profitable. In the short run investors may be excited by top line growth — but at some point, if it doesn't produce profit, they get impatient. And Amazon's latest quarterly results are a case in point.

What those results reveal is that cloud services — the business of renting data storage and computing power to other companies – looks like a cloud that's poised to burst — spilling red ink into investors' portfolios.

Before getting into this unpleasant future, let's look at those Amazon results. On July 25, Amazon shares fell 11% after it missed expectations — reporting a $126 million loss that was more than twice what analysts had predicted. While its sales soared 23% to $19.3 billion its expenses were up more — 24% to $19.4 billion.

English: Cloud Computing (Photo credit: Wikipedia)

Amazon cut prices for its Amazon Web Services unit in 2014. In a conference call, Amazon CFO Tom Szkutak said, "We had very substantial price reductions." Unfortunately. Amazon does not disclose its AWS revenues — but analysts "generally expect the business to generate between $5 billion and $6 billion in annual revenue by next year," according to the Wall Street Journal.

This brings to mind an idea that HBS strategy guru, Michael Porter, introduced in his 1980 book, Competitive Strategy — the five forces that shape an industry's profit potential. As I observed when working for Porter, those forces — rivalry among existing competitors, threat of new entrants, bargaining power of buyers and suppliers, and the threat of substitutes — can turn an industry that looks attractive on the surface into a minefield of profitless prosperity.

An example of this is the personal computer industry in the 1990s. This was a large and rapidly growing industry that reserved most of the profits for suppliers — like Microsoft Microsoft and Intel Intel which teamed up to gain a near monopoly position in supplying PC brains.

Companies that made PCs competed fiercely on price and the buyers — consisting largely of big companies — used their enormous bargaining power to put downward pressure on prices. Moreover, the barriers to entry into the industry were low so startups got into the business and cut prices to take market share.

Similar forces are at work in the $100 billion cloud computing industry. IDC predicted 25% growth in 2014 which makes the industry sound superficially attractive — after all it's big and growing fast. But there is significant rivalry from Microsoft's Azure and Google's Google's web services.

Moreover, new entrants — deep-pocketed and startups — are coming into the market. New corporate rivals include Verizon Communications Verizon Communications, Cisco Systems Cisco Systems IBM, and VMware. And startups Digital Ocean, Joyent and Contegix are focusing on niches through innovation, according to the Journal.

Amazon has been slashing prices — between 28% and 51%, reported the Journal. Google's Compute Engine service cut its prices — slashing by 60% per Gigabyte the price of Persistent Disk according to Cloud Times. And the Journal suggests that lower prices are cutting into AWS's margins that were believed to be higher than those in Amazon's core business of e-commerce.

And that's because Amazon enjoyed a huge market share lead that is probably eroding. In 2003, Evercore estimated that Amazon controlled 37% of the $9 billion infrastructure as a service market — way ahead of Microsoft (11%), Google (10%), and Rackspace (4%).

But in 2014, Microsoft has been catching up fast. According to Gartner, Microsoft is giving market leader AWS "a run for its money. Microsoft's vision of infrastructure and services platform allows customers to offer not only standalone offerings, but also to extend and interact seamlessly with Microsoft infrastructure and on-site applications."

Companies can play these rivals against each other to put downward pressure on prices. And given the risks of outsourcing their operations to a company that might be subject to security breaches or service interruptions, companies are likely to remain skittish about the cloud.

Finally, the investment required by cloud services providers to keep up with rapid growth and changing technologies is likely to yield a squeeze on costs even as new entrants jump in and cut price to grab new customers.

Rackspace is the only pure play in this industry and its financial picture is not pretty. In the last 12 months its revenues rose 17% but its net income fell about the same percent and its net margin is a skimpy 5%.

Should ARM Thank Apple Inc. For This Earnings Pop?

Apple's 64-bit A7 chip. Source: Apple.

Positioned at the heart of the mobile revolution, ARM Holdings (NASDAQ: ARMH  ) has a unique perspective on where computing is headed. The British company just reported a strong second quarter and shares are enjoying healthy gains today. It's possible that Apple (NASDAQ: AAPL  ) had a little something to do with driving ARM's quarter.

Let's dig in.

Starting at the top
Revenue came in at $309.6 million, a 17% jump from a year ago. Importantly, materially all of that growth came from licensing revenue. Total royalty revenue was essentially flat at $135.5 million. Within that total, royalties on shipped processors was up a modest 2% year over year, echoing some of the smartphone deceleration that investors have seen from major players such as Samsung and Apple.

Revenue

Q2 2013

Q2 2014

Total licensing	$102.6 million	$146.1 million
Total royalty	$135.3 million	$135.5 million
Software, tools, and services	$26.4 million	$28 million
Total revenue	$264.3 million	$309.6 million

Source: ARM.

Inking new licenses is key to ARM's future success, as it builds a pipeline and backlog of royalty streams that pay off for years. ARM scored 41 new processor licenses during the quarter, bringing its cumulative total to over 1,100.

Let's talk royalties
Royalty-bearing chips shipped during the quarter rose 11% to 2.7 billion. Mobile and embedded continue to be the dominant market segments in which ARM chips are being used. Average royalty per chip fell to $0.046.

Royalty revenue was stagnant for several reasons. Not only did seasonal trends related to broader consumer trends (80% of ARM's royalty value comes from consumer markets) affect growth, but China's broader transition from 3G to 4G also adversely impacted results. Wireless carriers are working to clear out existing inventory of 3G handsets in preparation for inventory buildup of 4G devices. That means OEMs are holding off on using the latest chips (which earn higher royalty rates) for the sake of their own inventory management.

Let's talk licensing (and Apple)
ARM signed seven new ARMv8 licenses during the quarter, bringing its year-to-date total to 13. This is the important part and where Apple comes into the equation. ARMv8 represents the transition to 64-bit chip architecture that is just now beginning. That's the same transition that Apple officially kicked off in the mobile space last year with the iPhone 5s and its A7 processor.

The shift to 64-bit has been years in the making. ARM began licensing ARMv8 back in 2009, but it takes years to develop chips and bring them to market.

Source: ARM.

ARMv8 licensing activity has dramatically accelerated over the past 18 months, and the company now has 50 total licenses. Apple took the industry off guard when it announced A7 last year, and competitors have scrambled to catch up in the 64-bit race. In December, a Qualcomm (NASDAQ: QCOM  ) employee conceded that the A7 "hit us in the gut" and that the company was "stunned" and "unprepared."

Samsung quickly confirmed that it would release a 64-bit chip in 2014, and Qualcomm has also been filling out its 64-bit lineup. While Qualcomm likes to tout its high-performance custom cores, its 64-bit offerings all use standard ARM cores. Custom cores take longer to develop, and this was likely a shortcut to accelerate the timeline. The important thing to note here is that Qualcomm obviously feels rushed and wants to catch up posthaste.

While neither Qualcomm nor Samsung would be included in this quarter's list of new ARMv8 licensees, the broader theme is that Apple has catalyzed 64-bit adoption in a big way and is accelerating the transition through competition, which is leading to more licensing activity for ARM.

It's the time of the season
As investors head into the tail end of 2014, ARM should see seasonal upside in its consumer end markets. That will include the iPhone 6 launch and its expected A8 processor, along with many other mobile devices. ARM expects full-year revenue to be "in line with market expectations," which is approximately $1.3 billion. Trading at 16 times sales, ARM is rather pricey. But it could be worth it.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Here's How Social Media Companies Make Money

So far in 2014, we've seen Facebook stock (Nasdaq: FB) continue its dramatic share price rebound, Twitter stock (NYSE: TWTR) plunge more than 40%, and two new social media IPOs debut - GrubHub (NYSE: GRUB) and Weibo (Nasdaq ADR: WB) - but have you ever wondered, how do social media companies make money?

We asked Money Morning E-Commerce Director Bret Holmes to give us the scoop. Part of Holmes' job is to utilize web advertising via social media platforms to best market Money Morning. As a result, he's on top of what's going on inside of today's social media giants.

Holmes said the key to unlocking value for social media companies is successful advertising models.

"Social media companies are legitimate advertising websites, no different than, say, Google or Yahoo. The same way Google made its money is the same way Twitter and Facebook will make their money," Holmes explained.

And web advertising via social media is a market that's growing at a staggering rate.

A 2013 Nielsen report showed that 89% of advertisers use free social media advertising and 75% use paid social media advertising. The report also highlighted that 64% of advertisers expected they'd increase their paid social media advertising budgets over the course of 2013. On May 12, BIA/Kelsey released its U.S. Social Local Media report. The research firm projected that total U.S. social media advertising revenue will grow from $5.1 billion in 2013 to $15 billion in 2018, for a compound annual growth rate (CAGR) of 24%.

That means a lot of opportunity for social media companies to make major money.

The trick for social media companies looking to profit as ad platforms is to find the best way to insert advertising into the user's experience without impacting the user in a negative way.

And that advertising methodology is hugely important to these companies' revenue growth.

The same BIA/Kelseyreport in May revealed that the greatest year-over-year jump in social media ad revenue ever has been seen this year. It's grown from $5.1 billion in 2013 to $8.4 billion, which the firm largely attributes to a surge in both native and mobile advertising. It estimates that social mobile revenue alone is projected at 38.3% CAGR.

Exemplary of the profitability of this kind of social media advertising growth is Facebook. In late April, Facebook announced that its mobile ads accounted for 59% of its second quarter ad revenue, up from approximately 30% of ad revenue in the first quarter of 2013. Mobile ad revenue alone came in at a mammoth $2.265 billion for the quarter.

This kind of advertising success is tied directly into a social media company's bottom line - and its profitability for investors.

To learn how to gauge which companies will succeed, here's how social media advertising actually works...

How Social Media Companies Make Money: A Lesson from Facebook

We'll use Facebook as an example.

The Facebook IPO was an unmitigated disaster. It lost over half of its value within six months of listing, and was priced at 107 times trailing 12-month earnings, making it pricier than 99% of all companies in the S&P 500 at the time.

But boy did it rebound.

From July through September 2013, the Facebook stock price more than doubled. Shares are up more than 150% over the past 12 months, and 15% so far in 2014. As of July 8, FB stock traded at $62.60 - putting it $24.60 over its IPO price of $38.

It was advertising that undoubtedly turned the tides for Facebook.

"Facebook has gotten really good at advertising. It's new, it's inexpensive, and it's smartly done," Holmes said. "When Google first started, it wasn't good at advertising, and look at them now. Facebook is going to be a success story."

Here is what Facebook did to unlock its value and become what Holmes described as "the most advantageously competitive product on the market for advertisers, hands down"...

Originally, Facebook started with space ads. Then, it added self-promoting individuals' or a company's Facebook page. But things were still sluggish.

However, around the start of 2013, Facebook developed a new advertising format. They're technically referred to as native social ads - ads that are seamlessly integrated into the social media's platform. BIA/Kelsey projects social media native revenue as the fastest-growing social media advertising method at a 38.6% CAGR by 2018.

"Facebook has integrated in-stream ads to the user experience. Response rates are high and advertisers will always chase the least expensive ad with the best response. It works because it's new and cheap," said Holmes.

In-stream ads can be videos. For instance, a commercial will appear before the user may watch an Internet video. The in-stream video ad will typically last 15-30 seconds.

On a social media site like Facebook, which has real-time update feeds, in-stream ads can be inserted into a streaming feed. So, for example, the user scrolls through the News Feed to see what friends and family are up to, and in-stream ads are peppered into the Feed.

By far the largest social network, FB's Q2 2014 ad revenue reached $2.27 billion - an 82% increase from the same quarter last year. Revenue for the full year 2013 was $7.87 billion, a 55% gain year over year.

"For the first time in 2013, Facebook let advertisers access FBX, an ad exchange where you can customize your own ads," explained Holmes. "Now we can glean information and better target our audience. We can also advertise on mobile now."

The ad model is helping Facebook monetize its massive 1.28 billion monthly active users who increasingly access the site via mobile devices. Facebook revealed it has more than 1 million advertisers in total as of the start of 2014.

And to top it all off, Facebook continuously improves its method to provide performance-based analytics that are invaluable to advertisers.

Watching Facebook's advertising Cinderella story shows us a great deal about how advertising makes money for social media companies.

One company that hasn't yet found a way to make money on its user base is Twitter - but it's working on it.

In a troubling Q1 2014 earnings report, Twitter revealed that monthly active users (MAUs) were lackluster, with only a 6% gain since last quarter. And the previous quarter saw only a 3% growth in MAUs. The report also showed that TWTR's net loss grew by more than $100 million. Twitter stock fell more than 8% that day, and it's down nearly 17% since its Nov. 8 initial public offering (IPO).

In an effort to improve its numbers, Twitter is in the process of rolling out 15 types of new ads aimed at e-commerce companies and mobile game developers, according to The Wall Street Journal.

But the key here is the addition of a mobile-app install unit. That means an ad for a game, for example, includes a button that takes users directly to an app store where they can buy it.
Facebook has included this tool since late 2012 - and in its most recent quarter, mobile in-app install units represented half of the company's revenue.

Another way Twitter has been trying to boost ad revenue is through e-commerce. In early May, it built in a way to send impulse-buy ads to people based on what they are tweeting about. In doing so, TWTR partnered with Amazon.com Inc. (Nasdaq: AMZN) to let users type #AmazonCart to respond to tweets that include an Amazon link - and put the item directly in their cart.

If Twitter is able to increase its user base and find successful ways to monetize it via ads, the stock could pull a Facebook-like turnaround.

For more on what Twitter has recently done to turn itself around, read here about its latest major management shake up...

Related Articles:

Nielsen: Paid Social Media Advertising - Industry Update and Best Practices 2013 BIA/Kelsey: Press Release: U.S. Social Media Advertising Revenues to Reach $15B by 2018 The Wall Street Journal: Coming to Your Twitter Feed: 15 New Types of Ads

SanDisk Corporation (SNDK) Earnings Report: What to Expect? WDC & STX

The Q2 2014 earnings report for storage solutions stock SanDisk Corporation (NASDAQ: SNDK), a peer or competitor of Western Digital Corp (NASDAQ: WDC) and Seagate Technology PLC (NASDAQ: STX), is scheduled for after the market closes on Wednesday. Aside from the SanDisk Corporation earnings report, it should be said that the Western Digital Corp Q4 2014 earnings report is scheduled for July 30th while the Seagate Technology PLC Q4 2014 earnings report is scheduled for after the market closes on Thursday. However, SanDisk Corporation has been getting some bullish attention from analysts lately plus the company has recently announced a new acquisition.  

What Should You Watch Out for With the SanDisk Corporation Earnings Report?

First, here is a quick recap of SanDisk Corporation's recent earnings history from Yahoo! Finance:

Earnings HistoryJun 13Sep 13Dec 13Mar 14

EPS Est	0.93	1.32	1.58	1.26
EPS Actual	1.21	1.59	1.71	1.44
Difference	0.28	0.27	0.13	0.18
Surprise %	30.10%	20.50%	8.20%	14.30%

 

Back in mid April, SanDisk Corporation reported a 13% first quarter revenue increase and a 12% sequential decrease to $1.51 billion. On a GAAPbasis, first quarter net income was $269 million, or $1.14 per diluted share, compared to net income of $166 million, or $0.68 per diluted share, in the first quarter of fiscal 2013 and $338 million, or $1.45 per diluted share, in the fourth quarter of fiscal 2013. The CEO commented:

"We delivered record first quarter results, driven by 61 percent growth in our SSD revenue and strong retail performance. We are excited by the momentum we are building in our business as we continue to execute on our growth initiatives."

This time around and according to the Yahoo! Finance analyst estimates page, the consensus expects revenue of $1.60 billion and EPS of $1.39 - slightly higher than EPS of $1.38 expected sixty days ago and EPS of $1.34 expected ninety days ago.

On the news front and just today, Stifel raised its price target on SanDisk Corporation as they expect the company's June quarter results to beat consensus estimates and they predict that guidance for its September quarter may also beat expectations. Stifel believes that demand is shifting towards SanDisk Corporation's high valued products and it keeps a Buy rating on shares.

At the end of June, Pacific Crest Securities' analyst Monika Garg also raised her price target, as well as her 2015 sales and EPS estimates for SanDisk Corporation. She commented that a tight environment for NAND flash logic gates in 2015, due to limited 3D NAND supply, is also expected to aid the company's profit margins.

However, the big news came in mid-June when SanDisk Corporation announced a definitive agreement to acquire Fusion-IO, Inc (NYSE: FIO), a leading developer of flash-based PCIe hardware and software solutions that enhance application performance in enterprise and hyperscale datacenters, in an all-cash transaction valued at approximately $1.1 billion, net of cash assumed.

What do the SanDisk Corporation Charts Say?

The latest technical chart for SanDisk Corporation shows that shares have trended strongly upward since about February:

A long term performance chart shows that SanDisk Corporation's performance was flat for a couple of years up until 2013 while Western Digital Corp and Seagate Technology PLC have also been rising:

After taking a pause earlier this year, Western Digital Corp is trending higher while Seagate Technology PLC has given a more volatile performance:

What Should Be Your Next Move?

SanDisk Corporation is looking pretty good heading into earnings and there appears to be no black clouds on the immediate horizon. Hence, investors and traders alike might want to take a closer look at the stock before Wednesday. 

Apollo slammed on education department review

SAN FRANCISCO (MarketWatch) — Shares of Apollo Education Group fell sharply after the market close after the company disclosed the U.S. Education Dept. plans a review of federal financial aid programs at the company's University of Phoenix.

Shares of Apollo (APOL)  fell more than 5% in late trading. Apollo said the review will look at the financial aid for 2012-2014. The review was disclosed in a regulatory filing with the SEC.

For-profit education companies such as Apollo have come under increased scrutiny in recent years. Last week Corinthian Colleges (COCO)   said it will sell 85 campuses and wind down 12 other schools, in the wake of legal and financial troubles.

Banking stocks are also in focus as earnings season hits its stride.

J.P. Morgan Chase & Co. (JPM)   and Goldman Sachs Group (GS)  , both Dow components, are slated to report results Tuesday. Both stocks rose Monday after Citigroup (C)   reported its results Monday and said it had reached a $7 billion settlement over claims related to Residential Mortgage-Backed Securities. Why Cii's $7 billion mortgage settlement may help borrowers

Few major companies are reporting after Monday's bell. Results are expected from Destiny Media Technologies (DSNY)  , Stanley Furniture Co. (STLY)   and Peregrine Pharmaceuticals. (PPHM)  .

Stocks: 5 things to know before the open

Click on chart for more premarket data. LONDON (CNNMoney) There's only one game in town Wednesday (apart from the Brazil blame game) and that's the latest insight into Federal Reserve thinking on interest rates.

Here are the five things you need to know before the opening bell rings in New York:

1. Fed minutes: The Federal Reserve will post minutes from its two-day June meeting at 2 p.m. ET.

"That's the main issue that's going on," said Tom Beevers, chief executive officer of Stockviews.com. "The market expectations of when a rate rise is going to occur have been pulled forward. I think the minutes will be examined for any kind of hawkish tone."

Expectations among some investors that the minutes could reveal a slight bias towards raising interest rates sooner rather than later may have contributed to Tuesday's market slide.

"Bottom line is that a set of minutes that bore will likely boost equity prices," noted Steven Englander, a foreign exchange strategist at Citi.

2. Next big banking fine: Citigroup (C) is reported to be close to agreeing to pay $7 billion to settle a U.S. government investigation into the sale of mortgage backed securities. The deal would include billions in help for borrowers, according to the reports.

3. Market recap: U.S. stocks closed lower Tuesday as tech stocks took a beating. The S&P 500 fell 0.7% and the Nasdaq sunk 1.35%. The Dow Jones Industrial Average lost 118 points. There was a lot of excitement about the index cresting over 17,000 last week, but it finished the day a notch above 16,900.

4. Stock market movers -- Alcoa: Shares in Alcoa (AA) rose by 2% premarket after kicking off earnings season by beating analyst estimates. Otherwise, activity was thin, with U.S. stock futures flat.

"Alcoa kicked off earnings and there was quite a positive reaction to the result," said Beevers, referring to an earlier uptick in futures. "I think that's generated a little bit of optimism in the market, that earnings got off to a good start."

Shares in Gigamon (GIMO) were down more than 2% before the open, after plunging a whopping 33% on Tuesday. The technology company had lowered its revenue guidance for the second quarter.

5. International markets overview: European ma! rkets began the day lower after Wall Street's weak close. Asian markets lost ground as subdued China inflation data provided more evidence that the economy is struggling to pick up pace after a below-target performance in the first quarter.

Could Apple, Inc.'s iWatch Look Like This?

Until recently, it was widely believed that Apple's (NASDAQ: AAPL  ) alleged iWatch would sport a watch-like display of 1.3 to 1.7 inches. That's why it was a bit surprising when Reuters reported last month that the iWatch display would measure 2.5 inches diagonally, with a "slightly rectangular" touch face to the device.

Given Reuters' credibility as a source of rumors and the fact that it said its sources were familiar with the matter, the report was enough merit for a new mockup.

Enter SET Solution's idea of what the iWatch may look like, and how it may work.

Apple's approach to smartwatch design would defy the current approach of going for a more watch-like look. Consider Motorola's Google Android-powered Moto 360:

Moto 360. Image source: Motorola.

The Samsung Gear line also has a smaller display, measuring 1.63 inches

Samsung Gear 2. Image source: Samsung.

Other recent iWatch news
Further, another new report about Apple's iWatch suggests the company may emphasize voice messages with the device.

UBS analyst Steven Milunovich (via Fortune) says that in a recent meeting with Apple's Tim Cook, the CEO emphasized the popularity of voice messaging over text messaging in China. Milunovich concluded that voice messaging could make sense in the iWatch.

QUOTE: When we visited with Tim Cook, he said that walking down streets in China one sees people speaking into their phones sending voice rather than text messages. Porting this capability to the watch makes sense as it is easier to send a voice message from a device already on the wrist than pulling out a phone. It also could aid penetration of China, which Cook said has a ways to go.

Apple is debuting voice messages to iMessage in iOS 8. Image source: Apple.

Pairing a bold move to shift messaging interest toward voice, and encouraging greater interest in wellness with built-in health sensors, Milunovich has great confidence in the device, projecting 21 million units in fiscal 2015 and 36 million in fiscal 2016. Adding perspective, Apple sold about 160 million iPhones and 71 million iPads in the past twelve months.

The iWatch is expected this fall. As the rumored launch timing approaches, investors will likely get an increasingly better idea of how Apple plans to differentiate the device in the market.

While it may be difficult at this point to project exactly how well Apple's iWatch will fair with consumers, it would be wise for investors to at least expect some meaningful upside from Apple's top and bottom line in the coming years, given Apple's past success at entering new categories. Consider, for instance, Morgan Stanley analyst Katy Huberty's projections. She believes the iWatch could boost revenue by as much as 10% in the first year of the device's sales.

The stock that may win big thanks to Apple's alleged iWatch
With the iWatch, Apple may spark a revolution. ABI Research predicts 485 million iWatch-like devices will be sold per year by 2018. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, just click here!

HPQ vs. IBM: Who Will Win This Clash of the Tech Titans?

Today I'm refereeing a boxing match between two of the biggest tech legends around: International Business Machines Corp. (NYSE: IBM) and Hewlett Packard Co. (NYSE: HPQ).

I'm calling it the Clash of the Tech Titans.

The prize? A big slug of profits for your investment portfolio...

Both of these fighters are big - we're talking market caps in the tens of billions - but these longtime blue chips are more black and blue right now... and are working through major corporate turnarounds. (In fact, both installed new chief executive officers less than three years ago.) They're both trying to raise revenue and income in order to send their stock prices higher.

Now, neither of these heavyweights is a bad investment - both are solid companies, in it for the long haul.

But one of these pugs just might be a stud - more of an inside fighter - that you should add to your portfolio now.

Today, if you agree with my decision and make that investment, you'll soon be watching your wealth grow fast...

The Tale of the Tape

In this corner, "Big Blue" traces its New York roots back more than 100 years. It literally pioneered the dawn of the computer age.

International Business Machines Corp. (NYSE: IBM) weighs in with a market cap of $186.13 billion, 2013 revenue of $99.8 billion, and net income of $18 billion. It's got a price/earnings (P/E) ratio of 12.64 and a 2.38% dividend yield.

And in the other corner, the "Puncher from Palo Alto" was one of the very first firms to set up shop in what became known as Silicon Valley. Founded in 1939 by two graduates of Stanford University, the founding partners started up the company in the proverbial one-car garage.

Weighing in with a market cap of $63.63 billion, Hewlett Packard Co. (NYSE: HPQ) reported $112.25 billion in 2013 revenue and a net income of $5.11 billion. Its P/E ratio is at 11.97, and its dividend yield stands at 1.88%.

However, appearances can be deceiving. Those sound like great numbers, but both of these fighters are in turnarounds.

Both have seen declining revenue, income, and stock price over the past few years, and I know that neither of these new CEOs is happy with her stock price.

And that's why I'm refereeing this match. I've been a turnaround investor for almost as long as I've been around the high-tech world.

No doubt, turnarounds are one of my "special situations" that can hand investors huge profits... if you know what to look for.

Let's ring the bell...

The Favorite: IBM

IBM comes into this fight as the favorite. Besides its overall heft and gaudy numbers, it's getting the best press right now.

In fact, if you read mainstream media accounts about IBM back in January, you might have been impressed enough to invest.

The company said it was starting a new business unit focused on its Watson supercomputing system and Big Data - technologies that find profitable patterns out of mountains of unstructured data. Watson, of course, is the computer that became famous in 2011 when it defeated two human contestants on the popular TV game show "Jeopardy!"

With its Watson subunit, IBM will crunch billions of units of data for corporate clients and to support research and development in pharmaceuticals, biotechnology, and publishing. For example, Watson could look at millions of consumer bills and find ways to improve efficiencies, or it could sift through billions of online transactions looking for fraud.

It's already helping the New York Genome Center map the genomic mutations of brain cancer.

CEO Virginia "Ginni" Rometty, who took over in early 2012, says she's investing $1 billion in the Watson unit, and she thinks it could generate $10 billion in annual sales within a decade.

Big Blue also said it was launching a new $100 million venture-capital fund to spur developers to write more apps for Watson.

The researchers at IDC forecast the Big Data market will hit $16.1 billion by the end of this year. IDC says the sector is growing six times faster than the overall market for information technology services.

IBM has also made major moves into cloud computing, the rapidly growing tech market in which customers pay vendors to host data and applications at remote computer centers they can access via the web. This year, IBM is spending $1.2 billion on cloud data centers, and the sector produced $4.4 billion in revenue in 2013 - and Rometty expects that number to grow to $7 billion in 2015.

On the surface, it sounded exciting: a company synonymous with power computing taking steps to cash in on the cloud and Big Data. However, while IBM's newfound prowess in the cloud and Big Data is impressive, I don't believe they make up for weaknesses in other areas.

IBM is no palooka, but Rometty faces some major short-run challenges that you need to understand.

First of all, sales are sketchy at best these days. In this year's first quarter, sales shrank 4% to $22.5 billion. Alone, that's not a big deal. But just as technologists do with Big Data, let's crunch some numbers and see if there's a deeper pattern at play.

Turns out, that marked the eighth straight quarter in which IBM's sales either broke even or declined from the year-ago period. That's a poor record, extending two full years.

Profits also need to improve. IBM's net income fell 21% from the year-ago quarter to $2.38 billion. And profit margins also fell by nearly 20%, declining from a 13% margin a year ago to the current 10.6%.

To aid the restructuring, Rometty recently sold IBM's low-end server business to Lenovo Group Ltd. (OTCMKTS ADR: LNVGY) for $2.3 billion. That's a move I applauded at the time as great for both firms.

But IBM can't escape the fact that nearly every part of its business has disappointed so far this year, causing some wags to dub it "Big Black and Blue."

I, on the other hand, think IBM is still a good stock for the long haul. It can play the rope-a-dope for a while and land its haymaker a few years down the line.

But the question for investors now is which fighter is the better bet over the next couple of years: Big Blue or the Puncher from Palo Alto?

The Contender: HPQ

Again, if you just looked at recent headlines, you'd think there are more dark days ahead for Hewlett-Packard. It recently said it plans to lay off up to 16,000 workers.

That brings the total number of jobs cut to roughly 50,000 as part of its five-year restructuring plan. Yes, that sounds pitiful - like a series of jabs that lead nowhere - but let's put that in context.

When Meg Whitman joined the company as CEO in late 2011, HP was a train wreck. In just six years, it had gone through five chief executives, three of whom were fired.

Sales of PCs and printers were plummeting. The HPQ stock price had fallen from near $55 in early 2010 to the mid-$20s.

And just one year into the job, Whitman faced an accounting scandal over HP's purchase of Autonomy, a British software firm. Though a predecessor led the merger, Whitman was the one who had to tell shareholders HP was writing off some $8.6 billion because of the deal.

By early last year, HPQ stock dipped almost all the way to $10.

For Whitman and HP, that was a major setback, but hardly a knockout punch. In this year's first fiscal quarter ended April 30, sales were nearly breakeven from the year-ago period at $27.3 billion.

But profits were up sharply. They rose roughly 18% from the year-ago fiscal quarter to nearly $1.3 billion.

The quarterly results show the overhaul plan is working so far: Restructuring charges fell 62% to $252 million.

Like IBM, HP is moving away from its dependency on hardware and is focusing more on cloud computing.

Whitman recently announced the firm will invest roughly $1 billion in that growth field. And in mid-June, HP announced it will align with industry leader Workday Inc. (NYSE: WDAY) to deliver human resources apps via the cloud.

Moreover, there's still life in those personal computers - still HP's largest business segment, with $32.07 billion in 2013 revenue. Earlier this year, HP reported an 8% rise in commercial PC revenue, making a 3% drop in consumer personal computers sting a little less.

And I just got word of HP's ProLiant DL580 Gen8 server. According to early reviews, it should clean IBM servers' clock.

In other words, HP may be making big moves into the cloud, but its iron still packs a big punch.

The Decision

It's been a long fight, going 10 rounds, with no knockouts. But HP knocked IBM down a few times and kept Big Black and Blue on the ropes for the last couple of rounds of this Clash of the Tech Titans.

And the judges - market investors - agree. It's a unanimous decision: HP has a lot more momentum than does IBM... and the stock performance shows it.

Trading at $180, over the past two years, IBM's stock has fallen nearly 6%, compared with gains for the Standard & Poor's 500 Index of more than 48%.

By contrast, HPQ trades at nearly $34. And over the last two years, the stock is up more than 73%, beating the broad market by roughly 50%.

And I think HP has a greater chance of outperforming the market over the next two years. It's going in with a solid combination of power punches.

Look at it this way. If IBM just gets back to its five-year closing high of $214.92, set on March 11, 2013, we'd be looking at an upside of about 19%.

But if HPQ just gets back to its five-year closing high of $53.87, reached April 5, 2010, we'd be talking about a gain of 59%.

Thus, as special situations go, Hewlett-Packard seems to be the clear winner over the next two to three years. In fact, HP looks like it will be the best-performing legacy tech stock over the next year.

When it comes to profits for stockholders, Hewlett-Packard is proving itself to be the Comeback Kid.

By the way, the winner of my Clash of the Tech Titans isn't the only investment that I'm watching closely right now.

I've got my eye on a technology that is producing products that are nothing less than miraculous.

I'm referring to 'LifeChips.'

This sector is growing faster than any technology trend in history. One research firm projects the market to surge 29,000% in the next three years.

LifeChips and related technologies are creating entire new industries overnight, and in a wide range of applications. Medicine, health and fitness, entertainment, military operations, industrial manufacturing...

All told, we're looking at an eye-popping $50 billion in new wealth.

And I want to make sure you get a chance to get a piece of it.

I've put together an amazing way for you to learn everything about it. Take a look here and you'll see what I mean.

A Look at Coke and Pepsi: Which Has the Safer Dividend?

The Coca-Cola Company (NYSE: KO  ) and PepsiCo (NYSE: PEP  )  need no introduction. Both companies have been around since the late 1800's and have been rewarding their shareholders with dividends and buybacks. But which company offers the safest rewards or the biggest dividend increases to shareholders?

Coke currently has a market capitalization and dividend yield of $185 billion and 2.9%, respectively. Pepsi's market capitalization and dividend yield are $135 billion and 2.9%, respectively. These yields appear quite attractive given the current low yields on US treasury securities. Over the six-year period from 2007-2013, Coke and Pepsi have grown their dividends by compound annual growth rates of 8.67% and 8.07%, respectively. This period encompasses the lead-up to the financial crisis and the most current year-end. Both companies have shown that they can weather the storm of economic uncertainty and still increase their dividends. In fact Coke has increased its dividend for 50 years straight, while Pepsi has done so for 42 years. 

When evaluating dividend safety, it helps to be in a stable industry that does not solely rely on the ebbs and flows of economic growth. This is not to say that economic growth does not impact these companies--it does. Basically, people are always going to drink the products that Coke and Pepsi offer consumers, but their sales will not vary as much with economic growth. Investors can quantify dividend safety by looking at the payout ratio, free-cash-flow generation, and coverage ratios.  Stock repurchases are another way to reward shareholders, and investors can evaluate them with coverage ratios as well.

Breakdown of the stats

Coke	2007	2008	2009	2010	2011	2012	2013
FCF	$5.5 billion	$5.6 billion	$6.2 billion	$7.3 billion	$6.6 billion	$7.9 billion	$8 billion
Payout ratio	52%	60%	55%	34%	50%	51%	58%
FCF coverage	1.1 times	1.22 times	1.16 times	1.04 times	0.74 times	0.86 times	0.82 times

Pepsi	2007	2008	2009	2010	2011	2012	2013
FCF	$4.5 billion	$4.6 billion	$4.7 billion	$5.2 billion	$5.6 billion	$5.8 billion	$6.9 billion
Payout ratio	39%	49%	46%	47%	49%	53%	51%
FCF coverage	0.7 times	0.63 times	1.71 times	0.65 times	1.0 times	0.88 times	1.07 times

Free cash flow, or FCF, is the cash generated by business operations after investments in capital expenditures. It represents cash available to shareholders that the company can return in the forms of dividends and stock buybacks. Coke and Pepsi have grown their free cash flows at compound annual growth rates of 6.44% and 7.38%, respectively. Pepsi has been increasing its dividend more rapidly than Coke and pays out a lower percentage of dividends from earnings than Coke, which implies that it may have room to increase its payout ratio.

The payout ratio looks at dividends paid as a percentage of net income, but the FCF coverage ratio looks at dividends and stock buybacks as a percentage of FCF. An FCF coverage ratio above one implies that the respective company is earning enough cash after capital expenditures to cover its current dividend and buyback program. A ratio of less than one over a multi-year period implies that the company is likely to reduce its dividend or more than likely its buyback program.

Coke's coverage has been hovering below one for the past three years. This can be traced back to its decision to continually increase its stock buyback program which has matched its dividend payments on a dollar basis. With Coke's ratio of less than one, we should not be surprised if it reduces its buyback program in the future. Investors can see Coke's dividend as safer than its buyback program because investors are generally more favorable toward dividends.

Investors can view stock buybacks as a vote of confidence from management that indicates it sees the stock as undervalued and a good investment. Pepsi, like Coke, conducts stock buybacks that closely match its dividend payments on a dollar basis. Pepsi's FCF coverage for the past three years has been higher than that of Coke, but not by much. Investors should be wary about whether Pepsi's buybacks will continue at the same clip.

Foolish takeaway
Investors who are looking for income in their portfolios would be wise to give Pepsi a closer look. Pepsi has a long history of dividend increases that are supported by healthy financials. Pepsi's steady FCF growth should help support its long-term dividend growth of 8.07%. Coke's higher payout ratio indicates that Pepsi has room to pay out more of its earnings to be in line with its peers. It's noteworthy that Pepsi's coverage ratio of below one probably signals that its buyback rate will not continue at its past levels, but its dividend increases seem sustainable. 

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Philips Spins Off Lighting Components Businesses

Jasper Juinen/Bloomberg via Getty Images Philips is to merge its lighting components businesses into a separate unit worth up to 2 billion euros ($2.7 billion), which may be listed -- a major step in its ongoing strategy to refocus on health care and high-end lighting systems. Under Chief Executive Officer Frans van Houghton, the Dutch company is reinventing itself after its TV, audio and video businesses struggled for years to compete with low-cost Asian rivals and prompted a spate of profit warnings at the firm. It has sold off its television business, cut more than 5,000 jobs and concentrated on growing its health care products. Now Philips, which started out 120 years ago as a pioneer in electric lighting, wants to narrow its focus in that area, too -- to large, complex lighting systems rather than LEDs, under pressure from a severe price war. The market for LEDs is booming as the world switches from incandescent light bulbs, now banned in most places, to more efficient and durable lights. But a price war for LED bulbs is hurting profits, leaving Philips and German rival Osram -- spun off from its parent company Siemens last July -- scrambling to develop new technology and seek out new market segments. By spinning off its Lumileds and its automotive lighting businesses, which had combined sales of 1.4 billion euros ($1.9 billion) last year, Philips said the unit would be better placed to compete for new business from outside customers who currently regard the Philips group as a competitor. It also said it would look for outside equity or debt investors into the new business to help it expand its capacity, with an initial public offering one of the options. "As a strong standalone company they will have increased flexibility to attract investments and customers to accelerate growth and to exploit scale," van Houten, who took the helm of the group in 2011, said in a telephone briefing. Analysts said it was a smart move that would make Philips a more manageable and profitable business. "It is definitely positive. It's a logical step in the strategy and will shore up their earnings quality," said Volker Stoll of Landesbank Baden-Wuerttemberg, adding that Philips appeared to be preparing the unit for an eventual sale. "The margins will get lifted and the return on capital expenditure will also increase," he said. "It's good news as this issues was looming for quite some time." New Frontier? Osram, which analysts say is weaker than Philips's new division in the field of LED lighting, has performed strongly since being spun off. Its shares have gained nearly 50 percent during a period when the German mid-cap index rose only 21 percent. Shares in Philips were up 3.2 percent shortly after the announcement. The company didn't give a valuation for the new business, but ING analyst Robin van de Broek estimated it could be worth about 2 billion euros. Osram trades at a multiple of 0.7 times price per share and Epistar, a Taiwanese rival which is more focused on LED manufacture, at 3.6 times price per share. The as yet unnamed new business will combine elements resembling each of the two companies. The spun-off lighting business will make components such as bulbs, auto headlights and high-powered LED lamps. It will count BMW, Volkswagen and the latter's Audi marque among its automotive clients. Some analysts say LED car headlights, with their promise of higher premiums for the manufacturer, better fuel efficiency and more natural illumination of the road, are the next frontier for LED lighting technology. Philips said the spin-off of the subsidiary, in which it could envisage holding a minority stake, should be completed by the first half of 2015, and cost Philips 30 million euros. Philips' remaining lighting unit -- which provides large lighting systems and services as well as light fittings and lamps for the professional and consumer markets -- will be a major customer of the separate company. The new business, which will be headed by Lumileds chief executive Pierre-Yves Lesaicherre, will also continue to collaborate with Philips lighting on research and development. -.

4 Stocks Breaking Out on Big Volume


DELAFIELD, Wis. (Stockpickr) -- Professional traders running mutual funds and hedge funds don't just look at a stock's price moves; they also track big changes in volume activity. Often when above-average volume moves into an equity, it precedes a large spike in volatility.

>>4 Huge Stocks on Traders' Radars

Major moves in volume can signal unusual activity, such as insider buying or selling -- or buying or selling by "superinvestors."

Unusual volume can also be a major signal that hedge funds and momentum traders are piling into a stock ahead of a catalyst. These types of traders like to get in well before a large spike, so it's always a smart move to monitor unusual volume. That said, remember to combine trend and price action with unusual volume. Put them all together to help you decipher the next big trend for any stock.

>>Book Double the Gains With These 5 Shareholder Yield Champs

With that in mind, let's take a look at several stocks rising on unusual volume recently.

Timken

Timken (TKR) engineers, manufactures and markets mechanical components, bearings, and engineered steel bars and tubes worldwide. This stock closed up 3.1% at $49.73 in Wednesday's trading session.

Wednesday's Volume: 2.49 million

Three-Month Average Volume: 1.10 million

Volume % Change: 271%

From a technical perspective, TKR ripped higher here right above some near-term support at $47.61 with above-average volume. This spike higher on Wednesday briefly pushed shares of TKR into breakout territory, since the stock flirted with its former 52-week high at $49.76. Shares of TKR tagged an intraday high of $49.83, before closing just below that level at $49.73. Market players should now look for a continuation move to the upside in the short-term if TKR manages to take out its new 52-week high at $49.83 with strong upside volume flows.

Traders should now look for long-biased trades in TKR as long as it's trending above Wednesday's low of $47.96 or above its 50-day at $46.25 and then once it sustains a move or close above $49.83 with volume that this near or above 1.10 million shares. If that move gets set off soon, then TKR will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $55 to $60.

Montage Technology Group

Montage Technology Group (MONT), through its subsidiaries, designs, develops and markets various analog and mixed-signal semiconductor solutions for the home entertainment and cloud computing markets. This stock closed up 2.2% at $21.36 in Wednesday's trading session.

Wednesday's Volume: 870,000

Three-Month Average Volume: 455,246

Volume % Change: 110%

From a technical perspective, MONT jumped higher here right above some near-term support levels at $20.50 to its 50-day moving average of $20.03 with above-average volume. This spike higher on Wednesday is starting to push shares of MONT within range of triggering a near-term breakout trade. That trade will hit if MONT manages to take out some key overhead resistance levels at $21.80 to $22.36 with high volume.

Traders should now look for long-biased trades in MONT as long as it's trending above its 50-day moving average at $20.03 or above more near-term support at $19.50 and then once it sustains a move or close above those breakout levels with volume that hits near or above 455,246 shares. If that breakout kicks off soon, then MONT will set up to re-test or possibly take out its next major overhead resistance levels at $23.50 to $24, or even $25.

LGI Homes

LGI Homes (LGIH) designs and constructs entry-level homes in Texas, Arizona, Florida, Georgia and New Mexico, the U.S. This stock closed up 3.7% at $19.40 in Wednesday's trading session.

Wednesday's Volume: 130,000

Three-Month Average Volume: 98,444

Volume % Change: 50%

From a technical perspective, LGIH ripped higher here right above some near-term support at $18 and broke out above some near-term overhead resistance levels at $19.23 to $19.30 with above-average volume. This spike higher on Wednesday is quickly pushing shares of LGIH within range of triggering an even bigger breakout trade. That trade will hit if LGIH manages to take out Wednesday's intraday high of $19.66 to its all-time high at $20.75 with high volume.

Traders should now look for long-biased trades in LGIH as long as it's trending above Wednesday's low of $18.60 or above $18 and then once it sustains a move or close above those breakout levels with volume that's near or above 98,444 shares. If that breakout gets started soon, then LGIH will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $25 to $30.

IXYS

IXYS (IXYS), an integrated semiconductor company, designs, develops, manufactures and markets power semiconductors, digital and analog integrated circuits, and systems and radio frequency power semiconductors worldwide. This stock closed up 3.5% at $12.76 in Wednesday's trading session.

Wednesday's Volume: 384,000

Three-Month Average Volume: 147,278

Volume % Change: 115%

From a technical perspective, IXYS jumped higher here right above some near-term support around $12 with above-average volume. This stock recently gapped up sharply from around $11 to close to $12.50 with monster upside volume. Following that move, shares of IXYS briefly pulled back off its high of $12.99 to just below $12 with strong downside volume. Shares of IXYS are now starting to rebound just above the intraday low of its gap-up-day zone and it's quickly moving within range of triggering a major breakout trade. That trade will hit if IXYS manages to take out Wednesday's intraday high of $12.82 to some more key overhead resistance at $12.99 with high volume.

Traders should now look for long-biased trades in IXYS as long as it's trending above its 200-day at $11.53 and then once it sustains a move or close above those breakout levels with volume that's near or above 147,278 shares. If that breakout gets underway soon, then IXYS will set up to re-test or possibly take out its next major overhead resistance levels at $14 to its 52-week high of $14.95.

To see more stocks rising on unusual volume, check out the Stocks Rising on Unusual Volume portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

RELATED LINKS:

>>5 Stocks Insiders Love Right Now

>>5 Foreign Stocks You Need to Sell This Summer

>>5 Stocks Set to Soar on Bullish Earnings

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including

CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

PIMCO Total Return Outflows Top $64B: Morningstar

Looks like PIMCO needs a goalie like Tim Howard of Team USA to save it from bad news.

Despite the rehiring of Paul McCulley, the bond shop continues to experience investment outflows, according to Morningstar. U.S. investors pulled some $4.5 billion out of the PIMCO Total Return Fund in June, the research firm estimates. That’s about 2% of its roughly $229 billion of assets in May, leaving it with some $225 billion.

There was a bit of good news: the PIMCO Total Return ETF (BOND) pulled in $33 million last month, giving it about $3.4 billion in assets.

“Things were getting less and less severe for a while, but the past two months were worse than expected,” said Michael Rawson, a fund analyst with Morningstar in Chicago, in an interview. “There’s no real negative news from PIMCO, and investors are buying funds in the [intermediate-bond] category. This has got to be a bit disconcerting for PIMCO.”

Indeed. This brings the tally of outflows to 14 months. (That's just one less than the number of goals blocked by Howard in the match against Belgium on Tuesday.) 

“Marginally, the outflows [are getting] worse, so this is a bit surprising – with the fund category getting better,” Rawson said. “Investors are less concerned with interest rates than last year, and I am surprised [with the recent outflows], given the recent hiring of McCulley. It’s surprising that the outflows haven’t stabilized a bit.”

Made in the Shade?

News of the outflows might not be a big shock to those following Morningstar’s major fund conference, which took place in June. PIMCO co-founder Bill Gross addressed the crowd, but in an unusual way, wearing sunglasses and proclaiming himself “one cool dude.” His remarks left many members of the audience somewhat confused.

This performance came about six months after the departure of then-PIMCO CEO Mohamed El-Erian and the frenzy it created as tensions between the two played out in the media.

These issues played a part in outflows at the time “with Mohamed leaving the firm and Goss making statements that gave the impression of poor communication and led some people to question leadership,” Rawson noted.

“But investors embraced them after the financial crisis,” the analysis said.

Given that U.S. outflows from the Total Return Fund have reached an estimated $64.1 billion, the atmosphere at the firm is likely to be grim.

“This must be causing tension in the firm as assets have shrunk a significant amount,” said Rawson. Bonuses paid to employees and management are tied to asset flows, “and those working in the industry are not used to losing assets.”

“There’s been a lot of shuffling of the ranks at PIMCO, and as assets shrink, the bonuses levels should be negatively impacted,” the analyst stressed.

("Patient investors are rewarded over the long term by sticking with core bond allocations in a diversified portfolio. The PIMCO Total Return fund has outperformed its benchmark and a majority of its peers over the last 1, 3, 5, 10 and 15 years," the company said in a statement given to Dow Jones.)

The situation at PIMCO stands in stark contrast to that of rival bond shop DoubleLine, led by Jeffrey Gundlach.

Morningstar’s estimates that the net inflows for the DoubleLine Total Return Fund in June were $515 million. Total assets in the fund at the end of June were $33 billion. 

“This is representative of the [medium-term] category overall,” Rawson said. Its popularity with investors has improved, since “the interest-rate environment is less dire than a year ago when they were concerned with a sharp rise in rates.”