DailyFinance.comhttp://www.dailyfinance.comDailyFinance.com%http://www.blogsmithmedia.com/BlogURL%/media/feedlogo.gifDailyFinance.comhttp://www.dailyfinance.comen-usCopyright 2012 Weblogs, Inc. The contents of this feed are available for non-commercial use only.Blogsmith http://www.blogsmith.com/Dow Breaks 13,000 for First Time Since '08 Crisishttp://www.dailyfinance.com/2012/02/21/dow-breaks-13-000-for-first-time-since-08-crisis/http://www.dailyfinance.com/2012/02/21/dow-breaks-13-000-for-first-time-since-08-crisis/http://www.dailyfinance.com/2012/02/21/dow-breaks-13-000-for-first-time-since-08-crisis/#commentsFiled under: ,

Dow breaks 13,000 for first time since '08 crisisNEW YORK (AP) - The Dow Jones industrial average crossed 13,000 on Tuesday for the first time since May 2008, when the Lehman Brothers investment bank was solvent, unemployment a healthy 5.4 percent and the worst of the Great Recession months ahead.

The milestone came about two hours into the trading day. The stock market got the final push from strong corporate earnings reports and a Greek bailout deal intended to prevent the next financial crisis.

The average was above 13,000 for about 30 seconds before dropping back. It reclaimed the mark just after noon and again just after 1:30, then lost all its gains for the day.

Just before 3 p.m. EST, the Dow was down 20 points at 12,929. The Standard & Poor's 500, a broader measure of the market, was down two points at 1,359. The Nasdaq composite index was down 16 at 2,935.

Just last summer, the Dow unburdened itself of 2,000 points in three terrifying weeks. S&P downgraded the United States credit rating, Washington was fighting over the federal borrowing limit, and the European debt crisis was raging.

A second recession in the United States was a real fear. But the economy grew faster every quarter last year, and gains in the job market have been impressive, including 243,000 jobs added in January alone.

"Essentially over the last couple of months you've taken the two biggest fears off the table, that Europe is going to melt down and that we're going to have another recession here," said Scott Brown, chief economist for Raymond James.

The Dow last closed above 13,000 on May 19, 2008. The next day, it crossed under 13,000, not to return for almost four years. The Dow fell as low as 6,547 on March 9, 2009. It has almost doubled since then.

The 13,000 level is a psychological milepost, but in a market built on perception, it could influence more cautious investors to pump more money back into the stock market, analysts said.

"You need notches along the way to measure things, and that's as good as any," said John Manley, chief equity strategist for Wells Fargo's funds group. "Is 50 older than 49 and a half? Yes, by six months. Do those six months really make a difference? Probably not. But it does give us a fixed point, something we can look at."

Dan McMahon, director of equity trading at Raymond James, called the 13,000 marker a "positive catalyst, and that's what we need to get us through the next range." In the end, he said, it's just "a big round number."

The Dow fell as low as 10,655 in the fall. The 13,000 marker is a 22 percent rally from that low. The Dow is within 1,200 points of its all-time closing high - 14,164, set Oct. 9, 2007.

From 13,000, it would take a 9 percent rally for the Dow to hit an all-time high. The S&P, a broader reading of the market, would need a bigger rally, 15 percent from here, to set a record.

Under the bailout deal, Greece will get €130 billion, or about $172 billion, from other European nations and the International Monetary Fund. In a separate deal, it will owe €107 billion less to investors who own its government bonds.

After months of the talks crawling along and vague headlines yanking the market up and down, the conclusion was almost anticlimactic because an agreement was already expected by the markets.

European markets fell after the Greece deal was announced. Stocks were down almost 4 percent in Greece, a little more than 1 percent in Spain and less than 1 percent in France and Britain. But the euro rose slightly to $1.32, which could be seen as a sign of confidence in European markets.

Investors noted that Greece remains in deep recession. Its bond investors will take a 53.5 percent loss on the face value of their bonds, which could discourage future investment.

The U.S. stock market has climbed steadily this year, primarily because of optimism about the economy. High gasoline prices are emerging as a chief concern for the economic recovery for the rest of the year, though.

A gallon of regular costs $3.57 on average, 40 cents more than a year ago and the highest on record for this time of year. With tension building over Iran's nuclear ambitions, Iran has halted oil exports to Britain and France and threatened to stop shipping to other European countries.

The price of oil settled at $106.25, up $2.65 for the day and its highest level since last May. Airline stocks got clobbered. United Continental lost 10 percent, Delta Air Lines 9 percent. The Dow transportation average lost 2 percent.
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U.S. markets enjoyed strong earnings reports from several big-name companies, including Home Depot and Dollar Thrifty. An exception was Wal-Mart, which reported a 15 percent drop in quarterly profits.

Overall, though, investors seemed comfortable moving money into the higher-risk stock market and out of safer investments like government bonds. The yield on the government's benchmark 10-year Treasury note rose to 2.04 percent from 2.01 percent Friday, a sign that fewer investors wanted the bonds.

Materials stocks and energy companies led the market higher Tuesday. Health care companies, makers of consumer staples and utilities, traditionally stocks to own in more cautious times, were lower.

Among the big movers:

- Wal-Mart fell 4 percent after missing analysts' expectations for revenue and per-share earnings. The world's biggest retailer has lost some of its momentum in the past couple of years with strategic errors. They included a brief foray away from "everyday low prices" and an attempt to declutter its shelves that turned off customers who went there for the convenience.

- Home Depot rose 0.4 percent after beating analysts' expectations for revenue and per-share earnings. The home-repair company has been hurt by the dour housing market, which has led homeowners to take on fewer expensive home renovations. Warm weather helped drive small-scale home projects in the latest quarter.

- Barnes & Noble fell 0.6 percent after missing expectations on revenue and per-share earnings. Rising costs offset higher sales of both traditional books and digital books. Investors seemed encouraged that the bookstore chain, a survivor in an era that has felled competitors like Borders and Waldenbooks, plans to introduce a cheaper Nook to compete with Amazon's Kindle Fire.

- Macy's, the department store chain, rose 2 percent after beating earnings expectations. The company, which also runs Bloomingdales, was helped by strong holiday sales and more exclusive brands.

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]]>Dow JonesDow Jones Industrial AverageDowJonesDowJonesIndustrialAveragestock marketStockMarketThe Associated PressTue, 21 Feb 2012 16:20:00 ESTWall Street Plays a Risky Game, Againhttp://www.dailyfinance.com/2012/02/21/wall-street-plays-a-risky-game-again/http://www.dailyfinance.com/2012/02/21/wall-street-plays-a-risky-game-again/http://www.dailyfinance.com/2012/02/21/wall-street-plays-a-risky-game-again/#commentsFiled under: ,

Wall StreetA month and a half into the new year, all's well on the stock markets. Through the end of last week, the Dow Jones Industrial Average (DJI) had:
  • 19 "up" days.
  • Only 14 "down" days.
  • Overall posted a 6% positive return for the year.
Taking note of the Dow's progress, The Wall Street Journal recently called its performance "eerie ... calm ... too quiet." Indeed, if things keep going at this rate, we're on track for the stock markets to gain more than 50% this year. Dow 18,000, anyone?

Irrational Exuberance: Part 2

That sounds like a crazy number -- even reminiscent of Alan Greenspan's famed "irrational exuberance" comments, back before the Internet Bubble burst in 2000. But up on Wall Street itself, the stock market's steady gains have a lot of folks getting, well, downright exuberant.

At investment banker Brown Brothers Harriman, for example, the stock eggheads are already busy counting chickens. After coming into 2012 with fears of Europe on their minds, BBH says that "the decline in market volatility" has them feeling confident that it's time to take a more "aggressive" approach to the market.

"We had been focused on more traditional 'quality' metrics, but now [that] volatility's come down ... we no longer see strong evidence to support those factors outperforming." Dumping its investments in companies with modest debt and conservative balance sheets, BBH is instead pursuing faster gains in "more economically sensitive companies, such as technology and retail stocks."

But is that really wise? If the smart folks up on Wall Street think it's safe to seek out riskier stocks because the Dow's going up, should you follow their lead?

Earth to Wall Street: Are You Out of Your Mind?

"Dow 18,000" may sound like an attractive number, but here are a few data points for you to think about before buying into Wall Street's flight to high-flying tech and retail stocks.

The Dow Jones has never reached a value of 18,000 points before. Literally. Never. In fact, the highest the Dow has ever gone is 14,093, an apex hit on Oct. 8, 2007.
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Historically, the Dow has averaged closer to a 10.5% annual return over long periods of time. Therefore, if 2012 is anywhere close to an "average" year, we've basically captured more than half the year's gains already, in just the first month and a half.

Valued against the profits that companies have earned over the past 10 years, the stock market is arguably already overvalued. If the average ratio of prices to trailing 10-year inflation-adjusted profits has been 18.7 for the past six decades, our current valuation of 22.3 suggests the stock market is already overpriced by close to 20%.

What's more, even stock market bulls who point to "trailing" year profits as the right P/E ratio to value, and call the market cheap at 15.5 times earnings, still say the stock market is only undervalued by 15% -- not 50%.

Storm Clouds on the Horizon

All of this suggests that the strong gains on the Dow that we've seen so far this year almost certainly won't continue through the rest of this year. When you consider how few gains remain to be had, shifting from safe investments in companies with low debt and sound balance sheets, and instead buying flighty retail and tech stocks, seems the height of madness.

All the more so when you consider the multitude of risks on the horizon, any one of which could shock investors out of their complacency, and undo all the gains we've enjoyed so far:
  • Europe hasn't come close to fixing its government debt mess. (Don't smirk, we haven't either.)
  • Iran's threatening to blow up oil tankers in the Persian Gulf, an event that would shock the oil markets and send gasoline prices soaring (and our economy tumbling).
And these are only the risks that we know about -- the known unknowns. They don't take into account any unknown unknowns circling out there like black swans, waiting to alight.

Wall Street may not want to think about all this. You should. As Sgt. Esterhaus might say: "Hey, let's be careful out there."


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]]>Dow JonesDow Jones AverageDow Jones IndustrialDow Jones Industrial AverageDowJonesDowJonesAverageDowJonesIndustrialDowJonesIndustrialAverageGlobal EconomyGlobalEconomyirrational exuberanceIrrationalExuberancestock marketStockMarketwall streetWallStreetworld economyWorldEconomyRich Smith, The Motley FoolTue, 21 Feb 2012 15:20:00 ESTWhy Zynga Will Never Be Great Againhttp://www.dailyfinance.com/2012/02/16/why-zynga-will-never-be-great-again/http://www.dailyfinance.com/2012/02/16/why-zynga-will-never-be-great-again/http://www.dailyfinance.com/2012/02/16/why-zynga-will-never-be-great-again/#commentsFiled under: , , ,

ZyngaFacebook isn't the only multibillion-dollar business that was hatched just a handful of years ago. Zynga (ZNGA) named after CEO Mark Pincus' late yet loyal bulldog, is less than five years old.

When Zynga began, social gaming was just about to get off the ground, and the company proved to be a quick learner. Zynga may not be a household name yet, but with a growing portfolio of sticky games including FarmVille, Words With Friends, and Empires & Allies, this bulldog of a company has become the undisputed champ of casual games played on Facebook and smartphones.

Math with Friends

When Zynga went public at $10 two months ago, critics blasted the company's valuation. With more than 700 million shares outstanding -- and counting -- was Zynga really worth $7 billion? Electronic Arts (EA), the country's second-largest traditional video game company, only commanded a market cap of $6 billion.

Bears won the first round. The IPO opened at $11, but Zynga consistently closed in the single digits through the first six weeks of the social gaming leader's publicly traded life.

Facebook put Zynga on the map, and the social networking behemoth with a whopping 845 million active users bailed out Zynga investors when it filed to go public. Buried deep in Facebook's prospectus was the revelation that Zynga accounted for 12% of Facebook's revenue. If Facebook was worth the $100 billion that some optimists were targeting, surely Zynga could justify a price tag closer to $10 billion.

Zynga's shares began to climb, peaking at $14.55 on Tuesday just before its fourth-quarter report.

Fertilizing the Farm

Zynga's first quarter as a public company was strong, but it poses some problematic questions.

Bookings -- a more telling metric for Zynga's business than traditional revenue -- grew 26% to $306.5 million. Growth has been decelerating lately, and it's not going to get any better. Zynga expects $1.35 billion to $1.45 billion in bookings for all of 2012, a 16% to 25% spurt over 2011. Will Zynga's growth rate ever accelerate?

Don't worry about the loss that Zynga posted for the holiday quarter. It is largely the handiwork of one-time stock-based compensation expenses triggered by its move to go public. Adjusted earnings weighed in at $0.05 a share, well short of the prior year's $0.09-a-share showing. Zynga sees a profit of $0.24 a share to $0.28 a share in 2012, and that's not a whole lot better than the $0.24-a-share adjusted earnings it rang up in 2011. Where has this gone as an earnings growth story?

Zynga will have roughly 890 million fully diluted shares outstanding by the end of this year. Based on Tuesday's high, that translates into a $13 billion market cap. Zynga went public valued more than Electronic Arts. Is it really worth nearly as much as video game leader Activision Blizzard (ATVI) now?

Sticky Situation

No one can argue that Zynga isn't massive. There are 48 million daily active users, 13% ahead of where Zynga was a year earlier. There are now 240 million monthly active users, and that's a year-over-year advance of 23%.

These are big numbers, but what does it mean when monthly active users are growing faster than daily players? Is Zynga losing its stickiness?

It's a fair question. Pull up Zynga's prospectus and you'll be shocked to see that faithful daily players are moving on. There were 62 million daily active users throughout Zynga's network of games during last year's first quarter. Daily visitors slipped to 59 million during the second quarter, 54 million during the third quarter, and 48 million in its latest reporting period.

Zynga has been able to overcome the sequential slide by growing its monthly users and milking more revenue out of every player, but how will investors react next quarter when daily average users are showing a year-over-year decline?

Toying Around

Investors applauded when Zynga teamed up with Hasbro (HAS) earlier this month on a deal to make toys based on Zynga properties. Holiday shoppers made Mattel's (MAT) Angry Birds game one of last year's best-sellers; what can Hasbro do with CastleVille?

The pairing was ironic, as I tweeted at the time:

Zynga announced a licensing deal with Hasbro for Zynga toys. First up? Words with Friends. Hasbro's calling it Scrabble. #Zyngazinger


Seriously, though, this has all the makings of a "jump the shark" moment, where Zynga's on the brink of losing relevance.

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It won't be the first time. Zynga learned about the fickle nature of gamers last year when Mafia Wars 2 failed to retain the gamers who enjoyed the original Mafia Wars.

Isn't that the problem with all of these social gaming companies? Zynga scrambled to put out a dozen games last year. Some will stick. Some will not. However, the developer barrier is low. The playing field is surprisingly level. The same path that Zynga took to grow so quickly will be followed by the next company to land the next FarmVille.

Zynga's stock may inch higher in the future. If online gambling rules are eased, investors will rally around Zynga's fledgling social poker game. Just because Mafia Wars 2 was a flop doesn't mean that Mafia Wars 3 will be a dud. The rub for investors is that Zynga is already being priced as if it has a market cornered that clearly will fluctuate in the coming years.

It's been an amazing five years for Zynga. The next five won't be as easy.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any stocks in this article. The Motley Fool owns shares of Activision Blizzard. The Fool owns shares of and has written calls on Activision Blizzard. Motley Fool newsletter services have recommended buying shares of Hasbro, Mattel, and Activision Blizzard, as well as creating a synthetic long position in Activision Blizzard.


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]]>Activision Blizzardangry birdsAngryBirdsElectronic ArtsHasbro IncMafia WarsMafiaWarsMattel Incsmartphonesocial gamingSocialGamingThe FoolThe Motley Foolvideo gamesVideoGameswords with friendsWordsWithFriendszynga outlookzynga revenueZyngaOutlookZyngaRevenueRick Aristotle Munarriz, The Motley FoolThu, 16 Feb 2012 07:00:00 ESTDon't Look Now, But Google Just Goofedhttp://www.dailyfinance.com/2012/02/14/dont-look-now-but-google-just-goofed/http://www.dailyfinance.com/2012/02/14/dont-look-now-but-google-just-goofed/http://www.dailyfinance.com/2012/02/14/dont-look-now-but-google-just-goofed/#commentsFiled under: , , , ,

Google ImagesDon't look now, but Google (GOOG) just goofed. Big time.

For years, the Internet search giant cast envious eyes upon archrival Apple (AAPL) and its ever-growing empire of iDevices: iPods and iPads, iPhones and iTVs, iClouds and Siri. (Note to Apple: I think you put the "i" in the wrong spot on that one.) And now, Google plans to do something about it.

Last week, rumors began emerging of a planned Google-branded wireless entertainment device. This could be another aspect of the Google TV reboot. The timing -- post Motorola merger -- suggests Google may parlay Motorola's TV set-top dominance into a new consumer electronics product for television. But right now, Google's initial aim will be limited to working up a sort of whole-house stereo system -- a stereo that's wireless, everywhere-accessible, and programmable through an Android smartphone.

Sound good? Actually, what it should sound like is ... familiar.
Here Be Dragons

Here's the thing: All this time that Google has kept Apple in its crosshairs, it should have been paying attention to Cisco Systems (CSCO) instead. Because not that long ago, Cisco made the same mistake Google is making today -- and it almost killed the company.

In 2009, Cisco announced a foray into the consumer electronics business. The company that built "the Internet backbone" hoped to increase Internet usage, thus driving demand for more of its bread-and-butter switches and routers. Building off a base in Linksys home routers, Scientific Atlanta DVRs, and the Flip camera phone, Cisco would develop a whole family of products that would more firmly embed the Cisco brand in consumers' lives. These products included the Cius tablet, the (improbably expensive) umi home videoconferencing system, and -- before them all -- the Cisco "Wireless Home Audio system."

If you don't own one of these gadgets now -- indeed, if you've never even heard of Cisco's stereo -- that's no surprise. Poor performance at the company's fledgling consumer electronics division had activist investors calling for radical moves at Cisco last year: selling the CE unit, or shutting it down. Some folks even demanded a breakup of the entire company.

Ultimately, Cisco dodged a bullet, and as demonstrated by last week's earnings, got itself back on the path to recovery. But this required significant structural changes to Cisco's organization, and closing down the Flip business at a $300 million loss.

Could Cisco's past be Google's future?

When Google Was Great

The parallels are unnerving. Much like Cisco, which started in Internet infrastructure, then branched into consumer electronics, Google rose to greatness doing one thing well -- providing free, ad-supported Internet search. Google grew bigger by expanding its ad market into smartphones, offering free Android software to hardware makers. That was great -- but actually building the hardware is something else entirely.

For one thing, selling CE hardware is low-margin. Google's software-centric business model boasts 30%-plus operating profit margins. In contrast, CE companies like Panasonic and Sony barely break even. CE is also terribly competitive. Google owes its massive Internet search profits to the fact that it's the go-to option in search. Every day, Internet users conduct two Google searches for every single search conducted on all other platforms combined.

Not so with consumer electronics. Google's "stereo" (and any harebrained CE ideas Google comes up with subsequently) will have to contend with Sony, Panasonic, Apple, Microsoft, and a dozen other CE specialists besides. This will be no great moneymaker for Google.

When All You've Got Is a Hammer ...

It's no mystery how Google fell into this trap. If a bright operator like Cisco can look at Apple's success in CE and think "We can do that, too," Google can be forgiven for making the same mistake. In fact, Google probably deserves a special pass on this goof because of the way it fell into it.

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Goaded by Apple's incessant patent litigation, Google bought Motorola for its trove of smartphone patents ... but wound up in possession of Motorola's hardware business, too. It was only natural for Google to look at this new hardware subsidiary and think, "We should do something with this."

After all, as the saying goes, when all you've got is a hammer, every problem starts to look like a nail. Google bought a "hammer" in Motorola -- but that doesn't mean it must use it. Google has a stellar business in software, but it really doesn't need the low-margin hardware biz. If it chooses to tread the road that Cisco did, Google will ultimately end up in the same place: saddled with an unprofitable, uncompetitive, unworkable CE business, and forced to choose between getting rid of it or letting it drag down results at the whole company.

Ultimately, Google must sell or spin off Motorola's hardware business to avoid the situation that (almost) sank Cisco. Better sooner than later. Or best of all -- immediately.

Motley Fool contributor Rich Smith does not own shares of (or short) any company mentioned above. The Motley Fool owns shares of Apple, Google, and Cisco Systems. Motley Fool newsletter services have recommended buying shares of Google, Cisco Systems, and Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple.



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]]>AndroidApple IncCisco Systems IncConsumer ElectronicsConsumerElectronicsgoogle motorola mergerGoogle TVGoogleMotorolaMergerMicrosoftMotorola IncPanasonicsmartphoneSony Corpwireless stereoWirelessStereoRich Smith, The Motley FoolTue, 14 Feb 2012 09:00:00 EST10 Companies in the 'Ultimate Stock Pickers' Portfoliohttp://www.dailyfinance.com/2012/02/13/10-companies-in-the-ultimate-stock-pickers-portfolio/http://www.dailyfinance.com/2012/02/13/10-companies-in-the-ultimate-stock-pickers-portfolio/http://www.dailyfinance.com/2012/02/13/10-companies-in-the-ultimate-stock-pickers-portfolio/#commentsFiled under: , , , , , , , , , ,

Bill GatesBy Frank Byrt, TheStreet.com

BOSTON -- Many of the most highly rated mutual funds sought solace and safety in conservative large-company stocks last year as the European sovereign debt crisis dragged on.

Morningstar, the mutual-fund and stock-rating firm, regularly tracks the top holdings and portfolio changes of 26 of its highly rated funds run by veteran managers, including Donald Yacktman's Yacktman Fund (YACKX), Bruce Berkowitz's Fairholme Fund (FAIRX), William Browne's Tweedy, Browne Value (TWEBX) and Warren Buffett's Berkshire Hathaway (BRK.B), a holding company.

Morningstar comes up with a short list of the most widely held stocks of the 26 funds and then whittles it down using its own stock ratings to end up with a portfolio of 10 stocks for what it calls the "ultimate stock pickers."

The stocks in the latest list have one thing in common: They're mega-cap stocks with market values ranging from ConocoPhillips' (COP) $96 billion, on up to Exxon Mobil's (XOM) $400 billion.

The 10 stocks also include a number of reliable consumer-goods providers, including Walmart (WMT), Procter & Gamble (PG), Pepsi (PEP) and Coca-Cola (KO).

So the 10 stocks are all ultra-conservative picks and it seems clear these funds were trying to minimize downside risk well into the fourth quarter as the sovereign debt crisis raged, and there was lots of doom and gloom in the air at home.

Such stodginess may be why many of these stocks are lagging the S&P 500's 7.7% gain this year.

Here, then, are 10 stocks that are the most popular with the 26 funds that make up the "ultimate stock pickers" team, per Morningstar, in inverse order of the number of funds in the group that hold them:

Gallery: 'Ultimate Stock Pickers' Portfolio




To see these stocks in action, visit the 10 Companies in the "Ultimate Stock Pickers" Portfolio portfolio on Stockpickr.

More from TheStreet.com





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]]>Berkshire HathawayBerkshire Hathaway IncCoca-ColaConocoPhillipsExxonExxonMobilFinanceIBM CorpJohnson & JohnsonMicrosoft CorpMorningstar IncPepPepsiProcter & GambleS&P 500TheStreet.comtop stock picksTopStockPicksTweedy Browne American ValueWachovia CorpWal-MartWarren BuffettWells Fargo & CoWilliam BrowneWindows ServerYacktman FundTheStreet.comMon, 13 Feb 2012 16:40:00 ESTRetail Stocks Are for Suckers: Why Their Rally Won't Lasthttp://www.dailyfinance.com/2012/02/13/retail-stocks-are-for-suckers-why-their-rally-wont-last/http://www.dailyfinance.com/2012/02/13/retail-stocks-are-for-suckers-why-their-rally-wont-last/http://www.dailyfinance.com/2012/02/13/retail-stocks-are-for-suckers-why-their-rally-wont-last/#commentsFiled under: , ,

TargetWhat is going on with the stock market these days? The Dow Jones Industrial Average is on a tear, up something like 6% so far this year. If it keeps on going at this rate, we'll wind up going into 2013 at Dow 18,000.

Wildfire success like we've seen in the stock markets lately has a lot of folks throwing caution to the wind, and looking for ways to get a piece of the action, to not get left out of a stock market on steroids. As one professional talking head recently told The Wall Street Journal, "the decline in market volatility" means it's time to take "a more aggressive approach for the calmer market ... picking more economically sensitive companies, such as ... retail stocks."

Sorry, Charlie. Retail stocks are for suckers. Here's why:

Retailers in the Discount Bin

On the one hand, it's understandable that investors might be attracted to retail today. A lot of these stocks got hit hard in 2011, and that has a lot of folks thinking they must be cheap. Over the past year, shares of Target (TGT), for example, have lagged the S&P 500's performance by a good 5%. Kohl's (KSS) is down 5% in absolute terms, and Sears Holdings (SHLD) has lost a whopping 45% of its market cap.
More recently, though, shares of these three companies have been outpacing the rest of the market pretty handily. Kohl's and Target are both up nearly 10% from the beginning of 2012, while Sears has rocketed up 65% from where it ended 2012.

So if retail stocks are starting to join in the rally, but they're still significantly cheaper than they were a year ago, that must mean you should buy them, right?

Wrong. Here's how retail stocks average, price-wise, across a small variety of subsets from the group:

Segment

Average P/E

Examples

Apparel stores

16.9

American Eagle Outfitters, Abercrombie & Fitch

Sporting goods

21.9

Dick's Sporting Goods, Foot Locker

Department stores

22.4

Kohl's, J.C. Penney

Discount stores

22.8

Walmart, Target


Mind you, I'm not saying there are no bargains to be found anywhere in retail. Within each category, individual stocks may be either more or less expensive than the average. (They may also be absurdly overvalued, as is the case with stock "star" Sears -- up 65% in a month, but entirely devoid of profit.) But as a general rule, within each subset and throughout the industry in general, retail stocks cost significantly more than your average stock on the S&P 500, where trailing P/Es hew closer to 15.1.
And don't even get me started on the "e-tailers." Blue Nile (NILE) at 48 times earnings? Amazon.com (AMZN) at 136 times? Crazy overpriced.

Growing, Growing, Gone!

Now, most investors know that you can't view P/E in a vacuum. A high-P/E stock may still be a bargain if its growth rate is good enough, and according to most analysts, growth prospects for retail look pretty good. On average, analyst estimates tell us that most retail companies should grow their earnings at about 14% per year over the next five years.
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That prediction may turn out to be optimistic.

A couple of weeks back, the Bureau of Economic Analysis released its fourth quarter 2011 GDP report showing consumer spending rising "sharply" for the second quarter in a row. You have to assume this report had something to do with the sudden optimism about retailers. But here's the thing: Even if the data are right, and even if consumers are spending more right now, they won't be able to keep it up for long.

According to the number crunchers at the Consumer Metrics Institute, there's something strange about the sudden spike in consumer spending last quarter. Consumers' "disposable income was flat, indicating that some of that improvement ... may simply be retail sales brought forward as a consequence of deep holiday discounting on the part of retailers." Moreover, CMI warns that in the absence of wage growth, "the fourth quarter splurge on goods is likely coming from a draw-down in savings."
But as anyone who's ever overdrawn a checking account (and been dinged with a bank fee) knows, savings eventually run out.

(The old joke springs to mind: "What do you mean I'm out of money?! I've still got checks right here in my checkbook.")

Suckers Rally

And here's the real moral of the story: Even if consumers still have checks, they may not have much money left to continue shopping. If and when their wallets run dry, so too will the rally in retail stocks.
Anyone who buys into the retail stock rally without considering this risk is getting played for a sucker.

Motley Fool contributor Rich Smith does not believe in the rally. And he doesn't own shares of any company mentioned above. The Motley Fool owns shares of Amazon.com, Walmart Stores, and Dick's Sporting Goods. Motley Fool newsletter services have recommended buying shares of Amazon.com, Blue Nile, and Walmart Stores and have recommended creating a diagonal call position in Walmart Stores.




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]]>Abercrombie & Fitch CoAmerican Eagle OutfittersBlue Nilebull marketBullMarketconsumer spendingConsumerSpendingKohl'skohlsretail stocksRetailStocksS&P 500Searsstocks to avoidStocksToAvoidtargetWal-MartRich Smith, The Motley FoolMon, 13 Feb 2012 09:35:00 ESTBonds Are a 'Safe' Investment: A Big Lie Gets Even Biggerhttp://www.dailyfinance.com/2012/02/09/bonds-are-a-safe-investment-a-big-lie-gets-even-bigger/http://www.dailyfinance.com/2012/02/09/bonds-are-a-safe-investment-a-big-lie-gets-even-bigger/http://www.dailyfinance.com/2012/02/09/bonds-are-a-safe-investment-a-big-lie-gets-even-bigger/#commentsFiled under: ,

bondsIt's happening again.

About a month ago, bemused investors awoke to news that over in Germany, the government had just sold $5 billion worth of Eurobonds that paid an average interest rate of -- get this -- negative 0.0122%.

In other words, if you bought one of these bonds for 100.01 euros, in six months you return it to the government and get back 100 euros.

While we've seen this happen in other "safe haven" countries -- Switzerland and the Netherlands -- this was the first time it had happened in Germany. For many bond investors, it won't be the last.

The Trouble with Europe (but Not Only Europe)

Here's the problem. In the bond secondary market (fancy industry-speak for people reselling bonds that the government has already issued), some bonds backed by governments deemed unlikely to go bankrupt have traded at negative yields on several occasions in recent months. Yields on already-issued three-month U.S. Treasury bonds were briefly negative back in October.

In early February, Barron's reported that the U.S. Treasury is pondering the next logical step: selling bonds that pay negative interest from the get-go. And why shouldn't they? When similar bonds are already changing hands at negative yield on the secondary market, it's clear that people are willing to accept negative interest for the perceived safety of investing in T-bills.

Why should government "leave money on the table?" If bond buyers will pay up for the privilege of owning a U.S. bond, maybe Washington could get a taste of this free-money action, too?

Gimme All Your Money. Now ... Pay Me to Take It

But isn't this, well, crazy? I mean, if Uncle Sam can convince people to lend him money, and to pay for the privilege -- good for him. And three cheers for the good ol' U.S. of A. If investors are so sure we will repay our debts that they'll accept a small loss on their investment for the surety they'll get most of their money back, we must be doing something right.

But is investing in Treasury bonds the right decision for individual investors? Probably not.

Why You Should Put Bond Buying on the Back Burner

Given a choice between buying "risky" stocks and "safe" bonds, bonds naturally attract investors who are reluctant to "gamble" with their savings. That thinking can get you into hot water.

o. Rising risks: As thousands (millions?) of folks who bought Greek government bonds learned last year, bonds aren't really risk-free after all. The further in debt a government gets, the higher the odds that it won't repay its debts. And the higher the odds a government won't pay its debts, the less valuable its bonds become.

In Greece's case, the government is trying to hammer out a deal that would involve at least a 50% writedown in bond values, and there's no law that says it couldn't happen here, too. Greece got in trouble because it allowed its government debt to rise to 160% of GDP. America, which had a debt-to-GDP ratio of less than 60% as recently as 2000, recently topped 100%. In short: We're not standing in Greece's galoshes just yet, but we're close.

o. Rising inflation: Rising inflation can steadily eat away at the value of investors' bond holdings. Consider that if a bond you buy pays negative interest, or zero interest -- or even 1%, 2%, or 3% -- there's a good chance that rising inflation will eat up any profits the interest might have earned you, leaving you with a loss.

Sure, some investors dodge this risk by buying "Treasury Inflation-Protected Securities," bonds whose value rises automatically to match the inflation rate. The catch: Many TIPS are already trading for negative real interest rates. (You just can't win.)

With Rates Like This, Who Needs Risk?

My No. 1 objection to buying bonds, though, is the obvious one. Default may or may not happen. Inflation may or may not be severe. If it was just these risks to worry about, I can understand why someone might gamble on a bond bet. But why in heaven's name would anyone make a deal that guarantees they lose money?

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Because that's exactly what you're doing when you buy a bond paying a negative interest rate. No ambiguity.

Okay, yes. If you're a big company like Apple, with tens of billions in cash that you need to stash somewhere, you may prefer the relative safety and liquidity of bonds -- even ones paying negative interest -- to the risk of putting your cash in a bank that could go belly-up, with no FDIC insurance to save you. And mutual funds and pension funds may be required by their corporate charters to keep their money in short-term bonds.

For the rest of us, rather than buy bonds, the smarter move is to put your money in dividend-paying stocks like Intel (INTC) or Microsoft (MSFT) or any number of the stalwart blue chips that, unlike the Treasury, pay real money in the form of dividends (2.7% for Microsoft, 3.2% for Intel). There's another way such stocks are unlike the U.S. government: They're not mired in debt, but flush with cash. I'll take these kinds of "risky" investments any day of the week.

Motley Fool contributor Rich Smith does not own shares of any company mentioned above. The Motley Fool owns shares of Microsoft and Intel. Motley Fool newsletter services have recommended buying shares of Intel and Microsoft, as well as creating a bull call spread position in Microsoft.

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]]>bond yieldsBondYieldsEurobondsEuropean debt crisisEuropeanDebtCrisisFinanceGermanyGreeceinflationLow risk investingLowRiskInvestingMicrosoftnegative interestNegativeInterestT-BillsTreasury NotesUnited States Department of the TreasuryRich Smith, The Motley FoolThu, 09 Feb 2012 16:55:00 ESTWhy Groupon Will Never Be Great Againhttp://www.dailyfinance.com/2012/02/09/why-groupon-will-never-be-great-again/http://www.dailyfinance.com/2012/02/09/why-groupon-will-never-be-great-again/http://www.dailyfinance.com/2012/02/09/why-groupon-will-never-be-great-again/#commentsFiled under: , ,

GrouponThe Groupon (GRPN) craze was great while it lasted.

The daily deals purveyor has never been more popular. Groupon closed out 2011 with 33 million active customers across 47 different countries. Quarterly results posted on Wednesday night show a company that is growing quickly.

However, there are more than a few signs that "Groupon fatigue" is kicking in.

First, the good news. Groupon saw its quarterly revenue soar 194% to $506.5 million, well ahead of the $475.2 million that analysts were expecting. The adjusted loss of $0.02 a share was less than the $0.03-a-share profit that Wall Street was forecasting, but the adjusted figure actually includes a $0.07-a-share hit on international taxes paid in countries where it is now profitable. Yes, Groupon is an international play now, with 63% of its revenue trickling in from outside North America.

Operating income actually clocked in at a positive $15 million. More impressively, free cash flow soared 248% to $155.1 million.

This certainly doesn't seem like a company on the way out. How dare anyone accuse Groupon of peaking?

Well, let's get to the darker side of this growth story.

Group Off

Groupon conveniently left out its subscriber count from Wednesday's report. When it went public late last year, the dot-com speedster let investors know that it had 142.9 million subscribers but only 29.5 million cumulative buyers as of the end of September. In other words, only roughly one-fifth of those receiving Groupon's daily blasts were ever wooed into actually buying one of the company's local deals.

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This time around, Groupon is letting us know that active customers are up 275% year over year to 33 million. It's an impressive number, but what do you think it means when the customer count is growing faster than revenue? Lower revenue per customer? Well, that's another metric found in November's S-1/A filing but not in Wednesday's 8-K.

If you're hungry for another big number that hints at something problematic, consider that gross billings soared 201% to $1.25 billion. This is the amount that Groupon charges customers for its deals after backing out any applicable taxes and refund estimates. The difference between gross billings and its reported revenue is what Groupon shells out to the 250,000 merchants offering city-specific deals on its website. Remember how revenue grew at a 194% clip? What do you think it means when gross billings are growing faster than revenue? Yes, Groupon is resorting to paying its merchants a bigger cut of the deals to keep them coming.

The 50/50 split that many assume takes place between Groupon and its lead-hungry merchants is a myth. Groupon's take is now closer to 40%. As distant silver medalist LivingSocial and even smaller rivals get more generous on their terms to win jaded merchants, Groupon will have little choice but to play along.

The Business Model Smells Funny

There's no shortage of horror stories from merchants who have experimented with the daily deals websites only to find that they attracted spendthrift one-time customers. There are also plenty of subscribers who have seen their pre-paid discount vouchers expire without being used. Maybe you didn't want that Brazilian wax after all. Maybe your wife wasn't impressed with the insinuation behind the pole-dancing classes voucher.

However, we still don't know if this will ever be worth it for Groupon. The company has accumulated a deficit of $676.6 million since launching less than four years ago. If the company were to curb expansion and scale back marketing costs, it would be pretty profitable, but what if this is a passing craze? Weren't radio stations and newspapers offering similar flash sales and discounted dining programs a few years earlier? Where did that get them?

With 632.8 million shares outstanding after November's IPO, Groupon went public with a market cap of nearly $13 billion at its $20 offering price.

Yes, it got the next laugh on Google (GOOG) after a reported deal to buy Groupon for $6 billion failed to materialize. But who will get the last laugh?

Facebook, restaurant reviews website Yelp, and dining reservations leader OpenTable (OPEN) have all bowed out of selling Groupon-like vouchers. They wouldn't be so quick to leave if there was potential in this niche.

Groupon's outlook for the current quarter is intriguing. The deal maker sees operating income of $15 million to $35 million, so there should be improvement there. However, the $510 million to $550 million in revenue that Groupon is targeting doesn't call for much of a sequential boost. We're looking at just 1% to 8% improvement over the fourth quarter it just wrapped up. Since Groupon's North American business is growing slower than its international operations, are we about to see Groupon's stateside business decline? At the low end of Groupon's guidance, that's probably what we will see.

Ouch!

Oh, and before bulls argue that sequential analysis isn't fair when pitting the holiday quarter against the seasonally lamentable first three months of the following year, it should be pointed out that revenue posted a 72% sequential burst during last year's freshman quarter.

Groupon isn't going away. Its debt-free balance sheet is flush with $1.1 billion in cash after the IPO and earlier financing rounds. As weaker players crumble -- and they will as consumers tire of handing over voucher printouts and mobile phones -- Groupon may appear to be the beneficiary.

Don't buy it. This is a harder model to pull off than it seems on paper and it may not be long before only merchants who need to deeply discount their food and spa services to attract customers will be participating. A year ago, Groupon shut down the social component where users could comment on deals. It was a great way to expose iffy merchants or question the advertised savings. Now Groupon limits the communication to questions that get answered.

What's Groupon hiding? You probably don't want to stick around to find out.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of OpenTable and Google. Motley Fool newsletter services have recommended buying shares of Google and OpenTable.

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]]>Daily dealDailyDealDealOfTheDayFinanceGoogleGroup BuyingGroupBuyingGroupongroupon outlookGrouponOutlooklivingsocialonline couponsOnlineCouponsOpenTableprofitsstocks to watchStocksToWatchThe Motley FoolRick Aristotle Munarriz, The Motley FoolThu, 09 Feb 2012 15:30:00 EST5 Reasons Facebook Stock May Be a Better Buy Than You Thinkhttp://www.dailyfinance.com/2012/02/09/5-reasons-facebook-stock-may-be-a-better-buy-than-you-think/http://www.dailyfinance.com/2012/02/09/5-reasons-facebook-stock-may-be-a-better-buy-than-you-think/http://www.dailyfinance.com/2012/02/09/5-reasons-facebook-stock-may-be-a-better-buy-than-you-think/#commentsFiled under: , ,

FacebookFacebook may be a free website, but that doesn't mean it will be a cheap investment.

Many analysts feel that by taking this long to go public, the leading social networking website will be priced too dearly for growth investors. If Facebook hits the market at the high end of its proposed valuation, where does a company with a $100 billion market cap go from here?

Google (GOOG) has been a seven-bagger since going public eight years ago -- soaring from $85 at its IPO to more than $600 today -- but the world's leading search engine also began its publicly traded life with a relatively modest $20 billion market capitalization.

Cynics are worried about the starting line.

However, what if Facebook isn't actually outlandishly priced? What if $100 billion is actually a reasonable price for a company that has taken the Internet to an entirely new level? Let's go over a few of the reasons Facebook may be cheaper than worrywarts are leading you to believe.

IPO1. What 845 Million Users Are Worth Will Change

Analysts often make the mistake of boiling this down to eyeballs. They divide $100 billion into Facebook's 845 million monthly active users and wonder if Facebook is truly worth $118 per user.

On the surface, it isn't. Facebook generated $1.1 billion in revenue in its most recent quarter, giving it a revenue run rate of $4.4 billion over the course of a year (it actually generated $3.7 billion in revenue for all of 2011, but it started out with a much smaller base of users to make this a fair comparison). In other words, Facebook is generating a little more than $5.35 a year in revenue on every user.

Run Facebook's net income of $302 million during the holiday quarter through the same run-rate math and Facebook is earning roughly $1.43 a year in revenue on every user.

No one would pay you $118 a head for that kind of business, but we're forgetting a few things.

  • Facebook is still growing. Its user base has more than doubled over the past two years.
  • Revenue is growing faster than Facebook's user base. Revenue has actually popped nearly fivefold during the two years that Facebook's active audience has doubled. A combination of better monetization and users spending more time on the site make this a growing metric.
  • As friend connections grow -- and there are already 100 billion friend connections on Facebook -- the site's user base will grow and so will the time they spend on the site.

In other words, $5.35 a year in revenue and $1.42 a year in earnings isn't the ceiling. We're still at the floor.

2. Corporate America May Be Willing to Pay Up

Despite the email hoaxes that make their rounds every few months, Facebook will always be a free website for users. If this is the model that made Mark Zuckerberg a multibillionaire, do you really think he's going to mess with it?

There may come a point at which offering a premium version of the site -- along the lines of $20 a year for an ad-free experience -- may make sense, but the low-lying fruit here is to go after the countless corporations that set up brand pages on Facebook for free.

Companies are slashing their marketing spends as a result of broadcasting through Twitter and Facebook. It's free as long as they don't want to spend on ads to promote their presence. Do you think that will last forever? Just as Facebook makes sure that it gets a piece of the action from app developers making money on its website, it won't be long before the social networking giant either begins charging larger companies with commercialization intentions for access or begins offering a premium platform to make it worth their marketing dollars.

3. The Next Zyngas Are Coming

One of the more surprising nuggets in Facebook's paperwork to go public is that 12% of its revenue last year came from social gaming giant Zynga (ZNGA).

Between payments processing fees related to Zynga's sales of virtual goods in its games and direct advertising by Zynga to get noticed, Zynga and Facebook have created a great win-win symbiotic relationship.

If a small company can grow to become so important on the heels of Facebook, Mafia Wars, and Words With Friends, why can't there be more budding Zyngas out there? There are -- and there will be.

4. Social Networking May Be the New Search

Google didn't roll out Google+ last year because it was bored. The world's most valuable dot-com realizes that Facebook can potentially eat into its business.

Before Facebook, Google made sense as the launching point of any search. Need a new dentist? Can't remember if it was Dermot Mulroney or Dylan McDermott in that movie you saw last week? Want to see what you can do this weekend? Big G could lend a hand.

However, many of these same queries can also now be posed right on Facebook as a status update. The response may not be immediate, but it will come from someone you know and possibly trust.

Google has blossomed into a $200 billion company largely on the strength of its ability as a search and online advertising company. What if Facebook can do this even better?

5. Madison Avenue Is Calling

Facebook angered privacy rights activists when it rolled out Beacon in 2007. Facebook -- a lot smaller at the time, of course -- teamed up with 44 consumer-facing companies to begin sharing actions on the site. A visit by a Facebook user to the websites of Blockbuster, TripAdvisor (TRIP), Fandango, or any of the other partners allowed users not only to broadcast their actions through Facebook, but also to let advertisers do a better job of targeting their marketing.

Beacon itself was shelved under a cloud of controversy two years later, but clearly there is marketing value to the likes, preferences, and actions of Facebook users if it's done in a fair and sensitive manner.

Can it get too creepy? Sure. If you click "Like" on a new Tom Hanks movie or stream Lady Gaga you may not appreciate that going out to your friends as ads to buy movie tickets or digital downloads. There has to be a balance here. However, if someone is going to reinvent online advertising -- taking it to a more effective, personal, and accountable level -- is there anyone that could do it better than Facebook, given how well it now knows you?

You may think it's straddling the fence on ethics, but Facebook's sitting on a goldmine of consumer data. It just needs to figure out when and how to start mining.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any stocks in this article. The Motley Fool owns shares of TripAdvisor and Google. Motley Fool newsletter services have recommended buying shares of Google.


Gallery: Facebook - A Timeline




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]]>advertisingdata miningDataMiningFacebook IPOFacebookIpoFinanceGoogleoutlookprofitssearchsocial networkingSocialNetworkingstocks to watchStocksToWatchTripAdvisorZyngaRick Aristotle Munarriz, The Motley FoolThu, 09 Feb 2012 14:50:00 ESTMicron CEO's Sudden Death Raises Wider Questions on Corporate Successionshttp://www.dailyfinance.com/2012/02/07/micron-ceos-sudden-death-raises-wider-questions-on-corporate-su/http://www.dailyfinance.com/2012/02/07/micron-ceos-sudden-death-raises-wider-questions-on-corporate-su/http://www.dailyfinance.com/2012/02/07/micron-ceos-sudden-death-raises-wider-questions-on-corporate-su/#commentsFiled under: ,

Micron CEOMicron Technology (MU) suffered the sudden death of its CEO, Steve Appleton, on Friday in a small plane accident in Boise, Idaho. Beyond the obvious human tragedy, this event is a sad but important reminder about the need for effective CEO succession planning.

It's hardly the first time a large company has suffered the abrupt death of a CEO:

  • Biochemical distributor and manufacturer Sigma-Aldrich (SIAL) lost CEO Jai Nagarkatti to a heart attack in 2010.
  • Fast-food cult favorite In-N-Out Burger faced a crisis after President Richard Snyder and Executive Vice President Philip West were killed in a chartered jet crash in 1993.
  • Fast-food giant McDonald's (MCD) saw lightning strike twice in the past decade: CEO Jim Cantalupo was felled by a fatal heart attack in 2004, and his successor Charlie Bell died of cancer less than a year later.

Micron named an in-house executive as its new CEO within days, as did Sigma-Aldrich, McDonalds and In-N-Out. But in some of these cases those decisions weren't born out of a pre-established CEO succession plan. In fact, in corporate America, the lack of a plan for such situations is more common than not.

Numbers to Make an Investor's Mind Numb

According to a 2010 survey of North American CEOs and board members, only 54% are grooming an executive as a CEO successor. And 39% of survey respondents had no internal CEO candidate in mind, according to the survey by Stanford University's Rock Center for Corporate Governance and Heidrick & Struggles.

The survey also found that only 50% of survey respondents said their boards had developed a written document detailing the required skills for the next CEO and that, on average, corporate boards only spent two hours a year discussing CEO succession planning. A board's nominating and governance committee, which are usually charged with finding a new CEO, spend on average only four hours, the survey found.

And while 71% of internal candidates know they are part of a formal talent development pool, half of them don't receive regular annual or semiannual talks to let them know where they stand or whether they're in the running for the CEO slot, according to the survey. As a result, some of those in the company's talent pool may defect to another employer.

"I don't think things have changed much since we've done that report," says David Larcker, a professor with Stanford's Graduate School of Business who specializes in corporate governance and is co-author of the report. "It's one thing to say you have a document, but is it carefully crafted with all the right steps and is it operational?"

Larcker says that while most companies can name an interim CEO immediately, a well-crafted plan will allow a company to name a permanent replacement within four to six weeks.

How Fast Is Fast?

In Micron's case, it immediately named then-President and Chief Operating Officer Mark Durcan as its interim CEO. Durcan clearly was not part of a Micron CEO succession plan, given that just weeks earlier, the company had announced that he planned to retire in August. Micron has since removed the "interim" from Durcan's title and says he no longer plans to retire in August.

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In Sigma-Aldrich's case, it simultaneously announced the sudden death of Nagarkatti and the appointment of Chief Financial Officer Rakesh Sachdev as his replacement. McDonald's took a similar tack, pulling a new CEO from its deep executive bench, noted Patrick McGurn, executive director of proxy advisory service Institutional Shareholder Services. He pointed to McDonald's rapid appointment of a new CEO, not once but twice, when tragedy struck.

In a CNN Money interview with McDonald's director Andrew McKenna, the director noted McDonald's faced three choices: make no CEO appointment, name an interim CEO, or promote the heir apparent prematurely.

The board found the first two options unacceptable, characterizing the title of interim CEO as "like buying something on trial," noted the CNN Money report. And while Bell was slated to undergo several more years of CEO grooming, a decision was made to hit the go button early. That strategy was followed again when Bell died of cancer less than a year after taking the helm, leaving the fast-food chain to name Jim Skinner, its former vice chairman and president of McDonald's Restaurant Group, as CEO in 2005.

What'll It Take for Change?

"It'll take pressure from ISS, companies stumbling in their CEO selection, bad press and more votes against a company board's nominating committee to lead to change," Larcker says.

ISS' McGurn notes the irony of how insurance companies demand that sports figures and entertainers sign clauses in their contracts to refrain from high-risk activities, such as skydiving and the like, but that the same demands have not been made of CEOs.

Appleton was known to engage in high-risk sports such as stunt flying, and he was injured in 2004 when his stunt plane crashed. He also raced cars in the desert, including in 2006 when he took a Baja Challenge Class win in the SCORE Tecate Baja 1000.

"For the board of directors, it's a tough issue," McGurn says. "You have so much invested in this CEO and yet it's hard to ask that they don't do anything that puts them a risk."

Motley Fool contributor Dawn Kawamoto does not own stocks in any of the stocks listed. Motley Fool newsletter services have recommended buying shares of McDonald's.




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]]>Andrew McKennaCEO successionCeoSuccessionCharlie BellCorporate governancedeathFast Foodheart attackHeartAttackJim CantalupoJim SkinnerMcDonald'sMicron TechnologyRichard SnyderSteve AppletonThe Motley FoolDawn Kawamoto, The Motley FoolTue, 07 Feb 2012 15:15:00 ESTTop 4 Staffing Stocks for an Improving Economyhttp://www.dailyfinance.com/2012/02/07/top-4-staffing-stocks-for-an-improving-economy/http://www.dailyfinance.com/2012/02/07/top-4-staffing-stocks-for-an-improving-economy/http://www.dailyfinance.com/2012/02/07/top-4-staffing-stocks-for-an-improving-economy/#commentsFiled under: , ,

staffing stocksNEW YORK -- We all know someone who has been stuck in a job they dislike but, due to a weak economy, has had little choice but to suck it up and stay put.

Not anymore. The U.S. economy has suddenly shifted into a higher gear, and "help wanted" signs are popping up at many more companies. As a result, many workers will soon start to sniff around, seeing if they can land a better job elsewhere.

That's great news for staffing firms. From executive recruitment firms to temporary staffing agencies, the whole industry should benefit.

To get a handle on Friday's jobs report and what it means for future gains, you need to look back at historical patterns. In the early 1990s, after companies laid off many employees, they froze hiring. It wasn't until early 1993 that more than 200,000 jobs were being created on a monthly basis. But the hiring upturn created a virtuous cycle as companies scrambled to hire talent before rivals could snatch them away. As a result, non-farm payrolls grew by more than 200,000 per month for much of the next six years.

Are we on the cusp of a sustained jobs boom? It's too soon to tell, but if we see another 200,000 jobs created in each of the next few months, then a clear trend will have been established.

Here are some names that may benefit.

Robert Half International

Thanks to a focus on professional staffing, especially in IT, Robert Half International (RHI) never took a deep hit from the economic slowdown as companies preserved spending on hard-to-replace technology staffers. As a result, sales rose from $3.2 billion in 2010 to $3.8 billion in 2011.

Still, that's well below the $4.6 billion in sales that Robert Half took in back in 2006 and 2007. EPS of around $1 in 2011 is roughly half of what the company earned a half-decade ago.

Might Friday's jobs report be putting Robert Half on a path back to peak performance? Well, the national unemployment rate would need to move below 7% for that to happen, as that is when job-hopping really kicks in.

In addition to its exposure to the IT field, Robert Half has a strong reputation among accounting and finance clients. The company maintains a strong network of relationships with existing professionals, and can offer prospective employers a wide range of choices.

"Knowing that Robert Half has a quality supply of resources, employers often use it as the vendor of choice for their staffing needs. These factors feed upon each other to create one of the most formidable job networks and narrow economic moats in the staffing industry," note analysts at Morningstar.


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Manpower Group

Staffing firm Manpower Group (MAN) saw its shares tumble this summer, and they have only partially recovered. That's because this Wisconsin-based firm also has a great deal of exposure to Europe, which accounts for 66% of sales.

Still, that exposure hasn't hurt results as badly as you'd expect. In the most recent, Manpower noted that European results were up in every country compared to a year ago. And that enabled the company to beat EPS forecasts by more than 10%.

Make no mistake, the European job market will lag the U.S. job market. Analysts expect U.S. employment to keep building from here, but don't expect that to be the case in Europe until at least the second half of 2012.

Analysts think Manpower's EPS will drop around 5% this year to around $3.10. Merrill Lynch has the lowest EPS forecast on Wall Street, anticipating EPS of just $2.70, but it also thinks results will sharply improve after that, with EPS hitting nearly $4 by 2014.

Shares of Manpower trade for roughly half of what they fetched back in 2007, and for long-term investors, this staffing stock may have the greatest upside as it slowly regains lost ground.

Kelly Services

Kelly Services (KELYA) got a powerful 10% lift from Friday's jobs report. That's only a mild salve in the wound of investors that had seen the stock fall nearly 20% the day before. Kelly had just delivered quarterly results that reflect a still-sobering job market. Operating income fell 25% from a year earlier. And EPS would have been 29 cents were it not for a one-time tax gain, trailing the 42-cent consensus forecast.

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At this point in the economic cycle, this is a company in transition. Kelly has seen its revenue mix shift in recent years towards temporary staffing, which carries slim profit margins. The company's permanent placement segment carries much firmer margins. The good news: companies that had been heavily relying on temps are likely to shift their focus back to permanent employment as the broader economy strengthens.

Of all the staffing stocks, this may be the best bargain, trading for less than its $18 tangible book value. The dowdy valuation may be the result of overly cautious management guidance. Management said earlier this week that sales in the current quarter will rise only modestly from a year ago. That forecast was issued before Friday's stunning employment surprise.

In all likelihood, Kelly Services is positioned to meet or even exceed their current forecast. For long-term investors, it's worth noting that shares of Kelly Services trade for half the levels seen five years ago.

On Assignment

For investors who aren't fully convinced that the U.S. is on the cusp of a jobs boom, On Assignment (ASGN) is a more conservative play. The company provides staffing in health care, biotech research, engineering and other niches that aren't economically sensitive. That focus is what the company calls the "math and science" niche.

Management tends to downplay expectations as evidenced by the fact that On Assignment has topped EPS estimates by at least 14% for four straight quarters. This staffing firm will release quarterly results on Feb. 14, and if history is any guide, an upside surprise may be in the offing.


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]]>Financehiringhiring outlookHiringOutlookjobsKelly Services IncmanpowerMerrill LynchNew YorkOn AssignmentOnAssignmentRobert Half Internationalstaffing agenciesStaffingAgenciestemporary workersTemporaryWorkersTheStreet.comunemploymentTheStreet.comTue, 07 Feb 2012 13:45:00 ESTAnother Brokerage Bites the Dust: Is Wall Street In Trouble?http://www.dailyfinance.com/2012/02/07/brokerage-failures-Kaufman-WJB-ticonderoga/http://www.dailyfinance.com/2012/02/07/brokerage-failures-Kaufman-WJB-ticonderoga/http://www.dailyfinance.com/2012/02/07/brokerage-failures-Kaufman-WJB-ticonderoga/#commentsFiled under: , ,

Wall StreetAccording to Warren Buffett, the United States dodged a bullet back in 2009. We didn't fall into a double-dip recession, and we won't be heading back into one anytime soon, either.

Just don't tell that to the stock brokerage industry.

Over the past couple of weeks, quietly and with little fanfare, three separate small brokerages bit the dust. In January, WJB Capital Group and Ticonderoga Securities both announced that a dearth of trading activity on the stock markets and a lack of capital in-house required them to close their doors and cease operations -- increasing the ranks of unemployed bankers by a couple hundred in total. Last week, we lost a third broker when Kaufman Bros., a highly regarded, minority-owned firm that played a key role in helping the U.S. government liquidate its stakes in the banks bailed out during Troubled Asset Relief Program, would also turn out the lights.

On the one hand, this may not matter much. (Raise your hand if you've ever even heard of "WJB Capital" before reading this column.)

But here's the thing: This could be only the beginning.

A Trend Emerges

The Wall Street Journal keyed into the emerging trend last week. Polling industry insiders, the Journal warned that things are apparently not well up on Wall Street.

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Previously, the failures of tiny brokers like Soleil Securities (absorbed by Ticonderoga last summer) and Gleacher & Co. might have been written off as aberrations. Now it looks like they were harbingers of doom -- and the failures of WJB, Ticonderoga, and Kaufman could be just the leading edge of "a wave of closures among brokers that rely on trading volume to generate revenue."

When the Journal first caught wind of this story, at the time of the Ticonderoga and WJB closures last month, the newspaper warned that "two other firms" -- unnamed at the time -- appeared to also be in peril. It would now appear that Kaufman was one of the imminent victims. The other may or may not be Susquehanna Financial Group, which last month laid off 15% of its stock traders, citing a lack of trading volume in the markets.

Even Larger Problems Loom

For the time being, it appears the tremors on Wall Street are taking down mainly the small fry. But bigger names in the industry, including Morgan Stanley (MS) and Goldman Sachs (GS), have also warned of weak revenues, and responded by laying off staff and cutting compensation for the brokers who remain.

It may not end even there. According to the Journal, a lot of these little firms, and Ticonderoga in particular, have historically specialized in placing trades for the hedge fund industry. If the brokers who handle their business are in trouble, therefore, it stands to reason that the customers who place the trades with these brokers may not be in the finest fiscal health, either.

Green is Good, Right?

Down here on Main Street, we're for the most part oblivious to the goings-on up in the rarefied air of Wall Street finance. We see the Dow Jones Industrial Average going up -- as it's done for most of this year so far -- and think everything must be going fine and dandy with the stock markets.

It's not. Indeed, according to Businessweek, "trading volumes on major U.S. exchanges fell 20 percent last year from 2009." That's bad news for brokerage firms like WJB, Ticonderoga, Kaufman, and all the rest, which depend on the commissions they collect from placing trades, to pay their workers and stay in business. But if trading volumes are down enough to put these firms out of business, what does this imply for the gains we're seeing on the Dow?

Motley Fool contributor Rich Smith does not believe in the rally. And he doesn't own shares of any company mentioned above, either. He does, however, have a large store of canned goods and potable water stacked up in the basement. Motley Fool newsletter services have recommended buying shares of The Goldman Sachs Group.



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]]>brokerageFinanceGoldman SachsGoldman Sachs Group IncMain StreetMorgan Stanleystock marketStockMarketSusquehanna Financial GroupSusquehannaFinancialGroupTiconderogaSecuritiestrading volumeTradingVolumeWarren BuffettWJB CapitalWJB Capital GroupWjbCapitalWjbCapitalGroupRich Smith, The Motley FoolTue, 07 Feb 2012 09:15:00 ESTThe 8 Brands That Wasted the Most Money on Super Bowl Adshttp://www.dailyfinance.com/2012/02/06/the-8-brands-that-wasted-the-most-money-on-super-bowl-ads/http://www.dailyfinance.com/2012/02/06/the-8-brands-that-wasted-the-most-money-on-super-bowl-ads/http://www.dailyfinance.com/2012/02/06/the-8-brands-that-wasted-the-most-money-on-super-bowl-ads/#commentsFiled under: , , , , , , ,

Chevy runs deepA 30-second ad spot in this year's Super Bowl cost an average of $3.5 million. That's an 84% increase from 10 years ago and the highest amount advertisers have ever had to pay. While that is quite the price hike, it is in line with the growth in TV audience, which has just about doubled over the past decade. But despite spending so much to reach such a massive audience at once, the results are rarely impressive.

Between 2002 and 2011, companies spent $2.5 billion on Super Bowl advertising, based on 24/7 Wall St.'s estimate. The top 10 spenders were responsible for more than one-third of that. And one company, Budweiser maker Anheuser-Busch, spent almost $250 million over the past 10 years on Super Bowl ads, a whopping one-tenth of the total.

24/7 Wall St. ranked total spending for all of the companies that advertised during the Super Bowl in the past decade. An analysis of the top spenders reflects how bad this investment can be. While some, such as Hyundai and Toyota have improved market share over that time, most have not. Based on total ad spending, product failures, change in market share, share price and sales, we identified the eight brands that wasted the most on the Super Bowl, including mega brands such as Coke, Budweiser, GM and Ford.

The top spenders fall into four major categories: automotive, film, food, including snacks and fast food, and beverages. Four of the top 10 Super Bowl advertisers are auto companies. Another four are food and beverage manufacturers. Three movie studios are in the top 25.

Because Super Bowl ads are dominated by a small number of industries, many companies in those industries are forced to advertise just to keep up. Most of the top 10 spenders are perennial also-rans. Yum! Brands, owner of KFC, Taco Bell and Pizza Hut, spent $67 million over the past 10 years. Meanwhile, McDonald's, the indisputable market leader, spent less than half that amount and is not a top 10 spender. Similarly, E*Trade, well-known for the talking baby campaign, spent more than any other online brokerage firm, yet remains fourth in the industry.

24/7 Wall St. tabulated all of the commercials from the past 10 Super Bowls, as archived by Adland, the "world's largest archive of Super Bowl commercials." Using that data, 24/7 calculated the number of commercials each company bought, as well as their length, including any available pregame, postgame and prime advertising commercials. To estimate the total amount each company spent on Super Bowl advertising in the past decade, we used the average costs of a 30-second commercial spot each year and the total number of minutes of advertising time recorded by Adland.
These are the eight brands that wasted the most on the Super Bowl.

8. E*Trade
Total ad spending (2002-2011): $35.9 million
Super Bowls advertised in over past 10 years: 6
Average ads per Super Bowl: 2.5
Change in share price (2002-current): -91.1%
Change in market share: n/a

E*Trade (ETFC) has run Super Bowl ads in the past five years, as well as in 2002, attempting to make headway against larger online trading competitors Fidelity Investments, Charles Schwab and TD Ameritrade. With an average of 2.5 ads per game, E*Trade has run 6.75 minutes of Super Bowl ads over the past 10 years. Although the company's ad campaigns have varied, its most popular campaign features the E*Trade talking baby, which debuted during Super Bowl XLII in 2008. Although that ad resulted in a record-breaking number of new accounts for the company, E*Trade's overall share price has decreased 91.1% since February 2002.



7. Ford
Total ad spending (2002-2011): $36.3 million
Super Bowls advertised in over past 10 years: 5
Average ads per Super Bowl: 2.2
Change in share price (2002-current): -17.1%
Change in market share: 20.2% (2002), 16.8% (2011)
Despite the fact that Ford (F) is one of the most iconic American brands, it has not run an ad during the Super Bowl since 2008. In that year, the company only ran one 30-second commercial. Competitors GM and Hyundai ran several ads that year and have each run at least five since then. When it was still running commercials, Ford advertised specific vehicles, including the Focus, Escape and the F-150. The 2006 commercial for the Escape Hybrid featured Kermit the Frog, who reported that it was actually "easy being green." While the advertisement was memorable, it also marked the year before the Escape Hybrid's sales peaked.



6. Warner Bros.
Total ad spending (2002-2011): $48.6 million
Super Bowls advertised in over past 10 years: 4
Average ads per Super Bowl: 4.75
Change in share price (2002-current): -51.6%
Change in market share: 11.7% (2002), 17.9% (2011)

Warner Bros. (TWX) has spent an enormous amount of money over the years advertising major motion pictures during the Super Bowl. Some, such as The Matrix Reloaded, Troy, and Batman Begins, became highly successful blockbusters. Showing trailers during the Super Bowl is only growing more popular for studios: Last year, a record 14 trailers were shown. The market share for Warner Bros. films increased from 11.7% to 17.9% between 2002 and 2011, but many of the movies it advertised during Super Bowls were complete flops. Films like Poseidon and Constantine grossed far less in the U.S. than they cost to make. Terminator 3: Rise of the Machines grossed $150 million domestically -- nearly $50 million less than its budget -- despite the fact that Warner bought more than two minutes in ads for the movie during the 2003 Super Bowl (and at $2.2 million for 30 seconds, they weren't cheap back then either).



5. Coca-Cola
Total ad spending (2002-2011): $61.0 million
Super Bowls advertised in over past 10 years: 5
Average ads per Super Bowl: 2.8
Change in share price (2002-current): +51.8%
Change in market share: 44.3% (2002), 42.0% (2010)

Even though Coca-Cola (KO) has only advertised for the past five years of the decade, it has spent more than almost every other advertiser. Since 2007, Coca-Cola has run several ads each year, including two 60-second commercials in 2011 that cost an estimated $12.4 million in ad time alone. Coke commercials during the Super Bowl are usually fantastic, and last year was no different. One ad featured a dragon drinking the beverage. In the other, two border guards representing opposing countries put aside their national differences to focus on their mutual love of the drink. Between 2000 and 2010, Coca-Cola Classic sales declined 22% in gallons sold.







4. Yum! Brands
Total ad spending (2002-2011): $67.8 million
Super Bowls advertised in over past 10 years: 9
Average ads per Super Bowl: 3
Change in share price (2002-current): +366%
Change in market share: 37% (2000), 28% (2011)
Yum! Brands (YUM) is one of the largest fast food companies in the world, operating chains including KFC, Taco Bell and Pizza Hut. When the company spends on Super Bowl advertising, it usually avoids pushing its most popular brand, KFC. Only five of the company's 27 Super Bowl commercials in the past decade advertised Colonel Sanders' restaurant. Instead, Yum! focuses on its smaller brands, Pizza Hut and Taco Bell, with 12 and 10 ads over that time, respectively. Yum! Brands' share price has increased 366% since 2002, due in large part to its international expansion. KFC, Taco Bell and Pizza Hut sales combined are still leagues behind McDonald's.


3. General Motors
Total ad spending (2002-2011): $135.2 million
Super Bowls advertised in over last ten years: 8
Average ads per Super Bowl: 5.5
Change in share price (2002-current): filed chapter 11 in 2009
Change in market share: ~29% (2002), 19.6% (2011)

Four automakers were among the top 10 spenders, but none of the others spent anywhere close to what General Motors (GM) has. GM bought more than $135 million-worth of commercial time during the big games. Even though GM didn't advertise in 2009 or 2010, while it was going through bankruptcy and reemergence, it still spent more than Ford, Toyota and Hyundai combined. In 2005, the company ran 13 separate commercials -- tying it with Pepsi and Anheuser-Busch for the most in a single year. Last year, the carmaker ran five commercials, all of which were Chevy ads, including one produced in collaboration with DreamWorks for the then-upcoming Transformers sequel.



2. PepsiCo
Total ad spending (2002-2011): $209.7 million
Super Bowls advertised in over past 10 years: 10
Average ads per Super Bowl: 7.2
Change in share price (2002-current): +32.4%
Change in market share: 31.4% (2002) - 29.3% (2010)
Although it trails Coke in most ways, PepsiCo (PEP) is the No. 1 soft drink company when it comes to Super Bowl advertising. Over the past decade, the company has spent over $200 million on advertising its products during the games, airing an average of 7.2 ads per year. Of course, it advertises much more than just Pepsi Cola: Its Super Bowl commercials push Gatorade, Sierra Mist, SoBe, Tostitos, Doritos and more. In 2010, PepsiCo spent more than $358 million on television advertising compared to Coca-Cola's $277 million. PepsiCo also aired 72 Super Bowl ads over the past 10 years compared to Coke's 14. Despite all this, Coca-Cola remains the king of carbonated beverages. And the volume of regular Pepsi sold dropped 32% between 2001 and 2010.







1. Anheuser-Busch
Total ad spending (2002-2011): $246.2 million
Super Bowls advertised in over last ten years: 10
Average ads per Super Bowl: 8.7
Change in share price (2002-current): N/A (was purchased by InBev in 2008)
Change in market share: 52% (2002), 48.3% (2011)
Since 2002, Anheuser-Busch, the maker of Budweiser beer, bought close to a quarter of a billion dollars in Super Bowl advertising -- one-tenth of the total for all advertisers. The American beverage company was purchased in 2008 by Belgian InBev, forming one massive beverage company -- Anheuser-Busch InBev (BUD). That year, the company purchased 13 separate Super Bowl ads for nearly $40 million -- the second-most spent by any company on ads in single year. Budweiser's commercials have featured some of advertisings most iconic animals, including football-playing Clydesdales, jealous lizards, and more recently, partying dogs. Bud Light and Budweiser used to be the first- and second-most popular beers in the U.S. But despite its massive ad campaigns, the company lost the No. 2 spot to Coors Light in 2011.


-- Charles B. Stockdale, Michael B. Sauter and Ashley C. Allen

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]]>Anheuser-BuschBud LightBudLightBudweiserChevroletCoca Cola CoCoca-ColacommercialsetradeFinanceFord F-SeriesFortune BrandsgminBevKFCmarket shareMarketShareMcDonald'sPepsisuper bowl adsSuperBowlAdsWall StreetWarner Bros.Yum! Brands24/7 Wall St.Mon, 06 Feb 2012 13:00:00 ESTReaders' Tips for Financial Renewal, Part 3: Investing for the Long Termhttp://www.dailyfinance.com/2012/02/06/readers-tips-for-financial-renewal-part-3-investing-for-the-l/http://www.dailyfinance.com/2012/02/06/readers-tips-for-financial-renewal-part-3-investing-for-the-l/http://www.dailyfinance.com/2012/02/06/readers-tips-for-financial-renewal-part-3-investing-for-the-l/#commentsFiled under: ,

investingA few weeks ago, we asked DailyFinance readers for their best tips for putting your financial house in order. Many offered advice on saving and careful spending, but the general consensus was that the best route to financial security lies in making your money work for you. And, ultimately, most agreed, that requires patience: While some suggested ways to achieve fast gains, most agreed that staying in the market for the long haul is the best way to ensure that you end up with a full bank account -- not an empty wallet.

Before we go any further, a caveat: While some of those who offered advice claim to be certified investment professionals, we did not verify their credentials or their claims. We're passing on many of their investment suggestions, but we ask our readers to take these suggestions advisedly -- and to consult with an investment professional before making any bold moves.

Slow and Steady Wins the Race

Many of those who offered advice began with the idea of defining your goals: Start by figuring out where you want to end up -- and what it will take to get you there. "Meek6" advises readers to calculate how much money they need "to generate income for the future and keep the principal intact." Once you reach that amount, he suggests, "retire when your financial bucket is full."

"Ed P" suggests that we "stick with a diversified group of mutual funds and hang on through thick and thin." Aged 70, he writes that "I have moved about one third of my portfolio into various fixed income funds." Given the fluctuations of the market, Ed's strategy may seem overly optimistic, but in his view, the future isn't quite so cloudy: "Just have a little faith that the capitalist system will rebound and survive."

"Francesmous" suggests a similarly restrained strategy: "You should always invest not with the goal of 'making a killing,' but of holding on to a solid stock for the long haul." With that in mind, she advises, the key is finding long-term, consistently performing stocks, not short-term Roman candles that are likely to flame out: "Do your homework and select stocks that pay a reasonable dividend and that have performed well historically," she suggests. "Put as much effort into choosing a stock as you would when researching a new car purchase."

Go With What You Know

And what do those stocks look like? Sometimes, opines "Chris W," they're brands you already know and trust. When he decided to manage his own money, he focused on "a couple of stocks with publicly available information, and importantly, companies whose products/services I could understand." In his case, they were Apple, Ford and Google, although he pulled out of the carmaker when things started to go south. But now that Ford is doing better, he's reconsidering: "I now like Ford again. I may lighten up on Apple a bit at some point in the near future and put one third of my money back in Ford."

Chris isn't the only reader who likes Ford, although others viewed the automaker's stock more as a short-term investment. "JMoss111" says his strategy is to "Watch for stocks that have tanked, but you know the company isn't going away." The example he uses is Ford, which he says he "bought at $3.00 and sold at $17."

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But while JMoss111's short-term strategy worked out well in that instance, most readers advise taking the long view. "Doc Dearth" advises "dollar cost averaging," a strategy that involves consistently investing the same amount of money at specific time intervals -- every paycheck, for instance. Using this method, DocDearth notes, "you buy more stocks, mutual funds, or ETFs when the market is down and less when it is up." Done properly, dollar cost averaging "eliminates and evens out the fluctuations and volatility the market gyrations that scare people off."

"Sue S." agrees with a lot of the preceding advice, but she's applying it to a different asset class: real estate. Part of her strategy lies in thinking about long-term fundamentals, not short-term gains: "While most of the nation was caught up in the housing frenzy, my husband and I invested in a small college town. We started slow and plan to hold on to the properties for a long time." The college town idea was solid -- after all, higher education is a growth industry, and students will always need a place to lay their heads. In Susan's case, the first place they bought "has been consistently rented to college students," and has paved the way for other purchases.

Everyone Loves Dividends

Those who submitted advice universally agreed that it's worthwhile to pursue stocks and mutual funds that pay dividends. Likewise, all suggested that the smart move is to continually re-invest those dividends, as it effectively compounds the investment. "Ray" notes that his dividends are a major source of income: "My annual dividends now exceed the amount I invest on an annual basis."

But not all investment decisions are so easy ... or so uncontroversial. For example, "Doc Dearth" strongly encourages readers to max out their 401(k) investments. In his view, if you aren't taking full advantage of your employer's 401(k) or similar plan -- and especially getting the full matching funds they offer, you're being "beyond foolish. There is no better way to save and invest regularly than having this money deducted directly from your pay check."

But "Rogsuehull" advises exactly the opposite course: "Ditch the high cost mutual funds in IRA's and 401k's as soon as you can," he says. Instead, he suggests, "Convert to high dividend individual stocks as you go."

That contrarian advice aside, Rogsuehull also offered some of the conventional wisdom offered by other readers, noting that investors should buy stock for the long run, should invest additional money every month, and should reinvest dividends. Steady investing, he says, will make you "happy for the rest of your life."

Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.


Previous articles in This Series
o. Readers' Tips for Financial Revival, Part 1: Smart Saving
o. Readers' Tips for Financial Revival, Part 2: Spend Wisely





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]]>401kBruce Watsonbuy what you knowBuyWhatYouKnowcollege townsCollegeTownsdiversificationdividend stocksDividendStocksdollar cost averagingDollarCostAveragingLong term investingLongTermInvestingMutual fundsMutualFundspersonal financePersonalFinancereal estateRealEstateTwitterBruce WatsonMon, 06 Feb 2012 10:15:00 ESTAs Facebook Files for Its IPO, a Look Backhttp://www.dailyfinance.com/2012/02/03/as-facebook-files-for-its-ipo-a-look-back/http://www.dailyfinance.com/2012/02/03/as-facebook-files-for-its-ipo-a-look-back/http://www.dailyfinance.com/2012/02/03/as-facebook-files-for-its-ipo-a-look-back/#commentsFiled under: , ,

FacebookIt's hard to believe that Facebook has been around for less than eight years. Initially conceived as a way for Harvard students to socialize with each other, it rapidly transformed into the most influential online social network in the world, fundamentally changing the way hundreds of millions of people connect, relate to, and stalk each other.

On Thursday, the site that made it possible for you to reconnect with your third-grade girlfriend and unfriend your annoying cousin started its latest evolution into a publicly traded company. As its IPO filings offer a glimpse behind the blue curtain -- and the company's move points to the next iteration of the world's most loved (and hated) networking site -- we decided to take a look back at some of the high points in Facebook's brief but captivating history.

Gallery: Facebook - A Timeline




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]]>Cameron WinklevossConnectUFacebookFacebook IPOFacebook PlatformFacebookIpoFinanceHarvard UniversityhistoryMark ZuckerbergMarkZuckerbergNew YorkNews Corpphoto galleryPhotoGalleryRetrospectiveThe Social NetworkTyler WinklevossWayne ChangBruce WatsonFri, 03 Feb 2012 10:50:00 ESTWhy J.C. Penney Will Never Be Great Againhttp://www.dailyfinance.com/2012/02/02/why-j-c-penney-will-never-be-great-again/http://www.dailyfinance.com/2012/02/02/why-j-c-penney-will-never-be-great-again/http://www.dailyfinance.com/2012/02/02/why-j-c-penney-will-never-be-great-again/#commentsFiled under: , , , , ,

JC PenneyThis should be a big month for J.C. Penney (JCP).

On Wednesday, the department store chain officially rolled out its "Fair and Square" pricing strategy. Instead of frequent sales and perpetual markdowns on aging inventory, J.C. Penney is introducing everyday low pricing. No one is sure if pricing confusion kept shoppers away from the retailer, but reliably low price tags on fashionable duds sounds like a winning strategy on paper.

If it sounds a lot like Target's (TGT) "cheap chic" way of thinking, perhaps it's because new CEO Ron Johnson spent the 1990s as an executive at the country's second-largest discounter.

But Johnson's real claim to fame is what he did on this side of the millennium.

Comparing Apples to Orange Stockings

Johnson arrived at Apple (AAPL) in time to pioneer the tech giant's ridiculously successful foray into retail. The Apple store empire grew into a 300-unit behemoth, raking in $15 billion in annual revenue under his watch. He left Apple to head up J.C. Penney in November.

He's a great catch for J.C. Penney, but will it be enough to turn the chain's fortunes around? The market seems to think so. Shares have nearly doubled since bottoming out back in August. Most of those gains have come since Johnson's arrival.

It's only helped Johnson's cause when he claimed that the chain's makeover -- in both pricing and layout -- may save the debt-saddled company $900 million over the next two years. He also issued a robust fiscal outlook, but even he can't know if all of his changes will work out.

For starters, this isn't Apple. This isn't the only place in the mall to buy a Macbook or get a "genius" to mend your ailing iPhone. (Better or cheaper clothing options are likely a few stores away.) There's a reason why Apple is any mall's top seller per square foot, and it has more to do with Apple's brand than how the bright stores are laid out.

Johnson can't just install the Green Bay Packers offense in the Cleveland Browns team and expect success. It doesn't work that way. Apparel retailing is a commodity.

There's also a big different between what cash-rich Apple can do and the flexibility available to J.C. Penney with its $3 billion in debt.

A Penney for Your Thoughts

The Apple-ization of J.C. Penney is also susceptible to jabs.

Folks have generally been bashing the sparse "jcp" logo that was officially introduced on Wednesday for its simplicity. And by next year the retailer's stores will be carved out into dozens of brand-specific areas with a "town square" center for services. This may very well work for Apple with only a handful of product categories, but it may be confusing for someone trying to find a particular brand among 80-100 brand areas in the "Main Street" that Johnson envisions.

If it flops, Johnson's toast. If it works, rivals will quickly embrace the new format. In other words, it's a lose-lose less scenario.

Even the every day low pricing mantra may prove to be confusing. J.C. Penney still plans unique month-long promotions anchored by a chunky 96-page catalog that will be mailed out. The "everyday" low prices deserve asterisks because extra markdowns may take place on the first and third Friday of the month to move stale merchandise. In the end, shoppers will still be navigating through a myriad of distinctive Every Day, Month-Long Value, and Best Price colored tags.

Simplicity shouldn't have to be this confusing.

Pin the Tail on the Retailer

Right now, the love affair is still strong between the meandering department store chain and the investing community.

Johnson hasn't failed.

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Optimists are counting the incremental shoppers, without considering that current customers might take their plastic elsewhere. They're warming up to the low prices that have helped Target, TJX (TJX), and Kohl's (KSS) through these bargain-hungry years, but perhaps they're not aware that the mall rents where J.C. Penney's lives are higher than what the strip-mall anchors have to shell out.

And if J.C. Penney is truly offering lower prices, are we looking at lower margins or a lower quality of merchandise? Choose one.

The stock's heady run in recent months has discounted the perfect execution of Johnson's turnaround strategy. Where's the upside? J.C. Penney is trading for roughly 20 times this new fiscal year's target. Kohl's and Target fetch multiples of 10 and 12, respectively. Even Johnson's former home -- growth demon Apple -- is trading for about half of J.C. Penney's forward earnings multiple.

J.C. Penney's stock is too expensive for any investor that can appreciate "Every Day" low prices. The reinvention process is always harder than it seems.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple. Motley Fool newsletter services have also recommended creating a bull call spread position in Apple.




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]]>Apple StoreAppleStoreclothingdepartment storesDepartmentStoresevery day low priceEveryDayLowPriceJ. C. Penneyjc+penneyjcpjcp+fair+and+squarejcpenneyjcpfairandsquareKohl'sMain StreetretailRon JohnsonTargetThe Motley FoolturnaroundRick Aristotle Munarriz, The Motley FoolThu, 02 Feb 2012 06:30:00 ESTDo Super Bowl Ads Score for Their Companies' Stocks?http://www.dailyfinance.com/2012/01/31/do-super-bowl-ads-score-for-their-companies-stocks/http://www.dailyfinance.com/2012/01/31/do-super-bowl-ads-score-for-their-companies-stocks/http://www.dailyfinance.com/2012/01/31/do-super-bowl-ads-score-for-their-companies-stocks/#commentsFiled under: , , , , , , , ,

etradeSuper Bowl Sunday is coming and you know what that means: Coca-Cola (KO) polar bears will be hamming it up, the E*TRADE (ETFC) Baby will charm viewers, and Audi's new LED headlights are going to do in some vampires. Ferris Bueller will even make a surprising return.

Yes, the New England Patriots and New York Giants will interrupt the entertainment to run some football plays, but everyone knows that the Super Bowl is really all about the commercials.

With advertisers spending a record average of $3.5 million this year for 30 seconds of pitch time, sponsors certainly seem to think that they'll be getting their money's worth. But will their shareholders feel the same way?

Calling an Audible for Attention

Gauging a market campaign's Super Bowl spot relative to its share price isn't as easy as it sounds. Some advertisers -- including LivingSocial and Teleflora last year -- aren't public. Some products are also part of much larger companies. A clever Doritos ad isn't going to be seen as a major score for its parent company, PepsiCo (PEP).

However, let's go over a few of the memorable ads from last year's Super Bowl game that are pure plays on publicly traded companies.
  • Best Buy (BBY) had the genius star-studded pairing of rock legend Ozzy Osbourne with teen idol Justin Bieber in a spot for its then-new buyback protection program. The ad may have been clever, but the market was still left wondering why it would need to pay more for a product for the sake of the restrictive obsolescence insurance that the consumer electronics retailer was providing. The stock fell 0.7% on the Monday after the Super Bowl, and tumbled 4.6% over the course of the week. Things haven't gotten any better for Best Buy, now off 26% since last year's Super Bowl commercial.
  • The E*TRADE Baby came back, this time with his tailor. The discount broker's ad showed how easy it was to get a novice investor up to speed in building an impressive portfolio. Sadly, the same thing can't be said of E*TRADE's stock itself over the long haul. The stock did pop 2.2% higher on the Monday after the ad aired -- and 4.2% on the week -- but it has gone on to shed more than half of its value.
  • PepsiCo had several ads for both Pepsi MAX and Doritos. Those didn't seem to move the stock at all. The soda-and-salty-snacks giant saw its shares slip 0.2% on Super Bowl Monday, closing flat on the week. However, unlike Best Buy and E*TRADE, PepsiCo is actually trading higher these days -- up by 6%.
  • And then there's salesforce.com (CRM), which spent a lot of money promoting Chatter during last year's Super Bowl. And today, how many people know that Chatter is a cloud-based company communications platform? The answer shows that Super Bowl ads may not even influence consumers, let alone the stock price.

For an even longer view of post-game stock performance we can rewind even further -- past last year's ads and into Super Bowl commercial highlights of yore.

Apple's (AAPL) 1984 ad -- the futuristic commercial directed by Ridley Scott -- made its national debut during the third quarter of Super Bowl XVIII in 1984. If you were fortunate enough to have bought Apple that year -- and held on through the company's rocky 1990s -- you'd be sitting on a 100-bagger today.

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However, we can also look to all of the Super Bowl ads by cash-rich and profit-poor dot-coms ahead of the Internet bubble that popped. The doomed Pets.com had a Super Bowl ad in 2000. Yahoo! (YHOO) gave television's costliest stage a swing with its talking dolphin ad in 2002. There's a surprising end to that one, though: Yahoo! shares have actually more than doubled since that time on a split-adjusted basis.

But memorable ads will only get you so far. Anheuser-Busch (BUD) has had some of the game's most notable ads. (Everyone remembers the Bud-weis-er frogs, the "Whassup?" guys, and classy Clydesdale horse clips.) And, yes, the company has definitely been a quality investment over the years across several incarnations. Even so, earlier this month, Coors Light overtook Budweiser as the country's second-most-popular beer by volume. And while Anheuser-Busch can take heart in knowing that its Bud Light is still the top dog in beer consumption, it still must ask: Were all those frogs talking for naught?

So do Super Bowl ads ultimately influence a stock's price? No, if all you do is spend $3.5 billion for an ad this weekend. If the product or service you're promoting will move the needle for your company, well, that's something else entirely.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Apple, Coca-Cola, Yahoo!, PepsiCo, and Best Buy. Motley Fool newsletter services have recommended buying shares of salesforce.com, Coca-Cola, Yahoo!, PepsiCo, and Apple. Motley Fool newsletter services have also recommended writing covered calls in Best Buy, creating a bull call spread position in Apple, creating a diagonal call position in PepsiCo, and shorting salesforce.com.


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]]>2012Anheuser-BuschApple IncAudiBest BuybudweiserClydesdaleCoca-Coladoritosetrade babyEtradeBabyJustin BieberJustinBieberozzy osbourneOzzyOsbournePepsiCostock pricesStockPricesSuper BowlSuper Bowl advertisingsuper bowl commercialsSuperBowlSuperBowlCommercialsThe Motley FoolWhassup?XLVIYahoo!Rick Aristotle Munarriz, The Motley FoolTue, 31 Jan 2012 13:15:00 ESTFeng Shui's Financial Predictions for the Year of the Black Water Dragonhttp://www.dailyfinance.com/2012/01/30/feng-shuis-financial-predictions-for-the-year-of-the-black-wate/http://www.dailyfinance.com/2012/01/30/feng-shuis-financial-predictions-for-the-year-of-the-black-wate/http://www.dailyfinance.com/2012/01/30/feng-shuis-financial-predictions-for-the-year-of-the-black-wate/#commentsFiled under:

Feng ShuiTea leaves, rabbit feet and Ouija boards aren't the typical tools of the investing trade. Instead, most responsible investors rely on research, analysis, strategy, and conviction to guide them. Still, that hasn't stopped some folks from looking for an easier, or more exciting, approach.

Two professors at Indiana University, for example, believe that the direction the Dow Jones Industrial Average will take can be determined via the collective mood of participants on Twitter. Others market watchers point to supposed correlations between the stock market and the length of skirts, the nationality of the model on the cover of Sports Illustrated's swimsuit edition, or whether it snows in Boston on Christmas. (For those keeping score: Short skirts, a white Christmas, and an American model all suggest the market will rise.)

Feng Shui Predicts...

And now, out of Hong Kong comes another prediction via a leading Asian brokerage, CLSA Asia-Pacific Markets. Just before China's Lunar New Year, it released its 18th annual "feng shui index," and its predictions augur well for Hong Kong's Hang Seng stock market index.

Feng shui is the ancient Chinese practice of improving one's fortune by arranging items in auspicious ways and by choosing promising dates for events. It has its skeptics and its ardent supporters, but when applied to the stock market this year, it's making many believers smile.

That's because this is the year of the black water dragon, and though it's associated with volatility, its appearance predicts a slow start in the first half of the year followed by a strong finish.

The CLSA report gets specific, too, predicting particular success for certain elements, such as water and earth. One specific business singled out for a good year is cement, which should make investors in Cemex (CX) happy. The stock has been beaten down in large part due to the global construction slowdown, but when building eventually picks up, demand for cement will grow.

Hold Your Horses... er, Dragons...

If you're rushing to the end of this article so that you can immediately switch to your broker's website to buy stock in American or Chinese stocks, hold on. The folks at the CLSA Asia-Pacific Markets stress that they offer the feng shui index "with our tongues firmly in our cheeks" -- in other words, it's not meant to be investment advice.

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Even without that disclaimer, you'd do well to take these predictions and any others based on such unconventional indicators with a grain of salt. Remember: Even a stopped clock is right twice a day. Those who make a lot of predictions are likely to be right now and then, and it won't always be clear whether any given hit is due to their brilliance or just random luck. And even if you only follow the guidance or example of proven winners, that might still backfire on you: The world's best investors have all made their share of regrettable moves.

What to Do

Instead, when it comes to stock-market investing, it's probably best to stick with tried-and-true routes to success, such as being a responsible investor. Instead of looking for astrology or sports superstitions to influence you, rely instead on research, analysis, strategy and conviction.

Read widely and deeply about the companies and industries that interest you. Study them so that you have a good sense of their competitive advantages and potential. Find exceptionally promising companies and focus your money on your best ideas. Diversify, so that you don't have all your eggs in one or a few baskets. Then be patient, stick to your convictions, and be prepared for occasional losses.

Longtime Motley Fool contributor Selena Maranjian owns shares of Cemex, but she holds no other position in any company mentioned. Click here to see her holdings and a short bio.






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]]>black water dragonBlackWaterDragonCemexChinese New YearChineseNewYearCLSA Asia-Pacific MarketsClsaAsia-pacificMarketsDow Jones Industrial Averagefeng shuifeng shui indexFengShuiFengShuiIndexHang Seng Indexleading indicatorsLeadingIndicatorsmarket outlookMarketOutlookskirt lengthSkirtLengthSports IllustratedsuperstitionTwitterSelena Maranjian, The Motley FoolMon, 30 Jan 2012 15:40:00 ESTCongress Tries to Police Itself on Insider Tradinghttp://www.dailyfinance.com/2012/01/30/congress-tries-to-police-itself-on-insider-trading/http://www.dailyfinance.com/2012/01/30/congress-tries-to-police-itself-on-insider-trading/http://www.dailyfinance.com/2012/01/30/congress-tries-to-police-itself-on-insider-trading/#commentsFiled under:

CongressWASHINGTON (AP) - Aware that most Americans would like to dump them all, members of Congress hope to regain some sense of trust by subjecting themselves to tougher penalties for insider trading and requiring they disclose stock transactions within 30 days.

A procedural vote Monday would allow the Senate later this week to pass a bill prohibiting members of Congress from using nonpublic information for their own personal benefit or "tipping" others to inside information that they could trade on.

Insider trading laws apply to all Americans, but CBS' "60 Minutes" in November said members of Congress get a pass, citing investment transactions by party leaders and a committee chairman in businesses about to be affected by pending legislation.

The broadcast report raised questions about trades of House Speaker John Boehner, R-Ohio; the husband of Democratic leader and former Speaker Nancy Pelosi of California; and Rep. Spencer Bachus, R-Ala., chairman of the House Financial Services Committee.

All three denied using any insider information to make stock trades, but the broadcast set off a flurry of efforts in Washington to deal with the public perception.

A recent Wall Street Journal/NBC News poll of registered voters found 56 percent of them favor replacing the entire 535-member Congress. Other polls this year have given Congress an approval rating between 11 percent and 13 percent, while disapproval percentages have ranged from 79 percent to 86 percent.

House Majority Leader Eric Cantor, R-Va., said he's working on an expanded bill that would go beyond stock transactions and ban lawmakers from making land deals and other investments based on what they learned as members of Congress.

The Senate version of the Stop Trading on Congressional Knowledge (STOCK) Act would subject any member of Congress who violates the ban on insider trading to investigation and prosecution by regulatory agencies and the Justice Department. It also directs the House and Senate ethics committees to write rules that would make violators subject to additional congressional penalties.

"We can start restoring some of the faith that's been lost in our government by taking this common sense step of making members of Congress play by the exact same rules as everyone else," said Sen. Kirsten Gillibrand, D-N.Y., who with Sen. Scott Brown, R-Mass., wrote the bill "We must make it unambiguous that this kind of behavior is illegal."

President Barack Obama endorsed the bill in in State of the Union speech last week, saying he would "sign it tomorrow." Brown used that opening to briefly speak with the president as he was exiting the House chamber after Tuesday's address.

"The insider trading bill's on Harry's desk right now," Brown told Obama, referring to Senate Majority Leader Harry Reid. "Tell him to get it out, it's already there."

"I'm gonna tell him," answered Obama. "I'm gonna tell him, I'm gonna tell him to get it done."

Obama raised the issue again in his radio and Internet address on Saturday.

"The House and Senate should send me a bill that bans insider trading by members of Congress, and I will sign it immediately. They should limit any elected official from owning stocks in industries they impact," he said.

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]]>Abuse of PowerAbuseOfPowercongresscongressmengovernmentinsider tradinginsider trading in CongressInsiderTradingInsiderTradingInCongressinvestmentsSenatorsThe Associated PressMon, 30 Jan 2012 09:00:00 ESTWhy Does Wall Street Hate AutoNation?http://www.dailyfinance.com/2012/01/25/why-does-wall-street-hate-autonation/http://www.dailyfinance.com/2012/01/25/why-does-wall-street-hate-autonation/http://www.dailyfinance.com/2012/01/25/why-does-wall-street-hate-autonation/#commentsFiled under: ,

Auto Nation"If you have nothing nice to say, don't say anything at all," is a mantra that's alive and well on Wall Street. Analysts prefer to cover stocks where their sentiment is bullish. Google (GOOG), for example, is a market darling. A full 34 of the 38 major firms with published analysis on the search giant give it a "buy" or "strong buy" rating. This series looks at the few stocks where Wall Street is generally bearish on a company's prospects.

We have always had a fascination with cars in this country. We still love many of the car manufacturers. Unfortunately, analysts don't seem to have a whole lot of love for the country's leading auto showroom operator.

Wall Street isn't keen on AutoNation (AN). Of the 14 established analysts tracking the stock, not a single firm has a "buy" or "strong buy" rating on the company. Nine analysts have "hold" ratings, and that neutral call isn't as encouraging as it sounds. The other five have negative "underperform" or "sell" ratings on the company.

Revving the Engine

AutoNation is huge. The company watches over 258 new vehicle showrooms, selling 32 car brands across 15 states. And there doesn't seem to be anything wrong with AutoNation on the surface.

The company has beaten Wall Street's profit targets in each of its four past quarters. These same skeptical analysts see earnings climbing 11% to $2.12 a share this new year, pegging revenue to climb 7% to a healthy $14.6 billion.

Nor is auto retailer losing any steam. It posted an 11% spike in new vehicle sales last month relative to December 2010. AutoNation handed keys to 24,342 drivers last month. In welcome news to Ford (F) and General Motors (GM), AutoNation's domestic car sales climbed 17% and import brands were flat. There was a 32% surge in the premium luxury category, suggesting that the pent-up demand for that new car smell during the economic downturn is finally starting to kick in.

There are some -- but not many -- potholes ahead.

Not Exactly Paradise by the Dashboard Light

One of the reasons domestics have thrived at the expense of imports is that the tsunami and earthquake that tore through Japan last year temporarily shut down many of its plants and parts manufacturers.

Production is ramping up again on that front, and in October, AutoNation said that the showroom operator will be welcoming in roughly 30,000 Japanese imports that it will have to sell at lower profit margins.

Selling cars is a cyclical business, though potential buyers naturally are thrown for a loop when Toyotas have accelerator problems and Chevy Volt batteries catch fire several days after serious accidents.

If the economic recovery is starting to rear its head, the big-ticket luxury of automobiles would seem to be a natural beneficiary. However, even bearish analysts aren't disputing AutoNation's pole position here. Some pros are simply turned off by the valuations.

Haggling on Price

When Wells Fargo downgraded shares of AutoNation this summer -- from the neutral "market perform" to the bearish "underperform" -- the analyst was concerned about AutoNation's valuation.

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AutoNation was trading at a 50% premium to publicly traded peers including Group 1 (GPI) and Penske (PAG), compared to its historical average of 16%.

The analyst had a point. AutoNation's stock had doubled over the past year to hit $40 at the time of the downgrade. The shares are down to the mid-$30s now, though still well above Wells Fargo's valuation range of $29 to $31.

A few months later, Bank of America followed Wells Fargo in downgrading AutoNation from "neutral" to "underperform." However, Bank of America's revision was based on the theory that domestic auto sales would be declining over the next few quarters. AutoNation's report -- and metrics out of Ford and GM -- offer a more encouraging prognosis.

The Antilock Brakes Are Kicking In

The original valuation argument against AutoNation remains.

The auto giant is fetching 17 times the $2.12 a share that analysts are projecting for 2012. That's a steep price when Penske and Group 1 Automotive are fetching multiples of 12 and 13, respectively.

It's a valid argument. AutoNation may have some advantages as the bigger player, but Penske is no slouch, with Wall Street forecasting $12.5 billion in sales. Group 1 is generating roughly half the revenue of AutoNation and Penske, but it's also growing slightly faster than its two larger rivals.

AutoNation isn't a bad company, it's just a bad stock relative to the available alternatives. Wall Street seems to see it that way, at least, and the numbers bear the argument out.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any stocks in this article, except for Ford. The Motley Fool owns shares of Google and Ford Motor. Motley Fool newsletter services have recommended buying shares of General Motors, Ford Motor, and Google. Motley Fool newsletter services have recommended creating a synthetic long position in Ford Motor.

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]]>AutoNationcar salesCarSalesGroup 1 AutomotiveGroup1AutomotiveoutlookPenskeprice earningsPriceEarningsThe Motley FoolunderperformvaluationWall StreetRick Aristotle Munarriz, The Motley FoolWed, 25 Jan 2012 06:30:00 EST