Opening Print and S&P Levels to Watch

Today's trade is going to revolve around the ability or inability of our elected officials to keep the government open. House Republicans voted late Saturday to fund the government and delay Obamacare for a year, upping the ante in their fiscal showdown with President Obama. This is the Republicans' way of extracting concessions on Obama's Affordable Care Act. Any time there is uncertainty the stock market reacts by selling off. The big question is, will this be like all the other recent negatives that the public sold into? The Asian markets closed mostly higher and Europe is down across the board .The last trading day of September starts with Chicago PMI, the Dallas Fed manufacturing survey and 3- and 6-month T-bill auction. The week as a whole has 21 different economic reports, 13 T-bill and T-note auctions or announcements, Ben Bernanke and St. Louis Federal Reserve Bank President James Bullard give opening remarks at the St. Louis Fed's Community Banking Research Conference on Wednesday, Richard Fisher and Jerome Powell from the Fed speak on Thursday, and the weekly jobs number comes out on Friday. There will be no rest for the weary this week ... As of this morning's open the S&P has closed lower six of the last seven trading days and last week had its first five-day consecutive decline. It's been an amazing letdown with little sign of letting up. In addition, both the S&P and Dow saw their first weekly loss in foyr weeks. The prospects of a government shutdown hung over the markets all last week. The S&P futures have declined 2% since the September 18, Fed no-taper 1725 contract high. They are still up 19% on the year. Our View: The "walkaway" trade is going to be overshadowed by the headlines concerning the government shutdown and today's quarterly rebalance. Trading is all about making decisions and today is going to be filled with them. It is our guess that at the last second the the government will pull off a deal that will cause some type of rally. It's important to remember that the end of September is prone to weakness from end-of-Q3 institutional portfolio restructuring (rebalance). According to the Trader's Almanac, the last trading day of Q3 has the Dow down 11 of the last 15 with a massive +4.7% gain in 2008. The first trading day of October fits the current patterns, Dow down 5 of the last 7 with a -2.1% loss in 2009. The question today is not just the shutdown but also about the month of October and all its nasty ups and downs. While all the negatives have been laid out "everyone" is supposedly short again. From the Fed no-taper to the German election, the markets have rallied after every event, and that is what we think will eventually happen here. If the S&P gaps sharply lower we lean to buying it with tight sell stops and would look to sell the rallies thereafter. Lastly, if you're not concerned about October you should not forget about the Dow's worst week in history, when it lost 1874 points (-18.2%) on the week ending 10/10/08. So while we may get some bang for our buck today, we feel confident the rest of October will be filled with some big ups and downs. In order to get it directly from the source we asked our good friend Jeffrey Hirsch from the Stock Trader's Almanac to give us his view on how October might play out and where he expects the S&P at year end. More on that later this week. As always, use stops and keep an eye on the 10-handle rule. Don't forget to catch MrTopStep on The Closing Print video. We report directly from the SPX pits, wrapping up the day and positioning for trade tomorrow. OptionsProfits can be followed on Twitter at twitter.com/OptionsProfits MrTopStep can be followed on Twitter at twitter.com/MrTopStep For LIVE futures chat, more information on the 10-handle rule and futures educational content CLICK HERE FOR A SEVEN-DAY FREE TRIAL.

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Why I'm Rebuying Wells Fargo, AIG, and Fifth Third

I'm buying more of some of my favorites in the financials-centric real-money portfolio I manage for The Motley Fool: best-in-class megabank Wells Fargo (NYSE: WFC  ) , ongoing insurance comeback story AIG (NYSE: AIG  ) , and Midwestern regional banker Fifth Third Bancorp (NASDAQ: FITB  ) .

Why am I doing three rebuys instead of purchasing the shares of a new company?

The big picture
As background, I track around 500 publicly traded financial companies, looking for solid performers trading at a discount. Depending on market sentiment, there are sometimes many candidates that look tantalizing after my initial screen -- and sometimes very few.

These days, after some decent rebounding in financial stocks, and with the U.S. market's 10-year P/E at 23.7 as calculated by Yale professor Robert Shiller, it's closer to "very few."

Internationally, I require a greater margin of safety, because I know less about the ins and outs of banking outside the United States. So when European majors such as Banco Santander and Deutsche Bank trade at similar multiples to book as American too-big-to-fail banks, they're not yet cheap enough for me dive in further.

Wells Fargo
Right now, because housing and the economy have been perking up, many banks' loan portfolios are looking deceptively good. We've seen bad loan and charge-off percentages steadily lowering over the past few years. That doesn't tell us too much about the loans the banks are making today. Only time and the next crisis will separate the truly recovered from the temporarily beautiful.

Let's start with Wells Fargo. Wells almost always trades at a premium to other large U.S. banks. My ongoing buy rationale has been that (1) the premium to lesser banks is justified, and (2) on a historical basis, its price multiples are well under where they've been.

As an aside, because of its crisis-time purchase of Wachovia, Wells looks worse than a lot of banks on loan quality, with 2.2% of its loans not performing. (For comparison, Fifth Third's rate is exactly half that amount.) It's also provisioning for only 90% of those bad loans. (For comparison again, Fifth Third is more than double that figure, and I like usually like banks to provision 100% or more.)

This is where trusting management comes in. Banks can play lots of accounting games when they classify what gets counted as a "bad loan." Based on Wells' conservative history, and because the bad loans were due to the purchase of a bank whose portfolio it knew to be toxic, I'm willing to trust Wells' management on its decent-but-not-great bad-loan numbers. I believe that when the next crisis hits, this view will be borne out.

More importantly, the Wachovia purchase is an example of Wells Fargo's ability to seize an opportunity. Wells snatched Wachovia from the arms of Citigroup by being able to do the deal without additional help from the government.

Wells' recent domination of the mortgage market is another example.

The resultant profitability is why Wells can trade at a premium to its peers on a book-value basis (1.9 times tangible book value) but remain at just 11 times earnings.

AIG
Big-time insurer AIG was a poster child for what went wrong during the financial crisis, so there's no premium here. It's currently trading at just 0.7 times tangible book. If you look at the average of 10 of its peers, they weigh in at 1.5 times tangible book. In other words, because of its past, AIG is trading for half of what a comparable property casualty insurer currently does.

I believe that's too low, because its problems have been fixable.

First, its AIG Financial Products unit -- the one that gambled with Wall Street, lost, and precipitated AIG's government bailout -- was closed in 2011, and the wind-down process (read: getting rid of the bad stuff) is more than 90% complete.

Second, back in December, the government fully exited its stock position in AIG (the government's stake had peaked at 92.1%.) AIG will still have to deal with regulators -- not necessarily a bad thing, given its past -- but with the government effectively out of the ownership picture, AIG is again its own boss, and a market headwind is removed.

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Fifth Third Bancorp
Fifth Third is a Cincinnati-based regional bank that I first bought shares of for the portfolio in August 2011 -- when shares of it and many banks fell during that debt-ceiling "crisis." Today, its stock price is almost 90% higher, but its fundamentals are still doing well.

I'm seeing a bank that strikes a balance between interest income and non-interest income. It's maintaining a good spread between its net interest margin and its cost of borrowing, and it's displaying good efficiency in its operations. All that is currently generating an impressive 1.5% return on assets.

On a relative basis, its price-to-tangible book multiple is in the middle of the road at 1.4, but it's able to turn its balance sheet into enough profits to trade at just 9.5 times earnings and pay out a 2.7% dividend yield. Not too shabby.

After waiting a full trading day (per Fool guidelines), I'll be buying Wells Fargo, AIG, and Fifth Third in my real-money portfolio. Click here to see the rest of my portfolio or follow along.

A banking stock for the road
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Hussman Funds - The Lesson of the Coming Decade

We continue to observe conditions that fall within the most negative 5% of historical instances, and these conditions (not any inherent preference toward bearishness) are the reason we hold to a defensive outlook here. The concept of a "broken speculative peak" is relevant – our main concern being that risk premiums have been driven to remarkably thin levels, and we are presently observing market action that suggests upward pressure on those risk premiums. As I've often noted, a severe market decline is really nothing more than a spike in risk premiums from previously inadequate levels.

As a simple measure of this combination – rich valuations coupled with upward pressures on risk premiums and competing yields – it's worth considering the current Shiller P/E near 24 (S&P 500 divided by the 10-year average of inflation-adjusted earnings) in the context of rising yields on competing securities. Both the Dow Jones Utility Average and the Dow Jones Corporate Bond Average are down more than 5% from their recent 26-week highs. The last time we saw this combination of weakness in interest-sensitive sectors with the Shiller P/E even above 18 was in September 2008, just before the market collapsed that year. We observed a similar deterioration following overvalued, overbought, overbullish syndromes in January 2000 (though be aware that it took several more months of top formation for the market to decline in earnest) and June-September 1987. This is certainly not the only concern that we have at present, but it illustrates our discomfort with speculative risk-taking here.

As a side note, we've seen some arguments disputing the relevance of the Shiller P/E, suggesting that the accounting treatment of writeoffs in recent decades has made this measure obsolete. This might be a more compelling view if other valuation measures such as S&P 500 price/revenue, price/dividend, price/book, and market capitalization to GDP did not all presently indicate exactly the same range of overvaluation! as the Shiller P/E does. One of the more intellectually distressing arguments on this front suggested replacing S&P 500 earnings with NIPA (National Income and Product Accounts) profit figures in the calculation of the Shiller P/E. This is an apples-to-oranges calculation, as NIPA figures measure economy-wide profits in dollars and are neither restricted to the S&P 500 nor include the per-share adjustments that index earnings do. Still, one can see why the substitution is superficially attractive: the ratio of NIPA profits to Shiller earnings has surged to the highest level in history in recent years, mirroring similarly elevated profit margins. Unfortunately, even much less breathtaking elevations in NIPA profits / Shiller earnings in the past have been regularly followed by weak subsequent growth in NIPA profits, as profit margins retreat. Moreover, the substitution of NIPA profits into the Shiller calculation substantially weakens, rather than strengthens, its relationship with subsequent S&P 500 total returns.

In any event, we refer to the Shiller P/E mainly because it is an easily accessible shorthand measure that is simple to obtain and calculate. As detailed in Investment, Speculation, Valuation and Tinker Bell, there are numerous other approaches that have a roughly 90% correlation with subsequent 10-year market returns, while many popular approaches (such as the Fed Model) have very little relationship to subsequent returns at all.

On the subject of economy-wide measures, the chart below shows the market value of U.S. nonfinancial equities (from Federal Reserve Z.1 Flow of Funds data) divided by nominal GDP, and the subsequent 10-year S&P 500 annual total return (nominal, right scale, inverted). The present ratio of equity market value to GDP is consistent with an expected 10-year nominal S&P 500 total return of about 3%, which is about the same figure one obtains using the Shiller P/E and other historically reliable measures. Nearly all of this total return can be expected to come! from div! idend income, suggesting that the S&P 500 index will be little changed, a decade from now, from present levels.

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All of this provides a good opportunity to reiterate that profits as a share of GDP remain nearly 70% above their historical norms; that cyclical variations in profits/GDP move closely and inversely with the combined total of government and household savings as a share of GDP; and that elevated profits/GDP are inversely correlated with subsequent growth in profits over the following 4-year period.

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A long-term perspective on intermediate-term discipline

A few weeks ago, in The Road to Easy Street I noted that even with the additional exclusions that we've introduced in recent years, overvalued, overbought, overbullish conditions sufficient to warrant our strongest defensive outlook have emerged about 5% of the time since 1940. These hostile conditions have historically been associated with average market losses on the order of 40-50% on an annualized basis.

The chart below expands on those comments, showing the cumulative performance of the S&P 500 when our estimates of the market Sharpe ratio were zero or negative (about 37% of history), compared with periods when they were positive (about 63% of history). The Sharpe ratio measures the expected return of the market in excess of Treasury bill yields, per unit of volatility. I've plotted the two lines on log-scale to highlight equivalent percentage changes.

This is not a chart of any specific investment strategy - only a partitioning of the data into two classifications to clarify my general approach to the investment process. As I've often noted, the worst estimated Sharpe ratios are generally associated with either overvaluation coupled with deteriorating market internals, or th! e emergen! ce of an overvalued, overbought, overbullish, rising-yield syndrome of conditions. A sequence of overvalued, overbought, overbullish, rising-yield conditions followed by deterioration in market internals is what I've termed a broken speculative peak and is what we presently observe. By contrast, the strongest Sharpe ratios tend to be associated with favorable (or at least reasonable) valuation coupled with a firming of market internals.

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The advance in the red line at the very right of this chart offers some perspective on the past few years. The fact is that particularly since late-2011, the market has advanced despite conditions that have historically been associated with significant market losses. Frankly, we're used to similar frustration during late-stage bull market advances – you'll see a similar creep upward in the red line approaching the 2000 and 2007 market peaks before severe market losses ensued. Still, the recent period has been particularly uncomfortable because of QE-driven speculation. You'll also notice a few similar upward segments in 1969, 1972, 1981 and 1987, indicating that a defensive stance would have resulted in some period of missed returns.

Notably, the recent situation could have been helped by overriding our approach with rules amounting to versions of "Don't fight the Fed", but those same rules applied to past cycles and long-term history would have failed dramatically. Remember that the 50% market plunges in 2000-2002 and 2007-2009 both unfolded despite aggressive and continuous monetary easing (see Following the Fed to 50% Flops).

We continue to align our investment outlook with the expected Sharpe ratio that is associated with prevailing conditions at each point in time (see Aligning Market Exposure with the Expected Return/Risk Profile). Strong opportunities to accept market risk have emerged over the course of every market ! cycle in ! history (and no stress-testing concerns will interfere with those opportunities as they did in the recent, extraordinary cycle). In my view, the primary concern here is not the risk of missing long-term returns, but of losing intermediate-term discipline in conditions that have historically proved damaging. Even if the S&P 500 Index goes nowhere over the coming decade - as historically reliable measures of valuation suggest - it will probably go nowhere in an interesting and volatile way, providing better value and opportunities that are well-supported by historical evidence. The challenge will be to maintain discipline even when frustration begs investors to abandon it.

No doubt, one can dispense with my concerns about market risk here by observing that the market has advanced despite our increasingly negative return/risk estimates, allowing one to conclude that "this time is different," and will continue to be so indefinitely. In my view, the more likely possibility is that investor faith in unlimited quantitative easing has supported a severe compression in equity risk premiums; that this faith is based largely on collective belief bordering on superstition – rather than on any meaningful historical relationship between the monetary base and the level of equity valuations; and that the extent of market overvaluation is obscured by profit margins that have been elevated to unprecedented but temporary heights by equally unprecedented but temporary deficits in government and household savings. If that case is true – and I believe it is – then the appropriate conclusion is not that this time is different, but merely that an increasingly weighty anvil has not yet dropped.

As I observed last week:

"Despite individual features that convinced investors in each instance that 'this time is different,' my perspective is that the truly breathtaking market losses in history share a single origin: the willingness of investors to forgo the need for a risk premium on securities that! have alw! ays required one over time. Market crashes are largely synonymous with a spike in risk premiums from previously inadequate levels. Once the risk premium is beaten out of stocks, there is no way out, and nothing that can be done about it. Poor subsequent returns, market losses, and the associated destruction of financial security are already baked in the cake. This should have been the lesson gleaned from the period since 2000, but because it remains unlearned, I am convinced that it will also become the lesson of the coming decade."

Economic Notes

A few observations about economic activity here. One is that while the low level of initial claims for unemployment has been a bright spot, the simple fact is that initial claims are almost always depressed at major market peaks, which contributes to the optimism and euphoria at those highs. In the chart below, I've added arrows over the present instance not to imply that the market must be at a peak here, but simply to emphasize that the recent pattern of new claims for unemployment (red line, right scale, inverted) is not at all inconsistent with previous instances of maximum market risk.

[ Enlarge Image ]

More broadly, the best way to characterize the incoming economic data is that we've observed some modest improvement in recent months, but still around levels that have historically marked the borderline between economic expansion and recession. Indeed, the composite message from numerous regional Fed and ISM (Institute for Supply Management) surveys is not much different than what we observed just before the last recession. Overall then, we've observed a modest bounce over the past few months, but weak and not particularly meaningful from a historical perspective.

[ Enlarge Image ]

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Meanwhile, the Federal Reserve's attempt to support employment growth through quantitative easing has been much like doing a frantic rain dance over thin ice, in hopes of attracting more fish. The first question that should be asked is whether there is any demonstrable mechanism (even one that can be illustrated with a basic scatter plot in historical data) that would link the efforts to the desired outcome; the answer being no. The second question that should be asked is whether the continued attempt creates the risk of unintended consequences; the answer being yes.

So while it's true that the 3-month average of monthly job creation has declined from 233,000 in February, to 172,000 in May, to 148,000 at present, this is more an indication of the ineffectiveness of quantitative easing than an argument for its continuation. We expect that the Fed will pursue a course of gradually fading out its efforts at quantitative easing, but in a way that aims to ease the potential disruption of the financial markets, where nearly all of the effect – primarily distortionary – has been centered. This really should not be a surprise, given that even the minutes from the January FOMC meeting indicated that "an ongoing evaluation of the efficacy, costs, and risks of asset purchases might well lead the Committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labor market had occurred." To quote Dallas Fed President Richard Fisher, commenting last week about the impact of QE on the real economy – "I don't believe it had any efficacy."

American Funds makes push to increase transparency

In a bid to win back investors, American Funds is increasing the transparency around how its mutual funds are managed but it won't be going as far as revealing individual manager performance and holdings.

Each American Fund is run by a team of portfolio managers, but each manager runs his or her own sleeve independently. For example, the $123 billion American Funds Growth Fund of America (AGTHX) has 12 managers who are each responsible for their own portion of the fund. Details about the individual managers, however, has been scarce, the company is in the process of changing that.

For the first time, the Los Angeles-based company is preparing reports that will detail the decision making process behind building the team that manages each mutual fund, including notes on each managers' investment style, strengths, and weaknesses, spokesman Chuck Freadhoff said.

“It's something that hasn't been fully understood before,” he said. “We haven't explained it well.”

The reports won't go as far as revealing each manager's performance or portfolio holdings, though, because Mr. Freadhoff said that information isn't actionable.

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“It may be interesting, but you can't invest in a single manager,” he said. “You're investing in the entire fund.”

Some financial advisers see the move as encouraging.

“If they're willing to share more information and more insight into their funds I don't see a downside to that,” said Melissa Hammel, managing member of Hammel Finanical Advisory Group LLC. Ms. Hammel has clients invested in several American Funds, including the $32 billion American Funds AMCAP Fund (AMCPX).

Jim Johnson, partner at Lighthouse Financial Planning LLC, has had as much as half his clients' assets in American Funds, but only has them in the firm's bond funds today.

“Anybody who has been through one of their meetings knows it's pretty clear how they do what they do,” he said. “If they have a way to communicate that without people having to go to their headquarters, I think it's a great idea.”

The detailed fund manager reports are just one step American Funds, which has suffered withdrawals of $242 billion since 2007, is taking to increase transparency. The firm’s assets total $993 billion, down from $1.15 trillion in 2007.

The company has already begun making portfolio holdings available 15 days after months' end and offering quarterly attribution analysis, reports that show advisers which holdings have been added, or subtracted, from an individual fund's performance that quarter.

In addition, advisers can expect to start seeing more American Funds portfolio managers at industry conferences, in the media, and appearing o! n financial TV networks.

“We know we need to communicate as broadly as we can,” Mr. Freadhoff said.

American Funds kicked off its increased outreach to advisers last year with the launch of its “The Long View” reports, which shared the company's insights into trends affecting the economy.

At the heart of the transparency efforts are registered investment advisers. American Funds are predominately sold through brokers, 64% of its fund assets are in load-rich A-shares, but the company is making a big push to court RIAs, who are mainly fee-based.

“RIAs like to interact differently than the traditional transaction-based broker,” Mr. Freadhoff said. “They ask for more detailed information. They need to know what you think and what your views are.”

The effort is paying off so far, in terms of recognition, if not money flows.

“Several years ago, anyone outside of the small RIA team [at American Funds] didn't seem to know what an RIA was,” Mr. Johnson said. “That's certainly not the case today. I'm absolutely seeing progress.”

American Funds has approximately $92 billion, or 9% of total fund assets, in its F-share classes, which don't have load fees, up from $72 billion, or 7% of total fund assets, in 2008.

Still, investors have pulled $11.5 billion from the funds this year even as the equity markets have rallied and performance across the American Funds lineup has improved.

The American Growth Fund of America, for example, outperformed the S&P 500 by 400 basis points in 2012 and its 23.87% return year-to-date through Sept. 18 tops the S&P 500 as well. Its 10-year annualized returns are almost 400 basis points better than the S&P 500 and rank it among the top 10% of large-cap mutual funds, according to Morningstar.

But the fund's underperformance in 2008, when it fell 39% versus the S&P 500's 37% drop, and in 2011, still drag down its three- and five-year annualized returns.

The Deal: Crown Castle's Lead on Tower Deal May Rest on REIT

NEW YORK (The Deal) -- With AT&T's (T) wireless towers on the market, Crown Castle's (CCI) recent decision to accelerate its conversion to a real estate investment trust has drawn increased attention. The move to the tax-light structure could affect its approach to financing a purchase of AT&T's towers.

Becoming a REIT would place requirements on the wireless tower operator's cash deployments. However, it could also increase Crown Castle's access to the equity markets, which would help it bid for AT&T's assets without adding excessive leverage.

AT&T had hired bankers and made progress in marketing the towers, sources said. Though Bloomberg reported that the Dallas telecom is seeking $5 billion for the towers, one person said the first round of bids had occurred and that the price would be lower.

The portfolio includes about 11,000 towers that produce about $200 million in cash flow and represent one of the last major targets in the industry. "I think Crown Castle is still in the driver's seat on the AT&T towers," Jonathan Schildkraut of Evercore Partners said. "A contributing factor to the timing of this announcement may have been the likely need to raise equity to acquire [AT&T]'s Towers, and the rightful expectation that early REIT conversion would be positively received by the market," he said of Crown Castle's announcement in September that it would change its capital structure sooner than previously expected. Schildkraut suggested that the final sale price may not represent the "true cost" of the towers. AT&T would like to keep the right to upgrade the towers, and would likely fold an agreement into the sale. "Eighteen to 20 times cash flow will be the headline number," he said. "The true cost will include whatever upgrade rights AT&T is able to negotiate." That would put the valuation at $3.6 billion to $4 billion. Kevin Smithen of Macquarie Capital estimated that AT&T's towers could raise $4.5 billion to $5 billion, based on a multiple of $400,000 to $450,00 per tower. There are other acquisitive tower operators. Earlier this month, rival American Tower agreed to pay $4.8 billion for Global Tower Partners, backed by Macquarie Infrastructure Partners Inc., Dutch pension fund manager PGGM BV and company management.

Moody's Investors Service analyst Gregory Fraser suggested that the timing of Crown Castle's announcement, just days after American Tower's latest deal, was not coincidental.

"Because American Tower is issuing a significant amount of debt to make this purchase, it has no more flexibility to make another large acquisition," he said. "With American Tower out of the running for a big acquisition, this means Crown will have a better chance of acquiring AT&T's towers."

American Tower touted its investment-grade balance sheet when it announced the deal for Global Tower, saying that its liquidity was one reason its bid prevailed.

Crown Castle, on the other hand, is speculative grade. That could present problems when it comes to its REIT structure and financing something as big as the AT&T purchase. "With rising interest rates, balance sheet matters more than ever, particularly with strategic activities," said EA Markets LLC co-founder Reuben Daniels, who advised American Tower on the Global Tower Partners deal. The New York investment bank, which is not part of a lending institution, advises clients on matters related to capital structure. "There is a view today that money is cheap and will be plentiful for years to come," he said. "Once the tide of liquidity is withdrawn from the system, to paraphrase Warren Buffett, 'that's when you find out who is swimming naked.'/" An investment-grade rating is "really important for a REIT," he said. The combination of high leverage and cash flow distribution requirements of a REIT can create "capital allocation hurdles," he said, noting that there are not many examples of low BB rated REITs. "You can't do everything," Daniels explained. "A REIT conversion can change a company's priority of cash flow allocations for dividends, debt reduction, share repurchase, capital expenditure or acquisitions." If access to capital is reduced, management's ability to make capital allocation decisions can be "severely constrained." Steven Marks of Fitch Ratings Inc. said that most of the REITs that his company rates are investment grade. "There are a few reasons why that is," he explained, including that commercial real estate is an asset that can support leverage and most REITs have access to mortgages. They tend to access the bond market because they want to, not because they have to.

There is also the fact that REIT bond investors may be prohibited from buying securities issued below investment grade.

"A REIT typically only wants to issue bonds if it is investment grade," he said.

Moody's analyst Fraser noted that data center REITs DuPont Fabros Technology and CyrusOne are Ba1 and B1, respectively.

"It is not necessary for a REIT to be investment grade," he said. In theory, a REIT structure should improve Crown's cost of capital to finance such a large asset purchase. REITs enjoy substantial tax benefits, Fraser said, and a company's cash flow metrics should look a little better than the typical non-REIT that pays taxes. Another benefit is that real estate investment trusts typically have a 39-year depreciation schedule, while non-REITs generally depreciate assets over 15 to 20 years. "If you have a lower depreciation expense," he said, "this will boost your reported earnings." Shifts in the market may also motivate Crown Castle to convert now. REIT's high dividend yields appeal to equity investors, and often deliver higher valuation multiples. "The window for that may be closing," Fraser said. Tapering by the Federal Reserve could reduce Treasury prices and push yields higher. Investors who are now drawn to equity REITs could be drawn to government notes. "You may see an outflow of investment from REITs to Treasuries," he said. It could behoove Crown Castle to act now, while the markets are more receptive to REITs. Of course, the availability of AT&T's towers provides additional motivation. Crown Castle declined to comment. AT&T did not respond to queries. Written by Chris Nolter

Baxter Completes Acquisition of Gambro (BAX)

On Friday, healthcare company Baxter International Inc. (BAX) announced that it has finalized its acquisition of medical technology company Gambro AB.

The acquisition will help Baxter’s long term growth in the healthcare industry and will expand its product and therapies portfolio. Baxter will also help grow Gambro’s international exposure by expanding into Latin American and Asia Pacific.

The deal was worth about $3.9 billion and will be included in BAX’s third quarter and full year results.

Robert L. Parkinson, Jr., chairman and chief executive officer of Baxter commented: “The combination of these two respected renal leaders – Baxter and Gambro – will enable Baxter to better serve healthcare providers and patients through a collective offering of innovative renal products and therapies.”

“Together, we will advance the state of dialysis care for patients with kidney disease worldwide.”

Baxter International shares were mostly flat during pre-market trading Friday. The stock is up 5% YTD.

LTC Financing in Crisis, Commission Says

While the recommendations that the Long Term Care Commission voted Sept. 12 to include in its final report to Congress later this month are “Band-Aids on [the] large and ever-growing problem” of LTC financing, according to one LTC expert, another expert believes the report was “a step in the right direction as it makes very clear that there is a crisis situation facing the country.”

The federal Commission on Long-Term Care completed its work on a package of recommendations that are designed to better ensure LTC coverage is available for the elderly and disabled. The recommendations must be included in the final report the group sends to lawmakers on Sept. 30.

In the area of LTC financing, the commission recommended improvements to Medicare and Medicaid as well as a "sustainable balance of public and private financing  for long-term services and supports (LTSS) that enables individuals with functional limitations to remain in the workforce or in appropriate care settings of their choice."

Jesse Slome, executive director of the American Association for Long-Term Care Insurance, says that the recommendations “appear to be many small steps,” with the biggest recommendation being the “creation of a new committee to study the issue” of LTC financing. “It is silly to think that an issue as complex as long-term care financing could be resolved, let alone adequately addressed, in such a short time and in such a heated political climate.”

Slome notes that those who were hoping the commission “might recommend a new social program must be disappointed.” The private marketplace, he says, “will continue. Rising interest rates will relieve much of the financial pressure on insurers, and we are confident about the future.”

However, with midterm elections on the horizon followed by a new presidential campaign, Slome says, “it will be interesting to see if there is any traction or support for further action.”

Bruce Chernof, the commission’s chairman, said in releasing the recommendations that while the commission had less than 100 days to craft solutions, he was “pleased” that a majority of the commission agreed on a number of “thoughtful recommendations that serve as a launching pad for future action by Congress and the administration.”

Chernof said that he was hopeful the “bipartisan nature” of the report and “the suite of ideas garnering broad agreement dispels the myth that our nation’s long-term care crisis is just too hard a problem to tackle. We must work to improve our approach to serving Americans with functional and cognitive limitations and their families, realizing that the time to act is now.”

But Chris Orestis, a long-term care specialist and former insurance industry lobbyist who is CEO of Life Care Funding, says that six of the panel members voted against the commission’s final report “because they do not believe it goes far enough in recommending specific ways to address the financing of long-term care.” While Orestis says he’s “glad” that the commission acknowledged there is a “national financial crisis surrounding long-term care,” he’s hoping “they will do more to act on solutions, such as Life Care Funding.”

10 Best Stocks To Invest In 2014

As he explains, Life Care Funding is one private-funding option recommended to the commission. It would allow middle-class seniors with too much money for Medicaid and too little to pay for their long-term care to convert their life insurance policies into LTC benefits earmarked to pay for such services as in-home nursing care and assisted living.

“Numerous states introduced legislation this year, and Texas passed into law, a bill that would require their Medicaid departments to inform seniors” of the Life Care Funding option, he says. “The seniors can sell the death benefit — instead of just giving up the policy they’ve been paying premiums on for years — and use the funds to pay for their care.” This allows them to “avoid the restrictions imposed by going on Medicaid and they keep future Medicaid eligibility intact.”

The LTC Commission, which consists of 15 members appointed by Democratic and Republican congressional leaders and the White House, was established after the Community Living Assistance Services and Supports (CLASS) Act was repealed by the American Taxpayer Relief Act, better known as the fiscal cliff  law, in January.

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Check out 4 Reasons Americans Skip LTC Insurance on ThinkAdvisor.

Hot Heal Care Stocks To Invest In 2014

Margins matter. The more Ignite Restaurant Group (Nasdaq: IRG  ) keeps of each buck it earns in revenue, the more money it has to invest in growth, fund new strategic plans, or (gasp!) distribute to shareholders. Healthy margins often separate pretenders from the best stocks in the market. That's why we check up on margins at least once a quarter in this series. I'm looking for the absolute numbers, so I can compare them to current and potential competitors, and any trend that may tell me how strong Ignite Restaurant Group's competitive position could be.

Here's the current margin snapshot for Ignite Restaurant Group over the trailing 12 months: Gross margin is 34.4%, while operating margin is 5.5% and net margin is 1.9%.

Unfortunately, a look at the most recent numbers doesn't tell us much about where Ignite Restaurant Group has been, or where it's going. A company with rising gross and operating margins often fuels its growth by increasing demand for its products. If it sells more units while keeping costs in check, its profitability increases. Conversely, a company with gross margins that inch downward over time is often losing out to competition, and possibly engaging in a race to the bottom on prices. If it can't make up for this problem by cutting costs -- and most companies can't -- then both the business and its shares face a decidedly bleak outlook.

Hot Heal Care Stocks To Invest In 2014: PDF Solutions Inc.(PDFS)

PDF Solutions, Inc. provides infrastructure technologies and services for the design and manufacture of integrated circuits (IC) in Asia, the United States, and Europe. It offers manufacturing process solutions that include process research and development, and process integration and yield ramp; volume manufacturing solutions; and design-for-manufacturability (DFM) solutions, such as logic DFM, circuit level DFM, memory DFM, and pdBRIX Physical IP solutions. The company also offers characterization vehicle (CV) infrastructure, which includes CV test chips, pdCV analysis software, and pdFasTest electrical wafer test system; Yield Ramp Simulator software that analyzes an IC design to compute its systematic and random yield loss; and Circuit Surfer software, which estimates the parametric performance yield and manufacturability of analog/mixed-signal/RF blocks. In addition, it provides pdBRIX platform, which includes software for identifying and developing a set of physical IP building blocks that are tailored to a given manufacturing process and target product application; dataPOWER YMS platform that collects yield data, loads, and stores it in an integrated database and allows product engineers to identify and analyze production yield issues; FDC software, which provides fault detection and classification capabilities to identify sources of process variations and manufacturing excursions by monitoring equipment parameters; and YA-FDC service and software platform that allows online modeling to create real-time virtual measurements of final product attributes during processing. PDF Solutions sells its technologies and services through direct sales force, sales representatives, and strategic alliances to integrated device manufacturers, fabless semiconductor design companies, and foundries in the microprocessors, memory, graphics, image sensor solutions, and communications segments. The company was founded in 1992 and is headquartered in San Jo se, California.

Hot Heal Care Stocks To Invest In 2014: Avi-tech Electronics Limited (CT1.SI)

Avi-Tech Electronics Limited provides burn-in and related services to the semi conductor industry. It also offers burn-in boards and boards related products, and engineering services; and engages in equipment distribution. The company�s Burn-In Services segment consists of burn-in service and tape and reel service. Burn-in service is a process wherein the individual integrated circuit (IC) chip is stressed at high temperature to weed out any defects caused during the assembly process; and tape and reel services are provided for customers who need the finished products to be delivered in reel form. Its Burn-in Boards and Boards Manufacturing segment involves in the design and assembly of printed circuit boards used for burn-in and reliability testing of IC chips. Avi-Tech�s Engineering segment undertakes system integration projects and engages in equipment manufacturing business, as well as provides technical services. This segment also distributes third party products. T he company operates in Singapore, Malaysia, the Philippines, the United States, Germany, Thailand, Taiwan, and China. Avi-Tech Electronics Limited was incorporated in 1981 and is headquartered in Singapore.

Best Stocks To Buy For 2014: Findel Plc(FDL.L)

Findel plc operates as a multi channel retailer in the business-to-consumer and business-to-business marketplaces in the United Kingdom, Europe, and Asia. The company operates in five segments: Express Gifts, Kleeneze, Kitbag, Education Supplies, and Healthcare. The Express Gifts segment engages in direct mail order businesses in the U.K., offering online and via catalogue a range of home and leisure items, clothing, toys, and gifts. The Kleeneze supplies household, and health and beauty products to customers through a network of independent distributors in the U.K. and the Republic of Ireland. The Kitbag segment is involved in the retail of sports leisurewear and official football kits both through its own online operation, kitbag.com, as well as through various partnership relationships with football clubs and other sports organizations, managing a range of retail, online, and/or mail order channels. The Education Supplies segment offers product that support curriculum s ubjects to schools and other educational establishments. This segment also supplies furniture and audio visual equipment, as well as commodity products, such as stationery and janitorial materials through its printed catalogue and through various e-procurement solutions. The Healthcare segment provides outsourced integrated community equipment services to trusts and local authorities. This segment also supplies a range of rehabilitation and care equipment to the public and private sectors through its catalogue and Internet. The company was formerly known as Fine Art Developments Limited and changed its name to Findel plc in 2000. Findel plc was founded in 1955 and is based in Hyde, the United Kingdom.

Hot Heal Care Stocks To Invest In 2014: AECOM Technology Corp (ACM)

AECOM Technology Corporation (AECOM) is a provider of professional technical and management support services for commercial and government clients around the world. The Company provides planning, consulting, architectural and engineering design, and program and construction management services for a range of projects, including highways, airports, bridges, mass transit systems, government and commercial buildings, water and wastewater facilities, and power transmission and distribution. It also provides program and facilities management and maintenance, training, logistics and other support services, for agencies of the United States government. It offers services in two segments: Professional Technical Services and Management Support Services. In June 2011, the Company acquired Spectral Services Consultants Pte. Ltd.

Professional Technical Services (PTS)

The PTS segment delivers planning, consulting, architectural and engineering design, and program and construction management services to commercial and government clients worldwide in end markets, such as transportation, facilities, environmental, energy, water and government markets. It provides program management services through a joint venture for the Second Avenue subway line in New York City, design and contract administration services for the Hong Kong-Zhuhai-Macao Bridge's Hong Kong Boundary Crossing Facilities and engineering and environmental management services to support global energy infrastructure development for a number of petroleum and mining companies.

PTS segment contributed 86% of the Company�� revenue during the fiscal year ended September 30, 2011 (fiscal 2011).

Transit and rail projects include light rail, heavy rail (including high speed, commuter and freight) and multimodal transit projects. The Company provided engineering design services for the new World Trade Center Terminal for PATH and the Second Avenue Subway (8.5-mile rail route and 16 stations) in New York City, the Ma O! n Shan Rail (seven-mile elevated railway) in Hong Kong, and Crossrail (74-mile railway) in the United Kingdom. Marine, Ports and Harbors Projects include wharf facilities and container port facilities for private and public port operators. The Company provided marine design and engineering services for container facilities in Hong Kong, the Ports of Los Angeles, Long Beach, New York and New Jersey. Highways, Bridges and Tunnels Projects include interstate, primary and secondary urban and rural highway systems and bridge projects. Aviation Projects include landside terminal and airside facilities and runways as well as taxiways.

Government Projects include the Company�� emergency response services for the Department of Homeland Security, including the Federal Emergency Management Agency and engineering and program management services for agencies of the Department of Defense. It also provides architectural and engineering services for national laboratories, including the laboratories at Hanford, Washington and Los Alamos, New Mexico. Industrial Projects include industrial facilities for a variety of end markets, including manufacturing, distribution, aviation, aerospace, communications, media, pharmaceuticals, renewable energy, chemical, and food and beverage facilities. Urban Master Planning/Design Projects include design services, landscape architecture, general policy consulting and environmental planning projects for a variety of government, institutional and private sector clients. It provides strategic planning and master planning services for new cities and mixed use developments in the People�� republic of China, Southeast Asia, the Middle East, North Africa, the United Kingdom and the United States.

Commercial and Leisure Facilities Projects include corporate headquarters, high-rise office towers, historic buildings, hotels, leisure, sports and entertainment facilities, hospitals and healthcare facilities and corporate campuses. Institutional Projects include engin! eering se! rvices for college and university campuses, including the new Kennedy-King College in Chicago, Illinois. It has also undertaken assignments for Oxford University in the United Kingdom, Pomona College and Loyola Marymount University in California. Healthcare Projects include design services for the Mayo Clinic Gonda Building in Rochester, Minnesota, University Hospital in Dubai Healthcare City and the Samsung Cancer Center in Seoul, Korea. It has also undertaken assignments for the new Veterans Affairs Medical Center in Orlando, Florida, and the Minneapolis campus of Children's Hospitals and Clinics of Minnesota. Correctional Projects include the planning, design, and construction of detention and correction facilities throughout the world.

Water and Wastewater Projects include treatment facilities as well as supply, distribution and collection systems, stormwater management, desalinization, and other water re-use technologies for metropolitan governments. Environmental Management Projects include remediation, waste handling, testing and monitoring of environmental conditions and environmental construction management for private sector clients. Water Resources Projects include regional-scale floodplain mapping and analysis for public agencies, along with the analysis and development of protected groundwater resources for companies in the bottled water industry.

Demand Side Management Projects include energy efficient systems for public K-12 schools and universities, health care facilities, and courthouses and other public buildings, as well as energy conservation systems for utilities. Transmission and Distribution Projects include power stations and electric transmissions and distribution and co-generation systems, including enhanced electrical power generation in Stung Treng, Cambodia. These projects utilize a range of services that include consulting, forecasting and surveying to detailed engineering design and construction management. Alternative/Renewable Energy Projects ! include p! roduction facilities, such as ethanol plants, wind farms and micro hydropower and geothermal subsections of regional power grids. It provides site selection and permitting, engineering, procurement and construction management and related services. Hydropower/Dams Projects include hydroelectric power stations, dams, spillways, and flood control systems including the Song Ba Ha Hydropower Project in Vietnam, the Pine Brook Dam in Boulder County, Colorado and the Peribonka Hydroelectric Power Plant in Quebec, Canada. Solar Projects include performing environmental work for the solar photovoltaic Brockton Brightfield project in New England, and environmental permitting services for the California Energy Commission to permit the development of a 250 mega watts (MW) solar thermal power plant in the Mojave Desert of California.

Management Support Services (MSS).

The MSS segment provides program and facilities management and maintenance, training, logistics, consulting, technical assistance and systems integration services, for agencies of the United States government. It also provides organizational and limited direct support services for equipment sent to the United States Army's Corpus Christi Depot in Texas. The MSS segment contributed 14% of the Company�� fiscal 2011 revenue.

Installation, Operations and Maintenance Projects include Department of Defense and Department of Energy installations where the Company provides services for the operation and maintenance of complex government installations, including military bases, test ranges and equipment. It also provides services for the operations and maintenance of the Department of Energy's Nevada Test Site. Logistics and Field Services Projects include logistics support services for a number of Department of Defense agencies and defense contractors focused on developing and managing integrated supply and distribution networks. Training Projects include training applications in live, virtual and simulation training! environm! ents. Systems Support Projects cover a set of operational and support systems for the maintenance, operation and modernization of Department of Defense and Department of Energy installations. Its services in this area range from information technology and communications to life cycle optimization and engineering, including environmental management services.

Technical Personnel Placement Projects include the placement of personnel in functional areas of military and other government agencies, as these entities continue to outsource critical services to commercial entities. It provides systems, processes and personnel in support of the Department of Justice's management of forfeited assets recovered by law enforcement agencies. It also supports the Department of State in its enforcement programs by recruiting, training and supporting police officers for international and homeland security missions. Field Services Projects include maintaining, modifying and overhauling ground vehicles, armored carriers and associated support equipment both within and outside of the United States under contracts with the Department of Defense. It also maintains and repairs telecommunications systems for military and civilian entities.

Hot Heal Care Stocks To Invest In 2014: Hammerson Prop Ord(HMSO.L)

Hammerson plc is a publicly owned real estate investment trust. The firm engages in investing, developing, and managing retail properties. It invests in real estate market of Europe with a focus in United Kingdom, Germany, and France. The firm primarily invests in shopping centers, retail parks, and offices. It was formerly known as The Hammerson Property Investment and Development Corporation plc, Hammerson Property and Investment Trust, and L.W. Hammerson & Co. Hammerson is based in London, the United Kingdom.

10 Best Energy Stocks To Buy For 2014

JERUSALEM (AP) -- The Israeli Cabinet on Sunday approved exporting 40 percent of Israel's newfound natural gas reserves, keeping a larger amount for local consumption than originally expected.

Prime Minister Benjamin Netanyahu told his Cabinet the decision struck a balance between domestic needs and the concerns of the exploration companies that will drill for gas underneath the Mediterranean Sea.

"It ensures the needs of the citizens of the state of Israel, both by filling the state coffers with considerable funds from exports and by supplying the local market with cheap energy," Netanyahu said.

Last year, an advisory panel proposed exporting just over half of the country's gas, sparking protests by Israelis who said the country should keep most of its reserves to reduce energy prices at home.

10 Best Energy Stocks To Buy For 2014: Vecta Energy Corp (VER)

Vecta Energy Corporation is engaged in the exploration for, and the acquisition, development and production of oil, natural gas and natural gas liquids. The Company has non-operated interests in three areas: the foothills of Alberta, northeast BC and the Brewster area in central Alberta. The Company has interest in the Brewster area of west central Alberta (in townships 42, 43 and 44; range 12-13, W5). These lands are prospective in the Belly River formation at depths of 1,500 to 2,000 meters, as well as deeper zones including Nordegg, Rock Creek, Ellerslie, Ostracod, Falher and Notikewin. A total of six wells have been drilled on Company acreage. The 102/01-26-043-13 W5 well is producing 350 to 400 thousand cubic feet of natural gas with liquids. The 15-11-043-13 W5 well is producing of 350 to 400 thousand cubic feet of natural gas with liquids.

10 Best Energy Stocks To Buy For 2014: Solazyme Inc (SZYM)

Solazyme, Inc. (Solazyme), incorporated on March 31, 2003, makes oil. The Company�� technology transforms a range of plant-based sugars into oils. Its renewable products can replace or enhance oils derived from the world�� three existing sources-petroleum, plants and animal fats. The Company is focused on commercializing its products into three target markets: fuels and chemicals, nutrition, and skin and personal care. In 2010, the Company launched its products, the Golden Chlorella line of dietary supplements. In March 2011, the Company launched its Algenist brand for the luxury skin care market through marketing and distribution arrangements with Sephora S.A. (Sephora International), Sephora USA, Inc. (Sephora USA), and QVC, Inc. (QVC).

The Company is engaged in development activities with multiple partners, including Chevron U.S.A. Inc., through its division Chevron Technology Ventures (Chevron), The Dow Chemical Company (Dow), Ecopetrol S.A. (Ecopetrol), Qantas Airways Limited (Qantas) and Conopoco, Inc., doing business as Unilever (Unilever).

In 2010, the Company entered into a 50/50 joint venture with Roquette Freres, S.A. (Roquette). In November 2010, the Company entered into a joint venture and operating agreement for Solazyme Roquette Nutritionals with Roquette. In December 2010, the Company entered into an exclusive distribution relationship with Sephora International, and in January 2011, the Company entered into a distribution relationship with Sephora USA. Under the arrangements, each of Sephora International and Sephora USA will distribute the Algenist product line in their respective territories.

In Fuels and Chemicals market its renewable oils can be refined and sold as drop-in replacements for marine, motor vehicle and jet fuels, as well as replacements for chemicals that are traditionally derived from petroleum or other conventional oils. The Company work with its refining partner Honeywell UOP to produce Soladiesel (renewable diesel), So! ladiesel renewable diesel for United States Naval vessels, and Solajet renewable jet fuel for both military and commercial application testing. In nutrition market the Company has developed microalgae-based food ingredients, including oils and powders that enhance the nutritional profile and functionality of food products while reducing costs for consumer packaged goods (CPG) companies. In Skin and Personal Care market the Company hs developed a portfolio of branded microalgae-based products. Its ingredient is Alguronic Acid, which the Company has formulated into a range of skin care products with anti-aging benefits. The Company is also developing algal oils as replacements for the oils used in skin and personal care products.

The Company competes with BP p.l.c., Royal Dutch Shell plc, and Exxon Mobil Corporation, jatropha, camelina, SALOV North America Corporation, Archer Daniels Midland Company, Cargill, Incorporated, DSM Food Specialties and Danisco A/S

Advisors' Opinion:

• [By Roberto Pedone]

  Another under-$10 stock that's just starting to trigger a major breakout trade here is Solazyme(SZYM), which is in the business of transforming a range of low-cost plant-based sugars into high-value oils. This stock has been trending strong so far in 2013, with shares up by 21%.

  This company just reported earnings on Wednesday, posting a loss that met Wall Street's expectations but coming up short on beating revenue expectations. Revenue decreased 50.59% to $6.7 million from the year-earlier quarter.

  If you take a look at the chart for Solazyme, you'll notice that this stock has been uptrending strong for the last month, with shares soaring higher from its low of $7.15 to its intraday high of $9.86 a share. During that uptrend, shares of SZYM have been mostly making higher lows and higher highs, which is bullish technical price action. That move has started to push shares of SZYM into breakout territory and back above its 200-day moving average of $9.35 a share.

  Market players should now look for long-biased trades in SZYM if it manages to break out above some near-term overhead resistance levels at $9.50 to $9.90 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 556,451 shares. If that breakout triggers soon, then SZYM will set up to re-test or possibly take out its next major overhead resistance levels at $12 to $13 a share.

  Traders can look to buy SZYM off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $8.75 a share. One can also buy SZYM off strength once it clears those breakout levels with volume and then simply use a stop right below its 200-day moving average of $9.35 a share, or right below $9 a share.

  This stock is very popular with the short-sellers, since the current short interest as a percentage of the float for SZYM is extremely high at 21.7%. This stock has big time short-squeeze potential, so make sure to put this on your breakout trading radar.

Top 5 Canadian Companies To Invest In 2014: Real Goods Solar Inc.(RSOL)

Real Goods Solar, Inc. operates as a residential and commercial solar energy integrator primarily in California and Colorado. The company provides engineering, procurement, and construction services. It offers various turnkey solar energy services, including design, procurement, permitting, build-out, grid connection, financing referrals, and warranty and customer satisfaction services. The company installs residential and small commercial systems that range between 3 kilowatts and 1 megawatt output. It also engages in the retail sale of renewable energy products. The company was founded in 1978 and is based in Louisville, Colorado.

Advisors' Opinion:

• [By Matthews]

  Real Goods Solar, Inc.(NASDAQ: RSOL) closing price in the stock market Tuesday, Jan. 3, was $1.50. RSOL is trading 8.97% above its 50 day moving average and -25.21% below its 200 day moving average. RSOL is -50.98% below its 52-week high of $3.06 and 51.52% above its 52-week low of $0.99. RSOL‘s PE ratio is N/A and its market cap is $26.93M.

  Real Goods Solar, Inc. operates as a residential and commercial solar energy integrator primarily in California and Colorado.

10 Best Energy Stocks To Buy For 2014: Spire Corporation(SPIR)

Spire Corporation develops, manufactures, and markets engineered products and services in the areas of PV solar, biomedical, and optoelectronics. It offers specialized equipment for the production of terrestrial photovoltaic modules from solar cells; and photovoltaic systems for application to powering buildings with connection to the utility grid, as well as supplies photovoltaic materials. It also provides surface treatments to manufacturers of orthopedic, cardiovascular, and other medical devices; and performs sponsored research programs into practical applications of biomedical and biophotonic technologies. In addition, the company offers custom compound semiconductor foundry and fabrication services to customers involved in biomedical/biophotonic instruments, telecommunications, and defense applications. Its services comprise compound semiconductor wafer growth, other thin film processes, and related device processing. Further, the company provides materials testing s ervices; and performs services in support of sponsored research into practical applications of optoelectronic technologies. The company offers its products primarily through its sales personnel in the United States, Europe, Africa, and Asia. Spire Corporation was founded in 1969 and is headquartered in Bedford, Massachusetts.

Advisors' Opinion:

• [By Putnam]

  Spire Corp.(NASDAQ: SPIR) closing price in the stock market Tuesday, Jan. 3, was $0.73. SPIR is trading -5.05% below its 50 day moving average and -52.78% below its 200 day moving average. SPIR is -88.23% below its 52-week high of $6.20 and 37.74% above its 52-week low of $0.53. SPIR‘s PE ratio is N/A and its market cap is $6.10M.

  Spire Corp. develops, manufactures, and markets engineered products and services in the areas of PV solar, biomedical, and optoelectronics.

10 Best Energy Stocks To Buy For 2014: SunPower Corp (SPWR.O)

SunPower Corporation, incorporated in April 1985, is a vertically integrated solar products and services company that designs, manufactures and delivers solar electric systems worldwide for residential, commercial, and utility-scale power plant customers. The Company operates in two business segments: the Utility and Power Plants (UPP) Segment and the Residential and Commercial (R&C) Segment. The UPP Segment refers to its solar products and systems business, which includes power plant project development and project sales, turn-key engineering, procurement and construction (EPC) services for power plant construction, and power plant operations and maintenance (O&M) services. UPP Segment also sells components, including huge volume of sales of solar panels and mounting systems to third parties, sometimes on a multi-year, firm commitment basis. The R&C Segment focuses on solar equipment sales into the residential and small commercial market through its third-party global dealer network, as well as direct sales and EPC and O&M services in the United States and Europe for rooftop and ground-mounted solar power systems for the new homes, commercial and public sectors. In May 2012, K Road Power Holdings, LLC (K Road) and SunPower Corp announced that K Road acquired the 25-megawatt (AC) McHenry Solar Project, which the Company designed. In January 2013, the Company MidAmerican Solar acquired the 579-megawatt Antelope Valley Solar Projects (AVSP), two co-located projects in Kern and Los Angeles Counties in Calif from SunPower.

In January 2012, the Company completed its acquisition of the wholly owned Total SA subsidiary Tenesol SA, a global solar provider. In September 2011, NRG Energy Inc. acquired 250 megawatt California Valley Solar Ranch (CVSR) project from SunPower. In June 2011, the Company introduced SunPower E20 Series Solar Panel (E20) series. The Company�� customers in its UPP Segment include investors, financial instituti ons, project developers, electric utilities, and independen! t! power producers in the United States, Europe, and Asia. In its R&C Segment, the Company primarily sells its products to commercial and governmental entities, production home builders, and its third-party global dealer network serving residential owners and small commercial building owners.

Solar Cells

The A-300 solar cell is a silicon solar cell with a specified power value of 3.1 watts and a conversion efficiency averaging between 20.0% and 21.5%. The Company�� A-330 solar cell delivers 3.3 watts with a conversion efficiency of up to 22.7%.

Solar Panels

The Company�� SunPower solar panel series include solutions, such as SunPower E18 Series Solar Panel (E18), SunPower E19 Series Solar Panel (E19), and SunPower E20 Series Solar Panel (E20). Available in a 72-cell configuration, the E18 series panel uses its A300 all back-contact solar cells and delivers a total panel conversion of 18.1% to 18.5%. Available in a 72, 9 6, and 128-cell configuration, the E19 series panel uses its A300 all back-contact solar cells and delivers total panel conversion of 19.3% to 19.7%. Available in a 96-cell configuration, the E20 series panel uses its A-330 all back-contact solar cells and delivers total panel conversion of up to 20.1%.

Inverters

The Company sells a line of SunPower branded inverters. The inverters are manufactured by third parties.

Roof Mounted Products

The roof mounted products include SunPower T-5 Solar Roof Tile System (T-5), SunPower T-10 Commercial Solar Roof Tiles (T-10), PowerGuard Roof System (PowerGuard) and SunTile Roof Integrated System (SunTile). Tilted at a 5-degree angle, the T-5 roof tile is a non-penetrating photovoltaic rooftop product that combines solar panel, frame, and mounting system. The T-5 solar roof tile systems are primarily sold through its R&C Segment.

Tilted at a 10-degree angle, the T-10 commerci al solar roof tiles is a non-penetrating panel interlock! sys! tem! . Depe! nding on geographical location and local climate conditions, this can allow for the generation of up to 10% more annual energy output than traditional flat roof-mounted systems. The T-10 commercial solar roof tile is primarily sold through its R&C Segment.

PowerGuard is a non-penetrating roof-mounted solar panel that delivers electricity while insulating and protecting the roof membrane from ultraviolet rays and thermal degradation. The PowerGuard roof system is primarily sold through its R&C Segment. SunTile solar shingles are designed to replace multiple types of roof panels, including the common concrete flat, low and high profile S tile and composition shingles. The SunTile roof system is also sold through its R&C Segment.

Ground Mounted Products

The ground mounted products include SunPower T-0 Tracker (T-0) & SunPower T-20 Tracker (T-20), SunPower Oasis Power Plant (SunPower Oasis), SunPower C-7 Tracker (C-7), and Fixed Tilt and Su nPower Tracker Systems for Parking Structures. The T-0 and T-20 trackers are single-axis tracking systems that automatically pivot solar panels to track the sun's movement throughout the day. This tracking feature increases the amount of sunlight that is captured and converted into energy by up to 30% over flat or fixed-tilt systems, depending on geographic location and local climate conditions. A single motor and drive mechanism can control 10 to 20 rows, or more than 200 kilo watts of solar panels. The T-0 and T-20 trackers have been installed in a range of geographical markets principally in the United States, Germany, Italy, Portugal, South Korea, and Spain. The T-0 and T-20 trackers are sold through both its UPP and R&C Segments.

The Oasis is a solar power block that scales from 1 mega watts distributed installations to central station power plants. Oasis provides a way to deploy utility-scale solar power systems, streaming the development and construction process while optimizing the use of available land! . The Sun! ! Power Oas! is is sold through its UPP Segment. The C-7 combines a horizontal single-axis tracker with rows of parabolic mirrors, reflecting light onto linear arrays of its solar cells. The C-7 tracker is sold through its UPP Segment. SunPower has developed designs for solar power systems for parking structures in multiple configurations. These dual-use systems typically incorporate solar panels into the roof of a carport or similar structure to deliver onsite solar power while providing shade and protection. They are suited for parking lots adjacent to facilities. Fixed Tilt and SunPower Tracker Systems for parking structures are sold through both its UPP and R&C Segments.

Other System Offerings

SunPower�� metal roof system is designed for sloped-metal roof buildings, which are used in some winery and warehouse applications. This solar power system is designed for rapid installation. It also offers other architectural products, such as day lighting with tran slucent solar panels.

Balance of System Components

Balance of system components are components of a solar power system other than the solar panels. It includes SunPower branded inverters, mounting structures, charge controllers, grid interconnection equipment, and other devices depending on the specific requirements of a particular system and project.

The Company competes with Canadian Solar Inc., JA Solar Holdings Co., Kyocera Corporation, Mitsubishi Corporation, Q-Cells AG, Sanyo Corporation, Sharp Corporation, SolarCity Corporation, SolarWorld AG, Sungevity, Inc., SunRun, Inc., Suntech Power Holdings Co. Ltd., Trina Solar Ltd., Yingli Green Energy Holding Co. Ltd., Abengoa Solar S.A., Acconia Energia S.A., AES Solar Energy Ltd., Chevron Energy Solutions, EDF Energy plc, First Solar Inc., NextEra Energy, Inc., OPDE Group, NRG Energy, Inc., Recurrent Energy, Sempra Energy, Skyline Solar, Inc., Solargen Energy, Inc., Solaria Corporatio n, SolFocus, Inc., SunEdison and Tenaska, Inc! .

10 Best Energy Stocks To Buy For 2014: Solazyme Inc (SZYM.O)

Solazyme, Inc. (Solazyme), incorporated on March 31, 2003, makes oil. The Company�� technology transforms a range of plant-based sugars into oils. Its renewable products can replace or enhance oils derived from the world�� three existing sources-petroleum, plants and animal fats. The Company is focused on commercializing its products into three target markets: fuels and chemicals, nutrition, and skin and personal care. In 2010, the Company launched its products, the Golden Chlorella line of dietary supplements. In March 2011, the Company launched its Algenist brand for the luxury skin care market through marketing and distribution arrangements with Sephora S.A. (Sephora International), Sephora USA, Inc. (Sephora USA), and QVC, Inc. (QVC).

The Company is engaged in development activities with multiple partners, including Chevron U.S.A. Inc., through its division Chevron Technology Ventures (Chevron), The Dow Chemical Company (Dow), Ecopetrol S.A. (Ecope trol), Qantas Airways Limited (Qantas) and Conopoco, Inc., doing business as Unilever (Unilever).

In 2010, the Company entered into a 50/50 joint venture with Roquette Freres, S.A. (Roquette). In November 2010, the Company entered into a joint venture and operating agreement for Solazyme Roquette Nutritionals with Roquette. In December 2010, the Company entered into an exclusive distribution relationship with Sephora International, and in January 2011, the Company entered into a distribution relationship with Sephora USA. Under the arrangements, each of Sephora International and Sephora USA will distribute the Algenist product line in their respective territories.

In Fuels and Chemicals market its renewable oils can be refined and sold as drop-in replacements for marine, motor vehicle and jet fuels, as well as replacements for chemicals that are traditionally derived from petroleum or other conventional oils. The Company work with its refining par tner Honeywell UOP to produce Soladiesel (renewable diesel! ),! Soladiesel renewable diesel for United States Naval vessels, and Solajet renewable jet fuel for both military and commercial application testing. In nutrition market the Company has developed microalgae-based food ingredients, including oils and powders that enhance the nutritional profile and functionality of food products while reducing costs for consumer packaged goods (CPG) companies. In Skin and Personal Care market the Company hs developed a portfolio of branded microalgae-based products. Its ingredient is Alguronic Acid, which the Company has formulated into a range of skin care products with anti-aging benefits. The Company is also developing algal oils as replacements for the oils used in skin and personal care products.

The Company competes with BP p.l.c., Royal Dutch Shell plc, and Exxon Mobil Corporation, jatropha, camelina, SALOV North America Corporation, Archer Daniels Midland Company, Cargill, Incorporated, DSM Food Specialties and Danisco A/S< /p>

10 Best Energy Stocks To Buy For 2014: SilverCrest Mines Inc (SVL)

SilverCrest Mines Inc. (SilverCrest) is engaged in the acquisition, exploration and development of mineral properties in Mexico and Central America. The Company�� principal focus is the development and operation of the Santa Elena Project, which property consists of seven mineral concessions totaling 2,726.54 hectares, portions of which include the producing Santa Elena gold and silver mine located northeast of Hermosillo, Sonora State, Mexico. It operates in three segments: the mine operations at Santa Elena, Mexico; mine exploration and evaluation projects at La Joya and Cruz de Mayo, Mexico, and Corporate. The Company is also focused on exploring and developing its La Joya Property located in Durango, Mexico, which contains a discovered polymetallic deposit. The Company�� other mineral properties include the Cruz de Mayo Project (Mexico), the La Joya Property (Mexico), the Silver Angel Project (Mexico) and the El Zapote Project (El Salvador).

10 Best Energy Stocks To Buy For 2014: Precision Drilling Corp (PDS)

Precision Drilling Corporation (Precision) is a provider of contract drilling and completion and production services primarily to oil and natural gas exploration and production companies in Canada and the United States. The Company operates in two segments: Contract Drilling Services, and Completion and Production Services. In Canada, the Contract Drilling Services segment includes land drilling services, directional drilling services, procurement and distribution of oilfield supplies and the manufacture and refurbishment of drilling and service rig equipment, and the Completion and Production Services segment includes service rigs for well completion and workover services, snubbing services, camp and catering services, wastewater treatment services and the rental of oilfield surface equipment, tubulars, well control equipment and wellsite accommodations. Advisors' Opinion:

• [By Louis Navellier]

  Dahlman Rose, an investment bank specializing in natural resources, upgraded the oil services industry in November 2012; one of the prime recipients of this upgrade was Precision Drilling, Canada's largest oilfield services company. Dahlman Rose expects North American exploration and production to increase by 11% in 2013 to $334 billion, led by a big increase from natural gas. The investment banker believes land drillers like Precision are selling at a historically low multiple of 1.1 times tangible book value compared to the historical norm of two times tangible book value. Heading into 2013, Precision's stock's dropped a significant amount and sits at one of its lowest levels in the past two years. Despite reduced demand for its services in 2012, CEO Kevin Neveu pointed out in October that, "PDS is seeing increased long-term contracts for upgraded and new rigs." Rising natural gas prices should increase the industry's rig utilization rate to around 85%, naturally increasing Precision's revenues and profits. This could be an easy double in 2013. 

10 Best Energy Stocks To Buy For 2014: TotalFinaElf S.A.(TOT)

TOTAL S.A., together with its subsidiaries, operates as an integrated oil and gas company worldwide. The company operates through three segments: Upstream, Downstream, and Chemicals. The Upstream segment engages in the exploration, development, and production of oil and natural gas. It also involves in the transportation, trade, and marketing of natural gas and liquefied natural gas (LNG), as well as in LNG re-gasification and natural gas storage operations. In addition, this segment engages in the shipping and trade of liquefied petroleum gas (LPG); power generation from gas-fired power plants, nuclear, or renewable energies; production, trade, and marketing of coal, as well as in solar power systems and technology operations. As of December 31, 2010, it had combined proved reserves of 10,695 Mboe of oil and gas. The Downstream segment involves in refining, marketing, trading, and shipping crude oil and petroleum products. It also produces a range of specialty products, s uch as lubricants, LPG, jet fuel, special fluids, bitumen, marine fuels, and petrochemical feedstock. This segment holds interests in 24 refineries located in Europe, the United States, the French West Indies, Africa, and China, as well as operates a network of 17,490 service stations. The Chemicals segment produces base chemicals, including petrochemicals and fertilizers, as well as engages in rubber processing, resins, adhesives, and electroplating activities. TOTAL S.A. was founded in 1924 and is based in Paris, France.

Advisors' Opinion:

• [By Glenn]  

  TOT has a market capitalization of $130 billion. Its dividend yield last year of 5% is among the best in the industry. Current P/E ratio of 9.2 seems very attractive compared to the industry average of 12. The stock prices did not participate much in the recent bull market. While smaller sized competitors such as ConocoPhillips (COP), Marathon Oil Corporation (MRO) and Statoil ASA (STO) offered spectacular returns (ranging from 30% to 50%), Total’s return in 2010 was only 2%. One may find that the price will catch up with profits.

10 Best Energy Stocks To Buy For 2014: Exxon Mobil Corporation(XOM)

Exxon Mobil Corporation engages in the exploration and production of crude oil and natural gas, and manufacture of petroleum products, as well as transportation and sale of crude oil, natural gas, and petroleum products. The company manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and other specialty products. As of December 31, 2010, it operated 35,691 gross and 30,494 net operated wells. The company has operations in the United States, Canada/South America, Europe, Africa, Asia, and Australia/Oceania. Exxon Mobil Corporation was founded in 1870 and is based in Irving, Texas.

Advisors' Opinion:

• [By Hawkinvest]

  Exxon (XOM) is a must-own stock for many oil investors. This company has a strong balance sheet and a very significant reserve base, which grows in value with the price of oil. Exxon recently reported solid results with earnings for the fourth quarter of 2011 coming in at $1.97 per share. The company also reported that it bought back about $5 billion worth of shares. Weaker margins in the refinery business did impact results, but overall, the report shows that the company is poised for a solid year ahead. Exxon has a very strong balance sheet and it can afford to continue buying back shares which will help to boost future earnings. This stock was trading for about $80 per share in December, but has been trending higher. Exxon shares have recently been finding support around $83 per share, so buying on dips at that level are particularly attractive.< /span>

  Here are some key points for XOM:

  Current share price: $86.57

  The 52 week range is $67.03 to $88.23

  Earnings estimates for 2011: $8.25 per share

  Earnings estimates for 2012: $8.99 per share

  Annual dividend: about $1.88 per share which yields about 2.2%

Merrill Edge Makes Big ETF Push

Merrill Edge says it has expanded its mass-affluent platform to include an ETF trading tool, and plans for more portfolio tools are in the works. Clients can trade ETFs online for $6.96, with 30 free online trades per month for some qualifying investors.

“This is part of our goal for Merrill Edge and especially for self-directed clients: Help them build portfolios with our capabilities around a selected list of ETFs and funds to choose from confidently and for good performance,” said Alok Prasad, head of Merrill Edge, in an interview with ThinkAdvisor.

Bank of America (BAC) launched Merrill Edge three years ago. The program now has about 1.6 million clients; some are self-directed investors, while others work with Merrill Edge advisors, mainly by phone.

“We are at $87 billion in assets as of August, with strong, 17% momentum in year-over-year growth, and we want to grow further,” said Prasad (right). “The Merrill Edge Select ETFs is part of our value proposition to make it easy and simple to invest with us.”

The ETF platform was launched in late August. It includes 61 products from Vanguard, iShares, State Street and other industry leaders, organized into five broad categories and 21 subcategories. Clients can select ETFs and work to rebalance their portfolio with these products in conjunction with Merrill Edge’s Asset Allocator Tool.

“It takes them through the process from start to finish,” explained Prasad.

When picking the 61 ETFs for the platform, Merrill looked as assets under management, since the larger funds have greater liquidity and better pricing, according to Paul Riley, managing director of Merrill Edge Product Solutions.

Tracking error, expense-ratio measures and bid-ask ratio spreads were also examined. “This way, we could get the highest liquidity and lowest cost in each category … ” Riley said, “and end up with a best-in-class group that’s unbiased in terms of the sponsor firms.”

Next Steps

Merrill Edge, which aims to attract as many Gen X and Gen Y clients as possible, will keep pushing out more online products, tools and information “to meet the goals of these investors,” Prasad said. “The demand is there.”

What’s likely to be the next Merrill Edge tool? “We are working on ideas for each of the asset classes, beyond mutual funds and ETFs,” he said. “We need to work with our Investment Management Group on the right protocols and framework to have the best in class, which gets harder in harder with alternative investments.”

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Still, the Merrill Edge executive says, the group “just needs time to work through the models.”

“We have a road map to add incremental enhancements as we continue to grow …” added Reilly. “We could envision, say, adding [country or other specific ETFs], which would be more tactical purchases for clients to make, over time.”

Alternatives will be an option for Merrill Edge clients, Prasad stresses. “Yes, absolutely. It’s a matter of working through our processes. We will continue to expand the [product] list and make this part of the road map.”

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More from Janet Levaux on ThinkAdvisor:

 

 

Sell, Canada, Sell: General Motors Drops 2% as Canada, Ontario Unload Shares

General Motors (GM) has fallen today on reports that both Canada’s national government and that of Ontario sold 30 million shares of the U.S. automaker at Tuesday’s close.

REUTERS

The Toronto Star has the details:

The federal and Ontario governments have sold a block of 30 million shares in General Motors valued in the neighbourhood of $1.1 billion, a portion of the equity they received when they bailed out the automaker in 2009.

Finance Minister Jim Flaherty said in an email that the shares were sold at Tuesday's closing price of $37 (U.S.) on the New York Stock Exchange, minus a small discount.

With completion of the sale, the governments will continue to hold more than 119 million GM common shares and 16.1 million GM series A preferred stock through a federal agency.

Investors might want to keep a closer on the U.S. unemployment rate, which has been a leading indicator of U.S. auto demand. Sterne Agee’s Michael Ward writes:

Historically, employment levels have been a primary indicator for new vehicle demand. Unemployment continues to be a cautious indicator for auto demand but the recent trends have been positive. The August unemployment rate of 7.3% decreased from 7.4% in July after adding 169,000 jobs in the month. Low levels of unemployment were a positive for the auto industry in the late-90s and into 2007 (the average unemployment rate between 1995 and 2007 was 5.0%), but higher levels over the last few years have disrupted confidence and limited the pace of the recovery. The Figure below compares the employment rate against a 12-month moving total of U.S. light vehicle sales. On a positive note, auto sales have been a leading indicator for the direction of U.S. employment trends over the last 30 years, and the trend is holding up once again this time around.

Europe, too, could be a source of sales, if the head of GM’s Opel unit is to be believed. The Wall Street Journal reports:

Hot Financial Stocks To Watch For 2014

General Motors Co. Vice Chairman Stephen Girsky said “there’s pent-up demand” in the European market that could boost the auto maker’s money-losing Opel operations over the next few years.

Mr. Girsky, chairman of Opel, has led an overhaul of Opel’s operations and management during the past two years, after the German unit lost $18 billion over the previous decade.

Mr. Girsky said Wednesday that Opel should be profitable by “mid-decade,” though much depends on whether European sales recover from a slump that pushed annual sales down by more than three million vehicles from the peak of more than 16 million six years ago.

Investors might not want to get their hopes up, however. In a report from the Frankfurt Motor Show, Baird’s David Leiker and Joseph Vruwink note that there’s little sign of improvement on the continent yet. They write:

Will 2013 Be a Blockbuster Year for Time Warner?

Time Warner Inc.’s (NYSE:TWX) stock has surged around 23 percent since the beginning of the year. The media giant, which owns Warner Bros, HBO, and CNN, has predicted double-digit growth for the coming year. With its current media holdings and the recent divestiture of its namesake magazine division, can its stock price climb higher? Let’s use our CHEAT SHEET investing framework to decide whether Time Warner is an OUTPERFORM, WAIT AND SEE, or STAY AWAY.

C = Catalysts for the Stock's Movement

Time Warner's first quarter results were met with mixed reviews from analysts and investors. While the company beat earnings estimates, quarterly revenues decreased by 0.6 percent from the previous year's quarter. The compressed revenue figures were mostly due to lackluster performance at the box office from its film entertainment division and lower ad revenue from some NCAA basketball tournament games airing in the fourth quarter of 2012, compared to the previous quarter.

Time Warner enjoyed continued success with its TV entertainment and networks division. HBO shows like Game of Thrones remain fan favorites and are benefitting from growing international viewership as well as new monetization opportunities via streaming video services. Revenues from Warner Brothers should grow this quarter as Time Warner picks up profits from recently released box office hits including The Great Gatsby and Man of Steel. Additionally, the recent spinoff of long struggling Time Inc. will allow Time Warner to focus on growing its TV and film divisions.

E = Earnings Are Increasing Year-over-Year

Time Warner's earnings per share have increased over the last three quarters. The most recent quarterly number of $0.75 showed a significant increase from the previous year's quarterly earnings of $0.59. While the earnings growth paints a pretty picture for investors, revenue growth has been sluggish. Time Warner attributes the 0.6 percent year-over-year decline in quarterly revenues of $6.94 billion to lagging growth in its film and TV entertainment division, despite a 4 percent revenue increase in its TV networks division. CEO Jeff Bewkes believes that the divestiture of its namesake unit, Time magazine, will free up more resources to focus on growing its film and TV entertainment division.

	2013 Q1	2012 Q4	2012 Q3	2012 Q2	2012 Q1
Qtrly. EPS	$0.75	$1.21	$0.86	$0.44	$0.59
EPS Growth YoY	27.12%	57.94%	10.26%	-25.42%	0.00%
Revenue Growth YoY	-0.57%	-0.35%	-3.20%	-4.07%	-4.43%

E = Excellent Relative Performance to Peers

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While chief competitors, Discovery Communications (NASDAQ:DISCA) and CBS (NYSE:CBS), shouldn't be underestimated, Time Warner offers the most value, especially to the dividend investor. Time Warner has increased its dividend steadily throughout the last several years, even increasing its dividend during the financial crisis. It now yields a best-in-class 1.90 percent and—with a payout ratio of 33 percent—the company has room for future increases. If you want high growth you should be looking at Discovery—with a projected growth estimate of 33.50 percent in the next year and the healthiest operating margin at 40.81 percent—but you will have to pay for it at a price to equity multiple of 32.55 versus Time Warner's multiple of 18.74.

	TWX	DISC	CBS
Trailing P/E	18.74	32.55	20.13
Growth Est. (2013)	12.20%	33.50%	19.20%
Dividend Yield	1.90%	N/A	1.00%
Operating Margin	22.77%	40.81%	21.80%

T = Technicals on the Stock Chart are Strong

Time Warner is currently trading at around $60.97, well above its 200-day moving average of $55.89 and its 50-day moving average of $58.50. The stock has experienced a strong uptrend in the past year—up 60 percent in the past 12 months. Time Warner is trading around its 52-week high of $61.73 that it achieved back in May.

Conclusion

While Time Warner is expensive relative to its historical price to earnings multiple, it is still relatively cheap compared to competitors like Discovery and CBS. There is talk of a possible merger between Time Warner and Liberty Media, which would boost the share price, but that’s just speculation at this point. Many analysts predict Time Warner will move toward the mid- to high-sixties in the near-term. Revenues should benefit from an impressive lineup of summer films. Additionally, Time Warner's competitive advantage is relatively safe as there are high barriers-to-entry in creating profitable media content. With a healthy and growing dividend to boot, Time Warner is an OUTPERFORM.