Saturday, December 31, 2011

Seeking Alpha: Multi-Color - An Emerging Leader In An Unknown Market

Quick! Name a company that manufactures the labels that go on the food, beverages, or consumer goods that you buy at the store every week. The odds are very good that, unless you work in the field, you cannot name one. Product labels are ubiquitous and a $30 billion global industry, but a hugely fragmented market. Multi-Color (Nadsaq: LABL) is looking to change that through a combination of innovative internal product development and acquisitions.

Labels Are Everywhere...
Maybe it's too obvious to point out that almost everything on a store shelf has a label on it. Not only are labels legally required on many products, but labels represent a final marketing touch that companies can use to make their products pop out from the competition and draw the attention of shoppers. While this is a large business, $30 billion worldwide and $9 billion in North America, it is incredibly fragmented – Multi-Color is the #2 player in North America, but holds less than 3% share and is one of only seven companies with more than $200 million in revenue.

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Multi-Color: An Emerging Leader In An Unknown Market

Friday, December 30, 2011

Seeking Alpha: Another Pullback, Another Opportunity in First Cash Financial

The history of pawn shop operator First Cash Financial (FCFS) has always been marked by pullbacks and retracements, and those have often been good times to reload on what has been an excellent decade-long growth story. Although concerns about the health of the Mexican operating environment and the direction of gold have pulled this stock back from its highs, First Cash remains a high-growth/high-return play with a big international kicker.

A Dose Of Reality To End The Year
Although First Cash had enjoyed a pretty good run for much of 2011, the stock has weakened lately on worries about the health of the company's Mexico operations. Supplying over half of the company's revenue and a lot of the growth, conditions in Mexico have weakened in part due to violence in Northern Mexico, some reduction in loan demand as the economy softens, and lower loan-to-value ratios as the company works to maintain margins and pricing discipline. Making matters a little worse, a weakening peso is a threat to earnings as well.

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Another Pullback, Another Opportunity In First Cash Financial

Seeking Alpha: Tiny Hurco Looks For A Big Recovery

The global recovery has been largely unimpressive and uneven, with stubborn unemployment in the U.S., sovereign debt and bank capital worries in Europe, and inflation worries in many of the fast-growing emerging markets. That has led to an uneven recovery in tiny machine tool company Hurco (HURC). Although Hurco has been punished along with most industrial concerns this year and there are definitely reasons to worry about the company's large European exposure, value-oriented investors interested in “companies that make stuff” should definitely consider this name as a 2012 recovery idea.

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Tiny Hurco Looks For A Big Recovery

Seeking Alpha: FEMSA Richly Valued, But Rich In Growth Opportunities

Like most other emerging markets, 2011 was a disappointing year for Mexico. Despite a drop of worse than 20% in the Bolsa, consumer products concern FEMSA (FMX) had a quite a strong year. While FEMSA's stock is no longer a bargain, patient investors may yet see further growth in the company's core OXXO franchise as well as new growth initiatives and capital redeployments that could build meaningful long-term value.

The Future In C-Stores
Although FEMSA's interests in Coca-Cola FEMSA (KOF) and Heineken are nothing to ignore, the company's OXXO convenience store franchise is really the story right now. With over 9,000 stores and about 5% share of Mexico's food and convenience retail market, OXXO is the dominant C-store franchise in Mexico and one of the most profitable retailers in the region – surpassing the likes of WalMex (WMMVY.PK), Cencosud, and CBD (CBD).

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FEMSA Richly Valued, But Rich In Growth Opportunities

Seeking Alpha: A Bumpy Ride For Commercial Vehicle In 2011

Arguably the nicest thing that can be said about Commercial Vehicle Group (CVGI) for 2011 is that the company was not alone and performance could have been even worse. Although heavy duty truck production rebounded well in 2011, major truck and truck component manufacturers had a thoroughly miserable year. Down nearly 50%, CVGI's year was bad, but then so too were those of Accuride (ACW) (down almost 60%), Navistar (NAV) and PACCAR (PCAR) (both down about 35%), and even the oft-popular Cummins (CMI), whose stock is down about 20%.

With truck production in 2012 still looking fairly solid at this point, is a rally in truck-related stocks in the cards? Perhaps even more to the point, is Commercial Vehicle Group the way to play that rally?

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A Bumpy Ride For The Commercial Vehicle In 2011

Investopedia: ACE And Arch Capital - Can Investors Look To These A-List Insurers?

Hardly anyone seems to have noticed, but 2012 has been a pretty good year for some of the large corporate insurers. True, there have been natural disasters this year and the rate environment isn't great, but many of the top players like ACE (NYSE:ACE), Arch Capital Group (Nasdaq:ACGL) and Renaissance RE (NYSE:RNR) have seen their stocks solidly beat the market this year. Of course, it's not all perfect in P&C and reinsurance - companies like XL Group (NYSE: XL) and PartnerRe (NYSE:PRE) have seen their stocks sell off this year. (For additional reading, see When Things Go Awry, Insurers Get Reinsured.)

The question for investors, though, is whether the recovery in 2011 has taken away the value in top-notch names like ACE and Arch Capital.

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Thursday, December 29, 2011

Investopedia: Neogen Is Almost Cheap

Investors who want to play the really interesting stories in med-tech have to be ready to act fast or step up when times look uncommonly tough. That's about the only way to get a decent valuation on stocks like Intuitive Surgical (Nasdaq:ISRG), Cepheid (Nasdaq:CPHD) or Illumina (Nasdaq:ILMN), and that seems largely true for animal and food safety specialist Neogen (Nasdaq:NEOG). Although valuation and earnings quality are still problematic here, these shares also highlight the importance of being up-to-date on research and able to pull the trigger quickly.

A Disappointing Second Quarter  
Although Neogen doesn't generally step far out of line, this quarter was a notable exception. Revenue rose just 2% this quarter, not only missing the averaged estimate but missing the low-end estimate as well. Animal safety revenue was up just 1%, due at least in part to lower activity in the GeneSeek agricultural genomics business. Food safety was hardly stellar, though, as revenue was up just over 3% this quarter.

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Investopedia: Is Ingersoll-Rand's Bar Finally Low Enough?

For all the talk of restructurings, initiatives and goals, the reality is that companies generally stay more or less in their historical slots - good companies continue to be good companies and laggards continue to lag. That makes it difficult to have a lot of faith in the idea that Ingersoll-Rand (NYSE:IR) is underpriced and primed to be a solid stock over the long term. Although IR does have some solid businesses, there is just simply no record or habit of outperformance here and investors bet on that at their peril.

Ample Skepticism  
Ingersoll-Rand certainly lives in a tough neighborhood these days, as not only have industrials been weak in general, but those with above-average exposure to areas like construction have had an even tougher go of it. That said, Ingersoll-Rand has still suffered more than most; it's 2011 performance certainly trails the likes of United Technologies (NYSE:UTX), Johnson Controls (NYSE:JCI), Honeywell (NYSE:HON) or Dover (NYSE:DOV).

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Seeking Alpha: Can Brasil Foods Hit Some Impressive Goals?

Brazilian meat company BRF-Brasil Foods (Nasdaq: BRFS) has had a solid run already. Basically a marriage of convenience between Perdigao and Sadia prompted by hideous derivative losses at Sadia, Brasil Foods has nevertheless formed itself into an impressive Brazilian food concern with significant export prospects. Perhaps even more to the point, in a year where most Brazilian equities fared quite badly indeed, this one did fairly well. Of course, the more important consideration is whether there's money to be made yet from this name.

A Known Quantity In A Major Emerging Market
Although far from a household name in the United States, Brasil Foods is in some respects a Brazilian version of Tyson Foods (NYSE: TSN). Like Tyson, Brasil Foods operates in a variety of protein markets, including chicken, beef and pork. Unlike Tyson, and perhaps more like Hormel (NYSE: HRL) or Sara Lee (NYSE: SLE), Brasil Foods has a sizable branded business as well.

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Can Brasil Foods Hit Some Impressive Goals?

Seeking Alpha: BB&T Gets Little Credit Where Credit Is Due

Although it never swirled the drain like many larger and better-known banks, and was aggressive in dealing with its sour loans, large regional bank BB&T (BBT) has to fight to get much respect from the analyst and institutional investor community. Given that the market seemingly believes that the prior decades of top-tier performance were a mirage, investors can still buy into a solid and growing banking franchise with relatively modest expectations built into the price.

Still Hungry For More
BB&T has seldom been shy about doing deals and little has changed in recent times. The company was able to acquire Colonial as a byproduct of the credit crisis and recently reached a deal with BankAtlantic to essentially buy that company's good assets without taking on the bad. This deal, coming at the cost of a 9% deposit premium) will vault BB&T from #14 in Miami to #6 and significantly enhance its Florida footprint – one of its few remaining market share weak points. Based on other recent deals (including PNC's (PNC) deal for Royal Bank of Canada's (RY) U.S. assets and the Comerica (CMA)-Sterling deal), BBT paid a fair price, particularly given the much-reduced credit risks.

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BB&T Gets Little Credit Where Credit Is Due

Investopedia: 2011 In Review - Pharmaceuticals

When considering the performance of the pharmaceuticals sector, an investor is almost always challenged with the question of definitions. Simply put, what exactly is a pharmaceutical company and where are the lines between "biotech," "specialty pharmaceutical," "generic," and regular ol' pharmaceutical companies? (For related reading, see Evaluating Pharmaceutical Companies.)

Leaving aside the issue of nomenclature, and acknowledging that there is some subjectivity involved in who is included or left out, this was actually a fairly strong year for the sector. True, fewer people are seeing the doctor, high unemployment means fewer people on insurance rolls, and overall health care spending has not been very strong. Nevertheless, the market has warmed to these stocks, as the iShares Dow Jones U.S. Pharmaceuticals ETF (ARCA:IHE) has handily beaten the market this year and risen by a solid mid-teens percentage.

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Investopedia: 2011 In Review - Semiconductors Get Chipped

Expectations for a tough year in semiconductors were already starting to build in late 2010, but most analysts and many investors have been surprised at the magnitude and length of the downturn. While end-user demand has remained relatively positive in most markets, order rates have slowed significantly and many chip stocks have taken a through bludgeoning for the year. (To know more about the technology industry, read A Primer On Investing In The Tech Industry.)

Although industry stock indices can sometimes be misleading, the greater than 10% drop in the Philadelphia Semiconductor Index(SOX) is at least a starting point for framing the discussion.

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Seeking Alpha: Alnylam Looks Nearly Left For Dead

By no means is it easy to try to launch an entirely new class of pharmaceuticals, but that is essentially what Alnylam Pharmaceuticals (ALNY) has set out to do. Despite some encouraging (albeit very early) signs of success, investors have very much taken note of Big Pharma's increasing skepticism towards what this company is trying to do. Consequently, the stock trades for little more than the cash on its books despite a promising pipeline that is only getting started in human studies.

The Long March
Investors who have high hopes for Alnylam's RNA interference (RNAi) technology may want to take a page from the history books. Although Amgen (AMGN), Biogen Idec (BIIB), Johnson & Johnson (JNJ), and Roche (RHHBY.PK) have all had success with recombinant protein and monoclonal antibody drugs, the reality is that the science underpinning these drugs really started early in the 20th century and it took more than a decade for promising (and Nobel Prize-winning) research in the 1970's to actually result in approvable drugs.

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Alnylam Looks Nearly Left For Dead

Seeking Alpha: Accuray Has to Turn Short-Term Pain Into Long-Term Gain

If the first six months are any indication, Accuray's (ARAY) acquisition of TomoTherapy hasn't really pleased anybody. Investors have seen steady erosion in their position value, while clinicians seem unimpressed or even confused about the purported benefits of this tie-up. All of that said, these are early days. Accuray already seems to be effecting a turnaround in the Tomo service operations and given the overall med-tech weakness in 2011, it may well be too soon to declare this merger and this company a failure.

Bad News First – A Tough Market Getting Tougher
Accuray is a small fish in a tough pond. Radiation therapy systems are large, expensive commitments for hospitals to make and that makes it all the more difficult for a small would-be player like Accuray to unseat established giants like Varian (VAR). Moreover, difficult financial markets have not helped hospital capital budgets and reimbursement pressures continue to constrain the radiation market.

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Accuray Has To Turn Short-Term Pain Into Long-Term Gain

Seeking Alpha: Will AES Finally Make Good In 2012?

Waiting for global electrical utility operator AES to pay off as an investment has been a lot like waiting for Godot, though I don't remember so many disappointments in Beckett's play. Although AES has a great collection of power generation assets, it has for some time now and management has never yet managed to wring much value out of them. With new management and a new plan, perhaps long-suffering investors will see some rewards for their patience in 2012.

The New New Plan
Long-term investors in AES have heard enough new plans over the years that they should well be skeptical. In particular, AES has a long history of shuffling the deck – selling this or that project and investing hundreds of millions into the next “big thing” all in the hopes of generating some real returns from a large asset base. Heretofore, it hasn't worked out so well and investors would have frankly done better with a money-market account for the last decade.

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Will AES Finally Make Good In 2012?

Investopedia: 2011 - Another Sick Year For Larger Med-Tech

Healthcare may not have been in the emergency room, or even the ICU, during 2011, but this sector was sick from beginning to end. Unfortunately, the story that was true in 2010 is still true today - higher unemployment means fewer people with health insurance, and even those with coverage are more nervous about taking time off or meeting their copays. At the same time, hospitals and the federal government continue to draw hard lines on pricing, and there have been few innovative product launches to stimulate new markets.

Just to frame the discussion, the Dow Jones U.S. Medical Devices Index Fund (NYSE:IHI) has fallen more than 5% year-to-date as of this writing.

A Very Familiar Name on Top
Yet again, one name dominated the list of top-performing med-techs. Intuitive Surgical (Nasdaq:ISRG) is still really the only game in town when it comes to surgical robots, and demand for these devices has remained high despite a fairly conservative environment for hospital equipment. Intuitive has seen revenue rise nearly 30% over the trailing twelve months, while the stock has jumped nearly 70%. Trading at over 23 times EBITDA and nearly 10 times revenue, this is hardly an undiscovered bargain in the space, but it does offer the growth that institutional investors are so desperate to find. (For related reading, see A Primer On The Biotech Sector.)

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Wednesday, December 28, 2011

Investopedia: 2011 In Review - Energy Services Come Up Short

There's arguably no such thing as a dull year in energy. In 2011, oil prices broke out over $110 in the late spring, only to ultimately bottom out below $75 in mid-fall before recovering back in the $90s. Although natural gas prices did break above $5 early in the year, most of the year has seen a steady erosion in prices and is close to flirting with the $3 mark.

With the market apparently flooded with natural gas, it is perhaps no great surprise that energy service companies have not been so strong in 2011. Although overall activity has not dropped as much as in prior "bad years," Wall Street has nevertheless seen fit to move these stocks down by about 10% on a sector-wide average.

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Investopedia: 2011 In Review - The Worst-Performing Mutual Funds

Given that there are thousands upon thousands of funds and trillions of dollars under management, mutual funds are a critical component of the investment scene. Many investors have a large percentage (if not all) of their retirement savings in these vehicles and though there is little need for day-to-day assessment, a periodic review is worthwhile. To that end, then, it is worth exploring where mutual fund investors saw the worst returns for 2011.

Readers should note that this was written with two weeks left in December, and final results may be somewhat different. Moreover, this analysis includes only funds that are open to new investment, have minimum initial investment requirements below $10,000, and assets under management of at least $100 million. (You might be carrying more risk than you think if your fund invests in derivatives. For more, see A Brief History Of The Hedge Fund.)

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FinancialEdge: A Look At The Eurozone In 2012

With the European sovereign debt crisis well into its third year and all but certain to continue in 2012, investors may well be weary of the entire subject. Unfortunately, the tendrils of this crisis reach far and wide, influencing not only the banking system and economy of Europe, but of the larger world as well. Given that Greece is hardly in the clear, fears still surround the situation in Italy, and Spain and Portugal are still in a precarious state, investors may well be asking if Europe's problems will ever end. (For related reading, see The Contrarian Play In Europe.)  
The State of Things Today 
After multiple rounds of extensive and coordinated intervention and outright manipulation on the part of Western central banks, it seems that government bankers have at least called the markets here near the end of 2011. Dollar and euro liquidity seems to be readily available (though not always on great terms), and worries of failed bond sales seem to be fading.

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Investopedia: 2011 In Review - How Did The Biggest Mutual Funds Perform?

Love them, hate them, embrace them or ignore them, mutual funds are a huge business; a multi-trillion dollar business. It is frankly the rare investor that doesn't hold at least one mutual fund; check the cash in your brokerage account, it's probably a money market mutual fund. It's far and away the most common investment vehicle in most investors' portfolios.

With that in mind, it is worth investigating how the biggest funds performed for 2011.

The $100 Billion Club 
Although the PIMCO Total Return fund has an unthinkably high AUM at over $240 billion, the fund nevertheless managed a positive return for the year; as of this writing, the total return for 2011 is just above 3%.

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Tuesday, December 27, 2011

Investopedia: 2011 - A Look Back At Gold Stocks

This past year was a curious one for the gold sector. While a lot of attention seemed to go toward the daily ups and downs of gold prices, the incessant wrangling over debt and budgets in much of the developed world, and the ongoing sovereign debt crisis in Europe, there were some interesting developments below the surface. Although the price of gold and the performance of gold miner stocks have never been in one-to-one lockstep, perhaps 2011 marks the beginning of an even greater independence in these trading patterns. (For more, see 5 Best Bets For Buying Gold.)

For Gold Itself, Not a Bad Year  
At the most basic level, gold had another strong year. While the year is not yet complete and the final tallies of the major market indexes are not yet written, it is all but inconceivable that 2011 will close without a fairly sizable performance gap in the favor of gold. As of this writing, the S&P 500 is basically flat for the year, while the SPDR Gold Shares (ARCA:GLD) is up better than 20%.

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Monday, December 26, 2011

Investopedia: Is Micron A Call Option On Consumer Electronics?

Once again Micron (Nasdaq:MU) has disappointed investors relative to expectations, but that may not really be all that important anymore. The biggest question is whether the memory space has dug out its trough for this cycle or is about to do so soon. For all of the consumer electronics headwinds, the fact remains that Micron is still one of the stronger players, and demand will rebound eventually. Although Micron is really not a good candidate for buy-and-hold, it may have value as an expiration-free call option on a broader sector recovery. (To learn more, check out Options Basics.)

Do Poor Results Matter?  
Micron posted results that are frankly not very impressive and once again missed average expectations (making it three in a row). Revenue fell 7% from the year-ago level and about 2% from the prior quarter. It wasn't all bad news, though. DRAM revenue was basically flat (as double-digit increases in volume offset double-digit decreases in price), but NAND flash product revenue rose about 6% from the fourth quarter.

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Friday, December 23, 2011

Investopedia: EMC A Name To Consider In A Tough Market

The chicken littles of the financial world are certainly getting their chance to spread their wings a bit. Nobody seems to be in any rush to predict great things for the global economy in 2012 and the best that can be said of the European situation is that it's getting worse at a slower pace. When Oracle (Nasdaq:ORCL) disappointed the Street with a soft earnings report a few days before Christmas, it was just like squirting lighter fluid on a campfire.

Investors cannot afford to be blithely confident about any assumptions in IT. However, it is hard to see how EMC (NYSE:EMC) isn't a bargain at today's prices. While the company is vulnerable to weakness at home and in Europe, and clearly needs customers to keep spending, data storage is a critical IT priority for many companies and should keep EMC in relatively better shape.

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Investopedia: Best Buy Gets Run Over By A Reindeer

For a company that finds itself needing to validate its big-box model and avoid going to the same elephant graveyard as Borders and Circuit City, Best Buy (NYSE:BBY) has certainly stepped in it again, and this time right before Christmas. Several news outlets, including the Wall Street Journal and PCMagazine, are reporting that Best Buy has been unable to fulfill online orders made in the weeks following Black Friday and has instead canceled these orders.

Too Popular for its Own Good?Unfortunately, Best Buy has said almost nothing publicly on this issue apart from an emailed statement to a FOX affiliate in Minneapolis, but from what information is out there, it seems that unexpectedly high demand and supplier shortages have led the company to cancel online orders made in the past few weeks. Looking through message boards and online forums at both Best Buy and shopping websites suggests that it's not a complete disaster and largely limited to items like the Sony (NYSE:SNE) PlayStation and Fujifilm AX-350 camera. Even still, Best Buy was hardly proactive about this and it looks like there are going to be some supremely irritated and newly-former Best Buy shoppers this holiday season. (For related reading, see The 4 Rs Of Investing In Retail.)

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Investopedia: TIBCO And The GARP Paradox

Value investors, and their quasi-traitor cousins GARP investors, often find little to buy in the software space. All too often, any software company priced like a bargain is likely to struggle to grow much (and will likely underperform the estimates that make it look cheap) or get much love from the typical tech investor crowd. That makes TIBCO (Nasdaq:TIBX) an intriguing but risky idea. While this company's valuation and their position as the last small independent integration vendor are appealing, any value investor is wise to be cautious about why this software stock seems appealing. (For related reading, see Stock-Picking Strategies: Value Investing.)  

A Fine End to the Year  
Despite the disappointing Oracle (Nasdaq:ORCL) reports that spooked investors, TIBCO reported a pretty good quarter. Revenue rose 20% for the quarter and slightly beat the average estimate. Growth was a little stronger in the slightly larger service/maintenance segment (up about 22%), while the licensing line showed around 17% growth and the company boasted of 28 deals over $1M for the quarter.

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Investopedia: ABB In Decent Shape No Matter What In 2012

The broadly-defined industrial sector has weakened going into 2012, due at least in part to increasingly challenging comps and negative view of the global economy in the year ahead. Although ABB (NYSE:ABB) does not often get its due credit for the quality of its operations, and there are some legitimate areas of potential concern, this stock looks just too cheap heading into an uncertain 2012.

Low Growth but Improving Orders
Recent performance at ABB has not been so hot, with just 4% organic growth. Power hasn't been bad and ABB has held its own with Siemens (NYSE:SI), Alstom and Schneider. Automation, especially process automation, has been a bit more problematic. Given that companies like Siemens, Honeywell

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Investopedia: 2011 In Review - Railroads

Maybe any sector gets interesting after a while if investors follow it closely enough. It was definitely interesting to watch the trends in railcar traffic and Wall Street perception for railroads this year. All in all, this was quite a solid year for the industry and the "average" railroad not only beat the market, but beat it by a healthy margin. Although the linkage between railroads and ducks is not exactly obvious on first blush, 2011 showed that they have at least one thing in common; things may look consistent on the surface, but there can be a lot of turbulence below the waterline.

Rail traffic went on a noticeable skid from the early spring and into the summer, feeding a lot of fears that industrial growth had stagnated in the U.S. and the economy was at risk of slipping back into recession. So far, though, it looks like this slide was just part of the seasonal pattern in traffic that has held true for many years now. Not only has rail traffic rebounded nicely, but intermodal activity continues to accelerate and pricing has been solid. (For related reading, see A Primer On The Railroad Sector.)  

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Investopedia: 2011 In Review - The Year In Growth Technology

With the maturation of many former growth stocks, the NASDAQ Composite is no longer a reliable bellwether for growth and it can be difficult to find reliable growth stock indices; the Russell 1000 Growth Index, for instance, includes stocks like Exxon Mobil. Suffice it to say, it does not seem especially controversial to say that 2011 was a pretty mixed year for growth stocks. Entire sectors, like semiconductors, green energy and networking/communication equipment, were weak and once-leading sectors like cloud computing slowed to some extent. Nevertheless, as is almost always the case, there were still notable stories for the year.

A Handful of Good Performers 
While the story of 2011 may be more about the disappointing stock performance of growth tech stocks, there were still some worthy exceptions. Apple (Nasdaq:AAPL) continues to simply defy gravity, returning better than 20% gains in the year while also being one of the companies that managed to generate growth in PCs, smartphones and tablets.

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Investopedia: 2011 In Review - Software Stagnates

Technology has not had a great year in 2011, and that's certainly true in the software space. While ETFs are not often perfect benchmarks, looking at the iShares S&P North American Technology - Software Index Fund (ARCA:IGV) shows a year-to-date decline of more than 4%. As is so often the case, though, even a down year for an overall industry can still be a very strong year for individual stocks. What worked and what didn't in 2011, in the software space? (For related reading, see A Primer On Investing In The Tech Industry.) 

Diversity at the Top 
Looking at some of the top performers in software this year, it is notable that there isn't necessarily all that much unifying the stories. NetSuite (NYSE:N) has been the strongest software company of any size this year, nearly doubling due both to ongoing growth in cloud computing and renewed takeover speculation in recent weeks.

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Investopedia: Winn-Dixie Gets An Early Gift

With only six days left 'til Christmas, BI-LO decided to finish its shopping list in a big way, announcing Monday that it was acquiring Winn-Dixie (Nasdaq:WINN) in an all-cash deal. Although some shareholders may lament that BI-LO's acquisition sells short Winn-Dixie's ability to turn itself around, the fact is that getting 85% or 90% of a company's possible value in straight-up, no-risk cash is not such a bad deal.

The Deal  
Winn-Dixie announced Monday morning that it had accepted an offer from privately held BI-LO to sell itself for $560 million or $9.50 per share in cash. That price represents a 75% premium to Friday's close, but only tiny premiums on the basis of EV/revenue or EV/EBITDA multiples. (For related reading, see Value Investing Using The Enterprise Multiple.)

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Thursday, December 22, 2011

Investopedia: Oracle Shovels Coal On The IT Sector

Oracle (Nasdaq:ORCL) certainly is no longer among the spectacular growth stories of tech, but it has at least two things going for it: a huge breadth of business and a startling record of consistency. It also happens to be a technology bellweather, and its off-kilter reporting schedule is often looked at by investors as a thermometer for the tech sector as a whole. Consequently, Oracle's rare and broad disappointment on Tuesday evening is sending chills through the tech sector and giving investors one last good nightmare before Christmas.

A Rare Stumble  
This was the first miss on quarterly earnings from Oracle in a decade; a rather remarkable record given the ups and downs of IT spending and the sheer scale of all the moving parts at the company in that time.

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Investopedia: Shaw Has Value, But Needs A Spark

Value traps can drive investors to distraction; nothing is quite as frustrating as owning a quality company but seeing the market ignore its long-term virtues because of short-term challenges. Such could be said for Shaw Group (Nasdaq:SHAW). Although the construction of new nuclear plants looks like a non-starter, the company still has a key position in servicing existing plants, not to mention ongoing opportunities in markets like environmental remediation for utilities and more general industrial and manufacturing construction. The question for investors, though, is how much pain they can tolerate in the short run as capex spending seems to be stuck on pause.

A Decent Start to the Year  
Shaw gave some encouragement to its shareholders on Wednesday morning with its earnings release. Revenue fell 2% from the year-ago level, but was in line with analyst expectation. Although the company picked up some business in the Mideast and Latin America, Asia and Europe were notably weaker. Within the segments, not a lot changed - the company's large power business saw revenue fall about 2%, while plant service and environmental/infrastructure traded off above-average and below-average growth.

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Investopedia: Can Lindsay Pump Out More Growth?

If only investing were as easy as saying "crop prices are strong, so buy stocks like Potash (NYSE:POT), Deere (NYSE:DE) and Lindsay (NYSE:LNN)." Although global crop prices were indeed strong in 2011, they were actually fairly weak in the latter half of the year and quite a few ag-related stocks have been weak as well. Making matters worse, Lindsay's irrigation business is almost as volatile as the commodities themselves, making this a consummate feast-or-famine type of equity.

A Good Start to the Year  
Lindsay doesn't often do as expected; surprises good and bad are more the norm. In this quarter, it was a good surprise - revenue rose 34% and easily topped the high end of the analyst guesses. Growth was driven by the irrigation business where revenue climbed 68% on fairly equal growth in domestic and international sales. The almost equally volatile infrastructure business saw revenue drop 37%, due in large part to shortfalls in the Quick Moveable Barrier (QMB) business.

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Investopedia: 2011 In Review - Conglomerates

Conglomerates, virtually by definition, are an unwieldy and heterogeneous lot. Many have their fingers in multiple industry groups, but not necessarily in the same or overlapping categories. Consequently, it's rare to find sector funds or sector performance statistics that have any particular utility. That said, a look at a select list of top conglomerates shows that this was a pretty challenging year for the sector.

Only A Few Winners 
Admittedly there's some selection bias here, as there is no standard definition of a "conglomerate" and many would-be conglomerates are folded into other industrial or financial categories. Nevertheless, it looks like the winners in the conglomerate space were few and far between.

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Investopedia: 2011 In Review - Industrials Show Some Rust

In a market where it is hard to find a lot of notable winners, industrials had a fairly difficult 2011. Although real-time results have stayed pretty strong, more and more companies have warned the Street that the easy times are over and that growth rates are going to start normalizing to more modest numbers. Making things worse, Europe is gasping and wheezing as its largest banks struggle with their capital and growth in emerging markets seems to be slowing.

A Few Pockets of Strength  
There weren't a lot of strong stories this year, but there were a few and a lot of them were in the aerospace and defense sector. Boeing (NYSE:BA), for instance, has risen almost 10 and 12%  this year, as commercial shipments are finally picking up with the introduction of new aircraft. Lockheed Martin (NYSE:LMT) has likewise delivered a positive year, despite fears of large government spending cutbacks. Goodrich (NYSE:GR) far and away takes the top prize, though, as its impending buyout by United Technologies (NYSE:UTX) has driven the stock to over 40% returns this year. (For related reading, see Understanding Leveraged Buyouts.)

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Investopedia: Arcos Dorados - Rare Or Overcooked?

What happens when emerging markets start seeing better incomes and higher standards of living? In the earliest days, it means cell phones, televisions and motorbikes. Later, it can mean adding more protein to the diet. Still later, it often means spending on luxuries like dining out, and American quick-service restaurants often represent affordable luxury in many parts of the world.

To that end, Arcos Dorados (NYSE:ARCO) is not only a play on improving economic conditions in Latin America, but a way to play one of the faster-growing markets for the proven and globally-successful restaurant chain McDonald's (NYSE:MCD). While it's one of the very few direct investment plays available to American investors within this trend, it's not exactly the cheapest stock by many standards.

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Investopedia: A Better 2012 Would Be Great For Actuant

Wall Street has already made its early bets on the state of the economy in 2012, and the outlook is not very encouraging. That would be bad news for investors in a diversified industrial mini-conglomerate like Actuant (NYSE:ATU) if not for the fact that Wall Street is often wrong. Although Actuant has recovered nicely from the worst of the recession and does have increasingly challenging comparables ahead, any upside in 2012's economic performance could make this an undervalued industrial play.

A Good Start to the Fiscal Year
Perhaps this quarter will set the tone for a better-than-expected fiscal year and an undervalued stock getting some love. Actuant reported 23% revenue growth and topped the highest analyst estimate, though core revenue growth was a far more modest 7%. Growth was strong in both the industrial and energy categories, where revenue rose by a low-teens percentage organically. Electrical growth was more modest at 7%, while core growth in the engineered segment was flat.

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Investopedia: Better Still Not Good Enough For Navistar

This has been a tough year for companies with high exposure to the heavy-duty truck industry. Navistar (NYSE:NAV) has long had its own issues, though, including a messy balance sheet, problems with its new engine, and a generalized difficulty in producing strong economic returns. Although the company's shares are undervalued relative to what it could accomplish, management has a lot yet to prove.

Mixed Results to Close the Year  
Navistar missed analyst expectations on the top line, but not by a large amount. Overall growth of 28% wasn't bad, with operating revenue (excluding financing revenue) up 29%. Performance was pushed by 36% growth in trucks, while parts revenue rose 16% and engine revenue rose almost 9% on a 14% increase in shipments. Military revenue rose 36% this quarter and made up close to 20% of the quarter's revenue.

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Wednesday, December 21, 2011

Investopedia: Paychex Limping Through The Cycle

Sometimes even strong management teams are handed macro situations that just overwhelm the inherent quality of their business. With new business creation still weak and pronounced sluggishness in small/medium-sized businesses (SMB), there's not much that Paychex (Nasdaq:PAYX) can do right now. Although this remains a quality play on an under-penetrated market that is key to future growth in the U.S. economy, the valuation already bakes in an eventual recovery.

Sluggish Second Quarter Performance  
Although Paychex arguably did a fine job of controlling that which was in their power to control, the second quarter had some definite weakness. Revenue rose less than 7% and missed not only the average analyst guess, but the low end of the range as well. Growth was even weaker (up less than 5%) when excluding the acquisitions of SurePayroll and ePlan.

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Investopedia: The Challenge Of Figuring Out FedEx Is Worth

Some investors believe that it's best not to overthink things or rely too much on cold numbers. Instead, they believe in buying into brands, business models and growth stories, with the idea being that the numbers eventually work themselves out. Much as it goes against my strong stock fundamentalist instincts, I can see a point here with a stock like FedEx (NYSE:FDX). Clearly, this company's brand and enormous global logistics infrastructure is worth quite a lot. Yet, the company's past returns on capital and free cash flow margin would suggest that today's apparently low valuation metrics deserve to be even lower still. (For related reading on free cash flow, see Free Cash Flow: Free, But Not Always Easy.)

An Encouraging Second Quarter 
FedEx showed meaningful progress on numerous fronts in its fiscal second quarter. Overall, revenue rose about 10% and this growth was well-balanced across the units. The very large Express business, which accounts for more than 60% of total revenue, saw growth of 10%, while the smaller Ground and Freight businesses grew 13 and 9%, respectively.

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Investopedia: The Investment Case For Cresud

Individual investors who don't count themselves among those wealthy enough to be so-called "qualified investors" have pretty limited options for playing the growth potential in agricultural commodities. Certainly there are now more commodity-specific ETFs than ever before, and investors can choose from among funds like Teucrium Corn (Nasdaq:CORN), the iPath DJ-UBS Livestock ETF (ARCA:COW) or more diversified options, like the Market Vectors Agribusiness ETF (ARCA:MOO).

Beyond that, though, it gets more difficult. There are a respectable number of fertilizer, seed, equipment and agribusiness stocks out there, like Potash (NYSE:POT), Tyson (NYSE:TSN) and Archer Daniels Midland (NYSE:ADM), but what about land? Farmland has been one of the best-performing asset categories in recent years, but there are almost no investment options for the individual investor. Argentina's Cresud (Nadsaq:CRESY) is one of the few exceptions. (For related reading, see 22 Ways To Fight Rising Food Prices.)

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Investopedia: Sanofi's Investment Prospects

Although Sanofi (NYSE:SNY) has not always gotten the attention that other major pharmas have drawn for their respective restructuring efforts, Sanofi has changed in some meaningful respects over the past few years. The company could still handle some of its internal operations a bit better, and there are definitely still some challenges to its revenue base, but investors would do well to consider one of the largest pharmaceutical companies in the world for their portfolios.

The Good  
Sanofi certainly has the scale that it takes to compete in the modern global pharmaceuticals market, as this is not only the fifth-largest drug company, but also one that is well-balanced between markets in the United States and non-U.S. markets. Moreover, the company has a sizable vaccines franchise and has been reinvesting capital in ancillary divisions like consumer health and animal care. (For related reading, see A Primer On The Biotech Sector.)

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Investopedia: The Worst ETFs Of 2011

With little real market news to talk about, December is often a month for totaling up the scores for the year and reviewing the winners and losers. While others have talked about the best-performing stocks and funds of the year, as well as discussing the goings-on in a host of industries, it's also worth taking notice of whose performance was simply not up to scratch. While the underperformance of most ETFs is simply a reflection of what's going on in the industry or index they mirror rather than the failings of a misguided manager, that's cold comfort for investors who held these funds for a large part of the year.

Resources Take a Pounding  
Although few commentators are calling this the end of the commodity supercycle, the reality is that 2011 was a terrible year for many commodity-focused ETFs. Only one major fund did worse than the Global X Uranium ETF (NYSE:URA), which fell almost 60% amongst fears that the nuclear plant disaster that followed Japan's earthquake and tsunami early in 2011 have ended the expansion of nuclear power for the foreseeable future. (For related reading, see Using ETFs To Build A Cost-Effective Portfolio.)

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Investopedia: A Minor Slip Sends Red Hat Skidding

Sometimes it seems that Wall Street drives the news more than the news drives Wall Street. In other words, investors interpret events and information in ways that are consistent with how they already want to view the world. Maybe that explains why stocks often sell off on good news or rise on bad news. In the case of Red Hat (NYSE:RHT), for instance, this software and service provider showed a fair bit of financial progress in the fiscal third quarter, but Wall Street seems hung up on a minor guidance revision and appears to be looking for an excuse to sell.

Solid Third Quarter Performance  
Red Hat announced that revenue rose 23% for the Q3, with subscription revenue up about 24%. Billings growth (which is revenue plus the change in deferred revenue) was up 23% for the period. For the quarter, Red Hat did well with large deals - signing 27 deals worth more than $1 million and 5 deals in excess of $5 million.

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Investopedia: AT&T's Bold Bid For T-Mobile Ends In Failure

Maybe there's some truth to the aphorism "nothing ventured, nothing gained", but AT&T (NYSE:T) has come up snake-eyes on its latest roll of the dice. In what had become not much of a surprise at all, AT&T announced Monday evening that it was abandoning its bid to acquire Deutsche Telekom AG's (OTCBB:DTEGY) U.S. operator T-Mobile because of what increasingly looked like insurmountable regulatory objections.

The News  
AT&T is abandoning its bid to combine with T-Mobile and become an even larger player in the U.S. mobile services market. This outcome is not all that surprising. Apart from the howls of self-interested parties like Sprint (NYSE:S), ample regulatory objections and blockades were raised to this deal. There's no doubt that it would have represented considerable consolidation (blending the No.2 and No.4 providers), though T-Mobile's position as something of a weak sister in the industry may have led AT&T to believe it could get the deal done. (For related reading, see How To Pick The Best Telecom Stocks.)

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Tuesday, December 20, 2011

Investopedia: ConAgra Reheats Some Leftovers

Are share buybacks a prudent return of capital back to its real owners, or a way for a management lacking in ideas and creativity to give the appearance of "doing something" and appease the Street? It's a relevant question when looking at ConAgra (NYSE:CAG), as this company has long been a laggard, and management seems slow to address many of the fundamental issues plaguing the company. There are fixable problems at ConAgra, but is this a management that can fix them?

Encouraging Second Quarter Results  
ConAgra reported 8% revenue growth for the fiscal second quarter, more or less matching the top end of the analyst range. Growth in the consumer business came in at over 4%, with solid mid-single digit price growth offsetting a small volume decrease. Commercial sales were considerably better, up 16% as price rose at a low-teens rate and volume posted a slight increase. ConAgra's commercial business has been stronger lately, though that needs to be seen in the context of prior underperformance. (Find out what these company programs achieve and what it means for stockholders. For more, see A Breakdown Of Stock Buybacks.)

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Monday, December 19, 2011

Investopedia: SonoSite Finds Its Deal

There was little mystery in seeing SonoSite (Nasdaq:SONO) get an acquisition bid. Not only has this relatively small manufacturer of portable ultrasound systems been a logical target for years, but the company began to actively and explicitly sell itself starting back in November. In a week that has seen another logical target (Synovis (Nasdaq:SYNO) get a bid from a not-so-likely buyer (Baxter (NYSE:BAX), the fact that it was Japan's Fujifilm that stepped up to buy the company makes this an a somewhat unusual story.

The Deal  
Fujifilm will be acquiring SonoSite for $995 million in cash, or about $54 per share. That's a 28% premium to Wednesday night's close and a 75% premium to the price of SonoSite's stock before it was widely known that the company was looking to sell. SonoSite is going out at a little more than three times trailing revenue, a multiple curiously similar to that of Synovis and one that is not all that robust by historical small-cap med-tech standards, but isn't so unreasonable given the performance of the company. (For related reading, see An Introduction To Small Cap Stocks.)

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Investopedia: Slower Doesn't Mean Stop For Joy Global

It is easy to understand how commodity and resource play investors are feeling nervous these days. The prices for major industrial commodities like coal, iron and copper have certainly come off their highs and ongoing attempts to tamp down inflation in China risks spoiling that story. Certainly the commodity markets are due for a pause, and investors with a few grey hairs probably already know that there are many ups and downs within broader commodity super-cycles. All of that said, while the fattest of the fat times may be in the past for Joy Global (NYSE:JOY) and the stock may have rougher sailing in the short term, the overall mining infrastructure play is not over yet.

Not Enough Joy to End the Year  
It seems pretty safe to bet that many analyst write-ups on Joy Global's quarter will focus on the company missing estimates, even though the misses were modest. On the top line, the company reported 27% overall growth and nearly 18% organic growth, missing the average estimate by a trivial amount. Growth was once again well-balanced, with surface equipment sales rising almost 21% and underground sales rising about 15%.

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FinancialEdge: Kim Jong Il's Death And The Markets

When news broke late Sunday night that North Korean dictator Kim Jong Il had died, there was pretty much an instant sense of uncertainty and nervousness in Asian markets. The reason for this unease is not hard to ascertain; North Korea is a desperately poor country with a huge military. If the new leader, Kim Jong Un cannot quickly cement his power and authority, there is the threat and risk of civil war, military provocation against South Korea and/or Japan, and a continuation (or escalation) of the brinksmanship that Kim Jong Il used to keep world powers ill at ease.

What will this change in power mean for the markets, both in Asia and in the United States?

Markets Generally Hate Uncertainty 
It was not surprising to see markets in South Korea and Japan sell off on the news of this change in North Korea. More than anything, markets hate uncertainty and there is now a gigantic red question mark where North Korean policy is now concerned. To that end, it is perhaps a bit surprising that gold was barely up as of early Monday morning.

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Investopedia: Research In Motion Sliding Toward The Cliff

There's a quote in one of Peter Lynch's books that goes something like "it's always darkest before pitch-black." Personally, I like to harken back to the quote that the light at the end of the tunnel is often an oncoming train. Take whatever snarky, pessimistic quote you prefer; Research In Motion (Nasdaq:RIMM) certainly deserves it. An arrogant and mis-run company is now paying the price for its mistakes and shareholders are looking at not only a long road back, but a road that may well lead to nowhere.

Third Quarter as Expected, But ... 
Research In Motion had previously alerted the Street to most of the salient details about this quarter, so the financial performance was not all that surprising, but it was still unpleasant to behold. Revenue fell 6% from last year, on a 1% shipment decline in smartphones. As it stands now, it looks like RIMM's smartphone market share has fallen apart 10%.

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Investopedia: Discover Still A Little Underappreciated

Discover Financial Services (NYSE:DFS) is really no longer the plucky up-and-comer. It's getting to the point where merchant acceptance of the Discover card is much more common than not, and the company is certainly a viable alternative to American Express (NYSE:AXP) when it comes to closed-loop systems. That said, the company still lags MasterCard (NYSE:MA) and Visa (NYSE:V) meaningfully, and investors have to balance out the potential benefits of future growth and M&A with the credit risks inherent to the business model.

A Solid End to the Year 
Discover's fiscal fourth quarter results ended the year on a relatively strong note. Revenue rose 13% as reported, with net revenue rising almost 23% from the year-ago level. Although the company's net interest income and margin was a little sluggish, that had a lot to do with student loans that the company acquired. Other metrics were pretty solid; receivables were up about 1%, credit card loans were up 3% and card sales volume was up 8% from last year.

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Investopedia: A Look At Yahoo's Past, Present, and Future

Flogging the rumors of a Yahoo! (Nasdaq:YHOO) buyout is a well-rehearsed move among financial journalists, over the last year or so. Certainly this one-time internet darling still captures a lot of attention, as did the stories about Microsoft (Nasdaq:MSFT) or Alibaba possibly acquiring it. In all of the discussions of what might happen to Yahoo!, though, it seems like there is relatively little acknowledgment that the company have still have its own independent future. (For other acquisitions, see Biggest Merger and Acquisition Disasters.)

Although going head-to-head with Google (Nasdaq:GOOG) is unlikely to start producing great economic returns, and the company has certainly missed out on many high-potential business endeavors, there are still a few things that Yahoo! does well. They just may not be the things that people immediately think about as long-term business opportunities.

What Yahoo! Was
Most readers are pretty well-acquainted with what Yahoo! used to be and what brought it to fame and recognition. Yahoo! was one of the first useful search engines on the web and arguably one of the first viable internet businesses.

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Investopedia: The Best New ETFs of 2011

Although 2011 has not been a great year for the equity markets, investor jitters haven't stemmed the growing interest in ETFs. Nearly 300 new ETFs came into being this year, a pretty remarkable number considering that there are now about 1,400 ETFs in existence on U.S. exchanges. 

What were the best among these newcomers to the market? That's actually a somewhat difficult question to answer, as "best" can have many different meanings. Obviously an investor who has been waiting many years for a particular type of ETF will see its entry as a very good thing indeed. Any discussion of the best can, and arguably should, reference performance, but investors should also not overlook another significant detail - fund size. ETFs often need a certain critical mass to be viable and it seems fair to argue that a fund's assets under management is a reflection of just how well it meets a particular market need.

Investopedia: 2011 In Review - Regional Banks Are Suffering

The best that can be said about regional bank performance in 2011 is that the smaller regional banks did less poorly than their larger brethren this year. In fact, as measured by the Keefe, Bruyette & Woods Regional Banking Index, regional bank stocks are down more than 7% on a year-to-date basis and down about 2% on a rolling one-year basis. That's better than the larger cap KBW Bank Index (which is down almost 24% on a year-to-date basis), but still well short of matching the S&P 500 this year.

Is there really much surprise in the performance of these banks? Consumers are trying to repair their personal balance sheets, property values and unemployment remain stubbornly disappointing, and loan demand is a mess, as generally only poor credit risks seem to be actively seeking loans. Were it not for the concerted efforts of the Fed to keep rates low, many banks would be in tough shape. (For related reading on the Fed, see How The Federal Reserve Manages Money Supply.)

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Sunday, December 18, 2011

A New Search Button

As some readers may already know, the "search" feature in the upper-left hand corner is worse than useless. I've added a new search function on the top of the left-most column and initial testing shows that it's much, much better.

So, I hope this helps any and all who've been frustrated in trying to find older posts I've made or articles I've written.

Friday, December 16, 2011

Investopedia: The Top Biotech Performers of 2011

This has really been a year of the "haves" versus the "have nots" in biotechnology. Although a few dedicated biotech ETFs have done rather well and there have been some huge individual outperforming stocks, the sector as a whole has not necessarily been all that strong. Still, for those companies that could deliver encouraging data, particularly in the fields of hepatitis and cancer, the market was more than willing to reward the stocks with a higher valuation.

Hepatitis C - The Story of 2011
If any one theme should leap out at biotech investors in 2011, it is the explosion of interest in companies targeting hepatitis C. It is not as though hepatitis C is a new disease, but a host of companies have finally developed compounds that look to offer major improvements in disease management and quality of life for the millions of people with this condition.

Two of the top three performing biotechs with current market capitalizations above $250 million are hepatitis C plays. Pharmasset (Nasdaq:VRUS) has delivered the sort of year that biotech investors dream about for 2011, with the stock up nearly 500% in the last year. The stock was already doing incredibly well on the basis of very strong clinical data in PSI-7977 trials - data that basically showed 100% response in early administration of the drug. This stock found another level, though, when Gilead Sciences (Nasdaq:GILD) stepped up and offered to pay a considerable premium to acquire the company.

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FinancialEdge: Can Research In Motion Be Saved?

The technology sector is a merciless market and there are few "fade into the sunset" stories. Instead, whenever and wherever there is success, a horde of rivals soon follow with the express intention of taking what you do best, doing it a little (or a lot) better and driving you out of business. The rise of Research In Motion (Nasdaq:RIMM) was unexpected and remarkable, virtually tethering a whole generation of workers to their jobs in a way never quite achieved before, but the fall has been just as remarkable. (For related reading, see Blackberry Continues Its Downward Motion.)

With the market having moved on from specialized one-function devices to do-everything smartphones, can Research In Motion adapt to and overcome the new competitive realities?

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Investopedia: Martin Marietta Puts Vulcan Between Rocks And A Hard Place

Sometimes business combinations are about growth and sometimes they are about survival ... and every once in a while they can be both. There's no questioning that the current market environment for aggregates (a catch-all for crushed stone, sand, and gravel) is pretty poor as construction and large-scale infrastructure projects have evaporated. Consequently, while Martin Marietta's (NYSE:MLM) bid for Vulcan Materials (NYSE:VMC) may seem at least a little opportunistic, it does take some risk out for both companies and leaves both investor groups with a lot of upside.

The Proposed Deal  
Although proxy materials from Martin Marietta suggest that these two companies have been talking about a deal for something like 18 months, Martin Marietta has apparently tired of waiting and debating. The company has launched a hostile stock-for-stock offer for its larger rival Vulcan.

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