Will JPMorgan Chase Move Higher?

With shares of JPMorgan Chase & Co. (NYSE:JPM) trading around $57, is JPM an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

JPMorgan Chase is a financial holding company that provides various financial services worldwide. The company is engaged in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, asset management, and private equity. Financial services companies like JPMorgan Chase are essential for well-functioning economies around the world

JPMorgan Chase announced a $13 billion settlement with the U.S. Department of Justice on Tuesday. The $13 billion sum is a record fine paid by a company to the federal government, but the settlement is also significant because it does not absolve the bank or its employees from any possible criminal charges. The Justice Department said that JPMorgan's toxic mortgages contributed greatly to the financial crisis and that JPMorgan employees knew they were selling mortgages to investors that did not meet guidelines.

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T = Technicals on the Stock Chart Are Strong

JPMorgan Chase stock has has done relatively well in the past couple of years. The stock is currently trading near highs for the year and looks poised to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, JPMorgan Chase is trading above its rising key averages, which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

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

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
JPMorgan Chase Options	19.76%	26%	24%

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

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

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

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

E = Earnings Are Mixed Quarter-Over-Quarter

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

	2013 Q3	2013 Q2	2013 Q1	2012 Q4
Earnings Growth (Y-O-Y)	-112.14%	32.23%	33.61%	54.89%
Revenue Growth (Y-O-Y)	-7.67%	13.67%	-3.57%	10.16%
Earnings Reaction	-0.01%	-0.30%	-0.60%	1.01%

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

P = Average Relative Performance Versus Peers and Sector

How has JPMorgan Chase stock done relative to its peers, Bank of America (NYSE:BAC), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), and sector?

	JPMorgan Chase	Bank of America	Citigroup	Wells Fargo	Sector
Year-to-Date Return	29.84%	32.73%	30.71%	29.43%	31.67%

JPMorgan Chase has been an average relative performer, year-to-date.

Conclusion

JPMorgan Chase is a bellwether in the banking space that forms an essential part of the United States financial system. The company announced a $13 billion settlement with the U.S. Department of Justice on Tuesday. The stock has done relatively well in recent months but is now trading near highs for the year. Over the last four quarters, earnings have been increasing while revenues have been mixed, which has produced conflicting feelings among investors. Relative to its peers and sector, JPMorgan Chase has been an average year-to-date performer. WAIT AND SEE what JPMorgan Chase does this quarter.

Mexico's Coca-Cola Tax Beats Bloomberg's New York Big Soda Ban

The U.S. and Mexico share more than a big stretch of border. They share a big waistline too. And some of what is plaguing Mexico's blossoming obesity problem is the great-tasting real sugar formula of Mexico's Coca-Cola. The New York Times called it The Cult of Mexican Coca-Cola. The problem is deeper than any one beverage and any one food.

Still, sweet drinks and junk food are a place to start. So Mexican President Enrique Peña Nieto has proposed taking a knife to the fat by taxing heavily sweetened soft drinks. That would combat the country's weight and diabetes problems, he claims. 

There's even a chance it will take effect. Mexico's lower House has approved the soft drink tax of 1 peso (8 US cents) per liter and a 5% excise tax on high-calorie packaged foods like potato chips, peanut butter and sweetened breakfast cereals. The Mexican Senate is expected to pass both measures. Still, a media campaign suggests otherwise.

It should be no surprise that Mr. Peña Nieto has angered some big players. Some of Mexico's biggest companies are involved. Take Femsa, which makes and distributes Coca-Cola and conveniently owns the Oxxo convenience stores. Femsa and Bimbo are two of Mexico's 19 largest public companies, according to Forbes 2013 list Global 2000 Largest Companies. Grupo Bimbo owns Sara Lee, Entenmann's, Boboli and Thomas' English Muffins. 

70% of Mexico's adults and 30% of its children are overweight or obese. That means it is overtaking the U.S., hardly an accolade. There is a corollary rise in chronic illnesses including adult-onset Type 2 diabetes. The latter effects an estimated 15% of Mexicans over age 20. The cost of weight-related illness to the country's public health system is said to exceed $3 billion a year.

But soda consumption in Mexico is especially bad, claiming the highest per-capita consumption in the world. The massive bottler, Coca-Cola Femsa SAB, operates in 10 countries. Femsa is already moping about the tax and its negative impact, grumbling that the proposed tax will cut its sales and even force cuts in its workforce.

Still, the company admits that consumers are likely to foot the bill. That may mean price increases of 12% to 15%. After all, these are sin taxes, excise taxes like those on alcohol, cigarettes and candy.

Although they are imposed on producers or sellers, they are almost inevitably passed on to buyers. They differ from sales taxes mostly by being more targeted. Suspect services can be targeted too. An example was the 10% tanning tax. It was projected to raise $2.7 billion over 10 years from America's 20,000 indoor tanning salons.

Projections may not prove true. All manner of studies are commissioned and debated too. Many are well-intentioned and may be rock-solid. Yet amid the rhetoric it can be hard to identify which are and which are not.

When New York's soda tax or soda ban was being debated, a study published in Health Affairs said experts estimated that a 15% cut in consuming sugared beverages among 25 to 64 year olds would prevent staggering numbers of deaths and serious illnesses, not to mention saving billions in medical costs. It is difficult to pooh-pooh such figures, particularly when the stakes seem so high. Yet money talks in any language.

As reported here—Mexico's Proposed Tax On Soda, Junk Food Opposed By Billionaire Beverage And Food Barons—Mexican companies that will be hurt by the tax have gone to the media. "You don't fight obesity with taxes," said full page anti-tax advertisements in Mexican newspapers. They blamed the tax on foreign influences, including New York's anti-soda Mayor Michael Bloomberg.

Of course, even the powerful Mr. Bloomberg failed against Big-Soda there. And Mexico is hardly New York. And while now the New York Soda Ban to Go Before State's Top Court, it may be that a soda tax in New York would have been far easier to swallow than a big soda ban. Like sugar.

You can reach me at Wood@WoodLLP.com. This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.

Hong Kong stocks fall after Fed taper, China data

HONG KONG (MarketWatch) -- Hong Kong stocks sold off early Thursday after the Federal Reserve decided to further taper stimulus, and after a final reading of China's manufacturing PMI contracted. The Hang Seng Index (HK:HSI) sank 1.5% to 21,815.04 in holiday-shortened trading. Tech stocks retreated, as Chinese PC maker Lenovo Group Ltd. (HK:992) (LNVGF) dropped 5.3%, failing to get a lift from news that it plans to acquire the Motorola handset business from Google Inc. (GOOG) for $2.91 billion as Lenovo aims for a bigger presence in the U.S. market. Software developer Kingsoft Corp. (HK:3888) (KSFTF) fell 1.9% and Internet giant Tencent Holdings Ltd. (HK:700) (TCTZF) dropped 1.5%. Casino stocks also declined. Sands China Ltds. (HK:1928) (SCHYF) , the Hong Kong-listed unit of Las Vegas Sands Corp. (LVS) , slipped 0.2%, despite financial results that showed Sands China's net income increased 40% year-on-year to $467 million in the fourth quarter. Melco Crown Entertainment Ltd. (HK:6883) (MPEL) slumped 3.2%, and both Wynn Macau Ltd. (HK:1128) (WYNMF) and MGM China Holdings Ltd. (HK:2282) (MCHVF) moved lower by 2.3%. On the mainland, the Shanghai Composite Index (CN:SHCOMP) gave up 0.5%.

Best Electric Utility Companies To Own For 2015

NEW YORK (TheStreet) -- On Wednesday I profiled 90 publicly-traded community banks in Community Banks With CRE Loan Exposures. My message to these banks is that they should take action to raise capital, trim noncurrent loans or consider merger opportunities.

On Thursday premarket we learned that the Portland, Ore., community bank Umpqua Holdings (UMPQ) will acquire the Spokane, Wash., savings and loan Sterling Financial (STSA) in a $2 billion deal.

Sterling is partially owned by private-equity firms Thomas H. Lee Partners LP and Warburg Pincus LLC with both having stakes of about 20.8%.

The deal is a combination of cash and stock valuing Sterling stock at a premium of 26% above its share price of Aug. 30 which was $24.20 and $2.18 in cash. A 26% premium puts the stock at $30.49. According to the FDIC Quarterly Banking Profile for the second quarter of 2013 Umpqua Holdings ended the second quarter with $11.79 billion in assets, a commercial real estate (CRE) to risk-based capital ratio of 376.8% and with their CRE loan commitments 55.3% funded. At the end of 2010 Umpqua had $11.67 billion in assets, a CRE to risk-based capital ratio of 423.9% with their CRE loan commitments a stressed out 86% funded. This bank has thus done a good job in reducing CRE exposures and in raising assets. [Read: Will Twitter Sell Its Soul Like Facebook Did?] Umpqua ($16.14) has a hold rating according to ValuEngine with fair value at $12.66, which makes the stock 27.5% overvalued with the stock just below its one-year price target at $16.44. The daily chart profile is negative with the stock trading below its 50-day simple moving average at $16.60. My annual and quarterly value levels are $15.37 and $14.18 with a monthly pivot at $16.72 and semiannual risky level at $18.02. According to the FDIC Quarterly Banking Profile for second quarter of 2013 Sterling Financial ended the quarter with $9.25 billion in assets, a CRE to risk-based capital ratio of 346.5% and with their CRE loan commitments 68.2% funded. [Read: Expiring Tax Benefits] At the end of 2010 Sterling had $9.5 billion in assets, a CRE to risk-based capital ratio of 349.8% with their CRE loan commitments a stressed out 91.8% funded. This bank has not grown since the end of 2010, but their CRE loan commitment pipeline is better managed.

Best Electric Utility Companies To Own For 2015: Steelcase Inc.(SCS)

Steelcase Inc. designs, manufactures, and distributes furniture systems and seating products, user-centered technologies, and interior architectural products primarily in North America, Europe, and Asia. Its furniture systems portfolio consists of panel-based and freestanding furniture systems; and complementary products, such as storage, tables, and ergonomic worktools. The company also provides seating products, including ergonomic chairs; seating for collaborative or casual settings; and specialty seating for specific markets comprising healthcare and education. In addition, its interior architectural products include full and partial height walls and doors. Further, the company offers workplace strategy consulting, lease origination, and furniture and asset management services. Additionally, it designs, manufactures, and sells visual communication products, such as static and interactive electronic whiteboards to primary and secondary education markets, as well as manu factures and sells steel and ceramic surfaces to third-party fabricators for use in the manufacture of static whiteboards. It also designs and sells surface materials comprising textiles, wall coverings, shades, screens, and surface imagings primarily to architects and designers for use in business, residential, healthcare, and hospitality applications. It sells its products to corporate, government, healthcare, education, and retail customers through the Steelcase, Turnstone, Details, and Nurture brands; and Coalesse and Designtex brands. The company markets its products and services through a network of independent and company-owned dealers, as well as directly to end-use customers. The company was founded in 1912 and is headquartered in Grand Rapids, Michigan.

Advisors' Opinion:

• [By Shauna O'Brien]

  Office furniture company Steelcase Inc. (SCS) announced on Thursday that it has named James Keane as its CEO.

  Keane will take over the role of CEO in March 2014, replacing long term CEO James Hackett. Currently, Keane is the company’s president and Chief Operating Officer where he works with product development, manufacturing, marketing, sales and distribution.

  Steelcase shares were mostly flat during Thursday morning trading. The stock is up 20% YTD.

Best Electric Utility Companies To Own For 2015: priceline.com Incorporated(PCLN)

priceline.com Incorporated, together with its subsidiaries, operates as an online travel company. The company provides price-disclosed hotel reservation services on a worldwide basis primarily under the Booking.com, priceline.com, and Agoda brand names; and price-disclosed rental car reservation services in approximately 80 countries through TravelJigsaw brand name. It also offers its customers the ability to purchase other travel services, including retail airline tickets; rental car days; vacations packages consisting of airfare, hotel, and rental car components; cruise trips; and destination services, including parking, event tickets, ground transfers, and tours through its ?Name Your Own Price? demand-collection system in the United States. In addition, the company offers an optional travel insurance package that provides coverage for trip cancellation, trip interruption, medical expenses, and emergency evacuation, as well as for loss of baggage, property, and travel d ocuments for air, hotel, and vacation package customers; and collision damage waiver insurance for rental car customers in the United States. The company?s other brands include Lowestfare.com, rentalcars.com, Breezenet.com, MyTravelGuide.com, Travelweb, hotelroom.com, and Car Hire 3000. priceline.com Incorporated was founded in 1997 and is headquartered in Norwalk, Connecticut.

Advisors' Opinion:

• [By Laura Brodbeck]

  Thursday

  Earnings Expected From: Priceline.com Incorporated (NASDAQ: PCLN), Ubiquiti Networks, Inc. (NASDAQ: UBNT), Bristow Group Inc. (NYSE: BRS), Groupon, Inc. (NASDAQ: GRPN), Scotts Miracle Gro Company (NYSE: SMG) Economic Releases Expected: US GDP, US Consumer Credit

  Friday

• [By Rick Munarriz]

  Briefly in the news
  And now let's take a quick look at some of the other stories that shaped our week.

  The future of smartphones may be a battle of megapixels. Nokia (NYSE: NOK  ) formally unveiled the Lumia 1020, a Windows Phone making waves for its 41-megapixel lens. The sky's the limit for priceline.com (NASDAQ: PCLN  ) . Morgan Stanley analyst Scott Devitt upgraded the fast-growing travel website operator, boosting his price target to $1,010. It's the first analyst to cross the four figures in setting a goal for Priceline. Tesla Motors (NASDAQ: TSLA  ) was tapped to fill next week's vacancy in the Nasdaq 100. The electric-car maker has tripled in recent months, making it one of the 100 largest non-financial stocks in the exchange.

• [By Dan Burrows]

  It’s hard to believe Priceline.com (PCLN) is one of the most expensive stocks by face value. After all, the online travel company was a classic example of the dot .com boom-and-bust.

5 Best Casino Stocks To Watch Right Now: Carbon Energy Ltd(CNX.AX)

Carbon Energy Limited focuses on producing clean energy and chemicals feedstock from Underground Coal Gasification (UCG) syngas. UCG is an alternative coal mining method that converts coal into gas underground using a series of boreholes operated remotely from the surface. The company also holds the right to explore and lease coal tenements in Wyoming, the United States, and Montana/North Dakota, the United States. In addition, it has a joint venture with Hema Endustri to develop UCG projects in the Amasra coal tenements located on the coast of the Black Sea in northern Turkey. The company was formerly known as Metex Resources Ltd and changed its name to Carbon Energy Limited in June 2008. Carbon Energy Limited is headquartered in Milton, Australia.

Best Electric Utility Companies To Own For 2015: China Mobile(Hong Kong)

China Mobile Limited, an investment holding company, provides mobile telecommunications and related services primarily in the Mainland China. It offers various services comprising local calls, domestic long distance calls, international long distance calls, domestic roaming, and international roaming. The company also provides voice value-added services, including caller identity display, caller restrictions, call waiting, call forwarding, call holding, voice mail, and conference calls; customer-to-customer messages and corporate short message services; and mobile Internet access services. In addition, it engages in other data businesses, which primarily include multimedia messaging services; color ring services that enable users to customize the answer ring tone from various selection of songs, melodies, sound effects, or voice recordings; and mobile reading, mobile gaming, mobile video, mobile payment/wallet, mobile TV, mobile market, and Internet data center services. F urther, the company offers telecommunications network planning, design, and consulting services; roaming clearance services; technology platform development and maintenance services; and mobile data solutions, and system integration and development services, as well as operates a network and business coordination center. Additionally, China Mobile Limited sells mobile phone handsets and devices. As of March 31, 2011, it served approximately 600.8 million customers. The company was formerly known as China Mobile (Hong Kong) Limited and changed its name to China Mobile Limited in May 2006. China Mobile was founded in 1997. The company is based in Central, Hong Kong, and is considered a Red Chip company due to its listing on the Hong Kong Stock Exchange. China Mobile Limited is a subsidiary of China Mobile Hong Kong (BVI) Limited.

Best Electric Utility Companies To Own For 2015: Assured Guaranty Ltd(AGO)

Assured Guaranty Ltd., through its subsidiaries, provides credit protection products to public finance, infrastructure, and structured finance markets in the United States and internationally. The company offers insurance, reinsurance, and credit derivative products that protect holders of debt instruments and other monetary obligations from defaults in scheduled payments, including scheduled interest and principal payments. It provides policies issued directly to the holders of insured obligations at time of issuance and those issued in the secondary market; and assumed reinsurance contracts written to third parties. The company insures various types of securities, including taxable and tax-exempt obligations issued by the United States or municipal governmental authorities, utility districts, or facilities; notes or bonds issued to finance international infrastructure projects; and asset-backed securities issued by special purpose entities. Assured Guaranty Ltd. markets its credit protection products directly to issuers and underwriters of public finance, infrastructure, and structured finance securities, as well as to investors in such debt obligations. The company was founded in 2003 and is based in Hamilton, Bermuda.

Advisors' Opinion:

• [By Sue Chang]

  Assured Guaranty Ltd. (AGO) �is forecast to post third-quarter earnings of 63 cents a share.

• [By Lauren Pollock]

  Assured Guaranty Ltd.'s(AGO) third-quarter profit more than doubled as the bond insurer recorded a gain tied to credit derivatives that masked a decline in net premiums earned. Shares rose 4.7% to $22.75 premarket.

Best Electric Utility Companies To Own For 2015: Gobimin Inc. (GMN.V)

GobiMin Inc., together with its subsidiaries, engages in the exploration, development, and exploitation of mineral properties primarily in Xinjiang, the People�s Republic of China. It principally explores for gold, copper, and nickel. The company holds a 70% equity interest in the Sawayaerdun gold project covering an area of approximately 1.7094 square kilometers in Xinjiang; and an 8% equity interest in the Yanxi copper property covering an area of approximately 21.67 square kilometers in Xinjiang. The company is based in Toronto, Canada.

Best Electric Utility Companies To Own For 2015: Opmedic Group Inc Com Npv (OMG.TO)

OPMEDIC Group Inc. provides healthcare related services primarily in Canada. It offers professional fertility services; laboratory and genetic services; diagnostic laboratory services, primarily prenatal screening; cytogenic tests designed to improve healthcare as an aid to prenatal screening and can be performed on peripheral blood, amniotic fluid, and bone marrow; and other cytology and genetic testing. The company also provides surgical and endoscopic services, such as general surgery, otorhinolaryngology, gynecology, urology, digestive endoscopy, and plastic and cosmetic surgery; and facilities for patients and surgeons. In addition, it offers sperm banking services. The company was formerly known as Repro Clinics Inc. and changed its name to OPMEDIC Group Inc. in October 2005. OPMEDIC Group Inc. was founded in 2001 and is headquartered in Mount-Royal, Canada.

Best Electric Utility Companies To Own For 2015: MELA Sciences Inc(MELA)

MELA Sciences, Inc., a medical device company, focuses on the design and development of a non-invasive, point-of-care instrument to assist in the detection of early melanoma. The company?s principal product, MelaFind, features a hand-held imaging device that emits multiple wavelengths of light to capture images of suspicious pigmented skin lesions and extract data. This product uses automatic image analysis and statistical pattern recognition to help identify lesions to be considered for biopsy to rule out melanoma. It consists of hand-held imaging device, which employs high precision optics and multi-spectral illumination; database of pigmented skin lesions; and lesion classifiers, which are mathematical algorithms that extract lesion feature information and classify lesions. MELA Sciences submitted the MelaFind pre-market approval application with the U.S. Food and Drug Administration (FDA) in June 2009 and is under review at the FDA. The company was formerly known as E lectro-Optical Sciences, Inc. and changed its name MELA Sciences, Inc. in April 2010. MELA Sciences, Inc. was founded in 1989 and is based in Irvington, New York.

Best Electric Utility Companies To Own For 2015: Saunders International Ltd(SND.AX)

Saunders International Limited designs, constructs, and maintains steel bulk liquid storage tanks and reservoirs in Australia. It constructs water reservoirs and petroleum tanks, as well as acid, bitumen, and chemical tanks. The company also offers facilities maintenance services, including risk based maintenance prioritizing, QA compliant inspection, decommissioning and recommissioning, in-house engineering analysis and workshop fabrication, mechanical repair, and preventative maintenance services. In addition, it provides steel fabrication services, which consists of rolling, pressing, abrasive blasting, and painting. The company offers its products to companies operating in petroleum, mining, mineral processing, manufacturing, water, and waste water sectors. Saunders International Limited was founded in 1951 and is headquartered in Condell Park, Australia.

Best Electric Utility Companies To Own For 2015: Dios Exploration Inc (DOS.V)

Dios Exploration Inc., a mineral research company, operates as a mining exploration and evaluation company in Canada. It focuses on exploring gold, uranium, diamonds, and a carbonatite with rare earth and niobium metals. The company holds interests in various properties comprising 5,300 mining claims covering approximately 2,750 square kilometers in the areas of central Quebec and the Otish Mountains. Dios Exploration Inc. is based in Montreal, Canada.

Best Electric Utility Companies To Own For 2015: Blackrock MuniYield Quality Fund Inc. (MQY)

BlackRock MuniYield Quality Fund, Inc. is a close ended fixed income mutual fund launched by BlackRock, Inc. It is managed by BlackRock Investment Management LLC and BlackRock Advisors, LLC. The fund invests in fixed income markets. It invests in long-term municipal obligations the interest on which is exempt from federal income taxes. The fund also invests in short-term securities. BlackRock MuniYield Quality Fund, Inc. was formed in 1992 and is domiciled in United States.

Twitter's Potential for Profit

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One of the leading topics these days, especially in regards to investing, is Twitter and its possible, impending IPO. Growth investor Chris Umiastowki of The Globe and Mail, shares his thoughts on this and what it, not only might mean for him, but also for you.

Earlier this month, the micro-blogging giant, Twitter Inc., filed its prospectus for an initial public offering. In my Strategy Lab columns, I've always said I would be interested in taking a very close look at Twitter if it went public.

Unfortunately for me, Twitter is taking advantage of a new rule that allows US companies with less than a billion dollars in revenue to file for their IPO confidentially. This hinders analysts, everyday investors and the press from digging into Twitter's financials or business strategy until shortly before the company's stock-market debut. Until I can see real numbers, I'll have to be satisfied reading the industry scuttlebutt and thinking about where Twitter's business may go in the coming years. Henry Blodget from BusinessInsider.com wrote just such a piece, referencing research from Wall Street analyst Robert Peck. It seems Twitter is expected to go public with a market capitalization of about $20-billion (US), which would represent 17 times next year's revenue estimate. This means, analysts think, admittedly based on very limited information, that Twitter will do about $1.2-billion in revenue in 2014. This seems like a crazy high multiple, until you realize that both Facebook and LinkedIn have gone public with similar forward revenue multiples, and both are posting excellent annual growth, which could justify their valuations.

I see tremendous potential for Twitter in the coming five to ten years. Out of nowhere, they've become the go-to place for any kind of headline, from technology, to finance, to Hollywood entertainment and gossip, to politics. Before Twitter, I found most of my industry-specific headlines from websites such as Yahoo Finance or by subscribing to the RSS feeds of websites that I liked reading. Twitter is superior, in my opinion, because it allows me to follow all the websites I love, but also lets me follow specific people, who will share interesting news that I'd have missed otherwise. Twitter also represents a well-organized, constantly updated flow of what's going on right now.

People care deeply about news and information in their areas of interest. I think this has more value than the kind of personal updates most people post on Facebook. It keeps people coming back.

I think Twitter should have excellent monetization opportunities. Need to hire for a specific role? Promote a tweet to people who follow Twitter accounts related to the topic in question. Want to tell the world about a new product? Whether it be recruiting, product advertising, or brand awareness, Twitter is built around users who follow other users, and that information reveals a lot about a person's likes and interests. I think this should drive incredible growth in advertising. It might also drive subscription-based revenue for firms who need to use Twitter's data to analyze trends or generate other useful analysis. The team of people who run the company on a full-time basis can surely come up with better monetization strategies than I can.

Consider that Twitter has only 200 million active users, as of February, and is expected to post revenue of $1.2-billion next year. I have to wonder whether we could see ten times that level of revenue inside of ten years. If so, I think it means there is powerful upside potential in the stock.

As a long term investor, I'm very interested in seeing if Twitter can go from dominant in the headlines to dominant in making money from the headlines. Right now they are the clear leader. With good execution, I suspect the company could make more money than LinkedIn ($27-billion market capitalization) and perhaps as much as Facebook ($115-million market capitalization).

Once I see the financials, I'll have a better idea of whether or not I want to pull the trigger on a Twitter share purchase. If I do, my intention would be to hold for a decade or longer. As with anything quite new, things can change. Twitter could lose out to a newer, better way of getting quasi real-time information on what matters to people. Or they could be outgunned by a company like Google via their social network, Google+. I'd have to keep a close eye on whether the opportunities I've described here are indeed materializing. I'd look to sell only when the reasons I bought were no longer valid.

I'd also have to accept, as always, that a stock like Twitter is bound to be hugely volatile. I might invest at one price and see the stock plummet 50% at some point. If you can't stomach something like that, please don't invest. But to me, I'm very interested in taking the risk on short-term volatility when I think there is an opportunity for a multibagger over the next decade.

Read more from the Globe and Mail here…

Netflix, Inc. (NFLX) Q4 Earnings Preview: What To Watch?

Netflix, Inc. (NASDAQ: NFLX) will post its fourth-quarter 2013 financial results and business outlook on its investor relations website on Jan.22, 2014, at approximately 1:05 p.m. Pacific Time. The company will host a live video discussion about its financial results and business outlook at 2:00 p.m. Pacific Time.

Netflix is the world's leading Internet television network with more than 40 million members in 40 countries enjoying more than one billion hours of TV shows and movies per month, including original series.

Wall Street expects Netflix to earn 66 cents a share, according to analysts polled by Thomson Reuters. The consensus estimate implies more than five fold increase from 13 cents it earned last year. The company expects fourth quarter earnings of 47 to 73 cents a share.

[Related -Netflix, Inc. (NASDAQ:NFLX): Can Netflix Trump Amazon.com, Inc. With New Plans?]

Netflix's earnings have managed to top Street view thrice in the past four quarters, with upside surprises in the range 6.10 percent to 200 percent.

Over the past three months, the consensus estimate increased significantly, 20 cents, indicating bullish expectations from the Street. One analyst has raised profit view of the company in the last 30 days.

Quarterly revenue is expected to rise 23.3 percent to $1.17 billion from $945.24 million in the same quarter last year.

Subscriber additions remain the key metric for Netflix, especially in domestic region. Investors would be focusing on the growth in its U.S. streaming subscriber base. It appears to be on the path to adding approximately 5 million subscribers per year for the foreseeable future. Netflix added 1.3 million U.S. subscribers in the third quarter and ended September period with 31.1 million.

[Related -Why I'm Eyeing Airline Stocks]

Netflix expects fourth quarter domestic streaming members of 32.7 to 33.5 million and paid members between 31.1 and 31.8 million. The company expects fourth quarter net additions to be flat with last year, and to expand its contribution margin about 400 basis points year-over-year (YoY) to about 23 percent. The unit is set to generate revenue of $731 million to $741 million and profit of $165 million to $177 million.

Moreover, the Street will look at how the company's international business is faring. The company recently launched in Netherlands after UK/Ireland and Latin America.

For the third quarter, international net additions were way up from the prior year at 1.4 million new members. Netflix sees continued momentum and about 1.3 million net additions for the fourth quarter, ending 2013 with 10.5 million international members.

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Netflix predicts international membership of 10.1 to 10.9 million in the fourth quarter, with paid members between 9.1 and 9.7 million. The division is projected to generate revenue of $210 million to $224 million. However, given increased investments, the segment would post a loss.

Netflix has been adding original and exclusive content to its streaming library, which seems to be paying off. TV series such as House of Cards, Lilyhammer, and Arrested Development are drawing a lot of audiences, resulting in higher sign ups.

The fourth quarter saw the premiere of its inaugural second season of Lilyhammer. It also launched its first animated original series with Dreamworks Animation, Turbo F.A.S.T.

During the quarter, Netflix and CBS announced a content licensing agreement in which all eight seasons of the SHOWTIME drama "Dexter" will become available for Netflix members in the United States.

The company plans to double its content investments in 2014. Coming to Netflix in 2014 will be second seasons of House of Cards, Orange is the New Black, Derek and Hemlock Grove.

Further, the company is improving streaming experience. It recently rolled out profiles features, allowing households distinct "profiles" for different members or viewing tastes within their home. This enables Netflix to provide a much more personalized experience for its members.

The key focus on the conference call would be the Net Neutrality rules and its impact on the company. Shares of Netflix have fallen as much as 5 percent after a federal appeals court's decision to strike down the FCC's net neutrality rule, which prohibits wireline service providers from discriminating against certain types of data traffic.

If this portion of FCC rule is gone, then streaming services such as Netflix and Amazon may need to pay higher fees to ISPs such as Verizon (NYSE:VZ) as their services consume heavy bandwidth. Moreover, Netflix and Amazon.com, Inc. (NASDAQ: AMZN) may need to change their pricing structure; otherwise, they need to incur heavy losses, lose customers or hurt margins. Investors may look at Netflix's strategy to counter this development.

The company may also be questioned over its new plans, which is supposed to rival Amazon Prime. Netflix is experimenting a $6.99 a month plan that allows only one video stream to be watched at once, and a $9.99-a-month plan that allows three streams at one time.

Netflix' moves surprised Wall Street, which was expecting the company to increase the price. This is a significant aspect of the long-term bull thesis on the stock and is needed to offset rising content costs. The Street may eager to know the traction of new plans with customers.

In addition, the Netflix may be surrounded with questions over competitive trends and its plans to partner with U.S. pay-TV operators to expand its domestic streaming business. The fourth quarter outlook would also be a focus point.

For the third quarter, Los Gatos, California-based Netflix's profit soared to $31.8 million or 52 cents a share from $7.7 million or 13 cents a share last year. Revenues for the quarter grew to $1.11 billion from $905.1 million last year.

NFLX stock, which traded in the 52-week range of $96.59 to $389.16, trades 83 times its forward earnings. They have dropped 6.5 percent since the last quarterly report but surged 240 percent in the last year.

Another big pay day for Viacom CEO

SpongeBob SquarePants' boss soaked up plenty of compensation and stock gains in 2013.

Viacom CEO Philippe Dauman, whose vast cable network empire includes MTV, BET and Nickelodeon, home to TV's wettest cartoon character, received compensation valued at nearly $37.2 million last year, up 11% from 2012's $33.5 million.

His pay package includes a $16.9 million bonus, stock valued at $10.4 million and stock options worth $6 million. Perks included personal use of corporate aircraft valued at $370,000.

Dauman, 59, has been CEO since September 2006, and his annual compensation packages have been among the largest of any publicly held company for several years. In 2011, he received compensation valued at $43.1 million and over $84.5 million in 2010.

Aside from 2013 pay package, Dauman gained more than $72 million from exercising previously issued stock options and another $38.9 million from vested shares. He's also getting a 2014 raise, up 10% to $4 million. from $3.5 million last year.

COO Tom Dooley, meanwhile, received compensation valued at $29 million, up 10% from $26.2 million in 2012. Dooley gained $57.7 million exercising previously issued stock options and $31.1 million from vested shares, up from $43.4 million in 2012.

Viacom's directors says its executive compensation strategy is designed to achieve superior annual results while driving shareholder value. "We are committed to providing competitive compensation packages to ensure that we attract and retain executives who will achieve these goals,'' directors said in Viacom's annual proxy, filed Friday. "We compete for talented executives in a highly-compensated industry.

Viacom Class B shares generated a 59% return during the company's last fiscal year.

5 Best Japanese Stocks To Own Right Now

Japanese stocks rose, with the Topix (TPX) Index paring a weekly loss, as Tokyo Electron Ltd. (8035) led chip-equipment makers higher and exporters rebounded after Finance Minister Taro Aso said global policy makers wouldn�� censure Japan for the currency�� slide.

Toyota Motor Corp. (7203), Japan�� biggest company, added 0.6 percent. Tokyo Electron climbed 7.1 percent after topping estimates for operating profit. Capcom Co. jumped 9 percent after saying it will buy back shares.

The Topix gained 0.3 percent to close at 1,126.67 in Tokyo, capping a 1.9 percent weekly drop, the most since November. The Nikkei 225 Stock Average rose 0.7 percent to 13,316.48, rebounding from a 0.3 percent drop, as the yen weakened against all 16 of its major peers. Canon Inc. and Nintendo Co. are among more than 200 companies on the 1,698-member Topix (NKY) due to report earnings next week, according to data compiled by Bloomberg.

��ow that investors see the yen isn�� going to rise, stocks are rebounding,��said Isao Kubo, a Tokyo-based equity strategist at Nissay Asset Management Corp., which oversees the equivalent of about $51 billion. ��here are expectations companies will report strong earnings on the back of government policy and a weaker yen.��

5 Best Japanese Stocks To Own Right Now: Vecima Networks In Com Npv (VCM.TO)

Vecima Networks Inc. engages in the design, manufacture, and sale of products that enable broadband access to cable, wireless, and telephony networks in the United States, Canada, Thailand, and internationally. The company�s hardware products incorporate embedded software to meet the requirements of next generation high-speed digital networks. The company offers its products for converged wired solutions and broadband wireless markets. Its products for converged wired solutions market includes a family of upconverters and modulators that process data from routers and convert it to higher frequencies for transmission over cable to subscribers; and gigabit network edge devices, EdgeQAM modulators, and transmodulators, which accepts high bit rate video streams from central servers and transmit them to subscribers. The company�s products for converged wired solutions market also comprise return path demodulators for processing communications between subscribers and the digit al cable infrastructure; and the Terrace family of last-mile gateway products to deliver premium and tailored content, as well as to preserve traditional analog services. Its products for Broadband Wireless market include transmitters and transceivers that process data from routers, switches, and modems for communicating to subscribers over a wireless environment. The company sells its products directly and through distributors to original equipment manufacturers, system integrators, multiple systems operators, cable operators, and other service providers. Vecima Networks Inc. was founded in 1988 and is headquartered in Victoria, Canada.

5 Best Japanese Stocks To Own Right Now: Pimco Municipal Income Fund II(PML)

PIMCO Municipal Income Fund II is a mutual fund launched and managed by Allianz Global Investors Fund Management LLC. The fund is co-managed by Pacific Investment Management Company LLC. It operates as a closed-end management investment company. The fund invests primarily in municipal bonds, variable rate notes, variable rate demand notes, and U.S. treasury bills. PIMCO Municipal Income Fund II was formed in 2002 and is domiciled in United States.

Top 5 Safest Stocks To Own Right Now: Mint Technology Corp.(MIT.V)

Mint Technology Corp., through its subsidiary, Mint Middle East LLC, provides vertically integrated prepaid card and payroll services in the Middle East. The company manages the issuance, administration, customer support, payment processing, set-up, sponsorship, and reporting of the cards and related activities. It designs, packages, delivers, and manages MasterCard and Visa branded payment programs for global acceptance and utility for credit card issuers, retailers, and member associations. The company also plans to provide alternative payment solutions, including microcredit, mobile top-up, and money remittance services to the unbanked sector of the working population in other countries in the Middle East and North Africa. Mint Technology Corp. is based in Toronto, Canada.

5 Best Japanese Stocks To Own Right Now: OPTOS ORD GBP0.02(OPTS.L)

Optos plc, together with its subsidiaries, engages in the design, development, manufacture, and marketing of retinal imaging devices primarily in North America and internationally. Its devices produce high resolution images (optomaps) of approximately 82% of the retina, which are used for the screening, early detection, and diagnosis of eye problems, such as retinal detachment, glaucoma, cataracts, retinal holes/retinal tears, and age-related macular degeneration. The optomaps could also indicate the evidence of non-eye diseases, including diabetes, hypertension, and various cancers. It offers OCT imaging products, which include Spectral OCT SLO system, an instrument to diagnose and track change the retinal diseases; and AC Cornea lens for imaging of the cornea and angle, as well as Daytona, an ultra-widefield retinal scanner for imaging and ultra-widefield scanning laser technology equipment. The company also provides diagnostic instruments, including ultrasound technolog y, visual field devices, ophthalmic lenses, and visual acuity systems, as well as develops image management software. It primarily serves optometrists, ophthalmologists, and vitreo-retinal specialists. Optos plc was founded in 1992 and is headquartered in Dunfermline, the United Kingdom.

5 Best Japanese Stocks To Own Right Now: Interface Inc. (IFSIA)

Interface, Inc. engages in the design, production, and sale of modular and broadloom carpets, and other floor covering products for the commercial, institutional, and residential markets primarily in the Americas, Europe, and the Asia-Pacific. Its products are used in corporate offices, retail spaces, government institutions, schools, healthcare facilities, tenant improvement spaces, hospitality centers, residences, and home office spaces. The company sells its carpets under InterfaceFLOR, Heuga, GlasBac, Bentley Prince Street, FLOR, Mission Zero, Prince Street House, and Home brand names; and raised/access flooring product under the Intercell brand name. It also provides antimicrobial chemicals under the Intersept brand; and TacTiles carpet tile installation systems, as well as various adhesives and products for carpet installation and maintenance. In addition, the company offers carpet replacement, installation, and maintenance services. It serves end-users, architects, engineers, interior designers, contracting firms, and other specifiers. The company has product showrooms or design studios in the United States, Canada, Mexico, Brazil, Denmark, England, Northern Ireland, France, Germany, Spain, Belgium, the Netherlands, India, Australia, Japan, Italy, Norway, the United Arab Emirates, Russia, Singapore, Hong Kong, and China. Interface, Inc. was founded in 1973 and is headquartered in Atlanta, Georgia.

5 Best Japanese Stocks To Own Right Now: Informatics Education Ltd. (I03.SI)

Informatics Education Ltd., an investment holding company, engages in franchising and licensing computer and commercial training centers, and examination facilitators primarily in Singapore, the United Kingdom, and the Asia Pacific. It operates in two segments, Higher Education and Corporate Training. The Higher Education segment offers diploma, advanced diploma, degree, masters, and doctorate qualifications in a range of business, engineering, and technological subjects to college going students and lifelong learners, as well as through an online virtual campus. The Corporate Training segment offers training and skills upgrading and enhancement to the general workforce in technical and non-technical areas. The company also provides computer and business education and training services; business management consultancy, and child development services; and operation system support services. In addition, it engages in the operation of e-learning portal that offers e-learning for higher education, corporations, and education services. The company provides its services through operating 47 franchised centers, 226 licensed centers, and 1 standard center. Informatics Education Ltd. was founded in 1983 and is based in Singapore.

5 Best Japanese Stocks To Own Right Now: Anthera Pharmaceuticals Inc.(ANTH)

Anthera Pharmaceuticals, Inc., a development stage biopharmaceutical company, focuses on developing and commercializing therapeutics to treat diseases associated with inflammation, including cardiovascular and autoimmune diseases. Its primary product candidates include varespladib methyl (A-002), which has completed its Phase 2 clinical studies for the treatment of acute coronary syndrome; varespladib sodium (A-001) that is in a Phase 2 clinical study for the prevention of acute chest syndrome associated with sickle cell disease; and A-623, which has completed Phase 1 clinical studies for the treatment of B-cell mediated autoimmune diseases. The company has license agreements with Eli Lilly and Company, and Shionogi & Co., Ltd. to develop and commercialize secretory phospholipase A2 or sPLA2 inhibitors for the treatment of cardiovascular disease and other diseases; and Amgen Inc., to develop and commercialize A-623. Anthera Pharmaceuticals, Inc. was founded in 2004 and is headquartered in Hayward, California.

5 Best Japanese Stocks To Own Right Now: Seven Arts Pictures PLC(SAPX)

Seven Arts Entertainment Inc. operates as an independent motion picture production and distribution company. It engages in the development, acquisition, financing, production, and licensing of theatrical motion pictures for exhibition in theatrical markets worldwide. The company also provides its motion pictures in other forms of media, including DVD, home video, pay-per-view, and free television. Seven Arts Entertainment Inc. was founded in 2002 and is based in London, the United Kingdom.

5 Best Japanese Stocks To Own Right Now: Continental Coal Limited(CCC.AX)

Continental Coal Limited engages in the production and sale of thermal coal in South Africa. It primarily holds interests in the Vlakvarkfontein mine; and the Ferreira project. It also holds interests in various development projects in South Africa, as well as exploration projects in Botswana. The company was formerly known as Continental Capital Limited and changed its name to Continental Coal Limited in July 2009. Continental Coal Limited is based in West Perth, Australia.

5 Best Japanese Stocks To Own Right Now: Resource America Inc.(REXI)

Resource America, Inc. operates as an asset management company. The company, through its subsidiaries, operates in three segments: Financial Fund Management; Real Estate; and Equipment Finance. The Financial Fund Management segment engages in the formation and collateral management of structured financial products and of issuers of collateralized debt obligations, such as trust preferred securities, asset backed securities, leveraged loans, private equity, commercial mortgage backed securities, residential mortgage backed securities, collateralized debt obligations, and home equity loans. The Real Estate segment focuses on the acquisition of multifamily properties on behalf of the limited partnership investment funds it sponsors. The Equipment Finance segment offers small ticket equipment leases to the small to mid-sized business market through the formation of strategic marketing alliances. Resource America, Inc. was founded in 1966 and is based in Philadelphia, Pennsylva nia.

Will Buyers Abandon Small Cars Because of Crash Dangers?

Small cars have several advantages for consumers. First among these is fuel efficiency. Second is that most small cars cost less than larger ones. These may be more than offset by the fact that small vehicles often are not safe to drive. Although the problem makes sense, it was driven home by recent research. And the research results may undermine sales in the important segment, robbing the industry of momentum.

The Insurance Institute for Highway Safety (IIHS) announced:

Only 1 minicar out of 11 tested achieves an acceptable rating in the Insurance Institute for Highway Safety’s small overlap front crash test, making these tiny vehicles the worst performing group of any evaluated so far.

General Motors Co.’s (NYSE: GM) Chevrolet Spark made the cut. The Honda Motor Co. Ltd. (NYSE: HMC) Fit, Toyota Motor Corp. (NYSE: TM) Yaris and Prius C, Ford Motor Co. (NYSE: F) Fiesta, Kia Rio, Hyundai Accent, Fiat 500, Mazda 2, Mitsubishi Mirage and Nissan Versa sedan did not.

Among the factors these cars have in common is price. The Fiesta sells for barely more than $14,000. The Mazda 2 has a base price under $15,000. The Yaris also sells for less than $15,000. The other “dangerous” cars on the IIHS list are priced similarly.

The 11 cars also get extraordinary gas mileage. The Versa gets 40 miles per gallon (mpg) on the highway. The Mirage gets as much as 44 mpg. The Fiat 500 lists its highway mpg at 40 as well. Each of the numbers is extraordinarily low. Low enough — recently — that when married with price, some buyers find them irresistible.

The segment of the auto buyer market to which these cars appeal is likely younger buyers who often do not have the money to afford expensive cars or high gasoline costs. The industry needs these buyers. The University of Michigan’s Transportation Research Institute recently reported that the people most likely to buy cars in general are 55 to 64 years old. This eclipsed the 35-to-44 year old group, which used to lead the list. Authors of a Bloomberg evaluation of the study reported:

Indeed, young people don’t seem that interested in driving. Just 79 percent of people between 20 and 24 had a driver’s license in 2011, compared with 92 percent in 1983, according to the Michigan study.

Conversely, the oldest boomers are trooping down to the Department of Motor Vehicles in growing numbers to remain licensed to drive. Almost 93 percent of those age 60 to 64 had a driver's license in 2011, up from 84 percent in 1983.

Car companies can ill afford trouble that would undermine sales of cars that appeal to the youth segment of the market. As older buyers reach the end of their driving years, someone has to replace them, or car companies have a hurdle they cannot overcome.

An Introduction To Gamma-Delta Neutral Option Spreads

Best Companies To Buy For 2014

Have you ever found strategies that make full use of the decay of an option's theta that are attractive, but you can't stand the associated risk? At the same time, conservative strategies such as covered-call writing or synthetic covered-call writing can be too restrictive. The gamma-delta neutral spread may just be the best middle ground to these concerns when searching for a way to exploit time decay while neutralizing the effect of price actions on your position's value. In this article, we'll introduce you to this strategy.

Learning Greek
To understand the application of this strategy as explained here, knowledge of the basic Greek measures associated with options is essential. This inherently means that the reader must also be familiar with options and their characteristics.

Theta
Theta is the decay rate in an option's value that can be attributed to the passage of one day's time. With this spread, we will exploit the decay of theta to our advantage to extract a profit from the position. Of course, many other spreads do this; but as you'll discover, by hedging the net gamma and net delta of our position, we can safely keep our position direction neutral in terms of price.

The Strategy
For our purposes, we will use a ratio call write strategy as our core position. In these examples, we will buy options at a lower strike price than that at which they are sold. For example, if we buy the calls with a $30 strike price, we will sell the calls at a $35 strike price. Of course, we will not just perform a regular ratio call write strategy - we will adjust the ratio at which we buy and sell options to materially eliminate the net gamma of our position.

We know that in a ratio write options strategy, more options are written than are purchased. This means that some options are sold "naked." This is inherently risky. The risk here is that if the stock rallies enough, the position will lose money as a result of the unlimited exposure to the upside with the naked options. By reducing the net gamma to a value close to zero, we eliminate the risk that the delta will shift significantly (assuming only a very short time frame).

Neutralizing the Gamma
To effectively neutralize the gamma, we first need to find the ratio at which we will buy and write. Instead of going through a system of equation models to find the ratio, we can quickly figure out the gamma neutral ratio by doing the following:

Find the gamma of each option.
To find the number you will buy, take the gamma of the option you are selling, round it to three decimal places and multiply it by 100.
To find the number you will sell, take the gamma of the option you are buying, round it to three decimal places and multiply it by 100. For example, if we have our $30 call with a gamma of 0.126 and our $35 call with a gamma of 0.095, we would buy 95 $30 calls and sell 126 $35 calls. Remember this is per share, and each option represents 100 shares.

Buying 95 calls with a gamma of 0.126 is a gamma of 1,197 (9,500*0.126).
Selling 126 calls with a gamma of -0.095 (negative because we're selling them) is a gamma of -1,197 [12,600*(-0.095)]. This adds up to a net gamma of 0. Because the gamma is usually not nicely rounded to three decimal places, your actual net gamma might vary by about 10 points around zero. But because we are dealing with such large numbers, these variations of actual net gamma are not material and will not affect a good spread.

Neutralizing the Delta
Now that we have the gamma neutralized, we will need to make the net delta zero. If our $30 calls have a delta of 0.709 and our $35 calls have a delta of 0.418, we can calculate the following.

95 calls bought with a delta of 0.709 is 6,735.5.
126 calls sold with a delta of -0.418 (negative because we're selling them) is -5,266.8. This results in a net delta of positive 1,468.7. To make this net delta very close to zero, we can short 1,469 shares of the underlying stock. This is because each share of stock has a delta of 1. This adds -1,469 to the delta, making it -0.3, very close to zero. Because you cannot short parts of a share, -0.3 is as close as we can get the net delta to zero. Again, like we stated in the gamma, because we are dealing with large numbers, this will not be materially large enough to affect the outcome of a good spread.

Examining the Theta
Now that we have our position effectively price neutral, let's examine its profitability. The $30 calls have a theta of -0.018 and the $35 calls have a theta of -0.027. This means:


95 calls bought with a theta of -0.018 is -171.
126 calls sold with a theta of 0.027 (positive because we're selling them) is 340.2. This results in a net theta of 169.2. This can be interpreted as your position making $169.20 per day. Because option behavior isn't adjusted daily, you'll have to hold your position roughly a week before you'll be able to notice these changes and profit from them.

Profitability
Without going through all the margin requirements and net debits and credits, the strategy we've detailed would require about $32,000 in capital to set up. If you held this position for five days, you could expect to make $846. This is 2.64% on top of the capital needed to set this up - a pretty good return for five days. In most real-life examples, you'll find a position that's been held for five days would yield about 0.5-0.7%. This may not seem like a lot until you annualize 0.5% in five days - this represents a 36.5% return per year.

Possible Drawbacks
A few risks are associated with this strategy. First, you'll need low commissions to make a profit. This is why it is important to have a very low commission broker. Very large price moves can also throw this out of whack. If held for a week, a required adjustment to the ratio and the delta hedge is not probable; if held for a longer time, the price of the stock will have more time to move in one direction.

Changes in implied volatility, which are not hedged here, can result in dramatic changes in the position's value. Although we have eliminated the relative day-to-day price movements, we are faced with another risk: an increased exposure to changes in implied volatility. Over the short time horizon of a week, changes in volatility should play a small role in your overall position. This doesn't mean you shouldn't keep your eyes on it though!

The Bottom Line
We can see that the risk of ratio writes can be brought down by mathematically hedging certain characteristics of the options we are dealing with, along with adjusting our position in the underlying common stock. By doing this, we can profit from the theta decay in the written options. Although this strategy is attractive to most investors, it can only be functionally executed by market professionals due to the high commission costs associated with it.

Hot Small Cap Stocks To Watch For 2014

Stem cells may not be in the news much�as the sector has moved beyond the use of embryotic�ones, but small cap stem cell stocks Cellular Dynamics International Inc (NASDAQ: ICEL), International Stem Cell Corp (OTCMKTS: ISCO) and BioRestorative Therapies (OTCBB: BRTX) have been fairly active over the past several trading days as ICEL went public, ISCO raised additional funding and BRTX grabbed more attention:

Cellular Dynamics International Debuts on the NASDAQ. Small cap Cellular Dynamics International,�which develops and manufactures fully functioning human cells in industrial quantities, had its IPO on Thursday where it raised $46.2 million from selling 3.8 million common at $12 a share. However, shares closed down 20.83% at $9.50 for a market cap of about $150 million. Nevertheless, that market cap is still bigger than the 14 other companies comprising the Stem Cell Stock Index compiled by William Busa, the president of Busa Consulting LLC. Busa commented to the Milwaukee Journal Sentinel that while ��ools companies��like Cellular Dynamics International don�� have "multibillion-dollar prospects" like therapeutics companies, very few biotech tools companies are able to pull off an IPO���something the company needs to be given some credit for. Moreover, its worth mentioning that the goal of Cellular Dynamics International is�to become the industry standard for manufactured human cells and it bills itself as the pioneer of manufacturing stem cells in industrial quantities.

Hot Small Cap Stocks To Watch For 2014: bebe stores inc.(BEBE)

bebe stores, inc. engages in the design, development, and production of women?s apparel and accessories. Its products include a range of separates, tops, dresses, active wear, and accessories in career, evening, casual, and active lifestyle categories. The company markets its products under the bebe, BEBE SPORT, bbsp, and 2b bebe brand names targeting 21 to 34-year-old woman. As of July 2, 2011, it operated 252 retail stores, and an online store at bebe.com in the United States, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Japan, and Canada, as well as 60 international licensee operated stores in south east Asia, the United Arab Emirates, Israel, Russia, Mexico, and Turkey. The company was founded in 1976 and is headquartered in Brisbane, California.

Advisors' Opinion:

• [By CRWE]

  bebe stores, inc. (Nasdaq:BEBE) reported that its Board of Directors declared bebe�� quarterly cash dividend of $0.025 per share. The dividend is payable on December 4, 2012 to shareholders of record at the close of business on November 20, 2012

Hot Small Cap Stocks To Watch For 2014: China Metro-Rural Holdings Limited(CNR)

China Metro-Rural Holdings Limited, through its subsidiaries, primarily engages in the development and operation of agricultural logistics and trade centers in northeast China. It also involves in purchasing, processing, assembling, merchandising, and distributing pearls and jewelry products. The company markets its pearls and jewelry products to wholesale distributors and mass merchandisers in Europe, the United States, Hong Kong, and other parts of Asia. In addition, it develops, sells, and leases residential and commercial properties in Hong Kong and the People?s Republic of China. The company is based in Tsimshatsui, Hong Kong.

Advisors' Opinion:

• [By Katie Brennan]

  Canadian National Railway Co. (CNR) added 0.9 percent to C$104.93 and Canadian Pacific Railway Ltd. rose 1.7 percent to C$131.73.

  Niko Resources surged 3.4 percent to $8.64 after the company entered an agreement for a $60 million loan that will be funded by a group of institutional investors. Net proceeds from the loan will be used to fund working capital requirements.

10 Best Stocks For 2014: EZchip Semiconductor Limited(EZCH)

EZchip, a fabless semiconductor company, engages in the development and marketing of Ethernet network processors for networking equipment. Its products include network processor chips, evaluation boards and network-processor based systems, and development software toolkits. The company offers network processors for use in forming the silicon core of networking equipment, such as switches and routers; and for voice, video and data integration in various applications. Its network processors are single-chip solutions, which enable its customers to design multi-port line cards, such as processing and classification engines, traffic managers, media access controllers, as well as a range of specialized hardware blocks that accelerate various functions. The company offers Evaluation systems which enable customers to test NPU-based systems; and toolkits that assist customers in creating, verifying, and implementing solutions based on its network processors. It provides a library f eaturing data plane code for a range of applications, which include Metro Ethernet protocols, Multi-Protocol Label Switching, IPv4 and IPv6 routing, Access Control Lists, GPON/EPON OLT functionality, Network Address Translation, and Server Load Balancing. The company sells its products directly, and through contract manufacturers and distributors to network equipment vendors. It markets its products in Israel, China, Hong Kong, the Far East, Canada, the United States, and Europe. The company was formerly known as LanOptics Ltd. and changed its name to EZchip Semiconductor Ltd. in July 2008. EZchip Semiconductor Ltd. was founded in 1989 and is based in Yokneam, Israel.

Advisors' Opinion:

• [By Lisa Levin]

  EZchip Semiconductor (NASDAQ: EZCH) shares climbed 5.80% to $23.53. The volume of EZchip Semiconductor shares traded was 635% higher than normal. EZchip Semiconductor's PEG ratio is 1.57.

• [By Evan Niu, CFA]

  What: Shares of EZchip (NASDAQ: EZCH  ) have jumped today by as much as 13% after the company reported first-quarter earnings.

  So what: Revenue in the first quarter totaled $15.3 million, topping the Street's forecast of $15.1 million. Non-GAAP net income per share came in at $0.23, which was right on target with expectations.

• [By Jake L'Ecuyer]

  EZchip Semiconductor (NASDAQ: EZCH) was also up, gaining 7.16 percent to $24.11 after a Cisco (NASDAQ: CSCO) announced a new product that would not threaten the company as previously thought. Equities Trading DOWN
  Shares of Cypress Semiconductor (NASDAQ: CY) were down 16.05 percent to $9.91 after the company lowered its Q3 forecast.

• [By Paul McWilliams]

  Paul McWilliams: Oh, absolutely. Another company that most investors probably have never heard of is a tiny little Israeli semiconductor company named EZChip (EZCH).

Hot Small Cap Stocks To Watch For 2014: KongZhong Corporation(KONG)

KongZhong Corporation, together with its subsidiaries, provides wireless interactive entertainment, media, and community services to mobile phone users in the People's Republic of China. It also involves in the development, distribution, and marketing of consumer wireless value-added services, including wireless application protocol, multimedia messaging services, short messaging services, interactive voice response services, and color ring back tones. In addition, it offers interactive entertainment services, such as mobile games, pictures, karaoke, electronic books, mobile phone personalization features, entertainment news, chat, and message boards; and through Kong.net offer news, community services, games, and other interactive media and entertainment services; and sells advertising space in the form of text-link, banner, and button advertisements. Further, the company develops and publishes mobile games, including downloadable mobile games and online mobile games cons isting of action, role-playing, and leisure games. As of December 31, 2009, it had a library of approximately 300 internally developed mobile games. Additionally, it develops online games; and provides consulting and technology services, as well as media and net book services. The company was formerly known as Communication Over The Air Inc. and changed its name to KongZhong Corporation in March 2004. KongZhong Corporation was founded in 2002 and is headquartered in Beijing, the People?s Republic of China

Advisors' Opinion:

• [By Seth Jayson]

  Calling all cash flows
  When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on Kongzhong (Nasdaq: KONG  ) , whose recent revenue and earnings are plotted below.

• [By Roberto Pedone]

  One under-$10 wireless services player that looks poised for a big spike higher is KongZhong (KONG), which is a provider of WVAS and mobile games to mobile phone users and a wireless media company providing news, content, community and mobile advertising services through its wireless Internet sites in the PRC. This stock is off to a hot start in 2013, with shares up sharply by 53%.

  If you take a look at the chart for KongZhong, you'll notice that this stock has been downtrending badly for the last two months, with shares plunging lower from its high of $14.92 to its recent low of $7.78 a share. During that downtrend, shares of KONG have been consistently making lower highs and lower lows, which is bearish technical price action. That move has now pushed shares of KONG into oversold territory, since its current relative strength index reading is 30.21. Shares of KONG are now starting to spike higher off its recent low of $7.78 a share and off its 200-day moving average of $7.95 a share. This spike could be signaling that the downside volatility for KONG is over in the short-term and the stock is ready to trend higher.

  Traders should now look for long-biased trades in KONG if it manages to break out above some near-term overhead resistance at $8.50 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action of 519,857 shares. If that breakout triggers soon, then KONG will set up to re-test or possibly take out its next major overhead resistance levels at $10 to its 50-day moving average at $11.33 a share.

  Traders can look to buy KONG off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $7.78 a share. One can also buy KONG off strength once it takes out $8.50 a share with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Hot Small Cap Stocks To Watch For 2014: OCZ Technology Group Inc(OCZ)

OCZ Technology Group, Inc. designs, develops, manufactures, and distributes computer components for computing devices and systems worldwide. It primarily offers solid state drives, flash memory storage, memory modules, thermal management solutions, AC/DC switching power supply units, and computer gaming solutions. The company?s products are used in industrial equipment and computer systems; computer and computer gaming solutions; mission critical servers and high end workstations; personal computer (PC) upgrades to extend the useable life of existing PCs; high performance computing and scientific computing; video and music editing; home theatre PCs and digital home convergence products; and digital photography and digital image manipulation computers. OCZ Technology Group, Inc. offers its products to retailers, on-line retailers, original equipment manufacturers, systems integrators, and distributors. The company was founded in 2002 and is headquartered in San Jose, Califo rnia.

Advisors' Opinion:

• [By Rich Duprey]

  The not-so-great and wonderful OCZ
  There was no company-specific news that caused solid-state-drive maker OCZ Technology (NASDAQ: OCZ  ) to fall almost 8% Wednesday. But an article that appeared on Seeking Alpha �questioning whether the company had six months or less to live before it filed for bankruptcy seemed to coincide with its fall.

Hot Small Cap Stocks To Watch For 2014: ATA Inc.(ATAI)

ATA Inc., through its subsidiaries, provides computer-based testing services in the People?s Republic of China. It offers services for the creation and delivery of computer-based tests utilizing its test delivery platform, proprietary testing technologies, and testing services; and provides logistical support services relating to test administration. The company?s computer-based testing services are used for professional licensure and certification tests in various industries, including information technology (IT) services, banking, securities, teaching, and insurance. Its e-testing platform integrates various aspects of the test delivery process for computer-based tests ranging from test form compilation to test scoring, and results analysis. ATA also provides career-oriented educational services, such as single course programs, degree major course programs, and pre-occupational training programs focusing on preparing students to pass IT and other vocational certification tests; test preparation and training programs and services to test candidates preparing to take professional certification tests in securities, futures, banking, insurance and teaching industries; online test preparation and training platform for the securities and banking industries; and test preparation software for the teaching industry. In addition, the company offers HR select employee assessment solution, an online system that utilizes its proprietary software and an inventory of test titles to help employers improve the efficiency and accuracy of their employee recruitment process. As of March 31, 2010, it had contractual relationships with 1,988 ATA authorized test centers. The company serves Chinese governmental agencies, professional associations, IT vendors, and Chinese educational institutions, as well as individual test preparation services. ATA Inc. was founded in 1999 and is based in Beijing, the People?s Republic of China.

Hot Small Cap Stocks To Watch For 2014: Voyager Oil & Gas Inc.(VOG)

Voyager Oil & Gas, Inc. engages in the exploration and production of oil and gas in the United States. It primarily focuses on oil shale resource prospects in Montana, North Dakota, Colorado, and Wyoming. As of May 17, 2011, the company controlled approximately 141,500 net acres in the five primary prospect areas comprising 28,000 net acres targeting the Bakken/Three Forks in North Dakota and Montana; 14,200 net acres targeting the Niobrara formation in Colorado and Wyoming; 800 net acres targeting a Red River prospect in Montana; 33,500 net acres in a joint venture targeting the Heath Shale formation in Musselshell, Petroleum, Garfield, and Fergus counties of Montana; and 65,000 net acres in a joint venture in the Tiger Ridge gas field in Blaine, Hill, and Chouteau counties of Montana. It supplies energy and fuel for industrial, commercial, and individual consumers. The company is based in Billings, Montana.

Hot Small Cap Stocks To Watch For 2014: Hot Topic Inc.(HOTT)

Hot Topic, Inc., together with its subsidiaries, operates as a mall- and Web-based specialty retailer in the United States. The company operates Hot Topic and Torrid store concepts, as well as an e-space music discovery concept, ShockHound. Its Hot Topic stores sell music/pop culture-licensed merchandise, including tee shirts, hats, posters, stickers, patches, postcards, books, novelty accessories, CDs, and DVDs; and music/pop culture-influenced merchandise comprising women?s and men?s apparel and accessories, such as woven and knit tops, skirts, pants, shorts, jackets, shoes, costume jewelry, body jewelry, sunglasses, cosmetics, leather accessories, and gift items for young men and women primarily between the ages of 12 and 22. The company?s Torrid stores sells casual and dressy jeans and pants, fashion and novelty tops, sweaters, skirts, jackets, dresses, hosiery, shoes, intimate apparel, and fashion accessories for various lifestyles for plus-size females primarily betw een the ages of 15 and 29. As of July 30, 2011, it operated 636 Hot Topic stores in 50 states, Puerto Rico, and Canada; 145 Torrid stores; and Internet stores, hottopic.com and torrid.com. The company was founded in 1988 and is headquartered in City of Industry, California.

Advisors' Opinion:

• [By Marshall Hargrave]

  In May True Religion (TRGL) announced a buyout offer from TowerBrook Capital for $826 million. Also in May, Rue21 decided to sell itself to Apax Partners for $2.2 billion. Before that, in March, Hot Topic (HOTT) announced that Sycamore Partners was buying out it out for $600 million.

Shorter the time target, less must be your equity exposure

Top 10 Performing Stocks To Invest In Right Now

Below is the edited transcript of his answers. Also watch the accompanying video.

Caller: I can invest Rs 20,000 per month. I want to earn around Rs 20 lakh in a time period of seven to eight years. I have investments in LIC, fixed deposits and NSC, and I have two dependents. How should I allocate the money?

A: Basically you already have a lot fixed deposits. So for Rs 20 lakh, that is, if you want to invest around Rs 20000 for a period of 10 years, I would suggest that you invest in diversified equity or even in top-capital equity. Essentially, you already have lots of debt schemes. I would recommend you do one of these two or three funds - Franklin India Bluechip, HDFC Top 200, Birla Sun Life Frontline Equity. You can pick and choose. This Rs 20000 could grow depending on the returns it could grow in 10 years to anywhere between Rs 40-53 lakh at an assumed return of around 14%.

Caller: I can invest Rs 10,000 per month and am looking at investment through an SIP. My goal is Rs 10 lakh in five years, and I have no dependents. How should I allocate the money?

A: You don�t have any dependents then possibly you don�t really need life insurance. You may need other kinds of insurance in terms of health or possibly disability insurance that you should seek. Separate advice but in terms of getting Rs 10 lakh for five years, when your period of investment is five years, a pure equity investment is not something that we would suggest. I would tend to suggest a balanced fund where about 70-75% is in equity and about 25-30% would be in fairly highly rated debt. This Rs 10000 per month will roughly give you, assuming a return of around 12.9% for five years, about Rs 8.5 lakh. If you want to get Rs 10 lakh, you should do Rs 12000.

Recommended funds are HDFC Prudence, you can do Reliance Regular Saving Fund � the balanced option or Birla Sun Life 95. The Rs 10000 or Rs 12000 that you decide to put in, I would suggest you spread it only over two funds and do not take all the three. You can pick and choose the two or three that you want.

Q: Would it be a safe assumption that if I am able to save Rs 10000 per month now its quiet possible that three or four years from now it will naturally scale up to maybe Rs 12000-13000� sheer inflation and perhaps the natural progress of things. Should one assume that when one has a goal of Rs 10 lakh five years down the line?

A: The point there is when he wants to increase his investment by Rs 2000 at that time, the period is only two or three years. And that time to invest in a balance fund would be a little more risky. As your goal comes nearer, you want more debt and much less equity. In fact, for a two-year horizon, it would be difficult to recommend equity. It will have to be pure debt instrument. If it is next year, he can still consider balanced fund but if it is after that then he should look at debt.

Profit Warnings: Numbers, Time Periods and What You Can Do

If a company in your portfolio issues a profit warning should you sell, buy more or just stay invested?

That is exactly the question I asked myself after experiencing quite a few profit warnings recently. I wondered if there wasn't a tested rule I could follow that for example says sell immediately after the profit warning is announced and buy the position back in a few months' time.

I decided to take a look at a research studies on profit warnings to see if there is not a strategy that will make you come out ahead.

The first, and most practical, study I found was a research note written in September 2008 by James Montier when he was still with Societe Generale called Maximum Pessimism, Profit Warnings and the Heat of the Moment.

The study was also published in James' excellent book called "Value Investing: Tools and Techniques for Intelligent Investment."

In the note James argues that humans are very bad at making decisions and procrastinate under pressure and thus it would be best if you have predetermined rules to help you make the best decision under pressure. And profit warnings are just such a high pressure situation. To find out what the best decision you can make James looked at 2004 study by G. Bulkley R. Harris and R. Herrerias from the University of Exeter called Stock Returns Following Profit Warnings: A Test of Models of Behavioural Finance.

In the study they looked at what happened before and after 455 profit warnings issued by UK companies between Aug. 12, 1997 and Dec. 31, 1999.

What they found was on the day the profit warning was announced the share price underperformed the market by an average of 16.6%. However what happened over the next six months is that share price continued to drift lower, on average performing 4% worse than the market.

James said this makes a strong case for you to sell immediately on the profit warning rather than be drawn into management excuses and procrastinate until perhaps the next profit warning i! s announced.

But the study also found that on average about a year after the profit warning stock prices start recovering and goes on to do extremely well, outperforming the market 22.4% over the next year.

James argues that this may be another good time to implement a rule to buy companies that issued a profit warning one year after the warning date.

But after a year of the stock price drifting lower you may find it very difficult to convince yourself to buy the company again. Especially if the share price, on average, lost 41% from six months before the profit warning to one year afterwards.

All the above numbers are however all based on averages. If you carefully look at the study you will see that all averages have huge standard deviations. This means that the returns from the 455 companies that issued profit warnings were all over the place. For example the share price performance on the day of the announcement ranged from +10.5% to -43.7%. (Technical: Two standard deviations from the mean, assuming the market adjusted returns are normally distributed.)

Also, as James correctly said, if you are a long-term investor in a good business, a profit warning is essentially just noise and may be a great buying opportunity.

If you are more of a trader on average your best strategy will be to sell immediately after the profit warning and reinvest in the company one year later.

The second study I found was published in 2009 by Fayez Elayan and Kuntara Pukthuanthong and was called Why warn? The impact of profit warnings on shareholder's equity.

In the study they looked at three 667 profit warnings by U.S. companies announced between May 1997 and December 2002.

They found that on average the two-day return after a profit warning was 16.59% worse than the market.

Between two and 90 days after the profit warning the share price of the companies on average recovered 4.09%, so there was some overreaction.

An interesting finding of the study was ! about 64.! 6% of companies only made one profit warning, about 23% made two and 12.4% issued three or more warnings. So only in 35.4% of the companies issuing profit warnings was there more than one cockroach in the kitchen.

Hot Energy Companies To Own For 2014

Also on average the share prices of the warning companies drifted lower shortly before the profit warning due to information leakage.

The study unfortunately did not look at share prices a year later to determine if it would have been better to sell immediately after the profit warning or not.

I then looked at April 2002 study called Stock Returns Following Profit Warnings by George Bulkley and Renata Herrerias from the University of Exeter.

They looked at two kinds of profit warnings, those that include a new earnings forecast, and those that offer only information that earnings will be below current expectations.

Not surprisingly what they found was that the fall in the stock price against the market was substantially more when the company did not give an indication of what earnings would be (-24.7%) compared to when they did give a new earnings forecast (-20.7%).

Also not surprising was that companies with a high price to book ratio (highly valued companies) issued nearly 70% of the profit warnings.

The same as in one of the previous studies the share price performance of profit warning companies were all over the place. In 25% of the companies leading to an increase in price and only about 50% of the time leading to a decline of more than 4% against the market on the day of the announcement.

They also looked at what happened to the share prices in the 12 months before the profit warning as they wanted know if the profit warning came as a complete surprise or if it followed a string of negative news about a company. And they found that on average profit warning companies lose about 25% of their value in the three! months b! efore the announcement.

The fourth paper I looked at was called The Relationship between the Profit Warning and Stock Returns: Empirical Evidence in EU Markets by Tserendash Tumurkhuu and Xiaojing Wang.

The study looked at 87 profit warnings issued by EU companies between January 2008 and April 2010.

The study's findings were not much different from others I looked at. The most significant price falls recorded between one day before and one day after the profit warning. This indicates that there was a leakage of information with some investors jumping the gun.

During the five days before and five days after the profit warning on average the share price response was -35% worse than the market. They also found that some of the negative price movement was recovered a few days after the profit warning which means that there was a certain amount of overreaction by investors.

Similar to previous studies they also found that if the profit warning contained some information on what profits would look like in future it had a less negative effect on the share price than if the warning only said that profits would be lower than expected.

The study also found that there was no significant difference between the price decline of a small or large company issuing a profit warning.

So in summary this is the essence of all the studies I looked at:

The share price of a warning company on average performs 25% worse than the market in the 6 months before the profit warning.On average the share price under-performs the market by 16% on the day the profit warning is announced.The share price does recover slightly in the days following the announcement.On average the share price unde-rperforms the market for a year after the announcement most likely as investors wait to see how and if the company recovers from the fall in profits.In the second year after the announcement on average warning companies outperform the market by 22%.
How can you use it?

If you are a long t! erm inves! tor:

Once you are sure the business of the company has not been deteriorated then a profit warning is just a short term set back and an opportunity for you to buy more.
If you are more of a trader:

Wait up to five days after the profit warning and sell after a slight recovery in the share price.Buy back your position a year after the profit warning.
Please remember that the above advice is based on averages (with a lot of variance) so the share price of the company you are invested in may behave differently.

Bank of America Corp Posts Higher Q4 Earnings; Beats Estimates (BAC)

Before the opening bell on Wednesday, Bank of America (BAC) reported its fourth quarter earnings, posting higher net income and revenue than last year’s Q4 results.

BAC Earnings in Brief

Bank of America posted quarterly revenues of $21.7 billion, up significantly from last year’s Q4 revenues of $18.9 billion. The company’s net income was also up considerably, coming in at $3.439 billion for the most recent quarter from last year’s Q4 figure of $732 million. EPS came in at 29 cents, which was up from last year’s Q4 EPS of 3 cents. BAC beat analysts’ estimates of 26 cents EPS on revenues of $21.24 billion. For the full year, BAC posted revenues of $89.8 billion, net income of $11.4 billion and EPS of 90 cents; all of these figures were significantly higher than 2012′s results.

CEO and CFO Commentary

Brian Moynihan, BAC’s CEO, had the following to say about the bank’s results: ”We are pleased to see the core businesses continue to perform well, serving our customers and clients. While work remains on past issues, our two hundred forty thousand teammates continue to do a great job winning in the marketplace.”

BAC’s CFO, Bruce Thompson, went on to say: "We enter this year with one of the strongest balance sheets in our company's history. Capital and liquidity are at record levels, credit losses are at historic lows, our cost savings initiatives are on track and yielding significant savings, and our businesses are seeing good momentum."

No Dividend Change

Bank of America did not mention any change to its dividend payout in its most recent earnings release. At the beginning of 2009, during the financial crisis, BAC cut its quarterly dividend from 32 cents to 1 cent, and the company has still not raised it. With positive earnings reports like this, investors will be looking for higher dividends in the near future.

Stock Performance

BAC stock was up 52 cents, or 3.1%, in pre-market trading, after finishing Tuesday’s trading up 34 cents, or 2.07%. So far this year, BAC is up 4.16%.

ACT: Actavis’s Growth Potential Anything But Generic

Popular Posts: SIRI: Sirius XM’s Signal is Fading Fast3 International Stocks Poised to Soar in 2014BAC: Time For Caution in Bank of America Stock Recent Posts: 3 Energy Stocks for a Cold Planet ACT: Actavis’s Growth Potential Anything But Generic 47 Actions To Take On the Dow’s Big Dive View All Posts

Welcome to the Stock of the Day.

We still have a few weeks until Actavis Plc (ACT) reports Q4 earnings, but already ACT shares are rising on strong preannouncement news. What’s up with the generics giant? Is it time to buy? Find out now.

Company Overview

Actavis Plc is one of the world’s largest generic drugmakers. For the past three decades, this company was known as Watson Pharmaceuticals (WPI), but the company rebranded itself as Actavis in 2013. With a portfolio of over 190 pharmaceutical product families, Actavis has its name on everything from antibiotics to contraceptives to smoking cessation treatments.

In addition to making these products, the company also handles distribution, delivering right to the doors of pharmacies and physicians’ offices. Actavis also sells its generic products directly to retailers, hospitals and mail order agencies. This company has its strongest presence in the United States, Canada as well as Latin America.

Pipeline Buzz

One of the most exciting things in the works at Actavis is generic versions of biologic drugs, which are created by biological rather than chemical processes. Biologic drugs are at the cutting edge of modern medicine, so many treatments run at tens of thousands of dollars. The generic, potentially cheaper, versions of biologic drugs are called biosimilars, and to date they’re not available in the U.S. So right now there is a race between biotechs to develop and get their biosimilars approved. Considering that the global market for biosimilars is forecast to be between $11 billion to $24 billion by 2020, this is a lucrative opportunity, and I look forward to seeing where both companies go with this.

Looking Ahead

Today Actavis announced strong preliminary results for Q4 and FY 2013. According to management, this was a “transformational year” for Actavis, thanks to its $8.5 billion acquisition of Warner Chilcott and a series of successful product launches (including generic versions of Suboxone, Lidoderm and Cymbalta).

So the company expects fourth-quarter adjusted earnings to outperform its previous forecast of $2.95 to $3.05 per share. This also means that Actavis will likely top the Street estimate, which is calling for earnings of $2.97 per share. As it stands, the consensus analyst estimate translates into 87% annual earnings growth.

Actavis also revealed that thanks to its strong cash position it was able to pay down $655 million in debt during the fourth quarter. So when Actavis reports fourth-quarter results on February 20, I expect it to make headlines.

Current Ratings

Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. One glance at ACT’s stock report page reveals that I’ve had this stock down as a buy for the past year or so. That’s thanks to the persistent institutional buying pressure backing up this stock: ACT receives an A for its Quantitative Grade.

Meanwhile, Actavis rates well on sales growth (A), analyst earnings revisions (A) and return on equity (B), but it could stand to firm up the other five fundamental metrics I graded it on (including operating margin growth, earnings growth and cash flow). However, I expect that many of these grades will imporve once the company reports Q4 results.

Bottom Line: As of this posting I consider ACT an A-rated Strong Buy.