Is General Motors Worth Investing In?

With shares of General Motors (NYSE:GM) trading around $38, is GM an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

General Motors designs, manufactures, and markets cars, crossovers, trucks, and automobile parts worldwide. The company markets its vehicles primarily under the Buick, Cadillac, Chevrolet, GMC, Opel, Holden, and Vauxhall brand names, as well as under the Alpheon, Jiefang, Baojun, and Wuling brand names. It sells cars and trucks to dealers for consumer retail sales as well as to fleet customers in daily rental car companies, commercial fleet customers, leasing companies, and governments.

General Motors shares were down 0.8 percent, after the firm released the best November sales results in six years. GM reported car sales were 212,060, up 13.7 percent in November, compared to a year earlier. The car company’s GMC brand saw a 19.8 percent increase with 35,727 total sales. Chevrolet sales were up 12.6 percent with 145,089 in total sales for the month. Buick car sales were 15,072, up 13.4 percent and Cadillac sales were 16,172, up 11.4 percent. “November sales were strong at all four of our brands, and demand was robust for everything from cars to crossovers to the industry’s newest and best full-size pickups,” said Kurt McNeil, GM vice president of U.S. sales operations.

T = Technicals on the Stock Chart Are Mixed

General Motors stock has been in a range over the last couple of quarters. The stock is currently trading sideways and may need time to consolidate before heading higher. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, General Motors is trading above its rising key averages, which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

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

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
General Motors options	31.43%	80%	78%

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

	Put IV Skew	Call IV Skew
December Options	Flat	Average
January Options	Flat	Average

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

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

E = Earnings Are Mixed Quarter-Over-Quarter

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

	2013 Q3	2013 Q2	2013 Q1	2012 Q4
Earnings Growth (Y-O-Y)	-49.44%	-16.67%	-3.33%	6.49%
Revenue Growth (Y-O-Y)	3.72%	3.88%	-2.32%	3.47%
Earnings Reaction	3.24%	-1.10%	3.01%	0.03%

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

P = Excellent Relative Performance Versus Peers and Sector

How has General Motors stock done relative to its peers, Ford (NYSE:F), Toyota (NYSE:TM), Tesla (NASDAQ:TSLA), and sector?

	General Motors	Ford	Toyota	Tesla	Sector
Year-to-Date Return	32.33%	28.07%	32.03%	307.20%	30.81%

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

Conclusion

General Motors continues to change its business as it looks to entice companies and consumers with its new and improved vehicles. The company’s shares were down 0.8 percent after the firm released the best November sales results in six years. The stock has been in a range over the last couple of quarters and is currently trading sideways. Over the last four quarters, earnings have been decreasing while revenues have been rising, which produced conflicting feelings among investors. Relative to its peers and sector, General Motors has been a relative year-to-date performance leader. WAIT AND SEE what General Motors does this quarter.

Merrill Lynch team managing $700M moves to HighTower

A team of Connecticut advisers who manage $700 million for clients has broken away from Merrill Lynch Wealth Management.

The Andriole Group, based in Madison, is joining HighTower Advisors. Charles Andriole, the founder, is making the move along with the firm's other principals — Geoffrey G. Gregory, Robert A. DeLucca and Matthew J. Montana — who will all receive the title of partner and managing director at Chicago-based HighTower.

Three other advisers — Eric C. Hanson, Christopher P. McFadden and Alexandra J. Miele — and two senior client service associates are also part of the firm, which focuses on high-net-worth families, and related businesses and non-profit organizations.

Mr. Andriole was ranked in the top 10 Connecticut advisers by Barron's this year.

Ana Sollitto, a spokeswoman for Merrill's owner, Bank of America Corp., declined to comment on the departure.

The team is the 40th to join HighTower, founded in 2008, and is HighTower's only Connecticut outpost. Like what you've read?

How to keep NSA out of your company’s data

(Editor's note: In this guest post, Yorgen Edholm, CEO of file sharing company Accellion, discusses security exposures that come with use of the public cloud.)

Who's in the driver's seat on your cloud strategy? Bob from marketing? Lisa from sales? It sounds ludicrous, but it's an unfortunate reality.

Today there are a lot of employees back-seat driving cloud corporate strategies by subscribing to public cloud solutions without IT's knowledge.

This means that proprietary corporate documents – such as confidential design specs, sales numbers, and business strategies – are being shared and stored without proper security controls.

Top 10 Tech Companies To Own For 2014

The recent NSA PRISM revelations demonstrated just how little control public cloud providers have over government access to hosted data, which has reinvigorated an important conversation about the security merits of private versus public cloud strategies.

For me, the debate boils down to one word: control. How much control do you want over your data? There's no one-size-fits-all approach to cloud computing – what's right for one organization might not be right for others.

It depends on the type of information you're managing and how confidential it is; your organization's security policies and whether or not you need to monitor and report on where information is going; and whether or not you're governed under industry regulations like HIPAA that dictate where and how you store information.

With a private cloud strategy, you call the shots. You get an infrastructure that's operated just for you and you set the terms of service, as well as decide where the data lives. You know that your organization's information is only being accessed by authorized users.

While a private cloud may not stop the NSA from demanding access to your information, at least with a private cloud deployment you would know! that it's occurring.

It's that peace of mind that's missing from public cloud solutions. With the public cloud there's no guarantee that you retain exclusive access to data that's rightfully yours. It's unclear exactly where your information is being housed, and who can view it

And as a result you could be exposing your organization to potential data leaks and costly compliance violations.

So are you ready to take back the wheel on your cloud strategy? My advice: let security, compliance and control lead the way. And follow the road that keeps your data right where it belongs – in a private cloud under the control of your organization.

Left Hand Milk Stout lives up to gold medal

Beer Man is a weekly profile of beers from across the country and around the world.

This week: Left Hand Milk Stout

Left Hand Brewing Co., Longmont, Colo.

www.lefthandbrewing.com

Count Left Hand Brewing Co. as one of the big winners in the recently concluded Great American Beer Festival, and for good reason.

The annual festival was held Oct. 10-12 in Denver, and once again showed the continuing growth and strength of the U.S. craft beer market.

The 4,809 entries from 745 breweries increased 12% from the 2012 event and included 230 first-time entrants. There were 49,000 public attendees who had the pleasure of drinking the great beers from around the country.

The list of winners can be found online here.

For those disappointed that their favorite brewery or brewpub did not show up on the list, it's important to know that not every brewery or brewpub in the country gets a chance to compete. Online registration is on a first-come, first-served basis and it was filled within an hour, so a good number of worthy breweries were not even able to take part.

Left Hand Brewing Co. of Longmont, Colo., and Firestone Walker Brewing Co. of Paso Robles, Calif., tied for the most gold medals with three each. The top breweries in the country in their size categories were Baker City Brewing Co., Baker City, Ore.; Devil's Backbone Brewing Co., Roseland, Va.; Firestone Walker Brewing Co.; and SandLot, Denver.

Left Hand won a gold medal in the Sweet Stout category for its Milk Stout and was certainly deserving. This year-round beer has a nice oily body and a slight sweet cream flavor that offsets the bitterness from the dark and roasted malts. A touch of oat adds to the creaminess of the 6% ABV beer.

The aroma and flavor is of chocolate, cocoa and vanilla, with the coffee aspects more in the background, as it should be for a milk or sweet stout. The carbonation is a bit less than typical for most beers, but appropriate for this style.

Left Hand beers ar! e available in about 27 states; its online Beer Finder link is here.

A follow-up to last week's column about Samuel Adams' Tetravis: While a couple of retailers in my area said their distributor would not be carrying it, other distributors say their allocations of it are on back order and encourage patience for those looking for the beer.

Michelle Diamandis, public relations supervisor for Boston Beer Co., maker of Samuel Adams beers, had this to say: "Tetravis will in fact be available nationwide and is currently rolling out to different areas of the country. It is definitely a bit scarce right now. We anticipate it will become more readily available in the next month or so."

——

Many beers are available only regionally. Check the brewer's website, which often contains information on product availability. Contact Todd Haefer at beerman@postcrescent.com. To read previous Beer Man columns Click here.

When To Short A Stock

Most investors by nature will "go long" when they buy stocks. Few investors naturally will short stocks (or bet on their decline) because they really don't know what to look for. Some investors see the shorting process as somewhat counter-intuitive to the traditional investing process, since many stocks do appreciate over time. That said, there is a lot of money to be made by shorting, and in this article, we'll give you a list of signs that show when a stock might be ripe for a fall.

Technical Trends
Look at a chart of the stock you are thinking about shorting. What is the general trend? Is the stock under accumulation or distribution?

It is not uncommon to see a stock that has been in a downtrend continue to trade in that same pattern for an extended time period. Many traders will use various technical indicators to confirm the move lower, but drawing a simple trendline may be all that is needed to give a trader a better idea of where the investment is headed.

As you can see from the chart below, the declining trend will make it difficult for an investor to gain on a move higher, because the position will need to fight against the major underlying trend, which in this case is downward.



Other technical indicators, such as a moving average, can also be used to predict a downtrend. Many traders will watch for an asset's price to break below a major moving average to suggest a likely decline, because stocks that fall below a major moving average, such as the 200-day moving average, typically continue their descent.

Estimates Ratcheted Down
When a company misses its quarterly earnings estimates, management will usually try to explain to investors what happened in a conference call or a press release. Following this, Wall Street analysts work to compose a report and distribute it to their brokers. This process can often take a great deal of time - sometimes hours or days - which feels like an eternity in Wall Street chronology.

Astute traders will often aim to short a stock somewhere between the actual release and the time it takes the analyst to generate the report. Keep in mind that when the brokers receive these reports, they are likely to be moving their clients out of the stock, or at the very least reducing their positions.

Tax Loss Selling On the Horizon
In the fourth quarter, you will note that companies trading in the lower end of their 52-week trading range will trade even lower. Why is this? It is because individuals and mutual funds want to book some of their losses before year-end to reap the tax benefits. Therefore, these types of stocks may make good candidates for traders seeking to profit from a move lower.

Insider Selling
There are plenty of reasons why an insider might sell his or her stock. This may include buying a home, or simply a desire to book some profits. However, if a number of insiders are selling the stock in large quantities, it may be a wise move to view this as a harbinger of things to come. Keep in mind that execs have extraordinary insight into their companies. Use this information to your advantage and time your short sales accordingly.

Fundamentals Deteriorating
You don't need to find a company that is on the verge of bankruptcy to successfully short its stock. On the contrary, you need to see only a mild deterioration in a company's overall fundamentals for big holders of the stock, such as mutual funds, to get fed up and dump the shares.

Look for companies that have declining gross margins, have recently lowered future earnings guidance, have lost major customers, are getting an inordinate amount of bad press, have seen their cash balances dwindle or have had accounting problems. Put another way, investors need to be aware at all times of the "cockroach theory." That is, where there is one (problem), there is probably a whole bunch more.


Swelling Inventories/Accounts Receivables
This fits in under the topic of deteriorating fundamentals, but it stands to be emphasized because these are two of the most obvious (increasing inventories and accounts receivable) signs that a company is going downhill.

What do these figures tell you?

Increasing inventory figures might not be a bad thing if a company has recently launched a new product and is building up a backlog of that product in anticipation of selling it. However, if a company shows a sizable inventory jump for no reason, it is a sign that it has goods on its books that are stale and might not be salable. These, in turn, will need to be written off and will have an adverse impact on earnings down the line.

Increasing receivables is a bad sign because it indicates that a company isn't being paid by its customers on a timely basis. This will also throw off earnings going forward. If some of these debts ultimately prove to be uncollectible, they will also have to be written off at some point.

Declining Sector Trends
While a company will occasionally buck a larger trend, most companies within a given sector or industry trade in relative parity. That means that supply and demand issues facing one company are likely to impact others at some point down the road. Use this information to your advantage. Make phone calls to a company's suppliers and/or customers. They can confirm whether the company is witnessing the same problems (or opportunities) as other players in the same industry or sector.

Conclusion
Investors need to be aware not only that short selling presents an opportunity to generate tangible gains, but also that signals can alert an investor when a stock is about to take a fall. This knowledge will make you an immeasurably better investor.

5 Controversial Gold Stocks And 3 ETFs: Where's The Real Value?

Gold Under The Microscope
This is the last installment of a five part series on gold.

In the prior installments of this look at gold, I discussed the basic premise of investing in gold in the current environment, and the forces pulling the gold price in different directions. Today I'll discuss some specific gold investments.

To own a stake in gold, there are four main choices:

Hold the actual physical metal in the form of bullion, coins or jewelry. Own shares of a mutual fund or exchange-traded fund, exchange-traded vehicle or exchange-traded note that holds gold in physical form. Hold gold derivatives, either directly, through options, or indirectly, through managed funds. Own shares in gold mining companies directly, or through funds, etc.

Let's look at the pros and cons of these various vehicles.

Miners suffer from cost pressures, like energy and labor, to which the metal is impervious, but mining profits may grow at a faster pace than the metal as the gold price accelerates. However, that has generally not been reflected in the price of mining stocks in recent years.

The physical metal shrugs off mining costs, etc., but leaves the investor the problem of storing it safely. Also, you may pay a premium of up to 15% to a dealer when you buy it, and take the haircut again when you sell it. Then it is taxed as a collectible, which takes a bigger tax bite than a capital gain on a stock.

Gold invested in ETFs and various types of mutual funds either have the collectible tax problem or the eternal mutual fund problem wherein, if you're not careful about when you buy and sell, you may end up paying capital gains taxes on profits someone else made and you didn't. Which of these perils you face depends on how the fund is structured.

Sprott Physical Gold Trust ETV (PHYS) is not taxed at the collectible rate, but is subject to the latter negative possibility. Sprott allows redemption of shares for actual bullion, subject to minimum requirements, which, however, are quite high for the average investor. The minimum amount varies, but is usually between 350 and 430 troy ounces.

ETFS Physical Swiss Gold Shares (SGOL) and StreetTracks Gold Shares (GLD) both are taxed as collectibles, but avoid the mutual fund danger noted above. I favor SGOL over GLD because it stores its gold in Swiss vaults, where one might suppose it is safer from the threat of confiscation by the U.S. government. During FDR's administration, the owning of gold by individuals was outlawed. Don't think it can't happen again.

By the way, all the "E" (exchange) vehicles are subject to some tracking error over an extended period of time, wherein the ETF, etc., does not quite track the price of the underlying asset. This error can be especially great in levered funds that aim to double or triple the performance or inverse performance of the asset. You should read the prospectus of any ETF, etc., carefully before investing.

The ETFs and funds that hold the physical metals all may have one other problem: We aren't in a position to audit their vaults to verify they really have the gold. Some companies do issue reports from outside auditors. We have to take it on faith that what they say is true. I have no information that would suggest it's not, but in today's world, and with the events in the world of finance in the last few years, one would be foolish to at least not consider that possibility. To the extent any of these holdings is backed by an over-the-counter derivative instead of actual metal, we are subject to counterparty risk. Think AIG, Lehman Brothers, etc.

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Exchange-traded options, on the other hand, are cleared through the CFTC, and your counterparty is required to hold adequate collateral. Still, if the option is on an ETF, you're back to the problems we just discussed. In addition, options are highly volatile, and can go to zero if your timing is wrong. That holds true whether the option is on an ETF or a stock of an individual mining company.

Which brings us to our next and final subject in this series…

Gold Miners
Of all the forms of gold one can invest in, the miners have been beaten up the most. At some point, they will probably represent the best buy. That being the case, let's do a little prospecting.

Following are a few miners that have various virtues to recommend them. It is extremely rare to find a perfect stock of any sort at a good price. Companies with the best growth outlook usually have stratospheric P/Es by the time we realize their potential. Very solid, low P/E companies usually have slow or uneven growth. These principles hold true with the gold miners, but in spades. Mining is an inherently "lumpy" business, with year-to-year results less predictable and more subject to risk than most other industries. Quarterly results are a real crap-shoot.

Hot Warren Buffett Stocks To Own Right Now

Bloomberg

Investors for years have been searching in vain for a formula to replicate Warren Buffett�� legendary returns over the past 50 years.

The wait could be over.

A new study that claims to have uncovered this formula was published last month by the National Bureau of Economic Research in Cambridge, Mass. Its authors, all of whom have strong academic credentials, work for AQR Capital Management, a firm that manages several hedge funds and other investment offerings and has $90 billion in assets.

Hot Warren Buffett Stocks To Own Right Now: TALK TALK TELECOM GROUP PLC ORD GBP0.001 WI(TALK.L)

TalkTalk Telecom Group PLC provides fixed line voice and broadband telecommunications services to consumers and business users primarily in the United Kingdom. The company?s residential products and services comprise voice telephony services, including line rental, calls, and added value services, such as voicemail; broadband Internet access and related services, such as email; and dial-up Internet access. It also offers line rental, call tariffs, and high speed business grade broadband; flexible call handling, and dialer and recording solutions to manage inbound and outbound calls; IT networking and security solutions that enable the clients to share applications; telephone systems, including handsets, accessories, and maintenance packages; and mobile network solutions, handsets, tariffs, and applications to suit various businesses. TalkTalk Telecom serves approximately 4.8 million customers under the TalkTalk, AOL Broadband, and TalkTalk Business brand names. The compan y was formerly known as New TalkTalk PLC and changed its name to TalkTalk Telecom Group PLC in January 2010. TalkTalk Telecom Group PLC was founded in 2002 and is based in London, United Kingdom.

Hot Warren Buffett Stocks To Own Right Now: La Mancha Resource Com Npv (LMA.TO)

La Mancha Resources Inc., through its subsidiaries, engages in the mining, exploration, and production of gold properties in Africa, Australia, and Argentina. Its principal properties include the Frog�s Leg and White Foil mines located in Western Australia. The company also holds interests in the Ity gold mine located in western C么te d�Ivoire; and the Hassai mine located in northeastern Sudan. La Mancha Resources Inc. was incorporated in 1996 and is headquartered in Montreal, Canada. As of September 10, 2012, La Mancha Resources, Inc. was taken private.

5 Best Medical Stocks To Invest In 2014: Infinito Gold Ltd(IG.V)

Infinito Gold Ltd., a development stage exploration company, engages in the acquisition, exploration, and development of mineral interests primarily in Costa Rica and Nicaragua. It holds interests in the Crucitas gold mining project comprising 800 square kilometers of exploration concession area in northern Costa Rica. The company was formerly known as Vannessa Ventures Ltd. and changed its name to Infinito Gold Ltd. in May 2008. Infinito Gold Ltd. was founded in 1981 and is based in Calgary, Canada.

Hot Warren Buffett Stocks To Own Right Now: Venoco Inc.(VQ)

Venoco, Inc., an independent energy company, primarily engages in the acquisition, exploration, exploitation, and development of oil and natural gas properties primarily in offshore and onshore California. The company holds interest in various fields comprising South Ellwood, Santa Clara Federal Unit, West Montalvo, Dos Cuadras, Beverly Hills West, and Santa Clara Avenue fields in southern California; and onshore Monterey shale formation, which consist of the Sevier field in southern California. It also holds interest in Willows and Greater Grimes fields in Sacramento basin. As of December 31, 2011, the company had proved reserves of approximately 95.9 million barrels of oil equivalents. Venoco, Inc. was founded in 1992 and is based in Denver, Colorado.

Hot Warren Buffett Stocks To Own Right Now: M Health Ltd(MHL.AX)

Orca Energy Limited engages in the exploration and evaluation of minerals, oil and gas, and uranium opportunities in Australia and Kyrgyzstan. The company holds a 22.5% interest in the East Kokmoinok Uranium license in the Kyrgyz Republic; and 100% interest in three petroleum licenses covering an area of approximately 6,000 square kilometers located in the Kyrgyz Republic. It also holds licenses in the onshore Cooper Basin, South Australia. The company was formerly known as Monitor Energy Limited and changed its name Orca Energy Limited in August 2011. Orca Energy Limited was incorporated in 1985 and is based in West Perth, Australia.

Hot Warren Buffett Stocks To Own Right Now: (CTEI)

Cemtrex, Inc. designs, engineers, assembles, and sells emission monitoring equipment and instruments, and air filtration and environmental control products to power plants, refineries, chemical plants, and cement plants, as well as to municipalities, hospitals, and federal and state governmental agencies. Its emission monitoring systems are installed at the exhaust stacks of industrial facilities and are used to measure the outlet flue gas concentrations of regulated pollutants. The company offers opacity monitors for stack opacity and dust measurements; direct-extractive and dilution-extractive continuous emission monitor equipment and systems that are applicable for utilities, industrial boilers, FGD systems, SCR-NOx control, furnaces, gas turbines, process heaters, incinerators, and process controls; ammonia analyzers for monitoring ammonia, nitrogen oxides, and sulfur dioxide by process analyzers that utilize UV absorbance techniques for detection; and mercury analyzer s. It also provides a line of air filtration and environmental control equipment to remove dust, corrosive fumes, mists, hydrocarbons, volatile organic compounds, submicron particles, and particulate from industrial exhausts and boilers; clean noxious and acid gases from industrial exhaust stacks prior to discharging to the atmosphere; and control emissions from construction facilities, mining operations, and dryer exhausts. In addition, the company markets technologies for controlling greenhouse gases, such as methane from coal mines; and assists project owners in selling carbon credits. Further, it offers replacement and spare parts, and repair and refurbishment services for emission monitoring systems. The company was formerly known as Diversified American Holding, Inc. and changed its name to Cemtrex, Inc. in December 2004. Cemtrex Inc. was incorporated in 1998 and is based in Farmingdale, New York.

Hot Warren Buffett Stocks To Own Right Now: Royce Value Trust Inc.(RVT)

Royce Value Trust Inc. is a close ended equity mutual fund launched and managed by Royce & Associates, LLC. It invests in the public equity markets of the United States. The fund spreads its investments across diversified sectors. It invests in value oriented stocks of small cap and micro cap companies. The fund benchmarks the performance of its portfolio against the Russell 2000 Index. Royce Value Trust Inc. was formed on July 1, 1986 and is domiciled in the United States.

Hot Warren Buffett Stocks To Own Right Now: Red Fork Energy Ltd(RFE.AX)

Red Fork Energy Limited operates as an oil and gas exploration and production company in the United States. The company engages in the exploration, appraisal, development, and production of oil and gas in the mid-continent region of the United States. It explores for conventional oil and gas horizons, shallow coal bed methane horizons, and shale gas. The company holds interests in Big River Mississippi project covering approximately 50,000 acres located in northern Oklahoma; and West Tulsa project comprising approximately 15,000 acres, Osage project covering approximately 5,000 acres, and East Oklahoma project comprising approximately 110,000 acres in Tulsa, Oklahoma. As of June 30, 2011, it had proved reserves of 8.0 million barrels of oil equivalent. Red Fork Energy Limited was founded in 2004 and is based in Perth, Australia.

Why Should You Care About Moats

I started reading about Buffet when I was in undergraduate days. I somehow got attracted to him. I was curious to learn what makes him do what he does. My quest for knowing more about Buffet led me to more wonderful things in life other than investing wisdom. It also introduced me to greats like Ben Graham, Charlie Munger, Phillip Fischer, Peter Lynch and many more. Warren Buffet is world's most successful practitioner of value investing. Ben Graham who is Buffet's Guru is the father of the practice.  Buffet changed value investing from Ben Graham's cigar butt to more of Charlie Munger's paying for quality Moat businesses. But over the years I have started to believe there exists no such term as value investing.

Nothing captures this more than Charlie Munger's words -

 "All sensible investing is value investing".

Equity markets give us an opportunity to investing in a multitude of businesses where the prices on offer keep on changing every day. Sometimes Mr. Market may throw bargains while there are times when it is quoting irrational prices. It gives investors an opportunity to choose when to invest. Investing in equity shares of a company is not buying pieces of paper its buying a share in a business. For a financial investor it's about partnering with a promoter as he goes around building and running the franchise. For any business to deliver good results it needs time in the same way for it needs time to get reasonably good results from any investment in equity shares. In the long run equity returns are anything but function of the performance of the underlying business. In the short run shares prices get influenced by a host of factors like market sentiments etc. It is always that quality franchise with honest managers tends to command premium in the market.

Real returns in the market can be made by maintaining a long term horizon.

As Charlie Munger once said "Money is not made by buying and selling…..but in the waiting"

 It is v! ery important for an investor to let his money compound .Great business are also great compounding machines. Great business enjoy above return, they have pricing power and tend to be market leaders in their respective arenas.   But in a capitalist society above normal profits tend to attract more investments and thereby more competition driving the returns to the long run mean. So a franchise which might look very profit today may not sustain it in the long run. The forces of market competition may chip away the factors which contribute to the above average returns. Investing in such businesses even for a long term horizon may not give above average returns. That is the reason we need to find businesses with enduring competitive advantage or Moats. Business which has such enduring competitive advantage or moat can withstand competition and still enjoy above average returns.

Competitive advantages can be illusionary or temporary in nature. They may disappear as conditions enabling such temporary competitive advantage wither away. For example Businesses which are earning above average returns due to favourabe business regulations like licences etc. or due to scarcity etc. It's important to understand the nature and reason behind the competitive advantage of the business.

So the next time when you come across a nice business franchise which you think is selling for a decent price proposition ask yourself just one question what makes this business franchise such a good one and if the reason can stay long enough for me as an investor to let the magic of compounding work for me. Just ask "Where's the moat", "Is it going to widen?"

Albert Einstein once said –

"Compound interest is the eighth wonder of the world. He, who understands it, earns it ... he who doesn't ... pays it."

Moats enable you to exploit the power of compounding. 

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Latest Guru Picks	Value Strategies
Warren Buffett Portfolio	Ben Graham Net-Net
Real Time Picks	Buffett-Munger Screener
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ETFs, Options	Low P/S Companies
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Model Portfolios	DCF Calculator
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Twitter Shares Rise 73% in First Trades on NYSE

There's no doubt that Twitter is trending. The microblogging service launched its initial public offering Thursday with great fanfare. Mark Lennihan/AP But not many individual investors were able to scoop up shares of the seven-year-old company at the IPO price. That's because the big boys -- institutional investors such as mutual funds and hedge funds -- grabbed those. So the question is -- in 140 characters or less -- should you buy in now that it's trading like any other issue? There's no easy answer, but we'll run through some of the pros and cons. First, Twitter (TWTR) is off to a fast start. The initial offering of 70 million shares was priced at $26 dollars, and the first trade was at $45.10 a share. That's a 73 percent jump. Trading, no doubt, will be very volatile for at least the next few days. Proponents like it because Twitter has become part of the vernacular, especially for people age 18-to-34 -- those most targeted by advertisers. They live in the Twitterverse, sending out messages of up to 140 characters. Some are as mundane as what you had for lunch today. Others are earthshaking such as when Twitter played a key role in the Arab Spring revolution. You can post your messages, and you follow other people who post. Entertainers Katy Perry, Justin Bieber and Lady Gaga all have more than 40 million followers. President Obama has nearly that many. The company has 232 million users worldwide, and its user base is still growing rapidly, up 39 percent from a year ago. The IPO price was raised several times in the weeks leading up the Thursday debut here, but still came in at what analysts consider a reasonable level, at least in comparison Facebook (FB) and other social networking companies. Now for some of the cons. The biggest negative is that Twitter has never made any money; never turned a profit. And it doesn't expect to earn a profit until 2015 at the earliest. Twitter is often compared to Facebook, but remember, Facebook was growing at a faster pace when it was the same size as Twitter is now. So it's public offering comes at an earlier stage of development. Analysts say the company's effort to monetize its huge fan base is still at an early stage. It hasn't proven that advertisers can successfully appeal to its audience, and that users won't be turned off be turned off by too many adds. And Twitter's pace of growth has slowed for seven consecutive quarters. There are still plenty of skeptics who say Twitter could be a flash in the pan. They say there's no guarantee it will even survive. The bottom line is, many advisers say there is no urgency to get into the stock right now. It's likely to be volatile of the coming days and weeks. So you might want to take a little bit of time to judge the company and its stock market value, before taking a leap of faith.

Top 5 High Tech Stocks To Invest In Right Now

Some tweet gaffes have arisen from companies poking fun at -- or making light of -- deadly serious events. Such was the case with a Kenneth Cole tweet gone awry. The fashion designer took heavy flak last winter for a tweet that riffed off the pro-democracy protests in Egypt's Tahrir Square to hawk his new collection: "Millions are in Uproar in Cairo. Rumor has it they heard our new spring collection is now available online," he tweeted. The attempt at a comical spin was not well received.

1. Kenneth Cole Winks at Egypt's Unrest to Hawk a Sale

"The company attempted to leverage dry humor and make a gentle, joking reference to current events, however Cairo is clearly not the best opportunity," Wisneski says.

Mutual Funds: Cheaper to Own Now Than Ever

Mutual funds offer immediate diversification and typically give you the peace of mind that at least someone is paying attention to where your money sits. But for these benefits, you must pay some fees. Due to a variety of factors, these fees are now lower than ever, and represent the changing landscape of how America is investing in a low-interest-rate world.

Falling fees
The Investment Company Institute's annual fact book (link opens PDF file) gives a detailed overview of the mutual fund industry. One of the most telling trends in the report is the decline in expenses over the years:

Source: Investment Company Institute.

The cost to invest in equity funds, bond funds, and hybrid funds, which invest in both equities and bonds, has fallen to some of the lowest levels in years. Over the past decade, the average expense to invest in an equity fund fell from 100 basis points, or $1 per $100 in 2002, to 77 basis points last year.

Why?
The report lists many reasons for this trend. First, even as the amount of assets in a fund increase, the fixed expenses of running the fund remain the same, so usually the expense ratio falls. Second, investors now prefer no-load funds as opposed to front-end or back-end load funds, for which investors pay a fee with the initial purchase or sale of a fund. The average front-end sales load percentage for equity funds have fallen from 3.9% in 1990 to 1% today. Third, economies of scale have also helped reduce costs as the number of households that own mutual funds has increased from 23 million in 1990 to more than 53 million last year.

Finally, the amount of competition has kept a downward pressure on fees. The number of ETFs over the past decade has exploded:

Source: Investment Company Institute.

WisdomTree  (NASDAQ: WETF  ) , the fifth-largest ETF provider, has grown its average assets under management from less than $1 billion in 2006 to more than $23 billion this year, with an average ETF fee of 0.53%. The low-cost leader, Vanguard, keeps putting the pressure on competitors with extremely low expense ratios. For the Vanguard Total Stock Market ETF  (NYSEMKT: VTI  ) , the annual fee amounts to a paltry 0.05%.

With interest rates and treasury bond yields so low, investors are scrimping and saving for each basis point, and flocking toward lower-fee options. They are also less willing to pay load fees, traditionally paid to advisors for the assistance of finding and purchasing a fund. Retail investors, empowered by online brokerages, have less of a need for this professional assistance, and are helping fuel the growth of ETFs as they construct their own portfolios. Market forces are moving in favor of investors, as one of the key differentiators of these funds is expense ratios.

To learn more about a few ETFs that have great promise for delivering profits to shareholders, check out The Motley Fool's special free report "3 ETFs Set to Soar." Just click here to access it now.

BlackBerry reports $4.4B loss

Ailing smartphone maker BlackBerry reported another round of losses during its third quarter as it navigates a major transition in its business.

The company reported $1.2 billion in revenue in its third quarter, down from $2.7 billion the year before. BlackBerry reported a loss of $4.4 billion, while its adjusted losses from continuing operations hit $354 million, or 67 cents per share. Analysts polled by FactSet, on average, expect a loss of 43 cents per share on revenue of $1.66 billion.

Shares of BlackBerry tumbled nearly 7% in pre-market trading before surging up 14%.

The new round of losses arrives as BlackBerry transitions to new leadership. This is the first quarterly report under CEO John Chen, who took over last month for Thorsten Heins. BlackBerry's management shakeup follows a decision to back off a possible sale of the company in favor of a $1 billion investment from Fairfax Financial Holdings.

Top Value Stocks To Own For 2014

"We have accomplished a lot in the past 45 days, but still have significant work ahead of us as we target improved financial performance next year," Chen said in a statement.

BlackBerry had pinned hopes of a rebound on its lineup of BlackBerry 10 smartphones, but consumers failed to show interest in a market dominated by Apple's iPhone and Google's army of Android devices. Earlier this year, Microsoft's Windows platform vaulted past BlackBerry as the No. 3 mobile operating system.

For the quarter, BlackBerry sold 4.3 million smartphones, but the majority were older devices running the BlackBerry 7 operating system.

The company announced a five-year partnership with Taiwanese manufacturer Foxconn. The primary focus of their deal will be creating a smartphone for Indonesia and "other fast-growing markets." Chen says the Foxconn device will likely launch in March or April.

Although BlackBerry plans to continue working on hardware, the c! ompany is shifting more focus to enterprise services and messaging, including its BlackBerry Messenger service.

"The most immediate challenge for the company is how to transition the devices operations to a more profitable business model," Chen said.

Contributing: Associated Press

Follow Brett Molina on Twitter: @bam923.

Best Stocks of the Nasdaq 100 in 2013

It has been a very good year for the Nasdaq 100. The index, which consists of the Nasdaq Stock Market's 100 largest non-financial companies by market capitalization, has gained 33.7% in 2013. That beats Standard & Poor's 500-stock index, up 29.6%, and the Dow Jones industrial average, up 26.2%.

See Also: 24 Stocks for 2014

Unlike the Dow and S&P 500, the Nasdaq 100 didn't surpass its record high during 2013, but the index is still home to highfliers. The main difference now compared with 2000, when the Nasdaq 100 peaked during the dot-com boom, is that not all of the fastest growers are pure tech plays.

Case in point: The index's best performer in 2013 was Tesla Motors (TSLA), which soared an eye-popping 336.9%. At $148, it trades at nearly 100 times 2014 estimated earnings, compared with 19 for the Nasdaq 100. (All prices and returns are as of December 18.)

There's a lot to like about the Palo Alto, Cal., company. Tesla is the only automaker that produces electric cars exclusively. Founded in 2003, it struggled much of the past decade with product delays and management change. Then, in 2012, the company introduced the Model S. The car was a slam dunk, winning numerous industry awards and rave reviews from Kiplinger's car writer, Jessica Anderson. Tesla's stock skyrocketed from $28 at the start of 2012 to an all-time high of $193 by the fall of 2013.

The company, which has a market capitalization of $18.1 billion, is still up against challenges. In the fall, two Model S cars in the U.S. caught fire when their undercarriage struck highway debris. The National Highway Traffic Safety Administration has opened a formal investigation. Because the shares are "priced for a perfect future," as we wrote recently when we named Tesla one of five stocks to consider selling, such setbacks hit shareholders hard. Between the beginning of October and the end of November, as news of the fires and resulting federal probe spread, Tesla's stock lost one-third of its value.

But if those fire worries are put to rest — as many analysts believe they will be — demand for Tesla vehicles could grow. The company is due to roll out the Model X crossover in 2014. As a result, analysts expect Tesla's earnings to increase by more than 150% in 2014. "We continue to believe that Tesla shares will approach $300 in several years," wrote analysts in a Deutsche Bank report.

The second-best stock of the Nasdaq 100 in 2013 may feel closer to home — literally. Netflix (NFLX), the video-streaming and DVD-by-mail service, is on the rebound, up 306.4% for the year.

Back in 2011, Netflix's stock was approaching $300 when the company, based in Los Gatos, Cal., announced a plan to raise subscription prices and split its business in two. Angry at the changes, some 800,000 customers dropped their service. Netflix abandoned the plan, but the damage was done: The stock dropped to $64 within the year.

Since then, Netflix shares have been on an up-and-down ride. But over the past year, the company surprised analysts and increased its subscriber base from fewer than 30 million worldwide to more than 40 million. As a result, the stock was not only 2013's second-best performer of the Nasdaq 100 index but also the top-performing component of the S&P 500 index. Netflix's market cap is now up to $22 billion.

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Top 10 Nasdaq 100 Stocks of 2013
Stock	Price *
1. Tesla (TSLA)	+337%
2. Netflix (NFLX)	+306%
3. Micron Technology (MU)	+244%
4. Facebook (FB)	+109%
5. Celgene (CELG)	+107%
6. Yahoo (YHOO)	+101%
7. Gilead Sciences (GILD)	+100%
8. Western Digital (WDC)	+95%
9. Biogen Idec (BIIB)	+92%
10. Priceline.com (PCLN)	+91%
Top 5 Medical Stocks To Own For 2014 * Returns as of December 18, 2013

Uncertainty remains about whether Netflix can continue to attract new customers and fend off competitors. But Tony Wible, an analyst at Janney Montgomery Scott, believes so. He says Netflix's large media library and focus on creating original content, including hit series such as "Orange Is the New Black" and "House of Cards," is a big advantage. "The barriers to entry to compete with Netflix just continue to grow," says Wible, who believes the stock could exceed $400 in the next year, up from about $375 today. Overall, analysts expect Netflix's earnings to more than double in 2014, giving the stock a forward P/E of 93.

Other top performers in the Nasdaq 100 trade at a fraction of that amount, including Micron Technology (MU), a semiconductor maker, which climbed 244.0% in 2013. It's valued at 10 times estimated earnings for the fiscal year that ends in August. Facebook (FB), up 108.8% for the year, has a P/E of 49 for the same period. But both companies are expected to grow more slowly than a company like Tesla or Netflix. "If you want to buy growth, there are going to be aspects of the stock that will make you uncomfortable, like the valuation and volatility," says Kevin Landis, chief investment officer of Firsthand Capital Management.

As for the worst Nasdaq 100 stock of 2013, the dubious distinction goes to Nuance Communications (NUAN). Shares of the maker of speech-recognition software lost 33.6% for the year. Nuance is one of five stocks being replaced in the index, effective December 23.

Oil futures edge upward on supply data

LOS ANGELES (MarketWatch) — Oil futures moved higher in electronic trade Wednesday, supported by a drop in weekly U.S. crude inventories, though the moves were modest ahead of the Federal Reserve policy decision due out later in the day.

Benchmark U.S. crude oil for January (CLF4)  rose 18 cents, or 0.2%, to $97.40 a barrel, paring a 26-cent loss Tuesday on the New York Mercantile Exchange.

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The advance for Nymex crude followed American Petroleum Institute data released after the close of regular trade showing U.S. oil stocks fell by 2.5 million barrels in the week ended Dec. 13, according to sources.

While a Platts survey of analysts had tipped a 4-million-barrel drop, Citi Futures energy strategist Timothy Evans said the result was roughly in line with consensus, "although there remains some risk that the more definitive [Energy Information Administration] data due out at 10:30 a.m. Eastern Standard Time on Wednesday will tell a different story."

Following the EIA data, the markets were due to receive the last Federal Reserve policy decision of the year.

Most market participants expect the Fed will hold off from announcing its long-awaited tapering of monetary stimulus, though the language of the policy statement will get close scrutiny and will likely move markets across many asset classes.

Meanwhile, Brent crude for February delivery (UK:LCOG4)  saw a more modest rise Wednesday, edging 6 cents higher for a 0.1% rise to $108.50 a barrel, taking a nibble from its 97-cent loss on Tuesday.

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"The larger issue is that Europe remains relatively well supplied with crude oil, with North Sea output running at the highest level in month, and the recent drop in U.S. crude imports leaving more barrels available for the rest of the global market," Citi's Evans wrote about Brent's move on Tuesday.

"The decline in OPEC [Organization of the Petroleum Exporting Countries] crude-oil production over the past few months may help limit the surplus, but it still looks as though supply will outpace demand in the months ahead," he said.

In other energy-futures trade Wednesday, January gasoline (RBF4)  held steady at $2.65 a gallon, and January heating oil (HOF4)  inched up less than a cent to $2.97 a gallon

January natural gas (NGF14)   improved by almost 2 cents, or 0.4%, to $4.30 per million British thermal units, adding to its 1-cent rise the previous day.

More MarketWatch news

Fed never grabs punch bowl in December, analyst points out

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Where Will Starbucks Go Next?

With shares of Starbucks (NASDAQ:SBUX) trading around $76, is SBUX an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Starbucks is a roaster, marketer, and retailer of coffee operating worldwide. The company purchases and roasts the coffees it sells along with handcrafted tea and other beverages, as well as a variety of fresh food items through its stores. Starbucks sells a variety of coffee and tea products and licenses its trademarks through other channels such as stores and national food service accounts. In addition to its flagship Starbucks brand, the company's portfolio features Tazo Tea, Seattle's Best Coffee, Starbucks VIA Ready Brew, Starbucks Refreshers beverages, and the Verismo System by Starbucks. Starbucks has developed a solid reputation over the past several years, which has generated a lot of buzz for its products.

Best Blue Chip Companies To Buy For 2014

It's understood that when customers go to Starbucks in the morning they want to get caffeinated, but did you know that some go to get carbonated, too? A recent report from Quartz reveals that the coffee giant has been secretly testing out a new market since last spring, one for "handcrafted sodas." According to Quartz, Starbucks baristas in certain locations have been letting customers choose to carbonate juices, sodas, and a selection of coffee and tea beverages, and the company has been happy with the consumer feedback.

T = Technicals on the Stock Chart Are Mixed

Starbucks stock has been exploding to the upside in recent years. The stock is currently pulling back and may need time to consolidate before heading higher. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Starbucks is trading between its rising key averages, which signals neutral price action in the near term.

Source: Thinkorswim

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

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Starbucks options	25.99%	96%	93%

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

	Put IV Skew	Call IV Skew
January Options	Average	Average
February Options	Average	Average

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

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

E = Earnings Are Increasing Quarter-Over-Quarter

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

	2013 Q3	2013 Q2	2013 Q1	2012 Q4
Earnings Growth (Y-O-Y)	36.96%	27.91%	27.5%	14%
Revenue Growth (Y-O-Y)	12.81%	13.26%	11.26%	10.59%
Earnings Reaction	0.27%	7.61%	-0.82%	4.1%

Starbucks has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with Starbucks’s recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has Starbucks stock done relative to its peers – Dunkin’ Brands (NASDAQ:DNKN), McDonald’s (NYSE:MCD), and Green Mountain Coffee Roasters (NASDAQ:GMCR) — and sector?

	Starbucks	Dunkin’ Brands	McDonald’s	Green Mountain Coffee Roasters	Sector
Year-to-Date Return	42.47%	47.54%	6.3%	85.53%	46.46%

Starbucks has been an average relative performance leader, year-to-date.

Conclusion

Starbucks provides in-demand coffee and tea products and services to consumers around the world. The company has been secretly testing out a new market since last spring, one for "handcrafted sodas." The stock has been exploding to the upside in recent years but is currently pulling back. Over the last four quarters, earnings and revenues have been increasing, which has pleased investors in the company. Relative to its peers and sector, Starbucks has been an average year-to-date performer. Look for Starbucks to continue to OUTPERFORM.

Blackstone, CCMP Capital, And Investcorp Want A Piece Of Versace At $1.5B Valuation

After leading the charge to buy a minority stake in luxury brand Versace, Italy's state-owned private equity fund seems to have lost out to a trio including Blackstone, CCMP Capital, and Bahrain's Investcorp.  While negotiations remain ongoing, the deal would include a 20% stake in the luxury retailer, valuing Versace at about $1.5 billion, according to Sky News.  A big deal for a minority stake in Versace would confirm the ferocious investor appetite for luxury names, with Moncler's stock market debut on Monday taking shares in the coat maker up 47%, delivering a windfall to founder Remo Ruffini and private equity backers Eurazeo Eurazeo and Carlyle Group.

Considered the front-runner in the negotiations only two weeks ago, Fondo Strategico Italiano (FSI) appears to have been relegated from a short list to acquire a 20% stake in one of the world's most iconic luxury fashion brands: Versace.  Instead, two New York firms, Blackstone and CCMP Capital, along with Bahrain's Investcorp could be nearing a deal with Donatella, sister of murdered founder Gianni Versace and the label's head designer, who is said to be leading negotiations.  While FSI seems to have lost out, a new round of bidding is expected before the end of the year.

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Appetite for luxury has been sky high, and this could mean a lot of money for private equity.  As my colleague Nathan Vardi reported, Monday saw the stock market debut of coat maker Moncler, which saw its stock surge nearly 50%, giving the company a valuation of more than $5 billion by the end of the trading session.  Paris-based PE firm and Eurazeo and the Carlyle Group raised more than $1 billion selling shares in the IPO.

And Moncler is not alone.  Since going public in late 2011, shares in Michael Kors have gone through the roof, rising 240%.  This year, the stock is up 60% as investors continue to bet on the brand's growth in the high-end market.  Michael Kors himself has become a very wealthy man due to the success of his company's stock, worth approximately $950 million given the shares he's sold and the additional options he holds, as Forbes' Brian Solomon explained.

If the Versaces secure a deal at a £900 million ($1.466 billion) valuation, as Sky News reported, they could be well on their path to billionaire status.  The company's biggest shareholder is Allegra, Gianni's niece, with a 50% stake, would see her net worth approximate $600 million after discounting 20% for potential dilution and continued investments in growing of the brand.  Gianni's brother Santo, sitting on a 30% stake, would be worth about $352 million, while Donatella's 20% position would have a value of about $234 million.

If the company continues on its current growth trajectory, last year they saw revenues jump 20% to $552.8 million, then a possible IPO could very well make the Versace billionaires over the next few years.  Regardless, what is clear at this juncture is that since the financial crisis, investor appetite for anything luxury, from fashion to real estate, remains unwavering.  And with that, private equity firms have the chance to make a killing.

Chipotle's Secret Ingredient: Sofritas

Chipotle Mexican Grill (NYSE: CMG  ) can use a kick, and a tofu-based protein may be the key.

The burrito roller is expanding its test of Sofritas -- tofu spiced up with chipotle chilies, roasted poblano peppers, and other spices -- as a fifth protein item on its menu. Chipotle made Sofritas available alongside carnitas, chicken, steak, and barbacoa at seven San Francisco locations earlier this year. The test is now expanding throughout Northern California. 

If successful, a nationwide rollout can't be too far away.

In this video, Rick explains why Sofritas comes at a great time. Beyond the obvious appeal for vegetarians, vegans, and customers wanting something different, comps at Chipotle have been uninspiring lately. The chain has also come up short on the bottom line in back-to-back quarters. It can use a kick, and tofu may be the answer at a company that prides itself on its very limited menu.

Chipotle's stock has been on an absolute tear since the company went public in 2006. Unfortunately, 2012 wasn't kind to Chipotle's stock, as investors question whether its growth has come to an end. Fool analyst Jason Moser's new premium research report analyzes the burrito maker's situation and answers the question investors are asking: Can Chipotle still grow? If you own or are considering owning shares in Chipotle, you'll want to click here now and get started! 

3 Stocks for an Income Investor's Roth IRA

The Roth IRA contribution deadline is looming. With less than two weeks left, it's time to fund your account if you haven't already done so. Let's quickly review why a Roth IRA is so critically important in saving for your retirement. Then we'll look at three great stocks for a dividend investor's Roth.

Best bang for your buck
Your most powerful way to save for retirement is a Roth IRA. It allows after-tax contributions in exchange for tax-free income in retirement. If you haven't made your contribution for 2012, you have until the tax-filing deadline to do so. If you're under age 50, you can fork over $5,000 into a Roth. If you are age 50 or older, you can contribute an additional $1,000.

If you're flush with cash, strongly consider getting a jump on your 2013 contribution. The limits are more generous -- $5,500 if you're under age 50. If you're 50 or older, you can still contribute that additional $1,000.

But keep in mind that some individuals are excluded from contributing to a Roth. If you're a high-wage earner, familiarize yourself with Roth eligibility requirements before contributing.

Stock ideas for the dividend investor
For income-desiring investors, there are many solid dividend-paying stocks trading at good buys in today's market. I've found three companies with competitive positions whose stocks boast strong dividend yields and attractive valuations. They each have forward price-to-earnings ratios less than the S&P 500's current P/E of 18. And while the average dividend yield of S&P 500 companies is 1.9%, these companies pay yields greater than the market.

Illinois Tool Works (NYSE: ITW  )
This Illinois-based manufacturer will likely benefit as spending ramps up in transportation and construction, two industries that make up a healthy portion of the company's revenue. Illinois Tool Works holds nearly 20,000 patents, indicating a successful history of innovation. The century-old company boasts a forward price-to-earnings ratio of 13 and a 2.5% dividend yield. 

US Bancorp (NYSE: USB  )
A top holding of Warren Buffett's Berkshire Hathaway, it's what US Bancorp has avoided that makes it appealing for investors: The bank didn't aggressively lend to the extent of its too-big-to-fail counterparts. The conservative nature of this regional bank has helped it return healthy shareholder value during the past several decades. The stock pays a 2.3% dividend yield and boasts a forward P/E ratio of 10. 

Coca-Cola (NYSE: KO  )
Another Berkshire Hathaway favorite, Coca-Cola dominates Interbrand's "Best Global Brand" list, having secured its top-spot status every year since the list's inception. With its beloved and blockbuster brand, the company enjoys fantastic margins and robust sales growth despite global economic headwinds. As a tasty bonus for shareholders, Coca-Cola pays a 2.8% dividend yield, which it's increased for 50 consecutive years.

Foolish bottom line
The Roth IRA contribution deadline is fast approaching. So, don't miss your opportunity to fund a retirement account and secure your financial future. Consider these three great dividend-paying stocks for your contribution dollars today.

Coca-Cola has long been a favorite stock of dividend investors. The cola giant's wide moat has helped provide its shareholders with superior gains in the past, but the company faces some new threats to its continued market dominance. The Motley Fool recently compiled a premium research report containing everything you need to know about Coca-Cola. If you own or are considering owning shares in the company, you'll want to click here now and get started!

Boeing Union Rejects Offer, Company Looks Elsewhere to Build 777X

After three days of talks between Boeing Co. (NYSE: BA) and the International Association of Machinists & Aerospace Workers (IAM) local union ended Thursday night, the union's leadership rejected what Boeing called its “best and final” contract extension offer. As part of its offer to the union, Boeing would have committed to doing final assembly of the new 777X aircraft and the assembly of the plane’s composite wing at a plant in Washington and would have committed to doing final assembly work on the 737 MAX through 2024.

Just a month ago, the IAM membership rejected a Boeing contract extension that called for cuts in wage increases for union members, reduced health care benefits and lower company contributions to its defined benefit retirement plan. Some 67% of IAM members voted to reject that deal.

Boeing tried to sweeten yesterday’s offer to the union, adding $5,000 to its previous offer of a $10,000 signing bonus and improving dental benefits. The company made no change its previous pension offer, which would have allowed union members to keep what they have accrued to date under the defined benefit plan, but base future benefits on a defined contribution plan. The pension benefit issue was the primary reason Boeing’s November offer was rejected.

Boeing said it has received offers to build a new plant for assembling the 777X from 22 states, many of which have submitted multiple sites. A total of 54 sites are being evaluated for a new plant location.

After the IAM rejected Boeing’s offer in November, we suggested that the negotiations were not really over between the two sides. Building a new plant in Washington and taking advantage of the available talent pool in the state is still the company’s best option for assembling its new planes. The union could win its struggle with Boeing over the long-term pension benefits issue because the company’s current management eventually will figure out that it will not be around when the bill comes due and paying the benefits will be somebody else’s problem.

KR – Start Shopping Now for Kroger Stock

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Welcome to the Stock of the Day!

This morning, all eyes are on Kroger (KR), which just reported its 40th consecutive quarter of identical supermarket sales growth. With such a stellar sales track record, why are shares down? Is this a buying opportunity?

Find out now.

Company Profile

With 2,631 supermarkets across 34 stores, Kroger is known for being the nation’s largest traditional supermarket operator. But what many don’t know is that the Kroger umbrella also covers nearly 1,200 gas stations, 800 convenience stores, over 300 jewelry stores and 37 food processing facilities.

In total, Kroger brought in $96.8 billion in 2012 and analysts expect 2013 sales to total up to $98.95 billion.

Earnings Buzz

Grocery chain operator Kroger posted solid operating results for the third quarter. The company posted a 3.5% year-on-year jump in identical supermarket sales (excluding fuel sales), marking the 40th consecutive quarter of growth.

Total revenue climbed 3% to $22.51 billion, missing the $22.72 billion consensus estimate by a hair. Over the same period, net income declined 6% to $299 million, or 57 cents per share. These results include a tax benefit and expenses related to the company’s pending merger with Harris Teeter.

Excluding special items, adjusted earnings were 53 cents per share, in line with analyst estimates. Looking ahead to fiscal 2013, Kroger expects between 8% and 11% earnings growth and 3% to 3.5% identical supermarket sales growth.

Competition Breakdown

Currently, out of the 48 companies in this industry, Kroger ranks 11th on market cap (the largest player in the business is Tesco PLC). Kroger stands out in terms of return on equity (second) and its 1.6% annual dividend yield (seventh). It also ranks above the industry average on earnings growth (15th), sales growth (16th) and long-term growth rate (17th).

When you compare Kroger with its big rivals—Costco (COST) and Target (TGT)—you see that KR is the best buy right now. Both COST and TGT are struggling to attract institutional buying pressure, with C- and F-rated Quantitative Grades respectively.This indicates that these two stocks have become riskier to invest in of late.

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Meanwhile, the other two lag behind Kroger in terms of sales growth, operating margin growth, earnings growth, earnings surprises and cash flow. COST is a C-rated hold while TGT is a D-rated sell.

Current Ratings

Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. Kroger has improved significantly over the past 12 months; this time last year, KR was a C-rated hold. Since then, buying pressure has made a complete reversal as institutional interest for KR has gained steam. Currently, KR receives an A for its Quantitative Grade.

As I mentioned earlier, Kroger has also improved its fundamentals, notably operating margin growth and return on equity (both A-rated). Kroger also scores well on earnings growth and cash flow (both B-rated). Meanwhile, the company could stand to work on its sales growth and its track record of beating analyst estimates, but overall it still receives a B for its Fundamental Grade.

Bottom Line: As of this posting, I consider Kroger a B-rated Buy.

Muthooth Finance NCD: Should you invest?

Muthooth Finance Non-Convertible Debentures, both secured and unsecured, are open for subscription. With Interest rates still remaining high, companies are finding it good time to raise money from the public by offering higher rates. This company also has been raising money quite frequently primarily due to the nature of its business.

Let review about this NCD to understand the risk associated and the considerable investment options-

The Company
Muthooth Finance is majorly into Gold Loans which is almost 98% of the total business. The business of the company is very much concentrated in southern part of Indian but in recent times it has focused on spreading it other parts of the country. The company revenues (which comes from the interest income) has almost doubled in last two years. Thriving on this increase in income, the company has been expanding rapidly by opening branches across the country.

About NCD
The total size of the issue is Rs 300 crore which is closing on December 2, 2013. The offer is on first come first serve basis and may be extended or pre-closed based on the fulfillment of requirement. The primary objective of this money is to either repay existing liabilities or utilize it for the operational expenses which company has to bear due to heavy expansion.

The company is offering two types of bonds within this NCD-
1 Secured Redeemable- These bonds will be backed by security and investors holding these bonds will be preferred as and when claim by investors arises.
2. Unsecured Redeemable bonds- This bonds will not be backed by any security and so the claim in of these investors will be settled only after other investors have been paid.

The minimum application is of Rs 10000 and then in multiple of Rs 1000.  The issue will get listed on BSE where it will be available for trading.

Interest Rates
The company is offering 12 options to the investors where the maximum rate is of 12.25% for 36 months payable monthly and 12.25% cumulative for 60 months. So effectively the money gets doubled when you invest it for 5 years. The unsecured NCD is of 72 months with a cumulative option.

Risk Factors
Following are the risk factors associated with the issue:
1. Interest Rate Risk- The business of the company is heavily dependent on the interest rates movement. On One side it borrows heavily to stay in the business and second it lends heavily to earn from the business. Both these can be affected for any adverse movement in the interest rates.

2. Default Risk- Although the credit rating of the company is on higher side, there is no denying that every private company has this risk associated with it. Since NBFCs do not have any regulatory restrictions for keeping any liquidity or cash reserves, for companies like Muthooth Finance which is heavily dependent on gold loan, the risk is higher.  The adverse situation of gold prices can also lead to investors default forcing company to recover from the collateral, which may not meet the company funds requirement.

3. Government Control- Gold consumption has been illustrated as a big concern for our country and so there have been measures by the government. RBI has also specifically restricted NBFCs to provide loans only up to 60% of the value. Even bank have been advised to cut down exposure in Loans to such NBFCs. All these measures will impact the business of the company.
Thus, there are risk within this business which are present with the company and which investors will have to take into consideration.

Should you invest?
The rating of the company is good and the yields are quite attractive. But it's wiser to avoid taking a long term bet and a high exposure. If keen to invest for the yield, consider the short term Secured option.

The author is a Investment Adviser & CFP at JS Financial Advisors.

Ex-LPL, Schwab Recruiter Opens Office to Help Advisors Go Indie

Veteran recruiter Al McIntee is relying on his 13 years of experience with LPL Financial (LPLA), Charles Schwab (SCHW) and Cetera Advisor Networks to start a new business for advisors who want to go independent or change their business model.

The number of options for advisors has gone way up over the past decade or so, and reps need someone to help them with “the exhaustive discovery work,” says McIntee, 46, who worked as an advisor for Merrill Lynch (BAC) when he started in the field.

For instance, there are the numerous regulatory and financial considerations that go along with understanding whether or not it’s worthwhile to form your own RIA, he explains. “Many financial advisors think the hybrid-RIA model may be right for them, and I can help demystify what independence is,” said McIntee in a phone interview with ThinkAdvisor.  

The average third-party industry recruiter aims to put advisors in touch with five broker-dealers. “They do a high-volume business and need to place advisors where they can collect the highest fees. It can be very impersonal, and a lot of the work is done online.”

Rather than helping advisors simply switch firms, McIntee says he tailors his services. “I can look at their books of business and discuss the merits of forming their own RIA or working with a corporate RIA and of staying with a hybrid model vs. going RIA only,” he shared.

In addition, issues like software programs for portfolio management and client relationships, back-office integration and licensing have to be carefully discussed.

“Advisors want some flexibility. They need to understand what model is right for their book of business,” explained McIntee, whose office is located in the Greater San Diego area. “A generic recruiter typically tries to get an advisor in touch with four or five broker-dealers and hope that one sticks.”

Current Operations

McIntee, who is meeting with several potential clients in New York this week, says his sweet spot is working with wirehouse advisors who want to go independent or IBD reps "looking to find better mousetraps." This includes working with reps who may have a good percentage of their business in separately managed accounts, for instance, and with clients who need collateralized lending.

“I want to do the legwork for the advisor,” he explained. “Also, reps can get paralysis analysis when they are poring over spreadsheets. I can look at their mix of business and goals and narrow the search down to two or three of the top firms after doing lots of due diligence.” The work is “platform agnostic,” he adds.

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His target reps and teams have about $400,000-$500,000 in yearly fees and commissions or more and at least $50 million in assets under management. In general, recruiters receive about 5%-7% of an advisor’s trailing 12-month production after a recruiting deal is signed — about 3% or 4% up front. The recruiting broker-dealer pays these fees, not the advisor, according to McIntee. Custodial firms typically pay recruiters 5-6 basis points for assets under management that are moved to them.

Working with a recruiter means an advisor’s confidentiality can be protected during the process, so an existing broker-dealer won’t find out a rep is looking around and getting ready to move.

“There are recruiters that will tell advisors just what they want to hear,” McIntee cautioned. “I can decipher the white noise, since I know what drives profitability. I can get advisors the top transitional assistance, as I know how margins and technology work."

Roubini Frets Over ‘Slow-Motion Replay’ of Last Housing Bubble

Nouriel Roubini is seeing signs that we are “entering bubble territory” in nearly a score of developed and emerging markets countries that he warns “looks like a slow-motion replay of the last housing-market train wreck.”

In a Nov. 29 opinion piece appearing on Project Syndicate, the NYU professor and economist says the signs of “frothiness” include fast-rising home prices, high and rising price-to-income ratios and high levels of mortgage debt as a share of household debt. Aided in the developed countries by very low short- and long-term interest rates, and considering their slow GDP growth, low inflation and high unemployment, “the wall of liquidity generated by conventional and unconventional monetary easing is driving up asset prices, starting with home prices.”

In the developed world, Roubini sees the beginning of bubbles in Europe (Switzerland, Sweden, Norway, Finland, France, Germany and at least in London in the U.K.) in North America (Canada) and in Australia and New Zealand. Bubbles are appearing in EM countries (though he says the “situation is more varied”) in those countries: Hong Kong, Singapore, China, and Israel and in major cities in Turkey, India, Indonesia and Brazil.

“With central banks…wary of using policy rates to fight bubbles,” Roubini’s biggest worry is that the standard tools applied by regulators—what he calls “macro-prudential” regulation and supervision of the financial system to address frothy housing markets—will prove “inadequate to control housing bubbles.” 

Roubini did not discuss the U.S. housing market, but two reports last week showed that the domestic market is certainly improving. Building permits for future U.S. home construction rose 6.2% in October to 1.03 million units, beating economists’ consensus expectations and reaching the highest level since June 2008. The S&P/Case Shiller composite housing price index of 20 metropolitan areas increased 13.3% in September over September 2012, the strongest single-month gain in the index since February 2006.

Robert Shiller himself has expressed some concerns over the housing market worldwide. In an interview published this weekend in the German magazine Der Spiegel, he expressed worries over the price of real estate markets in several Brazilian cities, though in another interview, in Barron’s this weekend, he did not see any bubble in the U.S. housing market. 

Roubini agrees on the need for “macro-prudential” regulation, in which regulators decree “lower loan-to-value ratios, stricter mortgage-underwriting standards, limits on second-home financing, higher counter-cyclical capital buffers for mortgage lending, higher permanent capital charges for mortgages, and restrictions on the use of pension funds for down payments on home purchases.” However, because of the internal political criticism that such regulation will “take away the punch bowl of liquidity” from those housing markets, the regulation is “modest,” he says, and therefore “the political economy of housing finance limits regulators’ ability to do the right thing.”

Roubini says that because “easy money and the need to hedge against inflation” remain operative throughout the world, that these housing bubbles “may not be about to burst just yet.” But he worries that “the higher home prices rise, the further they will fall—and the greater the collateral economic and financial damage will be—when the bubble deflates.”

In those countries where “non-recourse loans allow borrowers to walk away from a mortgage when its value exceeds that of their home, the housing bust may lead to massive defaults and banking crises.” In other countries where recourse loans “allow seizure of household income to enforce payment of mortgage obligations, private consumption may plummet as debt payments (and eventually rising interest rates) crowd out discretionary spending. Either way, the result would be the same: recession and stagnation.”

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