Ram pickup repeats as Motor Trend Truck of the …

For the second year, the Ram 1500 pickup has won one of the most coveted industry awards: Motor Trend Truck of the Year.

Even though it's not a new truck per se, the Ram managed to beat out the newly redesigned Chevrolet Silverado and GMC Sierra.

But the Ram isn't just a two-peat for the first time ever without good reason: The award, to a large extent, celebrates its new diesel engine, the first in a light-duty pickup in years.

Ram was chosen from among nine contenders, the magazine says. The trucks, which included pickups and vans, were all tested at a proving ground in the heart of truck country, Uvalde, Texas.

Ram stood apart because of its new diesel engine and eight-speed transmission, which easily topped the other models in fuel economy. the EcoDiesel, as Ram calls it, delivered 15 miles a gallon under the extreme testing conditions, then 21 mpg in more casual city/highway driving.

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Yet the Ram was deemed fully capable of doing all the things that pickup trucks do. For starters, it is rated as being able to tow up to 9,200 pounds.

"This isn't just a new engine," Motor Trend writes. "This is, strictly speaking, a different technology for the segment."

The magazine's editor note that the last diesel in a light-duty truck about 15 years was a noisy, clattering, smokey contraption. The new modern ones are smooth, quiet and soot-free.

They also lauded the Ram's optional air suspension and the real wood and other touches in its upscale Laramie.

Ram is Chrysler Group's truck brand, having been split off from the Dodge brand. Beside Ram 1500, Silverado and Sierra, other trucks in the competition included the Ram Heavy Duty, and Toyota Tundra pickups; and the Ford Transit Connect, Mercedes-Benz Sprinter, Nissan NV200, and Ram ProMaster vans.

Ulta Salon and Sally Beauty: 2 Stocks That Can Add Shine to Your Portfolio

Some companies in the beauty and personal care segment have one important characteristic -- a recession-proof nature, which is a result of everyone's desire to look beautiful and young. This brings us to Ulta Salon, Cosmetics & Fragrance (NASDAQ: ULTA  ) and Sally Beauty Holdings (NYSE: SBH  ) . Both have performed quite well over the last few years, as shown in the chart below, even during the recession (the gray area being the recession period). Their performance stands in stark contrast to that of Regis (NYSE: RGS  ) , which has seen its top line drop continuously after peaking in 2008.

ULTA Revenue (TTM) data by YCharts

Ulta Salon and Sally Beauty have demonstrated "recession-proof" capabilities, with Ulta Salon being the star performer with more than 224% growth in revenue compared with around 47% for Sally Beauty, shown in the chart above. Regis has been the laggard among its peers.

The U.S. prestige beauty market grew 6% during from September 2012 to August 2013 according to the NPD Group . The prestige segment continues to outperform all other segments in the beauty industry as a result of strong innovation and solid demand, particularly in skin care.

Ulta's beautiful performance
Ulta Salon has been cashing in on the segment's growth through expansions of its prestige brand boutiques for major flagship lines such as Clinique and Lancome, which have gone down well with customers. These boutiques helped drive revenue higher in Ulta's second quarter. Ulta also reported an 8.4% increase in same-store sales, which includes e-commerce sales that were up 72% versus the same period a year ago.

Ulta Salon generated second quarter revenue of $601 million, up 24.8% as compared to the same quarter a year ago, comfortably beating consensus estimates of $588.4 million. This was also more than its own guidance of $579 million to $589 million. Net income rose 28.3% to $44.9 million. Diluted earnings per share rose 29.6% versus the year-ago quarter to $0.70 per share . Ulta Salon also issued an upbeat forecast for the remainder of the year.

Ulta Salon will be launching several new brands that have strong followings and unique brand personalities. This includes IT Cosmetics, Jamie Kern Lima's award-winning line of color cosmetics infused with anti-aging technology, and Meaningful Beauty's skincare system, Cindy Crawford's brand developed in partnership with Dr. Sebagh, a renowned anti-aging expert.

Ulta Salon has also been working on expanding its customer base. In the second quarter, its loyalty program grew to 12 million active members, up 19% from a year earlier . This is good for the long run as Ulta will have more customers coming in to its stores at regular intervals.

Ulta Salon's value offerings, marketing initiatives, introduction of new products, and increasing focus on Ulta.com and brands will continue to play a key role in augmenting its overall business going forward. The company opened 33 stores in the second quarter, thus bringing its total store count to 609, and expects to have 675 stores by the year end. The company's long-term guidance is to grow its square footage by 15% to 20% a year .

Sally Beauty's efficiency
While Ulta might be the star performer when it comes to growth, Sally Beauty outshines its peers when it comes to operating efficiency. Sally Beauty leads the pack with a 14.18% operating margin for the trailing twelve months, which surpasses Ulta's 12.48%, as shown in the chart below. In addition, Sally Beauty, like Ulta, has been delivering solid top-line growth consistently.

ULTA Operating Margin (TTM) data by YCharts

Sally increased its gross margin by about 530 basis points from 44.2% in 2003 to 49.5% in 2012, which is a strong indicator of its pricing power. However, Sally has a problem with lower, non-Beauty Club Card (customers not covered by its loyalty program) traffic in its U.S. stores. This resulted in a minuscule 0.7% increase in comps, as a result of which its revenue grew by a mere 2.8% year over year .

Going forward, Sally sees the potential to double the number of its non-U.S. stores to approximately 1,500. In particular, Sally considers Europe and Canada to be key growth markets. In addition, with just about 7.2 million Sally Beauty Club Card members, there's potential for improvement here if we look at Ulta's total of 12 million members and the fact that Sally was able to double its number of members in a span of four years.

Regis in trouble
The 0.7% comps growth at Sally looks better when one considers the dire straits that Regis is in. Since its top line peaked in fiscal 2008 at $2.7 billion, Regis' revenues have fallen by more than 35% to less $2 billion as shown in the first chart. Regis also incurred losses in fiscal 2011 and 2012.

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Regis is trying to turn around through certain initiatives. For example, it introduced the SuperSalon point-of-sale system to gain insight into customer retention and staff productivity. Secondly, Regis is working on a visual merchandising strategy in its stores to improve the look of its salons and for that it created standardized Plan‐O‐Grams. Lastly, it adopted certain cost cutting measures like management restructuring and cutting down on unnecessary travel.

Takeaway
However, with a P/E ratio of close to 30 Regis is quite expensive, especially considering that the better-performing Sally Beauty has a P/E ratio of around 18. However, the best pick in this space looks to be Ulta Salon. Some might say that the company is expensive at 44 times earnings, but strong earnings growth is expected in the future. As a result, the forward P/E of Ulta comes down to 31, with analysts expecting earnings to grow at an annual rate of 23.5% for the next five years. That means Ulta Salon is the premium pick in this segment.

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The Vote Is In… Starbucks Earnings Greatness Needed To Be Even Greater

Starbucks Corp. (NASDAQ: SBUX) has reported its fiscal fourth quarter earnings. Expectations were high because the stock was within one percent of trading at an all-time high yet again. Howard Schultz and company reported earnings of $0.63 per share (EPS) and $3.8 billion in revenue. Thomson Reuters was calling for estimates of $0.60 EPS on $3.81 billion in revenue. The company’s comparable store sales grew 7%, driven by a 5% increase in traffic.

Starbucks is targeting sales growth for 2014 of 10% or higher, while Thomson Reuters was expecting sales growth of about 12%. Global same-store sales were forecast to rise in the mid-single-digits. It also sees earnings of $2.55 to $2.65 per share versus $2.67 expected from Thomson Reuters. Perhaps the company is sandbagging earnings in order to over-deliver ahead.

The company showed that its consolidated operating margin rose by 220 basis points to 17.6%. If you want one summary for the quarter, it was “by far the best year in Starbucks 42-year-history.”

Starbucks closed up over 1% at $80.83 against a 52-week trading range of $45.00 to $81.08. The consensus price target ahead of earnings was $84.69 and Starbucks was worth some $60.7 billion at the close.

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Shares were initially indicated down about 16.% at $79.40 in the after-hours trading session.

3 things to check before investing in stock market

Learning is a continuous process. Each day we enrich our experience and knowledge by coming across new events and various interactions. Investors relentlessly strive to get their decisions right.

Clinical precision is what they seek, some like Warren Buffet succeed, some other wannabe 'Buffets' are not as fortunate. The quest for new information and knowledge continues perpetually.

Here are a few things which investors will find interesting and will aid them in their search for knowledge and perfection.  

Cycles

Life along with the various other components associated with it, are cyclic in nature. Life cycles and business cycles provide a fair idea of how the circular pattern manifests itself. A serious investor is also well aware that cycles have an important role to play in their investment decisions and actions.

From the investor's point of view there are two rules which have to be accepted as cardinal truths:

Rule I:  Most things prove to be cyclical

Rule II: Some of the greatest opportunities of gain and loss accrue when people forget rule one. 

"Every rise has a fall", "good things do not last forever just as bad things cannot be everlasting" and other such similar metaphors go on to highlight the fact that the circle or wheel is always rolling.

An investor cannot afford to forget the existence of credit or investment cycles and should not base their investment decisions merely by extrapolating trends into the future. If the present position of the cycle cannot be properly deciphered then it will lead to the belief that the chain of good or bad events will continue everlastingly.

With experience, knowledge and increased awareness investors are able to identify patterns and can shape their financial behavior and attitudes accordingly. While it is always wise to be aware of the past it is also important to be attentive about the present.

A fact which is adequately backed by figures prove that mistakes and scams occur more often during the best of times than otherwise. Market watchers tell us that when cheap money is offered, people often borrow, buy and build indiscreetly which later snowballs into a major crisis.

While it is easy to surf the internet and consult sundry magazines and newspapers for future forecasts, it is essential and imperative for a prudent investor to understand the nuances of cycles. This will help them to base their investment decisions on a sound footing.

Pendulum

Howard Mark uses pendulum as an analogy to explain the market behaviour.

The investment market is like the pendulum of the old grand father's clock. It goes ticktock from euphoria to eureka at one end and desperation to dismay at the other. Knowing which way the pendulum is moving is at the essence of good judgement in the investment field.

Under ideal conditions the best position for an investor vis-à-vis the pendulum is when it is neither on an upswing nor on a downswing but at the point of equilibrium. However, this is purely a hypothetical situation as the pendulum will perpetually swing back and forth and will rarely be in equilibrium.

The investor has to understand the behavior of the pendulum in a manner which will give him the best leverage. This is by no means an easy task and it is always difficult to identify how long an arc the pendulum is going to make on either side.

Where we stand

It is always important to assess a position with respect to various direct and indirect influences working in the immediate environment. This is equally true in the world of investments. Knowing where we stand in the market lets us make an objective assessment of the situation and act accordingly.

Our position on the investment landscape is measurable when there is awareness about the business cycle, the progress of the pendulum is known and discretion is used to judge information available.

Pragmatism remains the cornerstone of good investment decisions. The mantra for happy life of the investor lies in being proactive in cutting down undue risks, zealously grabbing opportunities and gauging the market sentiments and attitudes.

While driving through blinding rain or swirling fog a driver has to use a combination of his knowledge, skill, confidence and perseverance in overcoming the odds. He cannot follow the same method as other drivers (on the same route) in all cases as the parameters may be different for him bigger car, less fuel, different physical features etc. This brings about a change in the driving strategy. For an investor the situation is somewhat similar as in both cases it is not known as to what lies ahead.

Practical tips to Investors

Investors would be keen to know how they can sharpen their skills by being acquainted with knowledge about the cycles, the position of the pendulum and the place where they stand.

Here are a set of questions which they can ask for a start:

I. Are investors optimistic or pessimistic about the market?

II. What do the media and financial experts have to say about the market indulge in or refrain?

III. Are security offerings and fund opportunities being weighed upon for making windfall gains or pitfalls?

IV. Is capital readily available or hard to obtain as per the current credit cycle?

V. Are P/E ratios high or low in the context of history and are yield spreads tight or generous?

VI. Is too much money chasing too few deals?

Assessment of the answers can be done by the investor himself or help can be sought from an expert financial adviser who can interpret the results of the questions and provide good guidance and feedback to the investor.

The author is Ramalingam K, CFP CM is the Chief Financial Planner at holisticinvestment.in, a leading Financial Planning and Wealth Management company.

Investors Cheer Boston Beer’s Q2

Happy hour started early today for brewer Boston Beer (SAM), which bubbled 15% higher in afternoon trading after the company's second-quarter earnings report from yesterday smashed expectations.

For the period ended, June 29, the craft beer brewer reported earnings of $19.7 million, or $1.45 a share, up from $14.4 million, or $1.06 a share a year prior. Boston Beer reported revenue of $181.3 million.

Analysts polled by Thomson Reuters forecasted earnings of $1.34 a share on revenue of $175 million.

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In a press release on the company's website, Founder and Chairman Jim Koch credited some of the company's success to the popularity of several brews including the company's seasonal beers and the Samuel Adams Boston Lager brand.

"We were also delighted to learn, that for the fifth year in a row, our wholesalers ranked us the number one beer supplier in the industry, in the annual poll of beer wholesalers conducted by Tamarron Consulting, a consulting firm specializing in the alcohol beverage distribution industry," said Koch.

We'll say 'cheers!' to that!

An Unexpected (but Welcome) Consequence of Rising Mortgage Rates

Common sense seems to dictate that rising mortgage rates will hurt the housing market by depressing the demand for purchase-money mortgages. But here's the thing: The data suggests that the exact opposite may be occurring.

At the end of last week, the nation's two largest mortgage originators, Wells Fargo (NYSE: WFC  ) and JPMorgan Chase (NYSE: JPM  ) , released earnings for the second quarter. Insofar as headline numbers go, both banks had stellar quarters, netting $5.5 billion and $6.5 billion, respectively -- Citigroup (NYSE: C  ) , which reported today, had a similar experience.

But if you dig a bit further, and into their mortgage operations specifically, the story is more nuanced. As expected, the volume of refinance mortgages fell markedly relative to the first quarter. Wells Fargo's dropped by 17% and JPMorgan's by 6%.

Unexpectedly, however, both banks reported dramatic sequential upticks in purchase-money mortgage originations. Volume at Wells Fargo was 46% higher than the first quarter, and JPMorgan reported an improvement of 44%.

I say "unexpectedly" because of what we've seen happen to mortgage rates since the Federal Reserve first hinted on May 22 that it may begin to taper its support for the economy. Following the announcement, the rate on a 30-year fixed-rate mortgage went from 3.35% at the beginning of May all the way up to 4.51% today.

As the price of a mortgage goes up via the interest rate, conventional economics tells us, the demand for one should go down. But clearly that's not happening here.

There are at least two explanations for this apparent paradox. The first is that homebuyers are rushing to lock in current rates, which are still exceptionally low on a historical basis, before they head higher.

"I'm afraid we're going to miss the boat," an aspiring homeowner recently told CNBC's Diana Olick. "I feel like we might get priced out of the market in a few months, and just depending on the mortgage payment whether we could afford it if the interest rates go up more."

The problem with this conclusion is that purchase-money mortgage applications are going down. You can see this in the figure below, which charts the Mortgage Bankers Association's index for purchase-money and refinance mortgages.

While applications for purchase-money mortgages may not have taken as dramatic a dive as refinance applications, one can't help but notice a subtle downward slope over the past two months.

It's for this reason that I prefer the second explanation. Namely, given the precipitous decline in refinance applications, mortgage lenders now have both the motive and the opportunity to pursue purchase-money mortgages.

The motive stems from the twilight of the refinancing wave. In Wells Fargo's case -- which matters disproportionately because it controls upwards of a third of the domestic mortgage market -- the revenue hole is huge. Last quarter was the seventh consecutive time that it had more than $100 billion in mortgage originations. In the vast majority of those quarters, roughly two-thirds of the volume related to refinancing activity.

And the opportunity is similarly grounded, given the vast quantity of manpower that the bank can -- and, at least in part, will -- redirect to originating purchase-money mortgages.

The net result is that, while the absolute number of purchase-money applications might decline in the face of rising interest rates, the proportion of them that are approved by lenders may be on the ascent.

For anybody who cares about the housing market -- and I say that somewhat facetiously because, as my colleague Morgan Housel has noted, "there hasn't been a strong economy without a strong housing market in modern history" -- this is very good news, as it supports the idea that home sales will continue their upward momentum.

It's estimated that every single-family home built by the likes of D.R. Horton (NYSE: DHI  ) and PulteGroup (NYSE: PHM  ) generates between two and three sustainable jobs. In addition, an increase in demand for housing will presumably push home prices higher, which will reduce the number of underwater homeowners and thereby spur consumer spending. It is, indeed, a virtuous circle.

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Inflation and Stock Selection

It's been so long that inflation has been largely under control in Western economies that many investors and analysts have not directly experienced its impact on everyday life. As I visit my local grocery store and throw my favorite shopping items into the basket, I tend not to check the current prices; I've become accustomed to fairly steady, slowly upward prices for a long time now.

Apart from a sudden pick-up in certain agricultural commodity prices around 2007, milk being one example that comes to mind, my time spent at the local supermarket has been largely predictable and uneventful for many years.

But as the third round of the Fed's easing policy continues for a while longer, economists and analysts foresee rising inflation as one of the primary risks from what has been described by Pimco's Mohamed El-Erian as ''an unprecedented high-stakes experiment'.' And the printing press has been working overtime not only in the U.S., but also of course in the UK, Europe and Japan as well.

No doubt focusing simply on the contents of my weekly shopping basket is only one way of measuring inflation, and some economists argue that inflation is here right now as evidenced by rapidly rising stock, property and oil prices. Is it now too late to plan for more inflation?

One of the best recent analyses of inflation and inflation hedging is the two-part paper by Lazard Research entitled ''Equity Investments as a Hedge Against Inflation'' (Aug. 14, 2012) by Werner Kramer, which you can easily find by an online search. This excellent research provides a background to the history of inflation trends since the 1970s and looks at the industrial sectors which did the best during the two high inflation periods from April 1973 to November 1974 and from December 1976 to April 1980.

One of the key conclusions of this research paper is that stock returns tend to be negative at the beginning of an inflationary period, but that over longer periods the returns tend to recover. It is also describe! d how companies can adapt to mild or moderate inflation over time, but that periods of very high inflation can be expected to result in negative stock market returns. This paper also looks back at what industrial sectors fared the best under the two inflationary periods in the '70s. For example, gold and oil services were found to be the top performing sectors during these periods.

However, simply investing in gold or oil services stocks may not be the right decision in today's market. During the '70's oil demand was on a strong upwards trend, and the inflationary period beginning in April 1973 was actually caused by an oil embargo by Arab oil-producing countries. But now this rate of increase in oil demand has slowed, and is stagnant in Western economies. And with gold having already corrected from a long bull run, its future value as an inflation hedge is currently less certain.

So now, in the light of current economic conditions, those concerned about the likelihood of rapidly increasing inflation need to be creative in their thinking, not just select sectors that did well in the inflationary '70s.

Predicting the consequences of inflation on different types of companies is quite challenging. I have done my best below to propose some general guidelines on the types of companies which I think could either benefit or suffer under conditions of higher inflation. I would very much welcome any feedback and additional or alternative suggestions.

Companies Which May Do Badly:

1. Companies with high debt (and a low interest cover ratio) since obviously higher interest charges on debt, which will most likely accompany inflation, will impact net profit. However this is not so straight-forward since debtors actually benefit in relation to creditors during periods of inflation since the value of the debt reduces in real (inflation-adjusted) terms as inflation continues.

2. Companies that have large projects that take several years to complete, such as large construction and eng! ineering ! projects.. Since the project price is under an existing contract, it will not normally be possible to pass on increasing raw material and labor costs to the client company, although many such companies will undertake some forward hedging contracts on essential raw materials.

3. Companies with a high proportion of costs for raw materials and labor. A classic example of high labor costs is security guard companies, which may have trouble passing on higher labor costs to existing clients. Many food production companies also have a high proportion of costs for agricultural commodities, and could see reduced profits if they don't have the ability to raise prices.

4. Companies with low profit margins. Changes in the cost structure will affect low margin companies disproportionately, unless the ability to pass on costs is guaranteed.

Companies which may do well with inflation:

1. In his Letter to Shareholders in 1983, Warren Buffett explained how companies with a high return on net tangible assets could often do well in times of increasing inflation. In other words, companies that do not require large additional amounts of capital spending each year may be in a position to increase prices and make a higher profit on the existing capital base. See's Candy is given as an outstanding example of an enterprise that can do very well with modest inflation. You can read more about this in Jacob Wolinsky's Oct 05, 2010 Gurufocus article entitled ''Warren Buffett on See's Candy".

2. Companies in monopolistic positions with an installed infrastructure. An excellent example here are the railroad companies. Because of their existing infrastructure which is impossible to duplicate these companies should be able to increase prices in response to an increase in the price level.

3. Companies selling high-brand recognition, low-cost consumer staples. Companies like Procter & Gamble, Nestle and Coca Cola should continue to do well since their established and powerful brands give them the power! to increa! se prices in line with increases in raw materials and labor costs. Another recent GuruFocus article on inflation hedging by ''4percentportfolio'' entitled 'Inflation Insurance for Your Retirement'' also discusses dividend growth stocks including both PG and KO.

4. Companies whose major asset is intellectual property or goodwill, i.e. those that do not have high costs for production plant, labor and raw materials in relation to sales. Examples here could be tech companies such as Google, Facebook and some healthcare product companies.

5. Real-estate investment trusts and commodity companies including mining, oil, forestry and agriculture.

The problem with making any suggestions of course, is that many of the companies mentioned above have already increased considerably in price since the bottom of the bear market in 2009. Although they may do relatively well in response to inflation, at their current prices they are certainly not ''cheap." The conundrum is that I face two choices: either pay what I consider to be ''fairly high'' prices for stocks at the present time or wait for them to become cheaper during a market correction. But as inflation worries lead investors to continually bid prices higher, I may find that I am holding onto excess depreciated currency if I simply sit on my hands. As I wander down the aisle of my local supermarket I suddenly get a flash of inspiration, and throw a couple of extra six-packs of Bud into my shopping trolley... just in case.

Disclosure: Long PG, KO, Nestle. No position in Google, Facebook or BUD. Readers are advised to do their own research before investing in any of the stocks or sectors mentioned.

Is Costco Set to Move Higher Post-Earnings?

With shares of Costco (NASDAQ:COST) trading around $114, is COST an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Costco is engaged in the operation of membership warehouses in the United States and Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Australia, and through majority-owned subsidiaries in Taiwan and Korea. The company's depots receive container-based shipments from manufacturers and reallocate these goods for shipment to its individual warehouses, generally in less than 24 hours. Costco's typical warehouse format averages approximately 143,000 square feet, where many products are offered for sale in case, carton, or multiple-pack quantities only.

On Tuesday morning, Costco reported earnings per share of $1.40, missing by 6 cents, with revenue of $31.77 billion, as its net profit grew 1.3 percent to $617 million. Comparable sales rose 5 percent, with the U.S. up 5 percent and international up 4 percent (7 percent excluding foreign exchange.) Membership fees grew 3.2 percent, to $716 million. Costco hopes to open 11 new warehouses before the end of the calendar year.

T = Technicals on the Stock Chart Are Strong

Costco stock has been exploding to the upside in recent years. The stock is currently trading sideways as it digests gains from its recent bullish run. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Costco is trading between its rising key averages, which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

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

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Costco Options	22.24%	90%	89%

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

	Put IV Skew	Call IV Skew
October Options	Flat	Average
November Options	Flat	Average

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

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

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E = Earnings Are Increasing Quarter-Over-Quarter

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

	2013 Q2	2013 Q1	2012 Q4	2012 Q3
Earnings Growth (Y-O-Y)	0.72%	18.18%	37.78%	30.14%
Revenue Growth (Y-O-Y)	0.83%	4.86%	8.29%	9.65%
Earnings Reaction	2.43%*	-0.94%	1.27%	-0.60%

Costco has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have had conflicting feelings about Costco’s recent earnings announcements.

* As of this writing

P = Excellent Relative Performance Versus Peers and Sector

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

	Costco	Wal-Mart	Target	Pricesmart	Sector
Year-to-Date Return	15.56%	7.05%	5.34%	24.34%	13.62%

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

Conclusion

Costco is a warehouse chain that sells large and bulk items to consumers looking to save an extra few bucks. A recent earnings release has investors excited about the company. The stock has been surging higher in recent years and is now trading slightly below all time highs. Over the last four quarters, earnings and revenues have been on the rise, however, investors have had mixed feelings about recent earnings announcements. Relative to its peers and sector, Costco has been a year-to-date performance leader. Look for Costco to OUTPERFORM.

AT&T says it will publish info on data requests

WASHINGTON (AP) — AT&T says it will publish reports on the number of requests for customer information it receives from law enforcement agencies, the latest move in the telecommunications industry toward fuller disclosure amid debate over government surveillance programs.

The announcement Friday by the largest U.S. telecom company came a day after rival Verizon Communications said it will make public the legal demands it has received.

Dallas-based AT&T says it will publish a report twice a year online. The first one, covering requests received this year, will be out early next year.

The controversy has deepened over data-gathering by the National Security Agency. The NSA's collection of hundreds of millions of Americans' phone records under secret court order was revealed in June in documents leaked by former NSA contractor Edward Snowden.

MORE: Verizon to publish data on phone record requests

Major shareholders of AT&T and Verizon demanded last month that the companies disclose their dealings with the NSA.

To the extent allowed by law, AT&T said its "transparency" report will include the total number of requests it receives from law enforcement agencies in criminal cases, a breakdown of the number of subpoenas, court orders and warrants received, the number of customers affected and details about the legal demands it receives.

"Any disclosures regarding classified information should come from the government, which is in the best position to determine what can be lawfully disclosed and would or would not harm national security," AT&T said in a statement from Wayne Watts, senior executive vice president and general counsel.

"When it comes to governmental surveillance and requests for customer information, all companies are compelled to comply with the laws of the country in which they operate," Watts's statement said. "We take our responsibility to protect our customers' information and privacy very seriously and pledge to continue to ! do so to the fullest extent possible."

MORE: Snowden says ruling vindicates leak of NSA files

AT&T has said previously that it protects customer information and complies with government requests for records "only to the extent required by law."

Several major Internet companies, including Google, Microsoft, Apple, Facebook and Yahoo publish periodic reports disclosing the number of requests from federal agencies and local police departments for personal data, which cover such things as email communications.

Until now, however, telecommunications companies haven't filed such reports.

The reports by the Internet companies don't provide specifics about the number of orders that the companies receive through the secret court set up under the Foreign Intelligence Surveillance Act to fight terrorism.

A presidential advisory panel this week recommended sweeping changes to the surveillance programs. Those include limiting the bulk collection of phone records by stripping the NSA of its ability to store that data in its own facilities. Instead, the data would be required to be held by the phone companies or a third party

President Barack Obama said Friday that the idea of having the phone companies keep the records was worth consideration. He did acknowledge "that might cost more; there might have to be different checks on how those requests are made."

Still, Obama said at a news conference, it's worth asking whether such a plan makes sense, "because right now people are concerned that their phone calls are being listened to even if they're not."

An opinion from the secret Foreign Intelligence Surveillance Court, which was declassified in September, said no company that has received an order to turn over bulk phone records has challenged the directive.

The opinion by Judge Claire Eagan spelled out her reasons for reauthorizing the NSA phone records collection for three months. Eagan concluded that the bulk collection of phone records does not violat! e the Con! stitution's Fourth Amendment, which prohibits unreasonable search and seizure.

But a federal judge in Washington ruled Monday that the phone records collection is likely unconstitutional, calling the operation "Orwellian" in scale. The government is expected to appeal the decision by U.S. District Court Judge Richard Leon, who put his ruling on hold "in light of the significant national security interests at stake in this case and the novelty of the constitutional issues."

The Obama administration has defended the program as a crucial tool against terrorism. The Supreme Court may well have the last word.

Hot Clean Energy Stocks To Own For 2014

With traditional energy production rising from fracking and horizontal drilling, the renewable energy sector hasn�� been a great investment since the financial crisis. Broad-based clean energy funds- like the iShares S&P Global Clean Energy Index (NASDAQ:ICLN) ��till sit far below their all-time highs. Those lousy returns have been even worse for the solar sector. As prices for panels have crashed due to a glut on the market, many solar stocks have suffered.

Yet, solar bulls may finally be getting some good news.

For the first time, new solar power installations overtook wind energy capacity across the globe. That�� a huge win for the energy form and could finally signal solar�� return as a valid portfolio choice.

Policy Shifts In Key Markets

According to Bloomberg New Energy Finance, photovoltaic capacity installed around the world this year will beat wind for the first time ever. The news agency predicts that a total of 35.5 gigawatts (GW) worth of wind energy- both onshore and off- will be installed this year. That compares to its median forecast of 36.7 GW of new photovoltaic capacity.

Hot Clean Energy Stocks To Own For 2014: Advocat Inc.(AVCA)

Advocat Inc., together with its subsidiaries, provides long-term care services to nursing home patients. It offers health care, nursing, personal care, and social services to their patients and residents. The company also provides rehabilitation and nutritional support services. As of June 30, 2011, it operated 9 company-owned and 37 leased nursing centers with 5,364 licensed nursing beds in Alabama, Arkansas, Florida, Kentucky, Ohio, Tennessee, Texas, and West Virginia. The company was founded in 1994 and is based in Brentwood, Tennessee.

Hot Clean Energy Stocks To Own For 2014: Singtel 100 (Z78.SI)

Singapore Telecommunications Limited engages in the operation and provision of telecommunication systems and services primarily in Singapore and Australia. The company also provides facilities management, consultancy, Internet access, and information technology (IT) services; technical, business, and management consultancy services; financial, data communication, telecommunications, mobile phone, narrowband portal content, equipment rental, interactive television, broadcasting, and IT disaster recovery services; and handset insurance and related services. In addition, it engages in the research and development, products and services development, and business partnership activities; venture capital investment holding; operation and provision of cellular mobile telecommunications systems and services; resale of fixed line and broadband services; provision of satellite capacity for telecommunications and video broadcasting services; ownership and chartering of barges; provisi on of storage facilities for submarine cables and related equipment; development and management of online Internet portal; and sale and maintenance of telecommunications equipment, as well as operates as a C1 Satellite contracting party. Further, the company distributes specialized telecommunications and data communication products; invests in telecommunications network infrastructure; distributes prepaid mobile products; operates and maintains fibre optic network between Brisbane and Cairns; manages, provides, and operates a call centre; provides information technology training, communication engineering, system integration, engineering and marketing, and general liaison and support services. Additionally, it develops and resells software; provides infotainment products and services; and operates as a trustee for superannuation scheme. The company is headquartered in Singapore. Singapore Telecommunications Limited is a subsidiary of Temasek Holdings (Private) Limited.

Best Low Price Companies To Buy For 2014: Rubicon Minerals Corp(RBY)

Rubicon Minerals Corporation, a mineral exploration company, engages in the acquisition, exploration, and development of mineral properties in Canada and the United States. It primarily explores for gold and base metal deposits. The company?s key asset is the Phoenix Gold Project located in the Red Lake gold camp, in the Province of Ontario. As of March 31, 2010, it controlled approximately 65,000 acres of prime exploration ground in the prolific Red Lake gold district of Ontario, Canada, as well as approximately 380,000 acres surrounding the Pogo Mine in Alaska and approximately 225,000 acres in northeast Nevada. The company was founded in 1996 and is headquartered in Vancouver, Canada.

Advisors' Opinion:

• [By Sean Williams]

  Another reason this fund looks attractive (at least to me) is that Rubicon Minerals (NYSEMKT: RBY  ) is one of its largest holdings at 6.02% of its assets as of May 10, 2013. Rubicon is in the late stages of the development process for the F2 Gold System, which has yielded drilling assessments as high as 767 grams/ton. F2 appears to be just as bountiful in gold well below the surface as it is near the surface, which could mean a very long and profitable mine life for Rubicon.

Hot Clean Energy Stocks To Own For 2014: Apollo Gold Corporation(BRD)

Brigus Gold Corp. engages in the extraction, processing, refining, and production of gold and other by-product metals primarily in North America. The company principally produces gold and silver. It primarily owns the Black Fox Complex and Black Fox Mill properties located in the Timmins Mining District in the Province of Ontario, Canada; the Goldfields project located in the Lake Athabasca region of Saskatchewan, Canada; and the Ixhuatan property located in the state of Chiapas, Mexico. Brigus Gold Corp., through its joint venture, holds interests in the Ampliacion Pueblo Viejo and Loma El Mate gold exploration projects located in the Dominican Republic. The company was formerly known as Apollo Gold Corporation and changed its name to Brigus Gold Corp. in June 2010. Brigus Gold Corp. was founded in 1936 and is headquartered in Halifax, Canada.

Advisors' Opinion:

• [By Zacks Investment Research]

  It is hard to find a good play in the Zacks Industry of mining non-ferrous metals, as the industry currently has a rank of 247 out of 261. In fact, in our five mining industries, there are only two No. 1-Ranked stocks: Brigus Gold (BRD) and Impala (IMPUY.PK). Both of these are in struggling industries, but they have proven to be best-in-class thanks to improving earnings estimates. Plus, both have seen their ranks surge from holds (or worse) up to strong buy territory, suggesting either of these names might be better picks than the struggling SCCO at this time.

Hot Clean Energy Stocks To Own For 2014: Westwood Holdings Group Inc(WHG)

Westwood Holdings Group, Inc. manages investment assets and provides services for its clients. It operates through two subsidiaries, Westwood Management Corp. and Westwood Trust. The Westwood Management Corp. provides investment advisory services to corporate retirement plans, public retirement plans, endowments and foundations, mutual funds, individuals, and clients of Westwood Trust. The Westwood Trust provides trust and custodial services to institutions and high net worth individuals, and participates in common trust funds that it sponsors. The company was founded in 1983 and is based in Dallas, Texas.

Hot Clean Energy Stocks To Own For 2014: Bolt Technology Corporation(BOLT)

Bolt Technology Corporation engages in the development, manufacture, and sale of marine seismic data acquisition equipment and underwater remotely operated robotic vehicles worldwide. It operates through four segments: Seismic Energy Sources, Underwater Cables and Connectors, Seismic Energy Source Controllers, and Underwater Robotic Vehicles. The Seismic Energy Sources segment offers marine seismic energy sources, such as marine air guns for use in seismic exploration; and replacement parts. The Underwater Cables and Connectors segment provides underwater cables, connectors, hydrophones, depth and pressure transducers, and seismic source monitoring systems. The Seismic Energy Source Controllers offers air gun controllers/synchronizers, data loggers, and auxiliary equipment. The Underwater Robotic Vehicles segment offers underwater remotely operated robotic vehicles for various underwater tasks. The company serves marine seismic exploration contractors, oil and gas companie s, defense industry, fire and rescue organizations, and educational institutions, as well as federal, state, and local governmental units. Bolt Technology Corporation markets its products directly, as well as through sales agents and a network of distributors. The company was founded in 1960 and is headquartered in Norwalk, Connecticut.

Hot Clean Energy Stocks To Own For 2014: Dupont Fabros Technology Inc. (DFT)

DuPont Fabros Technology, Inc., a real estate investment trust (REIT), engages in the ownership, acquisition, development, operation, management, and lease of large-scale data center facilities in the United States. The company leases its data centers to the American and international technology companies to house, power, and cool the computer servers that support their critical business processes. It also provides certain technical services to tenants, including layout design and installation of electrical power circuits, data cabling, server cabinets and racks, computer room airflow analyses, and monitoring. As of December 31, 2011, the company owned and operated seven data centers located in Northern Virginia; one data center in suburban Chicago, Illinois; one data center in Piscataway, New Jersey; one data center in Santa Clara, California. DuPont Fabros Technology, Inc. has elected to be taxed as a REIT. As a REIT, it would not be subject to federal corporate income t axes if it distributes at least 90% of its taxable income to its stockholders. The company was founded in 2007 and is headquartered in Washington, District of Columbia.

Advisors' Opinion:

• [By Rich Duprey]

  As noted last month, DuPont Fabros Technology�� (NYSE: DFT  ) �increased its�second-quarter dividend�25%, which will be paid on July 15 to shareholders of record on July 5. In addition to announcing this regular $0.25-per-share payout for its common stock, the data center operator also announced yesterday it would be paying dividends on two series of preferred stock, both of which will also be payable on July 15 to shareholders of record on July 5.

• [By Rich Duprey]

  Investors might find it fabulous that DuPont Fabros Technology� (NYSE: DFT  ) �has increased its second-quarter dividend, the third time in two years the payout has been increased.

Hot Clean Energy Stocks To Own For 2014: United Overseas Australia Ltd (EH5.SI)

United Overseas Australia Limited engages in the construction, development, and resale of residential and commercial land and buildings primarily in Australia and Malaysia. It is also involved in the investment of rental properties; and investment of UOA real estate investment trust. The company, formerly known as United Overseas Securities Limited, was founded in 1987 and is based in Osborne Park, Australia.

More from Mario Gabelli - Time Warner, Viacom, Timken, Fracking, 2014 Outlook

Top 5 Warren Buffett Stocks To Invest In Right Now

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Bad Earnings and Apple Rumors Send Stocks Reeling

Stocks are down sharply today thanks to worse-than-expected earnings from Bank of America (NYSE: BAC  ) and fears that Apple's (NASDAQ: AAPL  ) report may similarly disappoint. With roughly an hour left in the trading session, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is lower by 167 points, or 1.13%.

Given the absence of economic data, it's safe to conclude that today's decline is attributable to one thing: earnings. After yesterday's closing bell, Intel (NASDAQ: INTC  ) reported that its quarterly earnings plunged by 25% from the same time period last year and that its revenue contracted by 2.5%.

And yet shares in the chip maker are nevertheless moderately higher in afternoon trading. What gives?

The answer is that Intel's results were roughly in line with analysts' estimates. In addition, despite the fact that personal-computer sales purportedly fell 14% over the quarter, Intel's PC processor division only saw its top-line erode by 6%. As my colleague Anders Bylund noted, this wasn't wholly unexpected, given that the company never warned investors of an impending meltdown.

Unfortunately, Bank of America is having the exact opposite experience today. Namely, despite the fact that its net income improved by a factor of four over the first three months of the year, its shares are tanking, down 5.3% at the time of writing.

The reason is that, unlike Intel's, Bank of America's results came in below the consensus forecast. While analysts had estimated that the bank would earn $0.22 per share, its actual earnings came in at $0.20 per share. Suffice it to say, the market's not pleased.

And speaking of being displeased, shares of Apple fell below the $400 threshold for the first time since 2011, erasing nearly a year and a half's worth of gains. The catalyst was an announcement from Cirrus Logic (NASDAQ: CRUS  ) , a supplier of audio chips for the iPhone and iPad. According to the Associated Press, Cirrus said that "sales of a particular chip are slowing down as an unnamed customer [presumed to be Apple] moves to a newer component."

The implication, according to an analyst cited by the AP, is that Apple is unlikely to launch a new iPad Mini in the April-to-June period. For investors, it's important to keep in mind that this is purely speculation and rumor. We should get a better feel for things on Tuesday when the tech giant itself reports earnings.

There's no doubt that Apple is at the center of technology's largest revolution ever and that longtime shareholders have been handsomely rewarded. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on reasons both to buy and to sell Apple, as well as what opportunities remain for the company (and your portfolio) going forward. To get instant access to his latest thoughts on Apple, simply click here now.

Mawer New Canadian Equity Fund Comments on Constellation Software

Top 10 Heal Care Companies To Watch In Right Now

Constellation Software (TSX:CSU) is a Toronto-based firm that delivers software solutions to customers in 30 countries around the world. Their software systems are used by a diverse customer base that includes government entities, hospitals, schools, public utilities, and private businesses. It's quite possible that in a typical day you encounter a Constellation Software system numerous times as you visit a doctor, pay a utility bill, renew a driver's license, or visit a fitness facility. Since it can be costly and onerous for an organization to switch software vendors, Constellation tends to have a high degree of client retention.

Though Constellation Software was founded in 1995, it remained privately owned until its initial public offering in 2006. This was when Mawer established our initial investment in the company. During our research process we gained confidence in the ability to generate shareholder wealth with this business model, and we specifically came away impressed with the quality of the Constellation management team. They appeared highly skilled in the way that they evaluated opportunities, allocated capital, and executed their business plan. Their ability to identify accretive acquisitions and successfully integrate them into the business model was especially noteworthy. In time, they would become our own internal benchmark for managerial excellence, not just in Canada, but on a global stage.

From the Mawer New Canada Fund third quarter 2013 newsletter.

Also check out: Mawer New Canada Fund Undervalued Stocks Mawer New Canada Fund Top Growth Companies Mawer New Canada Fund High Yield stocks, and Stocks that Mawer New Canada Fund keeps buying

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CytRx (CYTR) Soars on 2-Day Rally

NEW YORK (TheStreet) -- CytRx Corp. (CYTR) extended its gains, parlaying an announcement Wednesday into a two-day rally. Shares closed 52.2% higher to $6.12 during Thursday's trading session, adding to an overall 152.1% gain since Wednesday's open.
CYTR data by YCharts

A rally was sparked after the oncological specialist announced the success of a mid-stage clinical trial of its cancer treatment before the bell Wednesday. The aldoxorubicin study, an experimental treatment targeting soft-tissue sarcomas, was found to have an 80% to 100% success rate in progression-free survival over using chemotherapeutic agent doxorubicin in isolation.

The success of CytRx is in stark contrast to ImmunoCellular Therapeutics (IMUC) which more than halved its value on Thursday. The cancer immunotherapy researcher closed 59.9% lower to $1.09, after a phase II study of its cell-based vaccine treating aggressive brain tumors failed to reap statistical significance in overall survival among patients.

--Written by Keris Alison Lahiff

Stock quotes in this article: CYTR, IMUC 

Amazon drops low-price strategy in grocery expa…

SAN FRANCISCO -- Amazon.com CEO Jeff Bezos built the world's largest Internet retailer by having the lowest prices.

That strategy is changing as the company expands into the vast grocery and consumer packaged goods market through its AmazonFresh business.

Now the priority is convenience rather than the lowest prices, an approach that could limit how much of this market Amazon can grab from grocery store operators like Safeway and Kroger and other rivals including Wal-Mart Stores, FreshDirect and the start-up Instacart.

AmazonFresh, which delivers groceries and related items the same day or the next day, started as a test in Amazon's home town of Seattle several years ago. The service expanded to Los Angeles earlier this year and launched in San Francisco Wednesday. If those cities perform well, the company may expand to many other urban areas and even outside the U.S. next year.

The thought of Amazon entering a new sector usually strikes fear into the hearts of incumbent companies as they worry profit margins will have to fall to compete with the Internet giant's lower prices.

But AmazonFresh prices are higher, or similar to most grocery stores, according to a recent analysis by RetailNet Group.

A basket of almost 30 grocery items from AmazonFresh in Los Angeles cost $94.80 and AmazonFresh in Seattle charged $99.58, according to a September survey by RetailNet.

Walmart To Go, an online grocery delivery rival, charged $80.38 for the same products and it cost $84.85 to have Instacart pick up and deliver those items from Trader Joe's, the survey found. Online, only Safeway's delivery service cost more than AmazonFresh in Seattle, at $101.83.

A similar basket of groceries cost less than $90 at physical grocery stores in LA run by Walmart, Trader Joe's and Target, the survey also found.

AmazonFresh also charges a $299 subscription for customers in LA and San Francisco. This makes grocery deliveries free for orders over $35 and it also gives shoppers access! to the benefits of Amazon's Prime service, which including free two-day deliver on most of the other stuff the company sells through its main website.

"This seems like a huge hurdle for shoppers to jump just to order groceries online, and artificially limits their addressable market," said Dan O'Connor, CEO of RetailNet Group.

AmazonFresh prices suggest that Amazon is targeting the mid-to-premium shopper who usually buys at Costco, Whole Foods, Bristol Farms and other high-end grocery stores, he added.

Indeed, shares of Kroger and Safeway, among the largest grocery chains in the U.S., have risen 55% and 85% respectively so far this year, outperforming Amazon stock.

Handling fresh meat and other perishable food requires an expensive labor base and skill set that Amazon may not be willing to take on. Instead, the company works with suppliers, distributors and other third parties for this important part of the process. But this means the company has to share more of the revenue with these other players, giving it less room to lower prices.

"They are not doing extensive prepping and trimming of fresh foods. It's a lower touch operation," said Tom Furphy, who helped run AmazonFresh for about four years and is now CEO of venture capital firm Consumer Equity Partners. "That means the combination of quality and good prices becomes tougher."

"They will serve a less price conscious and time-starved customer," he added. "They want people to feel good about the prices, but it's about convenience rather than the lowest prices."

Amazon spokesman Scott Stanzel said AmazonFresh is dedicated to providing low prices, vast selection and convenience.

Is Smucker in a Jam? Wells Fargo Cuts Rating To Underperform

Last month, J.M. Smucker (SJM) sold off sharply when fiscal second-quarter financial results failed to live up to Wall Street's expectations thanks to falling coffee sales, and the food company cut its sales estimate for the 2014 fiscal year, predicting a 2% decline.

Wells Fargo doesn't see things getting much better any times soon.

In a note published today, analysts John Baumgarter and Kristina Westura downgraded the stock to an Underperform from a Neutral, and now value the stock at $92 to $94 a share.

That's an 8% to 10% downside prediction for the stock.

Why? Baumgarter and Westura anticipate a challenging consumer environment, as well as slowing sales growth in the single-serve coffee market and easing tailwinds from cost deflation. 

Top Investments In 2014

So the Wells Fargo duo cut their per share earnings estimates for fiscal 2014 and 2015 to $5.72 and $5.74 respectively, from the previous forecast of $6.16 and $6.25.

Down 2% today to $102.74, Smucker has fallen since August when it hit a 52-week high of almost $115.

19 shocking facts about Detroit’s bankruptcy

At the end of the day, the Detroiter may be the most important American there is because no one knows better than he that we're all standing at the edge of the shaft. – from Detroit: An American Autopsy by Charlie LeDuff.

The lights are literally going out all across Detroit. Currently, 40% of its streetlights are not functioning, which is just one example among many of how the city is failing to meet the most basic needs of its residents. With long-term debt estimated between $18 billion and $20 billion, it's difficult to see how conditions in Detroit will improve anytime soon.

Earlier this year, Detroit filed for Chapter 9 bankruptcy making it the largest municipal bankruptcy in American history. On Dec. 3 at 9 a.m., Judge Steven Rhodes will decide if the city can proceed with its bankruptcy. The ultimate decision will have huge implications for pensioners, bondholders, and ordinary residents, who are wondering if the city will be allowed to revise the terms of its long-term obligations.

Regardless of the judge's ruling, Detroit faces daunting challenges on both the revenue and expense side of the ledger. I recently looked at some of the documents relating to the bankruptcy, and was struck by how desperate the situation has become. Below are some of the more shocking facts I discovered.

1. Detroit's revenue, in inflation-adjusted dollars, fell 40% from 1962 to 2012.

2. The city currently has just 9,700 workers, yet has 21,000 retirees drawing benefits.

3. Detroit's population has declined 63% since 1950, including a 26% decline since 2000. As of December 2012, its population was 684,799 – down from 1,849,600 in 1950.

4. Unemployment has tripled since 2000. As of June 2012, it's 18.3%, which is more than double the national average.

5. The number of employed residents has dropped more than 53% since 1970.

6. Property tax revenues have decreased by approximately 19.7% over the past five years.

7. The per capita tax burden on Detroiters is th! e highest in Michigan, despite relatively low levels of income for city residents.

8. The total assessed value of property in Detroit declined by 77% over the past 50 years in inflation-adjusted dollars.

9. Without restructuring, the city is projected to have negative cash flows of $198.5 million in FY 2014.

10. Detroit's long-term debt is estimated to be between $18 billion and $20 billion.

11. The city has unfunded pension liabilities of $3.5 billion.

12. Its unfunded health care liabilities are $5.7 billion.

13. In 2012, Detroit had the highest violent crime rate of any U.S. city with a population over 200,000. The overall crime rate is five times the national average.

14. Detroit has just 370 functioning street lights per square mile, compared with 812 for Cleveland and 785 for St. Louis.

15. Detroit has witnessed 11,000-12,000 fires every year for the past decade.

16. Detroit's homicide rate is at the highest level in 40 years, and it has been named one of the most dangerous cities in America for more than 20 years.

17. Its citizens wait on average more than 58 minutes for the police to respond to their calls, compared to a national average of 11 minutes.

18. The city has 78,000 abandoned structures.

19. More than half of its parks have closed since 2008.

It's always darkest...

Detroit's situation is extremely dire right now, and it will require great leadership and shared sacrifice in order to turn things around. Fortunately, there are already some glimmers of hope.

The big three auto companies, for example, are now profitable again after having experienced extreme difficulties in 2008 and 2009. GM (ticker: GM ) and Chrysler still have a significant presence in the city, while Ford (F) is based in nearby Dearborn. Both GM and Ford have seen their share prices rise by 29% so far in 2013.

Also, Detroit's downtown is reviving with Quicken Loans founder Dan Gilbert having invested more than $1 billion. War! ren Buffe! tt is a huge fan of Gilbert, and was recently very complimentary of the latter's efforts on behalf of Detroit.

Finally, Detroit has a new mayor who appears to possess the kinds of skills that will be essential for turning the city around. The path ahead will be difficult, but at least one great investor is hopeful. At a recent event for small businesses in Detroit, Warren Buffett said that he has a "real love for the city, and the potential is huge." He also said, "The United States with a flourishing Detroit is going to be a lot better than without one." I think all Americans would agree with that.

Note on sources

For the facts listed above, I relied primarily on the City of Detroit's Proposal for Creditors and the actual Chapter 9 bankruptcy filing. I also benefited from the outstanding investigation How Detroit Went Broke by the Detroit Free Press.

The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

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Amazon – A Dynamic Shift in its Business Model

As promised in a previous article, today I will look into the E-Commerce King: Amazon.com Inc. (AMZN) as an option to eBay Inc. (EBAY).

Growing the Old-Fashioned Way

Years ago the company was the biggest bookstore in the world, in the recent years it has expanded into a number of other product categories allowing other businesses and individuals to sell new, used and collectible products on its Web sites through its Merchant and Amazon Marketplace programs. The company has organized its operations into two principal segments: North America (57% of 2012 net sales) and International (43%). In the last quarter the company recorded earnings that were in-line with Zacks estimates, so let´s have a look at main drivers for the upcoming quarters.

Long Term Growth Opportunities

The industry pattern has shifted from catalog to internet sales as consumers are increasingly buying things online. Forrester Research projects that U.S. e-commerce sales will increase from $231 billion in 2012 to $370 billion in 2016. So the growth of the e-commerce industry demonstrates strong potential for increased Internet usage and e-commerce sales abroad which we consider a key factor for the company in this fast-growing market.

Double-Digit Growth

Due to significant opportunity within emerging markets (like India, China, and Brazil) the international segment could boost earnings in the next quarters. It is essential for the company develops and operates the buying process to increase e-commerce, in a platform like Paypal´s from eBay.

Valuation

In terms of valuation, the stock sells at a trailing P/E of 1349x, trading at a premium compared to the industry average of 18.2x. We have to take into consideration that a higher P/E ratio than its peers can signify a more expensive stock or higher growth expectations. Analysts' expectations imply a forward P/E of 143.52. To use another metric, its price-to-book ratio of 19.5 indicates a premium versus the industry average of 1.7x (a! higher price-to-book ratio makes a stock less attractive) and the price-to-sales ratio of 2.51x is above the industry average of 0.73x.

Investors care about total returns, which consist of share-price appreciation plus dividends paid, which in this stock does not apply. In terms of stock price appreciation, Amazon's stock price is up 67.3% in the last 12 months, and in a five-year period the comparison versus the SPY is tremendous as we can see it in the next chart.

[ Enlarge Image ]

Regarding profitability measures, return on equity (ROE) and return on assets (ROA) are at negative levels. We have seen the evolution for the prior ten years of ROE in a previous article.

Final Comment

In my point of view, an extremely important risk inherent in Amazon's business model is that it is characterized by low switching costs when shopping online. The firm must focus on technologies investments as they are key drivers for long-term growth opportunities.

Hedge fund gurus like Stanley Drucken Miller, Steve Mandel and Murray Stahl bought this stock. Meanwhile, Jim Simons, Louis Moore Bacon, Ken Fisher and Tom Gayner added Amazon to their existing positions. I would advise fundamental investors to consider adding this stock to theirs as well, as it seems to be an industry in a growth phase.

Best Safest Stocks To Invest In Right Now

Disclosure: Damian Illia holds no position in any stocks mentioned.

Also check out: Jim Simons Undervalued Stocks Jim Simons Top Growth Companies Jim Simons High Yield stocks, and Stocks that Jim Simons keeps buying Ken Fisher Undervalued Stocks Ken Fisher Top Growth Companies Ken Fisher High Yield stocks, and Stocks that Ken Fisher keeps buying
About the author:A fundamental analyst at Lonetreeanalytics.com constantly looking for value and income investments.

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Wednesday, December 4, 2013

Innovations that will transform home of the future

Magnets will soon do more than display kids' artwork on refrigerators. They'll actually be inside fridges, making them super efficient.

A new material that cools when demagnetized, expected to hit the market in about five years, could revolutionize the world of fridges and air conditioners by replacing the decades-old use of refrigerants.

"This technology has the potential to be more efficient by 25% to 30%," says Natarajan Venkatakrishnan, director of advanced technologies for GE Appliances, which has patents pending for the material. He says it's ready now, but General Electric is working to lower costs so consumers won't have to pay more.

Welcome to the home of the not-so-distant future. In an age of Google glasses and smart watches, the American dream itself will likely embody innovative technologies that could not only save energy and water but also improve health and bring nature inside.

GE expects the home of 2025 could have under-cabinet 3D printers, faucet sensors that detect bacteria in food and a laundry machine that stores clothes — after washing and drying — in compressed "pellet" form. And the milkman of yore may be back, as more groceries are delivered to exterior cooling units.

Some of these ideas may seem far-fetched, but recent breakthroughs and exhibits at last month's GreenBuild in Philadelphia — the annual meeting of the U.S. Green Building Council — reveal dozens of nifty products that are new or will soon be released.

Mushrooms and hemp, for example, are being used in insulation. At GreenBuild, New York-based Ecovative unveiled Myco Foam, which contains mycelium — mushroom "roots" that provide an airtight seal by growing and binding to the inside of a wall cavity. Also new are prefabricated panels of Hemcrete, made from the shiv or woody core of industrial hemp and a limed-based binder.

New technologies are helping to boost efficiency. Last month, Panasonic introduced Exterios, a combined heating-and-cooling system that's at le! ast twice as efficient as most furnaces and air conditioners. It has inverter technology that continually adjusts the compressor's rotation speed as well as a sensor that detects whether someone is in a room and automatically adjusts the temperature.

More innovation is coming. "There's tremendous runway still left with energy efficiency," says John Mandyck, vice president of sustainability at United Technologies, which is now making solar-powered elevators. "What's really exciting about the future is the integrated building or home — how all the systems work together."

• Automation. What's making this integration possible is the explosion in smart products — appliances, lights, shades.

This year, Whirlpool introduced four higher-end appliances — a dishwasher, fridge, washer and dryer — that can be remotely controlled with a smartphone app. Users can monitor energy rates and consumption.

Crestron has shades and draperies that can be remotely lowered or raised. "We see a lot of residential users putting in photo-cell sensors," says marketing manager Claudia Barbiero, noting these sensors automatically adjust window coverings depending on how much daylight enters a room. She says automation is especially helpful to homeowners with huge picture or second-story windows.

Several companies, including Crestron, have recently introduced home automation devices that allow users to set security alarms, turn lights on or off, program a room's temperature or start a load of laundry. Other gizmos allow access to data on smart meters, which track a home's energy use and report it back to the utility.

"Coming to a home near you very soon are small devices that can fit in the palm of your hand and will be able to read your smart meter," says Michel Kamel, CEO of California-based MelRok, adding they'll cost less than $100 and will help residents manage their energy use. Early next year, his company will release its own version.

"We can measure and control everything �! � every o! utlet, every light switch, every mechanical system and every fixture," says David Gottfried, founder of the U.S. Green Building Council. He estimates monitoring can help consumers save 30% to 50% of energy and water.

• Smart windows. Another product that can be remotely operated, via an iPad app, is new electrochromic window glass. SageGlass Simplicity, a glazing for windows in commercial buildings that can be darkened or lightened to control glare and heat gain, made its debut last month.

Pricey windows that can be tuned, like an engine, are starting to enter the residential market, as well. Last year, View (formerly Soladigm), began selling windows with thin-film electrochromic material between the panes. When a low-voltage current is applied, the material can reflect or absorb light and change the glass' color.

A smarter, less costly window is in the works. The U.S. Department of Energy's Lawrence Berkeley National Laboratory announced in August that it designed a new material — a thin coating of nanocrystals embedded in glass that can modify sunlight as it passes through a window.

"When used as a window coating, our new material can have a major impact on building energy efficiency," Delia Milliron, a Berkeley Lab chemist who led the research, said in announcing the breakthrough. The coating can control both visible and heat-producing near-infrared light so occupants can enjoy natural light without unwanted heat.

In October at the 2013 Solar Decathlon in Irvine, California, Middlebury College showcased a home that's powered by solar panels atop an exterior walkway. Its students say this approach, as shown here in a sketch, allows the house to face the street with the panels can face the sun.(Photo! : Courtes! y of Middlebury College)

• Solar canopies. Rooftop solar is booming nationwide as more companies offer leasing options that allow customers to installs panels atop their home with no upfront costs. Now, solar is moving beyond the roof.

Next year, Princeton-based NRG Energy will begin selling the gazebo-like Solar Canopy, which has solar panels on top. Once assembled, the modular kits could enable homes to go off grid or, by storing energy in batteries within the canopy, provide back-up power in case the grid goes down.

"In the wake of Hurricane Sandy's destruction, NRG began to take a more urgent look at providing a solution that could meet basic power needs in the event of a grid emergency," Tom Doyle, CEO of NRG Solar, said while unveiling the product in October.

Also next year, Quebec-based Renewz plans to begin selling residential Solar Charging Carports for about $30,000, says company CEO Sass Peress. The carport generates solar power that can be used to charge an electric vehicle or to supplement a home's energy.

Walkways may also go solar. At this year's Solar Decathlon, a bi-annual competition to see which university team can build the best solar home, Vermont's Middlebury College put solar panels atop an exterior walkway, providing a shaded entry to the house and optimal orientation to the sun.

"Our house can orientate to the street whereas our solar panels can orientate to the sun," says Cordelia Newbury, Middlebury's team manager. "This allows for anyone in a residential community to have solar."

• One-gallon flush. Toilets that used five gallons of water per flush were once the industry norm, but new ones use 80% less.

Kohler unveiled a product last year that uses 1.28 gallons per flush. Instead of relying on a flapper that only partially opens during a flush, it uses an AquaPiston canister that lifts completely off the valve, allowing water from 360 degrees to swoop in.

This year, after years of development, Toto introduced the 1G, ! a toilet ! that uses only one gallon. Its secret is a "Double Cyclone" flushing system, which uses two nozzles, rather than rim holes, to propel water more efficiently around the bowl

Consumers are seeking more efficient toilets, because water bills are often rising faster than electric ones, says Toto's Jason Fitzsimmons.

Modular kits to grow plants on walls or shelves inside a home are proliferating as consumers look to bring nature inside. Some systems were on display in November at the 2013 GreenBuild at the Pennsylvania Conference Center in Philadelphia.(Photo: Wendy Koch)

• Living walls. One of the most dramatic changes at this year's Solar Decathlon and GreenBuild was the plethora of wall and shelving products for growing plants.

"We've seen a great increase in living walls in the residential market," says Ryan Burrows of New Jersey-based EcoWalls, which debuted a "chef's wall garden" earlier this year that cultivates herbs and veggies.

Modular units that are easy to install and maintain are gaining popularity, says Curtis Alexander of Urban Jungle, a Philadelphia company that installs such systems for about $140 per square foot — excluding irrigation costs.

"People want more green in their lives," he says, adding he expects bio-walls — now typically 200 to 500 square feet — will get bigger.

"They're helping people connect to nature," says Nadav Malin, president of BuildingGreen, a company that researches eco-friendly building products. He says he's not yet convinced that small bio-walls improve indoor air quality as their advocates suggest, but he adds: "There's a strong psychological benefit."

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