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Vol.7 Issue 5, May 1st, 2010
Send comments and suggestions or get more information at info@NataliePace.com

QUOTE OF THE MONTH:
"Whatever you give a woman, she will make greater. If you give her sperm, she'll give you a baby. If you give her a house, she'll give you a home. If you give her groceries, she'll give you a meal. If you give her a smile, she'll give you her heart. She multiplies and enlarges what is given to her. So, if you give her any crap, be ready to receive a ton of sh*t!"

Erick S. Gray, author of many urban novels

Happy Mother's Day!


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BlockBuster’s Second Coming.

by Natalie Pace.

Includes a DVD Rentals Stock Report Card.

Blockbuster Video will have Avatar for rent or sell on May 9, 2010. 28 days before Netflix or Redbox, according to the company.

The headlines are screaming about Blockbuster’s potential bankruptcy, while behind the scenes, Blockbuster is resurrecting its brand and preparing for the second coming of DVD rentals – in $1/night self-serve kiosks. No matter how dangerous some Fools may think this company is, Blockbuster is determined to rule the world of DVD rentals again. (Motley Fool erroneously picks Netflix as "booming" when Redbox is the real DVD rental company exploding in earnings, and Blockbuster’s new self-serve kiosks could take a large chunk of that boom.)

Click on DVD Rental Stock Report Card to check out the earnings, debt, price-to-earnings ratio and more of Blockbuster, Netflix and Coinstar (owner of RedBox).

Below are a few reasons why I think Blockbuster qualifies as this month’s Company of the Month, even though this will be the only positive article you’ll see on the company until after their Shareholder’s Meeting on June 24, 2010.

6 Reasons Blockbuster Will Rise Again

1. 70% increase in DVD Kiosk Revenue at Redbox
2. Blockbuster is poised to beat RedBox at it’s own game
3. Blockbuster has better movies – a month earlier
4. Management has a viable game plan
5. Carl Icahn ousted without a scene!
6. Insider Buying

So, why, when Goldman Sachs is on the ropes with the SEC and the Justice Department and off 9% on its share price on April 30, 2010, did I opt to feature Blockbuster instead? Why did I overlook Hewlett-Packard’s acquisition of Palm, and the addition of the Palm Operating System for their version of the Apple iPad?

Goldman’s troubles have just begun and their stock price has not (yet) begun to reflect the depth of the mess, in my analysis. Hewlett-Packard’s acquisition of Palm on the cheap from Bono and his private equity fund, Elevation Partners, for just $1 billion (reportedly) seems like the story of the YEAR. However, HP is a diversified company with profit margins of 7% and annual growth in the 8% range. Having a product that competes with iPad isn’t enough to make Hewlett Packard a powerboat of returns, although this looks like a stable stock for any market storms that arise.

Blockbuster, on the other hand, caught my eye with a DVD kiosk at a local supermarket. How is it that a company that is ready to go under is undertaking a cutting edge revenue stream? I was intrigued enough to dig a little, and I’ve been enamored with every sheet I turned in their Proxy Statements since. Here’s how the story adds up.

  1. 70% increase in DVD Rental Revenue From Kiosks Means Good Times for Blockbuster. Red Box’s DVD revenue increased 70.1% in the first quarter of 2010 (over last year), according to J. Scott Di Valerio, CFO of Coinstar, Inc. (owners of RedBox). The video kiosk market doubled in value in 2009 (making this one of the hottest industries in the world), growing to $917 million in total revenue, according to Adams Media Research. If Blockbuster manages to seize half of the current DVD kiosk revenue, with its superior film offerings and increased kiosk presence, the top line revenue growth at Blockbuster could be the best it has seen in years. Adding $450 million to the top-line, combined with the $200 million in cuts that management has targeted for 2010, puts Blockbuster back into the black, with over $100 million to spare.

  2. Blockbuster is beating RedBox at it’s own game. Could Blockbuster actually deploy enough kiosks in 2010 to compete with RedBox? You know deployment is working when a Blockbuster kiosk can be found in a small town in Southeastern Arizona! Blockbuster has 2000 kiosks already deployed and another 8000 tapped to hit Main Street. By the end of 2010, Blockbuster aims to have almost half as many kiosks as Redbox (24,800), with better movies to choose from.

  3. Blockbuster has better movies – a month earlier. While RedBox has been suing the film companies to get a better selection of DVDs for its kiosks, Blockbuster just negotiated a deal to get the blockbusters up to 28 days before the competition. On April 27, 2010, Blockbuster’s chairman and CEO, James W. Keyes, advised, "Providing a four-week advance of new releases for our customers reflects Blockbuster's strategy to be the leading multichannel provider for movies and is possible because of our long-standing business relationships with the major studios."

  4. Management has a viable game plan. Blockbuster has been trapped in a cycle of trading under a dollar, which means that most fund managers won’t touch it with a ten-foot pole! This company got hammered when the headlines screamed that the company might declare bankruptcy (after Hollywood Video did). Share price and market value have to increase to keep the NYSE listing, which is why the board has recommended a reverse stock split within a range of 1-for-15 and 1-for-25. This is likely to be approved at the Annual Shareholder Meeting on June 24, 2010. That puts the share price in a price range where investors and managers have greater comfort making the purchase. Once positive headlines return and the share price is reasonable, investors will be attracted back and the market value of Blockbuster will increase. There are a lot of “ifs” in that premise, but if Blockbuster can out Carl Icahn without a scene, they are capable of pretty much anything.

  5. Carl Icahn ousted without a scene! Not sure how the board of Blockbuster convinced Carl Icahn to resign and sell 13 million shares for 27 cents, but I’ll bet Time Warner’s former Chairman and CEO, Richard Parsons, made a personal call congratulating James W. Keyes on the feat! (Icahn was a bug on Parsons’ back during the restructuring of Time-Warner, after the AOL-Time Warner implosion.) Goldman Sachs stayed in, as did other major shareholders, and executive insiders have begun purchasing Blockbuster stock.

  6. Insider Buying. You know what they say. If you want to know what’s going on with the company, check to see what the insiders are doing. And the insiders at Blockbuster are buying up stock en masse. There is consensus buying at the senior vice president level in store operations, finance and more.

So, the bottom line is that it doesn’t appear that Blockbuster is going down. In fact, Blockbuster might be doing a Rope-a-Dope, in order to pummel the competition when they are least expecting it. Blockbuster can now offer the in-store experience, mail rentals, on-demand and even $1/night kiosks, meaning it is the only full-service movie and game rental/sales company of the bunch – with the value added proposition that the company can release hit movies up to a month before the competition.

Wonder what the insiders of Netflix think of all this? They’ve been exercising their options and selling high – en masse.

I must warn you that with a share price under a dollar and a CCC corporate credit rating with a negative outlook from Standard and Poor’s, Blockbuster is considered to be very, very high risk. This investment is not for the faint of heart and should not be done with your nest egg holdings. Don’t bet the farm. Nonetheless, I added Blockbuster to the Hot News on Cool Stocks list today.

I added Netflix to the Watch list. Kiosk revenue growth outscored the Netflix subscription based model 3 1/2 to 1in 2009. If this trend continues, Netflix will be the company losing market share. A 45 price to earnings ratio is high for a company that is facing intense competition. Worth watching.

 

Full Disclosure: Natalie Pace does not own stock or positions in any company mentioned in this article.

About Natalie Pace:
Natalie Pace, is the author of You Vs. Wall Street and host of the Pace and Prosperity radio show on BlogTalkRadio.com/NataliePace. She is a repeat guest on FoxNews, CNBC, ABC TV and has contributed to Forbes.com, Sohu.com and BestEverYou.com and Magazine. As a philanthropist, she has helped to raise more than two million for Los Angeles public schools and financial literacy. Follow her on http://www.facebook.com/pages/Natalie-Pace/416616285568, on BlogTalkRadio.com/NataliePace and on YouTube.com/NataliePaceDOTCOM. For more information please visit, http://www.nataliepace.com

 

Please note: NataliePace.com does not act or operate like a broker. We report on financial news, and are one of the most trusted independently owned and operated financial news corporations in the U.S. This article is intended to educate and inform individual investors, and, thus, to give investors a competitive edge in their personal decision-making. The publicly traded companies mentioned in this article are not intended to be buy or sell recommendations. ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies.  

Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a long, safe strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.

Information has been obtained from sources believed to be reliable however NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.


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Great Mother's Day Gift Ideas.

by Staff.

“Church” by Van Gogh. Mom’s worth it! (Even if you can’t afford the original painting.) So make sure she feels priceless.

Every year, we do a survey, and overwhelmingly, in the past, our moms reported that they prefer stock, cash, spa gift certificates and couples’ getaway vacations over chocolate and flowers. This year, gold might generate more smiles than a stock certificate, but don’t just blow off the survey altogether and show up with daisies in your hand. Bad idea! Mom loves flowers, but she also desires something more representative for the daily care that she has provided for you all of your life!

If your love is much bigger than your wallet, there is always a gift that is both loving and priced right. Below we’ve put together a few Jobless Recovery-friendly presents that should warm her heart, keep you out of the Hot Seat and not break the bank! Remember, your presence and attention is priceless, so above all, make Mother’s Day a day of celebration.

1. Spa Retreats and Get Away Vacations. Some of our favorite destinations are sporting hotel prices that haven’t been this low for over a decade. Whether you are interested in South Beach, Vegas, Palm Springs or Scottsdale, chances are you can scoop up a 5-star hotel for 3-star rates. The Parker Palm Springs (where Brad and Angelina shot their W Magazine shoot while Brad was still married), a fabulous getaway, is paying you $1 a night during the week to stay at their place. (The deal really is: you pay $199 for the hotel and they give you $200 to use in their spa.) What a great offer! This is just the type of gift that Mom can really appreciate!

If you want to book the Parker Palm Springs, call 760.770.5000 and tell them Natalie Pace sent you! Be sure to try their Muddled Lemonade (shhh.. secret recipe…mmmm and Wazoo!) while you play tennis on their signature clay court!

2. Priceline, Expedia and other Discount Hotel Options. The trick to the Priceline Name Your Own Price option is that you have to know where you want to go, what star of hotel you want to stay in and what you are willing to pay. The only thing you cannot control is the exact hotel that Mom will end up staying at. For instance, if I bid $135/night in Beverly Hills for a 4-star hotel, I know I’m not going to end up at a Holiday Inn in Riverside, but I’m not sure whether I’ll get the Four Seasons or the Century Plaza Hotel in Beverly Hills. It’s worth a try!

Helpful Hint: Priceline typically divides each major city into at least four regions. If you absolutely want to stay in one area over another, don’t bid too low. Try bidding 70% of what the hotels in that area are charging. (Priceline tells you that.) If you want to stay in Manhattan and don’t care if you are in Soho or near Central Park, you have seven chances (one for each area) to keep upping your bid until one is accepted. So you can start a little lower in that case.

2. Las Vegas. Deals abound in Sin City. Trump Hotel Las Vegas is offering great rooms for just $99/night. The Venetian is offering rooms for just $139/night with over $100 in coupons back to you (including discounts on Phantom of the Opera tickets and restaurants), if you book before June 30, 2010. Wynn Las Vegas is offering 25% discount if you book 45 days in advance and use the Promo Code: EARLYBOOKING. Wynn’s hotel rooms feel more like luxury apartments, and with the discount, the rooms start as low as $219/night.

Don’t worry (too much) about the heat in the desert. The pools in Vegas are as spectacular as the showgirls. And with all of the world-class shows, Michelin-rated restaurants and gaming, waddya need to wander outside for anyway?

3. Spa certificates and club memberships. It’s worth a call to her favorite gym (that she’s been putting off joining until you have the extra dough) to see if they are offering any signup specials. Spa Day is also one of those luxuries that most women adore – although be careful where you book it because she is likely to have a preference on where she goes! Women can be pretty picky about where they want to be seen sweating and/or with green mask on their face. (In other words, she will have had to mention going to this place a gazillion times, and hopefully at least one of those times you were actually listening.)

4. A Day of Pampering. If money is really preventing you from buying the gift of her dreams, don’t underestimate the value of just getting it right all day long! Wake her up with, "I love you," on your lips and handpicked flowers in your hand. Deliver a handwritten and illustrated card featuring five things you love about her as a woman and a mother. Treat her to her favorite breakfast – in bed, of course. Jump in the car and take a long walk at her favorite destination, whether it is the beach, the lake or the mall. Gaze into her eyes at sunset. Toast to her with her favorite libation – whether it is champagne or sparkling water. And at the end of the night, could she use a foot massage? Women swooned over the scene when Kevin Costner painted the toenails of Susan Sarandon in Bull Durham. Can you beat that? Try to. It’ll pay off in spades for the Queen of your home.

5. Castles in Scotland. Speaking of Queens. If it’s time for that once in a lifetime trip, check out the Castles in Scotland article in this ezine for ideas. There are many castles in Europe that offer rooms and accommodations.

6. The Finest Gifts Don’t Cost a Thing. There is a scene in everyone’s life that plays on the Favorites Highlight reel, and most of the time, it didn’t cost a thing. Make it your goal to achieve that – even if you have purchased something for her. It is the sentiment, the love, the time, the card, the caring, the breakfast in bed, spending time with her doing something she enjoys and the gift that all add up for her on this very special day.

I didn’t mention the kids here because, of course, they will join you for breakfast, or for the walk and perhaps even most of the day. But be sure to make time just for you, as her husband, to honor her and express love in a more meaningful way than you ever have before.

7. Stocks and Cash, Does she have her own brokerage account? Many of the online discount brokerages will let you set up an IRA online with a pretty small amount of money. If you want to really impress her, set up the account and do a monthly auto-deposit as well (which can be as low as $50-$100, if need be). Include my book, You Vs. Wall Street so that she learns how to get rich, while enriching the world, with her newest piece of financial freedom! That’s a pretty empowering gift package for a very reasonable price. (You Vs. Wall Street is just $15 wherever books are sold.)

8. Get Away Vacation and Prosperity/Abundance Retreat rolled into one! Join Natalie Pace for a 3-day Get Rich and Enrich Retreat July 23-25, 2009. You and your beloved will get three full days of hands-on abundance, prosperity and investing training from Natalie Pace, a #1 stock picker, personally in a board room setting with just a dozen people. The retreat takes place in the beautiful, sunny beach town of Santa Monica, California, and Natalie does some of her training right on the sand, while watching the sunset. Many couples have celebrated their anniversaries (and loved it), walking in without a clue and/or a cracked nest egg and walking out with a budgeting and investing blueprint that works for the rest of their life. Register as a couple by Mother’s Day, and you will receive the Early Bird couple’s price of just $1995. That’s a saving of $1000 off of the regular solo price!

Only a handful of seats remain available at this retreat, so CALL 866.476.7442 or email info@NataliePace.com NOW to book your seats.

9. e-Cards. Moms are a sucker for cards and these days e-cards are quite unique and amazing. My favorite e-card website is http://www.jacquielawson.com/. You can join for $12/year and send as many e-cards as you like over the next 12 months. The new Mother’s Day Cards are very touching and can be delivered to her in-box worldwide.

Remember that Mother’s Day is as important to get right as the engagement ring was when you asked your wife to marry you. Splurge a little this year, if not in money, then in creativity!

If you are a mom, please weigh in on your favorite gift at the survey on the home page at NataliePace.com. That way your hubby and kids have a chance of getting you what you really desire. (Just leave the page open on your computer strategically, so that they can see the survey results…)


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Eilean Donan Castle

Castles in Scotland.  

by Barbara Siragusa.

I grew up in beautiful Scotland, never fully appreciating the beauty and majesty of the country until years later. I have now become a tourist when I revisit! My last trip there in February of 2009. I was lucky enough to visit several of the most beautiful and sometimes haunting castles in Scotland.

The first one was an absolute dream to visit. Eilean Donan Castle. Highlander the movie was filmed there and it has a rich and exciting history. As producers, we were given a 2-hour tour by a couple of wonderful gentlemen who were working there while the castle was closed to the public. We had the entire castle to ourselves.

The stories were hard to believe. Tales of Robert The Bruce and battles. The beauty seen from the uppermost parts of the castle was breath taking. I asked these men if they realized just how lucky they were. Miles from civilization, their only eating place a local pub, no McDonald's or Burger King's in sight. They smiled and said they did and were happy not to live in the rat race!

Another castle we had a chance to visit was Slain's Castle. This castle is the original Dracula's castle, which we will be talking about in an episode of our new TV series Raine of Terror. This castle and its story are in Scotland -- not in Romania!! Sadly this beautiful castle is earmarked to be torn down to make way for holiday homes.

Slain's Castle

We did also take a trip to England, where we talked to the owners of Chillingham Castle. This castle was very beautiful from the outside, but very macabre on the inside. When you first enter, there is a large mantrap on the wall, which would have been used years ago to trap the Scots trying to escape their dungeons. They do allow visitors to stay overnight in the "haunted" rooms. We declined.

Chillingham Castle

Eilean Donan castle itself is available for tours only, but you can rent the Castle’s “holiday cottage” that sleeps 4. You can also hire the castle for weddings, film shoots and photo shoots.

Slain's Castle is deserted and has no roof! Sadly, I believe it will be torn down soon to make way for holiday homes.

You can sleep over in At Chillingham Castle (if you dare). This castle is known as "The Scariest Place on Earth". (We didn’t stay there!) Chillingham Castle is open to the public, is available for weddings, private functions and tours and has self catering apartments.

These are a few of the castles I have visited in Scotland and England, and we hope to visit many more as we continue filming our TV series.

You can see more about our show at www.raineofterror.tv.

 

Barbara Siragusa is the vice president of ElectricBear Studios, LLC. She was raised in Scotland and moved to the US at the age of 21. Barbara lives with her husband in Florida where they own a production studio.


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Board Women.

by Elizabeth Ghaffari.

An excerpt from her book, Outstanding in Their Field: How Women Corporate Directors Succeed.

Excerpted with permission of ABC-CLIO LLC, Santa Barbara, CA from Chapter 1, Outstanding in their Field: How Women Corporate Directors Succeed by Elizabeth Ghaffari (Praeger/ABC-Clio: 2009) with Foreword by Toni Rembe.

Chapter 1
Overview: Women and Corporate Boards
Outstanding in Their Field is about 15 women with little in common except that they are directors at top Fortune 1000 public company boards. Each life story presents a unique collection of decisions made and lessons learned by the individual as she followed her chosen career into the boardroom. Most of the women acquired experience in several spheres: corporate finance and government or entrepreneurship and investment, for example. All the women are enjoying doing exactly what they love, applying their knowledge to address tough contemporary challenges, and representing the interests of shareholders to the best of their abilities and with a keen awareness of their duty of care and their duty of loyalty. These are the leaders—the women who have been nominated to public company boards of directors in today’s tough, highly regulated world of contemporary governance. They are in very high demand because of their expertise and experience. If we wish to see more women directors, then we will need to ensure that there are more women like these outstanding individuals—women who are able, prepared, and willing to serve.

Every month, we see more talented, competent, and capable women being nominated to public company boards of directors, in addition to women being added to top leadership roles of leading firms nationwide and around the world. What a difference it makes when women and men collaborate to build something better—schools, houses, and businesses. This is a book about how outstanding women collaborate as corporate board members.

Outline of Chapters
The pages that follow present the findings of research and interviews with 15 women directors on top California-based Fortune 1000 companies. Six chapters focus on each of the different paths into the boardroom. The introduction to each chapter describes the path, the findings that are common to all the women who pursued that path, commonly held beliefs about that path, and insights drawn from the interviews and analysis—lessons learned.

Within each chapter, we present biographies of selected women directors. Each biography is a stand-alone business case of the decisions and choices of one woman who became a corporate director. Each biography concludes with the insights extracted from her experiences.

There are no bad or wrong paths into the boardroom. All career options are viable, as demonstrated by the women we met and interviewed. Today’s women directors follow jagged paths more than a straight course, although a dominant route tended to serve as a hub around which the individual women expanded their influence and contacts and enhanced their skills and expertise. Many women gathered experience along multiple paths, which suggests that part of their value as directors is the breadth of their competencies and interests.

The Women Interviewed
It is not that women directors are out there on some remote pedestal. They are all real women who made the decisions to endure, persevere, and excel. Their stories inspire our admiration and respect. Once you meet these women and become familiar with the major steps in their careers, you might select from their experiences those lessons are relevant to your life, your time, and your current efforts.

Gayle Edlund Wilson and Andrea L. Rich discuss their careers in the nonprofit world. Linnet Frazier Deily, Linda Griego, and Sally K. Richardson came to their board roles through government service. Alice Bourke Hayes and Mary S. Metz came to their board roles by the academic career path. Leslie Myers Frécon, Donna Frame Tuttle, and Deborah Ann Coleman followed a few of the wide variety of career paths that have opened up recently in the investment/securities area. Judith L. Estrin and Lucille S. Salhany came to corporate director leadership roles by the entrepreneurial path. Janet Morrison Clarke, Judith M. Runstad, and Kathleen A. Cote came by the corporate pathway with an emphasis on retail, law, and technology.

This book shows women how to look for leadership role models among the wide variety of styles, careers, paths, and choices of businesswomen in the 21st century. If women aspire to leadership, they will raise their own expectations and not merely remain outside observers, helpers, and supporters. They will take on the mantle of leadership.

Lessons Learned
These women were chosen to serve because their experience added value to their boards. Any woman can become competent, qualified, and capable of assuming a board role. However, not every woman will become a corporate director, and not every woman should: it is an achievement, not an entitlement.

One executive recruiter who specializes in board searches reported that "Our experience suggests that, rather than [the number of women on corporate boards] being a problem on the demand side, it seems to be more a case of a limited supply of women directors who are prepared and ready to serve."

How does a woman find a corporate board role? She doesn’t. She builds a career of achievement and leadership. When a board of directors needs her skills and competencies, it will find her. And she will recognize it as an opportunity too good to refuse.

Selected quotes from Outstanding in their Field
"I look for directors who want to do board work because they enjoy it – they want to learn from the experience and to build relationships and credibility. It’s a great educational experience to work with a small business owner. It teaches you a lot that will help you run your own business." Leslie Frécon

"I love learning experiences… I think you spend your entire life learning. Boards of directors offer real-time experiences and the chance to make decisions that affect long-term strategies. That role is a challenging responsibility because your decision will affect the company for years to come… On a board, you’re thinking strategy and vision. I can’t find that anywhere else." Donna Tuttle

"First, you have to prove your worth, your value to the company. … We could have a lot more women on boards if, earlier in their careers, women thought about what it takes to get nominated." Deborah Coleman

"I think it is very important that I have always thought of myself not as a woman board member, but as a person with diversity of perspective and diversity of thought. I think I am a valued director more for the diversity of my thinking, not so much for the specifics of gender or experience. On a board, I am not there to focus on women’s issues. I am there to be a full board member looking at all of the issues of the company." Judith Estrin,

"It became obvious to me that I needed an MBA… so I signed up to take economics and accounting as independent classes. Econ was like a foreign language to me – very theoretical. I struggled at first, but I was competitive too and wasn’t about to be intimidated by it all." Gayle Edlund Wilson

Selected quotes reprinted with permission of ABC-CLIO LLC, Santa Barbara, CA.

 

Elizabeth Ghaffari is the author of Outstanding in Their Field: How Women Corporate Directors Succeed. She is President/CEO of Technology Place Inc. and founder of Champion Boards, a research and advisory service working with entrepreneurial businesses to tap the power of governance to plan and implement effective growth strategies.

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Who Picked Your Number.

by Chellie Campbell, author of The Wealthy Spirit and Zero to Zillionaire.

If they want what you have, they’ll pay anything to get it. If they don’t want what you have, free isn’t cheap enough.

It’s always very interesting when the topic of pricing arises with the participants in my Financial Stress Reduction® Workshops. People have many issues surrounding charging money for their products and services. The most usual one is that they don’t charge what they really want to charge – they’re afraid to price themselves too high and lose a sale. Especially now during the "Great Recession!" Don’t we have to slash our prices, have a big sale, help our clients with payment plans?

The answer is "sometimes". But if you slash your prices so much that you lose money on every sale, how is that going to help you?

Joe was a very polished, professional attorney who specialized in financial fraud issues (he must be really busy right now!) and worked on a contingency basis. He was struggling with his budgeting because he would work on a case for as long as two years before the case was decided and he got paid.

"Do you get a retainer up front to help with costs?" I asked.

"Yes, he said, "but it’s only $1,000 and that doesn’t last very long."

"So, why don’t you ask for $5,000?" I replied.

He started to answer and then stopped himself. He smiled and said, "Well, I guess I’ve been afraid that if I ask for too much, they’ll leave and go somewhere else."

"If they can’t pay you what you need to live, they should go," I answered. "You need to at least ask for what you want – you can always negotiate a bit if you need to. Why not try it?"

"You’re right," he said, "I have three prospective client meetings this week and I’ll try asking them for $5,000 and see what happens.

He left with that idea in mind, and I looked forward to seeing him at the next class session.

The following week, he was the first one to report his progress: "You remember I had three meetings with prospective clients last week? I asked each one of them for a $5,000 retainer. And you know what? Each one of them wrote out a check for that amount with no questions asked! And now I have $15,000 in the bank!"

Another class, a young woman had an 8-week workshop business helping people with relationships. She was unhappy with her income and wanted more money.

"How much are you charging?" I quizzed her.

"$400," she replied.

"How much would you like to charge?" I asked.

"Well…$800", she said hesitantly.

"So this week ask for $800 and see what happens," I suggested.

She did, they paid – and another happy client’s financial stress was reduced. I love when that happens!

Soon after that, another workshop leader told me she was unhappy with my class because she still wasn’t making enough money even though she had successfully enrolled ten people in her latest 6- week workshop.

"How much are you charging?" I asked. (Is this sounding familiar?)

"$125," she answered.

"Is that enough money for you to live on?" I asked.

"No," she replied, "That’s the problem!"

"Well, who picked that number?" I said.

She looked at me for a long moment, then said, "I guess I did."

"Then pick a better number and your problems will be solved!" I said.

Every business owner needs to pick two important numbers in their business:

  1. How many people do you want to serve each month?
  2. How much money do you plan to charge them?

Multiply these two numbers and see if it gives you enough money to pay your bills comfortably, save for the future, pay off your debts, buy a house, go on vacation, and live the life you desire.

If not, pick another number!

 

Chellie Campbell is the creator of the Financial Stress Reduction® Workshops, and author of The Wealthy Spirit and Zero to Zillionaire. She has been prominently quoted as a financial expert in the Los Angeles Times, Good Housekeeping, Lifetime, Essence, Woman’s World and more than 50 popular books. She can be reached at Chellie@chellie.com


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Nest Egg Rebalancing Plan.

by Natalie Pace.

Sell in May and Go Away.

March, April and May comprise the top performing months on Wall Street these days. (You can read more on this in my article entitled, "Stock Market Secrets Your Broker Isn’t Sharing" from Vol. 7, issue 3.) The worst performing months for the last decade are October, February, January and June, in that order. Since June is just around the corner, this gives a whole new urgency to Sell in May and Go Away (an old Wall Street adage).

Combine the quarterly trend with election year trends -- that the second year of the Presidential term is anemic, at best, and has been negative on average for the last decade -- and you have a good reason to rebalance your nest egg between now and the end of the month. (Please note that I’m not encouraging you to jump in and out of the market – market timing – but rather to have a good, diversified nest egg that you annually rebalance.) I’m suggesting that, whether we are in a Jobless Recovery or a full Recovery or will experience continued challenges, right now, when the markets have recovered 4,450 points from their March 2009 low, is a great time to take profits, rebalance and make sure that you are properly diversified.

Below is an easy 6-step plan that can protect you from a devastating downturn, while also allowing you to capitalize if the Spring Rally continues throughout all of 2010 Rally.

  1. Consider where the markets are.  
  2. Think of what you are mostly doing when the markets are where they are.
  3. Think of where the markets are headed.
  4. Overweight safe or "game on" based upon steps 1-3
  5. Draw a pie chart, allocating your age, PLUS or MINUS the overweighting, safe.  (29 + 20% safe = 49% safe)
  6. Diversify the remainder of the pie chart into 10 funds.

Here are more details on each step.

  1. Consider where the markets are. Hmmm. On March 9, 2009, the Dow Jones Industrial bottomed out to 6547, whereas the last week of April, the Dow was trading above 11,000. Looks like we are much higher than we were a year ago…
  2. Think of what you are mostly doing when the markets are where they are (high).  Selling. The term is buy low; sell high, after all. Again, you are not "market timing," or jumping all in and all out. (That doesn’t work.) But using seasonal trends as a gauge for your rebalancing once or twice a year works very, very well.

  3. Think of where the markets are heading. In this jobless recovery, we may not know exactly where the markets are heading, but we do know that there is still cause for concern, with unemployment over 11%. For some, that might make them very cautious. For Evel Knievel types, that might mean not taking on as much risk as normal.

  4. Overweight based upon macro trend reading.  Overweight safe, if you’re concerned or worried.  When you are exceedingly optimistic about the future of stocks, that’s when you might consider overweighting into select Exchange Traded Funds (ETFs). If you are a Nervous Nelly this year, reserve an additional 20% safe and if you’re Evel Knievel, overweight 5% or less safe. This is where your risk tolerance comes into play.

  5. Draw a pie chart, allocating your age, PLUS or MINUS the overweighting, safe.  (25 + 20% safe = 45% safe)
  6. Now, for those of you who hate the idea of allocating so much safe into low-yielding money markets (FDIC insured of course), please note that I’ll talk about other better-performing options for this safe portion of your dough in the June ezine. Know, for now, however, that bond funds are not so safe. When interest rates rise, they will lose value. When the markets drop, you’ll be glad you have enough safe because not losing money means your nest egg is intact, while others crack. Don’t be talked into risking your safe money for the possibility of making a few percentage points return. Just get safe for now.

  7. Diversify the remainder of the pie chart into 10 funds. Note that the four funds listed at the top of the pie chart are 4 Hot Industries. These will change year to year. For instance, this year, you may wish to include information technology, which was one of the top performing industries of 2009.
  8. The remaining six funds are diversified by size and style -- small cap growth, small cap value, mid cap growth, mid cap value, large cap growth and large cap value. Be sure to read my article, "How to Beat the Dow" in this month’s ezine for tips on how to pick the best six funds for your nest egg.

  9. Picking Exchange Traded Funds. You can go to the websites of leading funds and see what the top holdings and industries of each fund are to fine-tune your investment portfolio. For instance, do you want to own a fund that is heavy into financials and consumer discretionary when unemployment is so high? Wouldn’t you rather hold funds that are concentrated in information technology, biotechnology, gold, clean energy, consumer staples, industrial materials, etc.?
  10. Here are a two websites where you can easily find ETFs that are diversified by industry, size and style. Each fund has a page where you can click or scroll down to see the top holdings and top industries.

    1. PowerShares.com
    2. iShares.com

Hot Industries
What’s hot this year? It is predicted to be another challenging year for consumer spending. However, the Stimulus Bill is pouring a lot of money into improving efficiency, particularly in education, medicine and government – which translates into revenue for technology companies. When inflation becomes a concern, gold is typically strong. Clean energy is another line-item focus of President Obama’s Stimulus Spending. And people will still go to their doctor and take their medicine in a recession. Thus, I would expect to see strength in info tech, gold, clean energy and biotechnology. What industries do you believe are hot?

Below are the hottest returns in 2009.

Average Returns of Open End Funds in 2009

Name

Annual Ret 2009

US OE Latin America Stock

115.54

US OE Diversified Emerging Mkts

73.81

US OE Pacific/Asia ex-Japan Stk

71.16

US OE Technology

61.99

US OE Equity Precious Metals

52.56

US OE Foreign Small/Mid Growth

49.24

US OE Natural Res

48.48

US OE Europe Stock

47.32

US OE High Yield Bond

46.70

US OE Miscellaneous Sector

45.57

US OE Equity Energy

44.36

US OE Foreign Small/Mid Value

44.06

US OE Bank Loan
41.81

Name

Annual Ret 2009

US OE Communications

40.74

US OE Convertibles

40.58

US OE Mid-Cap Growth

39.11

US OE Foreign Large Growth

38.02

US OE Consumer Discretionary

37.84

US OE Mid-Cap Blend

37.39

US OE Global Real Estate

37.01

US OE Large Growth

35.68

US OE Small Growth

35.46

US OE Mid-Cap Value

35.41

US OE World Stock

35.27

US OE Diversified Pacific/Asia

34.70

   

Source: © 2010 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

If you wish to learn more about this rebalancing act, tune into the "Spring Cleaning Your Nest Egg" show on BlogTalkRadio.com/NataliePace. This show outlines these easy-as-a-pie-chart strategies ion greater detail, and streams 24/7 on demand. You can also download the Pod Cast to your iTunes platform.

Nest egg strategies, hot industries, annual rebalancing and more are the subject of my book, You Vs. Wall Street. Buy You Vs. Wall Street wherever books are sold.

 

About Natalie Pace:
Natalie Pace, is the author of You Vs. Wall Street and host of the Pace and Prosperity radio show on BlogTalkRadio.com/NataliePace! She is a repeat guest on FoxNews, CNBC, ABC TV and has contributed to Forbes.com, Sohu.com and BestEverYou.com and Magazine. As a philanthropist, she has helped to raise more than two million for Los Angeles public schools and financial literacy. Follow her on http://www.facebook.com/pages/Natalie-Pace/416616285568, on BlogTalkRadio.com/NataliePace and on YouTube.com/NataliePaceDOTCOM. For more information please visit, http://www.nataliepace.com

 

Please note: NataliePace.com does not act or operate like a broker. We report on financial news, and are one of the most trusted independently owned and operated financial news corporations in the U.S. This article is intended to educate and inform individual investors, and, thus, to give investors a competitive edge in their personal decision-making. The publicly traded companies mentioned in this article are not intended to be buy or sell recommendations. ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies.

Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a long, safe strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.

Information has been obtained from sources believed to be reliable however NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.


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Should the U.S. introduce a Value Added Tax?

by Dr. Gary S. Becker.

Given the current and projected large scale budget deficits of the United States, many people are advocating that the US follow the example of Europe and many other countries, and introduce a value added tax (VAT). President Obama suggested only a few days ago that a VAT for Americans is still on the table.

The case for a VAT is that it is a relatively efficient tax that induces less distortion in behavior than say a progressive income tax that raises the same amount in revenue. On the other hand, once introduced the VAT almost always tends to rise over time, which increases the burden of government spending and taxation.

If a country were starting a new tax system I would on the whole (I discuss my concerns later) recommend relying mainly on a VAT. However, countries like the US that already have complicated tax systems would make a mistake to simply add a VAT to the tax system without radical surgery in income and other taxes.

Since a VAT is a tax on the value added by companies at each stage of production of consumer and investment goods, it is similar to a sales tax levied directly on these consumer and investment goods. Usually, a VAT is a fixed percent, such as 10 or 20 percent, of the value added by each company, although often medicines and certain other necessities are exempt.  A VAT does not distort consumption decisions relative to savings and investment decisions since it taxes consumer and investment goods at the same rate. An income tax, by contrast, discourages savings and investment because it taxes savings twice: once on the income from which any savings are taken, and again on the income earned later on from any savings.

Like an income tax, a VAT does distort the decision whether to work more, or take more leisure and earn less. Since leisure time is not taxed, a VAT encourages an increase in leisure time and a decline in working time. A VAT is usually a flat tax, with the same tax rate for richer people who spend a lot on consumption and poorer persons who spend much less, whereas income taxes are usually progressive, with higher marginal tax rates on higher incomes. The higher the marginal tax rate, the greater the labor-leisure and other distortions-economists call the inefficiencies introduced by these distortions dead weight losses.

A flat VAT tax would be more efficient for two reasons than a progressive income tax that raises the same revenue: it does not discourage savings relative to consumption, and it induces fewer distortions on other behavior because it has flat rather than rising tax rates. A flat income tax eliminates the effects of rising tax rates, but still distorts savings behavior.

The downside of a value added tax to anyone concerned about growing government spending and taxing is very much related to its upside; namely, that a VAT is a more efficient and relatively painless tax. As with all taxes, proposals to increase the rate of taxation on value added runs into opposition from individuals and companies hurt by a higher VAT. 

However, since a VAT is easy to collect and causes fewer distortions in behavior than income and most other taxes, governments have an incentive to raise the VAT over time. In fact, value added tax rates do usually start low, but tend to grow rapidly over time. For example, the VAT rate in Europe started low but now ranges from 15 to 25%, and averages about 20%. In Denmark, for example, the VAT rate was 9% in 1962, but quickly rose to 25% by 1992, and has remained at that level.

So the greater efficiency of a VAT and its ease of collection is a two-edged sword. On the one hand, it would raise a given amount of tax revenue efficiently and cheaply. Since economists usually evaluate different types of taxes by their efficiency and ease of collecting a given amount of tax revenue, economists typically like value added taxes.  The error in this method of evaluating taxes is that it does not consider the political economy determinants of the level of taxes. From this political economy perspective, the value added tax does not look so attractive, at least to those of us who worry that governments would spend and tax at higher levels than is economically and socially desirable (see the discussion by Mulligan and me "Deadweight Costs and the Size of Government", The Journal of Law and Economics, October 2003).

In deciding how to close the sizable fiscal deficits facing the US and other countries, introducing or expanding a VAT appeals to many economists and politicians because of the features already discussed. However, the problem is that a VAT would be introduced not as a partial or full substitute for personal and corporate income taxes, but rather as an additional tax. This would make it much easier to close the fiscal gap by maintaining or increasing government spending and overall tax levels.

Since high taxes and high levels of government spending would discourage economic growth and raise rather than lower the overall distortions in an economy, I am highly dubious about introducing a VAT into the federal tax system unless accompanied by a major overall of this system. One big improvement that does not involve a VAT would be to flatten the present income tax rates and greatly reduce the various exemptions, so that the tax basis is widened. Even then it is necessary to be vigilant about combating the incentives government officials have to increase flat taxes over time, whether they are flat income taxes or flat value added taxes.

 

About Gary Becker:
Dr. Gary Becker is a University Professor, Department of Economics, and Sociology Professor, Graduate School of Business, The University of Chicago. He won the Nobel Prize in Economics in 1992 for his groundbreaking work in "human capital." President George W. Bush awarded him the Presidential Medal of Freedom in 2007.

 To keep track of Dr. Becker's continuing research and commentary, visit his web site and blog.


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How to Beat the Dow.

by Natalie Pace.

Did you know that the NASDAQ Outscored the Dow Jones Industrial Average, earning 40 cents on every dollar invested (compared to just 15 cents for the Dow) in 2009? Are you aware that the Dow Jones Industrial Average is just 30 companies, and that 13% of Dow Components were bailed out, including AIG, General Motors, Citigroup and Bank of America?

So, how do you beat the Dow, when it’s still the most popular Blue Chip Index on Wall Street? It’s much easier than you might imagine. Just one step really. Avoid it! There are thousands of companies traded on Wall Street and only 30 companies in the leading blue chip index (which is what the Dow Jones Industrial Average claims to be).

Savvy investors will look at this data with an equal measure of intrigue and skepticism. NASDAQ still hasn’t returned to its DOT COM heyday, when it cracked through 5000. But the Internet is pervasive and here to stay, and the NASDAQ 100 is leading the charge in this new world. Clean energy, another industry that has more companies in the NASDAQ (and only GE in the Dow), was the top industry in 2007, earning almost 60 cents on the dollar (double of the second place industry of oil and gas, which earned only 32 cents on the dollar). Meanwhile the Dow is heavily steeped in some of the most challenged corporations in the U.S. (not just limited to the four bailouts I’ve already mentioned). It’s not just the Dow, however, large cap companies, particularly those founded before 1980, have also performed miserably over the last ten years.

So, how do we know that small cap companies will continue to outperform the Dow?
Actually, there are quite a number of things that you likely don’t know about the Dow Jones Industrial Average. The name has become synonymous with Wall Street, just like Google is with Search and Kleenex is with facial tissue. But is it still deserving of that, or should we find a better word and strategy for the post-bailout Wall Street?

At minimum, you should find a better strategy for your nest egg! When an index can lose more than half of its value in eighteen months, your nest egg is vulnerable to cracking again. (The Dow dropped from 14,164 on October 9, 2007 to 6,547 on March 9, 2009.)

  1. What companies are in the Dow today? Click to access a table showing the 30 current Dow Components, as of April 15, 2010.
  2. Stock Symbol

    Company Name

    AA

    Alcoa

    AXP

    American Express

    BA

    Boeing

    BAC

    Bank of America

    CAT

    Caterpillar

    CSCO

    Cisco

    CVX

    Chevron

    DD

    Dupont

    DIS

    Disney

    GE

    General Electric

    HD

    Home Depot

    HPQ

    Hewlett-Packard

    IBM

    IBM

    INTC

    Intel

    JNJ

    Johnson & Johnson

    JPM

    JP Morgan

    KFT

    Kraft Foods

    KO

    Coca-Cola

    MCD

    McDonald’s

    MMM

    3M

    MRK

    Merck

    MSFT

    Microcosft

    PFE

    Pfizer

    PG

    Procter & Gamble

    T

    AT&T

    TRV

    Travelers

    VZ

    Verizon

    WMT

    Wal-Mart

    XOM

    Exxon-Mobil


  3. The Bailout Index. With four out of 30 companies bailed out, the Bailout Index might be a better name than the leading Blue Chip Index.

  4. Bank of America. Bank of America (which owns Merrill Lynch – another bailout) is still a component of the DJIA.

  5. Cronyism Economics. There is the perception that the Dow components are subjected to a long, arduous review before they are picked for the Index. However, a closer examination of the ownership of the companies of the Dow reveals a different story – one of "swapping out" more than selecting.
  • The Relationship between Citigroup (a bailed out bank and former Dow component) and Travelers Insurance (a current Dow component). Sandy Weill, the former Chairman and CEO of Citigroup, started building up his acquisitions with a 27% interest in Travelers Insurance back in 1992. Travelers Insurance and Citigroup merged in 1998, with Sandy Weill leading the combined company -- Citicorp. (This was the deal that shattered a former US requirement that banking and insurance remain separate entities.) Travelers replaced Citigroup on the Dow Jones Industrial Average on June 1, 2009 – a "swap out" not a selection.

  • On February 19, 2008, Bank of America was added to the DJIA. Hmmm. It was clear by this time that the U.S. economy was in real trouble. The January 2008 GDP growth report was just a breath above negative, mortgage banks were failing by the day and banking was at the heart of the cardiac arrest. Still, miraculously, Bank of America was selected to replace Altria on the DJIA. Just seven months later, in September 2008, BofA offered to buy (bail out) Merrill Lynch. This was the same month that Treasury Secretary Henry Paulsen and Federal Reserve Chairman Ben Bernanke let another investment bank/brokerage -- Lehman Bros. -- go bankrupt. Was swallowing Merrill the price of the Dow listing?

  • General Motors remained on the DJIA for years, while it posted tens of billions in losses, took on debt to the tune of $100 billion and even received emergency rescue funds (loans) from Treasury Secretary Hank Paulsen (after Congress denied the aid) right before Bush left office. GM declared bankruptcy on June 1, 2009. It was removed from the DJIA on June 8, 2009. Learn more about the Treasury Department’s emergency loan to GM in my article, "General Motors Owes One Hundred Billion Dollars," from January 1, 2009, Vol. 6, issue 1.

  • Philip Morris (tobacco company) joined the DJIA on October 30, 1985. Philip Morris changed its name to Altria Group on January 23, 2003, but kept the stock symbol MO and Altria became the Dow listing. Altria was removed from the DJIA on February 18, 2008 (when it posted substantial losses and restructured its business). However, just a few months later one of the Philip Morris companies – Kraft Foods – was added to the DJIA (on September 22, 2008). Philip Morris has owned Kraft Foods since 1988. Kraft was spun-off from Altria (Philip Morris) on January 31, 2007, but it was given to Altria shareholders, meaning that the "independent" company is still owned by the same people.

Trimming back on the Bailouts in your 401K, IRA, annuity and/or pension is going to require a little education, but once you know how to do it, it is very easy to be selective about what you own in your nest egg. Brokers get paid large commissions to sell Dow-laden mutual funds to their clients, so know that you may not get much support from your CFP. But, if your nest egg dropped dramatically when the Dow dropped to 6547, it is vulnerable to cracking again if you don’t make any changes. (See my article, "Nest Egg Rebalancing Plan" in this month’s ezine for more tips.)

Instead of the old dying businesses (like tobacco and gas guzzlers), you can invest in America’s most innovative companies, like Google, Apple, that are leading the charge to create the products of tomorrow. These companies have no debt and own the richest treasuries of all of the American corporations -- and are still passed over by the Dow selection committee.

Both Apple and Google had over $24 billion in cash at the end of 2009. Their market values, as of April 15, 2010, were $226 billion and $190 billion, respectively. By comparison, General Motors had a market value of just $2 billion in January of 2009, was losing money every year, selling fewer cars than the competition, owed more than $100 billion, would have imploded without Paulsen’s loan and could hardly have been called a leading Blue Chip company by any market standard imaginable (other than legacy).

You can read about easy-as-a-pie chart investing, hot industries, diversification, avoiding the Bailouts and annual rebalancing strategies in my book, You Vs. Wall Street. You can spend three days at the Get Rich and Enrich Retreat in the beautiful beach town of Santa Monica, California on July 23-25, 2010 learning these strategies one-on-one from me. Walk in without a clue (or with a wounded nest egg) and walk away with a blueprint that works for the rest of your life.

To learn more about the retreat, go to the home page at NataliePace.com and click on the Get Rich and Enrich Retreat banner ad. If you are interested in attending, I encourage you to call 866-476-7442 or email info@NataliePace.com NOW. This retreat only has a handful of seats remaining, and the March Retreat was a sell-out! You’ll receive $600 off if you register with your spouse or a friend.

 

About Natalie Pace:
Natalie Pace, is the author of You Vs. Wall Street and host of the Pace and Prosperity radio show on BlogTalkRadio.com/NataliePace! She is a repeat guest on FoxNews, CNBC, ABC TV and has contributed to Forbes.com, Sohu.com and BestEverYou.com and Magazine. As a philanthropist, she has helped to raise more than two million for Los Angeles public schools and financial literacy. Follow her on http://www.facebook.com/pages/Natalie-Pace/416616285568, on BlogTalkRadio.com/NataliePace and on YouTube.com/NataliePaceDOTCOM. For more information please visit, http://www.nataliepace.com

 

Please note: NataliePace.com does not act or operate like a broker. We report on financial news, and are one of the most trusted independently owned and operated financial news corporations in the U.S. This article is intended to educate and inform individual investors, and, thus, to give investors a competitive edge in their personal decision-making. The publicly traded companies mentioned in this article are not intended to be buy or sell recommendations. ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies.

Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a long, safe strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.

Information has been obtained from sources believed to be reliable however NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.

 


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Brokerage Firm Private Securities Offerings: Buying Your Brokerage.

Investor Alert by FINRA.org.

To raise capital, brokerage firms sometimes sell their own or an affiliate's securities. Such broker-dealer self-offerings (BDOs) can take the form of registered public offerings or private placements. This Alert addresses issues raised by a broker's private placement of its own or its affiliate's securities (private BDOs), particularly to firm customers.

While private BDOs can be legitimate investments, recent enforcement actions (see below) highlight the potential for abuse in private BDOs. Actions were brought against several individuals and firms that have sold more than $36 million in private BDOs to investors that involved fraud or other serious misconduct. Some of these cases involved the use of high-pressure sales tactics targeted at elderly or retired investors.
 
We are issuing this Alert to help investors understand what private BDOs are, the risks involved with them, and how to identify the telltale signs of fraud or other misconduct.

What is a Private BDO?
The money that brokerage firms raise in private BDOs is usually used to finance their operations or those of an affiliate. When you invest in a private BDO, you are investing in the brokerage firm itself or its affiliate. As such, you share in the risks that the business will be unsuccessful or unprofitable or you could participate in successful operations of the firm or its affiliates when the increased value of the firm or affiliate's equity is reflected in the value of its securities.

SEC rules place certain limitations on the way private BDOs and other private placements of securities can be sold to investors. Brokerage firms generally are not permitted to advertise the BDO and the number of small investors to whom the securities can be offered is usually limited. The securities sold in private BDOs are not registered with the SEC or filed with FINRA and they are not publicly traded. Private BDOs, therefore, are subject to significantly fewer disclosure requirements and less regulatory oversight than registered public offerings, and they are illiquid.

Why are Private BDOs Risky?
Investing in a private BDO can involve significant risk. And private BDOs that are publicized through spam emails or cold calling are often fraudulent or otherwise problematic. Before investing, consider the following:

  • The Offering May Be Illegal—Any company that offers or sells securities in a public offering must either register the securities with the SEC or meet one of the exemptions from registration. Otherwise the offering is illegal. Private BDOs may qualify for an SEC Regulation D exemption, which provides some of the most common exemptions from registration. But to meet these exemptions, the securities often cannot be advertised to the general public.

  • You May Not Be Able to Sell Your Investment—Sometimes the reason that a brokerage firm is conducting a private BDO is that the firm or its affiliate whose shares it is selling is not a public company. The risks of buying securities in a private BDO are increased when none of the company's stock is publicly traded. You cannot be certain when, or even if, the company will take steps that could result in a public market for the securities. That means you cannot be sure that you will be able to sell the shares. Even if the company does go public through an initial public offering (IPO), federal and state laws often require that unregistered or private securities that are acquired in transactions such as private BDOs must be held for a year or more before investors can sell them. Private companies also are often new and untested, without revenue, or experienced management. So even when they are legitimate, they are highly risky.
  • The Brokerage Firm or the Affiliate Has a Conflict of Interest. The brokerage firm benefits a great deal from your investment in it. While brokers generally benefit when you buy any investment from them, this is particularly true for private BDOs where the firm or its affiliate gets all your money rather than just a commission. Find out why the brokerage firm wants to raise money. Is it because the firm has been losing money or needs capital to meet regulatory requirements?

Red Flags that Could Signal Fraud
Regulatory investigations reveal patterns in the way problem private BDOs are promoted to investors:

  • Cold-Calling or Spam. Brokers selling problem private BDOs often use unsolicited telephone calls or email to sell private BDOs. In one case, a firm obtained customer accounts from defunct brokerages and used the firms' customer lists to identify potential victims.
  • High Pressure Sales Tactics. Dishonest brokers often use high pressure, "boiler room" sales tactics, hounding you to invest in a private BDO.
  • Claims that an Initial Public Offering (IPO) is Imminent. Beware of brokers who tell you that the brokerage firm will soon conduct an IPO and that you will reap large profits once the firm's securities are publicly traded.
  • Promises of Unusually High Returns. Brokers make optimistic price projections and predications about future performance, often with no documentation to back them up.
  • "Risk-free" Investments. Some private BDO frauds involve promises that you can't lose money. Don't believe it.
  • Refusal to Provide Current Financial Documents on Request. Brokers should provide financial statements on the request of potential investors.

Be advised: firms using these red-flagged tactics often provide little or no supervision of their sales people. Such firms may materially misrepresent management experience and other aspects of the company, omit information pertaining to disciplinary actions against the firm or individuals, and are in dire financial straits.

Protecting Yourself
The following steps will help protect you from making an investment decision you later regret:

1.  Check out the brokerage firm, the broker, and other individuals before you invest. You can get information from the following sources:

  • FINRA. Use FINRA BrokerCheck to make sure the brokerage firm and broker are properly registered and to research the disciplinary history of a firm or registered individual. Many of the individuals and firms involved in fraudulent BDOs have had run-ins with securities regulators. In one case, an individual involved in a private BDO had been barred from the securities industry.

  • SEC. Obtain a copy of the brokerage firm's report on Form X-17A-5. Form X-17A-5 is the audited financial report that every registered broker or dealer must file annually with the SEC. You also should check to see if the firm has filed a Form D or offering circular with the SEC. If a Form D or offering circular is not on file with the SEC, this may mean that the private BDO is illegal.


  • To obtain a copy of these documents, contact the SEC's Office of Public Reference as follows:

    Office of Public Reference
    100 F Street, NE
    Washington, D.C. 20549-0102
    Phone (202) 551-8090
    Email: publicinfo@sec.gov

    Use the SEC documents to verify information that has been provided to you in connection with the BDO and to check on the financial condition of the brokerage firm or its affiliate.

  • Your state securities regulator. Contact your state securities regulator to find out whether it has information about the company and the people behind it. Even if the firm may not have to register its securities with the SEC, it may have to register them with your state.
  • Better Business Bureau. Check with the Better Business Bureau to find any complaints against the firm or its brokers.

2.  Ask your broker these questions

  • How does this investment match my investment objectives? What is the risk that I could lose the money I invest?
  • How easily can I sell? What is the price I would get if I sold immediately? Will the securities be restricted? How long before I can sell my shares if the firm went public?
  • What will the proceeds of the offering be used for?
  • How was the price of the security determined?
  • How long has the firm or its affiliate been in business? Are they making money? Have they experienced any financial difficulties?
  • Has the firm had problems meeting its minimum net capital requirements with the SEC and FINRA?
  • Do the firm, its affiliate or their management have any legal or regulatory problems or filed for bankruptcy protection?
  • Will you be paid a commission or receive any type of compensation, including stocks, stock options, or warrants, for selling the shares in the BDO? How much?
  • Remember: Be skeptical. Verify any information you learn from your broker. Individuals and firms that promote fraudulent or problematic private BDOs may make false or misleading statements to lure you into making an investment.


    3.  Watch Out for Red Flags. If one of the red flags previously mentioned makes you suspicious about a BDO or if you think that the claims may be exaggerated or misleading, contact the FINRA Investor Complaint Center.

Additional Resources
Investor Alert—Stock Spams and Scams
Investor Alert—Subordination Agreements—Understand the Risks
The SEC's publication—Risky Business: 'Pre-IPO' Investing

Recent Enforcement Actions Involving Private BDOs

To receive the latest Investor Alerts and other important investor information sign up for Investor News.

 

About FINRA:
The Financial Industry Regulatory Authority (FINRA), is the largest independent regulator for all securities firms doing business in the United States. All told, FINRA oversees nearly 4,800 brokerage firms, about 170,400 branch offices and approximately 643,000 registered securities representatives.

FINRA believes investor protection begins with education. Using the Internet, the media and public forums, we help investors build their financial knowledge and provide them with essential tools to better understand the markets and basic principles of saving and investing.



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Schwab Sector Views: Time to Move.

by Brad Sorensen, CFA, Director of Market and Sector Analysis, Schwab Center for Financial Research 

April 29, 2010

Schwab Sector Views reflect a three- to six-month outlook and are appropriate for investors looking for tactical ideas. Market conditions change quickly so we usually update our views every two weeks.

We've been holding a relatively neutral stance for a couple months, with a lone outperform rating on health care and a single underperform rating on consumer discretionary. But we believe now is the time to shift our view on a couple of other sectors.

First, we are moving our outlook on the information technology sector back to outperform from marketperform. We had downgraded the group at the start of the year, noting that we still liked the fundamentals but were a bit worried about overly optimistic sentiment. Since then, the fundamentals have remained solid, and we believe the sector has digested most of the gains seen in 2009 by trading roughly in line with the market over the last quarter. In our view, this action has worked off some of the froth that may have been developing in the sector.

Second, we're downgrading the materials sector from marketperform to underperform. We believe the sector has outperformed the underlying fundamentals and is due for a pullback in the near future. With multiple countries (including China, India, Australia and Canada) looking to remove economic stimulus and tighten monetary policy, we think demand for materials may soften in the coming months. Additionally, monetary tightening could pressure commodity prices—which we believe have become a bit extended—likely further dampening enthusiasm for the materials group.

See below for more detail on these moves as well as our views on the other sectors. And check back often—these opinions are tactical in nature and can change quickly according to conditions in the market.

Sector

Schwab Sector View

S&P 500 benchmark weight

Dow Jones Wilshire 5000 benchmark
weight

Date Sector View last changed

Year-to-date return as of 4/28/2010

Consumer discretionary

Underperform

9%

10%

01/28/2010

17.18

Consumer staples

Marketperform

11%

10%

11/12/2009

4.47

Energy

Marketperform

12%

11%

09/26/2008

6.14

Financials

Marketperform

15%

16%

06/24/2005

12.69

Health care

Outperform

13%

12%

01/28/2010

-0.64

Industrials

Marketperform

10%

11%

11/12/2009

17.91

Information technology

Outperform

19%

19%

04/29/2010

5.09

Materials

Underperform

4%

4%

04/29/2010

4.17

Telecom

Marketperform

3%

3%

11/12/2009

-4.53

Utilities

Marketperform

4%

4%

01/28/2010

-1.61

S&P 500®  Index (Large Cap)

 

 

 

 

7.46

Source: Schwab Center for Financial Research, Standard and Poor's and Wilshire Associates, Inc.

Consumer discretionary: Underperform
The consumer discretionary sector has outperformed recently, bucking our underperform recommendation, as investors have been enticed by some better-than-expected results in the space. February same-store sales largely came in better than expected, and consumer confidence rebounded some, indicating that the American consumer is not as moribund as some have feared.

We're watching these developments closely but continue to believe that the group will underperform during the next few months. Year-ago comparables continue to be quite easy, with shoppers clenching their pocketbooks tightly during the peak of the financial crisis, and there was undoubtedly some pent-up demand that was relieved during the past couple of months.

However, unemployment remains relatively high, damaging spending by those without jobs as well as those who lose confidence as they see their neighbors struggle. At the same time, wage gains remain anemic—real hourly compensation for nonfarm business fell 0.6% year-over-year in the fourth quarter of 2009.

Finally, in the past, as retail sales have started to improve (which appears to be the case currently) the consumer discretionary sector has tended to underperform.

Clients can see our top-rated stocks in the consumer discretionary sector.

Positive factors for the consumer discretionary sector:

  • Inventories remain very lean, which could provide some level of pricing power to retailers as activity picks up.
  • Housing seems to be stabilizing, but there are concerns in the near future that threaten the recovery.
  • Retailers have aggressively cut costs, which should continue to help support profits.  
  • March retail sales numbers came in largely better than expected.

Negative factors for the consumer discretionary sector:

  • The unemployment rate is relatively high, but leading indictors are starting to showing signs of improvement.
  • Savings rates in the United States have been increasing. If Americans sustain current savings trends, this would continue to result in lower consumer spending.
  • Revolving credit limits are being reduced, which, by extension, will likely reduce consumers' ability to spend.
  • Wage gains remain very weak, which could put pressure on how much consumers can increase spending.
  • Government stimulus measures are likely ending this year, which could stymie a rebound in consumer spending.
  • Monetary stimulus is starting to be withdrawn, which could dampen economic prospects. 
  • Credit standards remain tight, although they are showing signs of easing slightly.
  • Fed and government support of the housing market is ending, which could result in another downturn in the housing arena, hurting consumer sentiment.

Consumer staples: Marketperform
The consumer staples sector continues to tread water, much as we expected in the current environment. The sector's fundamentals are relatively good, but investor sentiment toward the group remains muted. As a result, we continue to believe that the sector will perform roughly in line with the market for the foreseeable future.

This group traditionally helps stabilize the overall market. Demand for products in this group tends to be relatively constant, providing consistency of revenue growth and earnings performance that, while unexciting, can provide some comfort in more uncertain times.

However, there are certainly still issues with the group. Consumers remain very price-aware, and pricing power in the staples sector seems to be limited. Fierce competition among major players also holds prices down and limits the ability of companies to expand margins and profitability. However, that's being partially offset with cost cuts at the corporate level at many companies in this space.

Clients can see our top-rated stocks in the consumer staples sector.

Positive factors for the consumer staples sector:

  • Should the economic recovery begin to stall or retreat, investors would likely return to more defensive sectors such as staples.
  • Staples retailers have aggressively cut costs and attempted to create more perceived value for consumers, which could help to support sales.
  • Wage costs in the sector are growing at a declining rate.

Negative factors for the consumer staples sector:

  • Competition continues to accelerate and is exacerbated by the increasing emergence of Chinese production, which potentially causes pricing power in the group to evaporate as it compresses margins and squeezes earnings.
  • Pricing power in the group has been declining.
  • Decreasing volatility and increasing risk tolerance tends to hurt defensive sectors such as staples.

Energy: Marketperform
Crude oil and gas prices are back in the headlines, with oil pushing above $80 per barrel and gas approaching the $3-per-gallon mark. Despite the summer driving season approaching, we believe the price of oil is a bit extended. And keep in mind that the energy sector hasn’t moved in lock step with this commodity.  As such, we continue to view the energy sector with a bit of caution and believe that performance will be in line with the overall market.

Although emerging-market economies continue to expand, and more cars and higher demand for crude oil follow that expansion, we are seeing monetary policies tighten in many of those nations (highlighted by China), which tends to dampen demand for commodities. Additionally, crude oil supplies still remain relatively high by historic standards, making us a bit cautious on the energy complex in the near term.

However, these negative aspects are somewhat balanced, as we firmly believe that the global economy is returning to a path of sustainable growth and energy will remain a critical component of infrastructure improvements, which are much needed in emerging areas of the world if they hope to continue to grow.
 
Longer-term, we have a more positive outlook for the energy sector. Developing countries will almost certainly continue to demand more fuel and, once economies around the world start to show sustainable growth, we believe that will shore up demand again.

Clients can see our top-rated stocks in the energy sector.

Positive factors for the energy sector:

  • Global uncertainties could threaten some supplies, exacerbating an already heightened situation.
  • Developing nations will likely need more energy as they improve their infrastructure and modernize their economies.
  • The global oil and gas rig count has been falling while the Institute for Supply Management (ISM) new orders/inventory ratio is rising.

Negative factors for the energy sector:

  • Supplies could increase dramatically with a renewed commitment to exploration and technological improvements. Should oil companies step up efforts to access those supplies, upward pricing pressures could dwindle.
  • Crude oil inventories remain relatively high.
  • Oil tanker rates remain relatively low, which could indicate soft demand for the foreseeable future.
  • Some international governments are starting to rein in their stimulative policies, threatening to slow down the rate of growth in the global economy.
  • Global oil demand still appears to be relatively soft, despite the continuing economic recovery.

Financials: Marketperform 
The SEC charging a major investment bank with fraud rattled the financial sector, but only briefly—for now. While we certainly don’t pretend to know what the ultimate outcome of this case will be, our major concerns center around the possibility of further actions by the SEC against other institutions, and the momentum that stricter financial regulations may gain in Washington in the wake of negative headlines related to the SEC action.

It is largely these unknowns that lead us to hold our marketperform rating on the financial sector. Also, there's still another down leg likely to come in the housing market as a new wave of option adjustable-rate mortgages (ARMs) reset and "shadow inventory" comes onto the market.

However, interest rate spreads remain near record highs, boosting profits, while recent earnings reports indicate improving delinquency estimates. Additionally, merger-and-acquisition activity in the corporate world appears to be heating up after a quiet spell since the start of the financial crisis—which helps to bolster revenue in much of the financial sector.

Another possible positive, the commercial real estate market is starting to go through its retrenchment, which analysts believe could be severe. However, so far the damage has been less than some had feared, providing some hope for the regional banks where most of the commercial lending activity is located.

As a result of the mix of information in this very diverse area, we're maintaining our marketperform rating on the sector and will continue to watch activity in the group and adjust our outlook as needed.

Clients can see our top-rated stocks in the financials sector.


Positive factors for the financials sector:

  • The Fed is slowly letting its emergency measures meant to support the financial industry expire, indicating increasing confidence in the group.
  • The high levels of interest rate spreads should help profitability in certain areas of the sector.
  • More financial institutions are paying back government loans, illustrating their growing health and stability.
  • Capital market activity has been increasing, which should help boost revenues in the investment banking arena.

Negative factors for the financials sector:

  • Revolving home equity loans are declining, which has typically been a bad sign for bank profits and stock performance.
  • New regulations have severely restricted the ability of lenders to offer "exotic" mortgages, cutting back on the volume of business they can do.
  • New credit card rules have gone into effect, which could hurt profitability going forward.
  • Although improved after government action, confidence in the financial sector remains fragile. Concerns over the continuing dismal housing market—combined with increased government regulation—continue to hover over the group.  
  • The yield curve is quite steep, leading to our belief that flattening is highly likely, which would reduce interest margins for financial institutions.
  • Uncertainty as to how massive government intervention will affect the financial industry going forward could hold performance back for the foreseeable future.

Health care: Outperform
After nearly a year of uncertainty, there is at least some measure of confidence in the health care sector after the passage of the health care reform bill.

While the process has made some investors nervous (and we admit the results concern us longer-term as well), resulting in poor recent performance and, in our view, oversold conditions, we maintain our view that the health care sector is positioned to outperform during the next several months.

Given its growth characteristics combined with defensive qualities, we believe the health care sector is the one group that may attract more investor attention in the current economic environment, which lacks the clarity some investors might be seeking.

Helping our confidence in the group, higher-dividend-yielding sectors seem to be more attractive as investors become increasingly frustrated with the low yields on many fixed income vehicles. Further, the large cash balances on health care balance sheets allow for the possibility of increased dividends and potentially more merger-and-acquisition activity, both of which we believe would be a tailwind for the group.

Clients can see our top-rated stocks in the health care sector.

Positive factors for the health care sector:

  • The aging population could provide a boon for the industry as an increasing number of Americans require more extensive drug treatments and medical care.
  • Americans are increasingly obese, which results in a greater need for medical attention due to the myriad of health issues that coincide with obesity.
  • Balance sheets in the health care sector remain flush with cash, boosting the possibility of an increase in share-enhancing stock buybacks and increased dividend payments while also increasing the possibility of mergers and acquisitions in the space.

Negative factors for the health care sector:

  • Government regulation will likely increase during the coming years as more seniors demand intervention in order to theoretically lower their out-of-pocket health care costs.
  • Nominal consumer spending on prescription drugs has been slowing.
  • Growth in consumer spending on health insurance has been trending lower recently—potentially putting managed-care shares at risk.
  • Medicare reimbursement rates are likely to fall under the Obama administration, which could hurt pharmaceuticals, HMOs and managed-care companies.
  • The new health care law could dampen profitability in some areas of the sector, although there is still uncertainty regarding the full impact of the bill.

Industrials: Marketperform
Although economic growth continues, and manufacturing seems to be leading the way as evidenced by solid Institute for Supply Management (ISM) Manufacturing Index and industrial production numbers, we believe we are entering a peaking phase of economic recovery that will result in the industrial sector's performance being more in line with the overall market.

Also tempering our view of the group is the fact that government and central bank stimulus efforts are slowly starting to be removed or allowed to end, which could temper growth in the industrials arena.

Having said that, we're not overly negative on the group, as both China and the United States—along with many other countries—have targeted improving infrastructure as a major recipient of stimulus funds that have yet to be fully spent. We also believe that, as a result of tight purse strings in corporate offices during the past year, companies are about at the point where they need to start replacing and updating equipment—potentially benefitting the industrials sector.

However, while the falling dollar provided a bit of a tailwind to the internationally exposed industrial sector throughout much of 2009, we have seen some stabilization in the greenback that could continue—potentially hurting reported profitability of the group, at least modestly.

Clients can see our top-rated stocks in the industrials sector.

Positive factors for industrials:

  • Corporate balance sheets remain relatively cash rich, which could help push management to invest in new, more-efficient equipment in order to help offset production losses due to layoffs.
  • Unfilled orders in the machinery space are relatively high, which could help support orders going forward.
  • Lending standards, while still tight, have started to loosen, which should help boost capital spending.
  • New orders of machinery versus inventories have spiked, which has been a good sign for industrial production in the past.
  • Business confidence is improving, typically a good leading indicator of future equipment expenditures.
  • Inventories in much of the manufacturing area are extremely low, leading to the possibility of a demand-inspired rebuilding phase.

Negative factors for industrials:

  • Business spending continues to be restrained, as executives remain cautious, although confidence appears to be returning slowly, which could be beneficial if the trend continues.
  • Access to credit, in many cases, remains limited—especially in the smaller business arena, which dampens spending plans.
  • The dollar has shown signs of at least temporarily stabilizing, which, if sustained, would remove a tailwind that's helped performance during the past year.

Information technology: Outperform
After some volatility to start the year, the technology sector settled in a bit and traded roughly in line with the overall market during most of the first quarter. In our view, this action allowed the sector to digest many of the gains seen in 2009 and work off some of the froth that had built up. As a result, we are returning our rating on the sector to outperform, as we continue to believe the sector's underlying fundamentals look good.

Companies who have underinvested in capital during the past couple of years appear to be starting to loosen their purse strings—likely looking to tech as a place to invest first. These investments are typically attractive because they tend to increase companies' efficiency and productivity at all levels. As a result, companies can produce more with fewer workers, which allows companies to cut back on costs and potentially expand margins.

Additionally, balance sheets in the sector are solid, with large cash balances and relatively low debt. This enables the group to increase dividends and pursue mergers and acquisitions that might help performance.

These factors, along with relatively favorable outlooks from numerous companies during the recent earnings reporting period, lead us to boost our rating on the tech sector to outperform.

Clients can see our top-rated stocks in the information technology sector.

Positive factors for information technology:

  • Growth in business investment in technology is now outpacing growth in total business investment.
  • Real tech investment has been below trend for several years, which could bode well for the future of the sector as spending returns to more normal levels.
  • Retail sales in electronic and appliance stores have been rising rapidly as a percentage of total sales as of late.
  • We're starting to see banks loosen lending standards, which could slowly help to revive capital investments.
  • Producer prices for semiconductors are moving higher, which could help support profitability. Corresponding with this, sales of semiconductors have moved strongly higher.
  • New computer orders have spiked of late, while inventories remain anemic.

Negative factors for information technology:

  • Increasing global competition, especially in low-labor-cost environments, will likely continue to compress profit margins.
  • We see signs that companies remain hesitant to increase capital spending.

Materials: Underperform
As the economic recovery matures, we believe some of the more economically sensitive areas of the market, such as materials, may start to lag. We think investors might become a bit more cautious as the prospects for continued improvement in the economy become more uncertain. As a result of this, and the nice run the group had to start the year that we think is a bit extended, we are downgrading the materials outlook to underperform from marketperform.

We do remain relatively optimistic on the global economic recovery, but also recognize that the stock market is forward-looking and that a lot of that recovery story appears to be priced into these stocks. Additionally, stimulus measures around the world are starting to be removed, and several emerging economies, which tend to be heavy users of materials, are tightening monetary policy, which tends to dampen economic activity and soften demand for materials.

Additionally, dollar weakness helped boost prospects for the materials group in 2009, but continued stabilization or a further rebound in the US currency would likely put a dent in the picture for the materials group.

Finally, with the materials sector heavily dependent on the outlook for commodity prices, our view that several commodities are due for a pullback after speculation pushed prices beyond what the fundamentals may justify helps to support our move to downgrade the sector.

Clients can see our top-rated stocks in the materials sector.

Positive factors for the materials sector:

  • Scrap steel prices have started to turn higher, which could help support the materials sector.
  • Global government stimulus is reflationary in nature, which could help the materials sector's performance.

Negative factors for the materials sector:

  • Chinese demand for processed commodities might be slowing as technological advances and a build-out of production facilities allow the country to produce more of its own materials. China recently transitioned from a net importer of steel to a net exporter.
  • Global steel production is growing, which could pressure prices in the near future.
  • Some central banks are reining in some of their stimulus measures.
  • In China, due to the government's rapid and, at times, somewhat hasty response to the global downturn, overcapacity has started to become an issue. For now, aluminum production appears to be the best example of that, although there's a risk that other areas of overcapacity could develop.
  • Chinese steel inventories have spiked, which could pressure prices in the near future.
  • China has already started to pull back on their stimulus measures, concerning investors who are banking on the growing nation to pull the world along with it.

Telecommunications: Marketperform
The telecommunications sector could become more attractive as investors look for higher-yielding areas of the market to help offset the low interest rates on many fixed income investments.

That said, the sector has continued to lag to start the year—making us question the attractiveness of the group, although we have seen some rebound during the past month. While we're holding our marketperform rating for the time being, we're watching developments in the group closely.

However, with the economic recovery likely flattening out to some degree, the less cyclical (economically sensitive) telecom sector will probably become somewhat more attractive.

The telecom sector has lost a lot of its traditional defensive appeal, in our opinion, as the group has moved much of its business model from the stable, regulated fixed-line business to the more variable, consumer-dependent wireless arena, while also dealing with an onslaught of competition from a variety of sources.

But, for now, the high yields being paid in the group and exposure to a shrinking, but still not insignificant, fixed-line business help keep it tilted toward the defensive side of the ledger.

Competition for the spending dollars of increasingly budget-conscious consumers remains fierce, and telecom has certainly not been immune to bargain-hunting shoppers. However, we are seeing signs that American consumers might not be as moribund as feared, and recent retail sales results are relatively decent and could help boost the telecom group.

In contrast to the technology sector, companies in the telecom sector have a large amount of debt on their balance sheets, which causes us to continue to look at this group with caution. However, we are seeing credit markets loosen slightly, which might allow the sector to roll over that debt and continue to invest in their businesses.

Clients can see our top-rated stocks in the telecommunications sector.

Positive factors for the telecommunications sector:

  • Wireless demand appears to be increasing as more communication and media devices move to the wireless arena, although some of that movement is likely to take away from fixed-line revenue.

Negative factors for the telecommunications sector:

  • Consumer spending on telecom versus total spending is now falling, which has typically coincided with underperformance for the sector.
  • Net profit margins are declining for the telecom sector as competition squeezes margins.
  • The telecom sector has the highest debt-to-equity ratio of any nonfinancial sector. That could hurt the group in this tight credit environment.

Utilities: Marketperform
While we are certainly not in love with the utilities sector and recognize there are numerous issues facing the group, we believe the group may start to be more attractive as investors search out areas of the market that pay a bit more in dividends as they become disenchanted with the low yields being paid by fixed income instruments. As a result, we are holding our rating on utilities at marketperform.

As mentioned above, we believe the forward-looking stock market might begin to discount a more sluggish phase of recovery, leading to more defensive, higher-yielding sectors becoming relatively more attractive to investors. The relatively "boring" nature of sectors such as utilities may become more attractive should volatility increase.

Further encouragement for the sector comes from developments in Washington. It appears that many of the onerous and costly environmental regulations that were being discussed are at least on hold for the near future, helping to provide some more certainty for the sector.

As mentioned, all is certainly not perfect with the sector. With housing still struggling, the demand for utilities continues to be relatively weak, which would seem to limit growth. This problem is exacerbated by the capacity growth we've seen in segments of the sector, which could pressure margins going forward.

However, we believe there are just barely enough positives for the utilities sector to warrant a marketperform rating for the time being.

Clients can see our top-rated stocks in the utilities sector.

Positive factors for the utilities sector:

  • Dividend-paying stocks remain attractive as long as yields on conservative fixed income products remain relatively low. Should economic prospects decline further than currently expected, defensive, dividend-paying issues could become more attractive.
  • After the run in the market since March 2009, a correction might be in order, which could temporarily benefit the defensive utilities group.

Negative factors for the utilities sector:

  • Utilization rates of electric and gas utilities have moved down modestly while production has spiked—indicating a potential oversupply issue that could pressure margins.
  • Electricity prices have weakened as a result of dampened demand during the global recession.
  • Capacity growth has been rising, which has been a sign of underperformance of the sector in the past.

About Schwab Sector Views
Schwab Sector Views were developed by Charles Schwab & Co., Inc.'s ("Schwab's") Investment Strategy Council. Schwab Sector Views are Schwab's outlook on the 10 broad sectors as classified by the widely recognized Global Industry Classification Standard groupings. The GICS structure is comprised of sectors, industry groups, industries and sub industries. Schwab Sector Views are at the sector level. While Schwab Equity Ratings and Schwab Industry Ratings utilize a disciplined approach that evaluates all stocks (Schwab Equity Ratings) or all industries (Schwab Industry Ratings) in the same manner, Schwab Sector Views uses analytical techniques and methods that vary from sector to sector.

Explanation of columns in chart: The benchmark weights are provided for reference and represent each sector's market capitalization weight in its index.

Schwab Sector Views represent our current outlook on each particular sector. All investors should be well diversified across all sectors. However, investors who want to tactically overweight or underweight particular sectors may want to consider our three- to six-month relative performance outlook reflected in this column. These views refer only to the domestic equity portion of investors' portfolios.

How should I use Schwab Sector Views?
Investors should generally be well diversified across all sectors, at or near the respective sector market capitalization weights relative to the overall market (benchmark). However, investors who want to make tactical shifts to those weights with a goal of outperforming the overall market can consider the Schwab Sector Views as a resource. Schwab clients can also use the Stock Screener or Mutual Fund Screener to help identify buy and/or sell stock or mutual fund candidates in particular sectors that they may be underweighted or overweighted in their portfolios.

How to use Schwab Sector Views in conjunction with Schwab Equity Ratings
Sector diversification is an important building block in portfolio construction. Schwab Sector Views are expressed in terms of outperform, marketperform and underperform, and can be particularly helpful in evaluating and monitoring your portfolio composition. Schwab Sector Views can be useful in screening new stock purchases and in identifying portfolio holdings for possible sale. A review of sector weights coupled with individual stock concentration should be a critical measure of equity portfolio diversification. Schwab Equity Ratings provide an objective and powerful approach for helping you select and monitor stocks.

Important Disclosures
Schwab Sector Views do not represent a personalized recommendation of a particular investment strategy to you. You should not buy or sell an investment without first considering whether it is appropriate for you and your portfolio. Additionally, you should review and consider any recent market news.

Indexes are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly. The graph indicates returns based on gross returns. If commissions and other costs are deducted, the performance would be lower.

The GICS was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's. GICS is a service mark of MSCI and S&P and has been licensed for use by Charles Schwab & Co., Inc.

The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.

The information contained herein is obtained from sources believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation or a recommendation that any particular investor should purchase or sell any particular security. Schwab does not assess the suitability or the potential value of any particular investment. All expressions of opinions are subject to change without notice.


May. The Markets Are Hot. The Sun is Shining.

by Natalie Pace.

Includes my Hot News on Cool Stocks List.

What a Party! (Unless You Are Goldman Sachs).

May 3, 2010

General Stock Market Performance

Monday, 1.2.2008

Monday, 1.2.2009

Monday 1.4.10

Monday, 5.3.10

Gains 2-yr, 1-yr & 5 mo.

Dow: 13,044.12

Dow: 9,034.69

Dow: 10,430.69

Dow: 11,151.83

-15% & +23% & +7%

Nasdaq: 2,609.63

Nasdaq: 1,632.21

Nasdaq: 2,294.41

Nasdaq: 2,498.74

-4% & +53% & +9%

S&P: 1,447.16

S&P: 931.80

S&P: 1,115.07

S&P: 1,202.26

-17% & +29% & +8%


Wall Street Highs/Lows in the New Millennium:

Index

Low

High

Dow Jones Industrial Average

6,547 (3.9.09)

14,164 (10.9.07)

NASDAQ Composite Index

1,114 (10.9.02)

5,060.34 (3.10.00)

Hot News on Cool Stocks Highlights
726% gains on U.S. Gold!
NASDAQ Outscored the Dow Jones Industrial Average, 40% to 15%, in 2009
72% of the positions listed in 2008-2010 are in the money. Woo hoo!
Gold Tops stocks, real estate, bonds and T-Bills Over the Last 10 Years… (see below chart)
Real Estate Lost -12.4% in 2009.

Compare those returns to the returns of stocks, real estate, bonds, Treasury bills and gold over the last 30 years.

Market Update:
We’re in the money! The NASDAQ is up 9% on the year and 53% since January of 2009! Woo hoo. People are starting to feel good again… A little, until they notice how many are out of work. And still others who are giving homes back to the bank. Economists will say that unemployment is a lagging indicator – that the economy comes back first, and then jobs. Few mention the new wave of foreclosures and short sales. Fewer still talk about the massive amount of banks that are failing every day.

I’m excited for Americans who were so devastated a year ago, when the Dow was trading in the 6500 range. However, although I am an optimist by nature, I have a lot of skepticism about this "jobless recovery." Below are just a few reasons why this Great Recession is different. There are many, many reasons.

Some Troubling Facts about the Jobless Recovery
1. Bank Failures: There were 25 bank failures in 2008,140 in 2009, and 64 so far this year, according to the FDIC (as of May 3, 2010). That puts us on track to have 192 banks fail this year. This isn’t making headlines (yet), but it’s not just jobs that are lagging in this Jobless Recovery. Banks are imploding as well. In fact, daily, for the last four months, I’ve received notices of job listings at the FDIC. They are staffing up big time to try and keep up with all of the red tape created by having 229 banks fail in the last 28 months. That hasn’t happened on this magnitude in 80 years.

2. Foreclosures: Brad Sorensen, the CFA, Director of Market and Sector Analysis, Schwab Center for Financial Research, wrote on April 30, 2010, "There's still another down leg likely to come in the housing market as a new wave of option adjustable-rate mortgages (ARMs) reset and "shadow inventory" comes onto the market."

3. Nobody is Getting a Raise: Wage gains remain anemic—real hourly compensation for nonfarm business fell 0.6% year-over-year in the fourth quarter of 2009.

4. Real Estate Values: We have no idea how much further prices will fall. But we do know that another wave of foreclosures means reduced values.

5. Pension Plan Debt and Health Care Costs: 1/3 of our population is retiring. Many were made promises about getting to live off of the corporation for free and have all of their medical paid. Corporations are finding that they cannot keep the promises that they made. Airlines, auto manufacturers and more have had to use Chapter 11 to restructure debt, and sometimes, the companies emerge in such bad shape that they have to try it again.

I’m just as giddy about the gains as you are! And I do believe that we’ll continue to enjoy the seasonal surge of the Spring Rally, which typically tops off at the end of May.

However, for the last ten years, June has been, on average, a negative performing month. So, if you haven’t already rebalanced your nest egg, secured enough in the safe side, diversified properly, added a little more safe (depending upon your risk tolerance), this month is the month to do it. For more tips, read the two articles in this ezine, "How to Beat the Dow" and "Nest Egg Rebalancing Plan."

I outline easy as a pie chart nest egg strategies that work in bull and bear markets in my book, You Vs. Wall Street. If you really want to jumpstart your nest egg growth strategy and returns, you can join me for three days at the Get Rich and Enrich Investing Retreat on July 23-25, 2010. Walk in without a clue and/or with a cracked nest egg and walk out with a blueprint that works for the rest of your life.

To learn more about the retreat, go to the home page at NataliePace.com and click on the Get Rich and Enrich Retreat banner ad. If you are interested in attending, I encourage you to call 866-476-7442 or email info@NataliePace.com NOW. This retreat only has a handful of seats remaining, and the March Retreat was a sell-out! You’ll receive $600 off if you register with your spouse or a friend.

Track Record of our Reporting
While the markets are still down significantly since their high in October of 2007, the Hot News and Cooling Off lists below have a winning track record – in bear and bull market years. 86 positions listed below – 77% -- have delivered impressive gains over the past two years, even while the Dow Jones Industrial Average is trading lower than it was ten years ago! Only twenty-five of our listings went in the opposite direction of the reporting, which is quite impressive given the market gyrations of more than 7000 point swings since 2008. FYI: The trend of the Spring Rally is expected to continue until the end of May, and then, if this year tracks the historical trend, the summer doldrums and particularly the Hurricane Season could be hard on the markets.

Yes, many, but not all, of our top performers were shorts, which is why we added options training to the retreat. Remember that the trading portfolio should be equal to your experience, and should not be part of your nest egg. (The nest egg is money you earn while you sleep, not while you day-trade.) If you’re new, you should be using education or fun money, not your nest egg, to learn on. Take your profits early and often in these volatile, whip-sawing years.

4 out of 7 Company of the Year selections more than doubled.  My 2003, 2004 and 2007 Companies of the Year posted up to 9000% gains (Taser), up to 690% gains (Opsware) and up to 215% gains (Suntech Power Holdings), respectively, before we took them off of the list.  2009’s Company of the Year, U.S. Gold, had earned over 600% gains from its low (when we highlighted the company as a buy) as of April 15, 2010. MySpace, my 2006 Company of the Year, was a large part of News Corp’s success with shareholders that year.   So five out of seven Company of the Year selections were superperformers. That’s the kind of record that puts you on top on Wall Street.  (I launched my first publication on 11.15.02, and featured the first Company of the Year, Taser International, on 1.1.03.)

Some of my best picks include: U.S. Gold (UXG) +600+%, Google (GOOG) +585%, Opsware (OPSW) +690%, Rio Tinto (RTP) +145%, Sohu (SOHU) +150%, Suntech Power Holdings (STP) +107%, Taser (TASR) up to 9000% gains. Some of the best picks in 2008 and 2009 were put options – on the Cooling Off list -- which is why I added options training to my 3-day Get Rich and Green Investing Retreat. Look on the Cooling Off list for details on the incredible gains options investors enjoyed on Wells Fargo, Fannie Mae, Toll Brothers, KB Home, Novastar Financial and more there.

This stock newsletter was the first to list the following 911 alerts:

  1. 2008 Recession (Get Safe)
  2. Trim back on Faded Blue Chips in 2006
  3. Get out of Dodge (real estate) in 2005
  4. Google at the IPO! (May 2004)
  5. To get Fannie Mae and Freddie Mac out of your 401(k) in 2003

Market Movers:
The Federal Open Market Committee and Monetary Policy
The Fed funds rate continues to be "0 to ¼ percent." In the Federal Open Market Committee press release, the committee members state, "Growth in household spending has picked up recently but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly; however, investment in nonresidential structures is declining and employers remain reluctant to add to payrolls. Housing starts have edged up but remain at a depressed level."

That is Fed-speak for "We are doing everything to stimulate the economy, which should work eventually, but the situation is still rough, folks." Most of the Feds think that inflation is far enough away that Fed Fund rates will remain exceptionally low for an "extended period." There was one committee member who dissented to the language, and it is noteworthy that at the last two meetings and in the last two press releases, the Feds have included a detailed description of his dissent. I find the language of the last clause to be particularly troubling (highlighted in bold). "Thomas M. Hoenig…believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to a build-up of future imbalances and increase risks to longer run macroeconomic and financial stability, while limiting the Committee’s flexibility to begin raising rates modestly." An immodest raising of interest rates would be hard to take…

The next FOMC meeting takes place on June 22-23, 2010.

Advance Estimate GDP growth rates for 1Q 2010 were 3.2%, according to the Bureau of Economic Analysis. What caused the pullback from the 5.6% growth of the 4th quarter 2009? According to the BEA, "The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, and nonresidential fixed investment that were partly offset by decreases in state and local government spending and in residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased."

Second Estimate GDP growth rates for 1Q 2010 will be released on May 28, 2010 at 8:30 a.m. ET. These release days tend to be very active on Wall Street. For more BEA release dates, go to the BEA.gov website and be sure to visit the NataliePace.com calendar section often.

EDUCATIONAL OPPORTUNITES AND INFORMATION:
1. FOMC Information: Interested in reading the press release of the April 28, 2010 FOMC meeting for yourself? You can. The official Federal Reserve document is available online. Click on FOMC, or go to FederalReserve.gov to read!

The tentative FOMC meeting schedule for the 2009 calendar is: June 22-23 (Tuesday-Wednesday), August 10 (Tuesday), September 21 (Tuesday), November 2-3 (Tuesday-Wednesday), December 14 (Tuesday), January 25-26, 2011 (Tuesday-Wednesday).

2. Calendar Section: Conferences, Online Chats and more: Check out the Calendar section of NataliePace.com regularly. Be the first to know the dates of the mid-month Hot News on Cool Stocks Update and the publication date of our next ezine. Join me on BlogTalkRadio.com. Get more information on how to best use our articles in the FAQs article, located under the Investor Edu link on the home page of NataliePace.com.

Don’t miss the Pace and Prosperity Show with Natalie Pace on BlogTalkRadio.com,  Wednesdays at 9:00 a.m. PT.   There I interview experts on everything from gold, to health, to stocks, to bestselling books. Get real answers to your questions — anonymously (just pick a nickname when you call in). All of the shows are available for free as a Pod Cast. Just click on iTunes icon to access the library of over 25 shows available to you.

Get call-in and log-in instructions for the next show at BlogTalkRadio.com/NataliePace. This is a Q&A format, where you can call in or Facebook in your questions. Be sure to write down your most pressing questions now, and become a fan of Natalie Pace on Facebook at http://www.facebook.com/pages/Natalie-Pace/416616285568, so that we can interact on Facebook during the show.

3. Survey Results:
Each month we have three new surveys so that we can stay in touch with your needs and desires. Cast your vote on our survey page! This month we want to know what Mom really wants for Mother’s Day. Check it out to get your gift-giving right. And Moms, please weigh in so we know what to buy.

4. Euro interest rates: ECB rates are at 1.00% (main refinancing), 1.75% (marginal lending) and 0.25% (deposit facility). The next meeting and interest rate announcement is scheduled for April 22, 2010 at 2:30 p.m. CET. (May 6, 2010 after that.)

Hot Stocks List
Investors who "never pay retail," note that the BOLD highlighted stocks are trading at their 52-week lows or near the price featured in NataliePace.com’s article. This may be a good buying opportunity. (If the stocks are not highlighted, then in our estimation, this is not a good time to buy. Reasons are explained in the news commentary.) The companies that are listed below which are not highlighted may not be in a good buying range, but they appear to be poised to continue performing well (if you have already purchased them). There are never any guarantees in life, and all stocks are risk-based investments. Consult your certified financial planner before making any changes to your investment strategy. And remember that these "Stocks on Steroids" are not intended to be part of your nest egg strategy at all – not even for "pros." If you’ve never traded individual stocks before, this is your "fun" or "education" money. You should not stake your future on anything that you don’t have mastery over.

Hot News List (highlighted).  Be sure that you are buying low.
Blockbuster (BBI)
Sunpower (SPWRA)
Suntech (STP)

Profit-Taking (Please note that the current Spring Rally is expected to continue through May 30, 2010 – unless there is a very bad announcement):
Hoku Corp. (HOKU) +70%
LDK Solar (LDK) +39%
U.S. Gold (UXG) +726%

DELETIONS (Take your profits early and often):
None

HOT NEWS on COOL STOCKS LIST

Company NP owns? Symbol Price when featured

Price

5.3.10

Year High

Year Low

Gains since original feature

American Superconductor

No

AMSC

$30.70

$29.87

$43.73

$8.22

Flat

Read "The Sunny Side" Vol. 6, issue 3. AMSC should benefit from President Obama’s commitment to build a "a new smart grid to carry electricity from coast to coast." In fact, we know that AMSC is specifically on Obama’s mind, even though investors haven’t caught on yet.

President Obama mentioned American Superconductor by name in his weekly address of Nov. 21, 2009. In the official transcript, it is written: "If we can increase our exports to Asia Pacific nations by just 5%, we can increase the number of American jobs supported by these exports by hundreds of thousands.  This is already happening with businesses like American Superconductor Corporation, an energy technology startup based in Massachusetts that’s been providing wind power and smart grid systems to countries like China, Korea, and India.  By doing so, it’s added more than 100 jobs over the last few years." 

3Q earnings February 2, 2010: Revenues for the third quarter of fiscal 2009 were $80.7 million, a 95 percent increase over $41.3 million in revenues for the third quarter of fiscal 2008. AMSC generated GAAP net income of $5.2 million, or $0.11 per diluted share for the third quarter of fiscal 2009. This compares with a GAAP net loss for the third quarter of fiscal 2008 of $7.8 million, or $0.18 per share. Cash, cash equivalents, marketable securities and restricted cash at December 31, 2009 were $112.8 million. This compares with $141.1 million as of September 30, 2009 and $117.2 million as of March 31, 2009. The decline from September 30, 2009 was primarily due to timing issues related to customer payments. As of January 31, 2010, AMSC’s balance of cash, cash equivalents, marketable securities and restricted cash exceeded $135 million. AMSC continues to expect that it will be net cash flow positive for full-year fiscal 2009.

AOL

No

AOL

$23.00

$21.79

$27.00

$23.00

-5%

Read "AOL" from Vol. 6, issue 12.

1Q 2010 results showed a decline in advertising and subscription revenue, which prompted voters to pull back on their support. However, according to Chairman & CEO Time Armstrong, "AOL continues to make progress against our long-term objective of becoming an internet growth company. Our results highlight the accomplishment of our first goal in AOL’s turnaround which was to significantly reduce AOL’s cost structure."

To put this in context (and understand why AOL remains on the Hot News List), read the article written at the time of the IPO last December.

Blockbuster

No

BBI

$0.34

$0.34

$1.56

$0.24

--

Read "Blockbuster’s Second Coming" from Vol. 7, issue 5.

ENER1

No

HEV

$4.33

$4.26

$7.90

$2.75

Flat

Read "Life Begins with (Li) Lithium" from Vol. 6, issue 4. Ener1 develops and manufactures compact, high performance lithium-ion batteries to power the next generation of hybrid, plug-in hybrid and pure electric vehicles.

Annual report on 3.11.2010:

  • Reorganized and repositioned EV manufacturer THINK for full-scale production, took 31% equity stake and executed an exclusive supply agreement
  • Announced additional relationships with Volvo Cars, Japan Post, Nissan, Mazda, U.S. Army, HEPCO EV bus and Portland General Electric
  • Announced three smart grid demonstration projects with strategic partner ITOCHU Corporation
  • Completion of $118.5 million grant from the U.S. Department of Energy
  • Announcement of $69.9 million incentive package from the State of Indiana

Galaxy Resources

RISK: HIGH

(off the boards, thinly traded)

No

GALXF

$1.07

$1.10

$1.92

$1.00

+3%

Read "Should You Put the Brakes on Toyota" from Vol. 7, issue 2.

Take your profits early and often in this volatile marketplace. Anytime you’ve made 28% gains (or more) these are outstanding gains in just a few short months – especially on a thinly traded stock like Galaxy.

Green Dot

No

Not available

IPO

IPO

IPO

--

Read "IPO of the Year" from Vol. 7, issue 3. Check with your broker to see if you can be a part of this IPO. It is underwritten by J.P. Morgan, Morgan Stanley, Piper Jaffray and UBS. If you cannot participate in the IPO, then you can buy when Green Dot is traded on the public marketplace. No word, yet, on when exactly that will be. This is a "quiet" period for the company, when insiders are not allowed to talk to press.

If the public trading date occurs after May, it may be best to "wait and see" what the general marketplace does before buying in. That is because the Santa Rally has brought coal in the stockings of investors for too many years this past decade.

Hoku Scientific

Hawaii

RISK: HIGH

Yes

HOKU

$8.03

$2.00

(3.2.09)

$3.40

$14.55

$1.90

-58% &

+70%

Read "The Sunny Side," Vol. 6, issue 3 and "Solar Giants Tap a Small Hawaiian Company For Silicon," in the Oct. 2007 ezine, Vol. 4, issue 10.

On April 29, 2010, Hoku announced it had successfully produced polysilicon at its manufacturing facility in Pocatello, Idaho. HOKU operated the reactors continuously for approximately five days during the final phases of the commissioning procedure. During these live reactor runs, Hoku utilized trichlorosilane purchased from third-party suppliers. This is the same product that the Company plans to use during its initial commercial production runs this year.

 

This is an historic day for Hoku," said Scott Paul, president and chief executive officer of Hoku Corporation. "We have completed the first step in our planned production ramp-up and successfully manufactured our first batches of polysilicon. Importantly, this challenging, month-long commissioning process also allowed us to flex our operations team, and validate our training, systems and procedures. I am extremely proud of our team's accomplishment."

Hoku’s annual report is scheduled for June 2010.

LDK Solar

GREEN

Yes

LDK

$30.02

$4.94

(3.2.09)

$8.13

$76.75

$3.75

-73% &

+39%

Read the articles, "Green" in Vol. 6, issue 2 and "Solar Springs Up Again," in Vol. 5, issue 4.

LDK is benefitting from a 4-star rating from Motley Fool CAPS and lots of press from same in February.

3Q 2009 earnings on 11.23.09: Third quarter 2009 revenue was $281.9 million, compared to $228.3 million for the second quarter of fiscal 2009, and $541.8 million for the third quarter of fiscal 2008. Net income was $29.4 million, compared to a net loss of $216.9 million for the second quarter of fiscal 2009.

Annual report was issued on March 30, 2009. 4Q revenue was $304.6 million. Net loss was -$7.3 million. Has $384.8 million in cash and cash equivalents and $68.9 million in short-term pledged bank deposits.

LDK Solar ended the third quarter of 2009 with $67.8 million in cash and cash equivalents and $72.7 million in short-term pledged bank deposits.

MEMC Electronics

No

WFR

$11.99

$13.10

$73.56

$11.32

+9%

Read "The Sunny Side" Vol. 6, issue 3.

Acquisition of solar developer SunEdison (announced on 10.22.09) should start putting meat on MEMC’s bottom line in 2010. They now enter solar power generation with an A-list company in that field. Recovering after silicon re-pricing completely threw off their profit margins. Better times going forward.

2.3.10 4Q and FY results:

4Q highlights:

  • Net sales of $356.7 million - up 15.1% vs. previous quarter
  • Gross profit of $53.0 million - 14.9% of net sales
  • Operating cash flow of $19.4 million
  • Cash and investment balances of approximately $1 billion
  • Completed acquisition of solar developer SunEdison

MEMC's net loss for the fourth quarter was $7.1 million, or $0.03 per share, compared to a net loss of $64.6 million, or $0.29 per share in the 2009 third quarter and net income of $70.3 million, or $0.31 per share, in the 2008 fourth quarter.

Sunpower

No

SPWRA

$24.83

$16.94

$107.00

$18.50

-32%

Read "The Sunny Side" in Vol. 6, issue 3.

Sunpower panels are the most efficient in the world and have helped countless Solar Decathlon teams win the competition. This year’s #2 and #3 teams (Illinois and California) both used Sunpower panels.

Announced on March 11, 2010 that the company was awarded two grants totaling approximately $1.5 million from the California Solar Initiative Research, Development, Deployment and Demonstration (CSI RD&D) Program.  

FY earnings on 3.17.10: FY 2009 revenue of $1.524 billion, compared to $1.438 billion a year ago. Net income $33 million, compared to $90 million a year ago. Cash $616 million, compared to $472 million a year ago.

 

SunPower has more than 550 large public and commercial solar power systems installed or under contract, representing more than 450 megawatts of solar power generation.

 

March 29, 2010: SunPower Corp. acquired SunRay Renewable Energy, a leading European solar power plant developer with offices in Europe and the Middle East.

Suntech Power Holdings

No

STP

$14.26

$13.87

$49.60

$5.09

-3%

Read "The Sunny Side" Vol. 6, issue 3. The world's largest crystalline silicon photovoltaic (PV) module manufacturer. 2009 Earnings call (webcast) on March 4, 2010.

March 4, 2010 Full Year Earnings Report: Total net revenues were $1,693.3 million for the full year 2009. Total net revenues increased 23.4% sequentially to $583.6 million in the fourth quarter of 2009. Net income was $91.5 million or $0.53 per ADS. Cash, cash equivalents and short-term principal guaranteed investment was $1,034.0 million as of December 31, 2009.

Excellent earnings growth at 23.4% in the 4th quarter.

U.S. Gold

Colorado USA

RISK: VERY HIGH

Yes

UXG

$5.05

$.50 (10.20)

$2.66 (10.09)

$3.63

$7.04

$.38

-28% &

+726% &

+36%

Note: U.S. Gold is not producing gold at this time; is it a gold exploration company, based in Nevada. U.S. Gold is an exploration company, not a mining company, meaning that if they strike gold, the stock should spike and if they don’t, you could lose your investment. Very risky.

According to a statement released on March 1, 2010, U.S. Gold has a great new discovery of silver in their Mexico mine. "Drilling at El Gallo continues to return thick intersections of good grade that start at or near surface. To date, 95% of the holes drilled have encountered significant mineralization! We are extremely pleased with these results. Going forward we will continue with our large exploration program, publish an initial resource estimate during the second quarter and look to complete an preliminary economic analysis by year-end. Also, on March 15th and 16th US Gold will be taking a number of mining analysts to El Gallo in order to highlight what we feel is one of the best silver projects owned by an junior," stated Rob McEwen, Chairman and CEO.

Added to the S&P/TSX Global Gold Index and S&P/TSX Global Mining Index on 9.15.09.

If you believe in this CEO and company, you’ll want to make sure you have shares of U.S. Gold going forward. Gold should be a great hedge against inflation, which is predicted to become an issue once the economy starts to rebound (2010 and forward). Right now, the Feds are still a little concerned about deflation, but inflation could begin on the 12-24 month horizon.

This is an exploration company, not a mining company. They don’t produce gold at this time.

Began trading on the AMEX stock exchange on 12.11.06. (Also trades on the Toronto Stock Exchange.) Listen to my feature interview with CEO and Chairman Rob McEwen on BlogTalkRadio.com. You can review my original Q&A with Rob McEwen and interview on U.S. Gold in Vol. 4, issue 2. (Feb. 2006).

Recently Deleted Companies 2008-2010:
Echelon +20%, GE, +13% and +18%, Google, +15% and +31%, Johnson & Johnson +10%, LDK Solar +18%, Microsoft +12%, Satcon +13%, Suntech +35%, Trina Solar +22%, World Water & Solar +22%. Genentech (8.1.08) +40%. Altair (deleted on 8.7.08) posted gains of +3% and +57%. Zoltek (deleted on 8.18.08) lost 30% before being removed. LDK Solar was deleted on 9.2.08 with 46% and 29% profits. U.S. Gold profit taking on 11.6.08 amounted to 72% gains. Conergy gains of 51% were taken on 11.7.08. American Superconductor posted 50% gains between 12.1 and 1.14.09. MEMC Electronics (WFR) had 21% gains between 12.1 and 12.15.08. STP had gains of 69% between 12.1.08 and 1.2.09. SQM profits 20% on 1.14.09. WWAT was deleted on 2.1.09 with -62% losses. On 2.15.09, AMSC had gains of 65%, MEMC Electronics 26%, Sociedad de Quimica y Minera 48% and U.S. Gold 432%. Citigroup gains of 42% on 3.15.09. Genentech was deleted on 3.15.09 with gains of 29%. OSI Pharmaceuticals was deleted on 3.15.09 with 7% gains. Rio Tinto was deleted on 3.27.09 with gains of 67%. On 3.27.09, the following companies were in the money: ALTI (+48%), AMSC (+51%), eBay (+24%), GE (+40%), HOKU (+38%), LDK (+46%), MEMC (+44%), PBW (+35%), SATC (+42%), SQM (+76%), STP (+211%), TSL (+207%), U.S. Gold (+456%) and WBK (+25%). Profit-taking 4.13.09: ALTI +209%, AMSC +70%, HOKU +32%, LDK +64%, PBW +42%, SQM +42%, UXG+418%. Deleted 4.13.09: eBay, +45%, Eurox -11%, GE +47% & -56%, Google +9%, Maxwell +25%, MEMC Electronics -33% & +49%, Microsoft +24%, SATC +67%. STP +262% & -64%, TSL +216% & -67%, Westpac +42% & -22%. Deleted 5.4.09: FMC Corp. with 19% gains. PZD with losses of -39%. SPWRA with 19% gains. TREMX with 50% losses. WSDT with losses of -59%. Deleted 5.15.09: SQM with gains of 38% and 62%. Deleted 5.31.09: EMKR with losses of 13% and 88% and Melco with losses of 8%. Ener1 with gains of 11% and 17%. Deleted 7.20.09: Conergy with losses of -52-98%. Deleted Smith and Nephew on 8.15.09 with gains of 17% and losses of 28%. Deleted the New Zealand dollar currency ETF by Wisdom Tree with 36% gains on 12.12.09. 12.18.09: Deleted Ener1 with 22% gains and Satcon with 29% gains. Deleted 1.11.10: KCI with 88% gains!

Recently Deleted from the Hot News list:
None

Stocks to Watch
Some of these are great companies that we’re thinking of adding to the Hot List and some are stinkers we’re thinking of adding to the Cooling Off List. Read carefully to identify which is which!  

Note that right now most of our favorite companies are on the Watch List. Getting the price right is as important as picking the right company. Never pay retail!

Recent Additions:
Netflix (NFLX)

Recent Deletions:
None

Company

NP owns?

Symbol

Price when featured

Price

5.3.10

Year High

Year Low

Gains since original feature

Allscripts Misys Healthcare Solutions

No

MDRX

$19.94

$20.22

$22.21

$9.70

Read "Health Care Reform" Vol. 7, issue 4.

Altair Nano-technology

No

ALTI

$1.16

$0.58

$2.94

$0.56

Read "Life Begins with (Li) Lithium" Vol. 6, issue 4. 1Q2010 earnings will be announced on May 6, 2010 at 11:00 a.m. ET.

Altair was not on the list of battery makers receiving grants from the Obama Administration.

Was a contender in the lithium ion battery marketplace, but has lost market share and prestige.

Big Lots

No

BIG

$30.28

$38.30

$41.42

$19.49

Read "Discount Designer Stores," from Vol. 5, issue 6.

Canadian Imperial Bank

RISK: Medium

No

CM

$65.88

$73.88

$108.79

$30.64

Refer to the "Banking on Iraqi Dinars" article in volume 5, issue 2 for details. Financial markets are under duress. Avoid most banks for now. Canada’s banks were ranked #1 by the Milken Institute for global capital in 2009; Australia was #2.

Citigroup

RISK: HIGH

No

C

$2.26

$4.41

$5.43

$2.55

One of the troubled, bailed out banks…

eBay

No

EBAY

$16.80

$23.91

$32.10

$9.91

Etail should perform better than retail in the recession, but eBay is priced higher than I’d want to pay in a vulnerable "jobless" recovery.

Eldorado Gold

No

EGO

$10.56

$15.54

$15.40

$6.90

 

Read "Investing in Gold" from Vol. 6, issue 9. Annual report on March 18, 2010:

Net income of $102.4 million, down from $164 million in 2008 (-38%). Revenue $361 million for 2009, 25% increase over $288 million in 2008.

"This was a very successful quarter and year for Eldorado," stated Paul Wright. "We had record quarterly production with strong performance from both our Kisladag and Tanjianshan gold mines. And with the successful completion of our acquisition of Sino Gold and the continued development of our projects in Turkey, China and Greece, we are solidifying our position as one of the world's lowest cost gold producers. Our gold sales revenue increased by 29 percent to $358.5 million as we benefited from increased production and gold prices. Looking ahead, we anticipate 2010 production of 550,000 to 600,000 ounces of gold at a cash operating cost of between $385 and $400 per ounce."

First Solar

No

FSLR

$144.76

$146.91

$207.51

$98.71

 

See "Solar Springs Up Again," article in Vol. 5, issue 4.

First Solar joined S&P500 on 10.02.09.

First Solar uses cadmium telluride instead of silicon to transfer sunlight into useable energy. This was a huge competitive advantage when silicon was hard to get at a reasonable price. That is shifting, however, for two reasons. Silicon manufacturing is heating up and costs are lowering as a result, and cadmium telluride isn’t as abundant or as efficient a power source as silicon. Read the article for more details.

FMC Corp.

No

FMC

$51.36

$64.30

$80.23

$28.53

 

Read "Life Begins with (Li) Lithium" from Vol. 6, issue 4 and "Should You Put the Brakes on Toyota," from Vol. 7, issue 2. FMC is the real winner of the stimulus package because they supply lithium to the battery makers. On the other hand, however, that is not all that this company manufactures and sales have been off in 2009. Waiting for a better buy-in point. FYI: FMC just sold $300 million in senior notes. Check with your CFP if you’re interested in purchasing. There may be opportunities in the secondary marketplace.

Annual report 2.4.10: Revenue was $2,826.2 million, a decrease of 9 percent as compared with $3,115.3 million in the prior-year period. Net income was $228.5 million, 25 percent lower than $304.6 million in the year-earlier period. Regarding the outlook for 2010, Pierre Brondeau, FMC president and chief executive officer, said, "Despite the expected tempered, uneven recovery in global markets, we anticipate delivering a year of strong performance. For the full year 2010, we expect earnings before restructuring and other income and charges of $4.35 to $4.75 per diluted share.

Ford Motor Company

No

F

$9.65

$13.30

$14.57

$4.71

 

Read "How Cap and Trade Saved Ford" from Vol. 6, issue 4. Ford is making cars people want to drive, but it owes over $100 billion dollars. Be careful with any investment here. Has recalled some commercial vehicles in China, as of January 29, 2010.

Google

No

GOOG

$393.69

$530.60

$629.51

$384.69

See Vol. 6, issue 5 for "Hulu Your Heroes" Be careful not to buy in too high.

1Q 2010 on 4.15.10: Google reported revenues of $6.77 billion for the quarter ended March 31, 2010, an increase of 23% compared to the first quarter of 2009. GAAP net income was $1.96 billion, compared to $1.42 billion in the first quarter of 2009.

Cash – As of March 31, 2010, cash, cash equivalents, and short-term marketable securities were $26.5 billion. No debt.

On a worldwide basis, Google employed 20,621 full-time employees as of March 31, 2010, up from 19,835 full-time employees as of December 31, 2009.

Netflix

No

NFLX

$101.99

$101.99

$109.70

$36.25

 

Read "Blockbuster’s Second Coming" from Vol. 7, issue 5.

Orocobre

No

OROCF

$1.70

$2.16

$2.72

$0.99

Read "Should You Put the Brakes on Toyota" from Vol. 7, issue 2.

PowerShares Wilderhill Clean Energy ETF

No

PBW

$9.78

$10.31

$11.76

$5.78

Read "The Sunny Side" Vol. 6, issue 3.

Rio Tinto

No

RTP

$49.20

$47.92

$218.15

$30.00

Gold, copper and other commodities mining. Based out of UK. Mines worldwide, but focused greatly in Australia. Annual general meeting is May 26, 2010 in Melbourne, Victoria. 4:1 stock split took place on April 30, 2010.

Ross Stores

No

ROST

$35.90

$57.02

$58.93

$34.74

Read "Discount Designer Stores," from Vol. 5, issue 6. Expect annual report around April Fool’s Day. Sales have been impressive, especially given the "jobless recovery."

Sociedad Minera y Quimica de Chile

No

SQM

$36.36

$36.32

$43.93

$30.70

 

This is a great company that manufactures silicon for the solar and IT industry. Looking for a better buy-in, closer to or under $35.

Read the article, "Treasure Hunting," in Vol. 5, issue 10 and the article "Life Begins with (Li) Lithium," from Vol. 6, issue 4. SQM announced on Sept. 30, 2009 that prices for lithium carbonate and lithium hydroxide will be reduced by approximately 20% from current levels for the renewal of all its supply contracts. The purpose is to accelerate demand recovery, create incentives for research of new lithium uses, and contribute to the sustainable long-term development of the lithium market.

2009 FY Earnings (on 2.25.2010): Revenues for 2009 totaled US$1,436.9 million, representing a decrease of 16.0% over the US$1,774.1 million reported in 2008. Earnings for the year 2009 of US$327.1 million (US$1.24 per ADR), a decrease of 34.8% with respect to 2008, when earnings totaled US$501.4 million (US$1.91 per ADR).

Patricio Contesse, SQM's Chief Executive Officer, stated, "The impact of the economic downturn took a toll on volumes in our Specialty Plant Nutrition, Iodine and Lithium business lines. Additionally, average 2009 prices in our fertilizer and lithium businesses were lower than those recorded during 2008. The Company did, however, benefit from higher average iodine prices and significantly higher potash volumes. While the overall results achieved in 2009 were lower than in 2008, net income and revenues recorded for 2009 were the second highest in Company history. In relative terms, SQM also outperformed counterparts in its main businesses and in particular those in the fertilizer industry."

Sohu (Chinese Co. ADR)

Beijing, China

Small Cap

RISK: MEDIUM

No

SOHU

$46.54

$48.49

$72.29

$46.62

 

See NataliePace.com ezines, Vol. 3, issue 4 and Vol. 2, issue 9 for feature articles on Sohu. Dr. Charles Zhang, the Chairman and CEO of Sohu.com, is one of our CEOs of the year in 2007. Read the articles in Vol. 4, issue 1. You can watch a Q&A with Dr. Charles Zhang in an exclusive interview I did on the Forbes.com Video Network.

Trina Solar Ltd.

No

TSL

$35.12

$26.31

$31.18

$7.06

Read "The Sunny Side" Vol. 6, issue 3. Please note that TSL had a 2 for 1 stock split on 1.20.10. That is why the price looks dramatically different. Investors will note that they should now have twice as many shares…

FY earnings 2.24.10:

Total net revenues were $845.1 million, an increase of 1.6% from 2008. Gross profit was $237.2 million, an increase of 44.2% from 2008. Gross margin was 28.1%, compared to 19.8% in 2008. Net income for the full year was $97.6 million, an increase of 59.0% from 2008.

Dec. 1, 2009: Chinese solar power company Trina Solar Ltd. said it signed a new sales agreement to supply about 8 megawatts of photovoltaic modules to the Chinese domestic market, as part of its efforts to expand sales in China. Shipments began in November and are to continue through the end this month. Prices were not released. The Golden Sun program in China aims to install 20 MW of solar power capacity in every province, according to the Associated Press.

VMWare

No

VMW

$52.91

$62.69

$63.81

$25.27

Read "Health Care Reform" Vol. 7, issue 4.

Westpac

No

WBK

$73.54

$129.00

$133.55

$68.75

Issued it’s full-year results on Nov. 4, 2009. Go to Westpac.com.au to access.

Net profit of $3,446 million, down 11% from a year ago. Not bad. Australian banks were the best in the world during recession, with Canadian Banks scoring high as well.

 

Cooling Off Stocks List (may be Poised for a Decline in Share Price).
Note: The companies listed in bold have recently been added to this cooling off list and/or may be currently poised for a decline in value. Investors who have them in their portfolio should read the recent news and consider whether it is time to sell and take profits, dump losses, short the position and/or simply weather the storms, while keeping the company in their long-term portfolio. At any rate, always consult your certified financial partner before making adjustments to your portfolio. (Again, note that the stocks on this chart are expected to go DOWN in price.)

Highlighted Companies (Cooling Off List):
None

(Why buck the trend? For the last 10 years, March-May have been positive months…)

DELETIONS:
None

Company

NP owns?

Symbol

Price when added to Cooling Off List

Price 5.3.10

52-week High

52-week Low

Gains/Loss

American Express

Yes

AXP

$16.98

$41.56

(11.16.09)

$47.20

$42.48

$9.71

+278% &

+14%

Read the article "American Express," from Vol. 6, issue 2. 1Q 2010 Earnings on 4.20.10: Revenues were down 11%. To $ 6,606. Net income was income of $885 million, up 103 percent from $437 million a year ago. $21 billion cash on hand. Debt is $44 billion and liabilities total $130 billion. (Market value of AMEX is $56 billion.)

"Cardmember spending was up 16 percent, rebounding strongly from the recessionary lows of last year," said Kenneth I. Chenault, chairman and chief executive officer. "Credit metrics also continued the improvement that began in the second half of 2009."

Apple Computer

No

AAPL

$132.07

$200.38

(2.12.10)

$266.35

$272.46

$119.38

+202% &

+33%

See archived ezine Vol. 4, issue 2, for the feature article, "Apple Chips."

2Q 2010 earnings on 4.20.10 were amazing: posted revenue of $13.5 billion, down from $15.65 billion in the 1st quarter (and $9.08 billion a year ago). Net quarterly profit of $3.07 billion (down from $3.38 billion in 1Q and almost double $1.62 billion of a year ago).

Apple sold 2.94 million Macintosh® computers during the quarter, representing a 33 percent unit increase over the year-ago quarter. The Company sold 8.75 million iPhones in the quarter, representing 131 percent unit growth over the year-ago quarter. Apple sold 10.89 million iPods during the quarter, representing a one percent unit decline from the year-ago quarter.

 

"We’re thrilled to report our best non-holiday quarter ever, with revenues up 49 percent and profits up 90 percent," said Steve Jobs, Apple’s CEO. "We’ve launched our revolutionary new iPad and users are loving it, and we have several more extraordinary products in the pipeline for this year."

 

"Looking ahead to the third fiscal quarter of 2010, we expect revenue in the range of about $13.0 billion to $13.4 billion and we expect diluted earnings per share in the range of about $2.28 to $2.39," said Peter Oppenheimer, Apple’s CFO. (FYI: This will be the second Q in a row with lower earnings.

Insider selling is in the range of $300. Consensus insider selling from multiple directors and officers, including CFO and COO. I Love Apple. At a better price in a more stable marketplace, with a better succession plan to Jobs. Seems like the insiders agree.

Applied Materials

No

AMAT

$12.76

$13.51 (9.15.09)

$14.00

$14.61

$8.19

+10% &

+4%

Leadership, product line and recessionary actions were strong, but AMAT transitioned to solar just when sales dropped off. Weathering the storm is imperative in the meantime. Investors should be aware of the high P/Es of this company, which is hard to justify in a contracting environment. With almost $2 billion in cash and marketable securities, AMAT is in a position to regroup and recover in the future. With any luck and with the worldwide emphasis on clean energy, this is a temporary setback.

1Q 2010 earnings call on Wed., February 17, 2010. FY loss (released on 11.11.09): For fiscal year ended Oct. 25, 2009, the company reported net sales of $5.01 billion and a GAAP net loss of $305 million or $0.23 per share.

Baidu

No

BIDU

$183.15

$488.00

(2.12.10)

$708.99

$718.00

$229.55

+387% &

+45%

Leading Chinese website for search (similar to Google). 113 P/E is high for a revenue stream so tied to advertising (during a global recession). (Advertising revenue models tend to suffer greatly in recessions and Google’s P/E is only 30, by comparison, right now.)

The primary Risk Factor for Baidu is: We derive revenues primarily from online marketing services, which accounted for 98.9%, 99.8% and 99.9% of our total revenues in 2006, 2007 and 2008, respectively.

 

Berkshire Hathaway

No

BRK.A

$97,000

$114,000 (2.12.10)

$117,430

$125,252

$84,600

+21% &

+3%

See archived ezine Vol. 6, issue 8, for the feature article, "The Oracle Turns 80."

Added to the S&P500 on February 12, 2010. BRK.B did an unprecedented thing. Buffett made the stock affordable, by splitting it 50:1. Anyone can now buy in the $45-$78 range. Many tout triumph, but they may not be aware of the exposure that BRK has to financial giants, Wells Fargo and American Express, among other challenging industries (including insurance).

Capital One Financial

No

COF

$22.29

$42.04

(1.11.09)

$46.13

$47.73

$16.57

+207% &

+10%

Read the articles "IPO of the Year," and "American Express," from Vol. 7, issue 3 and Vol. 6, issue 2. COF has a lot of liabilities that are highlighted in the Stock Report Card of the IPO of the Year article from volume 7, issue 3. If you read the SEC filngs and realize how much COF has off the books, how much money they’ve had to take from the Feds and much liability they may have for mortgages that second parties want them to be responsible for, you’ll know why COF is on the Cooling Off List. Additionally, S&P rating is BBB with negative outlook.

Fortress Investment Group

No

FIG

$3.57

$5.37 (8.13.09)

$5.25

$8.30

$1.02

+47% &

-2%

1Q 2010 results will be reported on May 6, 2010 before the market opens.

Annual report on Feb. 25, 2010: For the year ended December 31, 2009, GAAP net loss was $909 million versus a loss of $1,221 million for 2008. Excluding principals’ agreement compensation, full year 2009 GAAP net income was $43 million, up from a net loss of $266 million in 2008 (meaning that the principals at FIG took almost a billion, even though the fund lost money for investors and shareholders).

At December 31, 2009, FIG had $0.7 billion of assets (excluding cash and cash equivalents) in our principal investments segment, compared to $0.7 billion (excluding cash and cash equivalents) at December 31, 2008. During the fourth quarter of 2009, we increased commitments to our principal investments by $1 million and funded $7 million of our commitments. We had $131 million of unfunded commitments to our principal investments as of December 31, 2009.

Assets under management for the hybrid private equity funds was $3.3 billion at December 31, 2009 compared to $2.3 billion at December 31, 2008. Cash and cash equivalents are down to $197 million from $263 million a year ago.

Daniel H. Mudd, currently member of the Fortress board of directors, will become the firm's new CEO effective August 11, 2009. George W. Wellde has been elected to Fortress' Board of Directors.

Read the articles, "Cherry Picking the Cherry Bombs" (Vol. 5, issue 12) and "Money Grows on Wisdom Trees," from Vol. 4, issue 3.

On 9.22.09: dividend was canceled by Board.

Intel

RISK: LOW

No

INTC

$16.66

$20.25 (9.1.09)

$23.26

$25.29

$12.06

+39% &

+15%

Intel is a great blue chip. Sales are off 7%, however and net income is off by 17% from last year. Annual report Jan. 14 2010: For 2009 Intel posted revenue of $35.1 billion. The company reported full-year operating income of $5.7 billion, net income of $4.4 billion and EPS of 77 cents. The company generated more than $11 billion in cash from operations and paid cash dividends of $3.1 billion.

Maxwell Labs

No

MXWL

$18.05

$14.64

$21.81

$4.50

-19%

Read "Life Begins with Lithium" from Vol. 6, issue 4.

Full Year earnings results were released on Feb. 18, 2010. Lots of stock granted to insiders (board directors and executives) on 2.17.10 (free stock).

Total revenues were $101 million, versus $78 million a year ago. Net loss was $23 million, compared to $15 million a year ago. Cash is at $30 million, up from $20.5 million a year ago. $17 million in debt, with $5 million due in the near future, and $24 million owed on accounts payable. (Uh oh!)

Medtronic

No

MDT

$33.35

$42.44

(2.12.10)

$44.13

$46.10

$24.06

+32% &

+4%

Medtronic’s Infuse Bone Graft product has been at the center of the debate of some controversial deaths, and has investigated by a Congressional Panel, the Justice Department, the SEC and other national, state and local governance officials for issues related to the use of this product and others. Read the earnings report for a complete list of the complaints and current status. The company reports that on August 21, 2009, the Department of Justice decided not to intervene at this time but may intervene at any time for good cause based upon a Court Order entered on August 28, 2009.

MGM Mirage

No

MGM

$26.79

$16.41

$100.50

$5.10

-39%

Get more information in Vol. 5, issue 10 in the "(No) Viva Las Vegas" article.

4Q and Full Year 2009 issued on 2.18.10: The Company reported a fourth quarter diluted loss per share of $0.98, which includes the impact of a pre-tax non-cash impairment charge totaling $548 million, or $0.73 loss per diluted share net of tax, related to the Company’s undeveloped land holdings in Atlantic City. For the same quarter in 2008, the Company reported a diluted loss per share of $4.15, which included a non-cash goodwill and indefinite-lived intangible asset impairment charge of $1.2 billion, or $4.25 per diluted share net of tax, and a gain on repurchased debt of $87 million or $0.21 per diluted share net of tax.

 

  • Net revenue decreased 6% to $1.5 billion, compared to a 9% year-over-year decrease in the third quarter of 2009;
  • Casino revenue decreased 7%, partially offset by strong baccarat results during the quarter with baccarat volume up 44%;
  • Las Vegas Strip REVPAR(1) decreased 16% compared to the prior year quarter versus a 23% year-over-year decrease in the third quarter of 2009; and
  • Adjusted Property EBITDA(2) was $307 million, or down 8%.

EPS from continuing operations for the full year was a loss of $3.41 per diluted share compared to a loss of $3.06 per diluted share in 2008.

 

The Company’s outstanding debt balance (net of the $1.6 billion of excess cash) was $12.5 billion at December 31, 2009, down from $13.5 billion at December 31, 2008.

As previously announced, the Company is seeking amendments to its aggregate $5.55 billion of senior credit facilities which would, among other things, extend the maturity of a substantial portion of those credit facilities from October 3, 2011 to February 21, 2014. The Company has asked its lenders to provide their final approvals of the transaction by February 24, 2010.

Microsoft

No

MSFT

$29.64

$30.86

$30.53

$14.87

+4%

Read the "AOL" article from Vol. 6, issue 12 to review the Stock Report Card on Microsoft from December 2009.

Great blue chip (certainly better than Citigroup, Bank of America, AIG and GM were), if you buy at the right price. But revenue is off. Q1 2010 earnings report (on 10.23.09): Windows Revenue is off by 39%, down to $2,620 million from $4,278 in 2008 1st Q. Operating income is off 52%, down to $1,463 from $3,059 a year ago… Nintendo’s WII is the gaming device of choice (and X-Box shipments were down to 2.1 million, from 2.2 million). "Nongaming" entertainment revenue is reportedly off by 14% ($98 million). What’s nongaming entertainment? Remember Zune? Well, that is one of the "PC hardware products" that is decreasing in sales. (Did it ever sell at all?) You get the picture. When revenue is down by 14% across the board, and the strongest season – holidays – are predicted to limp along and favor the competition (WII), and anti-trust law suits are still being battled, best not to buy Microsoft at its 52-week high.

Sears Holding

Yes

SHLD

$52.93

$98.06

(1.11.10)

$122.36

$124.96

$49.80

+231% &

+25%

Sears is up on Jim Cramer’s "appliance" picks from his January 8, 2010 show, not real earnings or outlook… (Remember: Jim also recommended Bear Stearns before it went bust, too.) Chairman Eddie Lampert has been dumping shares en masse, to the tune of over $376 million. Consensus insider selling…

Read the articles, "Cherry Picking the Cherry Bombs" (Vol. 5, issue 12) and "Discount Designer Stores," article (Vol. 5, issue 6). Sears is one of the largest, oldest retail chains in the U.S, and formerly, was as American as baseball and apple pie. These days, however, Sears is more of a hedge fund, which might help to explain why you’ve been trying to get that appliance repaired (under warranty) for months or been waiting for a replacement for your coffee pot for so long that you’ve taken up drinking tea. Almost all of the board directors at Sears are in the investment business, not the retail business. In fact, board director Emily Scott, a TV station founder, is the only person on the board without significant investment experience. No one on the Sears board has any experience at all in retail.

Still don’t have a CEO. Bruce Johnson has been the interim CEO for well over a year. New CFO started October 2008, right before the preparation of the annual report began. The former CFO Miles Reidy decided that he needed to spend more time with his family than to put is name on the 2008 annual report. Another big red flag.

Full year earnings report on 2.23.10: Revenues of $44 billion in 2009 are down from $47 billion a year ago and $51 billion in 2007. Net income came in at $235 million, which is better than last year’s $53 billion, but only about a quarter of the net income of 2007, which was $826 million. Sears doesn’t provide pensions to current employees, but the cost of their legacy pension obligations was $170 million in 2009. Sears expects to pay $275 million to pensions in 2010 and $535 million in 2011. Sears Canada sold its headquarters, adding $74 million to the top line in 2009. Hedge fund losses were $67 million.

Debt: short term of $325 million, with long term debt of $1.6 billion. S&P gives a rating of BB- to Sears.

Taubman Centers REIT

No

TCO

$24.74

$34.55 (2.12.10)

$44.94

$45.00

$21.85

+82% &

+30%

Read the article, "Global Recession," from Vol. 6, issue 6 in June 2009.

Annual report on Feb. 9, 2010: Net income allocable to common shareholders for the quarter ended December 31, 2009 was $0.07 per diluted common share (EPS), versus a loss of $1.90 per diluted share for the fourth quarter of 2008. EPS for the year ended December 31, 2009 was a $1.31 loss versus a $1.64 loss for the year ended December 2008. Results for the fourth quarter of 2009 included $38.5 million of litigation charges related to Westfarms (West Hartford, Conn.), of which the company's share was $30.4 million. In addition, the 2009 annual results were impacted by the previously announced $2.5 million restructuring charges and $166.7 million impairment charges (or $160.8 million at the company's share) relating to The Pier Shops at Caesars (Atlantic City, N.J.) and Regency Square (Richmond, Va.).

Consensus insider selling.

Time Warner

No

TWX

$24.44

$33.88

$50.70

$17.81

+39%

Read the article, "Hulu Your Heroes," from Vol. 6, issue 5 in May 2009.

Full Year 2009 earnings on Feb. 3, 2010. Full-year Revenues declined 3% from 2008 to $25.8 billion. Net income $2.5 billion, compared to a loss of $13.4 billion a year ago. Long term debt and other liabilities: $23 billion (not including pension costs).

Toyota Motor Company

No

TM

$77.05 (2.12.10)

$77.69

$91.97

$51.79

flat

Read "Should You Put the Brakes on Toyota" from Vol. 7, issue 2. Sales fallout from the January 2010 floor mat and accelerator recall, which halted sales and affected 4.8 million (or more) vehicles, should show up on the interim earnings report on or about June 24, 2010. Look at price/viability going forward after that date. (If Toyota wasn’t such a strong leader in the auto manufacturing world, this company would be on the Cooling Off List until June.)

Wells Fargo

No

WFC

$20.05

$29.21

(10.15.09)

$33.88

$44.69

$7.80

+67% &

+15%

See "Wells Fargo’s Incredible Exploding Earnings" in Vol, 5, issue 9, and "Wells Fargo’s Great Depression," in Vol. 4, issue 12. Annual report will be issued at the end of Feb. 2010.

FY 2009 on 1.20.10: Record net income of $12.3 billion. Record revenue of $88.7 billion. You can read the full report at : https://www.wellsfargo.com/invest_relations/earnings. Should you believe this, however, when most of the non-performing loans and other problems are off the books, and the Federal Open Market Committee Chairman Ben Bernanke is not releasing information on which banks are receiving which kind of support from the FOMC? Here’s a link to the Testimony that Chairman Bernanke gave on February 24, 2010 to Congress. The most interesting reading is at the bottom, in the section entitled, "Federal Reserve Transparency," where he states, "An appropriate delay would also allow firms adequate time to inform investors through annual reports and other public documents of their use of Federal Reserve facilities." This indicates that the public has not been properly informed at this time, but might be in the future, after an appropriate delay, which indicates that the earnings reports you are reading by this bank and others have a good deal that is not transparent in them.

Wells Fargo Chairman takes early retirement:
Dick Kovacevich stepped down as chairman and a director at the end of 2009.

Wynn Resorts

No

WYNN

$95.42

$91.88

$176.14

$18.06

-4%

Check out the article, "(No) Viva Las Vegas" in Vol. 5, issue 10.

Annual earnings on 2.26.10: FY revenue was up 2% to $3 billion. Net income was $39 million, compared to $210 million a year ago. 4Q 2009 results: Net revenues for the fourth quarter of 2009 were $809.3 million, compared to $614.3 million in the fourth quarter of 2008. The revenue increase was driven by a 29.6% increase in revenues at Wynn Macau and a 35.7% revenue increase from our Las Vegas operations as the 2009 fourth quarter included a full quarter contribution from Encore. Net loss was $5.2 million.

Our total cash balances on December 31, 2009 were $2.0 billion. Total debt outstanding at the end of 2009 was $3.6 billion, including approximately $2.5 billion of Wynn Las Vegas debt and $1.1 billion of Wynn Macau debt.

Yahoo

No

YHOO

$15.00

$16.95

$18.02

$9.42

+13%

Read the "AOL" article from Vol. 6, issue 12 to review the Stock Report Card on Yahoo from December 2009.

Recently Deleted in 2008/2009:
Fannie Mae was deleted on 2.11.08 after losing -50% and -56% of its share price value, and then again on 7.1.08, after losing another -40%. (Both puts more than doubled.) Novastar Financial (NFI) was deleted on 6.2.08 with -95% share price implosion. Sears Holding Corp. was deleted on 7.1.08 with 64% gains on the put option. Wells Fargo was deleted on 7.1.08 with 83% gains on the put. Apple was deleted on 8.1.08 with 35% gains on the put. The Google put, deleted on 8.1.08, was another great performer, with over 50% gains. First Solar had gains of over 32-34%. Mentor was deleted on 9.30.08 with 75% gains on the put option (-17% on the share price); Medicis was deleted with gains of over 37% on the share price (down direction). Boston Properties, Las Vegas Sands and Macerich were deleted on 10.9.08 with gains of 16-30%, 66% and 28-42% respectively. Wells Fargo was deleted on 11.6.08 with 35-50% gains on the put and again on 12.1.08 for 50-70% gains. American Express posted 35% gains in just 30 days, between 2.1.09 and 3.2.09. First Solar was deleted on 8.13.09 with 33% gains. KB Home with 74% gains and Toll Brothers with 51% gains on 10.01.09.

 

IMPORTANT DISCLAIMER (PLEASE READ):
Please note: NataliePace.com does not act or operate like a broker. We report on financial news, and are one of the most trusted independently owned and operated financial news corporations in the U.S. This article is intended to educate and inform individual investors, and, thus, to give investors a competitive edge in their personal decision-making. The publicly traded companies mentioned in this article are not intended to be buy or sell recommendations. ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies.

Investors should NOT be using the Hot News on Cool Stocks list or the Cooling Off list to trade their nest eggs. Your retirement plan should reflect a long, safe strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.

IMPORTANT DISCLAIMER: Information has been obtained from sources believed to be reliable however NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.


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The NataliePace.com Calendar section features conferences, teleconferences, retreats, educational opportunities, cultural events, galas, market events and online chats with executives and VIPs. Stay plugged in! We add online chats, article updates, teleconferences, etc. as they are booked, so be sure to visit the calendar section early and often.  Below is only a partial listing of what’s happening this month.

See below for just a few of the amazing educational and networking opportunities that world-class organizations are offering for you. To access links to the event website and registration, go to the Calendar section at NataliePace.com.

Natalie Pace on CNBC
Thursday, May 6th, 2010
10:20AM through 10:30AM ET
I'll be on CNBC talking about the Hottest and Safest places for your nest egg. See you on air then/there!

Mother's Day
Sunday, May 9th, 2010
Mother! Wonder what she really wants? Check out our online survey.

Radio Show. Hot Countries for Your Investment $$.
Wednesday, May 12th, 2010
9:00AM through 9:30AM PT
Join Natalie Pace on her Pace and Prosperity Show as she interviews Dr. Marc Miles. Dr. Miles is the editor of the 2006 Index of Economic Freedom, the former Sr. economist of the Heritage Foundation and a respected global strategist. His specialty is emerging countries. Learn which countries are hot and which are bound to cool off.

James Cameron keynote. Las Vegas, NV
Sunday, May 16th, 2010
Academy Award winning director James Cameron keynotes the CA World 2010, education, training and networking conference on IT for all of your IT team members.

Agape Revelation Conference, LA, CA
Thursday, May 20-22, 2010
Reverend Michael Bernard Beckwith and Dr. Rickie Byars Beckwith delight, empower, awaken, create and celebrate in this 3-day conference. Dance in the rhythm and celebrate unconditional love and transformation.

GDP 1Q 2010 report (2nd)
Thursday, May 27th, 2010
8:30AM through 8:45AM ET.
The U.S. Dept. of Commerce, Bureau of Economic Analysis (BEA.gov) releases its 2nd estimate report on GDP growth in the 1st quarter of 2010. Final results for the 4th quarter of 2009 came in at 5.6%. Advance results for 1Q 2010 were 3.2% growth.

Natalie Pace at Borders, Las Vegas, NV
Saturday, June 19th, 2010
2:00PM through 3:30PM PT
Natalie Pace will lead a fun, interactive, visioning game that asks (and answers) the question, "How would you live if you had all the money in the world." Come play with us!

Father's Day!
Sunday, June 20th, 2010
Wonder what Dad really wants? Check out our survey on the home page.

Summer Solstice
Monday, June 21st, 2010
Celebrate the dog days of summer, when the Earth is tipped closest to the Sun.

Women in Business National Conference and Business Fair. Baltimore, MD
Tuesday, June 22nd, 2010
Sheila Johnson, billionaire and first African American woman to build a luxury hotel, will keynote this conference. Sheila also owns the Washington Wizards, so hit her up for NBA tix! Bestselling author Suzy Welch will keynote the following day.

FOMC Meeting
Tuesday and Wednesday, June 22-23, 2010
The Federal Open Market Committee meets to determine Federal Reserve policy in the U.S. Two-day meeting June 22-23, 2010.

Get Rich and Enrich Retreat, Santa Monica, CA
July 23-25, 2010
You spend hundreds of thousands learning how to earn money. Why not spend a fraction of that learning how to invest? 3 days in a boardroom setting, learning investing directly from Natalie Pace, sets you up for life. There are only a handful of seats remaining. Call 866-476-7442 to register NOW!

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VISION: To build a global community of investors through a worldwide website, seminars, radio, television and print partners.
GOAL: To provide high-quality, first-run, ethical financial news, information and education, presented in an entertaining format, across all media (television, radio, print and online).
MISSION: To provide the news, information and education investors need to make better choices and to make investing as much fun as shopping.
PHILOSOPHY: Member Mosaic. Piecing together a more complete picture of the publicly traded company, one tile at a time, by valuing firsthand consumer experience, conducting evaluations of the executive team and lining up the numbers of the publicly-traded company with its competitors in a Stock Report Card.
For more information on NataliePace.com contact us at
www.NataliePace.com, P.O. Box 1350, Santa Monica, CA 90406-1350 or 1-866.476.7442 (toll-free telephone number).

NOTICE: NataliePace.com is NOT a stock brokerage service, and does not operate or act as one.