Extreme bull: S&P 500 to top 2,000 by spring

The S&P 500 could hit 2,000 sometime within the next six months and tapering by the Federal Reserve might not begin until March.

Those are a few of the predictions by a team of portfolio managers at asset management firm Neuberger Berman, which held a media briefing Wednesday on the company's outlook for 2014. The general sentiment: Things are looking good — really good — for investors in the New Year. Here's a few conclusions from today's event:

Stay bullish on U.S. investments. Eli Salzmann, a portfolio manager for U.S. large cap value strategies, said the firm has been bullish since June 2012, and he doesn't expect the stance to change anytime soon. He is expecting “mini-hyper growth” at the start of 2014. “I think the first half of next year will surprise everyone on the upside,” he said. “We're not in the beginning of the game. We're in the sixth or seventh inning, but we're going to go higher.”

U.S. Citizens Renouncing Skyrocket---The Tina Turner Effect

America is a great land and lures immigrants worldwide, yet record numbers of U.S. citizens and permanent residents are giving up their citizenship or residency. For all the immigrant arrivals there's an increasing trickle the other direction too. And this year that trend is up by at least 33%  from the previous high in 2011.

The U.S. Treasury Department is obligated to publish the names each quarter. It is a kind of public outing that puts Americans on notice who relinquished their rights. For the 3rd quarter of 2013, 560 U.S. citizens renounced their citizenship or gave up long-term resident (green card) status.

Those seem like tiny numbers, yet the total thus far for 2013 is 2,369. See Number of Taxpayers Who Renounced U.S. Citizenship Skyrockets to All-Time Record High, quoting Andrew Mitchel. Under U.S. tax law, it is not relevant why someone expatriates. Whether the expatriation was motivated by tax avoidance or something else used to matter, but the law was changed in 2004.

Since then, the tax and other consequences do not depend on why one leaves. Yet after Facebook co-founder Eduardo Saverin departed permanently for Singapore with his Facebook IPO riches, there was an angry backlash. Mr. Saverin's post-Facebook fly-away prompted such outrage that Senators Chuck Schumer and Bob Casey introduced a bill to double the exit tax to 30% for anyone leaving the U.S. for tax reasons.

So far, that bill remains unpassed. Meantime, are people following Tina Turner's lead? No, and not Eduardo Saverin's either. Most expatriations are probably motivated primarily by factors such as family and convenience. Many people like Ms. Turner have built a life somewhere else and may not plan to need a U.S. passport.

Complex or costly taxes can help sway a decision but are often only one factor. Although statistics are not available for why people say a final good-bye, many now find America's global income tax compliance and disclosure laws inconvenient and nettlesome. Some go so far as to say that the U.S. tax and disclosure laws are downright oppressive.

No group is more severely impacted than U.S. persons living abroad. For those living and working in foreign countries, it is almost a given that they must report and pay tax where they live. But they must also continue to file taxes in the U.S. What's more, U.S. reporting is based on their worldwide income, even though they are paying taxes in the country where they live.

Many can claim a foreign tax credit on their U.S. returns, but it generally does not eliminate all double taxes. These rules have long been in effect, but enforcement was historically less of a concern with expats. Today enforcement fears are palpable.

Moreover, the annual foreign bank account reports known as FBAR forms carry civil and criminal penalties all out of proportion to tax violations. The penalties for failure to file these forms, civil and criminal, are severe. Even civil penalties can quickly consume the balance of an account.

The coup de grace is FATCA, which is ramping up now worldwide. It requires an annual Form 8938 to be filed with income tax returns for foreign assets meeting a threshold. And foreign banks are sufficiently worried about keeping the IRS happy that many simply do not want American account holders. Americans abroad can be pariahs shunned by banks for daily banking activities.

Still, leaving America can have a special tax cost. To exit, you generally must prove 5 years of tax compliance in the U.S. Plus, if you have a net worth greater than $2 million or have average annual net income tax for the 5 previous years of $155,000 or more (that's tax, not income), you pay an exit tax.

The theory of the exit tax is that is the last chance the U.S. has of taxing you. It is a capital gain tax as if you sold your property when you left. At least there's an exemption of $668,000.

Citizens aren't the only ones to suffer. Long-term residents giving up a Green Card can be required to pay the tax too. See High Cost To Go Green: Giving Up A Green Card. A decision to expatriate should never be taken lightly. Taxes or no, it can be a big step. And around the world, more people are talking about taking this giant leap.

You can reach me at Wood@WoodLLP.com. This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.

Auto Parts: You Must Own One Stock in This Sector

Popular Posts: 3 Best ETFs to Own Until You Die5 Safe Dividend Stocks Yielding North of 7%Auto Parts: You Must Own One Stock in This Sector Recent Posts: Auto Parts: You Must Own One Stock in This Sector 5 Safe Dividend Stocks Yielding North of 7% Time to Tune in to AMC Networks View All Posts

Plenty of sectors have at least one must-own long-term stock. With a little thought and research, they aren’t too hard to find. But in a few cases, little subsectors might contain companies that don’t get a lot of recognition despite their products being intrinsic to our everyday human experience.

Cars come to mind, and you could probably get away with owning a common car dealer like Toyota (TMC). The problem with this approach, though, is that auto manufacturers are economically sensitive and can have really bad years. That's why I go one level deeper to what I call "infrastructure" plays, which in this case means auto parts.

See, cars are always going to be on the roads all over the world. They will always be sold because all cars eventually die. And along the way, no matter how well-engineered they are, they will need parts and require maintenance. That's why you should own a stock in the auto parts sector for the long term. The challenge is in picking the right one.  Here's a quick look at your options:

AutoZone (AZO) is a $15 billion company with 5,109 stores in the US and Mexico. It holds $4 billion in debt and $133 million in cash and generates very reliable free cash flow of $800 million to $900 million annually. AZO has a projected long term-growth rate of 14.8%, and trades at a FY13 P/E of just 14. That’s a lot of debt for the company, but it’s cheap at just under 5%, and very manageable.

Genuine Parts Company (GPC) is a $12 billion company with 1,100 Napa Auto Parts stores in the US, Canada, and Mexico. It holds $250 million in debt and $197 million in cash.  Free cash flow improved to $800 million in FY12 from $600 million in FY11. GPC has a projected long term-growth rate of 10%, and trades at a FY13 P/E of 19, so I consider it vastly overvalued.

Advance Auto Parts (AAP) is a $7.4 billion company with 4,000 stores in the US, Canada, and Mexico. It’s $604 million in debt is almost entirely offset by its $520 million in cash.  Free cash flow is a bit inconsistent, swinging up and down over the years, but presently at a very solid $410 million. AAP has a projected long-term growth rate of 13.5%, and trades at a FY13 P/E of 18, so it is also overvalued.

O'Reilly Automotive (ORLY) is also a $15 billion company with 4,000 stores in the US alone. It holds $1.4 billion in debt and $366 million in cash, and generates strongly increasing levels of free cash flow — from $350 million in FY10 to $800 million in FY11, up to $950 million in FY12. It has a projected long-term growth rate of 17.3%, and trades at a FY13 P/E of 18.5. The stock is a bit pricey, but the fantastic cash flow trend, and 3% interest on debt makes it a compelling consideration.

Pep Boys (PBY) is a $690 million company with 750 stores in the US. It holds only $197 million in debt and $65 million in cash. Its free cash flow situation is less compelling, with only $34 million in FY12, coming after a breakeven FY11 — that's what you get with a smaller company trying to expand its footprint. It's a bit slower growing at 14% long-term, and trades at a current year P/E of 13, so it is arguably a tiny bit undervalued. Buying here means you are betting they will win market share in a very crowded field.

Motorcar Parts of America (MPAA) is the tiniest entry at only a $208 million market cap. It's a bit more specialized, focusing more on alternators, starters and wheel hub assemblies. It also distributes only through the DIY stores. MPAA sits on $100 million in debt and $16 million in cash. It’s cash flow negative and trades at a P/E of 14 on long term growth of 15%. I'd stay away from this one, given the cash flow situation.

In conclusion, I think you want to be with AutoZone or O'Reilly here. The latter is on a stronger cash flow trend, but both appear to be slightly undervalued, and very good stocks to own.

As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities. He is president of PDL Broker, Inc., which brokers financing, strategic investments and distressed asset purchases between private equity firms and businesses. He also has written two books and blogs about public policy, journalistic integrity, popular culture, and world affairs. Contact him at pdlcapital66@gmail.com and follow his tweets @ichabodscranium.

5 Stocks Under $10 in Breakout Territory

DELAFIELD, Wis. (Stockpickr) -- At Stockpickr, we track daily portfolios of stocks that are the biggest percentage gainers and the biggest percentage losers.

Stocks that are making large moves like these are favorites among short-term traders because they can jump into these names and try to capture some of that massive volatility. Stocks that are making big-percentage moves either up or down are usually in play because their sector is becoming attractive or they have a major fundamental catalyst such as a recent earnings release. Sometimes stocks making big moves have been hit with an analyst upgrade or an analyst downgrade.

Regardless of the reason behind it, when a stock makes a large-percentage move, it is often just the start of a new major trend -- a trend that can lead to huge profits. If you time your trade correctly, combining technical indicators with fundamental trends, discipline and sound money management, you will be well on your way to investment success.

With that in mind, let's take a closer look at a several stocks under $10 that are making large moves to the upside today.

Kandi Technologies Group

Kandi Technologies Group (KNDI) is engaged in designing, developing, manufacturing and commercializing electrical vehicles, all-terrain vehicles, go-karts and specialized automobiles related products for the People's Republic of China and global markets. This stock closed up 5.3% to $5.35 in Tuesday's trading session.

Tuesday's Range: $5.21-$5.55

52-Week Range: $3.08-$8.50

Tuesday's Volume: 1.78 million

Three-Month Average Volume: 1.72 million

From a technical perspective, KNDI jumped higher here right above some near-term support at $5.07 with above-average volume. This move is quickly pushing shares of KNDI within range of triggering a near-term breakout trade. That trade will hit if KNDI manages to take out Tuesday's high of $5.55 to some more resistance at $5.72 with high volume.

Traders should now look for long-biased trades in KNDI as long as it's trending above some near-term support at $5.07 or above its 50-day at $4.85 and then once it sustains a move or close above those breakout levels with volume that hits near or above 1.72 million shares. If that breakout hits soon, then KNDI will set up to re-test or possibly take out its next major overhead resistance levels at $6.50 to $7.

Gafisa

Gafisa (GFA) is a homebuilder in Brazil. This stock closed up 5% to $3.13 in Tuesday's trading session.

Tuesday's Range: $2.97-$3.15

52-Week Range: $2.22-$5.24

Tuesday's Volume: 1.70 million

Three-Month Average Volume: 1.77 million

From a technical perspective, GFA ripped higher here right above some near-term support at $2.80 with decent upside volume. This stock has been uptrending strong for the last month, with shares moving higher from its low of $2.27 to its intraday high of $3.15. During that move, shares of GFA have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of GFA within range of triggering a big breakout trade. That trade will hit if GFA manages to take out Tuesday's high of $3.15 to some past resistance at $3.30 with high volume.

Traders should now look for long-biased trades in GFA as long as it's trending above support at $2.80 and then once it sustains a move or close above those breakout levels with volume that hits near or above 1.77 million shares. If that breakout triggers soon, then GFA will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $3.68 to more resistance at $4.20 to $4.70.

Oi

Oi (OIBR) provides telecommunication services in Brazil. This stock closed up 1.6% to $1.87 in Tuesday's trading session.

Tuesday's Range: $1.83-$1.89

52-Week Range: $1.42-$4.51

Tuesday's Volume: 2.61 million

Three-Month Average Volume: 4.32 million

From a technical perspective, OIBR rose modestly higher here right above its 50-day moving average of $1.72 with lighter-than-average volume. This stock has been uptrending strong for the last few weeks, with shares moving higher from its low of $1.42 to its intraday high of $1.89. During that move, shares of OIBR have been consistently making higher lows and higher highs, which is bullish technical price action. That move is quickly pushing shares of OIBR within range of triggering a near-term breakout trade. That trade will hit if OIBR manages to take out some near-term overhead resistance levels at $1.89 to $2.04 with high volume.

Traders should now look for long-biased trades in OIBR as long as it's trending above its 50-day at $1.72 or above more support at $1.60 and then once it sustains a move or close above those breakout levels with volume that's near or above 4.32 million shares. If that breakout hits soon, then OIBR will set up to re-test or possibly take out its next major overhead resistance levels at $2.25 to $2.29. Any high-volume move above those levels will then give OIBR a chance to tag $2.50 to $2.75.

Molycorp

Molycorp (MCP) is a rare earth company. This stock closed up 4.6% to $6.73 in Tuesday's trading session.

Tuesday's Range: $6.46-$6.87

52-Week Range: $4.70-$14.44

Tuesday's Volume: 8.04 million

Three-Month Average Volume: 6.17 million

From a technical perspective, MCP spiked notably higher here right above some near-term support at $6.37 with above-average volume. This stock has been uptrending modestly higher for the last month, with shares moving up from its low of $5.95 to its recent high of $6.98. During that move, shares of MCP have been consistently making higher lows and higher highs, which is bullish technical price action. This spike on Tuesday briefly pushed shares of MCP back above its 50-day moving average of $6.75. Shares of MCP are now starting to move within range of triggering a near-term breakout trade. That trade will hit if MCP manages to take out some near-term overhead resistance levels at $6.98 to $7.13 with high volume.

Traders should now look for long-biased trades in MCP as long as it's trending above support at $6.37 and then once it sustains a move or close above those breakout levels with volume that hits near or above 6.17 million shares. If that breakout hits soon, then MCP will set up to re-test or possibly take out its next major overhead resistance levels at $7.73 to $8.06. Any high-volume move above those levels will then give MCP a chance to tag its next major overhead resistance level at $9.25.

Global Cash Access

Global Cash Access (GCA) is a global provider of innovative cash access and data intelligence services and solutions to the gaming industry. This stock closed up 2% to $8 in Tuesday's trading session.

Tuesday's Range: $7.82-$8.00

52-Week Range: $5.71-$8.46

Tuesday's Volume: 442,000

Three-Month Average Volume: 502,128

From a technical perspective, GCA spiked modestly higher here right off some near-term support at $7.80 with decent upside volume. This stock has been trending sideways inside of a consolidation pattern for the last month and change, with shares moving between $7.50 on the downside and $8.17 on the upside. Shares of GCA are now starting to move within range of triggering a major breakout trade above the upper-end of its recent sideways trading chart pattern. That trade will hit if GCA manages to take out some near-term overhead resistance levels at $8.03 to $8.17 and then once it clears more past resistance at $8.50 to $8.71 with high volume.

Traders should now look for long-biased trades in GCA as long as it's trending above its 50-day at $7.43 and then once it sustains a move or close above those breakout levels with volume that hits near or above 502,128 shares. If that breakout hits soon, then GCA will set up to enter new 52-week-high territory above $8.46, which is bullish technical price action. Some possible upside targets off that breakout are $10 to $11.

To see more stocks that are making notable moves higher today, check out the Stocks Under $10 Moving Higher portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

Exchanges open Tuesday: Here’s what to do

Don't wait. But don't hurry either.

That's the best approach to the new health insurance exchanges that are scheduled to open for business Tuesday. Buying insurance is supposed to be easier than ever once several provisions of the Affordable Care Act take effect this fall. That doesn't mean the process is easy or should be done speedily, however, experts say. That's especially true if insurance shopping is new to you.

"Don't be hurried in buying a plan," says Bryce Williams, managing director of global benefits consulting firm Towers Watson Exchange Solutions. "There's no rush."

Williams likens it to buying the first car off an assembly line: It may be best to let the new exchanges — particularly the 31 run by the federal government — iron all the kinks out. Federal exchanges may not be ready and there may be more and better information and "hand holding" available after a few weeks. Besides, your insurance won't start until Jan. 1, 2014, whether you sign up now or in December.

If you're one of the more than 45 million people who lack health insurance, you can begin the enrollment process Oct. 1, but you certainly don't have to. The deadline to purchase (or face a penalty at tax time in 2015) is March 31, 2014.

Every state has people called navigators who received grants to help guide consumers through the process in an unbiased way. Insurance companies are also increasingly pitching their individual policies online and in stores, where agents are available to help you figure out what plan is right for you — but they obviously have a vested interest in your decision. A key benefit to the new online exchanges is the ability to easily compare different plans — as you might during online car shopping — without a pushy salesperson hovering.

Key steps in the process:

Step one: Figure out if you're eligible to buy a plan on your state's exchange. Start at HealthCare.gov, the federal government's portal, which will route you to your state or allow you to c! reate an account if the feds are running your state's insurance marketplace. Plug in details about where you live, what you earn and family size. If your income is below 400% of the federal poverty limit — which is about $46,000 for an individual and $94,00 for a family of four — you'll be able to shop for a policy.

If your income is low enough, you may be alerted that you're eligible for Medicaid and told how to apply for that.

Step two: Determine if you are eligible for financial help, which can come in the form of subsidies to offset the cost of premiums, co-payments or deductibles.

Anyone under age 65 participating in the new state exchanges can get tax credits if their incomes are between the poverty level and 400% of the poverty level. In 2014, that means families of four that make $24,000 to $94,000 per year could get subsidies. Those who make 250% or less of the poverty level can get even more financial help. The federal poverty level is now $11,490 for an individual and $23,550 for a family of four.

Step three: Calculate what you've been spending for your uninsured health care, including prescription drugs, doctor's visits and any emergency room or other hospital visits. Are there health concerns you've avoided addressing that are likely to get worse, like that sore knee or breathing condition? Medicines you should be taking but aren't? Are there young athletes in the house?

Step four: Spend time pondering what type of plan is right for you, based on how much you can afford to pay in premiums, co-payments and cost-sharing for procedures, as well as what your medical needs are likely to be next year.

Options are grouped into coverage levels that are coined bronze, silver, gold and platinum based on the percent of out-of-pocket costs borne by the consumer. Bronze plans cover the lowest percentage of expenses — 60% — and have the lowest premiums. Silver plans cover 70%, gold pay 80% and platinum plans cover 90% of out-of-pocket costs. Even policies that! appear a! ffordable may not be if you have high deductibles, co-payments or cost-sharing for procedures.

Could you afford to pay 60% of last year's medical bills — and almost everything out of pocket until a high deductible is met?

You need to consider other factors when deciding among plans. Williams recommends consumers stick with insurers that are "well entrenched" in their area; not one you've never heard of before.

Farzan Bharucha, a health care strategist for consulting firm Kurt Salmon, recommends calling providers you would consider if you had insurance and ask whether they will be accepting patients in the policies you're considering.

"A fair number will say they are full," says Bharucha, who advises physician groups and hospitals.

FACT CHECK: Fact check: Who's telling the truth about Obamacare?

Step five: Decide whether it even makes sense financially for you to buy insurance. For some people, paying the annual penalty, which starts at $95 or 1% of income for the first year, may be the cheaper move. (Unless of course, your health takes a turn for the worse.) By 2016, however, the annual penalty will be $695 or 2.5% of income.

The exchange plans are set up so you will never have to pay more than 9.5% of your salary for insurance. But the new law certainly doesn't mean coverage will be cheap.

STORY: Why Congress is (or isn't) exempt from Obamacare

"It's still going to be expensive. particularly for low income people," says Andy Hyman, who directs the health care coverage team at the Robert Wood Johnson Foundation. "There is a financial burden, but it's far less today than what it was."

How the financial help works

Under the Affordable Care Act , there are two main types of subsidies to reduce insurance costs and out-of-pocket costs of medical care: tax credits and cost-sharing reductions. To lower your insurance costs, if eligible, you can get subsidies to help pay for plans obtained in the new state exchanges. You might also qualify to! pay less! out-of-pocket for co-payments, co-insurance (that share of procedure costs you have to pay) and deductibles.

Tax credits

The subsidy amount is based primarily on income and number of family members. The tax credit is calculated as the cost of a "benchmark" middle-range plan in your area minus your required payment, a set percentage of your family income. These benchmark plans are set as the second-lowest-cost "silver" plans for a person of your age living in your area. Depending on how much you make, you'll be expected to pay between 2% and 9.5% of your income on monthly premiums. The difference between these two numbers is what the government will cover.

For example, Kaiser Family Foundation says a 40-year-old who makes $30,000 a year is expected to pay 8.37% of income in insurance, or $2,512 per year. In this person's area, the estimated "benchmark" premium is $3,857 per year. So this person gets a tax credit of $3,857 minus $2,512, or $1,345, the foundation says.

These tax credits are "advanceable," meaning that the savings are included in your monthly premiums. You pay lower costs up front, rather than having to get reimbursed later.

Cost-sharing subsidies

Health Savings Account-qualified health plans define a general maximum amount for out-of-pocket costs. Then, eligible people can get reductions in their own maximum out-of-pocket expenses, which range from one to two-thirds of this initial maximum, depending on income. Those with the lowest incomes — at or below 250% of the poverty level — can also get plans that cover a higher proportion of the cost of medical services.

Still murky? You'll see how much you can get in savings after you fill out an application for the state exchanges starting Tuesday. But until then, you can estimate your potential savings with the Kaiser Family Foundations's subsidy calculator This calculator takes into account information about your income, family and tobacco use and gives you estimates of how much you might receive! in subsi! dies and how much you might have to pay for premiums and out-of-pocket costs.

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Honoring Advisors Who Serve(d): July 4th, 2013

On Memorial Day, the nation paused to remember those who, in the words of Abraham Lincoln, gave “the last full measure of devotion.” AdvisorOne honored those advisors and partners to advisors—and one famous non-advisor who influences the advisory world, PIMCO’s Bill Gross—who served in the armed forces of the United States.

This is the third year we’ve published this slideshow that is meant, in a small way, to thank all those who served their country. For this Fourth of July edition we’re featuring seven “new” advisors and four from previous Advisors Who Serve(d) slideshows.

We’ve created a special landing page for you to view our previous slideshows as well. The seven new people on the following pages responded to our call this year to share the particulars of their service—some in the past and some still serving—and, in most instances, some photos of themselves when they were in service. 

Most telling to us, however, were the vets’ responses to how their military service helped prepared them for their advisory careers. We began this series of slideshows in 2011 because anecdotally there seemed to be a large percentage of advisors, both men and women, who had served in one of the branches of the military over the years but in many cases had not received the appreciation they were due for their service.

The comments of this group on their military experiences speak for themselves—profound and humorous, patriotic and often self-deprecating, but humbly proud of their service as well.

(Check out previous Advisors Who Serve(d) installments from 2011 and 2012 for Memorial Day and Fourth of July.)

Name: John Grover Wilson

Title/Company: Managing Director, Senior Investment Advisor — Raymond James & Associates

Branch: USAF-retired

Rank held at beginning of service and at end: Lt. at beginning, Col. at the end

Service Dates: 1968-1992

Work you did: Fighter Pilot, F-4, RF-4 and others

Brief story that stands out from your service time: Hold the Air Medal (2) and Distinguished Flying Cross from serving in Vietnam. I’m presently the Chief Chaplain of the Volunteer State Veterans Honor Guard. In my spare time, I presided over 250 military funerals with honor. I am presently on the steering committee for the Medal of Honor Society Conference in 2014 to be held in Knoxville. Flew two tours in SEA. Funny story: I was a White House Social Aide during the Nixon administration.

Name: David S. Chang

Title/Company: President, CEO — WealthBridge

Branch: Army

Rank held at beginning of service and at end: Cadet; Major

Service Dates: 1998-2008 (Active duty) 2009 to Present (Hawaii Army National Guard)

Work you did: West Point Cadet, Armor Officer, Ground Scout Platoon Leader, Military Intelligence Officer

Brief story that stands out from your service time: I spent 15 months in Northern Iraq. The work hours were grueling but what made life bearable were the soldiers I served with, we were all one big happy family. I knew that my XO (executive officer) went to high school with Rachael Ray. He knew I was a big fan of hers, especially since I am an eater! During Christmas my XO brought me up to the front of our commanders and staff after a normal meeting and surprised me with an autographed photo of Rachael Ray made out to me! It was one of the best Christmas gifts I got, I am very appreciative that he took the time to reach out to her and she in turn took time to write to me. It was a definite morale booster!

Name: John Thomas Deutsch

Title/Company: Senior VP, Investments — Raymond James & Associates

Branch: U.S. Navy

Rank held at beginning of service and at end: Seaman to CWO(4)

Service Dates: 1962-1985

Work you did: Avionics Commissioned Warrant Officer W-4

Brief story that stands out from your service time: Too many great shipmates and funny stories for one to stand out but, late in my career, I served on the USS Coral Sea CV-43. Our Battle Group as well as the Nimitz’s were stationed in the Indian Ocean in support of the Iranian hostages rescue attempt on Aug. 24, 1980. Tragically, the operation was unsuccessful and ended with the loss of aircraft and eight US service members. Memorably, I was walking on the flight deck with support attack aircraft fully loaded out after midnight when our Captain, Dick Dunleavy, announced on the 1MC that we would be standing down because of the failed outcome. That was one of the first publicized uses of special forces to effect U.S. policy objectives. Today, 30 years hence, both Iran and heroic special forces operators remain in our daily headlines and in my memory.

Name: Kevin Hott

Title/Company: Financial Advisor — Merrill Lynch

Branch: U.S. Navy

Rank held at beginning of service and at end: E1-E4/Seaman Recruit to Petty Officer Third Class

Service Dates: 1997-2001

Work you did: Gas Turbine Systems Electrician

Brief story that stands out from your service time: The first morning after arriving at Recruit Training Center Great Lakes I found myself being awoken abruptly by the Drill Instructor. He was screaming in my face, nose-to-nose, after I overslept by a “few minutes.” I learned quickly when you’re the only one not in formation you get the wrong kind of attention. While we were deployed in the Mediterranean, I remember the roller coaster of emotions we experienced when we all learned of the USS Cole bombing. Oh, and how can I forget the swim call we had in the middle of the Mediterranean? When you have folks jumping off the side of a destroyer into 13,000 feet of water it’s not a pleasant experience when you’re in the water and realize the ship isn’t completely stopped.  Name: David Latch

Title/Company: President — Frederick Advisors

Branch: U.S. Army

Rank held at beginning of service and at end:  E-3, O-4

Service Dates: 1977-1999

Work you did: Aircraft Maintenance, then Medical Logistics

Brief story that stands out from your service time: I was nearing the end of my first enlistment and was unsure about re-enlisting. My NCIOC, whom I really didn’t think much of, told me to write down the pros and cons of both staying in and getting out. Once I did that, I became a “lifer.”

Name: James Schwartz

Title/Company: Senior Advisor — Strategic Wealth Advisors

Branch: U.S. Air Force

Rank held at beginning of service and at end: 2nd Lt to Captain

Service Dates: 1985-1997

Work you did: A-10 and F-16 Fighter Pilot

Brief story that stands out from your service time: The first year in the USAF was spent in pilot training near Del Rio, Texas. While learning to fly the T-37, student pilots must become proficient in acrobatics, including loops, barrel rolls and split-S's. The split-S is a maneuver where the pilot rolls the jet upside down then pulls back on the stick forcing the jet to fly straight down then continue to a level flight path heading the opposite direction (think of the second half of a loop). As I went through my split-S maneuver and the nose of the aircraft was going straight down toward the earth, my instructor, sitting to my right, said, “Jim, you better pull a little harder.”

And so I did—probably a little too quickly and a little too hard. The G's (acceleration one feels on their body at the bottom of a roller coaster) increased from zero to 3, then 4, and finally 5. At 5 G's a 150-pound person weighs 750 pounds! Well, my instructor wasn’t prepared for such a quick transition to 5 G's and he passed out! I finished my split-S back to level flight but it took my instructor some time to regain consciousness and figure out where he was (later he divulged to me that when he came to he thought we had crashed). At this point the flight was over (due to the loss of consciousness episode) and I flew him back to the base where after two days he was back in the saddle. As I look back at that incident, as a new student pilot, I have to say I was a little scared when I realized my instructor (the person I counted on to be there when I screwed up) had lost consciousness and it was up to me to bring him home. Name: Robert S. Peterson

Title/Company: Vice President, Investments — Raymond James & Associates

Branch: U.S. Army

Rank held at beginning of service and at end: Pvt. to Sergeant

Service Dates: 1970-1973

Work you did: Military Intelligence, Linguist

Brief story that stands out from your service time: I was trained as an interrogator and a linguist in Laotian. I spent most of my time teaching English to foreign nationals.

Name: Bill Gross

Title/Company: PIMCO - founder and co-chief investment officer

Branch: U.S. Navy

Rank held at beginning of service and at end: LT JG – Lieutenant, Junior Grade

Service Dates:  1967 - 1970

Work you did: N/A

Brief story that stands out from your service time: I arrived at the Pensacola Naval Air Station ready to fulfill my enlistment and ready to become a fighter pilot. And like all raw recruits, we were put in the capable hands of a drill sergeant. Remember, the drill sergeant’s duty is to humiliate and harass us to the breaking point and beyond. And me, the cocky college boy, was so shaken by the experience that it was one of the military moments I remember most vividly. I spent half the night cleaning my rifle, and failing the inspections nonetheless. It took me so long to make up my bunk to my sergeant’s specifications that I slept on the floor. I did push-ups and chin-ups and marched and ran obstacle courses but my sergeant was never satisfied. “You’ll never fly a jet Mr. Gross!,” he screamed. “BLIMPS are more your style!” I ended up flying neither.

Meredith Schneider

Title/Company: Principal — Schneider Wealth Management

Branch/Rank: US Army - 2nd Lt through Captain

Service Dates: June ’92 - Aug. ’96

Work you did: Platoon Leader, Maintenance Officer, S-1, Civil Affairs Officer

Brief story that stands out from your service time: I am honored to have had the opportunity to meet so many people from all over the country who served with great dedication. I will never forget the "Any Solider" letters we received while in Bosnia. Some days they were the only link to life outside of our tents since we had no phone, television, newspaper, Internet, and often no mail from loved ones. I remember a letter in particular from a young boy in Rhode Island who wrote in reply to a letter I wrote back to him. He wrote, "Receiving your letter was the happiest day of my life." Little did he know how happy I was to receive his letter of support.

Harold Evensky

One of the few people in the advisor community who is identified by one name, like a Brazilian soccer player, Evensky is the chairman and cofounder of the wealth management firm of Evensky & Katz in Coral Gables, Fla. He is the author of numerous books, is now an adjunct professor at Texas Tech University and among his honors has been membership of the IA25. But Harold is also a veteran, serving in the Medical Corps of the U.S. Army as a Captain from 1968-1971.

Joni Youngwirth

Folks from Commonwealth Financial Network know Youngwirth quite well, as do other advisors who have benefited from her practice management knowledge delivered in speeches at national conferences, or who have read some of her prescriptions in the pages of Investment Advisor, for instance. 

They may know of her practical, disciplined bent when it comes to practice management, but what they may not know is that this partner to advisors previously served with the U.S. Air Force, rising to the rank of first lieutenant.

Youngwirth is Commonwealth Financial Network's managing principal, practice management, and a regular contributor to Investment Advisor.

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Check out previous Advisors Who Serve(d) installments from 2011 and 2012 for Memorial Day and Fourth of July.

We know there are more of you out there who served, so please consider adding your name and story to the growing list of Advisors Who Serve(d) by filling out this simple questionnaire at AdvisorOne.

Bank of America Investors Look Ahead to Earnings

Bank of America (NYSE: BAC  ) is on its way to modest gains for the second day in a row as the bank sits at a 0.7% rise as of 10:30 a.m. EDT. The big news for bank investors this morning doesn't really involve B of A, but it will give its shareholders a glimpse at what's to come next Wednesday when it reports second-quarter earnings.

Officially open
Bank earnings season officially started this morning when both JPMorgan Chase  (NYSE: JPM  ) and Wells Fargo (NYSE: WFC  ) reported for the second quarter. Both banks topped analyst expectations for both top- and bottom-line growth, giving other investors hope that their respective banks will follow suit. But more importantly, the two earnings reports showed the major trends for the quarter and addressed some investor concerns.

First off was revenue growth, with mortgage originations topping the list of areas to focus on. Both banks reported increased activity year over year, but the rise in interest rates caused a sequential drop in new loans. Bank of America will be watched closely in this segment because of its stated goal of commanding a higher percentage of the market share in home lending.

Both Wells and JPMorgan reported that the number of bad loans in their portfolios had decreased, so provisions to cover those loans were lower. Since B of A has struggled to clean up its portfolio of loans, this may also be a big area of focus for its reported earnings next week.

With the new push by the Fed for increased capital reserve requirements, looking at current levels of reserves will help investors know whether or not their banks will have to scramble to cover shortcomings. Both reporting banks seemed to have their ducks in a row, with Wells reporting a current Basel III Tier I common ratio of 8.54% and JPM stating 9.3% for the same measure.

Of course, one of the most important measures of a bank's profitability, net interest margins, was under close watch this morning as both banks reported narrowed margins due to continued pressures from the low interest rate environment. With the entire market keeping a watchful eye on the Fed and its next move for interest rates, the banks will be expecting a period of transition once rates do rise. But JPMorgan CEO Jamie Dimon made it clear this morning that higher rates would mean lower profits based on the decrease already seen in new mortgage activity.

A lot to think about
Bank of America is generally under a lot of pressure as earnings season rolls around each quarter. With high expectations coming from analysts and investors alike, it can be hard for any bank to live up to them, not just B of A. But for investors, this morning's release of two powerhouses in the industry gives a lot of food for thought and plenty of time to prepare for Wednesday's report. Though B of A has challenges outside of the scope of the JPM and Wells reports, the general trends listed above will be a good place to start for investors looking at the operation's performance in a challenging quarter.

Many investors are terrified about investing in big banking stocks after the crash, but the sector has one notable stand-out. In a sea of mismanaged and dangerous peers, it rises above as "The Only Big Bank Built to Last." You can uncover the top pick that Warren Buffett loves in The Motley Fool's new report. It's free, so click here to access it now.

Aggreko Confirms Revenue Up 5%

LONDON -- The shares of Aggreko (LSE: AGK  ) have slid 2.1% as of 8:30 a.m. EDT after the plant-hire firm said its first-half revenue had gained 5%.

Within an update covering the six months to June 30, the FTSE 100 member claimed its performance had been "in line with expectations." Profit for the half year, though, was at a similar level to that of 2012.

Aggreko revealed that revenue in America and Europe had advanced 11% and 8%, respectively, while sales in Asia and Australia had slumped a combined 6%.

Prior to today, City boffins were expecting Aggreko's 2013 earnings to drop from 101 pence per share to 92 pence per share and support a near-term P/E of 19. Of course, whether today's update, the current share price, and the wider prospects for the plant-hire sector all still combine to make Aggreko a buy is something only you can decide.

However, if you currently own Aggreko shares and are looking for buying opportunities, this special market research reviews several attractive investment possibilities. Just click here for the report -- it's free.

1 More Reason Apple Stock Is a Great Buy Today

The global smartphone industry has absolutely exploded into one of the most important segments in all of consumer tech today. And, although the competition in this space has never been fiercer, as names like Nokia and Blackberry attempt to regain their long-lost footholds, it's becoming increasingly apparent that the handset space truly belongs to Apple  (NASDAQ: AAPL  ) and Samsung. Although the first half of 2013 has seen many new and competitive offerings come to market, it's clear that the Apple/Samsung duopoly is as robust as ever. Taking a look at the smartphone industry from the lens of what matters most, profits paint quite the picture. 

It's exactly those profits that have driven such impressive gains for longtime Apple shareholders, who have been handsomely rewarded. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

Thursday's Top Upgrades (and Downgrades)

This series, brought to you by Yahoo! Finance, looks at which upgrades and downgrades make sense, and which ones investors should act on. Today, headlines feature a pair of downgrades from Standpoint Research, which is ratcheting back ratings on both Delta Air Lines (NYSE: DAL  ) and Guess? (NYSE: GES  ) . But the news isn't all bad. So before we get to those two, let's take a look at why one other analyst sees...

Boeing flying higher
Confirmation that United Continental has resumed flights aboard upgraded and verified-not-likely to-combust Boeing (NYSE: BA  ) Dreamliners is sparking (sorry -- poor choice of words) some enthusiasm on Wall Street today. Analyst Oppenheimer has reportedly upped its price target on the already buy-rated stock, and now thinks Boeing shares are going to $120. And while I'm not entirely convinced that $120 is the "right" number for Boeing, I do agree that on balance, the stock does look buyable today.

Why? Let's take a look at the numbers.

Boeing shares currently cost just under 19 times earnings. The stock pays a 2% dividend, and is pegged to grow earnings at roughly 14% per year over the next five years. So far, this suggests a stock that's fairly modestly overpriced -- but wait. We're not done.

Boeing currently generates about $1.32 in free cash flow for every $1 it gets to report as "net income" under GAAP accounting standards. As a result, its real cash profit is significantly bigger than its P/E ratio lets on. Indeed, if I value the stock on free cash flow, Boeing shares look fairly priced today based on their growth prospects alone. That's before you factor in the $2.6 billion in net cash on Boeing's balance sheet, and before you count the 2% dividend yield.

Result: I think Boeing shares still have room to rise. Maybe not by the 20% that Oppenheimer projects, but by some amount, certainly.

Delta grounded
If only I could say the same thing about key Boeing customer Delta Air Lines. Standpoint Research pulled its buy rating on the stock this morning, noting that while "DAL still looks attractive at 6 times estimates for next year ... the estimates for 2014 may be a bit speculative at 50% above trailing twelve months earnings and the company is carrying a lot of debt."

I'll say. Delta's debt load right now is about $9.4 billion, net of cash on hand. And if it's trading for six times what it might earn next year, one thing's for certain already -- Delta shares cost more than 17 times the earnings it actually made over the past year. You know, facts as opposed to guesses.

Now granted, most analysts have high hopes for Delta, and project the company will earn a lot next year, then keep on growing earnings at about 24% per year over the next five years. That's fast enough growth to justify even a 17 P/E, but for one thing: Delta's earnings aren't all they seem to be.

Real free cash flow at the company is just $441 million, or less than half reported GAAP profits. As a result, the company's price-to-free cash flow ratio is a shockingly high 35.1, and when you factor debt into the picture, Delta's enterprise value-to-free cash flow ratio rises to a whopping 61.1.

Suffice it to say that when the valuation numbers on a company get this big, I think it's time to start pulling in the bull's horns, and choose caution over aggression. Standpoint's right to downgrade Delta.

Guess this one won't be going up anymore
Shifting away from aerospace in our final ratings review, Standpoint also downgraded shares of Guess? Thursday. Quoted on StreetInsider.com, Standpoint's Ronnie Moas noted that the stock is "fairly valued" at 14 times earnings -- and indeed, as of this writing the stock actually trades a bit above 14 times earnings on both trailing and forward bases. So does this mean it's time to sell?

Standpoint thinks no, and is only downgrading the stock to "hold." But I'm inclined to go a step further and say the stock does look sellable today. Projected long-term growth at Guess? is only 9% at this point, and while the stock's 2.7% dividend yield is certainly tempting, combined, these two numbers still don't add up to anything big enough to justify a 14 P/E.

Factor in now the fact that Guess?, like Delta, doesn't generate as much real cash profit as it reports for net income, and the stock's arguably even more overvalued than it already looks when valued on P/E.

Long story short, Standpoint's right to downgrade. The only question is whether the analyst cut Guess? far enough.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Guess?. The Motley Fool owns shares of Guess?. 

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Tesla Motors: Will Spending Shock the Street?

Tesla Motors (TSLA) reports its financial results after tomorrow’s close. While Bears focus on demand for its cars, Northland Capital’s Colin Rusch and Noah Kaye think investors should focus on production:

Associated Press

The bear argument on Tesla appears focused on lack of demand which the company has repeatedly indicated was not an issue. With Elon Musk's tweet last week about sales being up 65% Y/Y, we believe the unknown variable at present is production runrate after the company's upgrades to its manufacturing lines. That number is challenging to triangulate and we have no indication yet on disappointment relative to production levels. We expect the company to comment on progress toward its 2,000 vehicle/week production rate exiting 2015. We believe the company has the potential to ship and record revenue on ~70k vehicles which would translate into ~$7B in revenue vs. the street at $5.4B. Management continues to believe demand is not a constraint for growth…

Rusch and Kaye also wouldn’t be surprised if the Street were shocked by Tesla’s spending. They explain:

We believe [Tesla] has continued to invest in operations to service customers and lay the foundation for long-term growth with product development. As much as we believe investing in growth is important for the company, we would like to see some operating leverage as the company ramps sales. One of the key elements to our thesis on Tesla is the company's effective deployment of capital and the potential to develop new products cost effectively. We continue to believe
management are good stewards of capital, but believe the street has modeled spending too low and that prolonged OpEx growth will begin to drive questions about long-term profitability.

Shares of tesla motors have dropped 0.8% to $240.78 at 10:17 a.m. today.

Urban Outfitters: Big Plans, Big Problems?

The next time you set foot into your nearest Urban Outfitters (URBN), Anthropologie or Free People, don't expect to find the abundance of clothing you've gotten used to—the company announced it has chosen to chuck apparel and "stuff" will reign supreme.

At its analyst day last week, management rolled out plans for growth that include reducing the amount of clothing it sells and upping its stake in non-clothing merchandise.

Credit Suisse analyst Christian Buss weighed remains cautious even as he calls Urban Outfitters' moves as a step in the right direction. He writes:

The team laid out the next phase of its growth strategy, which boils down to: 1) Expansion of the product line into new categories; 2) Dramatically expanding existing stores in key 25-50 locations; and 3) Extending the company’s lead in eCommerce. These first two strategies raise a number of questions about the company’s long-term margin profile and return on invested capital. While we are ultimately more cautious on the three to five year outlook as a result, we believe that the outlook for earnings power in the short-term (two-three years) is likely to be enhanced, not diluted as accretive new categories are added to the mix.

eCommerce, however, is one strength that sets Urban Outfitters apart from its competition, Buss says:

We view Urban Outfitters as one of the leading retailers in the United States with respect to their eCommerce strategy, with penetration higher than that of any major specialty retailer, and the company shifting investments into margin-accretive emphasis on conversion. To this end, the company is looking to find ways to improve their capabilities by unifying store and online inventories. This unified inventory approach should allow the company to improve in-stock rates, reduce the working capital drag from having unproductive pools of restocking inventory and misalignment of store inventories with demand. This effort will also allow the company to roll out pick-up in store and delivery from store. Over time, we expect URBN to expand eCommerce penetration to 36%.

Investors have opted out of accessorizing with Urban Outfitters today–shares have dropped 0.8% to $35.80, while Abercrombie & Fitch (ANF) is off 1.5% at $34.13 and Gap (GPS) has ticked down 0.1% to $41.16%.

Millennials are Spending Half of Their Paychecks to Pay Down Debt

By Hal M. Bundrick

NEW YORK (MainStreet) Student loan debt has been the headline for years as young Americans have struggled to make ends meet. And while the burden of paying for college is undeniable, it's not the primary reason over half (56%) of Millennials are living paycheck-to-paycheck.

Credit cards are, in fact, the culprit.

More than four in ten (42%) of adults aged 22 to 33 say debt is their biggest financial concern in fact, many characterize it as "overwhelming." But surprisingly, the oft-cited weight of student loans is the third most pressing debt they face. Gen-Y says their debt load averages 16% as credit card debt, 15% mortgage debt, 12% student loan debt, 9% auto debt and 5% medical debt. All in all, 47% of Millennials are spending half of their paychecks just to pay down these debts, according to a Harris Poll fielded on behalf of Wells Fargo. Perhaps motivated to help others forego the hardships they've encountered, when asked what advice they would offer to someone just starting out, most Millennial respondents said, "Don't spend more than you earn" (33%), followed by "Get educated about your personal finances" (17%), and "Start saving for retirement now" (16%). And when it comes to seeking advice, most turn to "family" (57%) for trusted financial guidance, followed by "financial institutions" (54%) and "personal finance experts/personalities" (50%). Having survived the Great Recession, most (80%) say it taught them to save "now" in order to weather future financial difficulties. About half of all Millennials say they are "satisfied" with their current savings rate, yet 45% are not saving for retirement. "The silver lining of the recession that started over five years ago is that a majority of Millennials get that saving is a necessity and even equate it with 'surviving' tough times," said Karen Wimbish, director of Retail Retirement at Wells Fargo. Known for a sense of optimism, three-quarters of Gen-Y say they are confident they will be able to address any financial problems they may encounter in the next ten years. Nearly three-quarters (72%) feel they will be able to save enough money to create the lifestyle they want in the future. Of those who have started saving, almost half (46%) are saving between 1-5% of their income for retirement; 31% are saving 6-10%; 18% are saving more than 10%. Of the four in ten Millennials who are not yet setting aside funds for the future, 84% say they are not doing so because they "do not have enough money to save right now." Most Millennials (69%) say they feel better off financially than others of their generation. Plus, 68% expect their standard of living before retirement to be better than their parents. --Written by Hal M. Bundrick for MainStreet

Rieder: 'Jet' magazine makes a digital landing

Samir Husni took this one hard.

Husni, founder and director of the Magazine Innovation Center at the University of Mississippi and the man who trademarked his nickname "Mr. Magazine," was doing some consulting in Cape Town, South Africa, when he got the news about Jet.

Jet, a 63-year-old publication aimed at the black community, played an important role in thrusting the civil rights movement into the American consciousness. On Wednesday, the pocket-size magazine, which already had cut back from weekly publication to once every three weeks, announced that it will be converting into a digital weekly at the end of June.

"I've never been as saddened by the demise of a magazine as much as I was by the news about Jet," Husni says. "It's an American institution."

It's easy to see Jet's fate as yet another nail in the coffin of print in a digital world. But the reality is more complicated. Many magazines continue to make money, albeit not as much as in their halcyon days. Husni points out that quite a number of titles have recently published their largest issues ever. There are about 10,000 magazines today, as opposed to 2,000 in 1980. And a number of digital-based magazines have made forays into the print world.

Desiree Rogers, CEO of Johnson Publishing Company (JPC), which publishes JET Magazine.(Photo: Johnson Publishing)

Similarly, newspapers, while embattled, don't seem on the verge of going away anytime soon. Again, many are profitable. And a number of intriguing new players — think investment superstar Warren Buffett, Amazon founder and CEO Jeff Bezos, Boston Red Sox owner John Henry, Minnesota Timberwolves owner Glen Taylor, free-spending Orange County Register owner Aaron Kushner — have been drawn to ! a field once largely consigned to the dustbin of history. Suddenly we have new newspaper wars in Los Angeles, New Orleans, Long Beach.

So Husni takes another lesson from Jet's shift. It's a crowded, competitive market out there, and you've got to put out a first-class product to compete. And that means investment. Jet, Husni feels, was moving in the opposite direction, with thin issues and less frequent publication.

But while Husni is in mourning, Desiree Rogers, CEO of Johnson Publishing, which owns Ebony as well as Jet, would urge the magazine maven not to be so blue. Rogers, a former White House social secretary in the Obama administration, sees the development as a move back to Jet's roots.

Jet was born as a small, digest-size publication intended to be a quick read. "In the world today, everything is moving faster. There is more news and far less time to read it," founder John Johnson said in the first issue back in 1951.

Jet had gotten away from its weekly format, Rogers points out. Now, it will be weekly again, presenting a new issue every seven days on a paid app ($20 a year) for mobile devices. The magazine also will post breaking news updates daily on its website.

Rogers says the quick digital read will be a perfect complement to Ebony, with its longer-form pieces on lifestyle issues

Jet will continue to cover entertainment, politics, pop culture and social issues important to the black community. But Rogers is excited about the new features the new format makes possible.

Instead of just mentioning that hot new movie, Jet will link to a trailer. In the Love and Marriage section, Jet may take you to the wedding.

Johnson Publishing is a private company, and Rogers won't discuss the magazine's financial state. But she says pointedly that Jet's printing and postage bills are a formidable challenge, given the magazine's rate base of 700,000.

So what would founder Johnson, whose magazine's high point was its groundbreaking coverage of the Emmet! t Till ly! nching in Mississippi in 1955, think of the forthcoming digital plunge?

"If Mr, Johnson were here," Rogers says, "he would have said, 'What took you guys so long?'"

Buy Skechers For The Long Run

U.S. retail sales inched up 0.2% in December. This increase followed a 0.4% jump in Nov., resulting in retailers' merriment. Although this was driven by the highly promotional environment and deep discounts, this shows that consumers are willing to open their wallets. In fact, there are some standout companies that have performed much better than expected, making the most of increased consumer spending.

Footwear retailer Skechers (SKX) recently reported a blockbuster quarter. Results far surpassed the Street's expectations, pushing the stock price north.

Great performance indeed

High demand for products drove revenue up to $450.7 million, an increase of 14% over last year's quarter. Demand for winter wear, such as boots, surged mainly due to a colder holiday season. On the other hand, warm weather in the West led to higher sports footwear sales.

All of Skechers' segments did well, which led to staggering growth in the top line. Both its wholesale and retail businesses grew substantially as the shoe retailer launched new products. Revenue from the retail segment increased 18.6% over last year; the company opened 20 new stores. However, store additions were not the only reason for the performance. Same-store sales grew 12.8%, which boosted total revenue.

Additionally, the footwear retailer's e-commerce operations grew by 9% due to stronger marketing efforts. The company's earnings more than tripled to $0.28 per share from $0.08 per share a year-ago. Skechers' efficient inventory management and cost-savings efforts paid off, resulting in a margin expansion of 190 basis points.

Strong recovery from the past

Although the shoe retailer's performance has been remarkable, this isn't the case when we look at its stock price. Over the last five years, Skechers did not perform as well as peer Crocs, as evidenced by returns. However, it did manage to outperform Nike during the same period.

Crocs' stock price grew 1,180% over the last five years, much higher than Skechers (522.6%) and Nike (297.9%). This is mainly because Crocs' stylish and colorful footwear attracted customer in hordes. Moreover, its products were comfortable, which lured people to its stores.

Skechers, on the other hand, lacked innovation, which is why it lost customers' interest, especially in the domestic market. Also, its inability to manage rising input costs added to Skechers' woes. However, with increased efforts to grow its geographical presence and new product developments, Skechers outpaced its peers.

Skechers' stock price has appreciated by 61.7% over the last year, whereas Crocs shares have fallen 3.2%. Crocs' performance has been deteriorating since it is unable to attract many customers. In fact, in Crocs recently reported fourth-quarter, revenue increased by only 1.6% since demand for its colorful clogs declined. Same-store sales fell 4%, forcing the retailer to move into more fashionable footwear.

Nike remains in the second position with returns of 43.9%. Nonetheless, Nike's efforts have been quite fruitful; the company experienced a revenue increase of 8% to $6.4 billion. The company's products resonate with customers because of Nike's focus on comfort and innovation.

Nike's products such as Nike+ FuelBand and Flyknit technology have not only attracted more customers but also led to expanding margins. Moreover, the company has been marketing its products well by promoting them at various sports events such as the Olympics and the World Cup.

Way to go

Therefore, it is clear that Skechers has recovered over the years and seems to be a strong player. It also has some good reasons to be hopeful. For example, it plans to open a number of new stores in the future in order to grow its top line. For 2014, the footwear company expects to add 60 to 70 new stores, which will enhance its presence.

Skechers also plans to expand its footprint internationally, where demand for its products has been attractive. Lastly, it plans to continue to innovate and launch new products, which will provide more reasons for customers to enter its stores.

Conclusion

After having a difficult time, Skechers seems to be making a great comeback. Its diversified product portfolio, which includes items catering to needs ranging from winter wear to sportswear, has been luring customers in. Moreover, the marketing tools it has chosen to use have been helpful. Its ability to outpace other players and its plans for a bright future make me believe in this company. Investors should not ignore this growing retailer.

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Why You Should Be Wary of Small-Cap Stocks

Alamy Stocks of small companies have defied gravity for years now. From the bottom of the bear market on March 9, 2009, through Feb. 14, the Russell 2000 index of small-capitalization stocks has returned an annualized 29.5 percent, trouncing the large-company-oriented Standard & Poor's 500 stock index by an average of 4.4 percentage points per year. What's more, the Russell 2000 (^RUT) has beaten the S&P 500 (^GPSC) every year since 1999, except for 2005, 2007 and 2011. Over that stretch it has returned an annualized 8.2 percent, compared with 4.7 percent for the S&P. That's the longest run of market-beating returns for small caps ever -- far eclipsing the old record set from 1973 to 1983. But that huge outperformance has made small caps "extremely overvalued" in the view of Steven DeSanctis, small-cap strategist at Bank of America Merrill Lynch (BAC). "This is the upper bound of absolute valuation," he says. (Biotech looks even more problematic; more on that in a minute.) Small caps are about as expensive as they've ever been. Their price-earnings ratio -- based on operating earnings over the past 12 months -- is 23 percent greater than the P/E of the 300 largest U.S. companies, reports the Leuthold Group, a Minneapolis-based investment research firm. That premium is the second-highest since Leuthold began tracking the measure in 1983. (It was slightly higher in 2011). Just look at the numbers. The 300 largest companies trade at a bit less than 16 times estimated 2014 earnings. In contrast, small caps -- which Leuthold defines as stocks with a market value (share price times number of shares outstanding) of less than $3.3 billion -- trade at an average price-earnings ratio of just under 20. What could spark a sell-off? DeSanctis voices several concerns aside from valuation. First, the small-cap earnings reports in the fourth quarter were "sloppy," he says. Year-over-year earnings growth has been a robust 12 percent, but more companies than usual have reported earnings below analysts' estimates. Second, he thinks the Federal Reserve's tapering of its bond purchases will lead to greater volatility in the stock market. "The pickup in volatility is bad for small caps," he says. Third, DeSanctis says, analysts are wildly over-optimistic about earnings for the coming 12 months. On average, analysts predict that small-cap earnings will rise 20 percent, he says, but those forecasts are "very unrealistic." He estimates 12 percent earnings growth. When companies report disappointing earnings, the market almost always punishes their stocks. Fourth, bargains in small-cap land are scant, DeSanctis says. "Every stone has been overturned." Only 10 percent of the stocks in the Russell 2000 sell for less than 10 times estimated earnings. Companies in the Russell without earnings -- which represented 12 percent of the index's market value -- led the index last year, an event DeSanctis calls "awfully strange." Anytime speculative stocks lead the market, you should be concerned. Just a bit more than one-third of the firms with no profits were in health care, mainly biotechnology. Small-cap biotech stocks have soared 72 percent from the start of 2013 through Feb. 17. Many, if not most, of these companies expect to remain unprofitable for years to come, are looking for more financing and have just one or two compounds in the early stages of testing. Most such compounds never even get close to being approved for sale. and if they do get regulatory approval, the process can take years. These biotech stocks trade at an average of 27 times revenues -- that's revenues, not earnings. That's about 50 percent more than average. The only time they were more richly priced was just before the popping of the tech bubble in 2000. The biotech industry may be approaching a turning point in drug development, and biotech companies are targeting major diseases, including cancer, dementia and heart disease. But as we learned during the tech meltdown, even if you invest in a company that is changing the world, you stand a good chance of losing money if you pay an insanely high price for its stock.