Top Stocks To Invest|Stocks to Invest 2012

The Worst Health-Care Stocks of 2012

2012-01-27T19:39:00.000-08:00

The following video is part of our "Motley Fool Conversations" series, in which David Williamson, health-care editor and analyst, and Brendan Byrnes, industrials editor and analyst, discuss topics around the investing world.
In today's edition, David and Brendan discuss some of the worst health-care stocks of 2011. These stocks fit relatively neatly into three categories: failure to launch, trial troubles, and home health-care scare. This video focuses on failure to launch -- i.e., companies whose drug candidates made it through the rigorous approval process only to be met with a lukewarm (or downright cold) commercial reception. They also discuss which of the downtrodden stocks are likely to get sales rolling in 2012.

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When to put your cash back into the market

2012-01-26T20:49:00.000-08:00

NEW YORK (CNNMoney) -- I have a substantial amount of cash I want to move into stock and bond mutual funds I already own. I'm aware of the concept of dollar-cost averaging, but I'm afraid that as soon as I move the money it will decline in value and take years to recover. My question is not about what to invest in, but how to make those investments timing wise. -- Robert P.
Dollar-cost averaging and timing aren't the central issues here. They're sideshows.
The real question is: Does the mix of stock and bond mutual funds you already own truly represent the balance of risk versus reward you're comfortable with as an investor?
If it is, then you should immediately invest the cash along the same lines your current investments are allocated. So if you decided that a portfolio of 60% stocks and 40% bonds is the right investment mix for your time horizon, then you should put 60% of the new cash into stock funds and 40% into your bond funds.
But if you're not okay with your current asset mix, then you need to change it to one that's appropriate -- and then immediately invest your new money in the same proportions.
I realize this isn't the standard advice you would get from many, if not most, personal finance journalists, advisers, talking heads on cable TV business shows and much of the blogosphere. The conventional answer would be to tout the supposed benefits of dollar-cost averaging and talk about the way it reduces risk or boosts returns or performs all sorts of wonderful magic.
But all of that is nonsense. Dollar-cost averaging is a clunky, inefficient way of investing. It's just been mindlessly repeated so many times that it's become dogma, which, as the late Nobel laureate Paul Samuelson once told me, is "a truth so truthful that we dare not question it."
But if you step back a moment and look at your situation from a slightly different vantage point, I think you'll see what I'm getting at.
While your fear of losing your money as soon ! as you i nvest it is understandable, you need to remember that you're already vulnerable to market declines. It's a natural consequence of investing. If the market tanks, the money you already have in stock and bond mutual funds will take a hit.
But you don't guard against that possibility by pulling your money out of your funds every time you're worried about a setback and then re-investing it when you feel better about the market. That's a recipe for selling low and buying high.
No, you protect against the risk of market setbacks by practicing asset allocation -- that is, you put together a mix of stock and bond funds that can generate decent long-term returns while keeping the downside to a level you can tolerate.
So what makes you think you should you do anything different with this new cash you're looking to invest? You shouldn't.
As for the oft-recommended strategy of dollar-cost averaging, or gradually moving your cash into your portfolio, say, by dividing it into twelve pieces and investing one piece each month, all you're really doing is taking a year to get to the asset mix you've decided is right for you. In short, you're undermining the investment strategy you've set.
So here's what I recommend instead.
Start by going over your current mix of funds and make sure that it truly reflects your tolerance for risk. The fact that you're so concerned about investing this new money makes me wonder whether you're investing more aggressively than you should.
I'm not suggesting that you huddle down in money-market accounts, bond funds or anything like that. But the key to investing is assuring that you're comfortable with your overall portfolio.

Fix your asset allocation

There are a couple of tools that can help with that assessment. If you go to Morningstar's Asset Allocator tool, for example, you can re-create your current portfolio and see how your investments might grow over different periods of time and get a sense of what kind of short-term setbacks! you mig ht suffer along the way. You can then try different mixes of stocks and bonds to see how they might perform.
You might also want to take a look at Fidelity's Portfolio Review tool. After choosing a goal and plugging in some info about your investments, you'll get a pie chart showing how you're currently invested, along with some stats showing the best and worst one-year return for that that mix as well as its average performance over the past 85 years. You can then use the slider to create more conservative and aggressive portfolios and see how they performed.
Once you're comfortable with the make-up of your portfolio, you can turn your attention to the cash you want to invest. And there the solution is simple: take the cues from the portfolio you've decided is right for you. No timing, no dollar-cost averaging. Just invest the cash into your existing funds in the same proportions they represent of your overall portfolio.

Ask the Help Desk your money questions

Following my recommendation doesn't mean the value of your investments won't decline if the market falls apart. But short of getting out of the market altogether (which then leaves you guessing about when to get back in) there's no way of avoiding that.
But going through the process I've outlined gives you your best chance of investing all your money, new and old, in a way that has a decent shot at getting the returns you want, while keeping risk at a level you can handle.

Amgen, Watson Strike $400M Deal for Biosimilar Cancer Drugs

2012-01-26T19:08:00.000-08:00

Amgen? (Nasdaq: AMGN ) has spent years defending itself from enemies in the generic drug business, but now the world's largest biotech company has found a way to join forces with a major maker of copycat pharmaceuticals.
Thousand Oaks, CA-based Amgen, which has R&D operations in Seattle, San Francisco, and Boston, said today it has agreed to collaborate with Parsippany, NJ-based Watson Pharmaceuticals (NYSE: WPI ) to develop and sell targeted antibody drugs for cancer that are "biosimilar" knock-offs of the originals. Watson has agreed to pump as much as $400 million into developing the molecules, while Amgen will contribute its specialized expertise and infrastructure for producing these complex protein drugs that are made in living cells.
The companies didn't say in today's joint statement which cancer antibody drugs they will attempt to make as biosimilars. But the companies did say that the partnership will not make lower-cost versions of Amgen's billion-dollar biotech drugs like etanercept (Enbrel) or epoetin alfa and darbepoetin alfa (Epogen and Aranesp). The biosimilar drugs will be sold under a joint Amgen/Watson label, and Watson will receive royalties and sales milestones from product revenues.
Major biotech companies, like Amgen and Genentech, have argued for years that biologic drugs like theirs can't be copied in the same straightforward manner as conventional small-molecule chemical compounds like those made by traditional drug companies like Pfizer and Merck. Since biotech drugs are incubated inside living cells that are maintained in carefully controlled bioreactors, much of what makes the product unique is the trade-secret protected manufacturing process that isn't part of the patent that covers the molecule itself. Tiny alterations to this process can lead to fundamental changes in the product itself, which the big ! companie s have argued requires new clinical trials for "biosimilar" products.
Generic companies have countered that new clinical trials would add too much time and expense to the development process, making it impossible for their biosimiliar products to be offered as cheaply and easily as a new generic version of, say, Pfizer's atorvastatin (Lipitor). The new business model hasn't really been established yet in the U.S., but other major drug companies, including Merck, have shown interest in biosimilar drugs that presumably would be cheaper than brand-name originals, but more expensive, and more profitable, than conventional generic pills. More recently, Biogen Idec and Samsung have agreed to collaborate on making biosimilar drugs.
"This collaboration reflects the shared belief that the development and commercialization of biosimilar products will not follow a pure brand or generic model, and will require significant expertise, infrastructure, and investment to ensure safe, reliably supplied therapies for patients," Amgen and Watson said in their joint statement.
Watson is holding a live webcast to discuss the collaboration today at 5 p.m. Eastern/2 p.m. Pacific.
More from Xconomy.com:

Merck Fine-Tunes Biosimilars Strategy as FDA Guidelines Loom
Itero, Seeking a "Biosimilar" That's Better, Strikes Deal With Watson for Female Infertility
Amgen's Dmab Cuts Fracture Risk for Osteoporosis Patients, Just What Investors Wanted to See

The Defeat of the "Shadow Shogun" Means it's Time to Buy Japanese Stocks

2012-01-26T03:28:00.000-08:00

Japanese Prime Minister Naoto Kan's narrow Tuesday victory over Ichiro Ozawa for the leadership of the Democratic Party of Japan wouldn't normally get investor pulses racing - after all Japan has had five prime ministers in four years.

However, the Bank of Japan's heavy intervention in the currency markets this week confirmed my view that this political twitch was really very different.

The upshot: As investors, we should pay attention ... and should look to increase our allocation to Japanese stocks.

Big Spenders No More

Ozawa, known as the "Shadow Shogun," was originally a powerful politician in the Liberal Democratic Party that dominated Japanese politics for 55 years. He split with the LDP in 1993, reformed the opposition and became the power behind the DPJ. He served as the DPJ's secretary general from 2006 to 2009, although he was forced by scandal to resign before its election victory in September 2009.

The reason we should pay attention is that Ozawa's defeat may end the dominance of the big-spending interests in Japanese politics and allow Kan to get down to the hard work of correcting Japan's deficit and debt problem. This will take several years, but even in the short term may result in faster growth for the Japanese economy and - interesting to us as investors - the final end of the 20-year bear market in Japanese stocks.

You see, Ozawa earned his "Shadow Shogun" nickname for his arm-twisting, backroom deals. He used his power to promote Japanese infrastructure spending, forming alliances with the big construction companies that funded his own political career, as well as the careers of those around him.

This "cash splash" philosophy has been a big problem for the Japanese budget and its growing debt. Ever since Japan's stock-and-real-estate bubble burst in 1990, leader after leader has attempted to prop up the economy with major infrastructure spending.

The only excep! tion was the short (2001-2006) stretch under then-Prime Minister Junichiro Koizumi, when the spending flow was cut back and some attempt was made to balance the budget.

Alas, this budgetary enlightenment wasn't to last.

When the global financial crisis struck in 2008, Japan - like other countries - resorted to repeated "stimulus" initiatives, which is finance-speak for infrastructure spending. The result has been an inexorable climb in Japan's debt load, which this year reached 217% of gross domestic product (GDP).

At that level, something has to give. Only twice in world history - Britain after 1815 and again after 1945 - has a country with a higher debt level managed to bring it down without default.

According to the National Bureau of Economic Research (NBER), public-debt levels that reach or exceed 90% of GDP become highly problematic. And a recent research study - conducted by economists Kenneth S. Rogoff of Harvard and Carmen M. Reinhart of the University of Maryland - found that for countries with debt-to-GDP ratios "above 90%, median growth rates fall by 1%, and average growth falls considerably more."

The Wrath of Kan

Kan, who took office in June, realized that policies had to change, but was damaged by DPJ losses in July's upper house elections. And when he refused to resort to the same sort of backroom wheeling-and-dealing that had been the hallmark of "Shadow Shogun" politics, Ozawa challenged him for the party's leadership.

The Tuesday (Sept. 14) election was the showdown between Ozawa and Kan.

Having seen off Ozawa, Kan should now have a reasonable run of power in which he can take steps to repair Japan's economy. And it's pretty clear what those steps need to be.

Public spending needs to be cut back, so that the budget can be reduced, preferably without large increases in taxes. At the same time, the danger of deflation - made worse by a steadily rising yen (which reduces Japanese exports by making them more expensive, even as it re! duces th e prices of imports) - must be fought off.

The Bank of Japan (BOJ), following Kan's instructions, achieved progress on this front on Wednesday (Sept. 15): It intervened heavily in the foreign-exchange market, first in Tokyo, and then - when it opened - in New York.

One estimate puts the BOJ's first-day intervention at $11.6 billion. The intervention pushed the Japanese yen down by more than 3% against the U.S. dollar. That will help Japanese exporters - and at the same time will limit deflationary forces in Japan's domestic economy.

All of that, in turn, should give Kan some room for budget cuts.

The Tokyo stock market reacted favorably, rising more than 2% on the news of intervention. By Japanese standards, it's currently very cheap, at less than 25% of its 1990 value and it remains near the bottom of its trading range since 2000. It has bounced little since its bottom last year, unlike other global markets.

Thus, Japan's stock market currently appears to have better rebound prospects than many other markets around the world. So if you haven't got any money in Japanese stocks, you should probably boost your allocation.

Let me be clear: Even with this week's developments, Japan isn't destined to become the world's next white-hot market; given what transpired this week, I'd say my rating has shifted from 5.0 out of 10 to about 7.5 or 8.0.

Besides, Japan is still the world's third-largest economy, and its prospects seem likely to improve. And let's not forget, it is an export powerhouse in the fastest-growing region in the world - Asia.

Action to Take: Japanese Prime Minister Naoto Kan's victory over Ichiro "The Shadow Shogun" Ozawa for the leadership of the Democratic Party of Japan this week was worthy of note all by itself. But you throw in the Bank of Japan's dramatic intervention in the world currency markets and Japan is a market U.S. investors can no longer afford to! ignore. Japan's stock market currently appears to have better rebound prospects than many other markets around the world. So if you haven't got any money in Japanese stocks, you should probably boost your allocation.

For a general exposure to Japan, you should go for its exchange-traded fund (ETF), the iShares MSCI Japan Index (NYSE: EWJ). The fund has $4.5 billion in assets, so it's certainly large enough for ample liquidity, while its expense ratio is low at only 0.55% of assets. Trading at 15 times earnings, the fund is reasonably priced. Plus, it's got a 1.6% dividend yield.

Of the big exporters, I most like Honda Motor Co. Ltd. (NYSE ADR: HMC). It's trading on only 9.9 times trailing earnings, or only 17% above book value, and it hasn't had to deal with the scandalous product-quality problems that have dragged down rival Toyota Motor Corp. (NYSE ADR: TM) in the U.S. market. With the revival of global automobile markets in full swing, and its orientation towards fuel-efficient models, Honda is well placed to take advantage of the increasing wealth of East Asia.

Japanese banks are a real bargain. Mizuho Financial Group Inc. (NYSE ADR: MFG), for example trades at only 60% of its net asset value (NAV) and at only 5.5 times earnings - a far lower rating than its U.S. or European peers. With the Japanese economy expanding in a healthy manner, and its domestic real estate problems far in the past, Mizuho looks like an excellent value, and the market is likely to realize this soon.

Finally, Japan's small-company sector will likely benefit greatly from an economic revival. To benefit, investors should consider the Fidelity Japan Small Companies Fund (FJSCX). This well-established, no-load mutual fund concentrates on Japan's smaller companies, which are often difficult for U.S. investors to invest in directly. As foreign funds go, its expense ratio of 1.1% is quite reasonable.

Amazon's 2011: A Blueprint for the Next Decade of Growth

2012-01-24T14:59:00.000-08:00

The following video is part of our "Motley Fool Conversations" series, in which Eric Bleeker, senior technology analyst, discusses topics around the investing world.
In this edition, Eric continues his review of how major tech companies performed in 2011. One company that had no shortage of storylines across the year was Amazon.com, which not only continued seeing strong growth and expansion of its e-commerce strength and cloud-computing momentum, but also took the wraps off its foray into the tablet market: the Kindle Fire.
What's interesting about Amazon is that the company saw earnings falling throughout 2011 despite huge sales increases. That's in large part because the company has been willing to aggressively price its Kindle e-readers and later Kindle Fire tablet to establish itself as a digital leader in addition to the leading online storefront. With Amazon now moving a million Kindles a week and reports of Amazon's production of Kindle Fires approaching 5 million units in the final quarter of 2011, that strategy looks to pay off, but not in a timeframe that might satisfy short-sighted investors on Wall Street.
Ultimately, 2011 looks to be the year where the blueprint for the next decade of Amazon's growth was laid out. It'll be:

A hybrid of Wal-Mart, a dominant retailer, but online ��
Costco, through continuing tie-ins to Amazon Prime, which provides a recurring annual revenue stream ��
And Apple: Through offering hardware that's vertically integrated with closed-in software.

Note that in the video, the Amazon shipment rate for Kindles as a whole device class is 1 million per week.
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Same-sex spouses lose big on taxes

2012-01-23T10:49:00.000-08:00

NEW YORK (CNNMoney) -- Same-sex spouses are paying as much as $6,000 a year in extra taxes because the federal government doesn't recognize gay marriage, according to an analysis conducted for CNNMoney by tax specialists.
While marriage provides tax benefits for many heterosexual couples, same-sex families don't enjoy the same perks because they are not allowed to file their federal returns jointly.
The imbalance persists despite increasing acceptance of gay marriage as a legal right. More than 12 states now grant full or partial marriage rights to same-sex couples, and a recent Gallup poll showed -- for the first time -- that a majority of Americans favor gay marriage.
But not the federal government, which is constrained by the 1996 Defense of Marriage Act. Even as more same-sex couples are able to file jointly at the state level, they are still forced to file as single when submitting federal returns to the IRS.
This means they can't combine their income and deductions to take advantage of lower tax rates. It's also harder for them to qualify for certain tax breaks because the credits phase out sooner for single filers.

State tax changes on the way in 2012

"It's costing these families thousands of dollars a year, as well as the emotional pain and suffering," said Ken Weissenberg, a partner at accounting firm EisnerAmper who is in a same-sex marriage himself.
Why gay couples pay more: To zero in on the tax bill gap between same-sex families across the country, CNNMoney asked H&R Block to crunch number comparing same-sex and heterosexual families according to a variety of scenarios. (Check out H&R Block's methodology)
One scenario involved families with one spouse earning $100,000 and the other spouse staying at home with the family's two kids.
In the same-sex family's case, the working spouse files as "head of household," and the stay-at-home spouse is considered a "qualifying relative."
Say ! that cou ple reported no other income or deductions. In that case, the same-sex household's federal tax bill is $15,199, which includes tax the head of household must pay on health insurance premiums to cover the stay-at-home spouse. That's $4,543 higher than the straight couple's liability.
Why? Because the "head of household" designation comes with some disadvantages.
Filing as "head of household" instead of "married filing jointly" exposes more income to a higher tax bracket. Plus, standard deductions, which are given based on the filing status to taxpayers who don't itemize deductions, are lower for a head of household than they are for married couples filing jointly.
And then there are the kids. When a child tax credit is claimed, the gap between same-sex households and married couples can grow even wider.
The heterosexual couple in H&R Block's example is able to claim the full $1,000 child tax credit for each kid. But the credit phases out sooner for families claiming "head of household." So in this case, the cost of being unable to file jointly comes out to $6,043 for same-sex households.
The one exception where same-sex spouses can actually come out ahead is the so-called marriage penalty. For some same-sex spouses in the higher tax brackets who work and have no children, filing tax returns using the "single" status makes the liability a little lower than that of heterosexual married couples. Still, "single" status is typically less advantageous than "married filing jointly."

They tried to deduct what?!

Other factors driving up the bill: It's not just income taxes that are costing same-sex couples more.
Many same-sex spouses don't qualify for the same marital exemptions given to other families for inheritance taxes and gift taxes. In addition, same-sex households receive lower tax exclusions for capital gains on the sales of a home (unless the home is jointly owned and each! spouse qualifies for the exclusion).
All of this is not only costing same-sex couples more, but it's a paperwork and compliance nightmare.
Same-sex families who live in states where gay marriage is recognized typically have to fill out up to four separate returns -- including mock federal returns -- to cover both their state and federal taxes. Plus, hiring a tax preparer to take on these more complicated returns tends to be significantly more expensive.
"But it shouldn't stop anyone from getting married," said Weissenberg, who says he pays an extra $5,000 in taxes per year simply because he is in a same-sex marriage. "If I had to pay twice as much in taxes to be married to my husband, I would."

Fannie and Freddie Fantasies

2012-01-21T07:15:00.000-08:00

An important but fundamentally flawed debate about Fannie and Freddie's role in the ongoing crisis has raged since the SEC sued the former senior managers of both entities for securities fraud. The Wall Street Journal and Peter Wallison (in the WSJ) have claimed that the suit vindicates their positions and discredits the Federal Crisis Inquiry Commission (FCIC). Joe Nocera, in his New York Times column, has thundered at the SEC and then Wallison, accusing him of ��The Big Lie.�� Nocera's column is also interesting because it (implicitly) argues that the thesis of Reckless Endangerment is incorrect. His colleague Gretchen Morgenson and Joshua Rosner co-authored that book. I write to provide yet another view, distinct from each of the sources.
There are two primary issues about Fannie and Freddie and the crisis discussed in the debate. First, why did Fannie and Freddie, relatively suddenly, change their business practices radically and begin purchasing large amounts of nonprime mortgages? Second, what role did declining mortgage credit quality that did not descend to the level of loans that the industry described as ��subprime�� play in the Fannie and Freddie crisis? The first issue is vastly more important and this article focuses on it. (The short answer to the second question is: ��The first issue, for everyone except the SEC, comes down to this question: did Fannie and Freddie's controlling officers (eventually) cause them to buy large amounts of nonprime loans for the same reason their counterparts running Lehman, Bear Stearns and Merrill Lynch did (the higher nominal short-term yield maximized their current compensation) or because ��the government�� made them buy the loans?) (Lehman, Bear Stearns, and Merrill Lynch were not subject to any governmental requirements to purchase any category of nonprime loans.)
I show that Fannie and Freddie's controlling officers (eventually) caused them to buy huge amounts of nonprime loans for the higher short-term nominal yield (though ! they kne w that the actual yield would be negative as soon as the housing bubble stalled). I exploit a ��natural experiment�� provided by liar's loans �C loans made without prudent underwriting of the borrower's capacity to repay the loan. No governmental entity ever required any lender, or any purchaser of loans (and that includes Fannie and Freddie), to make liar's loans. The mortgage industry's anti-fraud experts, the FBI, and the banking regulators all warned about liar's loans producing an epidemic of fraud. If Fannie and Freddie purchased large amounts of liar's loans, then their controlling managers did so because liar's loans' higher short-term nominal yield maximized their near-term compensation �C not because ��the government�� made them do so.
OFHEO, which was Fannie and Freddie's regulator during the relevant period, had ample regulatory authority to prevent Fannie and Freddie from purchasing liar's loans and its head, James B. Lockhart, was a George Bush appointee and one of his oldest friends (from prep school). Lockhart had President Bush's full support and he was in no way intimidated by Barney Frank or Chris Dodd. Lockhart shared Bush's anti-regulatory mindset, his inability to envision elite business leaders as felons, and his strong support for even the most perverse executive compensation systems. Lockhart was not ��captured�� by Fannie and Freddie. He was not a supporter of either entity. He and his senior regulators that I met simply did not believe it was legitimate for the government to regulate compensation or, absent proof that the business practice had already produced large losses, Fannie and Freddie's business strategy.
The, SEC complaint takes the unique, na?ve, and untenable position that Fannie and Freddie bought very large amounts of nonprime loans in order to increase market share. This position is exceptionally important because it reveals the SEC's unwillingness to take on even the most perverse executive compensation systems that are driving our recur! rent, in tensifying financial crises. Suffice it to say that the documentary record at Fannie and Freddie is replete with evidence that the controlling officers drove the decision to adopt a new business plan of purchasing vast amounts of nonprime loans and that the reason for the plan was to increase short-term nominal yields. Their risk people repeatedly warned them that the new plan could be disastrous. High short-term yield produced extraordinary near-term compensation for Fannie and Freddie's controlling officers, so it is no surprise that the CEOs' decided in favor of the path that made them wealthy �C and produced disaster for Fannie, Freddie, and the government.
Perverse Executive Compensation Systems are Criminogenic
Each of the discussions (and that includes the SEC complaints) is faulty because it proceeds as if Fannie and Freddie suddenly began engaging in accounting and securities fraud late in the crisis. That is objectively false. The SEC (and eventually Fannie and Freddie's regulator �C then OFHEO, now called FHFA) documented that Fannie and Freddie had long engaged in accounting and securities fraud �C no later than the beginning of the decade that would eventually produce the crisis. The SEC detected Freddie's and then Fannie's frauds in 1983. Indeed, the SEC explicitly charged that Fannie's senior managers caused it to commit accounting fraud for the purpose of maximizing their executive compensation. I was an expert witness for OFHEO against Raines, et al. in the agency's enforcement action arising from this earlier fraud. The SEC and OFHEO's actions led to Freddie appointing a new CEO in December 2003 (Richard Syron, the most senior defendant in the new SEC suit arising from Freddie's operations) and Fannie appointing a new CEO in December 2004 (Mr. Mudd, Fannie's COO during its endemic accounting fraud from 2000-20003). Mudd is the most senior defendant in the SEC suit arising from Fannie's operations.
One of the delightful acts of unintent! ional se lf-parody arising from the crisis is that when the Business Roundtable (the 100 largest U.S. corporations), eventually decided that they needed a spokesperson to respond to the Enron-era epidemic of ��accounting control fraud,�� they selected Frank Raines (Fannie's CEO).
Business Week dutifully asked Raines why the fraud epidemic occurred. Raines responded:��Don't just say: ��If you hit this revenue number, your bonus is going to be this.' It sets up an incentive that's overwhelming. You wave enough money in front of people, and good people will do bad things.��
Raines knew of what he spoke, for his predecessors, and he had devised such a bonus system (tied largely to, non-GAAP, earnings per share (EPS) targets purportedly designed to be ��stretch�� goals). Fannie's compensation system produced exactly the perverse results that Raines predicted and explained to Business Week.
��By now every one of you must have 6.46 [EPS] branded in your brains. You must be able to say it in your sleep, you must be able to recite it forwards and backwards, you must have a raging fire in your belly that burns away all doubts, you must live, breath and dream 6.46, you must be obsessed on 6.46��. After all, thanks to Frank, we all have a lot of money riding on it��. We must do this with a fiery determination, not on some days, not on most days but day in and day out, give it your best, not 50%, not 75%, not 100%, but 150%.��
��Remember, Frank has given us an opportunity to earn not just our salaries, benefits, raises, ESPP, but substantially over and above if we make 6.46. So it is our moral obligation to give well above our 100% and if we do this, we would have made tangible contributions to Frank's goals.�� (Mr. Rajappa, head of Fannie's internal audit, emphasis in original.)
I call internal audit the anti-canary. Miners took canaries into coal mines because the birds are more susceptible than humans to carbon dioxide and monoxide. If the canary loses consciousness the humans ! can surv ive by exiting the mine. Internal audit is supposed to the least susceptible unit in a firm. The mantra of internal audit is ��independence�� from the senior managers. If internal audit is suborned by executive compensation then the rot is pervasive in other units. In considering the import of Rajappa's speech to his internal audit troops, consider the fact that it was a written speech and that Rajappa provided the text to Raines �C and got favorable suggestions to make it even stronger. Raines knew and approved of the fact that the rot at Fannie was pervasive. Ireland Imports U.S. Executive Compensation and Produces a Similar Crisis
A word about ��stretch goals.�� Consider this exceptionally na?ve passage from a Nordic banker (Nyberg) recently asked to write a report on the failed Irish banks. He is discussing earning targets that maximized executive compensation.
��Targets that were intended to be demanding through the pursuit of sound policies and prudent spread of risk were easily achieved through volume lending to the property sector.�� (Nyberg 2011: 30)
The bonus targets, of course, were not ��intended to be demanding through the pursuit of sound policies.�� The senior managers chose stretch goals, impossible to reach through prudent lending, because such goals were ��easily achieved�� by ignoring asset quality (which they proceeded to do). As George Akerlof and Paul Romer aptly observed in their 1993 article (��Looting: the Economic Underworld of Bankruptcy for Profit��), accounting control fraud is a ��sure thing.�� Whether one is in Ireland or the U.S., the fraud recipe for a lender (or loan purchaser) has four ingredients.
1.Grow like crazy2.By making (or buying) exceptionally bad loans at a premium yield, while3.Employing extreme leverage, and4.Providing grossly inadequate allowances for loan and lease losses (ALLL)
Indeed, Ireland provides a superb natural experiment that helps us determine why banks make or purchase exceptionally ! bad loan s with grossly deficient underwriting and trivial ALLL. The fraud recipe is so perverse because it is mathematically guaranteed to produce record (albeit fictional) short-term reported income, huge compensation, and catastrophic losses. If a material number of banks (or a small number of very large banks) follows the same fraud recipe in an asset category it will hyper-inflate a bubble in that asset. Accounting control frauds often lend into teeth of a glut.
Ireland is so useful because it had no equivalent of a Community Reinvestment Act ("CRA") and no material secondary market (no equivalent of Fannie and Freddie �C hence, no requirements to purchase a subset of below median-income home mortgages). Nevertheless, its real estate bubble was roughly twice as large (in relative terms) as the U.S. bubble and it had twin bubbles in commercial and residential real estate. Its banks exhibited a collapse of loan quality driven by perverse executive compensation. Irish bank CEOs followed the same fraud recipe as Lehman, Merrill Lynch, Countrywide, WaMu, Fannie, Freddie and their ilk and produced the same catastrophic losses.
��All of the covered [failed] banks regularly and materially deviated from their formal policies in order to facilitate rapid and significant property lending growth. In some banks, credit policies were revised to accommodate exceptions, to be followed by further exceptions to this new policy, thereby continuing the cycle.��
��Occasionally, management and boards clearly mandated changes to credit criteria. However, in most banks, changes just steadily evolved to enable earnings growth targets to be met by increased lending.�� (Nyberg 2011: 34)
��The associated risks appeared relevant to management and boards only to the extent that growth targets were not seriously compromised.�� (Nyberg 2011: 49)
That's right; let nothing get in the way of making it simple to meet the bonus target �C even though doing so will destroy the bank.
Fannie and Fr! eddie's CEOs Led them in Serial Accounting and Securities Fraud
Fannie and Freddie's accounting frauds in the earlier part of the decade, however, followed a different recipe. Their managers were then ��skimmers�� instead of ��looters.�� We should not be too kind to them. Their earlier accounting fraud recipe put Fannie and Freddie (and therefore the government) at risk of loss and their phony (��dynamic��) hedging posed a systemic risk. Fannie and Freddie's original fraud scheme sought to maximize the senior managers' income by taking substantial interest rate risk. This required Fannie and Freddie to grow their portfolios massively. ��[F]rom 1998 to 2003, Freddie Mac's retained portfolio grew at an annual average rate of about 21 percent. Over the same period of time, Fannie Mae's mortgage holdings increased by an annual average rate of 17 percent. By 2003, Freddie Mac's retained portfolio ($661 billion) was about 72 percent as large as Fannie Mae's ($920 billion.)��-The Rise and Fall of Fannie Mae and Freddie Mac: Lessons Learned and Options for Reform. Richard K. Green and Ann B. Schnare (November 19, 2009: p. 18).
Fannie and Freddie's controlling officers made the opposite bet on the direction of interest rates. Fannie lost its bet, so it hid it losses by calling them ��hedges.�� This accounting fraud turned Fannie's real losses into fake profits, maximizing the officers' bonuses. This bit of accounting and securities fraud caused the SEC to required Fannie to restate its financial statements and recognize millions of dollars in losses. Naturally, Fannie's officers did not give back their bonuses. Freddie won its bet on interest rates and, after recognizing enough income to maximize current executive bonuses, it created ��cookie jar�� loss reserves so that it could draw on them if it failed to meet the targets that maximized future bonuses. The SEC was not amused and required Freddie to restate its financial statements.
Here is the crazy thing �C the SEC, OFHEO, an! d Depart ment of Justice all failed to demand that Fannie and Freddie end their perverse executive compensation system that made the executives wealthy through fraud and put the entities and the government at risk. The Bush White House took no action and made no criticism of the compensation system. The Congress (both parties) made no criticism of the compensation systems. Remember, we had seen these perverse compensation systems blow up the S&L industry and the Enron-era accounting control frauds.
OFHEO even allowed Mr. Mudd, Fannie's COO during the period of its extensive accounting and securities fraud, to replace Raines' as CEO in December 2004. None of this was due to any weakness in OFHEO's regulatory powers. The problem was an unwillingness to regulate. The unwillingness was ideological. OFHEO's senior managers did not consider it legitimate to regulate executive compensation or to block Fannie's choice of its new CEO. The new SEC suit names Mudd as a defendant. OFHEO had its maximum leverage over Fannie and Freddie when the SEC discovered their accounting and securities frauds and its own examinations confirmed those frauds in the middle of the critical decade. OFHEO used its leverage to fight the last war �C ensuring that Fannie and Freddie did not take excessive interest rate risk. It sharply limited the amount that Fannie and Freddie could grow their portfolios and cracked down on hedging abuses. Unfortunately, the first of these actions, while completely appropriate, helps explain the new accounting and securities fraud that are (or should be in a better complaint and prosecution) the subject of the new SEC action.
Fannie and Freddie's New Controlling Insiders become Looters
By December 2004, the SEC and OFHEO had forced out Fannie and Freddie's controlling managers who led the accounting control frauds in the first part of the decade, but they left in place Fannie and Freddie's exceptionally perverse executive compensation systems that promis! ed that the new senior officers could attain vast wealth if they could cause Fannie and Freddie to report high, short-term profits. Their old scam, interest rate risk plus hedge/cookie jar accounting fraud could no longer be used when Fannie and Freddie's new controlling officers took power. There was only one alternative means of creating (fictional) outsized reported profits. They could not grow their portfolio significantly, but OFHEO failed to require them to divest those portfolios �C and those portfolios were massive because of the earlier fraud scheme. In 2005, Fannie and Freddie's new controlling officers led them into an orgy of purchasing nonprime loans (liar's loans, subprime loans, and subprime liar's loans) �C the loans sure to generate the largest short-term nominal yield. This had the intended effect on the controlling officers' executive compensation. Fannie and Freddie's controlling officers increasingly moved prime loans out of portfolio by securitizing and selling them. Their portfolios increasingly became littered with nonprime loans. Fannie and Freddie's controlling officers followed the classic recipe for looters using accounting control fraud. The difference between Fannie and Freddie and some of its counterparts is that Fannie and Freddie's risk and (some) underwriting officers mounted considerably greater opposition to the fraud recipe than many other accounting control frauds. This explains why Fannie and Freddie's losses (relative to the amount of nonprime loans they purchased) were smaller than many of their counterparts.
It is only by taking into account Fannie and Freddie's earlier accounting fraud and the SEC and OFHEO's reactions to those frauds that one can understand why Fannie and Freddie made radical changes in their purchase of nonprime loans in 2005. It is only by taking into account the (moderately) superior professional culture of its risk professionals that one can understand why their losses were not far worse (given the enormous amounts of nonprime loa! ns they purchased from 2005-2007). Wallison implicitly assumes that if Fannie and Freddie had not purchased these nonprime loans their competitors would not have done so. That assumption is extraordinary and requires heavy proof. Wallison provides none.
It was Fannie and Freddie's competitors who purchased the same nonprime loans so eagerly in 1998-2004 that they eviscerated Fannie and Freddie's once dominant market share in the secondary market for mortgage loans. Fannie and Freddie's combined share of the secondary market fell from well over 90% in 1990 to under one-half by 2004. Indeed, many of Fannie and Freddie's losses come from investing in or guaranteeing the financial derivatives issued by its competitors where the underlying asset was nonprime assets, particularly liar's loans and subprime liar's loans. ��Private label securities accounted for 56 percent of Fannie Mae's total mortgage-related security purchases from 2004 through 2006, and 54 percent for Freddie Mac. (See Exhibit 4.) Most of these purchases involved securities backed by subprime or Alt-A mortgages. (See Exhibit 9.) In 2006, the GSEs' purchases of such securities represented 9.8 percent of the total volume of subprime and Alt-A originations made within the year.�� (Green & Shnare 2009: 23)
��Alt-A�� is one of the many euphemisms for liar's loans. The term is a double lie. It purports that the loans are prime quality (��A�� grade) and it purports that the loans are underwritten through ��alternative�� means. In reality, the capacity of the borrower to repay the loan was not underwritten. Typically, the lenders and their agents fraudulently inflated the borrower's income. Fannie and Freddie were Late to Purchasing Huge Amounts of Nonprime Paper
Fannie (which predated Freddie), created the concept and standard of the ��prime�� home loan decades ago when it was an independent government agency before it was privatized. When it was a government agency, ! it was t he principal source of desirable market discipline ensuring high mortgage quality. Nonprime home loans include three primary categories �C liar's loans (loans made without prudent underwriting of the borrower's capacity to repay the loan), subprime (loans made to borrowers with known, serious credit defects), and subprime liar's loans (combining both problems). One of the easy tests of competence is to find whether a writer knows so little that he believes that subprime and liar's loans are dichotomous. Credit Suisse reports that, by 2006, 49% of the loans called ��subprime�� were also liar's loans.
Prior to 2005, nonprime loans were sold overwhelmingly to large investment banks. These banks were not subject to any governmental requirements to purchase such loans. The investment banks purchased the nonprime loans because doing so maximized their controlling officers' compensation. Fannie and Freddie lost enormous market share because of this competition.
Wallison's Thesis has been Repeatedly Falsified
The indisputable fact that it was the non-regulated sector (mortgage banks, mortgage brokers, investment banks, and non-bank affiliates that led the epidemic making and purchasing fraudulent nonprime loans has not prevented multiple, major analytical failures about the role that Fannie and Freddie played in the crisis. The historical quibble is that Fannie and Freddie reduced their loan purchase standards well before 2005. That is true, but it does not explain why Fannie and Freddie suffered huge losses on nonprime loans. Fannie and Freddie's definition of ��prime�� created an exceptionally safe standard in which credit losses were minimal. It was possible to reduce that standard without creating a criminogenic environment and the data review by FCIC demonstrates that the loans that Wallison has lumped together (relying on Pinto's work) and labeled ��subprime�� are extremely disparate. Fannie's original definition of ��prime�� was equivalent to an A+. The l! oans tha t the mortgage industry called ��subprime�� were a C-. Liar's loans were a D-. Subprime liar's loans were an F. There is a large range in credit quality between the original definition of prime and loans the industry called ��subprime.�� FCIC showed that the loans that Pinto (but not the industry) classified as ��subprime�� had dramatically lower default rates than the loans that the industry classified as subprime.
As Charles Calomiris, one of Fannie and Freddie's most virulent critics has emphasized, the proof as to who is correct in this argument about categorization rests on the performance of the loans. The loans at Fannie and Freddie that Pinto (but not the industry) termed subprime performed far better than the loans the industry termed subprime.
Nocera's December 23, 2011 column calls Pinto and Wallison's work a ��big lie�� because it categorizes loans that Fannie and Freddie would not have considered ��prime�� (circa 1982) as ��subprime�� even when these loans were not considered ��subprime�� by the industry (circa 2006).
http://www.nytimes.com/2011/12/24/opinion/nocera-the-big-lie.html?_r=1&src=me&ref=general
This is unduly harsh. Pinto and Wallison (and Joshua Rosner and Gretchen Morgenson) are correct that the credit quality of some loans considered prime deteriorated for over a decade. The real problem is the authors' lack of consistency. At root, their point is that differences matter. Specifically, they argue that making nonprime loans is far riskier than making prime loans. The same logic, however, requires them to evaluate whether differences matter within the vast category that they created and labeled as ��subprime.�� They failed to conduct this evaluation. The FCIC conducted one aspect of the evaluation and found that the differences within the Pinto/Wallison category had enormous consequences for relative performance. The bulk of Fannie and Freddie's loans that fall within Pinto/Wallison's unique and far broader categorization of ��su! bprime�� loans perform far better (have much lower default rates) than the narrower, commonly used categorization of subprime.
Second, all the authors advancing this meme failed to evaluate the difference between liar's loans and non-liar's loans for the purpose of their real thesis �C ��the government�� caused the crisis by forcing Fannie and Freddie to purchase bad loans. This argument has many factual weaknesses, but one fatal weakness is the fact that there was never any governmental requirement for Fannie and Freddie to purchase liar's loans. This provides a natural experiment that allows us to test, and reject, the thesis that Fannie and Freddie purchased bad loans because of governmental mandates.
The CEOs of Fannie and Freddie caused them to buy vast amounts of liar's loans because the higher nominal yield maximized near-term executive compensation. The CEOs of Fannie and Freddie acted like the CEOs of Bear Stearns, Lehman, and Merrill Lynch and they did so for the same reasons and with the same fatal consequences. Akerlof and Romer captured the dynamic in the title of their article (��Looting: the Economic Underworld of Bankruptcy for Profit��). The firm fails, but the CEO walks away wealthy because accounting control fraud is a ��sure thing.��
Remember, the FBI has already warned (in September 2004) and the mortgage industry's own anti-fraud unit (MARI) has warned in early 2006, respectively, that an ��epidemic�� of mortgage fraud will produce a financial ��crisis�� if it is not stopped and that liar's loans are 90% fraudulent. No honest, financially sophisticated entity would make or purchase liar's loans (or CDOs backed by liar's loans) knowing these facts. Yet, several of the leading investment banks, hundreds of mortgage bankers, WaMu, Countrywide, IndyMac, and Fannie and Freddie rushed to make or purchase endemically fraudulent mortgage paper.
This would be irrational for any honest CEO, but it would be optimal for a CEO directing an accounting control fraud.! Fannie and Freddie's losses on liar's loans paper are extreme �C and note that the authors of the study make the common error of assuming that liar's loans and subprime loans are dichotomous. If one examined separately the losses on Fannie and Freddie's subprime liar's loans (and CDOs where such loans were the bulk of the underlying) the losses would be catastrophic.
��In 2008, for example, Alt-A mortgages represented just 9.7 percent of Fannie Mae's book, but accounted for almost 40 percent of the company's credit losses. The experience at Freddie Mac tells a similar story: the serious delinquency rate on Freddie Mac's Alt-A book (which is 8 percent of the portfolio) is more than three times higher than the total portfolio's rate.�� (Green & Schnare 2009: 24).
Sadly, the SEC fails to exploit this natural experiment involving liar's loans. Indeed, the SEC complaint appears to have been drafted by someone so poorly informed that he believes that liar's loans and subprime loans are dichotomous categories. Nocera is also critical of the SEC complaint, but his criticism arises from his erroneous belief that the complaint rests on Pinto and Wallison's unique categorization of ��subprime�� loans. Nocera is guilty of what he accuses Pinto and Wallison of doing, writing ��I still maintain that the S.E.C.'s charges are weak, and that the agency brought the case in part for political reasons: how better to curry favor with House Republicans than to go after former Fannie and Freddie executives?�� This is a strong charge requiring at least some proof, but Nocera provides no support.
Nocera (and Wallison) miss entirely the key aspect of the SEC complaint that refutes Wallison's thesis that Fannie and Freddie bought bad loans because ��the government�� made them buy bad loans. Wallison's facially implausible claim is that Fannie and Freddie were weak political actors forced by crazed Democrats to purchase suicidal loans in order to subsidize poorer minorities that support Democrats. Fannie a! nd Fredd ie were exceptionally powerful political entities with strong support from both parties, e.g., Newt Gingrich, but ignore this aspect of unreality solely for the purpose of testing the internal logic of Wallison's hypothesis. Wallison's claim is that Fannie and Freddie were so weak politically that they were forced to take on suicidal loans in order to curry political favor with the Democrats.
If that were true, then Fannie and Freddie should have consistently been leading the purchase of subprime loans from 1993 on (which was when HOEPA became law). In reality, Fannie and Freddie lost tremendous market share because they (generally) refused to purchase loans the industry categorized as subprime until roughly 2005. Their rivals, the investment banks (who were not subject to any affordable housing mandates), rushed to purchase massive amounts of these subprime loans. That is the conventional (compelling) reason to reject Wallison's thesis. I have added another reason �C Fannie and Freddie would never have purchased liar's loans under Wallison's thesis because ��the government�� never compelled them to purchase liar's loans and doing so would be suicidal. The SEC complaint adds an additional reason why Wallison's thesis fails. Under Wallison's thesis Fannie and Freddie should have been exaggerating the amount of subprime loans they were making in order to curry favor with the despicable Democrats. But the SEC complaint (and Wallison and Pinto's own work) prove that Fannie and Freddie did the opposite. Fannie and Freddie's controlling managers consistently cooked their financial statements and financial disclosures to make it appear that Fannie and Freddie purchased vastly fewer subprime loans than they actually purchased. (They did the same thing with their liar's loans �C for the same reasons.) Nocera (incorrectly) assumes that the SEC complaint relies on Pinto/Wallison's unique, ultra-broad categorization of ��subprime�� loans, but Fannie and Freddie's documents show that they understat! ed both the number of liar's loans and subprime loans they purchased (as categorized by conventional industry norms). This makes perfect sense for managers running an accounting control fraud, but it makes no sense under Wallison's thesis.
We need to be blunt about the source of Wallison's thesis. Wallison is one of the leading architects of the global financial crisis in his capacity as AEI's long-time co-director of their financial deregulation program. He pushed the criminogenic three ��de's��: deregulation, desupervision, and de facto decriminalization. He criticized Fannie and Freddie for not making greater amounts of nonprime loans. He is desperately seeking to escape accountability for his major role in creating a global crisis. He is an ideologue who would have been fired by AEI had he supported financial reregulation. His thesis that the crisis was really caused by the government forcing the politically powerless Fannie and Freddie to make suicidal loans is a desperate effort to save himself and his ideology. Wallison's thesis cannot survive the laugh test. It requires that, for over a decade in which the Republicans had control over the Congress and/or the White House Fannie and Freddie's CEOs knew they were purchasing loans that would eventually prove catastrophic for Fannie and Freddie, the lenders (loan sales to Fannie and Freddie are made with recourse back to the seller), and for the (poorer minorities) purchasing the homes. No one at Fannie and Freddie leaks this to the Republican Congress or the Bush White House even though such leaks would have (under Wallison's thesis) provided the mother of all Democrat-bashing congressional hearings. No one at OFHEO, including Bush's old friend, and strong Republican, James Lockhart (the guy running OFHEO), informs Bush that Fannie and Freddie are headed for catastrophe because the Democrats have forced them to purchase suicidal loans to poorer minorities (i.e., the base of the Democratic Party).
The thesis also requires that, kn! owing of the coming catastrophe, Fannie and Freddie's controlling officers, for over 15 years, decided to provide only trivial accounting allowances for the inevitable catastrophic losses �C even though GAAP would mandate that they provide massive allowances in such circumstances and even though the controlling officers' failure to do so could be prosecuted as securities fraud. The failure to provide massive allowances makes no sense under the Wallison thesis, but it is the standard ��fourth ingredient�� for an accounting control fraud.
Had Fannie and Freddie's controlling officers appropriate allowances for losses their financial reports would have shown the truth �C that the actual long-term yield on liar's loans was negative. Fannie and Freddie would have reported substantial losses from 2005 on had they established the allowances required by GAAP, which would have eliminated their bonuses. Wallison is the Problem and Placing him on FCIC was Scandalous
The Wall Street Journal editorial on the SEC complaints against Fannie and Freddie claims that FCIC should be embarrassed that it ignored the key role that Fannie and Freddie played in the crisis. The Wallison has a new piece in The Atlantic in which he claims ��the government�� caused the crisis.
http://www.theatlantic.com/business/archive/2011/12/hey-barney-frank-the-government-did-cause-the-housing-crisis/249903/
If one had to pick one person in the private sector most responsible for causing the global financial crisis it would be Wallison. As I explained, he is the person, who with the aid of industry funding, who has pushed the longest and the hardest for the three ��de's.�� It was the three ��de's�� combined with modern executive and professional compensation that created the intensely criminogenic environments that have caused our recurrent, intensifying crises. He complained during the build-up to the crisis that Fannie and Freddie weren't purchasing more affordable housing loans. He now claims that ! it was F annie and Freddie's purchase of affordable housing loans that caused the crisis. He ignores the massive accounting control fraud epidemics and resulting crises that his policies generate. Upon reading that Fannie and Freddie's controlling officers purchased the loans as part of a fraud, he asserts that the suit (which refutes his claims) proves his claims.
Placing Wallison on FCIC was like placing the Don's consigliere on a panel that is supposed to investigate the mafia. What was Wallison going to say as a FCIC member? ��Mea Culpa, I've been wrong for a quarter-century about everything important and I have come to admit that deregulation, desupervision, and de facto decriminalization are disastrous.�� There was a reason no other Republican appointee to FCIC was willing to sign on to Wallison's dissent. His dissent is a screed that is devoted to protecting his theoclassical economic ideology. FCIC did not ignore Pinto's work, it refuted its analytics. Wallison's real complaint is that FCIC took Pinto's work seriously enough to do the analytical work that Pinto and Wallison should have done to determine whether Pinto's unique categorization of ��subprime�� produced a category of loans with similar (terrible) performance results. What Wallison cannot forgive the FCIC staff and other commissioners for is that they did treat his claims seriously despite his obvious self-interest and the logical inconsistency of his claims.
It was taking his claims seriously and evaluating his data that he failed to evaluate that put the final nail in the coffin of his claims. Wallison and Pinto have had a year to point out any data errors in FCIC's demonstration that the loans Pinto categorized as ��subprime�� had greatly superior loan performance compared to loans the industry categorized as ��subprime.��
There is no point criticizing the Wall Street Journal's editorial staff. They know that FCIC concluded that Fannie and Freddie played a major role in the crisis. FCIC was correct that ! Fannie a nd Freddie were late to the party in terms of purchasing the loans and CDOs that eventually caused the catastrophic losses. The question was why Fannie and Freddie suddenly began to buy enormous amounts of largely fraudulent nonprime paper in 2005.
They did so, as the repeated investigations have found, for the same reason that Fannie and Freddie engaged in accounting control fraud earlier in the decade �C it makes the controlling officers wealthy. It is a ��sure thing.�� What I have added is the relevant time line explaining the role that Fannie and Freddie's earlier accounting control frauds, and the modest sanctions levied by the SEC and OFHEO, played in explaining why they went so heavily into fraudulent nonprime paper around 2005.
Wallison has been conspicuously silent in demanding that elite CEO frauds that drove this crisis be prosecuted. I ask him, and I ask reporters who discuss any story with him, whether he will now demand that we end the de facto decriminalization of the fraudulent CEOs who drive our financial crises and become wealthy through their frauds. Does Wallison believe that Fannie and Freddie's controlling officers would be a good place to begin prosecuting?
Bill Black is the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. He spent years working on regulatory policy and fraud prevention as Executive Director of the Institute for Fraud Prevention, Litigation Director of the Federal Home Loan Bank Board and Deputy Director of the National Commission on Financial Institution Reform, Recovery and Enforcement, among other positions.

Bill writes a column for Benzinga every Monday. His other academic articles, congressional testimony, and musings about the financial crisis can be found at his Social Science Research Network author page and at the blog New Economic Perspectives.
Follow him on Twitter: @WilliamKBlack

William K. Black

Bill Black is an Associate Professor of Economics and Law at the University of Missouri �C Kansas City (UMKC). He is a white-collar criminologist. He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He taught previous

Adding a new Bath at home

2012-01-20T08:09:00.000-08:00

Tub heater. The bathtub is a very critical feature in terms of the general style as well as belief of your rest room. Before you decide to hurry out to buy a brand new bathtub, take the time to take into consideration what your loved ones would like most: can it be rapid, regular bath areas? Extended, comforting bathrooms? Each? A few things to consider come into play here, thus have somewhat imagined before making your buy as well as moving forward together with installment.
Several Considerations
To begin with, exactly where have you been putting in the new bathtub? A Standard 50-gallon bath which measures 5′ extended through 30″ vast isn’t really really hard to reach your bathrooms about the second ground. However, if you are buying a high end whirlpool as well as bath, you may have to consider other choices: getting rid of any second-floor screen, as an example. Without having any screen choice, seek out baths which come within a number of items. By doing this you will get the tub the stairway as well as build this on-site. Tub heater.
Bathtubs that do not get enclosures feature whether left-end apron or perhaps a right-end apron. This really is dictated through faucet positioning. A good route is any bath having a reversible choice so that it operates whatever.
Your current water heater, active plumbing, as well as ground power are just as crucial as your bath assortment. For those who have scaled-down, half-inch normal water water lines, clogging your gutters massive high end bathtub may be much more time-consuming as compared to you want. Three-quarter ” water lines will perform the trick for the huge, heavy bathtub. In addition, a smaller normal water container is not going to provide you with the pleasure regarding nice, hot water in a huge bathtub! If you are searching to get any bath together with 80 or even more gallons regarding normal water, you will need a water heater approximately any 75-gallon normal water potential. You! may tak e into account getting an inline heater being a answer, nonetheless. This will ensure you possess a consistent, hot water heat throughout your own bath. Ultimately, ensure your own ground are prepared for a substantial (as well as high end) bath. Modern properties are prepared for the weight; in case you are in an elderly house, ground joists are usually necesary.
Tub heater. Keep in mind, check with a specialist contractor pertaining to support. You want to make sure the work is done proper!

The Worst Health-Care Stocks of 2011

2012-01-19T08:11:00.000-08:00

The following video is part of our "Motley Fool Conversations" series in which David Williamson, health-care editor and analyst, and Brendan Byrnes, industrials editor and analyst, discuss topics across the investing world.
In today's edition, David and Brendan discuss some of the worst health-care stocks of 2011. These stocks fit relatively neatly into three categories: failure to launch, trial troubles, and home health-care scare. This video focuses on home health-care scare. The home healthcare sector was beaten down mercilessly in 2011 after an already poor showing in 2010. Given a DOJ and SEC investigation over billing practices, negative Medicare changes impacting business, and declining guidance figures, are these business doomed to failure? Or have they gotten so cheap that brighter days for investors are just over the horizon in 2012??

Looking for our prediction for 2012? Check out The Motley Fool's brand new report, "The Motley Fool's Top Stock for 2012." It highlights a company that is revolutionizing commerce in Latin America. You can get instant access to the name of this company by?clicking here -- it's free.

Wall Street Finds Multiple Causes For Optimism; Financials Lead (Updated)

2012-01-17T09:49:00.000-08:00

European finance leaders finished an apparently successful summit and that has American investors cheering. Add these two items to the good news category: the Standard & Poor's 500 index is on track to post its best month since January 1987 and U.S. consumer spending picked up in the third quarter.
The Dow Jones industrial average was up 2.92 percent, or 346.70, to 12,215.74; the Nasdaq was up 3.32 percent, or 87.96 points, to 2,738.63; and the Standard & Poor's 500 was up 3.43 percent, or 42.57 points, to 1,284.57; the NYSE composite was up 3.90 percent, or 292.53 points, to 7,798.68; and the AMEX composite was up 1.63 percent, or 37.20 points, to 2,312.91.
Hot Stocks
Financial stocks were some of the best-performing today. Citigroup Inc. (NYSE:C) was up 9.47 percent, or $2.95, to $34.11.
Exxon Mobil Corp. (NYSE:XOM) reported a whopping 41 percent increase in quarter-to-quarter revenue and beat Q3 EPS estimates, but was up only 0.94 percent, or $0.78, to $81.87.
Time Warner Cable (NYSE:TWC) missed Q3 EPS and revenue projections. The nation's second-largest cable provider was down 7.86 percent, or $5.56, to $65.08.
Motorola Mobility Holdings Inc. (Nasdaq:MMI) was up 0.31 percent, or $0.12, to $39.02 ahead of an after-hours quarterly earnings release. Shares were trading down slightly after hours after investors found MMI missed expectations.
Las Vegas Sands Inc. (NYSE:LVS) was up 4.44 percent, or $1.93, to $45.40. The company was up in after-hours trading after beating quarterly revenue estimates.
Advanced Micro Devices Inc. (NYSE:AMD) was up 8.73 percent, or $0.4450, to $5.54. It was trading even after-hours on news it beat quarterly revenue and EPS estimates.
Electronic Arts Inc. (Nasdaq:ERTS) was up 0.45 percent, or $0.11, to $24.50. In after-hours trading, the company is down 2.5 percent despite beating quarterly estimates.
Commodities and Currencies
Oil was up 4.04 percent, or $3.64, to $93! .84 per barrel. Gold was up 0.74 percent, or $12.80, to $1,735.50 per ounce.
The euro gained 0.0296 against the U.S. dollar to 1.4189.
The dollar lost 0.3005 against the Japanese yen to 75.9400. The British pound gained 0.0141 against the dollar to 1.6102.
International Markets
International markets, particularly in Europe, were upbeat today. France's CAC 40 led the parade, up 6.26 percent, or 199.00 points, to 3,368.62. Germany's DAX was up 5.35 percent, or 321.77 points, to 6,337.84; and Britain's FTSE was up 2.89 percent, or 160.59 points, to 5,713.82.
Japan's Nikkei was up 2.04 percent, or 178.07 points, to 8,926.54; and Hong Kong's Hang Seng was up 3.26 percent, or 622.16 points, to 19,688.70; Singapore's Straits Times was up 2.80 percent, or 77.63 points, to 2,847.57; and China's Shanghai Composite was up 0.34 percent, or 8.13 points, to 2,435.61.
Industry Watch
The toy and hobby store industry was the day's best performer, up 14.24 percent. That was all due to Build-A-Bear Workshop Inc.'s (NYSE:BBW) strong quarterly results. Shares ended up 14.24 percent, or $0.83, to $6.66.
The healthcare information systems industry was the day's worst performer, down 3.78 percent. Quality Systems Inc. (Nasdaq:QSII) was down 3.53 percent, or $1.53, to $41.82. The company completed a two-for-one stock split today and reported strong quarterly numbers.
Best and Worst
China Yida Holdings Co. (Nasdaq:CNYD) was the day's biggest percentage gainer, up 34.13 percent, or $0.71, to $2.79.
Orrstown Financial Services Inc. (Nasdaq:ORRF) was the day's biggest percentage decliner, down 29.62 percent, or $3.91,to $9.29 on a swing from profit to loss from last year's Q3 to this year's.

Where to Find Stocks with Yields Double Those in the U.S.

2012-01-17T02:28:00.000-08:00

Last week, I told you about the enormous number of high-yielding stocks abroad. I think the amount of international dividend-payers out there is one of the market's biggest secrets.
If you remember, I told you only 18 profitable U.S. companies were paying yields of more than 12%... compared with 412 abroad. The numbers fluctuate day to day, but the trend is pretty clear.
I've researched this topic for years. And the fact is, foreign companies are simply paying higher yields across the board.

Take a look at the table to the right.
You can see the difference between what we get from U.S. companies and what's available from international companies. Keep in mind I only looked at the common stocks of companies that were profitable in the past year.
Truth is, the stocks in the S&P 500 pay an average yield of just 2.0%. This makes us one of the lowest-yielding markets in the world.
But go abroad, and you find something completely different. No, not every country is a dividend stalwart... but there are a surprising number of markets that more than double the yields found here in the United States.
Compare our 2.0% average yield with what I'm seeing in international markets.
According to Bloomberg, Germany's average yield is 3.6%... Brazil's average yield is 4.1%... the United Kingdom yields 3.4%... Australia yields 4.5%... New Zealand pays 4.4%.
Take a look:

As Judy Sarayan, a fund manager at mega-investment firm Eaton Vance explained in simple terms, "There's a much stronger dividend culture abroad... individual investors play a larger role in those markets, and the! y have a lways demanded more dividends."
But there are more reasons to look abroad than just the dividend yields.
In the one-year period between August 2010 and August 2011, the S&P 500 returned 15.9%. This is certainly nothing to sneeze at, but when you look at total performance worldwide, the U.S. market ranked just 36th in the world in that same period.
And during the past five years, the S&P 500 has returned 12.6%. But 34 other countries delivered better stock market returns.
So not only can you find higher yields abroad, but you can also see stronger capital gains.
You see, there's a correlation between economic growth and rising stock prices. The faster the growth, typically the higher the stock market moves. And international markets are where the majority of the world's economic growth is happening.
Look, the United States is unlike any other nation on the planet. It's the largest economy and home to the world's most innovative entrepreneurs. But the simple fact is that the headiest days of our economic growth are behind us.
Why?
It's simply the law of large numbers. With an economy in excess of $14 trillion, growing more than a few percent each year is a major undertaking.
In fact, think back about what we've seen in the past few years. The U.S. government has spent trillions in an effort to stimulate the economy. The Federal Reserve has spent trillions more. Interest rates have been slashed to zero.
And yet, the U.S. economy grew just 2.8% in 2010. Not bad, but only good enough to rank us 117th in the world -- between South Africa and Cameroon -- when it comes to annual gross domestic product (GDP) growth.
Qatar topped this list with 16.3% growth. Singapore saw a 14.4% rise in GDP. Panama, 7.5%... South Korea, 6.1%... Poland, 3.8%... even Germany boosted its GDP at a 3.5% annual rate.
Fact is, more and more income investors are realizing that if they want to give the! mselves the best chance at the "Holy Grail" of investing -- high yields AND rising stock prices -- they need to look at international companies.
> Don't get me wrong -- investing in international dividend-payers isn't a guaranteed winning investment. Nothing ever is. But as I like to say, limiting yourself to only U.S. stocks is like going to a restaurant and limiting your options to just one side of the menu. Sure you can find something you like... but wouldn't you rather see all the options?

Challenges loom ahead for the rest of 2012

2012-01-16T22:19:00.000-08:00

Bolstered by strong sales of games like Dead Space 2, Dragon Age II, and Bulletstorm, Electronic Arts (NASDAQ:ERTS) beat Wall Street’s earnings expectations late Wednesday and saw its stock rise 7% in recent Thursday trading.
But the rest of the year may not go as smoothly. While it once appeared like the company would be able to maintain its positive momentum, its catalog of late-2011 releases are under threat, putting recent gains at risk.

The most significant issues face the company’s lucrative EA Sports titles. The looming NFL lockout and the absence of the World Cup tournament are putting a significant damper on Madden NFL 2012 and FIFA 2012, entries in the company’s perennial best-selling franchises.
The lack of a new major game in the company’s NBA Live (changed to NBA Elite last year, before being cancelled) series is also a challenge, and an NBA work stoppage looms this fall. EA CEO John Riccitello said that these problems represent a potential “$250 million revenue challenge” for fiscal 2012, and the company adjusted its forecast to account for the worst. That’s a small comfort to shareholders banking on strong sports game sales.
The other problem is that EA’s multiplayer online game Star Wars: The Old Republic, intended as a competitor to Activision Blizzard’s (NASDAQ:ATVI) World of Warcraft, is likely going to be delayed until next year (although the company has scheduled it for a release in the second half of 2011). Having already spent massive sums on the game’s development — costs have been rumored to be everywhere between $80 million and $300 million — EA needs to have its online Star Wars game ready for consumers before Blizzard reveals its World of Warcraft follow-up, code-named Titan.
EA’s d! igital g ames business, including social games on Facebook and mobile games on Apple’s (NASDAQ:AAPL) iPhone, remain a bright spot for the rest of 2011. The company’s digital sales for the previous fiscal year totaled $811 million, handily beating expectations of just $750 million. Its digital initiatives continue to grow by leaps and bounds, and on Tuesday, EA acquired mobile and social game maker Firemint, maker of the popular iPhone game Flight Control, for around $25 million.
Unfortunately, the company’s digital business only makes up 20% of overall revenue. With uncertainty surrounding the company’s traditional game offerings for the rest of the year, a stock runup from of more than 40% since late January may be hard to repeat anytime soon.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at?@ajohnagnello?and?become a fan of?InvestorPlace on Facebook.

Romney Tops Iowa Poll

2012-01-15T17:54:00.000-08:00

Mitt Romney is at the top of the Des Moines Register's latest Iowa poll, although Rick Santorum made a surprise jump into third place, pushing out Newt Gingrich.

Sen. Ron Paul of Texas came in second among the contenders for Republican presidential nomination.
The results of the poll of likely Republican caucus-goers were announced Saturday, just days away from Tuesday's Iowa caucuses, which kick off the Republican primary season.
In four days of polling, from Dec. 27-30, former Massachusetts Gov. Romney came away with 24%, while Paul had 22% and former Sen. Santorum (R., Penn.) had 15%, according to a Des Moines Register report on the poll.
Former House speaker Newt Gingrich had 12%, while Texas Gov. Rick Perry had 11% and Rep. Michele Bachmann (R., Minn.) had 7%, the report said.But a look at the last two days of polling shows how quickly Santorum is gaining in popularity. If only those days are used, Santorum edges out Paul for second place, the Des Moines Register said.
And in the final day of polling, Santorum had 22% support, just one point away from Romney 23% on that day, the newspaper added.
The poll was conducted by Selzer & Co. of Des Moines and was based on telephone interviews with people likely to attend the Republican caucuses, the Register reported.
The margin of error for the full four days is plus or minus 4 percentage points, the newspaper said. For the last two days, it's plus or minus 5.6 percentage points, it added.

Dell (DELL) Earnings: Has The PC Had Its Day?

2012-01-15T16:48:00.000-08:00

Dell’s earnings dropped 48% last quarter and now it will probably fire more people. The numbers were not a surprise. Independent research shows PC sales falling around the world as the recession sets in.?Earnings from Hewlett-Packard (HPQ) and Lenovo have confirmed that. There is even concern that sales of the popular Apple (AAPL) Mac may drop.

But, the demise of the PC may not simply be because of the recession. Consumers and businesses may turn to other devices to write, create documents, send data and access the internet. Right now, they are handheld smartphones and netbooks. They have drawbacks which may be going away.
The first disadvantage smaller electronic devices have is their computing power. Processors for these?products don’t match those in PCs. But, Intel (INTC) is among the companies working on high-powered chips for small devices. It knows that as PC sales falter, its current business of providing x86 chips will start to fall apart.
The other drawback to handhelds and netbooks is connection speeds to the internet. When they are linked up to WiFi, they can take advantage of broadband. But, out of range of those signals, they have to rely on slower 3G. The cellular industry is in the midst of solving that problem with a build-out of “4G” networks which will run as fast as the fastest landline broadband.
The advantages the PC had in the past are quickly going away.
Douglas A. McIntyre

Yahoo! Q3 Rev In Line, EPS $0.21/Sh Beats; Q4 View Light

2012-01-14T13:25:00.000-08:00

Yahoo! (YHOO)? this afternoon reported Q3 revenue and EPS ahead of analysts’ expectations, while offering a Q4 revenue view that was short of expectations.
The Internet giant said it earned 21 cents a share on revenue of $1.07 billion.
Analysts were expecting the company to earn 17 cents a share on revenue of $1.07 billion.
For the current quarter, the company sees revenue in a range of $1.13 billion to $1.24 billion, which at the midpoint, $1.185 billion, is below the average $1.22 billion estimate.
Yahoo shares are up 49 cents, or 3.4%, at $15.96 in late trading.
Yahoo! will hold a conference call at 5 pm, Eastern, and you can check it out here.
Of course, despite today’s report, many investors are still more focused what lies ahead for Yahoo!, amid rumorsof varying probability that co-founder Jerry Yang is planning to take it private, the Chinese e-commerce company Alibaba wants to to buy the company, or it may teamup with anyone from Microsoft (MSFT) to AOL (AOL).
In his note, “Will Earnings Even Matter?” Susquehanna analyst Herman Leung writes “Key investor focus will be on the timing and progress of interested parties in the strategic review process.”

(AMT, WSO, GCO, CRWE) Stock Highlights by DrStockPick.com

2012-01-12T18:08:00.000-08:00

American Tower Corp. (NYSE:AMT) announced the pricing of its registered public offering of senior unsecured notes due November 1, 2021 in an aggregate principal amount of $500 million. The notes will have an interest rate of 5.900% per annum and are being issued at a price equal to 99.858% of their face value.
American Tower Corporation, through its subsidiaries, operates as a wireless and broadcast communications infrastructure company.
Watsco Inc. (NYSE:WSO) announced that its Board of Directors has declared a regular quarterly cash dividend of 57 cents on each outstanding share of its Common and Class B common stock. The cash dividend is payable on October 31, 2011 to shareholders of record at the close of business on October 14, 2011.
Watsco, Inc., together with its subsidiaries, distributes air conditioning, heating and refrigeration equipment, and related parts and supplies in the United States.
Genesco Inc (NYSE:GCO) The board of directors has declared dividends on the various classes of its preferred stock for the quarter ending October 29, 2011, payable on October 30, 2011, to shareholders of record on October 14, 2011.
Genesco Inc. engages in the retail of footwear, headwear, and sports apparel and accessories; and the wholesale of footwear.
Crown Equity Holdings, Inc. (CRWE)
Crown Equity Holdings Inc. (CRWE) is pleased to announce that it has entered into a joint venture to deploy VoIP (Voice over Internet Protocol) technology delivering voice, video and data services to residential and commercial customers. The joint venture company is Crown Tele Services Inc. which was a wholly-owned subsidiary of Crown Equity Holdings Inc. Crown Equity Holdings Inc. will own fifty percent (50%) interest in the joint venture.
Commenting on the joint venture, Kenneth Bosket, President of Crown Equity Holdings Inc., said: “We are excited to deliver VoIP communications s! olutions specifically designed to meet the business and residential market needs in this fast-growing global market.”
Crown Equity Holdings Inc’s selection of Core Link reflects recent diversification beyond CRWE’s original charter as a provider of services and knowledge to small business owners taking their own companies public. In addition to these services, Crown Equity Holdings Inc has transitioned into a multifaceted media organization that publishes clients’ news online; sells advertising adjacent with its digital network targeted at a high-income audience; designs, hosts and maintains websites; produces marketing videos from concept to final product; crafts press releases and articles for maximum SEO; develops email campaigns; and forges branding campaigns to bolster client company images.
Crown Equity Holdings Inc. together with its digital network currently provides electronic media services specializing in online publishing, which brings together targeted audiences and advertisers. Crown Equity Holdings Inc. offers internet media-driven advertising services, which covers and connects a range of marketing specialties, as well as search engine optimization for clients interested in online media awareness.
Internet marketing helps you to attract prospective customers who are already looking for the products and services that you offer which enables you to reel in those prospects that are ready to make a commitment.
The more that you are able to get those who are interested in your products and services to your web site, the more that you are going to find that you’re able to generate leads and to make sales. Of course, just getting people to your web site is only the first step. Additional benefits of internet marketing begin to show themselves when you have a web site that stands out from those of your competitors, when your site provides the information that your site visitors are looking for and that information is easy for them to ! find.

Family Offices Database – Top 7 Reasons For Using One

2012-01-10T21:18:00.000-08:00

If you are raising capital you can establish a distinct competitive advantage over others trying to the do the same if you have a high quality family offices database. There are thousands of capital raising groups and banks which are reaching out and selling products to these firms that if you don’t have the right contact details you are already 3 steps behind in this very intense competition for FO business. Within this article we provide the top 7 reasons why you should use a FO database.
1) It can help you spend more time developing relationships and less time trying to find contact details of these firms.
2) The resource can assist you in identifying large vs. small ultra high net worth wealth management groups so you don’t waste your time on too large or small of a firm.
3) It can help you employ multi-modality marketing by sending them a mailing, email, and then calling all in the same day.
4) A database can help make you become more effective during phone calls by quickly getting you to their website where you can learn all about their firm before you place the call.
5) This type of a resource can also enable you to spend more time traveling to see the most important clients you have developed relationships with while your competition is stuck trying to find their contact details online
6) By obtaining contact details to these groups you are able to spend more of your time selling and marketing to a niche market that has an enormous level of wealth and money to spend.
7) Reaching out to FOs with all of their firm information will make you appear more professional and well organized.
This article shows exactly why it can help your team raise capital by using a family offices database, I hope you have found these tips helpful.
Bottom Line…if you are working with family offices or trying to raise capital from family offices you are going to use your time more effectively if you invest it in buildi! ng relat ionships and not having to build your own Family Office Database from scratch.
Our expert team has just released our 4th Version of our Family Office Directory, check it out here: http://FamilyOffices.com

FCIC Releases Final Report, Says Financial Crisis Was Avoidable

2012-01-08T21:19:00.000-08:00

The Financial Crisis Inquiry Commission (FCIC) delivered Thursday to President Obama and members of Congress the results of its investigation into the causes of the financial and economic crisis.
The FCIC concluded that the crisis was avoidable and was caused by:

Widespread failures in financial regulation, including the Federal Reserve’s failure to stem the tide of toxic mortgages;
Dramatic breakdowns in corporate governance including too many financial firms acting recklessly and taking on too much risk;
An explosive mix of excessive borrowing and risk by households and Wall Street that put the financial system on a collision course with crisis;
Key policy makers ill prepared for the crisis, lacking a full understanding of the financial system they oversaw;
And systemic breaches in accountability and ethics at all levels.

“Despite the expressed view of many on Wall Street and in Washington that the crisis could not have been foreseen or avoided, there were warning signs. The greatest tragedy would be to accept the refrain that no one could have seen this coming and thus nothing could have been done. If we accept this notion, it will happen again” said Phil Angelides, Chairman of the Commission.
The FCIC’s report also said specific components of the financial system contributed significantly to the financial meltdown: collapsing mortgage-lending standards and mortgage securitizations; over-the-counter derivatives; and the failures of credit rating agencies.
The FCIC also examined the role of government sponsored enterprises (GSEs), with Fannie Mae serving as the case study. The Commission found that the GSEs contributed to the crisis but were not a primary cause. “They had a deeply flawed business model and suffered from many of the same failures of corporate governance and risk management seen in other financial firms but ultimately followed rather than led Wall Street and other lenders in purchasing subprime and other risky mortgages,” the report said.
To reach its conclusion, the FCIC reviewed millions of pages of documents, interviewed more than 700 witnesses, and held 19 days of public hearings in New York, Washington, D.C., and communities across the country that were hit hard by the crisis. The reports and accompanying dissents are available to the public on the Commission’s website.
The operations of the FCIC will conclude on Feb. 13.

Great Fresh Business Program To Effectively Create Bucks Online

2012-01-06T01:29:00.000-08:00

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From this brief content piece I want to present to you a work-from-home income opportunity called “Opportunity Dock”. Basically, this is a program for every person to whom doing work from home still continues to be a dream. The problem that beginners typically come across is how to get started, especially when they have a little amount of money. Consider this, a website that offers a single-stop net store by providing its members with all they need to generate money online or ganar dinero por internet right away.
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Polypore's 2011 Points to Promise

2012-01-04T05:39:00.000-08:00

Polypore International (NYSE: PPO ) , a Charlotte, N.C.-based filter technology specialist, makes parts for use in batteries that help run things such as tablets, smartphones, and electric-drive vehicles (EDVs). To the savvy investor, 2011 may very well have become a turning point for growth in this company. During the first half of the year, investors seemed to be on board, but that optimism later turned sour. Here's why.
Early 2011
Polypore started things out strong with back-to-back earnings announcements that smashed expectations. Though management never gave specific outlooks, it repeatedly cited increased demand for the company's products as reason to view the future optimistically.
During the first half of the year, that was music to investors' ears.

Polypore International Stock Chart by YCharts
Late 2011
But then in August, things started to head south. Even though the company recorded an eye-popping 85% increase year over year, investors didn't like what they heard moving forward.
To Fool contributor Neha Chamaria, that reaction seemed silly. The main reason the company told investors to temper their short-term outlook was a good one: IT would be spending money to expand its capacity to meet customer demand.
With battery companies such as Exide Technologies (Nasdaq: XIDE ) and EnerSys (NYSE: ENS ) demanding more of what Polypore has to offer, the company has no choice but to spend the money to expand if it wants to meet demand. And if EDVs ever take off from the likes of Tesla (Nasdaq: TSLA ) or even Ford (NYSE: F&nb sp; ) , the future could prove even more lucrative for Polypore and make this buildout look even more prescient.
So even though the company finished 2011 on a down note, I believe Polypore could have a bright future.

Polypore International Stock Chart by YCharts
2012 and beyond
Though I believe the future is bright for Polypore, it's not The Motley Fool's Top Stock for 2012. Instead, our analysts have found a company that has all the greatness of Costco baked into its DNA but operates in the quickly growing economies of Central and South America. Get your copy of our special free report detailing the company today, absolutely free!

5 of Last Week's Biggest Winners in 2012

2012-01-02T20:48:00.000-08:00

What's better than momentum? Mo' momentum.
Let's take a closer look at five of this past week's biggest scorchers.

Company	Dec. 30	Weekly Gain	My Watchlist
Parlux Fragrances (Nasdaq: PARL )	$5.10	47%	Add
MoSys (Nasdaq: MOSY )	$4.20	38%	Add
Endeavor (NYSE: END )	$8.69	36%	Add
RAM Energy (Nasdaq: RAM )	$3.13	27%	Add
Arctic Cat (Nasdaq: ACAT )	$22.55	19%	Add

Source: Barron's.

Parlux was last week's biggest gainer, soaring when Perfumania agreed to buy out the rival fragrance company now that CEO Ilia Lekach has stepped down. Parlux investors will receive $4 in cash and 0.2 shares of Perfurmania for every share of Parlux that they currently own.
An analyst reiterated his "speculative buy" rating on MoSys after the memory specialist raised money by selling off dozens of its patents.
Investors cheered Endeavor's endeavor as the energy company is acquiring ConocoPhillips' interest in a few Central North Sea oil fields in a $330 million transaction that will boost its profile.
RAM Energy Resources continues to tack on gains after a recapitalization announced the week b! efore. T he sale of oil and natural gas acreage, as well as a $550 million stake acquired by an industry veteran, have combined to give the company brighter prospects.
Finally we have Arctic Cat proving that it's one cool cat. The maker of snowmobiles and ATVs announced that it will buy back the 33% stake in the company owned by Suzuki Motor at a healthy discount.
It was a great week for these five stocks. If you want to get an early read on some of tomorrow's major gainers, there's a special report on three hidden winners in a booming industry. The report is free -- like this article -- but it won't be around forever, so check it out now.

NVDA: Raymond James Sees In-Line Q3; GPU Fears Overdone

2012-01-02T08:00:00.000-08:00

Hans Mosesman of Raymond James this afternoon reiterates an Outperform rating on shares of chip maker Nvidia (NVDA) writing that the company will probably meet Street expectations for Q3 revenue of $1.062 billion and earnings per share of 26 cents when it reports results this Thursday, after the bell.
Mosesmann thinks some investors are making too much of the prospect that Nvidia’s graphics processing unit (GPU) sales may have been hurt last quarter by competition from Intel (INTC) and Advanced Micro Devices (AMD). Both UBS��s Uche Orji and Needham & Co.��s Rajvindra Gill warned on Thursday that the Nvidia could be losing GPU share, and that Nvidia’s “Tegra” processor for phones and tablets could disappoint.

Unlike the conventional wisdom indicating that Nvidia lost meaningful share this quarter, we believe that overall losses were modest in 3Q11 [...] Some Street observers may be confusing overall graphics share moves as a proxy for Nvidia dynamics and even though the company is effectively out of the “integrated” graphics markets over the past year and the trend for netbooks to use “graphics” (counted as a graphics “unit” in some industry research) also skews the numbers.

As for Tegra, Mosesman concedes a build-up of inventory of the parts could be a problem, given that OmniVision (OVTI), the maker of cell-phone camera sensors, today pre-announced weak Q3 results, and a weak Q4 outlook, and given chip maker Atmel’s (ATML) dismal remarks last Tuesday regarding the tablet market.
Still, me also thinks the stock’s underperformance its 5% rise this year trails the Nasdaq Composite Index — doesn’t make sense given what has been “a beat and raise April quarter, an in-line performance in ! July, an d an above consensus outlook for FY13.”
Nvidia shares today fell 8 cents, or half a percent, to $14.74.

Family Dollar Stores Earnings Cheat Sheet: Third Straight Quarter of Rising Profit

2011-11-25T00:17:00.000-08:00

best shares to invest in 2012
24
Oct/11
Buy And Hold Isn’t Dead, Just Misunderstood
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Every once in a while, a bunch of doomsayers pop up proclaiming the demise of buy and hold. This tends to happen more often during times of heavy volatility and uncertainty in the market, such as over the past few months. Some of these folks like to follow up with testaments to the superiority of whizbang new investment strategies, with names like “buy and watch” or “buy and monitor.” The problem isn’t that they’re wrong – on the contrary, they’re absolutely right. The problem is that the concept of “buy and hold” that they’re attacking is nothing more than a strawman. It’s easy to win when you’re dueling a scarecrow, because straw doesn’t fight back.

Let’s look at some articles here on SA that have been published recently: Investors Should Not Be Complacent About Dividend Champions, by James Kostohryz, and Why Picking A Stock To Hold Forever Is Folly: The Apple/Cisco Case, by Roger Nusbaum. First, let me say that Mr. Kostohryz and Mr. Nusbaum are both excellent writers who provide many articles of value to the investment community. I read both of them regularly and will continue to do so. However, both of the articles cited above pick on a premise that was never true to begin with: that the buy-and-hold investment style encourages investors to hang on to their stocks ad infinitum after they’ve bought them, without paying any attention to how the underlying businesses are doing.

The first and most important rule of buy-and-hold is to know your investments. That includes knowing when to get out. It’s very possible for traditional buy-and-hold investors who follow the school of long-term value investing to dump a stock one quarter after they purchased it. Their investment thesis may have been wrong. The fundamentals of the company may have changed. Unforeseen challenges to the business may have materialized. Such an action doesn’t diminish the validity of their strategy.

The “hold” of buy-and-hold refers to intent, not a guaranteed outcome. In this way, buy-and-hold investing is kind of like marriage. When we marry, most of us intend and hope to stay hitched for good. When long term investors buy a stock, we hope that the company will continue to grow and remain competitive forever. We select the partner/companies that have the best chance of making that hope a reality.

Of course, a lot of the time it doesn’t turn out that way. When you find out that the person you married is not who you thought they were, sometimes the best thing to do is to walk away. When you find out that the business you bought is no longer as strong a competitor as it once was, it may be time to cash in your chips and move to another table.

A character in a great movie once said, “On a long enough timeline, the life expectancy of everyone drops to zero.” The same is true of businesses. Of the original Dow stocks, only General Electric (GE) remains, and the financial crisis was a pretty close call for GE. Competitive destruction is one of the ugliest, but most fundamental forces of free market capitalism. It doesn’t matter how good you are, eventually someone better is going to come along to pick a fight with you, and then it’s game over. Nothing immunizes a company from the omnipresent threat of competitive destruction. Not a fat dividend, not a wide moat, not a fortress balance sheet. Eventually, all companies must die.

Buy-and-hold investors understand this, which is why the first principle of buy-and-hold is what it is. The more intimately familiar you are with a company’s operations, prospects, and financial health, the more likely it is that you’ll recognize when it’s time to take your money off the table. No one who actively practices buy-and-hold investing is under the delusion that they must hold on to their stocks forever no matter what happens. Some investors do a portfolio check-up more often than others, but the only investment vehicles that you can just dump money into and then forget about are index funds.

The only reason this is true is because index funds aren’t really completely passive. Every stock in an index was added there by a person, and stocks get removed when they no longer fit the profile of the index. When you buy an index ETF like the SPDR S&P 500 (SPY) or the iShares MSCI EAFE (EFA), you’re not holding on to your investments forever either, because the indexes get reshuffled every so often: new companies get added in, faltering companies get taken out. Index investors can afford to be less vigilant because they have the company behind the index acting as their portfolio manager. Investors who choose to pick their own stocks benefit from no such proxy.

If you’re not the kind of investor who has the time to stay on top of his portfolio 24/7, there are a lot of companies out there that operate under safeguards that make it less necessary to keep tabs on them all the time. Alcoa (AA) plies its trade in a capital intensive industry that poses formidable barriers to entry. Cisco (CSCO) has a huge war chest stuffed with cash, which helps to buffer against economic assault (though a technology stock is never really a safe investment no matter its balance sheet). Ford (F) benefits from great leadership that steered it through a market downturn that swallowed up most of its competitors. The more capable your managers are, the less risk you assume with a hands off approach to ownership. Finally, Intel (INTC) offers an unrivaled dividend yield compared to its industry peers that continues to grow, which means that by the time cracks begin to appear in the company’s foundation, investors may have already made their money back and more through dividends alone.

These companies may have an edge over their competitors in terms of stability, but there’s no such thing as a safe investment, only safer. You can call it buy-and-hold, buy-and-watch, buy-and-monitor, or whatever new catchphrase the news streams serve up, but in the end, it amounts to the same thing: buying great companies at a reasonable price, and letting them go when they’re no longer great companies at a reasonable price.

Times may change, but the fundamental ideas of value investing, of buy-and-hold investing will continue to remain relevant so long as people in society continue to make money by selling their stuff to other people.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in F over the 2next 72 hours.
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23
Oct/11
Infosys Up 6% As FYQ2 EPS Beats, Year View Tops Estimates
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Shares of Infosys (INFY) are up $3.34, or 6%, at $56 after the company this morning beat fiscal Q2 earnings per share estimates, and forecast Q3 profit ahead of expectations, and projected the year’s results ahead of consensus.

Revenue in the three months ended in September rose 17% to $1.75 billion, yielding EPS of 72 cents. Analysts had been modeling $1.75 billion and 69 cents.

CEO S.D. Shibulal remarked that the “global macroeconomic environment is still uncertain,” and that it “is and should be a concern for the IT industry.”

For Q3, the company sees revenue in a range of $1.8 billion to $1.84 billion, and EPS of 79 cents to 80 cents. That is a little light on the top line compared to the average $1.85 billion estimate, but ahead of the average 75-cent EPS estimate.

For the year, the company sees revenue of $7.1 billion to $7.2 billion, and EPS of $3.02 to $3.06. That is ahead of the average estimate for $7.1 billion and $2.88 per share.
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22
Oct/11
Family Dollar Stores Earnings Cheat Sheet: Third Straight Quarter of Rising Profit
by admin under best shares to invest in 2012, best stocks investments for 2012, best stocks to buy now for 2012, best stocks to hold 2012, best stocks to invest, Best stocks to invest in 2011, best stocks to invest in 2012, Best stocks to invest right now, best stocks to pick up, best way to invest in 2012, good stocks to invest in 2012, great stocks to invest in 2012, hot penny stocks for 2012

S&P 500 (NYSE:SPY) component Family Dollar Stores Inc. (NYSE:FDO) reported its results for the fourth quarter. Family Dollar Stores operates more than 6,600 retail discount stores across the U.S., offering consumables, home products, apparel accessories, seasonal and electronics.

Investing Insights: Steve Jobs Prepares to Deliver a New Catalyst for Apple’s Stock.

Family Dollar Stores Earnings Cheat Sheet for the Fourth Quarter

Results: Net income for the discount store rose to $79.8 million (66 cents per share) vs. $74 million (56 cents per share) in the same quarter a year earlier. This marks a rise of 8% from the year earlier quarter.

Revenue: Rose 9.1% to $2.13 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: FDO beat the mean analyst estimate of 63 cents per share. Analysts were expecting revenue of $2.12 billion.

Quoting Management: “A year ago we launched an ambitious, multi-year plan to accelerate revenue growth, expand operating margins and optimize our capital structure, and I am pleased to announce that we have executed well against our plans in a very difficult operating environment,” said Howard Levine, Chairman and CEO.

Key Stats:

The company has now seen net income rise in three straight quarters. In the third quarter, net income rose 6.5% and in the second quarter, the figure rose 9.8%.

Gross margin shrank 0.7 percentage point to 34%. The contraction appeared to be driven by increased costs, which rose 10.2% from the year earlier quarter while revenue rose 9.1%.

Revenue has risen the past four quarters. Revenue increased 7.8% to $2.15 billion in the third quarter. The figure rose 8.3% in the second quarter from the year earlier and climbed 9.5% in the first quarter from the year-ago quarter.

The company topped expectations last quarter after falling short of forecasts in the third quarter with net income of 91 cents versus a mean estimate of net income of 94 cents per share.

Competitors to Watch: Dollar General Corp. (NYSE:DG), 99 Cents Only Stores (NYSE:NDN), Dollar Tree, Inc. (NASDAQ:DLTR), Big Lots, Inc. (NYSE:BIG), Wal-Mart Stores, Inc. (NYSE:WMT), Target Corporation (NYSE:TGT), Fred’s, Inc. (NASDAQ:FRED), Costco Wholesale Corp. (NASDAQ:COST), Gordmans Stores, Inc. (NASDAQ:GMAN), and Amazing Savings, Inc (ODDJ).

Investing Insights: Steve Jobs Prepares to Deliver a New Catalyst for Apple’s Stock.

Top Stocks of 2012 Aflac (AFL)

2011-11-23T08:45:00.000-08:00

Top Stocks of 2012
“Aflac (NYSE: AFL) is best known in the U.S. for its ‘duck ads,’ but actually earns over 75% of its money from Japan,” says Dirk Van Dijk.
In selecting the stock as his top pick for 2012, the strategist for Zacks.com, recalls “Aflac happens to be an old favorite of mine, a stock that I first recommended back in 1991.” Here’s his current update.
“In the U.S., its policies are sold through employers on a payroll deduction, as part of companies ‘cafeteria plans’. They are pretty straight forward. If you get sick and can’t work, or are in the hospital, it pays out a set mount directly to the insured.
“It is thus not at risk for rising health care costs (but is if more people get sick). The U.S. unit was under some pressure as payrolls shrank, but with some positive news on the employment front, that should turn around.
“In Japan, once people get AFL insurance they don’t drop it (which is very important in the life and health insurance industry) with a persistency rate of 95%.
“The firm has a superb track record, but came under big pressure during the crash last year due to fears about its investment portfolio. I think those fears are being assuaged over time.
“It has already realized $1.7 billion (pre-tax) in investment losses. Some of those are not going to come back, like its holdings in Lehman Brothers and WAMU, but other parts of the holdings that were written down just might come back.
“Aflac did however write down $380 million as other than temporary losses in holdings of some Ford debt, and Ford has been doing much better of late, certainly much better that it looked back at the end of the first quarter when GM and Chrysler were going down for the count.
“The company has generated an ROE of 33.4% over the last 12 months, and its five year average ROE is 20.84% (it has leveraged up a bit, from having no debt to a still very manageable and conservative 22% debt to capital. As that happens AFL should return to its historic valuations.
“How much upside potential is that? A Lot. Over the last five years (which of course included the big sell o? last year) AFL’s P/E has averaged 15.4x.
“Based on 2010 earnings estimates it is going for 9.5x now, and 8.7X 2012 consensus estimates, and those estimates have been rising.
“AFL also has a habit of beating the estimates. It has done so the last three times out, and in 17 of the last 28 quarters, with only five disappointments.
“AFL currently yields 2.4%, which is nice. It has however, increased that dividend in each of the last 27 years, and over the last 15 years it has done so at a compound annual rate of 20.7%.
“AFL happens to be an old favorite of mine, a stock that I first recommended back in 1991, and was a core holding for most of my tenure at C.H. Dean. I know the management team well from those days, and they are amongst the best I know in the industry.”

3 Undervalued Tech Stocks to Buy Now

2011-11-20T00:51:00.000-08:00

When investors see the words “undervalued tech stocks,” the first companies that jump to mind are probably the mega-cap giants like Cisco (NASDAQ:CSCO) and Microsoft (NASDAQ:MSFT). The large-cap space certainly has more than its share of cheap tech stocks, but a look into mid- and small-cap territory reveals other, less talked-about opportunities. Computer Sciences (NYSE:CSC), Lexmark International (NYSE:LXK), and China Digital TV (NYSE:STV), are three such stocks that deserve more attention than they receive.

Computer Sciences

Shares of CSC, an IT-outsourcing company, have been pummeled from a February high above $56 to $37.20 on Wednesday. The stock has been hit by less-than-stellar earnings results and concerns that the U.S. government’s perilous fiscal situation will weigh on the 39% of CSC’s business that comes from federal contracts. That’s undoubtedly a legitimate worry, but also one that is well-known at this point. At 7.3 times 2012 estimates (and a price-to-earnings-to-growth ratio of 0.9) and a share price sitting at 0.8 times book value, it appears that the bad news is fully discounted in the stock. Two other key points regarding CSC: first, the stock yields 2.2% – much better than you’ll find with the average large-cap tech stock. Second, the company is cash-rich and is frequently mentioned as a target of a buyout. Betting on a takeover is always a dicey proposition, but CSC offers investors a solid risk-reward tradeoff even without the benefit of a buyout.

Keep in mind: The last time CSC’s P/E was at this level, the stock traded up 25% in less than two months.

Lexmark International

A maker of printers, ink, and imaging products, Lexmark has seen its shares come under heavy selling pressure since late 2010 – a trend that wasn’t helped by its May earnings miss. While the printing business is indeed in gradual decline, it may finally be time to say “enough is enough” regarding the downturn in Lexmark’s share price. After hitting a high above $47 in mid-October, the stock now stands at $28.62. At this level, the stock trades at forward P/E of less than 7x, and removing the net cash of $7 a share (about a quarter of its market cap) on its balance sheet brings the P/E below 5.5x. A low P/E can be a trap when growth is slowing, of course, but the company’s core ink business continues to generate substantial free cash flow. And like CSC, Lexmark has the added benefit of being a strong candidate for an eventual takeover.

Keep in mind: The recent selloff has driven LXK’s valuation to its lowest level in history.

China Digital TV

The smallest of the three companies discussed here, China Digital could offer big potential to patient investors. The company makes smart cards that allow the conversion of an analog signal to digital. A boring business perhaps, but consider that China is the world’s largest TV market with 377 million viewing households. Of these, 187 million have cable and only 90 million currently have a digital signal. This adds up to a stellar growth opportunity for a company with no debt and over 70% of its market cap accounted for by the $214 million of cash on its balance sheet. The stock trades for less than 7x 2012 earnings estimates and a PEG of just over 0.4. Chinese stocks are not without risk, as 2011 has taught us, but patient investors who tune into STV may be in for quite a show.

Keep in Mind: Like LXK, CSC trades at an all-time low P/E.

Technology investing has been no picnic for investors thus far in 2011, but these stocks provide a compelling margin of safety in the event of further volatility in the months ahead.

Best Stocks to Invest in Right Now

2011-11-17T11:15:00.000-08:00

Many experts are saying that the stock market is cheap right now. This includes great investors like Warren Buffett who thinks that equities are cheap. That is prompting a lot of investors to find the best stocks to buy right now as the market is still cheap. That is of course unless you are part of the crowd that things there will be a contraction once the quantitative easing measures are over.

I’ve heard Target as a good stock to buy recently. Their fundamentals are strong. They are profitable and the rest of the financial statements show a pretty strong company. They also look like they could potentially be undervalued from doing a business valuation based on discounted cash flows.

Ford is another good company right now. They are a strong company and were able to bounce back after they refused government bailout money. They are profitable in an industry that is bouncing back as a whole. More and more people will start buying cars again, and they already have. There is a lot of pent up demand that will be released on this market and Ford is one of the strongest players to profit off of this move.

More of the best investment options would be to be in technology stocks as well. You can see the fastest trending ones will be the likes of Apple and Google. Also look for Facebook to come out as an IPO at some point down the line. They have made some moves recently that have indicated that they may be interested in going public.

The healthcare industry is also good as well. Find strong companies that are growing with lots of future potential market growth. These would be niche markets like elderly care or the retirement industry. But really, most healthcare companies that are strong and growing will be good as this rising tide raises the good ships in this sector.

After the Cloud: Top Tech Trends for 2012

2011-11-15T05:13:00.000-08:00

Last year belonged to Apple (NASDAQ:AAPL). The company’s share price rose to almost $350 over the course of 2010, making the company the most valuable tech entity on the planet.

Even more significantly, Apple’s touchscreen portable devices defined the industry. Even as the iPhone continued to grow and the iPad’s popularity spurred competitors to build their own tablet PCs, Google (NASDAQ:GOOG) was able to surpass Apple in at least one regard: More people bought Android phones than other kind. That wealth was spread across multiple manufacturers like HTC and Motorola (NYSE:MMI), but it showed that smartphone technology was now a mass-market force.

If 2010 was the year of smartphones and tablets, 2011 is proving itself to be the year of so-called cloud-based services (accessing applications via the Internet) for those devices. Google Music, Amazon’s (NASDAQ:AMZN) CloudPlayer, and Apple’s iCloud are just three of the new cloud businesses that will open before the year is out, each one of them allowing access to whatever entertainment or stored information, like documents and pictures, without the need of a hard drive.

The question now: What technology trends will define 2012? Here are three contenders:

The smaller, cheaper smartphone

AT&T (NYSE:T) and Verizon (NYSE:VZ) may be talking about how faster data transfer speeds will keep the smartphone market humming over the next 18 months, but the real hot commodity will be feature-light, cheap smartphones that can compete with the best iPhone and Android devices available now. AT&T and retailers like Wal-Mart (NYSE:WMT) have had tremendous success selling older model iPhones for $50 with new contracts. A smaller iPhone intended for teenagers that sells for $99 and runs as smoothly as the current iPhone model will be even more popular. Unsurprisingly, Apple is said to be working on just such a device.

Internet Television

Google bet big on its Google TV service being one of its biggest hits in 2010, but poor reviews of the service itself and complete consumer disinterest in the two major devices it came packed in, Sony’s (NYSE:SNE) Internet HD TV and the Logitech (NASDAQ:LOGI) Revue, put the kibosh on the company’s ambitions. Google plans to take another shot, though, and cable providers like Time Warner (NYSE:TWX) and Comcast (NASDAQ:CMCSA) are exploring multiple ways to allow access to the same content over mobile devices that people can get in the living room. Whether it’s as a service or a new type of living room TV set-top box like the kind made by Google and Roku, Internet TV will come into its own in 2012.

Hybrid PCs

The PC market has had a rough 2011 so far, with PC sales dropping more than 1% over the first quarter. That doesn’t mean the industry is done for, however — it’s merely in a state of transition. Next year will bring the introduction of more low-cost PCs like Google’s Chromebook as well as PCs that offer more functionality in line with those in the iPad. Hewlett-Packard (NASDAQ:HPQ) has had modest success with its all-in-one touch screen Omni PCs. Apple will likely introduce its own version of the Omni next year. The industry-changer will be the company that introduces an affordable hybrid that can act as both a portable tablet and a feature-rich PC.

Top Oil Stocks 2011/2012 – Top Oil Stocks to Buy 2011/2012

2011-11-12T03:48:00.000-08:00

Oil Stocks to Buy 2011/2012- 2011/2012 Oil Stocks

Below is a list of my latest oil stock picks for 2011/2012. These 2011/2012 Oil Stock Picks are my favor stocks to buy and some of the stocks I will be trading personally. Last year, one of my top oil stock picks was Brigham Exploration (BEXP). BEXP stock went from $15 to $27 from July to December of 2010 and was one of my biggest stock gainers of the year. I feel 2011 will be a good year for stocks and the overall stock market. Oil in 2011 should hit $110-$120 which would make the oil stocks rally even higher.

Key Areas of Oil Exploration in 2011 – Eagle Ford Shale – Niobrara Shale – Bakken Shale – Permian Basin – Oil Discoveries are still going on in these fields and in 2011, more Oil Discoveries will be made. Keep an eye on the Chainman Shale – Cabot Oil & Gas (COG) mentioned in late 2010 that they are drilling for oil in the Chainman Shale. We also have Venoco (VQ) drilling the Monterey Shale in California. With that, here is a list of my best oil stock picks for 2011

#1 Top Oil Stock Pick 2011/2012 – Oil Stocks – Hyperdynamics Corporation (HDY) – While Hyperdynamics (HDY) is my top stock pick of 2010, it is a risky one. The company has no revenues and does not make any money but could be sitting on a very large pool of oil off the coast of Africa. Drilling for oil is expected to begin in December 2011. Hyperdynamics was headed into a downward spiral over the past couple years but changed the management team in 2010 who vowed to take the company in a new direction. Hyperdynamics has a very large prospective leased area off the coast of the Republic of Guinea. In November 2010, Hyperdynamics raised $30 million in a private placement from financial giant Blackrock (BLK) which will help in preperation costs to drill for oil in late 2011. Hyperdynamics did a few surveys and believe they could be sitting on billions of barrels of oil.

As for HDY stock in 2011, It is my top stock to buy and my best trading idea. I have been trading HDY since the stock was $1.60 in August 2010 and gave it a price target of $4 – $6 for 2011. HDY hit a high of $3.63 in October 2010 and continues to trade around $3.00 as we head into 2011. If everything goes as planned and the company does infact sit on top of a large oil pool, we could be looking at a $8-$10 stock by year end 2011 in my opinion. I gave it a target of $4 – $6 when the stock was hitting $2.60 just to be on the conservative side. Of coarse, if Hyperdynamics announces any delays or lesser oil reserves, all bets are off. Pullbacks below $2.50 should be a great buy if you are looking for an entry point. I currently own HDY stock for the long term and will buy more stock on pullbacks. If you have any questions or feel like discussing HDY stock, visit my HDY message forum thread.

#2 Top Oil Stock Pick for 2011 - Kodiak Oil & Gas (KOG) – Kodiak Oil & Gas was another huge stock gainer for me at the end of 2010. I bought KOG stock at $4.30 in mid November 2010 and sold between $5.00-$5.70 a month later. KOG went on to hit $6.69 a few weeks later. Kodiak Oil in Gas recently aquired additional acreage in the Bakken Shale. This acreage is in some of the best zones in the Bakken which includes the Three Forks Oil zone. When I originally bought KOG at $4.30, I placed a personal target of $8-$10 on it for 2011. I am sticking with this and feel the stock could even hit $12. A lot will depend on what oil does but ultimately the stock is going a lot higher. While I don’t own KOG right now, I plan to buy the stock on any major correction.

Invest 2012: best stocks to invest 2012

2011-11-10T03:36:00.000-08:00

As many experts suggest, maybe most of us not feel an immediate impact on the life after U.S. credit downgrade by S&P, but all of us can see a change in the future. So, invest best stocks 2012 to maximize you odds of return is necessary.

* The money manager and editor of The Oberweis Report suggests, “Take a look at American Superconductor Corp. (NASDAQ: AMSC), my choice for the top stock idea for 2012”.

The bulk of AMSC business today comes from the wind power industry, as it designs wind turbines and sells turbine electrical systems that can be customized for each customer. AMSC is the leading provider of electrical components to China, US and Korea. The proof is in the pudding, of course. Amidst a weak economic backdrop, the company grew revenues by 85% in their latest reported quarter as they announced their third consecutive quarter of profitability.

* “Annaly Mortgage Management (NYSE: NLY) is our favorite investment idea for 2012,” says Jack Adamo.

The company uses modest leverage — about half what banks use — to increase shareholder returns. With short-term rates likely to remain low for several years, Annaly’s interest-rate spread will be wide and profitable. The company has never had a losing year. “The market is still scared blind by anything that has the word “mortgage” attached to it; so, the shares, which would normally yield about 7%, now yield nearly 15%, and the dividend has been growing!

* AOL (NYSE: AOL), formerly America Online, is one of the most storied – and bloodied – names in the Internet sector,” says Bernie Schaeyer.

* “Asian stocks are also booming as China’s growth remains strong,” says Mark Skousen, who chooses AsiaInfo Holdings (NASDAQ: ASIA) as his top pick for the coming year.

* “Atlantic Power Corp. (Toronto: ATP.TO) sells power primarily to electric utilities in major U.S. markets under long-term contracts,” notes income specialist Carla Pasternak.

Top Stocks of 2012 Aflac (AFL)

2011-11-09T05:33:00.000-08:00

Top Stocks of 2012
“Aflac (NYSE: AFL) is best known in the U.S. for its ‘duck ads,’ but actually earns over 75% of its money from Japan,” says Dirk Van Dijk.

In selecting the stock as his top pick for 2012, the strategist for Zacks.com, recalls “Aflac happens to be an old favorite of mine, a stock that I first recommended back in 1991.” Here’s his current update.

“In the U.S., its policies are sold through employers on a payroll deduction, as part of companies ‘cafeteria plans’. They are pretty straight forward. If you get sick and can’t work, or are in the hospital, it pays out a set mount directly to the insured.

“It is thus not at risk for rising health care costs (but is if more people get sick). The U.S. unit was under some pressure as payrolls shrank, but with some positive news on the employment front, that should turn around.

“In Japan, once people get AFL insurance they don’t drop it (which is very important in the life and health insurance industry) with a persistency rate of 95%.

“The firm has a superb track record, but came under big pressure during the crash last year due to fears about its investment portfolio. I think those fears are being assuaged over time.

“It has already realized $1.7 billion (pre-tax) in investment losses. Some of those are not going to come back, like its holdings in Lehman Brothers and WAMU, but other parts of the holdings that were written down just might come back.

“Aflac did however write down $380 million as other than temporary losses in holdings of some Ford debt, and Ford has been doing much better of late, certainly much better that it looked back at the end of the first quarter when GM and Chrysler were going down for the count.

“The company has generated an ROE of 33.4% over the last 12 months, and its five year average ROE is 20.84% (it has leveraged up a bit, from having no debt to a still very manageable and conservative 22% debt to capital. As that happens AFL should return to its historic valuations.

“How much upside potential is that? A Lot. Over the last five years (which of course included the big sell o? last year) AFL’s P/E has averaged 15.4x.

“Based on 2010 earnings estimates it is going for 9.5x now, and 8.7X 2012 consensus estimates, and those estimates have been rising.

“AFL also has a habit of beating the estimates. It has done so the last three times out, and in 17 of the last 28 quarters, with only five disappointments.

“AFL currently yields 2.4%, which is nice. It has however, increased that dividend in each of the last 27 years, and over the last 15 years it has done so at a compound annual rate of 20.7%.

“AFL happens to be an old favorite of mine, a stock that I first recommended back in 1991, and was a core holding for most of my tenure at C.H. Dean. I know the management team well from those days, and they are amongst the best I know in the industry.”

Best Stocks (multibaggers) to invest in 2011-2012

2011-11-07T00:04:00.000-08:00

low PE, high EPS indian stocks 2011-2012, best Stocks to invest in 2011-2012, best penny stocks, best fundamental stocks, fastest growing companies,multibaggers of year 2011-2012

Below are the multibaggers of year 2011-2012 with good fundamentals and trading on low price and PE. Investor can keep the stocks for 18-24 months perspective.

1. Choksi Imaging Ltd

cmp – 55.00
PE ratio 4.52
EPS (Rs) 12.28 till Mar, 10
Sales (Rs crore) 38.61 Jun, 10
Face Value (Rs) 10
Net profit margin (%) 3.35 Mar, 10
Last dividend (%) 20

2. Diana Tea Company Ltd

cmp – 23.00
PE ratio 4.82 14/09/10
EPS (Rs) 4.72 Dec, 09
Sales (Rs crore) 11.02 Jun, 10
Face Value (Rs) 5
Net profit margin (%) 13.03 Dec, 09
Last bonus 3:2 14/07/05
Last dividend (%) 10 31/03/10

3. Zenith Birla (India) Ltd

cmp – 16.00
PE ratio 6.83 14/09/10
EPS (Rs) 2.23 Mar, 10
Sales (Rs crore) 129.83 Jun, 10
Face Value (Rs) 10
Net profit margin (%) 2.36 Mar, 10
Last bonus 1:5 24/06/10
Last dividend (%) 20 25/06/10

4. Shalimar Paints Ltd

cmp – 380
PE ratio 13.77 14/09/10
EPS (Rs) 26.44 Mar, 10
Sales (Rs crore) 82.73 Jun, 10
Face Value (Rs) 10
Net profit margin (%) 2.70 Mar, 10
Last bonus 3:10 11/09/82
Last dividend (%) 75 03/06/10

5. Alfa Transformers Ltd

cmp – 37.00
PE ratio 26.84 13/09/10
EPS (Rs) 1.41 Mar, 10
Sales (Rs crore) 3.66 Jun, 10
Face Value (Rs) 10
Net profit margin (%) 3.52 Mar, 10

6. DMC Education Ltd

cmp – 11.50
PE ratio 13.22 13/09/10
EPS (Rs) 0.81 Mar, 10
Sales (Rs crore) 3.21 Jun, 10
Face Value (Rs) 5
Net profit margin (%) 14.99 Mar, 09
Last bonus 1:1 14/05/07

7. Disa India Ltd

cmp – 1400
PE ratio 21.59 13/09/10
EPS (Rs) 65.30 Dec, 09
Sales (Rs crore) 18.57 Jun, 10
Face Value (Rs) 10
Net profit margin (%) 13.30 Dec, 09
Last dividend (%) 2000 20/02/08

8. MVL Industries

cmp – 31
PE ratio 5.17 14/09/10
EPS (Rs) 6.34 Jun, 10
Sales (Rs crore) 134.60 Jun, 10
Face Value (Rs) 10
Net profit margin (%) 2.71 Jun, 09

9. Medi-Caps Ltd

cmp – 83
PE ratio 7.41 14/09/10
EPS (Rs) 11.34 Mar, 10
Sales (Rs crore) 6.29 Jun, 10
Face Value (Rs) 10
Net profit margin (%) 16.48 Mar, 09
Last dividend (%) 15 27/08/10

10. N R Agarwal Industries Ltd

cmp – 76
PE ratio 6.02 14/09/10
EPS (Rs) 12.71 Mar, 10
Sales (Rs crore) 113.87 Jun, 10
Face Value (Rs) 10
Net profit margin (%) 5.52 Mar, 10
Last dividend (%) 18 30/07/10

Where To Buy Penny Stocks

2011-11-05T02:03:00.000-07:00

Tips On Where To Buy Penny Stocks
For those not acquainted with what penny stocks are, these would be stocks offered at under $5 a share. The goal here is to procure the stocks at reasonable prices and sell them for over what they cost to buy. Some will purchase these stocks for long-term investments but most of the people wondering where to buy penny stocks will look towards trading.

Daytrading is the method of selling and purchasing stocks in the exact same day. It’s no secret that such an enterprise includes great jeopardy. Nevertheless many have conclusively proved that huge profits can be generated thru such stocks which are why they’re perennially commended to those hunting for something more dynamic in their trading ventures.

Again, this all does raise issues concerning where to buy penny stocks. The fast answer will be to get them from a trusty service that trades in penny stocks. The majority already know this. What they want is a suggestion for a service that trades in such stocks. These are 3 of the most well-known brokers that handle this type of :

E*Trade : Is there a rather more well-liked online trading site than E*Trade? The solution to that question can be discussed for hours. There are scores of glorious trading firms out there. Having said that, few have the ability to deliver the top quality service this company is understood to supply.

Again, there are lots of corporations on the market that confess the facility to offer low cost, high volume trades but few deliver at the same quality level as E*Trade.

Scottrade : you might say that Scottrade gives E*Trade a run for its cash so far as renown goes. Scottrade has definitely merited its reputation as a quality trading service. This is a trading service that takes many further steps to be certain that clients have accessibility to the trades they want to make at costs which will prove reasonable to them. Such a combo is surely a noble one and Scottrade definitely is merited of its positive reputation.

Zecco : Zecco won’t be as well called the other 2 trading services it is unquestionably a top resource for those wondering where to buy penny stocks. What drives folks to get penny stocks from this actual broker? Low transaction costs and prime quality shopper service would be among the 2 most cited reasons.

Naturally, there are much more than 3 brokerages which handle penny stocks. The key is to get a service that charges a fair rate mixed with top quality shopper service. Such a twin approach will definitely evoke and excite folks into making the required trades that may yield major returns on their investments.

Standard Life Investments pulls out of money market funds

2011-06-23T19:57:00.000-07:00

Money Markets, Standard Life Investments

Top ten trades: Wednesday 27 April 2011 (all day) more >>

FEATURE: Robert Tyerman's Market View more >>

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Top ten trades: Tuesday 26 April 2011 (all day) more >>

Standard Life Investments has confirmed it is to exit its money market funds following a review of is cash investment business.

A spokesperson for the company said the decision to review its money market funds offering ahead of potential changes to the way the sector is regulated.

According to Standard Life Investments, money market funds could be brought 'within the scope of banking regulations' under proposed regulatory changes.

The decisions decided to exit the constant net asset value (CNAV) funds business to concentrate instead on funds with more variable net asset value.

The company is set to develop proposals, which will allow current investors to continue in CNAV-valued investments with a manager operating within banking regulations.

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Blue Chip Bulletin: BAT warns government of black market risks

2011-06-23T13:38:00.000-07:00

British American Tobacco

Blue Chip Bulletin: Tesco changes tack after customer abuse more >>

FEATURE: Robert Tyerman's Market View more >>

Barclays to remain in London more >>

Market update (AM): AB Foods drops on bearish outlook more >>

Blue Chip Bulletin: Wood Group completes $2.7bn well support sale more >>

Market update (PM): Vodafone down after peer performance more >>

British American Tobacco (BATS.L) has attacked government plans to ban the display of cigarettes in shops, warning it could actually increase the appeal to some social groups.

The tobacco giant made the incredible claim after lashing out at the UK government for increasing tobacco duties by two per cent above inflation last month, which the company said would encourage illicit trade.

Speaking at today’s annual general meeting, Richard Burrows, chairman of BAT, said one in four cigarettes in Ireland is illicit or counterfeit and said the government was right to freeze cigarette duty as a result.

Burrows warned the UK government that there is a real prospect of a black market grabbing hold of the British smoking population.

He added, ‘The problem does not stop with tax. There is no convincing evidence that banning the display of tobacco in shops, requiring generic packaging or banning cigarette ingredients will cut smoking rates and help public health.

‘Forcing cigarettes under the counter, making packs easier to counterfeit or changing the taste of consumers’ favourite brands are likely to drive smokes to the unregulated market, possible forever.

‘I think governments have forgotten that the more tobacco that is driven underground, the more smoking may appeal to the curious.’

At the same meeting, shareholders voted in a final dividend of 81 pence per share, taking the total for the year to 114.2 pence per share – an increase of 15 per cent on the previous year.

The company has also reintroduced its share buy back programme, which had been suspended for two years.

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Standard Life Investments pulls out of money market funds

2011-06-23T07:19:00.001-07:00

Money Markets, Standard Life Investments

Top ten trades: Wednesday 27 April 2011 (all day) more >>

FEATURE: Robert Tyerman's Market View more >>

Market update (PM): Aggreko surges on trading update more >>

Barclays to remain in London more >>

Blue Chip Bulletin: Barclays reports first quarter profit drop more >>

Top ten trades: Tuesday 26 April 2011 (all day) more >>

Standard Life Investments has confirmed it is to exit its money market funds following a review of is cash investment business.

A spokesperson for the company said the decision to review its money market funds offering ahead of potential changes to the way the sector is regulated.

According to Standard Life Investments, money market funds could be brought 'within the scope of banking regulations' under proposed regulatory changes.

The decisions decided to exit the constant net asset value (CNAV) funds business to concentrate instead on funds with more variable net asset value.

The company is set to develop proposals, which will allow current investors to continue in CNAV-valued investments with a manager operating within banking regulations.

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Allianz launch UK Absolute Return fund

2011-05-17T19:35:00.000-07:00

Absolute return, Allianz Global Investors, Uk

Fidelity to merge away Growth & Income fund more >>

WDB Asset Managment adds to multi-manager range more >>

Standard Life discourages UK small cap investors more >>

BlackRock reveals income of £343m for first quarter
more >>

Kleinwort Benson expands Enterprise fund range more >>

Thames River launches emerging markets absolute return fund
more >>

Allianz Global Investors has launched the UK Absolute Return Fund to be managed by RCM UK chief investment officer Jeremy Thomas.

The fund will aim to deliver returns greater than cash or bonds but with less volatility than equities.

Under Thomas, the fund will make stock selections based on a two-to-three year time horizon and be made up of a long and a market neutral portflio.

Thomas said, 'Sound stock selection will be the key driver of this Fund. Our investment approach has three key pillars: Quality, Growth and Valuation.

'We believe that, taken together, they can produce consistent absolute returns over the economic cycle and through both up and down markets.'

The fund will carry a 3 per cent initial charge for individual savings account (ISA) investors or 4 per cent through a direct investment.

The new launch will also carry an annual management charge of 1.25 per cent and have a minimum investment of £500 (£1,000 through an ISA).

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Top ten trades: Thursday 28 April 2011 (until noon)

2011-05-17T13:16:00.000-07:00

Top ten trades: Wednesday 27 April 2011 (all day) more >>

Top ten trades: Tuesday 26 April 2011 (until noon) more >>

Top ten trades: Thursday 21 April 2011 (until noon) more >>

Top ten trades: Wednesday 20 April 2011 (all day) more >>

Top ten trades: Monday 18 April 2011 (until noon) more >>

Top ten trades: Friday 15 April 2011 (until noon)
more >>

Top ten trades
Thursday 28 April 2011 (until noon)
Source: TD Waterhouse

TD Waterhouse view:
'AIM-listed Toledo Mining is a new entry in 3rd position of our customer buys table this morning after the stock moved from last night’s close of 27.85 to 30.64 by midday today.

'Whitbread is another new entry in our customer buys table in 5th position after announcing a 20 per cent increase underlying pre-tax profit for Q1 but warned that recent like-for-like sales growth had slowed. That said, the hotel and restaurant group also unveiled plans to expand its Costa Coffee and Premiere Inn businesses over the next year, potentially creating 2,500 new jobs.'

BUY
1. Barclays, 21.7 per cent
2. Solo Oil, 16.4 per cent
3. Toledo Mining, 14.1 per cent
4. Lloyds Banking Group, 9 per cent
5. Whitbread, 7.9 per cent
6. Nighthawk Energy, 7.4 per cent
7. BP, 6.2 per cent
8

Reasons to Buy Gold Stocks For 2011

2011-05-17T06:57:00.001-07:00

I always get a real kick out of hearing that "the consumer is 70 percent of the economy," mostly because it gives me a chance to heap ridicule and scorn on whoever said it, and I say that the consumer is 100 percent of the economy!

VIDEO: Investing in agriculture

2011-05-03T12:46:00.000-07:00

Agriculture, First State

Market outlook: Arm, Barclays, BP, WPP, Shire, Unilever more >>

Top ten trades: Wednesday 20 April 2011 (all day) more >>

Market outlook: Burberry, SABMiller, Hargreaves Lansdown, Tesco more >>

Top ten trades: Thursday 14 April 2011 (all day) more >>

Top ten trades: Wednesday 13 April 2011 (all day) more >>

Top ten trades: Tuesday 12 April 2011 (all day) more >>

The Share Centre's Sheridan Admans and First State's Skye Macpherson discuss the case for investing in agriculture.

Admans, investment adviser at The Share Centre, said First State's Global Agri-business fund had recently been added to its fund buy-list, the Platinum 120.

He said ' Although this fund has a short history, it is managed by a team that has a wealth of experience managing natural resources.'

'Due to the increased strain on food production, climate change and population growth, the supply and demand story for investment in agriculture and associated businesses is providing a very strong investment theme.'

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Top Penny Stocks For 2011

2011-05-03T06:27:00.001-07:00

Penny stock profits can be so fast — piling up in just weeks, days, or sometimes even hours — that the gains are like waking up one morning as a millionaire! That's why I call them "overnight" profits!

Top Penny Stocks For 2011

2011-05-01T04:32:00.000-07:00

Mortgage Applications Fall as Rates Hit Seven-Month Highs

2011-04-30T22:13:00.000-07:00

Applications for U.S. home mortgages declined last week as home loan interest rates rose for a fifth consecutive week, to seven-month highs, an industry group said on Wednesday.

Market update (PM): ITV leads the pack ahead of long weekend

2011-04-30T15:54:00.000-07:00

FTSE 100, ITV

Top ten trades: Thursday 28 April 2011 (until noon) more >>

Market update (AM): Whitbread falls in early trading more >>

Market update (PM): Aggreko surges on trading update more >>

Barclays to remain in London more >>

Blue Chip Bulletin: Barclays reports first quarter profit drop more >>

Blue Chip Bulletin: ITV agrees to £18m settlement with STV more >>

The biggest riser at the close of trading before the UK's extended bank holiday weekend was commercial broadcaster ITV (ITV.L).

The broadcaster saw share price rise by 4.5 per cent to 76p after analysts at Panmure Gordon reiterated its 'hold' status for the stock.

Standard Life (SL.L) continued with a strong showing increasing by 3.4 per cent to 226.6p, after this morning reporting strong sales and inflows during the first quarter of 2011.

International Power (IPR.L) saw its share price rise by 3.3 per cent to 330.6p, insurance group Legal & General (LGEN.L) added 3.1 per cent to 123.1p, while advertising and marketing group WPP increased by 2.8 per cent rising to 781p.

Whitbread (WBI.L) dropped 3.4 per cent to 1,678p after its preliminary results failed to impress investors.

AstraZeneca (AZN.L) dropped 3.3 per cent to 2,996p, while both Unilever (ULVR.L) and Shire (SHP.L) fell 2.6 per cent to 1,938p and 1,852p, respectively. Elsewhere Barclays (BARC.L) dropped 1.9 per cent to 282.1p.

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Top Penny Stocks For 2011

2011-04-30T09:35:00.000-07:00

Mortgage Applications Fall as Rates Hit Seven-Month Highs

2011-04-30T03:16:00.001-07:00

Applications for U.S. home mortgages declined last week as home loan interest rates rose for a fifth consecutive week, to seven-month highs, an industry group said on Wednesday.