Why Trimble Navigation Limited's Earnings Are Outstanding

Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.
Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.
Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on Trimble Navigation Limited (Nasdaq: TRMB  ) , whose recent revenue and earnings are plotted below.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.

Over the past 12 months, Trimble Navigation Limited generated $218.4 million cash while it booked net income of $150.8 million. That means it turned 13.3% of its revenue into FCF. That sounds pretty impressive.
All cash is not equal
Unfortunately, the cash flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash flows are of high quality. What does that mean? To me, it means they need to be real and! replica ble in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).
For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable for the short term) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it's ordinary in recessionary times, and you can only increase collections so much. Finally, adding stock-based compensation expense back to cash flows is questionable when a company hands out a lot of equity to employees and uses cash in later periods to buy back those shares.
So how does the cash flow at Trimble Navigation Limited look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. TTM = trailing 12 months.

When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.
Trimble Navigation Limited's issue isn't questionable cash flow boosts, but items in that suspect group that reduced cash flow. Within the questionable cash flow figure plotted in ! the TTM period above, stock-based compensation and related tax benefits provided the biggest boost, at 5.7% of cash flow from operations. Overall, the biggest drag on FCF came from changes in accounts receivable, which represented 13.2% of cash from operations.
A Foolish final thought
Most investors don't keep tabs on their companies' cash flow. I think that's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated home-run stocks that provide the market's best returns.
We can help you keep tabs on your companies with My Watchlist, our free, personalized stock tracking service.

• Add Trimble Navigation Limited to My Watchlist.

Exactly what is a 3m Littman stethoscope

3m Littman stethoscope is without doubt one of the crucial medical equipments that health-related practitioner are making use of in their clinics. There are actually distinct different types of these stethoscopes which makes it effortless for your clinical practitioner to get the perfect a single for his line of health-related subject. Health-related industry experts depend on this sort of stethoscopes and this is because of their first-class acoustics, dependable operation and unsurpassed top quality and provider.
Each time a health-related practitioner is attending to his patient, he must make certain that he is working with superior stethoscope as this is actually the only way that he’ll have the ability to acquire accurate effects. Getting exact results allows a single in order to give the correct analysis. There are several attributes that make 3m Littman stethoscope a stethoscope that is certainly favored by a lot of clinical practitioners.
When a clinical practitioner is employing 3m Littman stethoscope, he’s guaranteed that he’ll be able to offer the ideal analysis. It is because this kind of stethoscope includes a superior acoustic that allows the practitioner employing it to have the ability to listen to even the faintest audio being produced by his patients’ organs. For a healthcare practitioner to create sure the 3m Littman stethoscope that he’s employing is going to be in a position to offer him exact outcomes, he ought to be sure that he is using a top quality one.
There are various resources that a healthcare practitioner can use to receive a stethoscope that could be effective into his line of health-related subject. Amid the most beneficial supply that a clinical practitioner can use to glimpse for his ideal kind of stethoscope is on-line. World wide web has made it effortless for people to perform their shopping when you may get virtually every little thing on the internet. Trying to find 3m Littman stethoscope on line is easy as all th! at you&# 8217;re supposed to acquire is often a laptop linked to a efficient internet.
Searching on the net permits a person to avoid wasting time as he’ll not need to go from just one healthcare furnish shop to your other looking for the correct form of stethoscope. All that a medical practitioner could have to carry out would be to kind the identify and have the opportunity to look at the different kinds and versions which have been out there.
3m Littman stethoscopeAll that a healthcare practitioner will have to complete is to style the name and find a way to look at the different varieties and versions which can be readily available.

Should We Follow Seth Klarman on the Purchase of Targacept?

Any free fall in a stock price would signal investment opportunities for any value investors. The reason for the fall might be varied, from a pending law suit, a change in auditors, a resignation of key executives, to a miss in expected earnings, etc. Just recently, Targacept (TRGT), the biopharmaceutical company engaging in the design, discovery and development of neuronal nicotinic receptor (NNR) for the treatment of diseases and disorders of the nervous system, experienced a free fall in just a month. In the beginning of November 2011, the stock price was around $19, and it dropped 63% to $7. It is currently staying at $7.8 per share.



And with that significant downfall in TRGT��s stock price, our famous value investor, Seth Klarman had initiated its position, along with other gurus�� trades such as Jean Marie Eveillard and George Soros; they had bought into this stock in the past for the same price. As we can see below, the price range that those gurus paid for the stock is around $7-$8 per share. Seth Klarman moved aggressively, taking more than 16% of company��s total shares outstanding. However, it is just 1.38% compared to the total dollar value of his portfolio.



That was the guru trades. How about the insider trades in the same period?



A very consistent and large share sale of company��s executives was detected in the year 2011, from its director to vice president, senior vice president, CFO and treasurer. But at that time, the price was very high, from $21 to $30 per share, and the stock price is now off 60%-70% from insiders�� average selling price.

So there are two questions appearing in our minds. Should we follow our guru to initiate a position in this stock? And if we! follow Seth Klarman to purchase the shares, how much of our total portfolio should this position account for?

Let��s start with the fundamentals of the company. Like any biotech company, TRGT experienced a very high swing in its operating performance over the years. Operating income and net income have been mainly negative, and only positive in 2 out of 10 years. The same situation is reflected in its operating cash flow and its free cash flow over time.

So it was hardly that Seth was buying in because of the company��s earning power. So it is mainly because of the asset plays. Let��s look at its asset value:

We can see the financial structure of TRGT is quite conservative, with D/A only at 35%, whereas 77.5% of the liabilities are in deferred revenue, with very little long-term and short-term debt. On the asset side, the main asset TRGT is holding is cash and short-term investments, up to $213 million, or 76% of its total assets. So when adjusting its cash and level of debt, the $264 million market cap becomes only $55 million in enterprise value. So the investor effectively pays $55 million for the marketable securities that the company is making, bearing some accrued liabilities and has deferred revenues ahead. The investment in marketable securities is rather safe, as it is mainly in U.S. Treasuries, some corporate debt instruments and certificate of deposits.

Clearly, it was a ��cigar butt�� purchase, and by putting out $55 million, the investors can get $57 million investment in marketable securities and nearly no bank debt ahead. It seemed to be quite cheap. However, with any ��cigar butt�� or asset play, a reasonable amount of diversification should be implemented. Even Seth acquired more than 16% of the company, but in his portfolio, this transaction was only nearly 1.4% in his total dollar value of his portfolio. Should any investors follow Seth, remember the ample diversification should not be ignored also.
This is the subjective viewpoint of the author, and it is not the recommendation to buy, hold or sell the stocks mentioned in this analysis. Anyone who wishes to buy, hold or sell the stocks has to do his/her own analysis at his/her own risk.

'How to Be A Gentleman' Nears Cancellation

It looks like CBS'(CBS) new comedy How to be a Gentleman could be next on the list of cancelled shows.

According to reports, the network shut down production of the series, which stars Kevin Dillon and was created by David Hornsby. The remaining seven episodes will air on Saturday nights.
How to be a Gentleman premiered to mediocre ratings, and its second episode saw a 7% decline in viewers between 18 and 49 years old. If CBS pulls the plug on How to be a Gentleman, it will join The Playboy Club, Free Agents and H8R, which all were cancelled last week.
-Reported by Jeanine Poggi in New York.
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Amgen, Watson Strike $400M Deal for Biosimilar Cancer Drugs

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

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

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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.