Sunday, July 31, 2011

Investopedia: Plum Creek Timber Is Still A Little Warped

Timberland may be a great investment class, but it does not automatically follow that Plum Creek Timber (NYSE:PCL) is a great investment at any and all times. While these are indeed still down days for the residential building market (a major consumer of timber from saw logs) and real estate in general, Plum Creek is not looking all that cheap. Such is the dilemma when investors fully buy into the underlying soundness of a company's core business. 

Some Good, But More Bad in Q2 Results  
Plum Creek surpassed analyst expectations for second quarter revenue growth, but the company's 10% growth was bulwarked in large part by real estate sales. Timber revenue fell 5%, while revenue from timberlands sold for real estate jumped 84%. Sawlog volume was weak in general - hurt by bad weather in the Northwest and good weather in the South (which pressured prices and led Plum Creek to hold off on harvests). Prices were higher for Northwest products and lower for Southern, and the company saw more than one-quarter of its Northwest harvest go to China.

To read the complete piece, please click below:

Saturday, July 30, 2011

Investopedia: Eaton's Growth Still Industrial Strength

For all of the worries about another slowdown in the economy, many industrial conglomerates are reporting solid growth in calendar second quarter results. Eaton (NYSE:ETN) is clearly among them. What is interesting, though, is the extent to which this growth has been bulwarked by the emerging markets - a circumstance that is tiding over many of these companies in lieu of a stronger domestic market. 

Solid Second Quarter Results  
For the Q2, Eaton reported that revenue grew more than 21%. Stripping out acquisitions, foreign currency and the like, organic growth was more on the order of 14%. Unusual for many industrial companies, Eaton management also provides its opinion on end market growth, and it believes its end markets grew 12% in the quarter - suggesting some meaningful share growth for the company.

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Friday, July 29, 2011

Investopedia: Is The Worst Of It Over For Texas Instruments?

Sometimes "less bad" passes for better on Wall Street, and such may be the case for Texas Instruments (NYSE:TXN). Although the company's second quarter results and third quarter guidance don't suggest a rampant recovery in the chip sector, it does seem that business has stabilized. Even still, investors would likely do well to remain suspicious and cautious. 

A Second Quarter More or Less As Expected  
The results that Texas Instruments reported late Monday seemed more or less consistent with the company's earlier guidance. Revenue fell 1% from the year-ago period, but rose 2% on a sequential basis. Growth was boosted by strong results in embedded chips, held back by wireless, and analog was more or less in line with the company averages. 

To read the full piece, please follow the link:

Investopedia: Diverse Markets Boosting Dover

So far this has been a solid quarter for a wide range of industrial conglomerates. Investors can add Dover (NYSE:DOV) to this list, as ongoing strength in markets like materials handling, fluid management, microphones, and frequency control products are helping this relatively small industrial conglomerate post very attractive revenue and order growth. 

An All Around Solid Second Quarter  
Arguably the worst that can be said about Dover's second quarter performance is that it did not beat the analyst estimates by a huge amount. Nevertheless, the company reported 21% top line growth, 14% organic revenue growth, and order growth of 15%. 

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Investopedia: Tempest-Tossed Berkley

Storms both real and figurative have been buffeting the insurance industry for some time now. Loose underwriting standards and a drive for market share have kept a lid on premium price increases, storms and natural disasters have been whacking the loss ratios and a low interest rate environment - combined with default worries at national and local levels - has hampered investment income. 

In times like these, W.R. Berkley (NYSE:WRB) is a relatively safe harbor.

A Mix of News For Q2
In one very big respect, the second quarter was a bad one, but in many other ways it was a confirmation of real progress. Operating income was down about one-third from last year and that's the big negative take-away for investors.

To read the full piece, please click below:

FinancialEdge: Buying Power Around The World

Anyone who has traveled outside of North America has likely noticed that prices can be very different around the world. What are luxuries in some countries are relatively common in others and vice versa. Price is a central mechanism in economics as it represents the place where suppliers and consumers do business, so it is interesting to explore these differences and the factors that shape them. (If you want to take advantage of the increase in consumer prices, check out A Guide To Investing In Consumer Staples.)

Same Foods, Very Different Prices 
Food is a good proxy for some of the differences in prices between countries, as everybody eats and an egg is an egg wherever one may roam. While The Economist has long used its Big Mac Index as a means of measuring purchasing power parity (PPP) between countries, the Big Mac is simply one particular food item. It is interesting, then to explore some of the other discrepancies. 

Ground beef sells for about $3 a pound in much of the U.S., but nearly $6 in Australia and $11.50 in Taiwan. While the latter makes sense (there aren't large herds of cattle wandering Taiwan), Australia is a bit surprising with its ranching culture. Sticking with fruits of the bovine, milk retails for about $2.25 in the U.S., but only 70 cents in India and a little over a dollar in Brazil and South Africa. Curiously, milk in Hong Kong retails for about $2, while the price in Taiwan is more than twice as high.

To read the full column, please click below:

Investopedia: Evaluate Your Investments With SWOT Analysis

SWOT analysis can be a useful tool in evaluating and monitoring equity investments. Standing for "strengths, weaknesses, opportunities and threats," SWOT analysis was reportedly developed by Albert Humphrey in the 1960s and has become a staple concept in business management and investment evaluation. (To understand the qualities that make for a great company, investors must dig deep into "soft" metrics. Check out Qualitative Analysis: What Makes A Company Great?)

Most commonly used as a business planning tool, SWOT analysis can be used to evaluate products, divisions, companies and entire markets. It can also be used as an investment tool; giving an investor a handy snapshot of the potential advantages or disadvantages of a company's current positioning.

To read the primer, please click below:

Thursday, July 28, 2011

Investopedia: How Far Will Baidu Follow Google's Map

Often called the "Google (Nasdaq:GOOG) of China", Baidu (Nasdaq:BIDU) has indeed rewarded investors with exceptional growth for some time. While the Chinese internet market is far from mature, the question remains whether Baidu will look to become such a wide-ranging technology company. It is an interesting dilemma - stick and stay in a market that can still pay, or divert resources toward becoming a more well-rounded company.

Growth, Growth and More Growth  
Baidu reported that second quarter revenue jumped 78%, beating estimates by about 5%. The number of paying clients rose 17% from last year (and 9% from the first quarter), while the revenue per client spiked up 52% (and 29% sequentially).

Continue to the full piece:

Investopedia: Bard Not So Bulletproof

Diversified medical device maker C.R. Bard (NYSE:BCR) does not often get a lot of attention from small investors, but it has long been a popular name with institutional investor. The company has a long track record of consistent topline growth and one of the best histories of return on capital in the sector. Because of its consistency, its execution, and its well-diversified base of business, Bard has carried a premium valuation for some time. 

Thursday's earnings shook up that idyll. Bard missed on both the top line and gross margin, and the company's vulnerability to the U.S. market once again came front and center. Perhaps, then, those shorts (Bard had an unusually high short ratio going into these earnings) had the right idea. 

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Investopedia: CB&I Harnessing Some Energy

These are bad days for large-scale construction, right? High debt and low tax revenue is hampering public works projects and manufacturing companies have little need to add capacity just yet. Likewise, construction activity in the leisure sector (hotels, casinos, and so on) has yet to pick up. On top of that, power generation is caught between those who hate the idea of more coal plants and those who really hate the idea of more nuclear plants. 

Well, yes and no. Construction activity in those segments is indeed weak, but there is a notable exception - the oil and gas sector. And that is where CB&I (NYSE:CBI) (formerly known as Chicago Bridge & Iron) makes its bread and butter; building a wide range of facilities like storage tanks, processing plants, liquefaction facilities and terminals.  

To read the full article, please click below:

Investopedia: McDonalds Continues To Reinvent

McDonald's (NYSE:MCD) is a curious story. It runs only one concept worldwide, but it runs it extremely well. What's more, though it has a fairly limited menu and a relentless focus on driving out costs, it is seeing growth and operating leverage by expanding that menu and finding even more ways to become even more efficient. It is also an interesting contrast to Yum! Brands (NYSE:YUM) as the companies seem to be following very different playbooks at this point in their corporate lives. 

Great Second Quarter Performance 
If McDonald's is the place where people go to eat when they cannot afford better options, that may explain why results were so strong in the second quarter. Unlike Yum! Brands, McDonald's actually saw good same-store sales growth in both the U.S. (up 4.5%) and Europe (up 5.9%), while Asia-Pacific and emerging markets were more modest (up 5.2%) relative to the much higher economic growth in those areas. 

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McDonald's Continues To Reinvent (MCD, YUM, RT, RRGB, WEN)

Seeking Alpha: How The Healthcare Sector Became Another Way To Play The Jobs Report

There used to be a time when healthcare was one of those all-weather “safe” plays. No matter the ups and downs of the economy, healthcare stocks never sank too far. As second quarter earnings are highlighting quite clearly, those days are clearly long past now. Healthcare investors need to hope for real improvement in job and wage statistics if the sector is to grow. Though there is still some leverage to be had in hospitals boosting their capital spending from the unsustainably low levels of 2008-2010, that play has its own expiration date.

Where Have All The Patients Gone?
Take a look at the earnings from companies like Johnson & Johnson (NYSE: JNJ), Bard (NYSE: BCR), and St. Jude (NYSE: STJ) and problems pop out. None of these companies are seeing much real volume growth in their device businesses, as patients are staying home and out of doctors' offices and hospitals. Even at a company like Covidien (NYSE: COV), that is actually doing relatively well, the underlying organic growth is not terribly robust outside of taking share from other med-tech rivals.

To read the full piece at Seeking Alpha:
How the Healthcare Sector Became Another Way to Play the Jobs Report

Investopedia: MHS-ESRX Merger Will Force Intersting Choice In Washington

When Express Scripts (Nasdaq:ESRX) announced its intention to acquire Medco Health Solutions (NYSE:MHS) last week, it lit the fuse on what is likely to become one of the most far-reaching (if not most interesting) developments in health care in some time. At a bare minimum, this deal is going to force the current U.S. administration to make some very interesting choices when it comes to market competition and health care costs. 

The Deal  
To offer a quick review, Express Scripts is proposing to acquire its larger rival (in terms of prescription share) for total consideration of $71.36 at the time of the announcement. This consideration will be broken up between $28.80 in cash and 0.81 shares of Express Scripts. Assuming the deal goes through, it will deliver Medco shareholders a 28% premium to its pre-deal price and Medco shareholders will hold about 41% of the new company. 

To read more, click below:
MHS-ESRX Merger Will Force Interesting Choice In Washington (ESRX, MHS, ABC, CAH, TEVA, UNH, WAG, CVS)

Wednesday, July 27, 2011

Investopedia: General Electric Cleaned Up And Reloaded

Fans and sports reporters talk about how perennially competitive teams "don't rebuild, they reload" and the same could be said for General Electric (NYSE:GE). Though far too much has been made of Six Sigma (which was actually created at Motorola), the managerial abilities of its CEOs, and the "inevitability" of GE's diversification bringing solid results, the fact remains that GE is a very competitive player in numerous key growth markets. With the company having repaired a fair bit of the damage done in the credit crunch, this industrial conglomerate looks poised again for some growth. 

Q2 Results - Always Complicated, But Showing Improvement  
To its credit, GE gives investors a large amount of data to chew on every quarter. While GE reported that reported revenue (including GE Capital) fell 4% and industrial revenue fell 6%, organic industrial revenue looked to be positive to the tune of about 5%. Segment operating profit margin compressed about two points (due to weakness in energy, particularly wind power), but reported operating earnings from continuing operations rose 18%. 

To continue to the full text, click below:
General Electric: Cleaned Up And Reloaded (GE, SPW, NOV, UTX, BA, HOLX, HAL)

Investopedia: PepsiCo Leaves Funny Aftertaste

Global beverage and snack food giant PepsiCo (NYSE:PEP) offers a good lesson as to why many investors believe that valuation always matters. PepsiCo was, and is, a fine company, but the valuation has been a little too fizzy for some time. The net result? A stock that has significantly lagged the market and its large rival Coca-Cola (NYSE:KO) over the past couple of years. Now with global commodity pressure and a strained consumer, Pepsico seems to be running a little flat.

Second Quarter Results Lacking Some Quality  
It is hard to get especially enthusiastic about second quarter results at PepsiCo. While reported revenue did indeed climb nearly 14%, organic revenue growth was a little less than 5% (the company uses its own different metric for organic growth and reported 8% growth by its methodology). Growth was definitively led by the international operations, as PepsiCo Americas Foods posted 7% organic growth, while Americas Beverages was basically flat. Volume was likewise iffy - total snack food volume was up about 10%, while beverages rose about 1%. 

The full article can be read for free at Investopedia:
PepsiCo Leaves A Funny Aftertaste (PEP, KO, K, KFT, GIS, UL, NSRGY.PK)

Investopedia: Microsoft Anything But Soft

It is a fact that Apple (Nasdaq:AAPL) has overtaken Microsoft (Nasdaq:MSFT) in quarterly revenue and it seems like a safe forecast to assume that gap is going to widen for quite a few more quarters. With the rise of smartphones, tablets, cloud computing, open source, and a variety of other "Microsoft-killers," a tiny little detail has been lost - Microsoft is still very much a relevant factor in PCs, servers, enterprise software, and many other markets. 

A Solid Close to the 2011 Fiscal Year  
To be sure, Microsoft is well past the point where it is going to grow like Apple, VMware (NYSE:VMW) or any of the host of up-and-coming software players. But "old" or "mature" are not synonymous with "dead." Microsoft did close the year with growth of over 8% for the quarter and growth that was nearly 6% on a sequential basis. 

To read more, continue on to this link:
Microsoft Anything But Soft (MSFT, AAPL, VMW, IBM, HPQ, RHT, ORCL)

Investopedia: Danaher Delivers On High Expectations

Ordinarily it is no big deal when someone is walking along and has a slight stumble. Put that same person on a mountainside, though, and that stumble is suddenly quite a bit more serious. That might be one way to think about Danaher's (NYSE:DHR) second quarter earnings - there was not all that much to object to, but Danaher carries a hefty premium due in part to a reputation for excellent execution. That may just be something to keep in mind if investors find themselves reading about a "disappointing" quarter. 

Solid Second Quarter Results  
While Danaher did report a fairly gaudy growth rate of over 15% for the second quarter, organic growth was a more modest 7.5%. Organic growth was led by test/measurement and industrial tech, while the environmental unit saw a small organic revenue decline. Danaher's dental business looked like a bit of a laggard (but still up more than 6%) and life sciences was relatively solid. 

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Danaher Delivers On High Expectations (DHR, BRK.A, SI, TMO, PAY, XRAY, GE)

Tuesday, July 26, 2011

FYI to readers

There's a bit of a backlog at Investopedia and some technical glitches as well.

Rest assured I'm still here cranking away and I'm sure the pieces will get up before long.

In the meantime, between Accuray (Nasdaq: ARAY), Quest (Nasdaq: QSFT), 3M (NYSE: MMM), and Commercial Vehicle (Nasdaq: CVGI) I think I've had plenty more "fun" than I wanted this earnings release cycle...

Disclosure: I own all of the mentioned stocks

Investopedia: Caterpillar Hits A Pothole

The problem with cyclical stocks like Caterpillar (NYSE:CAT) is that investors and analysts inevitably forget about the "cyclical" part and get way too giddy when times are good. That, in turn, leads inevitably to expectations beyond the level these companies can achieve and, when misses start accumulating, sell-offs in the stock. Such would seem to the be the case after CAT's second quarter results. The results indicate that business continues to be quite strong, but the reaction to those results shows that enthusiasm in the bull camp had previously jumped the fence and ran amok. 

So What Was Wrong with Q2 Earnings?  
On the face of it, it's hard to be all that upset with the numbers Caterpillar delivered. Revenue rose 39% on a reported basis, and organic growth was in the neighborhood of 32%. Growth was led by the resource industries category, with 53% revenue growth, but even the so-called laggard, power, was up 32%. Interestingly, CAT is not seeing a lot of pricing momentum today - volume was up almost 31% for the quarter, but pricing was up only a little more than 1%. 

To continue, follow the link below:
Caterpillar Hits A Pothole (CAT, TEX, DE, ETN, ITW, BWA, OSK)

Investopedia: U.S. Bancorp Standing Out And Outstanding

For investors leery of the extent to which banks have been making their numbers on the back of reserve releases and "non-operating" charges, U.S. Bancorp (NYSE:USB) is a breath of fresh, clean air. Once again U.S. Bancorp has distinguished itself from its peers with a strong quarter. While some investors may be put off by the relatively low percentage of actual banking within USB's business mix, this company seems undervalued and underappreciated by the Street today.

Finally, a Bank with a Clean Result 
Because of the impact that decisions like security sales can have on financial results, there will never be a perfectly clean quarter for a major bank, but U.S. Bancorp's second quarter results are close enough for jazz. Better still, they were largely on target with the expectations laid out by management.

To finish reading, please follow this link:
U.S. Bancorp Standing Out And Outstanding (USB, WFC, TCB, C, BAC, BK, STT)

Monday, July 25, 2011

Investopedia: Right Place, Right Valuation For EMC

With another quarter in the books, it is pretty clear that "Big Data" is still a good place to be in the tech space - and that EMC (NYSE:EMC) is still the 800 pound gorilla. While there may be some legitimacy to the idea that EMC is at risk of someday getting "Cisco-ed" (Nasdaq:CSCO) by upstart rivals, that looks to be a long-term risk. For the here and now, EMC remains one of the more compelling ideas among established tech names. 

Another Strong Quarter In The Books  
EMC logged 20% annual revenue growth for the second quarter; a result that did not significantly exceed analyst expectations. The company reported that the info storage business saw about 19% growth, with high-end sales (led by Symmetrix) up 15% and mid-tier up 27% on strength from Isilon and VNX/VNXe sales. Encouragingly, revenue growth was still on the order of 17% after backing out VMware's (NYSE:VMW) contributions.

To continue, click below:
Right Place, Right Valuation For EMC (EMC, VMW, NTAP, HPQ, DELL, IBM, ORCL) 

Investopedia: United Technologies Finds Some Turbulence

High expectations are great for a stock when the company delivers and shareholders see nice gains in their portfolio. The trouble with high expectations (and high valuations) is that the market is quick to punish what would otherwise be a solid performance. That would seem to be the biggest risk for United Technologies (NYSE:UTX) these days, as the company continues to sport both solid performance and a healthy valuation. 

The Quarter That Was  
Though there were some hiccups, United Technologies reported an all-around solid quarter (and one where revenue exceeded expectations). Revenue rose more than 9% as reported, with 6% organic growth. Top-line growth was led by the Otis business, while Hamilton Sunstrand and Carrier were close behind. Pratt & Whitney and Sikorsky were the laggards this quarter, but both still posted better than 5% revenue growth. 

To read the full piece:
United Technologies Finds Some Turbulence (UTX, BA, GE, GR, SI)

Investopedia: Macroeconomics Tutorial

Some time ago, Investopedia asked me to write a long soup-to-nuts macroecon tutorial. It is now up on the site (at the link below). This is not "light reading" or event-driven, but may still be of some interest to those macro econ fans out there.

To view the tutorial, please click below:

Investopedia: M&T Bank In A Rare Class

The meltdown in the banking sector has had some interesting consequences. Nimble banks with fairly clean balance sheets like Bank of the Ozarks (Nasdaq:OZRK) have taken advantage of FDIC assistance to significantly expand their footprint by acquiring failed banks. Once-respected giants like Wells Fargo (NYSE:WFC) and U.S. Bank (NYSE:USB) have seen investors apply major haircuts to their future earnings power, and former winners like Washington Mutual and Wachovia were basically gutted.

Curiously, M&T Bank (NYSE:MTB) has come through this mess relatively unscathed. While sound underwriting certainly helped limit the financial damage, a strong reputation with investors has buoyed the stock price as well. Consequently, it's one of the rare banks out there that does not look like a tremendous bargain at current prices. 

Read more through this link:
M&T Bank In A Rare Class (MTB, PNC, FNFG, NYB, HBC, C, SBNY)

Investopedia: Will The Street Believe In Steel Dynamics?

This has been a tough year for steel companies. Squeezed between rising costs and iffy demand, the sector has largely been treading water. With better than expected results for the second quarter, maybe the turn is at hand for Steel Dynamics (Nasdaq:STLD). Then again, considering a glut of sheet steel and the company's spot pricing exposure, the Street may be slow to fully climb on board this name. 

A Better Quarter ... Sort of  
There are two ways to think about Steel Dynamics' quarter - it was much worse than initially expected, but at least better than the company's pre-announced guidanceRevenue rose more than 27% this quarter, with tons shipped rising 15% and all steel products up a little more than 14%. Shipments were especially strong in categories like structural, rail and steel bar.

Continue via the link below:
Will The Street Believe In Steel Dynamics? (STLD, MT, NUE, CMC, GGB, ATI, BTU)

Investopedia: Lofty Expectations Sink Riverbed, Fortinet, and F5

It may not be far from the truth to say that the days after earnings releases are some of the worst days in the calendar for tech investors. Many tech stocks trade on hype and hope, and earnings reports have a tendency to bring a little reality back to the picture and prompt investors to reconsider the multiples they're paying.

Such would seem to be the case for the trio of Riverbed (Nasdaq:RVBD), Fortinet (Nasdaq:FTNT) and F5 Networks (Nasdaq:FFIV). None of these companies had what would normally be called a bad quarter, but each sported hefty valuations and expectations. Now, with calendar second quarter earnings in hand and a few worries about growth momentum, these stocks have all come under heavy selling pressure.

To read the full article, click the link below:

Saturday, July 23, 2011

Investopedia: Harley-Davidson Looking A Little Over-Revved

Nobody knows what the "new normal" for this economy is going to look like. Poor employment and wage growth, and nervous banks are keeping a limit on big-ticket consumer spending, but it seems reasonable to assume that the average consumer's taste for leisure has not vanished for good. The trouble, though, is that some stocks like Harley-Davidson (NYSE:HOG) seem to be pricing in a quicker return to normal than the economy seems capable of delivering. (To learn more about the effect earnings will have on stock prices, check out Earnings: Quality Means Everything.)

A Strong Rebound in the Second Quarter  
Certainly Harley-Davidson showed some signs of life in this latest quarter. Revenue jumped 18% as the company shipped 13% more bikes and realized almost 7% better pricing. This growth was underpinned by better than 7% growth in domestic sales, while international sales and shipments were relatively softer. 

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Harley-Davidson Looking A Little Over-Revved (HOG, THO, WGO, PII, CCL, RCL, MTN, HMC)

Investopedia: Patience Will Pay At Wells Fargo

Another quarter is in the books, and things do not look dramatically different for America's largest banks. While granting that earnings momentum is still lacking, and a huge slug of bad debt and foreclosed homes is an albatross around the industry's neck, this still remains one of the most undervalued industries in the market. Barring a belief that the U.S. economy will never recover or that the government will regulate the industry into the ground, patient investors should consider accumulating and holding quality names like Wells Fargo (NYSE:WFC). 

Second Quarter Results Without Much Sizzle  
Unlike tech stocks this quarter, which seem to produce exciting results whether good or bad, bank stocks are producing pretty uniformly boring results. Wells Fargo is hardly different in that regard. 

To read the full article at Investopedia, follow the link:
Patience Will Pay At Wells Fargo (WFC, PNC, C, BAC, ZION, UMPQ, FCNCA)

Investopedia: VMware Maintains The Momentum

The PC market is fading, the chip sector is stumbling, and the server market is inspiring no one right now. And yet, the market for data storage and virtualization/cloud software just keeps growing. The latter point is particularly relevant to VMware (NYSE:VMW) and this company's second quarter earnings report suggests there's no let up in the growth just yet. (For further assistance in breaking down earnings, check out Getting The Real Earnings.)

Q2 Has More of the Same  
There was not a lot new in VMware's second quarter report, and that will likely sit just fine with the shareholders. Revenue rose 35% on a constant currency basis from last year and about 9% on a sequential basis. U.S. revenue rose 35% and not only was international growth strong at 38%, it now makes up more than half of the company's revenue base. License revenue was up 40% for the quarter and Enterprise License Agreements (ELAs) were more than 25% of total bookings for the quarter.

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Investopedia: Stryker's Diversification Pays Off

The management of medical device and equipment maker Stryker (NYSE:SYK) has always seemed to have an uncanny knack for findings ways of pulling growth out of its hat. In a pretty uninspiring market for orthopedic implants, Stryker is finding growth in hospital equipment and acquisitions. With a strong market position and good long term prospects, this is one of the first names that investors lacking exposure to health care should consider. 

A Surprising Second Quarter  
Stryker's consolidated results were not so surprising, but how the company managed to get from A to B was a little surprising. Revenue rose about 16% on a reported basis, with 12% constant currency growth.

To read the full article, please click below:

Friday, July 22, 2011

FinancialEdge: Will The Greek Crisis Affect Your Retirement?

There seems to be something universal about the human fascination with disaster. Although everyone decries those who slow down to look at an accident on the highway, it is probable that everybody has done it. So it is only natural that the ongoing crisis and drama in Greece captures a lot of attention over here. This isn't just about voyeurism, though, as the ongoing crisis may well have long-term ramifications on your retirement. (Find out how to determine whether you're on the path to a comfortable retirement , or financial ruin. See Will Your Retirement Income Be Enough?)

Defaulting to an Older Europe?
Greece has not been kicked out of the euro yet, and nobody seems to be seriously discussing the idea of Greece withdrawing (or being forced out). Nevertheless, it cannot be excluded as a potential outcome. Greece may find that the cost of staying in the currency union is just too high and unpalatable for its people and may feel that going back to the drachma, and the ability to devalue/depreciate the currency, is too useful to ignore.

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FinancialEdge: Is Someone Listening To Your Phone Messages?

Most of us put a premium on our privacy, but as the News Corp/News of the World scandal in the U.K. has shown again, we cannot always assume that our privacy is secure. In fact, this current scandal is not all that exceptional. Paris Hilton was subjected to a similar violation about six years ago, and numerous celebrities (including Sienna Miller and Scarlett Johansson) have had their cellphones hacked - often in an attempt to garner some salacious bit of information or compromising photo that can go straight to newstands and websites. (For some ways to keep your information safe, check out Tips For Keeping Your Financial Data Safe Online.)

Not surprisingly, many people are wondering just how safe their technology is and whether or not someone may be listening to their phone messages. So, what steps can people take to minimize the risks that their own information can be stolen from them?

Use a Little Common Sense and Originality
According to a study by Daniel Amitay, and assuming that Apple (Nasdaq:AAPL) iPhone users are basically as smart and security-savvy as anybody else, I can dial my way into any iPhone user's voice mail and have about a 5% chance of accessing their voice mail simply by assuming that they used "1234" as their PIN number. Add "0000" and "2580" (which is straight down the middle of a keypad) and the odds jump to almost one-in-10.

To read the complete column, please follow the link below:

Thursday, July 21, 2011

Investopedia: The VIX - Using The "Uncertainty Index" For Profit And Hedging

Volatility is a major factor in equity and option investments, and the Chicago Board Options Exchange Market Volatility Index (VIX), has been a popular and carefully-watched indicator almost from the moment it was launched. Though VIX may or may not be a rigorous substitute for risk, investors and financial commentators nevertheless watch this indicator to measure the tenor of investor attitudes about the market and the likely path of short-term trading. 

As a financial indicator in its own right, however, it is also possible for investors to use the VIX as a means towards profits or the protection of their portfolios. (Discover a new financial instrument that provides great opportunities for both hedging and speculation. Check out Introducing The VIX Options.)

VIX – What It Is (And Is Not)  
The VIX is a weighted index that blends together several S&P 500 index options, with the notion that the greater the premiums on these options, the more uncertainty about the direction of the market. In design, then, it is the square root of the 30-day period returns, and it is expressed as percentage points. As such, it is supposed to be a forward-looking representation of what sort of volatility the markets expect in the short term.

To read the complete piece, please go to:

Investopedia: Big Blue Still Making The Green

For better or worse, IBM (NYSE:IBM) basically tracks the market for tech spending. That makes it a fine one-decision option for investors wanting general tech exposure, but it also means that investors should not expect leading-edge growth. IBM's results suggest that the tech market is still fairly healthy, and the valuation suggests investors still do not fully appreciate the company's virtues. 

Services Rebound in Q2  
IBM posted an all-around solid performance in the second quarter, as revenue exceeded even the high end of the analyst range. Reported revenue rose 12% for the quarter on an annual basis and 8% sequentially. Foreign currency was a powerful factor this quarter, as constant currency growth was 5% on an annual basis. 

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Investopedia: Cisco Waves A White Flag

There were plenty of rumors that Cisco (Nasdaq:CSCO) was going to launch a major restructuring effort, and the company delivered exactly that on Monday. While the plan may very well reduce costs and boost margins, investors should not get too excited about the announcement - companies do not cost-cut their way to prosperity, and sending thousands of employees packing does not address the company's significant competitive deficiencies. 

Poor Performance Comes Home to Roost  
Cisco has been stuck in a funk for a while now as tech investors have abandoned this one-time golden child. Acquisitions of companies like Scientific Atlanta have failed to produce much value and the company has seen its competitive edge lost to dynamic rivals like F5 (Nasdaq:FFIV), Juniper (Nasdaq:JNPR), Hewlett-Packard (NYSE:HPQ) and Riverbed (Nasdaq:RVBD). 

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Wednesday, July 20, 2011

Investopedia: Apple Is Just Absurd

If something is too good to be believed, it probably should not be believed. If something can't go on forever, it won't. And yet, there's Apple (Nasdaq:AAPL). Apple continues to log financial results that are just absurd as the company has clearly found a golden mean of product desirability and profitability. The question is whether or not Apple has enough rabbits left in the hat to please investors and analysts. 

A Blowout Third Quarter  
It is not all that uncommon to see billion-dollar mining companies report huge growth in a cyclical upswing, but very, very few companies go from about $16 billion in sales one quarter to nearly $29 billion a year later. But that is what Apple did in the fiscal third quarter, as revenue rose 82% from last year and 16% from the second quarter. 

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Investopedia: Drugs Don't Cure All That Ails J&J

Not liking Johnson & Johnson (NYSE:JNJ) can sometimes feel tantamount to not liking apple pie or capitalism itself. True, JNJ is among the bluest of blue chips and a company with incredible staying power. And yet, the idea of investing in individual stocks is to outperform the broader markets, and JNJ is not necessarily the best option for that goal. (To help you pick stocks, check out How To Pick A Stock.)

Mediocre Q2 Results  
Johnson & Johnson did not report a bad second quarter result, but nor was it an exceptionally strong quarter. Revenue rose about 8% as reported, but organic growth was a much more modest 2%. Growth was led by the pharmaceutical group where sales were up more than 5% on an organic basis. Devices were less impressive at just over 1% growth, and the consumer business was down almost 2% on an organic basis. 

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Investopedia: The Grind Goes On For Bank Of America

Bank of America (NYSE:BAC) seems locked into a dance of "two steps forward, two steps back." While the company got itself into a huge mess with poor underwriting and acquisition decisions, the company continues making mistakes like taking shortcuts in its foreclosure process. The conundrum for investors is that Bank of America has an invaluable branch network and strong positions in key states like California, Texas and Florida, but that network will never get full value absent evidence that B of A can run itself effectively and earn its cost of capital. 

Another Bank with Swampy Second Quarter Results  
Like Citigroup (NYSE:C), and indeed most large banks, Bank of America's second quarter earnings are complicated by all manner of charges, gains and items. At the bottom-most bottom line, though, the company delivered on its guidance and produced earnings of 33 cents after those items. Of course, reserve release is still a big part of the story, and Bank of America saw $2.4 billion in earnings from this line item, while tangible book value fell about 4%.

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Investopedia: Check Point Looks To Manage Its Own Threats

Most companies of any repute strive to be the best in their industry, but of course only a very few ever manage to pull it off. Even for those who succeed, and security specialist Check Point Software (Nasdaq:CHKP) deserves to be on that list, it is not all parades and plaudits. The trouble for Check Point, as it often is for industry leaders, is the pressure to stay on top of the game and preserve both growth and margins. It's no easy task and the extent to which Check Point succeeds will determine how much is left in the stock. 

Secure Second Quarter Results  
Check Point had a respectable second quarter. Revenue rose 15% from last year (and about 7% sequentially) and that was enough to surpass the surprisingly tight range of analyst estimates. Growth was well-balanced between products and services, as both grew at about the same 15% clip. Billings growth was solid, but the small uptick in days sales outstanding would seem to suggest that more orders came later in the quarter than before - a development that does not seem so serious now, but bears watching.

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Investopedia: J.B. Hunt - A La Intermodal

Despite concerns about economic activity, railroad volume, shipping container volume and the health of the trucking industry, goods are still getting shipped around the country and more and more of that shipping is being handled by intermodal carriers. That puts J.B. Hunt (Nasdaq:JBHT) in the driver's seat, and the company is certainly delivering strong results. 

Good Second Quarter Results, With a Catch  
In many respects J.B. Hunt had a great quarter. Operating revenue was up nearly 22% and, even excluding fuel surcharges, leaves 14% revenue growth. The company's intermodal business was the leader; growing 29% this quarter and making up nearly 60% of operating revenue. The company's dedicated contract services business also did well, with growth of 15%. Trucking was the laggard, coming in with just 4% revenue growth this period. 

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Investopedia: Questions Of Success And Value At Charles Schwab

It is an unfortunate reality of investing that figuring out whether a company is top-notch is not especially helpful in figuring out whether the stock is a top candidate to buy. True, it often makes sense to own the best businesses that you can find, but the metrics that mark quality and value are not the same. 

In the case of Charles Schwab (Nasdaq:SCHW) it is not hard to argue that this is one of the best brokerage and financial service companies out there. The trick, though, is in figuring out what that quality is worth and the probable path of earnings and cash flow in the coming years. As a growth stock, it looks intriguing, but a return-to-equity valuation shows a different sort of story. 

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Tuesday, July 19, 2011

Investopedia: Gannett Looks To Be A Survivor

The "newspapers are doomed" theme has been making its rounds for over a decade now, buoyed in large part by the fact that it's basically true. For the most part, the days of the locally-owned and operated daily newspaper are long gone, or at least gone insofar as a growth story. But that doesn't automatically mean that large media companies like Gannett (NYSE:GCI), New York Times (NYSE:NYT) and McClatchy (NYSE:MNI) are doomed. The question, though, is whether there's any clear way for these companies to unlock whatever value remains of their businesses. 

Another Gloomy Quarterly Report  
Gannett did not post disappointing numbers for the second quarter relative to expectations, and that may be the best that can be said about it. Revenue was down a bit more than 2%, led by the ongoing erosion of the publishing business. Publishing revenues were down almost 5% on a greater than 6% drop in ad revenues. Broadcasting was ever so slightly positive and though digital revenue was up more than 12%, it still comprises just about 13% of total revenue. 

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Investopedia: Halliburton Waits For The World To Catch Up

Energy may indeed be a global market, but that does not mean that industry activity levels are consistent across regions. Once again, energy services giant Halliburton (NYSE:HAL) has reported exceptional results in North America while overseas service demand seems more tepid. With the stock having nearly doubled over the past year, investors need to count on that eventual recovery in overseas activity to push margins and earnings even higher in the next year or two.

Q2 Results Driven by the Home Markets
Halliburton is an international services company, but North America made up more than half of the company's revenue this quarter. Total company revenue rose 12% sequentially (and 35% annually), with North American revenue up 16% and international revenue up 8%. That North American result looks especially good in light of the 6% growth in rig activity.

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Investopedia: Petrohawk Flies Into The Sunset

It cannot really be said that the announcement of the acquisition of Petrohawk (NYSE:HK) Thursday night was a big surprise. Not only was this an attractive "mid-major" with productive and highly concentrated assets, but most analysts of note thought it was trading well below the fair value of its assets. Apparently BHP Billiton (NYSE:BHP) agreed, and had no problem opening its wallet and paying a premium for this natural gas-focused exploration and production company. (To learn more about mergers, check out The Merger - What To Do When Companies Converge.)

The Terms of the Deal  
BHP Billiton proposes to acquire Petrohawk for $38.75 per share in cash, a price that creates a total deal value of approximately $15 billion (including debt) and a 65% premium on the shares. Assuming that the deal goes through, and the $400 million break-up is high but not necessarily prohibitive, BHP will be paying something north of seven times the forward EBITDA for Petrohawk - more or less near the "standard" forward multiple for a company like this (albeit a premium to the current group average in the "5s").

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Investopedia: New Oriental Not Too Cool For School

Sometimes a little perspective is in order. New Oriental (NYSE:EDU) gets well-deserved plaudits for being the largest private education provider in China, and yet the company's revenue is about one-tenth that of Apollo Group (Nasdaq:APOL), the operator of University of Phoenix and the largest for-profit education company in the U.S. And yet, Apollo's enterprise value is only about 50% larger than that of New Oriental. That raises some interesting questions about the sort of growth potential New Oriental has, as well as how much of that growth has already been put into the stock by enthusiastic new shareholders.

A Strong End to the Fiscal Year  
New Oriental certainly gave out a graduation present of its own as it closed its fiscal year. Revenue rose 59% for the fourth quarter, handily beating even the high end of the analyst range. Given that enrollment was up about 12% for the quarter, it is pretty clear that New Oriental is seeing some strong trends with its pricing and mix. 

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FinancialEdge: The State Of The 401(k)

For better or worse, study after study has shown that workers save more money when they sign up for programs that automatically take part of their earnings and put them in retirement savings programs. The same is also true of automatic withdrawal programs for online savings accounts.

This makes employer-sponsored retirement plans like the 401(k) program very valuable. When employers elect to match some percentage of their employees' contributions, these programs become even more valuable. With so few people saving additional money on their own, 401(k) programs have become increasingly important and their present and future status should be a major concern for all workers.
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Investopedia: Should Investors Circle Back To Cubist?

It is biotech stocks like Cubist Pharmaceuticals (Nasdaq:CBST) that keep investors coming back into a sector that is arguably more famous for spectacular failures than reliable success. While Cubist stock has not reclaimed the highs of the 2000-2001 era, the company has nevertheless ridden the success of its antibiotic Cubicin to become a near 10-bagger from the lows of late 2002. The question for investors now, though, is whether the company can find another Cubicin and keep the investor enthusiasm healthy. 

A Solid, But Not Special, Second Quarter  
Cubist reported sales growth of 5% for the second quarter, fueled by 9% growth from the company's core drug, Cubicin. Although Cubicin sales were a bit stronger than analysts were generally expecting, overall revenue was basically in line with expectations. Margin performance was likewise unspectacular in either direction - the company saw some gross margin erosion (due in part to larger sales discounts), but adjusted operating income growth tracked revenue. 

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Investopedia: Ralcorp Adds Both Clarity And Confusion

There is no doubt that Ralcorp (NYSE:RAH) is getting creative in its efforts to get value for its assets. Still not willing to agree to ConAgra's (NYSE:CAG) bid, Ralcorp apparently believes that separating the company may be its best chance at guaranteeing greater value for its shareholder base. 

First, a Warning  
Ralcorp led off its Thursday night announcements with a warning on fiscal third quarter results. Citing weak volumes in cereal and some difficulty in getting better pricing through, Ralcorp lowered its guidance for the third quarter to a range of $1.13 to $1.18 - well below the $1.37 average estimate. Just as a point of reference, investors should also note that the lowest published estimate was $1.28, so this was indeed a meaningful miss. 

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Investopedia: Citi Still Healing

The best thing that might be said about Citigroup's (NYSE:C) second quarter is that expectations for large banks had turned so sour going into July that it did not take much for this still-struggling bank to produce a little relief with its results. The problem with Citi is the same as it has been for a while - the bank is going to need time to heal. That means near-term momentum will be lacking, but the long-term prospects suggest there is some value here. 

A Morass of Numbers for Q2  
It would be easy to write at great length about the various parts of Citi and how they performed this quarter. In lieu of that, here is a quick summary of some of the most salient takeaways. First, while total company revenue was up 5% sequentially (and down 7% from last year), the parts of the business that management intends to keep saw revenue fall 1% on both a sequential and annual comparison. 

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Monday, July 18, 2011

Investopedia: Vical Gets Some Validation

Investors in small-cap vaccine biotech Vical (Nasdaq:VICL) received some good news late on Thursday, as the company announced a licensing deal with a major Japanese pharmaceutical company. While this is a solid deal that will bring some more cash into the business, the real question for investors these days is whether Vical's candidate for metastatic melanoma can ultimately obtain FDA approval and then stand with the likes of Bristol-Myers' (NYSE:BMY) Yervoy in the market.

Astellas Steps Up  
While Vical's Allovectin-7 therapy for melanoma gets a lot of the press, Thursday's deal concerns the company's experimental TransVax product for cytomegalovirus (CMV) in transplant patients. Astellas Pharma (OTCBB:ALPMY.PK) has acquired worldwide rights to TransVax and will assume responsibility for its clinical development. In exchange, Vical gets a staggered up-front payment of $35 million in total, future potential milestones, royalty payments (if the drug makes it to market) and the option to co-promote the drug in the United States.

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Investopedia: Go With Uncommon Sense On ASML

Normally it would not take much work to justify buying the stock of a company whose revenue grew 43% in the last quarter and trades at a reasonable valuation. But ASML (Nasdaq:ASML) is a semiconductor equipment company, and this is a sector where investors' heads are always twisted to the future - a future that looks to have significantly fewer orders in the short term. Still, long-term investors who can weather a down period in the cycle should seriously consider adding shares of one of the best-positioned equipment companies in the space. 

A Good Second Quarter, But Nobody Cares  
ASML reported that second quarter revenue rose 43% from the year-ago level and a little over 5% from the first quarter, a level of performance that exceeded the consensus analyst guess. While shipments were basically flat, the company did see an uptick in the average selling price (both on a sequential basis). Better still, margins were solid - the company saw gross margins improve 40 basis points sequentially and the operating margin improved by more than a full point as the company logged close to 10% sequential growth. (For related reading, see Analyzing Operating Margins.)

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Investopedia: Corruption And Scandal Don't Make News Corp A Bargain

One of the golden rules of dealing with the media is to "control the message". Given the increasing furor over the conduct of News Corp (NYSE:NWS) in a phone-hacking scandal in the U.K. and the calls for the company to be prosecuted (or at least investigated) under the Foreign Corrupt Practices Act, News Corp is clearly failing in that regard. While some investors may be attracted to the stock given its declines in the wake of the scandal and the theory that it is too big to fail, caution may be the better part of valor today. (For a couple of strategies to over come this scandal, read Crisis Management Strategies For Business Owners.)

An Ugly Action Kills a Paper  
Even by the iffy standards of British tabloid journalism, News Corp's News of the World always walked a gray line when it came to scandal and controversy. Going a step way too far, though, several of the paper's employees have been accused of hacking into private citizen's phones and intercepting voice mails, including those of the families of dead soldiers and those who lost family members in the 2005 terrorist bombings. 

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Investopedia: Icahn Puts Clorox In The Spin Cycle

Love him or hate him, Carl Icahn makes the world a more interesting place. Who else but Icahn would launch a multi-billion dollar bid for a company he likes while hoping that the bid ultimately fails? And yet, that is what is happening now with Clorox (NYSE:CLX), as Icahn apparently hopes to stimulate a superior bid from a larger consumer goods company. 

The Deal That May Be
Icahn (through Icahn Enterprises) has stepped up with a bid of $76.50 per share for the rest of Clorox (Icahn owns a little more than 9% of Clorox shares). That is a 12% premium to a stock that has been a pretty notable laggard versus the S&P 500 over the past two years (though an outperformer on the five year comparison).

If Clorox were to take this $10.2 billion deal, it would be at a valuation of about 10.6x trailing EBTIDA and less than two times forward sales - valuations that would still be below comparables like Procter & Gamble (NYSE:PG) and Colgate Palmolive (NYSE:CL). 

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Investopedia: Digging Into A Joy Global Rumor

About a month ago I reviewed mining equipment company Joy Global's (Nasdaq:JOYG) earnings and speculated that "It might also be worth wondering, though, whether the company would consider additional deals - say like the acquisition of International Mining Machinery, China's leading mining equipment company - to expand into particular regional markets." Now Bloomberg, Reuters, and several other sources are reporting rumors that the two companies are in advanced merger discussions. 

The Deal That May Be  
Prior to these rumors leading to a halt in trading of International Mining Machinery's (Nasdaq:ICMHF.PK) shares on the Hong Kong exchange, the company carried a $1.1 billion market valuation. Although IMM's share price has been depressed a bit on fears of a slowdown in economic activity and the widespread expectation that major owner Jordan (which owns 41% of shares) will be selling shares, Joy Global will likely need to offer something on the order of $1.3 billion to get a deal done. 

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Friday, July 15, 2011

Investopedia: Transcept Pharmaceuticals Bulls Get A Rude Awakening

FDA rejections are almost always painful for biotechnology companies, and Tuesday's press release from Transcept Pharmaceuticals (Nasdaq:TSPT) announcing that it expected another FDA rejection has certainly brought the pain. On mid-day Wednesday, the stock was down about 40% and approval of the company's middle-of-the-night sleeping pill is now looking like a more distant possibility. 

What Transcept Was Trying to Accomplish  
Transcept was hoping that the FDA would sign off and approve the company's proprietary low-dose formulation of zolpidem. This is a compound that was developed and marketed by Sanofi-Aventis (NYSE:SNY) as Ambien and is now manufactured as a generic by Teva Pharmaceuticals (Nasdaq:TEVA) and many others. This new drug, called Intermezzo, is targeted for people who awaken in the middle of the night and have difficulty getting back to sleep - the first so-called middle-of-the-night insomnia pill.

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Investopedia: Is The U.S. Holding Back Yum! Brands?

The list of American companies that have done a better job than Yum! Brands (NYSE:YUM) of growing their brands and business in China is a short one indeed. In fact, YUM has been so successful in its international growth that it is now worth wondering if the U.S. business is still capable of being part of the company's future growth plans, or whether there might be some sort of "value-unlocking" transaction in the company's future. 

Second Quarter Results Tell a Story  
Overall, YUM reported that sales rose more than 9% in the second quarter, surpassing the average estimate by more than $100 million, but not quite beating the highest estimates in the range. There are no two ways about it - China was the story here. U.S. same store sales fell 4% as Taco Bell and KFC were both weak, but Chinese same-store sales shot up 18% on 21% higher store traffic. The company's other foreign operations were a more moderate grower, with 2% same-store growth. 

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Thursday, July 14, 2011

Investopedia: Kinetic's Roller Coaster Ride Comes To An End

Wound care specialist Kinetic Concepts (NYSE:KCI) has had a heckuva ride over the last seven years. Once a Wall Street darling with a monopoly position in a healthy market, Kinetic saw setbacks in the courtroom and setbacks in the market before fighting back with an acquisition and some savvy product line extensions. That fueled a rocky share price trajectory that saw the stock cut severely on two occasions, only to bounce back strongly. 

All's well that ends well, though, and shareholders are getting a going-away present worth more than three times the stock's low during the worst of the credit crisis and recession.

Kinetic Gets a Deal
There have been rumors off and on about Kinetic Concepts being a buyout target for years, but the speculation heated up just last week. Validating that speculation, the company announced Wednesday morning that it had accepted an all-cash buyout from a private equity group. 

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Investopedia: Expectations Gnaw At Wolverine

Would the real footwear market please stand up? Athletic shoe companies like Nike (NYSE:NKE) and Adidas (OTCBB:ADDYY) have been quite strong, and so has fashion-oriented Steven Madden (Nasdaq:SHOO). And then there are the likes of Collective Brands (NYSE:PSS), Brown Shoe (NYSE:BWS) and Skechers (NYSE:SKX) with weak sales and even weaker stocks.

Wolverine (NYSE:WWW) is on the stronger end of the range, even if the Street was not falling over itself to reward the company for solid second quarter results. Then again, if conservatism is the biggest sin of Wolverine, long-term shareholders should not be bothered by the quarterly noise. (For related reading, see Strategies For Quarterly Earnings Season.)

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Investopedia: Fastenal Not Slowing Down Yet

There is ample fodder for a dour outlook on the U.S. economy. Politicians in Washington, D.C. continue to play chicken with the budget. Debt discussions, economic statistics like employment, wage growth and ISM are not terribly encouraging, and indicators like rail traffic look sluggish.

Nevertheless, plenty of companies with strong correlations to the health of manufacturing are still performing well. Growth at industrial supplier Grainger (NYSE:GWW) has slowed but is still pretty solid, while other industrial input companies like Lincoln Electric (Nasdaq:LECO) and Praxair (NYSE:PX) have strong stocks and good earnings estimate momentum.

With that backdrop, then, it is perhaps not so surprising that Fastenal (Nasdaq:FAST) reported solid top-line growth for the second quarter. Though it was not a perfectly clean quarter and the stock is quite expensive, Fastenal's results suggest underlying business activity is not so terrible. (For related reading, see Profit By Understanding Fundamental Trends.)

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Wednesday, July 13, 2011

Investopedia: Will Social Gaming Keep Electronic Arts Relevant?

The fad of the day is social and mobile gaming, and investors are more than a little fired up over the upcoming IPO of Zynga. While some people dread seeing notifications from games their friends are playing on platforms like Facebook, others cannot get enough of them and buy smartphones and tablets, in part on their ability to support gaming. Not wanting to get left behind, Electronic Arts (Nasdaq:ERTS) is making a major financial commitment to becoming a player in this space.

The Latest Deal
Electronic Arts announced Tuesday night that it would acquire PopCap Games, publisher of games like Plants vs. Zombies and Bejeweled, in a cash-and-stock deal. Electronic Arts will be paying $650 million in cash and $100 million in stock up front for the privately held Seattle-based game company. But scaled earn-outs could push the total deal price north of $1.3 billion if PopCap delivers cumulative two-year operating income of over $343 million.

Any way you slice it, this is a rich valuation on the fundamentals. PopCap does boast over 150 million installed games, but it produced about $100 million in revenue last year (though reportedly with a growth rate in the vicinity of 40%). To the extent that traditional game publishers like Electronic Arts, Activision Blizzard (Nasdaq:ATVI) or Take-Two (Nasdaq:TTWO) are comparables, the 7.5 times trailing sales that Electronic Arts is paying (just based upon upfront consideration) is about triple the going rate. 

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