Top 5 China Stocks To Buy Right Now

Micro-brewers aren’t so micro anymore.

The gourmet beer industry is in a quandary these days that will impact the value of industry stocks, such as Boston Beer (NYSE: SAM), Anheuser-Busch InBev (NYSE: BUD), and MolsonCoors (NYSE: TAP), among others. We think Boston Beer, maker of Sam Adams, is in the best position to thrive.

First, let’s wipe the foam way and study a problem for the industry that’s in significant need of a solution.

The brewery industry has unleashed an army of lobbyists upon Washington, DC, to curry favor, twist some arms (and yes, bend some elbows) to convince Congress to reduce tax burdens micro-brewers consider heavy and onerous. These taxes are a bottom line killer in a combative industry.

Companies such as Boston Beer and Anheuser Busch may have a point on high excise taxes. No longer are North America and Europe no-brainers for beer companies. Growth has stagnated in the so-called “old continents” and breweries are looking to new, emerging market opportunities such as China, India, and increasingly, Africa.

But the entire industry has the dry heaves over a declining market, with older Baby Boomers giving up their wicked ways and their Millennial kids opting for that raspberry cake martini over a nice pint of lager.

That’s where the lobbying campaign comes in, with 2012 a banner year for micro-brewery lobbying efforts, and 2013 should follow suit. In fact, lobbying ranks were significantly swelled as the big micro-brewers put the full-court press on Congress to alleviate what industry executives view as exorbitantly higher excise taxes.

This summer, the US Brewers Association launched a huge lobbying effort that targeted 90 US Senators and 250 members of the House of Representatives, with face-to-face meetings on tap with 250 brewery executives.

Under particular lobbying pressure is House Ways and Means Committee Chairman Dave Camp, a Michigan Republican. The brewery group has already met wi! th Camp and is using that meeting as a jumping off point for those meetings with 340 federal legislators.

And last spring, brewery execs descended on Washington, DC in what the Brewers Association called the largest lobbying effort it’s ever organized. According to the group, 220+ individuals from 46 states met with more than 300 congressional offices. The meetings centered around educating members of Congress about small brewery businesses and asking for support of the recently introduced excise tax recalibration legislation, also known as HR 494, a new bill introduced by Cong. Jim Gerlach, a Pennsylvania Republican.

According to the bill’s official text, HR 494 seeks to “amend the Internal Revenue Code of 1986 to provide a reduced rate of excise tax on beer produced domestically by certain qualifying producers.” The Brewers Association is taking the fight right into bars in the districts of powerful legislators.

After a meeting at a Baltimore ale house, US Sen. Barbara A. Mikulski (D-MD) announced she had joined the Senate Small Brewers Caucus. According to the Senator’s office, at the meeting, Senator Mikulski discussed her commitment to small business jobs and Maryland’s craft and micro breweries that strengthen our economy.?

“Maryland’s small businesses are the backbone of our economy. They create jobs. And they are important to the communities they serve,” Mikulski said. “My great-grandparents owned a local bakery and my father ran a grocery store. I learned how small businesses help weave social fabric by hiring local workers and investing in their communities. I’m proud to raise a glass here in Baltimore with Maryland brewers and take the fight to Washington to support small business jobs.”?

But I don’t like the bill’s chances of passage, and I don’t see any favorable upward movement in brewery stocks as a result. According to the government watchdog site GovTrack.us, HR 4! 94 only h! as a 2 percent chance of passing into law, and is already currently buried in committee as you read this paragraph.

Another industry trade group, the Beer Institute is also looking for favorable treatment on Capitol Hill, pushing a bill that would reduce taxes on all US brewers, no matter what their size. That bill, the Brewer’s Employment and Excise Relief Act (or BEER Act) is set to be introduced later in 2013, after the Beer Institute completes an intense lobbying effort of its own.

The variances are understandable. The Brewers Association represents 1,799 microbrewery companies, while the Beer Institute is home to 2,800 US brewers of all shapes and sizes. Each is representing the interests of its members, and both spent about $1.3 million last year pushing for its interests in Washington, DC. In addition, both groups say the tax issue is their largest priority.

But even if both industry groups break through, and pass one or both bills (and again, I am doubtful either will happen), I wouldn’t get too attached to any beer stocks, save for high-growth microbrew company Boston Beer, maker of Sam Adams.

Betting on Boston

I’m more optimistic about a microbrew firm such as Boston Beer, which announced plans to expand its operations this year.

Industry consolidation has stalled the growth of mainstream beer stocks (such as Anheuser-Busch, which is trading at $99 per share, a level that hasn’t changed much in the past six months). While they are starting to pull back on high prices, after months of driving beer prices upward, the damage has been done. Those higher prices only alienated their core demographic of younger, less affluent drinkers.

As for Boston Beer, the stock is trading at a sky-high $240 per share, worth about $3 billion in market capitalization, after a huge run-up in 2013. Is there enough suds in the glass to keep the company’s stock moving higher?

I think so. Its robust cash position, widely praised distri! bution op! erations, and a strong embrace by so-called “gourmet drinkers” and small brewers all signal a stock that has upward momentum left.

With sales growing by 15 percent to 20 percent annually, and plenty of room to grow (it only controls 1 percent of the US beer market), Boston Beer enjoys better prospects than its industry peers.

The Red Sox are in the playoffs and the Patriots are rolling again, so Boston Beer is set to benefit as the beer of choice in New England this fall—and the stock of choice for consumer beverage-minded investors across the rest of the country.

Brian O’Connell is an investment analyst at Investing Daily. He has appeared as an expert financial commentator on CNN, NPR, Fox News, Bloomberg, CNBC, C-Span, CBS Radio, and many other media broadcast outlets.

 

Top 5 China Stocks To Buy Right Now: China Lodging Group Limited (HTHT)

China Lodging Group, Limited, together with its subsidiaries, develops, operates, and manages a chain of hotels in the People?s Republic of China. It operates HanTing Express Hotel that targets knowledge workers and value-conscious travelers; HanTing Seasons Hotel, which targets mid-level corporate managers and owners of small and medium enterprises; and HanTing Hi Inn for budget-constrained travelers. As of March 31, 2011, the company had 473 hotels consisting of 259 leased-and-operated hotels and 214 franchised-and-managed hotels; and 162 hotels under development, including 74 leased-and-operated hotels and 88 franchised-and-managed hotels. China Lodging Group, Limited was incorporated in 2007 and is headquartered in Shanghai, the People?s Republic of China.

Top 5 China Stocks To Buy Right Now: General Steel Holdings Inc. (GSI)

General Steel Holdings, Inc., through its subsidiaries, engages in the manufacture and sale of steel products in the People's Republic of China. It offers hot-rolled carbon and silicon steel sheets primarily for use in the production of small agricultural vehicles and other specialty markets; spiral-weld pipes for the energy sector primarily to transport oil and steam; and high-speed wire and reinforced bar products for the construction industry. The company sells its products primarily to distributors. General Steel Holdings, Inc. was founded in 1988 and is headquartered in Beijing, the People?s Republic of China.

Top 5 Small Cap Stocks To Buy For 2014: Top Image Systems Ltd.(TISA)

Top Image Systems Ltd. provides enterprise solutions for managing and validating content entering organizations from various sources. It develops and markets automated data capture solutions for managing and validating content gathered from customers, trading partners, and employees. The company?s solutions deliver digital content to the applications that drive an enterprise by using technologies, such as wireless communications, servers, form processing, and information recognition systems. It offers eFLOW Unified Content Platform that provides the common architectural infrastructure for its solutions. The company also provides Smart, an automated classification solution, which is the eFLOW plug-in for unstructured content providing single point of entry for information entering the organization; and Freedom, the eFLOW plug-in for semi-structured content that enables customers to identify and capture critical data from semi-structured documents, such as invoices, purchase orders, shipping notes, and checks. In addition, it offers Integra, the eFLOW plug-in for structured content, which provides a solution for data capture, validation, and delivery from structured predefined forms; eFLOW Ability, an integrated module interfacing with SAP systems for automated parking, approval, and posting of invoices and other document within SAP systems; and eFLOW Invoice Reader, an invoice capture and approval solution, which could be deployed and integrated in enterprise accounting environment, such as SAP, Oracle, and other financial systems. Top Image Systems Ltd. sells its products through a network of value-added distributors, systems integrators, original equipment manufacturers, and partners in approximately 40 countries worldwide. It has strategic partnership with SQN Banking Systems (SQN) to incorporate SQN's fraud detection solutions with its eFLOW Banking Platform in the Asia Pacific market. The company was founded in 1991 and is headquartered i n Ramat Gan, Israel.

Top 5 China Stocks To Buy Right Now: Arotech Corporation(ARTX)

Arotech Corporation, together with its subsidiaries, provides defense and security products. It operates in three divisions: Training and Simulation, Battery and Power Systems, and Armor. The Training and Simulation division develops, manufactures, and markets multimedia and interactive digital solutions for use-of-force training and driving training of military, law enforcement, security, and other personnel; provides simulators, systems engineering, and software products to the United States military, government, and private industry; and offers specialized use of force training for police, security personnel, and the military. The Battery and Power Systems division manufactures and sells lithium and zinc-air batteries for defense and security products and other military applications; and develops and sells rechargeable and primary lithium batteries and smart chargers to the military and to private defense industry. This division also develops, manufactures, and markets primary zinc-air batteries, rechargeable batteries, and battery chargers for the military; and produces water-activated lifejacket lights for commercial aviation and marine applications. The Armor Division manufactures military and paramilitary armored vehicles, and employs sophisticated lightweight materials to produce aviation armor; and uses engineering concepts to produce combat armored military vehicles and up-armor civilian commercial vehicles. This division also uses lightweight armoring materials and advanced engineering processes to provide ballistic armor kits for rotary and fixed wing aircraft. Arotech sells its products primarily in the United States, Israel, Taiwan, Canada, England, Germany, Australia, China, Hong Kong, Mexico, India, Spain, Singapore, and Japan. The company was formerly known as Electric Fuel Corporation and changed its name to Arotech Corporation in September 2003. Arotech Corporation was founded in 1990 and is based in Ann Arbor, Michigan.

Advisors' Opinion:

• [By Bryan Murphy]

  For those traders who were lucky and smart enough to be in an Arotech Corporation (NASDAQ:ARTX) before today, then congratulations - you're up at least 38% on your position. Now it's time to get out. Conversely, if you're looking for a new name to get into (or perhaps looking for a place to park your ARTX proceeds), then you may want to consider Pazoo Inc. (OTCBB:PZOO)... a tiny online retailer of health and fitness goods. PZOO has dropped several tell-tale hints that more upside is on the way.

Top 5 China Stocks To Buy Right Now: Yanzhou Coal Mining Company Limited(YZC)

Yanzhou Coal Mining Company Limited engages in the underground mining, preparation, and sale of coal. It involves in manufacturing, washing, processing, and selling steam coal used in the electricity power sector; and metallurgical coal used with coking coal in the process of pulverized coal injection, as well as operates six coal mines. The company also engages in the provision of railway transportation services; production and sale of coal chemicals, primarily methanol; and generation of electricity and heat. In addition, it involves in the manufacture and sale of mining machinery and engine products; and development of integrated coal technology. Further, the company engages in the transportation via rivers and lakes; sale of construction materials; and trading and processing of mining machinery. It has operations primarily in China, Japan, South Korea, and Australia. The company was founded in 1973 and is based in Zoucheng, the People's Republic of China. Yanzhou Coal Mining Company Limited is a subsidiary of Yankuang Group Corporation Limited.

Advisors' Opinion:

• [By Roberto Pedone]

  Yanzhou Coal Mining (YZC) engages in the underground coal mining, as well as preparation, processing, sale and railway transportation of coal. This stock closed up 7.6% to $7.31 in Thursday's trading session.

  Thursday's Range: $7.14-$7.31
  
  52-Week Range: $6.68-$18.57
  
  Thursday's Volume: 391,000
  
  Three-Month Average Volume: 370,383

  From a technical perspective, YZC bounced sharply higher here right off some near-term support at $6.77 with above-average volume. This stock has been downtrending badly for the last six months, with shares plunging from its high of over $14 to its recent low of $6.68. During that move, shares of YZC have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of YZC have recently formed a double bottom chart pattern at $6.68 to $6.77. This stock now looks ready to reverse that downtrend and possibly trigger a near-term breakout trade. That trade will hit if YZC manages to take out some near-term overhead resistance levels at $7.76 to $8 with high volume.

  Traders should now look for long-biased trades in YZC as long as it's trending above its recent low of $6.77 and then once it sustains a move or close above those breakout levels with volume that hits near or above 370,383 shares. If that breakout triggers soon, then YZC will set up to re-test or possibly take out its next major overhead resistance levels at $9 to $10. Any high-volume move above those levels will then give YZC a chance to tag its next major overhead resistance levels at $10.67 to $11.11.

Whitney Tilson - I've Never Seen More 'Target Rich' Shorts Other Than Late 1999 and 2007

Whitney Tilson wrote the following in a letter to his followers detailing his four main short ideas:

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I have two strong feelings about shorting right now:

a) It's a horrible business, it's cost me a fortune over the past 4½ years, I wish I'd never heard of it, and every bone in my body wants to cover every stock I'm short and never short another stock again; and

b) In my 15 year career of professional investing, the only other times that have been as target-rich in terms of juicy, obvious shorts are late 1999/early 2000 and late 2007/early 2008 (and we all know how those ended…).

So which feeling am I going to follow (I feel like John Belushi in that famous scene in Animal house, with the angel on one shoulder and the devil on the other…)? I don't know, but this I know for sure: the only other time I felt like covering every short and becoming a long-only manager was October 2007. So I went through my short book, stock by stock, and said, "OK, am I willing to cover MBIA at $70? Hell no, not a single share! Allied Capital at $30? Hell no, not a single share! Farmer Mac at $30? Hell no, not a single share!" And on it went… I couldn't bring myself to cover a single share of any stock I was short – they were all "trembling-with-greed" shorts.

And that's exactly how I feel today…

So I'm going to stick my next out and share my views on four battleground stocks that are among my favorite shorts: World Acceptance (WRLD), Green Mountain (GMCR), Herbalife (HLF), and InterOil (IOC). And next week at the Value Investing Congress I will present another short, my largest.

2) Let's start with an easy one, World Acceptance (WRLD), which I first wrote about in my email on 5/19 (let me know if you want me to resend you this email). Here is what I wrote in my Q2 letter to investors about! it:

World Acceptance

World Acceptance is an installment lender that makes small, unsecured loans to subprime borrowers via 1,203 offices in 13 states and Mexico. It has highly attractive financial characteristics and has grown strongly for many years, leading to exceptional stock performance. Keep in mind, however, that these statements also characterized subprime mortgage lenders like Countrywide up to the peak of the housing bubble – just before they collapsed. Like them, I believe that World Acceptance is a truly predatory company, victimizing and exploiting its customers with usurious interest rates, outrageous fees, and overpriced, unnecessary credit insurance. This business is so shady and exploitative that it is effectively outlawed in all but the 13 states World Acceptance operates in.

I became aware of the company by reading an expose published by ProPublica, which has won two Pulitzer Prizes for its investigative journalism. Its series of articles on World Acceptance is an extraordinary piece of work that lays out in detail the many ways in which the company deceives and defrauds its customers. Here are the highlights (lowlights) from the series:

Repeat Refinancing of Delinquent Borrowers

· "In every World office, employees say, there were loan files that had grown inches thick after dozens of renewals." "That's [World's] favorite phrase: 'Pay and renew, pay and renew, pay and renew,'" Simmons said. "It was drilled into us." It's a tempting offer: Instead of just scrambling for the money to make that month's payment, the borrower gets some money back. And the renewal pushes the loan's next due date 30 days into the future, buying time."

· "For Sutton, making her monthly payments was always a struggle. She remembered that when she called World to let them know she was going to be late with a payment, they insisted that she come in and renew the loan instead."

· World's credit quality is a fiction, a substantial nu! mber of c! ustomers can't repay and are repeatedly refinanced. "At World, a normal month begins with about 30 percent of customers late on their payments, former employees recalled."

Comments on Deceptive Sales of Credit Insurance

· "Former World employees say they were instructed not to tell customers the insurance is voluntary."

· "World can legally understate the true cost of credit because of loopholes in federal law that allow lenders to package nearly useless insurance products with their loans and omit their cost when calculating the annual rate."

· "As part of her loan, Sutton purchased credit life insurance, credit disability insurance, automobile insurance and non-recording insurance. She, like other borrowers ProPublica interviewed, cannot tell you what any of them are for: 'They talk so fast when you get that loan. They go right through it, real gibberish.'"

· "'Every new person who came in, we always hit and maximized with the insurance,' said Matthew Thacker, who worked as an assistant manager at a World branch in Tifton, Ga., from 2006 to 2007. 'That was money that went back to the company.'"

· "When insurance products are optional — meaning the borrower can deny coverage but still get the loan — borrowers must sign a form saying they understand that. 'We were told not to point that out,' said Thacker, the former Tifton, Ga., assistant manager."

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· "'You were supposed to tell the customer you could not do the loan without them purchasing all of the insurance products, and you never said 'purchase,'' Buys recalled. 'You said they are 'included with the loan' and focused on how wonderful they are.'"

· A regional supervisor threatened to discipline a sales person for advising customers that the insurance was voluntary.

· World's systems! don't ! let a customer to decline the optional insurance: "But World soon made it harder to remove the insurance premiums,' Buys said. She couldn't remove them herself but instead had to submit a form, along with a letter from the customer, to World's central office. That office, she said, sometimes required borrowers to purchase the insurance in order to get the loans."

Threatening Customers in Violation of FTC rules

· "If the phone calls don't work, the next step is to visit the customer at home: "chasing," in the company lingo. 'If somebody hung up on us, we would go chase their house,' said Kristin from Texas. The experience can be intimidating for customers, especially when coupled with threats to seize their possessions, but the former employees said they dreaded it, too. 'That was the scariest part,' recalled Thacker, a former Marine, who as part of his job at World often found himself driving, in the evening, deep into the Georgia countryside to knock on a borrower's door."

· "Visits to the borrower's workplace are also common. The visits and calls at work often continue even after borrowers ask the company to stop, according to complaints from World customers to the Federal Trade Commission. Some borrowers complained the company's harassment risked getting them fired."

· World also threatened to collect personal possessions pledged as collateral even though the FTC bars pledging "household goods" such as a TV and furniture.

The Consumer Financial Protection Bureau was established precisely to combat practices like World's. As the ProPublica article notes:

The Consumer Financial Protection Bureau…has the power to sue nonbank lenders for violating federal laws. It could also make larger installment lenders subject to regular examinations, but it hasn't yet done so. Installment companies have supported Republican efforts to weaken the agency, echoing concerns raised by the lending industry as a whole.

Will the CFP! B act to ! rein in World and its ilk? I think it's likely, as it's already acting against payday lenders, which utilize similar techniques to victimize consumers. In April, the CFPB released a report entitled Payday Loans & Deposit Advance Products, which the Wall Street Journal covered in an article entitled, U.S. Regulators to Warn Against Payday-Style Loans:

Federal regulators are preparing to crack down on short-term payday loans and similar products offered by banks after concluding they trap consumers into taking on debt that they can't repay.

The Office of the Comptroller of the Currency and Federal Deposit Insurance Corp., in an effort to prevent so-called direct deposit advance loans, plan to warn banks against offering such products and erect hurdles for those that continue doing so, said people familiar with the matter.

The regulators plan to issue guidance mandating that banks evaluate consumers' ability to repay such loans and limit how often they can make repeated loans to the same customer.

Meanwhile, the Consumer Financial Protection Bureau said it also intends to throw up roadblocks to payday loans, suggesting it could limit the number of consecutive loans to discourage consumers from taking on too much debt.

The CFPB, in a report to be released Wednesday, said it expects to use its authority to provide consumer protections to loans issued by nonbank lenders.

Dennis Shaul, chief executive of the Community Financial Services Association of America, which represents payday lenders, said his industry would "work with the CFPB to ensure payday loans are a safe, reliable option for the millions of consumers who need access" to short-term loans.

The crackdown comes amid criticism of short-term loans that are intended to help consumers through a financial rough patch but can quickly trap them in a cycle of debt, in which they need to take out subsequent loans to pay debts they have already incurred.

What's the proper price for the stock of a h! ighly lev! ered financial company doing unsecured lending to subprime customers, facing potentially crippling regulatory action? I'd argue that 1x book value would be generous, especially in light of questionable loss reserves. Yet World's shares trade at 3x book value, so I think the stock has at least 67% downside – and I wouldn't rule out a zero. Simply put, this business should not exist.

In late July the company finally issued its 10K, which was delayed, and dropped these bombs (which are most definitely NOT boilerplate):

Management's assessment of the Company's internal control over financial reporting identified a material weakness related to the documentation of the establishment and assumptions underlying the adequacy of the allowance for loan losses and the documentation of management's assessment of renewals that may be considered loan modifications as of March 31, 2013…

…The material weakness resulted from the aggregation of the following deficiencies:

• The Company did not have a documented policy that addressed the establishment of the allowance for loan losses, including the assumptions underlying the allowance for loan losses and how management would review and conclude on the appropriateness of the allowance for loan losses; and

• The Company did not have a control to assess whether the accounting treatment of renewals was in accordance with U.S. generally accepted accounting principles and what impact, if any, renewals would have on the estimate of the allowance for loan losses

So I guess it shouldn't be surprising that WRLD released the news that its CFO, Kelly Malson, "retired" after the close today, which was obviously very sudden given that the company hasn't even begun a search for a new CFO and Malson didn't leave for another job:

World Acceptance Corporation Announces Planned Retirement of Chief Financial OfficerPress Release: World Acceptance Corporation – 46 m! inutes ag! o

GREENVILLE, S.C.--(BUSINESS WIRE)--World Acceptance Corporation (NASDAQ: WRLD) today announced that Kelly M. Malson plans to retire from her position as Senior Vice President and Chief Financial Officer of the Company. The Company will initiate a search for a new CFO, and the exact timing of Ms. Malson's departure will depend on the Company's process for finding a successor. Malson's eight-year tenure with the Company began in 2005, and she has served as the Company's Chief Financial Officer of the since March 2006.

"I want to thank Kelly for her service and many valuable contributions to our Company as CFO and a key member of our senior management team," said Sandy McLean, the Company's Chairman and Chief Executive Officer. "Her leadership and dedication have been critical to our success and the development of our finance function and team. Although we are sorry to see her leave, we respect Kelly's decision and desire to pursue other objectives and wish her all the best in those endeavors."

"I am honored to be a part of the World Acceptance team and to have had the opportunity to work together with so many talented and dedicated colleagues to grow our Company and position it for continued success," said Malson. "I look forward to supporting the Company in a smooth transition and thereafter pursuing other life objectives."

(Note that the Malson is also the Chair of the audit committee of CONN, another HIGHLY questionable company…)

3) Now let's turn to Green Mountain (GMCR). Jesse Eisinger, one of the best investigative journalists around, raises some very good questions about the company and its accounting in his column today, which begins:

Green Mountain Coffee Roasters' first-ever investor day is Tuesday, and the company is flying high.

The stock price of the company, which sells coffee machines under the Keurig brand and the little K-Cups that go in them, has soared more than 260 percent in the last year.

Despite pers! istent qu! estions, most of Wall Street remains resolutely bullish on Green Mountain, which has a market value of $12 billion.

In 2010, the company disclosed it was being investigated by the Securities and Exchange Commission. In 2011, the hedge fund manager David Einhorn, who is betting against Green Mountain's stock price, delivered a highly critical 110-slide speech at an investor conference, raising questions about the company's future prospects and, more seriously, its bookkeeping. He followed up a year later with another one.

A class-action lawsuit, which was dismissed, quoted anonymous former employees about suspicious activities. Green Mountain has said it conducted an internal investigation that cleared the company.

Green Mountain operates on a razor/razor blade model — selling brewing machines but making its real money on the K-Cups. It used to disclose exactly how many K-Cups it sold but stopped doing so in 2010. Instead, it tells investors the year-over-year percentage growth. Wall Street has dutifully plugged numbers in to estimate the unit sales.

Last year, Green Mountain faced expirations of the patents that covered its brewing system. Wall Street has been monitoring whether Green Mountain will lose market share to new private-label knockoffs. And indeed, a recent Barron's article suggested that it was losing share faster than expected.

A recent disclosure from the company's new chief executive, Brian Kelley, has revived the questions about sales, as do on-the-ground accounts I have received from former factory and warehouse workers.

Because Green Mountain's investor day will give analysts and shareholders unusual access to company executives, it seems like an opportunity to ask them some hard questions.

Here are a few from me.

■ Just how many K-Cups has Green Mountain sold year-to-date and is it less than the Street understands?...

■ How wide is the gap between how many K-Cups the company says it has sold and how many have ended ! up in cus! tomer's hands? And why?...

■ What explains the unusual movements of Green Mountain inventory described by some former company workers and associates?...

■ What is happening with the S.E.C.'s investigation of Green Mountain, which the company has said involves its accounting practices?...

Let's take a closer look at K-Cups, where the math just doesn't make sense – and the company isn't helping with an explanation. At the analyst day today (see webcast and 188-slide presentation at: http://investor.gmcr.com/index.cfm), the company was asked to reconcile this estimate of K-Cups (since, as Eisinger notes, the company stopped disclosing K-Cup sales in 2010): there are 16 million brewers, GMCR claims usage (an "attachment rate") of 1.4 K-Cups per day x 365 days/year, which results in sales of 8.2 billion K-Cups per year (which doesn't even count maybe 15-20% additional consumption away from home). But GMCR isn't selling anything close to this number of K-Cups, per both analysts and the company (see Eisinger's article below), so what gives? My answer: usage is declining. It makes sense that the people who bought brewers first are likely to be the heaviest users, so the company and analysts should be modeling declining attachment rates – but of course they're not.

When asked about this at the analyst day today, three people from management started speaking at the same time and eventually the CEO said "We don't do straight math." Now that's a quote for the ages!

An even greater concern is that 700-900 MILLION K-Cups can't be accounted for. Eisinger writes:

That's a far cry from 5.6 billion. There seems to be a gap in the United States of about 900 million K-Cups.

What's going on?

Mr. Brandt said the company declined to give its overall sales volume, but said the IRI number that I was furnished with was too low. He said a company analysis indicated that this portion of Green Mountain's sales should be about 2.7 billion, ! not 2.6 b! illion.

Still, even if we use the company's figure of 2.7 billion, total sales in the United States would be 4.9 billion, or about 700 million K-Cups short of what the company has said. That's a lot of extra K-Cups sitting in the channel.

Maybe I'm just being paranoid, but I've seen this kind of thing before: in many of the China frauds, companies were booking fake sales, resulting in fake profits. But that leads to a big problem for the companies: it's hard to fake all the cash that should be in the bank as a result of the supposed profits. The solution? Fake/overpriced/fraudulent acquisitions and/or cap ex to reduce the cash (that was, of course, never there).

Now go back and read David Einhorn's 110-slide presentation on GMCR at the Value Investing Congress on Oct. 17, 2011 (posted here: http://blogs.wsj.com/deals/2011/10/19/heres-the-einhorn-presentation-that-killed-green-mountain-shares) and look at the high-priced acquisitions on pages 50-53 and especially pages 68-72 on cap ex. Einhorn calculates that $431 million (58%) of GMCR's cap ex is "unexplained" and concludes:

• Capital spending is growing much faster than the business

• Capital intensity should be getting more efficient as the company achieves scale

• The gap is so large and insufficiently explained that it raises questions about what is being capitalized and casts doubt on the business model

Einhorn gave an update on GMCR in his presentation at the Congress on Oct. 2, 2012. He didn't release the slides, but here are some of my notes:

GMCR's cap ex as a percentage of sales was 11.0% in 2011, 13.1% (est.) in 2012, and 9.2% (guidance) in 2013. Compare this to the 3.3% average in the food products industry, with a range of 1.0% to 6.3%.

GMCR's cumulative cap ex from 2007-2012 was $1.043 billion and K-Cup shipments in 2012 were 7.1 billion. Divide these two and you get 14.7 cents of cap ex over six years for each K-Cup produced in 2012. Compare this to Einhor! n's ana! lysis of a competitor, which spent 3.8 cents for each K-Cup produced (buying the same production equipment as GMCR). Again, MASSIVE unexplained cap ex.

Einhorn then turned to the production capacity that GMCR's competitors were bringing online and estimated that they would have enough capacity to take 19% market share by the end of 2012 and 26% by the end of 2013.

Lastly, Einhorn showed that competitors were already selling K-Cups for 22-39% less than GMCR was, and highlighted price cuts GMCR had taken that would wipe out nearly all of its profit.

(Obviously these last two things haven't occurred yet – but that doesn't mean they won't…)

Is GMCR committing massive accounting fraud? I don't know – and I certainly can't prove it – but there are a number of warning flags, so I sure can't rule it out. The company could easily put a lot of these concerns to rest by providing some obvious disclosure – like number of K-Cups sold – but refuses to (despite providing highly granular disclosure on most other matters – see today's 188-slide presentation today, for example), which makes me all the more suspicious…

The nice thing about GMCR as a short is that I think it's a good one even if it's accounting is clean because of its very high valuation (29x trailing EPS and 22x FYE 9/14 estimates (if you believe them)) combined with its patent loss a year ago, which is resulting in a ton of low-cost competition entering the market (see page 44-48 of Einhorn's 2011 presentation and my notes from his 2012 presentation above).

It's almost never pretty when a company with a monopoly market share and monopolistic pricing begins to face competition from low-cost generic producers (think what happens when a drug goes off patent) – but it can take some time for the competition to emerge and impact the monopolist's financials, during which time the monopolist can give whatever guidance it wants (and you can be sure that Wall St. "analysts" won't! question! the pie-in-the-sky guidance). Witness today's analyst day…

4) Attached is Bill Ackman's latest salvo against Herbalife. I've deliberately not engaged in this war and don't intend to write or speak about it further because a) it's such a war and b) I don't need the brain damage, but I'm convinced that Ackman is right that it's a pyramid scheme. It's a very clever one, however, because there's just enough of a legitimate business that anyone who's predisposed to conclude that it's legitimate (or just wants to stick it to Ackman – see Icahn, Carl) can easily find evidence that there are some real sales and consumption. But as Charlie Munger once famously said: "If you mix raisins and turds, they're still turds."

Of course it's possible that HLF could be a pyramid scheme, but not be a good short. For the short to work, one or both of the following must happen:

a) There's a slowdown in the number of new suckers/victims that are needed to enter the bottom of the pyramid each year to maintain it, perhaps because the truth about HLF becomes widely known or the law of large numbers catches up with HLF; and/or

b) Regulators/auditors must act to rein in HLF.

I think the latter is more likely, but I don't think it'll be a sudden thing – for example, how regulators shut down Fortune Hi-Tech Marketing (see:www.bloomberg.com/news/2013-01-28/direct-seller-fortune-hi-tech-marketing-accused-of-fraud-1-.html). Rather, I think it's more likely to play out like the for-profit ed industry, where a combination of running out of suckers combined with more scrutiny and tighter regulation resulted in this stock chart of the past two years of ESI, APOL and CECO:

5) Last but not least, an old favorite short, InterOil (believe it or not, this one is still going on!). Here's what I wrote in my Q2 letter:

InterOil

I believe InterOil is one of the largest promotions of all time – but unfortunately (so far) for anyone short the stock, it'! s also on! e of the cleverest. The company, which has all sorts of associations with questionable characters (and pretty much every other red flag a short seller looks for), has been drilling for natural gas in Papua New Guinea for well over a decade and has repeatedly claimed to have found the mother lode – only to disappoint investors again and again (see Appendix B for a remarkable and telling series of unfulfilled promises from the company and its founding CEO, Phil Mulacek, dating back to 2007). One would think investors would finally wise up, but to date they haven't, as the company currently sports a $3.4 billion market cap.

This valuation is based on the expectation that InterOil has discovered one of the world's largest natural gas fields and that current negotiations with ExxonMobil will result in an extremely lucrative deal for InterOil. I think the odds of this are close to zero.

To be clear, nobody – not InterOil's management nor any outsider – knows with certainty whether the company has a real resource discovery or not. This isn't a fraud like Bre-X (for those of you with long memories) because there really is some gas in InterOil's fields, which makes it almost impossible to disprove the company's claims. Instead, one has to analyze geological reports, look at the track record of the company's promises, examine the background of the key people, and then apply common sense.

Here are the key facts: after 15 years of drilling, InterOil still has no proven, probable or possible reserves (nothing but a "contingent resource estimate" by a company well paid by InterOil); its founding CEO unexpectedly quit recently (when was the last time this event was followed by great news?); the company continues to burn enormous amounts of cash; and after hyping a bidding war among multiple major oil companies, is currently only negotiating with one, ExxonMobil (think about who's likely to have the upper hand in those negotiations…).

Here is my analysis of what Inter! Oil told ! its investors in a presentation at its annual meeting on June 24th:

· What the company said: "Monetizing sufficient resource to cover our share of infrastructure costs and fund exploration while retaining maximum upside for IOC equity interest."

What I think it really means: ExxonMobil will take a huge amount of the upside from whatever InterOil might have in exchange for a small amount of money to cover InterOil's ongoing "infrastructure costs and fund exploration."

· What the company said: "Post-negotiations, InterOil and Pacific LNG have clear path to resource monetization."

What I think it really means: ExxonMobil only agrees to pay InterOil anything material if it's actually discovered a major field.

· What the company said: "There will be staged payments before and after production commences to compensate for resource revisions."

What I think it really means: Nobody knows how much natural gas (if any) InterOil actually has so, again, ExxonMobil will only agree to pay InterOil anything material if it actually has a major find.

· What the company said: "The purchase of an interest in PRL 15 is not contingent on resource recertification."

What I think it really means: ExxonMobil will take a stake in InterOil's resource now, prior to resource recertification, most likely in exchange for a de minimis amount of money.

· What the company said: "The resource recertification will be used to determine the economic interest in the license and to allocate upstream capital costs."

What I think it really means: There will definitely be a resource recertification and all of the economics of the deal will be contingent upon what it shows.

Overall, this makes it clear that ExxonMobil has little confidence that InterOil has discovered anything, but is happy to get a nearly-free call option in the (very small) chance that InterOil really has discovered a huge resource.

Appendix B: Endless False Promises from In! terOil an! d Its Founding CEO, Phil Mulachek

· We are in discussions, a vast number of companies on at least three continents have expressed interest joining our acreage following the Elk-1 discovery and flow test.

- Mulacek April 4, 2007

· "Strategic industry partner… who has extensive LNG experience" will deposit $42.5mm for 5% of LNG project.

- InterOil Press Release May 24, 2007

· Over the next quarter, going forward, we look to close the farm-in of our first strategic LNG partner.

- Mulacek Aug. 14, 2008

· Detailed discussions continue with potential strategic investors as we target a sale of 20% to 25%.

- Mulacek Feb. 25, 2009

· European partners have been talking to us.

- Mulacek Feb. 25, 2009

· A number of Japanese companies approach[ed] us, and we are in discussions... over thenext two to three months.

- Mulacek May 20, 2009

· We [gave] access to 30 companies interested [in the project]. We are now trimming [them] down to a few groups.

- Mulacek July 9, 2009

· We are now in the final qualification and final scoping phase of our LNG program with strategic partners.

- Mulacek Aug. 9, 2009

· It [InterOil] aims to find a partner to back the project "over the next couple of months" and to make a final investment decision in about a year.

- Wayne Andrews via Bloomberg Dec. 24, 2009

· We have a number of options in place or under discussion on financing, most of which are tied to our strategic partnering process.

- Mulacek March 2, 2010

· We expect (to) start construction this year after FEED and FID are agreed.

- Mulacek Aug. 4, 2010

· We target FID on the condensate plant by the end of the first quarter of 2011 and the LNG plant by mid-2011.

- Mulacek Nov. 16, 2010

Armour Monthly Dividend At 5 Cents, Strong Buy And Hold

ARMOUR Residential REIT Inc. (NYSE: ARR) announced September 18, 2013, the dividend for October, November and December 2013 will have a dividend of $0.05. At the current opening on Friday, September 27, 2013, of $4.23 that would represent an annualized dividend return of over 14%. In a review of its numbers and anticipated market effects from the looming budget battle and deficient battle, we continue to recommend that ARR is worthy of a buy and hold recommendation.

In order to limit exposure to increasing volatility in the mortgage and US Treasury bond markets in Q3 2013, the company reduced its portfolio to approximately $16.1 billion from a high of approximately $26.9 billion in the first half of 2013. The company did not reduce any of its hedge positions since June 30, 2013, which represent 88.6% of repurchase agreement borrowings and resulted in a net balance sheet duration of 1.05 at August 30, 2013. ARR publishes a monthly report on its website. September 10, 2013 report.

In the last 6 months ARR's revenue growth greatly exceeded the industry average of 10.8%. Since the same quarter one year prior, revenues leaped by 63.9%. Growth in the company's revenue appears to have helped boost the earnings per share. Although ARR's stock price has gone down since the Fed's Chief publicly stated the Federal Reserve may soon reduce the dollar amount of bonds they are currently purchasing, the company has profited nicely.

The company's current return on equity has increased when compared to its ROE from the same quarter one year prior. This is a signal of strength within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, ARR's return on equity significantly exceeds that of both the industry average and the S&P 500.

Shares are down 35% year to date, but we anticipate a rebound during the last quarter to over $5.00 per share. Most investors have failed to acknowledge the earnings improvements the company has achiev! ed over the two last quarters. In the September/October quarterly numbers release the overall market is expected to acknowledge the improvements and provide a bounce to the stock price. With the stock's sharp decline last year, now is a positive time for investors to buy in, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry.

The one down side we do see is when the Fed begins reducing purchases in the bond market interest rates will climb and could negatively affect ARR's business operations. Although the company has repositioned itself as stated above, there will be a softening in the market. We do expect ARR's dividend to continue to pay over a 10% return on investment and continue to recommend our buy and hold position.

ARMOUR is a Maryland corporation that invests primarily in fixed rate residential, adjustable rate and hybrid adjustable rate mortgage-backed securities issued or guaranteed by U.S. Government-sponsored entities. ARMOUR is externally managed and advised by ARMOUR Residential Management LLC, an investment advisor registered with the Securities and Exchange Commission. ARMOUR Residential REIT, Inc. has elected to be taxed as a real estate investment trust for U.S. federal income tax purposes.

Source: Armour Monthly Dividend At 5 Cents, Strong Buy And Hold

Disclosure: I am long ARR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

Additional disclosure: Information from news releases and the Company's website. Investors should always ensure the investment meets their goals and risk standards, as any investment can increase or decrease in the market.

More precise numbers = more trust from clients

Clients may have more confidence in financial advisers who use precise numbers, rather than those who round them up or down, new research from the University of California, Los Angeles, suggests.

People who use more specific numbers — such as citing a 6.4% return instead of a 6% return — are judged to be more reliable sources and are more likely to be tapped by others for advice, according to a recent study by Danny Oppenheimer, associate professor of marketing and psychology at UCLA.

“For advisers, if you give more precise estimates, people will think you are more confident in your decisions and may be more inclined to trust you,” Mr. Oppenheimer said.

Most previous research on what conveys confidence has focused on physical cues, such as the eye contact of the presenter, their posture and whether they make nervous gestures. This research suggests that specificity with numbers as a confidence booster works even when the information is delivered through written forms of communication.

“So much more communication is happening today in ways that people don't have normal cues,” Mr. Oppenheimer said, noting the increased importance of e-mail and social media in business.

In the first part of the study, 187 undergraduates were asked to read 10 questions and estimate the confidence level of the person who had answered each one. The answers all involved numbers but some offered precise measures, such as “2,611 miles,” while others gave imprecise answers like “2,600 miles.”

Participants judged those who answered with more significant digits to be more confident, Mr. Oppenheimer said.

In the second part of the study, 163 people were paid to participate in a Price is Right-style game where they had to guess the price of different items. They were given audience suggestions like “$60” or $63” and had to choose which audience members would advise them in subsequent rounds.

Researchers found that participants preferred advice from those who gave more precise estimates, said the study, which was co-authored by UCLA's Ashley Angulo and Princeton University's Alexandra Jerez-Fernandez.

Applications for the research include “which politician to vote for, which stock broker to take on as financial advisers, and which doctor to trust with diagnosis,” the authors wrote.

However, one key is to be accurate, Mr. Oppenheimer advised.

Some legal psychological research suggests that when someone makes a statement with a lot of confidence but get it wrong, people are more skeptical of the person in the future, he said, noting that such theories have not been investigated in the context of! investments.

“And of course, it's easier to be wrong, the more specific you are,” Mr. Oppenheimer said.

Good News Watch: Advanced Micro Devices (AMD) Has a Sense of “Huma” and More

Shares of chip maker Advanced Micro Devices, Inc (NYSE: AMD) have been trending down lately as summer comes to an end. I should mention that we have the stock in our SmallCap Network Elite Opportunity (SCN EO) and our position went from handsome profit to a loss after it reported earnings (See: Advanced Micro Devices, Inc (AMD): When Warm Just Isn't Hot Enough) a month ago in part because the earnings came out on the heals of earnings misses by major tech stocks like Microsoft Corporation (NASDAQ: MSFT) and Google (NASDAQ: GOOG). And while our position is still down, its worth highlighting some of the good news about AMD which could impact the stock as August comes to a close:

Bullish Options Trading. Schaeffer's Investment Research has pointed out continued bullish options trading on Advanced Micro Devices' shares. Specifically, it was noted that 43,000 contracts changed hands on Tuesday with September 3.50 calls being in the greatest demand with nearly 7,000 options being traded. Traders buying long calls apparently expect AMD to rally to $3.63 over the next few weeks.

An Edge on 3D Performance? On a tech note, it was recently reported that AMD's Senior Product Marketing Manager Marc Diana had said that the PS4 has shipped with a sense of Huma [Heterogeneous Uniform Memory Access] from the company – giving it an edge on 3D performance. However, AMD later called the news source where that got reported to clarify Diana's statements:

"During a recent gamescom 2013 interview, an AMD spokesperson made inaccurate statements regarding the details of our semi-custom APU architectures.   AMD will not comment on the Microsoft Xbox One and Sony PS4 memory architectures and will not speak for Microsoft, Sony or other AMD customers."

Attendance at the Citi Global Technology Conference. On Wednesday, September 4, at 9:45 am, Advanced Micro Devices is scheduled to present at the Citi Global Technology Conference (A real-time audio webcast of the presentation can be accessed on the Investor Relations homepage: http://ir.amd.com or by clicking here) with the scheduled speaker being Lisa Su, SVP and General Manager, Global Business Units. Wall Street conferences can potential be a good source of updated information from a company and do have the potential to move a stock. Singapore Real Estate Deal. On a minor note that will impact third quarter earnings, Advanced Micro Devices has recently entered into a conditional put-and-call option agreement to sell and lease-back its Singapore facility as part of its strategy to reduce investments and capital in non-core parts of the business (such as estate). The transaction is expected to generate proceeds of approximately 59 million Singapore dollars (or $46 million), net of all fees. This amount will be reflected in third quarter 2013 financial statements when they are reported on October 17. Share Performance. Advanced Micro Devices rose 0.88% to $3.42 on Wednesday plus the stock is up 50% since the start of the year, down 13.2% over the past year and down 41.1% over the past five years – producing the following long-term chart:

Here is the latest technical chart for investors who are technicians as well as for traders,

 In other words, traders might want to keep an eye on Advanced Micro Devices – especially next Wednesday when the company presents at the Citi Global Technology Conference.

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SmallCap Network Elite Opportunity (SCN EO) has an open position in AMD. To find out what other open positions SCN EO currently has, and to learn why so many traders and investors are relying on this premium subscription service, click here to find out more.

Single-Family Housing Starts Rise 7% in August

NEW YORK (TheStreet) -- Housing starts rose in August, but homebuilders are still building far fewer homes than expected.

Total housing starts for August was a seasonally adjusted annualized rate of 891,000, 0.9% higher than the downwardly revised July estimate of 883,000 and 19% above the August 2012 rate of 749,000.

Economists polled by Bloomberg expected housing starts to rise to 915,000 from the original estimate of 896,000.

Still, single-family housing starts rose 7% in August to a rate of 628,000 from July. Multi-family starts, which are more volatile, fell by nearly 10%. Building permits declined 3.8% from the upwardly revised July estimate of 954,000 to a seasonally adjusted annual rate of 918,000. Economists expected permits to rise to a rate of 950,000 from the original estimate of 943,000. Homebuilder confidence has been high in the last several months, but in the most recent survey , builders reported increasing hesitancy on the part of buyers as interest rates have risen. New home sales plunged more than 13% in July. Homebuilders are more sensitive to interest-rate hikes as they tend to cater to mortgage-dependent buyers. Housing starts have lagged other indicators in the recovery. One reason is the industry is still recovering from the housing bust and it has taken time for builders to ramp up. With household formation below normal, homebuilders have been wary of overbuilding. Homebuilders have also kept their inventory lean amid a shortage of labor and supplies and chosen to hike prices instead to boost their margins. But with the recent slowdown in the buying frenzy, builders may be rethinking those price hikes. Mortgage applications in the most recent week ended Sept. 13 climbed 11.2%, with the purchase index up 3% from a week earlier on a seasonally adjusted basis. Unadjusted, the purchase index was up 12% from the week earlier. But on year-over-year basis, applications were up only 1%, hardly robust. Still there is pent-up demand and the overall supply of homes for sale is still low on an absolute basis. A healthy recovery in housing starts is essential for the housing market to get back to normal.

Top Financial Stocks To Own For 2014

-- Written by Shanthi Bharatwaj in New York.

>Contact by Email.

Follow @shavenk

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

New Natural Gas Development Could Be a Game Changer

The following video is from Tuesday's Digging for Value, in which host Alison Southwick, and Motley Fool energy analysts Taylor Muckerman and Joel South, get to the heart of the biggest stories in energy investing today.

In today's segment, Joel South talks about an intriguing development from EQT Corp. (NYSE: EQT  ) and Green Field Services, where the companies drilled a multistage fracked natural gas well in the Marcellus shale using 100% field natural gas. Using natural gas from close wells instead of diesel to power rigs could be another game changer as oil and gas companies continue to increase drilling inefficiencies and thereby significantly lower costs.   

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Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

Follow us and tweet us energy-related questions on Twitter for even greater personalized coverage.

Consumer Sentiment Sags Again in August

After an unexpected jump to a six-year high 85.1 in July, the Thomson Reuters/University of Michigan consumer sentiment index fell back to earth on Friday. The final index reading for August came in at 82.1, still well above expectations for a final reading of 80.5. The mid-month preliminary reading came in at 80.0.

Contrary to evidence released in this morning's report on personal income and spending, some consumers are expecting income gains. Unfortunately, households with incomes below $75,000 are less sanguine about their prospects and they pushed the subindex on consumer expectations down, from 76.5 in July to 73.7 in August. Rising interest rates also figured into consumers' outlook, especially as interest rates push up mortgage borrowing costs.

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On the current economic conditions subindex, sentiment fell from 98.6 in July to 95.2 in August.

The last two weeks of August cushioned the blow delivered in the first two weeks of the month, which could be a positive signal for September. There are plenty of reasons to think that is overly optimistic. First, a potential military conflict in Syria could chill consumer sentiment. More important, perhaps, is that the U.S. debt ceiling is set to be reached in mid-October and we can expect more news coverage of an event that nearly drove the U.S. into default in 2011. The annual peak for consumer sentiment could well be behind us.

Alcatel-Lucent: Is A Turnaround Possible?

Alcatel-Lucent (ALU), formed through a merger of Alcatel and Lucent Technologies in 2006, has been suffering from decline in its top line. The top line has declined from $21.01 billion in 2010 to $19.05 billion in 2012. This decline was due to the growing competition from Chinese vendors like Huawei and ZTE (ZTCOF.PK). To revive the company's fortunes Michael Combes, the newly appointed CEO, announced the Shift Plan in June this year. This plan was aimed at restructuring Alcatel-Lucent and focuses on increasing its core networking business' revenue by over 15% from 2013-2015. This growth is expected to come from initiatives implemented towards the development of products which are innovative and can cater to the growing demand in the communication industry. The company has taken initiatives to set the platform for this Shift Plan. In addition, the company is also betting on contracts from adoption of 4G technology in countries like China. These contracts are expected to support Alcatel-Lucent's turnaround strategy. Let's discuss these in detail.

Strategic partnership for boosting R&D

On June 30 this year, Alcatel-Lucent announced a strategic partnership with Qualcomm (QCOM) to develop small cell base stations, which improve wireless 3G, 4G, and WiFi networks across residential and commercial areas. These are compact machines, which are placed on buildings to improve internet connectivity. The partnership will result in both companies investing a total $132 million in R&D for developing next generation Alcatel-Lucent's lightRadio small cell products featuring Qualcomm's chipsets. This initiative is part of its shift plan, in which the company is focusing on increasing its R&D for developing products that cater to new technology.

Alcatel-Lucent is expected to take 95% stake in this partnership. Small cell base stations are in demand as they are compact and consume less space than large base stations or cell site, and due to growing internet usage, telecom service provi! ders prefer this equipment for better connectivity for data traffic. Telecom service provider Verizon (VZ) has started using this technology for their existing networks, and Verizon is expected to deploy 200 small base stations this year. Another major telecom player, AT&T (T), plans to deploy 40,000 small cell base stations by 2015.

This partnership is expected to help Alcatel-Lucent post top line growth, which is expected to reduce the company's net loss that increased to $1.17 billion in second quarter of this year. Despite the current losses, we expect that small cell station base demand will provide good opportunity for the company to generate earnings for the shareholders in the future.

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4G, the next growth driver

Alcatel-Lucent, leader in CDMA network solution with 37% market share, is betting big on China's 4G market. Recently, the world's biggest mobile operator in terms of subscribers, China Mobile (CHL), awarded $3.2 billion in initial 4G contracts to Chinese and European vendors, with Alcatel-Lucent getting 10% share in the contract. The contract was signed for supplying 4G base stations, which are used to broadcast mobile signals.

Alcatel struggled last year in terms of revenue from its China division, declining 16% year over year in 2012 due to decreased spending by Chinese telecom operators. But with the China 4G license auction expected to come by year end, the company is expected to gain more contracts, thus bringing revenue growth from the world's biggest telecom market. 4G being a next big growth driver, provides ample opportunities for communication equipment manufacturers like Alcatel-Lucent to gain from potential contracts from adoption of this technology in China.

Looking at the upcoming 4G auctions in China, telecom providers have increased their infrastructure build up to capitalize on this 4G revolution. China Mobile, the largest mobile ! company i! n terms of subscriber base of 740 million, heads the race to grab this opportunity. The company had lost subscribers in the 3G segment to its competitors like China Telecom (CHA) and China Unicom (CHU), due to launching of 3G services in Time Division Synchronous Code Division Multiple Access, or TD-SCDMA, mode. This network mode has faced compatibility issues with smartphone manufactures like Apple (AAPL), that doesn't manufacture TD-SCDMA supported phones. Looking at these issues, China Mobile has opted to roll out its 4G services in Time-Division Long-Term Evolution, or TD-LTE, mode. This network mode is expected to be compatible with Apple's upcoming iPhone, which is expected to support both 3G and 4G networks in China thanks to Qualcomm's recently launched baseband processors, which are compatible with both networks.

The buzz towards this launch of compatible smartphones has been making headlines after news of a meeting between Apple's CEO and China Mobile's chairman regarding this launch. Apple, which is facing stiff competition from Samsung (SSNLF.PK), is betting on China Mobile's huge subscriber base for growth of iPhone sales in China.

With 138 million China Mobile 3G users reported in June this year, even a 10% market share in this subscriber base would mean additional sales of 13.8 million iPhones, and this figure excludes the potential 4G market. Recently, Apple announced that its product launch event for its new iPhone will be held simultaneously in the U.S. and China. This announcement has made the case of a launch of a compatible iPhone stronger.

The recent talk with Apple and infrastructure build up will help China Mobile gain leadership in the 4G market. The company has already built 20,000 TD-LTE base stations in 15 cities for trials of 4G services, and plans to spread its presence to 100 cities by constructing 200,000 more base stations by end of 2013. All these investments are expected to bear fruit in terms of revenue growth with its market leadership in 4G market.! This mar! ket is expected to have 439.9 million users in 2017 with China Mobile having s 52% share, as per market research firm IHS iSuppli.

On the other hand, Alcatel-Lucent is facing stiff competition in the communication equipment industry and is expecting more contracts after the 4G auction, which is expected to help in consolidation of its declining revenue.

We are taking Enterprise Value/EBITDA multiple for peer analysis of Alcatel-Lucent, as it is not conclusive to evaluate the company because of its negative bottom line and R&D commitments, which affect the expenditure side of its income statement.

After doing the peer analysis on the Enterprise Value/EBITDA multiple, we have found that Alcatel-Lucent currently trades at 6.22x for the trailing 12 months, which is lower than its biggest European rival Ericsson (ERIC), which has value of 8.11x for the trailing 12 month period. This comparison denotes that Alcatel-Lucent is undervalued as compared to its peer, and due to its initiatives, the company has upside potential that can benefit investors in the future.

Conclusion:

China's mobile 4G revolution and new strategic partnership with Qualcomm are expected to lay foundation for Alcatel-Lucent's turnaround scenario. Despite its weak performance, investors have shown confidence towards the company's growth initiatives, which are reflected in the company's stock price that has appreciated 164% YTD.

Whether it's a buy or sell is not a clear cut answer for this stock, but one thing is for certain: under the leadership Michael Combes, the company has a turnaround plan in place to achieve targeted revenue growth as per its Shift Plan, which is expected to reflect in the company's bottom line. Investors must understand that this stock must be viewed as a long term investment. Turnaround doesn't happen overnight. Although Alcatel-Lucent is facing stiff competition from Chinese and European vendors, the company is building its R&D capabilities to cater to the growing demand! for inno! vative products in the telecommunication industry.

Source: Alcatel-Lucent: Is A Turnaround Possible?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

Additional disclosure: Fusion Research is a team of equity analysts. This article was written by Rohit Gupta, one of our research analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.

Boeing 787 Dreamliner in Norway Reports Brake Problem

A Norwegian airlines revealed on Thursday that a newly delivered 787 Dreamliner from Boeing Co. (NYSE: BA) has been parked at Stockholm's Arlanda Airport since Monday as a result of a potential problem with the aircraft's brakes. Norwegian Air Shuttle ASA has ordered total of eight Dreamliners.

The airlines told The Wall Street Journal that technicians were working on the problem and "we hope it will be up in the air pretty soon." An airlines spokesperson said the company has "full confidence" in the Dreamliner and will not change its plans to acquire the new planes.

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The Dreamliner has been plagued with a number of issues since its first delivery more than a year ago. The plane's composite body panels had a separation problem and battery issues have led to overheating and fires. This is the first reported problem with the aircraft's brakes.

Boeing's shares closed on Wednesday at $106.37 and are inactive in premarket trading so far Thursday morning. The stock's 52-week range is $69.03 to $109.49.

After a Summer Stall, the Dollar Bull-Run is Back

Getty Images The U.S. dollar looks set to shake off its summer lull as the factors for a renewed rise appear to be firmly in place. Upbeat economic data, rising Treasury yields and Federal Reserve tapering expectations have boosted sentiment on the greenback, which hit a six-week high around 100.20 yen Friday, and held close to a seven-week peak hit against the euro Thursday following dovish comments from the European Central Bank. A rise in 10-year Treasury yields to 3 percent Thursday, their highest level since July 2011, following stronger-than-expected economic data has refocused attention on the U.S. currency. "We had a temporary pause in July when bond yields pulled back and the dollar paused, but now we're near that 3 percent level and there's renewed focus on payrolls and the Fed meeting this month, so for sure we're going to see another bout of dollar strength," Nick Bennenbroek, head of currency strategy at Wells Fargo (WFC), told CNBC Asia's "Squawk Box" on Friday. The euro hovered around $1.3124 on Friday, within sight of Thursday's seven-week low at $1.3109 and down about 2.4 percent from a six-month peak hit last month. Among the upbeat economic data lending to positive dollar sentiment, Thursday's survey from the Institute for Supply Management showed services industries in August posted their fastest growth since December 2005, exceeding market expectations. Meanwhile, news that weekly jobless claims declined to a near five-year low has lifted expectations for a stronger-than-expected non-farm payrolls report on Friday.

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Strong jobs data could cement expectations that the Fed will start to unwind its monetary stimulus when it meets later in September -- a backdrop that is seen as favorable to the U.S. dollar at a time when central bank stimulus measures are putting pressure on other major currencies. Economists polled by Reuters forecast 180,000 new jobs were created in August compared with 162,000 in July. They expect the unemployment rate to remain unchanged at 7.4 percent. Kathy Lien, managing director at BK Asset Management, said that for the dollar to push decisively above 100 yen, Friday's payrolls number needs to come in above 200,000. Dowd anticipates a push up in the dollar as Fed tapering expectations and the rise in U.S. government bond yields has boosted the greenback's appeal.

Boosting Monthly Savings by $33 Could Add $330 to Retirement Paycheck

The nation’s largest administrator of retirement accounts advises that younger workers who boost savings by just 1% can meaningfully impact their monthly paycheck at retirement.

Fidelity Investments added the financial planning advice to its latest quarterly analysis, released Tuesday, of asset levels and participant behavior among the firm's 12.4 million 401(k) plan participants.

The Boston-based investment manager, which administers the most retirement assets in both 401(k) plans and IRAs in the U.S., noted the average 401(k) balance rose nearly 11%, to $80,600, at the end of the second quarter from the previous year.

That balance was far higher — $211,800 (up nearly 19% from a year ago) on average — for continuously employed workers enrolled in a 401(k) plan for 10 years.

Another positive trend: For the past four years, workers have continued to increase their salary deferral rate.

But the asset management behemoth seized the occasion of its quarterly report as a teachable moment, warning that younger workers in particular are not saving at a recommended rate of 10% to 15% of income (including employer contributions).

“It is critical young workers realize that even the smallest increase to their monthly savings today [of] just 1% — whether in a 401(k) or an IRA — could have a meaningful impact on their retirement paycheck down the road,” said Fidelity’s James MacDonald, president of its Workplace Investing unit, in a news release.

To illustrate this impact, Fidelity says a 25-year-old worker earning $40,000 annually would need to put away just $33 a month.

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After various assumptions embedded in a lengthy footnote — for example, an assumed 1.5% annual income growth spanning the worker’s career, retirement at age 67 and no hardship withdrawals — that worker could increase his monthly paycheck by $330 a month if he is fortunate enough to earn a 7% annual rate of return. At a 5.5% average annual return, the worker would still see a $200 monthly increase in his retirement paycheck.

If an older, 35-year-old worker earning a higher salary of $60,000 a year takes the initiative to stash that 1% of her income for retirement, her pretax monthly paycheck could rise by as much as $270 at a 7% rate of return, or by $180 at a 5.5% average return.

Fidelity also offered illustrations of young workers saving a higher, but flat (vs. percent of income) monthly amount ($50) in their IRA accounts.

The takeaway there was that, at least in the case of an assumed high rate of return of 7% annually, the young worker starting at the later age of 35 increased her retirement paycheck by little more than half ($220 per month) the amount attained by the worker who initiated that discipline at age 25 (realizing a $390 monthly paycheck increase).

For those who feel an income plan for their retirement is worth the investment of 30 minutes of their time, Fidelity offers an online retirement calculator allowing workers to chart their own income trajectory by noting assets, savings behavior, return assumptions and expected expenses.

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Check out 401 (k)s More Confusing Than Health Insurance: Charles Schwab on ThinkAdvisor.

Cambridge Bancorp Reportd 2nd Quarter Earnings (OTCBB:CATC, OTCMKTS:CLNO)

Cambridge Bancorp (CATC)

Last Friday, CATC previously surged (+0.26%) up +0.10 at $39.00 with 600 shares in play at the close (ref. google finance July 26, 2013 – Close).

Cambridge Bancorp previously reported unaudited net income of $3,475,000 for the second quarter of 2013 compared to $3,451,000 for the same quarter in 2012. The slight increase in earnings was primarily attributable to growth in noninterest income, offset by a decrease in net interest income. Diluted earnings per share were $0.89 for the second quarter of 2013, unchanged versus for the same quarter in 2012. For the six months ended June 30, 2013, unaudited net income was $6,806,000 compared to $6,736,000 for the first half of 2012. Diluted earnings per share were $1.75 for the first six months of 2013 versus $1.74 for the same period in 2012.

Cambridge Bancorp (CATC) 5 day chart:

Cleantech Transit, Inc. (CLNO)

Cleantech Transit, Inc. (OTCMKTS:CLNO) (www.cleantechtransit.net ) through its Discovery Carbon subsidiary, develops emissions offset strategies for companies, municipalities, and countries. Last Friday, CLNO previously surged (+12.82%) up +0.025 at $.220 with 163,136 shares in play at the close (ref. google finance July 26, 2013 – Close).

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CLNO 's daily range was at ($.22 – $.185) thus far and currently at $.22 would be considered a (+19900%) gain above the 52 wk low of $.0011. The stock is up +0.22 ( +9066.67%) since the concerning dates of January 28, 2013 – July 26, 2013. +9066.67% is the 6 month high and rightly so.

Cleantech Transit, Inc. (CLNO ) 5 day chart: