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How to Get Rich by Banking on the Echo Boomers

Adam J. Wiederman — 2013-05-17T05:00:00+00:00

Filed under: Stock Picks, Clothing & Accessories, Shopping Trends, Economy

Alamy

Although the economic potential of echo boomers may not be as promising as some are expecting, there are several ways investors can actually profit from their behavior.

Echo boomers are the demographic group comprised of baby boomers' progeny. They're slightly larger as a group than their parents (80 million compared to just 77 million baby boomers) and better educated. But this is a generation that's saddled with tens of thousands of dollars in debt -- something that will likely stunt their economic growth as they age.

However, while echo boomers work their way through these challenges, savvy investors stand to make hefty sums by investing in their consumer behaviors.

Short on Cash, High on Cachet

This group, though young, is already economically influential -- and will become even more so as their income grows.

According to the National Retail Federation, they already have direct spending power of over $200 billion and an indirect spending power of $500 billion. A few years ago, Visa predicted this group could account for $2.45 trillion in annual spending by 2015. Considering how indebted the generation is, it's interesting that echo boomers are described as largely "aspirational shoppers, middle-income earners with high-end tastes and affinity toward popular brands," according to market researcher IBISWorld.

This research gives good clues as to where they spend (and will continue to spend) their money. And it offers direction to investors looking to capitalize on this generation's spending habits by narrowing the field of stocks to companies that produce the products that matter most to echo boomers.

Three Key Industries Enjoying a Boost from Echo Boomers

There are three key places where echo boomers spend their disposable income:

Fashion. Echo boomers, as a group, are concerned about their style -- something fashion designers and luxury brands have certainly taken notice of. Over the past few years, Tiffany (TIF) and Coach (COH) have introduced lines of lower-priced jewelry and handbags, respectively, to attract women in this demographic.

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J Crew, Banana Republic (GPS), and Urban Outfitters' (URBN) Anthropologie offer high-end fashion products at affordable prices. And even Target (TGT) has been pairing up with high-end designers to woo this group. This past Christmas the mass-market retailer went so far as to team up with Neiman Marcus to add some high-end cachet to its offerings.

Health. Echo boomers are also worried about their overall well-being, spending large portions of their paychecks on keeping their bodies healthy. One big winner that should continue to do well as the company expands is Whole Foods Market (WFM), which sells natural and organic foods and high-end personal hygiene products in and around major cities where this demographic is settling. Echo boomers also spend a good amount of free time at the gym. Town Sports International Holdings (CLUB) could be a winner given its dominance in the East Coast's largest cities (New York, Boston, Philadelphia, and Washington, D.C.)

Technology. It should come as no surprise that echo boomers spend large sums of money on gadgets from companies like Apple (AAPL), using online services from Google (GOOG), and buying items on Amazon.com (AMZN). These companies have already been wildly successful for investors, but given echo boomers' seeming addiction to newer, faster, and more expensive electronic toys, this success should continue.

Make Money from the Trend

These sectors may change as the group ages (though technology will probably be a big desire for them for the remainder of their life). But for the next 10 to 20 years, these preferences should remain the same. That means that investors who get in on companies like those above (even after their successful runs) will continue to be rewarded.

This article was written by Motley Fool analyst Adam J. Wiederman. He has no positions in any of the stocks mentioned. The Motley Fool recommends Amazon.com, Apple, Coach, Google, and Whole Foods Market. The Motley Fool owns shares of Amazon.com, Apple, Coach, Google, and Whole Foods Market.

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Stock Trek: 7 Companies that Behave Like 'Star Trek' Aliens

Tim Beyers — 2013-05-16T05:00:00+00:00

Filed under: Google, Microsoft, Apple, Stock Picks, Amazon.com, Cisco Systems, eBay, Entertainment Industry, Music & Entertainment

Paramount Pictures

"Star Trek Into Darkness," the second installment in J.J. Abrams' reimagining of the Viacom (VIA) sci-fi franchise that dates back to 1966, opens in 336 domestic IMAX (IMAX) theaters Wednesday and then nationwide on Friday. Overseas, the film is already a hit, having earned $31.7 million in seven international markets last weekend.

Rumors abound for what fans can expect to see in "Darkness," chief among them that it's an updated spin on the 1982 classic "Star Trek II: The Wrath of Khan," with British actor Benedict Cumberbatch cast as the villain.

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I'm not entirely sure what to think, but as a longtime Trekkie you can count me among the many itching to see the film. More than 78,000 commenters at Rotten Tomatoes say they are too, while 88 percent of critics surveyed rate the sequel "fresh."

What Stock would Spock be?

The beauty of "Star Trek" is found in the richness of the universe developed and enhanced over nearly five decades, six TV series, and 12 films that have spawned fan-authored books and games. The closest thing we have on Earth to the vast "Trek" universe is the turbulent sea of thousands of equities traded on our stock exchanges.

With that as our backdrop, let's have a little fun. Here are seven stocks that resemble the popular races of "Star Trek":

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Tim Beyers owns shares of Apple and Google. The Motley Fool recommends Apple, Cisco Systems, eBay, Facebook, and Google. The Motley Fool owns shares of Apple, eBay, Facebook, Google, and Microsoft.

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5 Stocks for Mother's Day

The Motley Fool — 2013-05-10T13:15:00+00:00

Filed under: Technology, Stock Picks, Entertainment Industry, Travel Industry, Investing

Alamy

Sunday is Mother's Day and, sure, you could spring for flowers, a sappy card and some decorative soaps. Or you take a more nontraditional route and give mom a gift that keeps on giving: stocks.

We asked some of our writers to suggest stock ideas that their own mothers would appreciate and cherish for years to come. We're talking about companies that moms can relate to, and companies that, if held for the long-term, have the potential to help her recover some of the money she shelled out for bikes, braces, acne treatments and band camp. (On this special day we'll forget about the bad haircuts, embarrassing pictures and making us wait to get our ears pierced.)

Without further ado, here are five great companies for moms and the people who love them.

For the media-savvy mom: Amazon.com (AMZN)
My Mom loves to read as much as I do. She also likes classic movies and television shows (I Love Lucy is her favorite). For all of the things she loves the best one-stop-shop is Amazon.com. Mom can act like a kid in a candy store clicking around Amazon.com.

As the world's largest e-tailer, it's a richly diverse business with interests in everything from clothes and cosmetics to housewares and Internet hosting. (Okay, maybe that last one's not quite mom's cup of tea.) That's not all. Amazon's Instant Video service is slowly becoming the market's best alternative to Netflix. This is a company that has achieved 32 percent average revenue growth over the past five years with more big gains likely.

Mom would also like CEO Jeff Bezos. He is building what he calls a customer-centric business that gives visitors to the website more than they asked for. What Mom doesn't want that? -- Tim Beyers

For the mom who's still a kid inside: Disney (DIS)
Growing up a few hours away from Disney World -- and heading out to the House of Mouse several times a year -- makes Disney a no-brainer on Mother's Day. Disney isn't just the family entertainment giant: It's my family's entertainment leader.

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Shares of Disney hit new all-time highs this week, and it's easy to see why. ESPN is a sports programming juggernaut. Theme park attendance has never been higher. Iron Man 3 this past weekend became the country's largest box office opening outside of last year's The Avengers. Paying billions for Marvel doesn't seem so dumb now, and the same can be said for other 10-figure deals for Pixar and Lucasfilm.

This week's quarterly report was another beauty with revenue climbing 10 percent and net income soaring 32 percent.

No one is better than Disney at milking value out of endearing family characters as it's able to take a hit theatrical property and cash in through merchandising at its namesake stores, attractions at its theme parks, and extending that popularity through its television properties. -- Rick Munarriz

For the mom who deserves a good mani-pedi: Steiner Leisure (STNR)
Some people like to offer their moms spa treatments as gifts. This year, why not consider gifting an actual spa treatment provider?

Steiner Leisure mans the floating spas on 156 of the largest cruise ships. All of the major lines rely on Steiner to pamper their passengers with relaxing spa treatments and related services.

Steiner also runs a dozen post-secondary schools across the country to teach spa services, and that's a convenient way to recruit new hires for its growing reach. Don't worry, landlubbers. Steiner also manages 66 land-based spas and sells its proprietary Elemis products, but cruise-based treatments remain its biggest business.

This is a growing business. Revenue climbed 16 percent last year to hit $811.5 million. Earnings growth has been spotty, but it's hard to find a company that has a near monopoly in a high-end niche that should continue to grow as cruise lines continue to expand their fleets with larger ships. -- Rick Munarriz

For moms on the go: Starbucks (SBUX)
Nobody works harder than moms trying to juggle all the responsibilities they take on in their busy lives. Among the customers you see in line every day at Starbucks locations around the country, you'll find plenty of moms getting a much-needed pick-me-up to start their days, whether it's the grande hot chocolate my wife drinks or the classic short mild-roast black my own mom would probably have ordered back in the day.

They're clearly not the only ones, as Starbucks saw its total sales jump 11 percent during the first three months of 2013 to a new record of $3.6 billion, and the company boosted its own projections for even further growth for the rest of the year and beyond.

Starbucks has gone well beyond coffee, offering tea, juice, and a variety of baked goods to appeal to a wider customer base and drive its recent success. Assisted by its extensive international expansion efforts, Starbucks has built a global reputation not just for quality products but also for ethical behavior and corporate responsibility.

Moms will especially appreciate the company's partnership with the charitable organization Every Mother Counts, which is seeking to make pregnancy and childbirth safe for mothers around the world. And with plenty of growth left in its future, Starbucks stock makes an appropriate choice for moms on the go. -- Dan Caplinger

For movie buff moms: Netflix (NFLX)
It's easier than ever for Mom to hop on the streaming video bandwagon, especially when so many televisions are coming out that already have a Netflix feature. (And, yes, mom, I'll come over and help you set it up.)

Netflix is a treasure trove for romantic comedies, family flicks, primetime soaps and classic movies. It's also a company that can give mom's stock portfolio an uplifting boost.

For starters, this company is riding high on a gangbusters quarterly earnings call. Netflix beat analyst expectations by raking in $1.02 billion in revenue, an 18 percent boost from the last quarter. It also brought in 3 million new streaming subscribers, and even announced that at 29.2 million domestic subscribers, had just passed HBO's 28.7 million.

With popular shows like House of Cards and Arrested Development tucked safely under its belt, mom will be happy she tuned into Netflix in the years to come. -- Caroline Bennett

Motley Fool contributors Caroline Bennett and Dan Caplinger have no positions in any stocks mentioned. Rick Munarriz owns shares of Walt Disney, Netflix, and Steiner Leisure Limited. Tim Beyers owns shares of Walt Disney and Netflix and has the following options: Long Jan 2014 $50 Calls on Netflix. The Motley Fool recommends Amazon.com, Netflix, Starbucks, and Walt Disney. The Motley Fool owns shares of Amazon.com, Netflix, Starbucks, and Walt Disney.

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Groupon Posts Strong Quarter After CEO's Departure

Matt Brownell — 2013-05-08T17:06:00+00:00

Filed under: Stock Picks, Earnings, Retail, Shopping, Deals

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The last time Groupon (GRPN) reported its quarterly earnings, the daily-deal company saw its share price dive after badly missing its revenue targets -- and only recovered when it subsequently fired founder and CEO Andrew Mason.

Wednesday's earnings report, covering the quarter ending March 31, was a good deal more positive.

The company beat analysts' estimates by bringing in $601 million in revenue for the quarter, and its earnings-per-share of 3 cents was in line with projections. That growth was driven by a 42% year-over-year revenue increase in North America, more than enough to counter an 18% drop in overseas revenues. Active customers, which Groupon defines as subscribers who have bought at least one Groupon in the last year, rose from 36.9 million to 41.7 million, an impressive year-over-year increase of 13%.

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The report cheered Groupon's weary investors, with the share price shooting up 12% in after-hours trading.

But Groupon still has a way to go before we can declare a comeback. Shares have still lost about half their value in the past year, and last month, UBS analyst Eric Sheridan gave the stock a sell rating, declaring that it had an "unproven business model." Meanwhile, there's plenty of management uncertainty to go around: The board still hasn't named a replacement for Mason, and on Tuesday Staples hired away Faisal Masud, head of the company's fledgling Groupon Goods service.

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.

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Inflation Worries? Fight Back with Dividend Stocks

Chuck Saletta — 2013-04-17T05:00:00+00:00

Filed under: Coca-Cola Company, Stock Picks, Dividend Stocks, Investing

Getty Images

Inflation is back in the news these days, thanks to President Obama's new budget proposal. That proposal adjusts the way inflation gets calculated in an attempt to raise tax revenue and stem the rise of Social Security spending by slowing the rise in the Consumer Price Index.

No matter how it gets officially calculated, inflation is a real threat to your long-run ability to make ends meet. You need an effective way to fight that threat, especially now that potential changes to the official calculations are likely to slow the automatic benefits you're used to getting from the old method.

Pick your Risk

In this era of abysmally low interest rates, there are no safe and surefire ways to protect yourself from the ravages of inflation. Even recent issues of TIPS bonds -- the U.S. government's Treasury Inflation Protected Securities, which are designed to help investors fight inflation -- currently carry negative interest rates. That means investors will still lose money in real terms after those bonds adjust for inflation.

The real question these days isn't whether you take risks with your money to try to keep pace with inflation -- it's what risks you take just to keep treading water in real terms.

In that light, owning the stocks of companies that pay dividends, have regularly increased their dividend payments, and look capable of continuing to raise their dividend payments just might be the best inflation fighter available to your arsenal.

Why Dividends May Be Your Best Bet

There are three key reasons to believe that successful companies can continue to raise their dividends at least as fast as inflation: accounting, real growth, and cost-cutting.

Accounting: Consider a company that likes to pay a dividend equal to 50 percent of its after-tax earnings to its shareholders as a reward for the risks of owning its stock. If its costs rise in line with inflation and it can pass a similar increase down the line to its customers (whose costs would also be rising in line with inflation), then it has an automatic gain in profits and dividends, in line with that inflation. The table below shows how it works:

	First Year	Second Year, After 3% Inflation
Costs	$1,000,000	$1,030,000
Revenues	$1,100,000	$1,133,000
Pre-Tax Profits	$100,000	$103,000
Tax (35%)	$35,000	$36,050
Profit After Tax	$65,000	$66,950
Dividend (50%)	$32,500	$33,475
Dividend Increase		3%

Data from author's calculations.

In reality, not all costs or prices rise exactly in line with inflation, but the general concept still holds.

Real growth: Of course, most companies wouldn't be satisfied to just keep pace with inflation; they're trying to grow their businesses in real terms, as well. Assume that, in addition to the 3 percent inflation, they manage to eke out 1 percent growth in both revenues and costs, from really building their business through introducing new products or gaining new customers. The adjusted table would look like this:

	First Year	Second Year, After 3% Inflation and 1% Real Growth
Costs	$1,000,000	$1,040,000
Revenues	$1,100,000	$1,144,000
Pre-Tax Profits	$100,000	$104,000
Tax (35%)	$35,000	$36,400
Profit After Tax	$65,000	$67,600
Dividend (50%)	$32,500	$33,800
Dividend Increase		4%

Data from author's calculations.

Cost-cutting: Additionally, just like you and I try to look for ways to cut costs in order to keep our own personal inflation rates down, so do companies. They use tactics like "leveraging their scale" to try to get better prices on their larger purchases, not replacing people who leave (or even downright firing folks), and redesigning their products and processes to cost them less.

Assume that same company facing 3 percent inflation and the costs of 1 percent real growth successfully cuts down its baseline costs by 1 percent. Its adjusted table would look like this:

	First Year	Second Year, After 3% Inflation, 1% Real Growth, and 1% Cost-Cutting
Costs	$1,000,000	$1,029,600
Revenues	$1,100,000	$1,144,000
Pre-Tax Profits	$100,000	$114,400
Tax (35%)	$35,000	$40,040
Profit After Tax	$65,000	$74,360
Dividend (50%)	$32,500	$37,180
Dividend Increase		14.4%

Data from author's calculations.

Those three factors, working together, are what allow many companies to consistently raise their dividends and what enable those dividends to often increase at least as fast as inflation.

Who's Done It?

These sorts of things actually happen in the real world. Several companies have been increasing their dividends for decades, and a few have actually reached the half-century mark of not only paying dividends, but regularly increasing them as well.

The table below calls out a handful of the ones that have been most successful at pulling off that string of longevity:

Company	Industry	Years of Consecutive Increases	Date of Last Increase	Amount of Last Increase	Payout Ratio
American States Water (AWR)	Water utilities	58	July 31, 2012	27%	45%
Genuine Parts (GPC)	Auto parts wholesale	57	Feb. 19, 2013	9%	48%
3M (MMM)	Conglomerate	55	Feb. 5, 2013	8%	37%
Coca-Cola (KO)	Beverages-soft drinks	51	Feb. 21, 2013	10%	52%
Johnson & Johnson (JNJ)	Drug manufacturers -- major	50	April 26, 2012	7%	62%

Data from company press releases and DailyFinance, as of April 10, 2013.

Dividends aren't guaranteed, of course. But given the choice between an absolute guarantee that your buying power will lose ground to inflation over time and a fighting chance to keep pace that's backed up by decades of evidence, wouldn't you want to at least consider giving growing dividends a try?

For More on Dependable Dividends

If you're on the lookout for stocks with strong track records of paying you well for owning them, The Motley Fool has compiled a special free report outlining our nine top dependable dividend-paying stocks. It's called "Secure Your Future With 9 Rock-Solid Dividend Stocks."

Motley Fool contributor Chuck Saletta owns shares of Genuine Parts Company. The Motley Fool recommends 3M, Coca-Cola, and Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson.

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5 Companies Set to Cash In on America's Aging Population

Dan Caplinger — 2013-04-04T05:00:00+00:00

Filed under: Stock Picks, Consumer Goods, Drug Companies, Insurance Industry

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Let's face it: We're getting old. The percentage of Americans age 65 or older has been steadily on the rise over the decade. It hit 14 percent in 2012 -- and the Census Bureau projects that by 2050, 21 percent of Americans will be at least 65 years old.

Our aging demographic profile has created some immense challenges, particularly in the areas of Social Security and Medicare. But it also opens up opportunities for enterprising businesses that provide necessary services to an aging population.

Companies that identify demographic trends are best positioned to profit from them. Here are five that are in the right place at the right time -- and if they're smart about their strategic vision, they (and their investors) could reap a lot of growth from an aging customer base.

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Motley Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson and Medtronic.

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Stocks of Ice and Fire: 'Game of Thrones' Investing Ideas

Katrina Chan — 2013-04-02T13:10:00+00:00

Filed under: Stock Picks, Investing Basics, Books, Stocks

HBO

From King's Landing to Winterfell to Qarth to The Wall to living rooms across the nation -- the epic tale of the fight for the Iron Throne of Westeros continued with Sunday's premiere of Season 3 of HBO's popular fantasy series "Game of Thrones."

For fans of the show (or the George R.R. Martin "A Song of Ice and Fire" suite of novels the series is based on) the Lannister, Stark, Baratheon and Targaryen clans are practically family -- dysfunctional, scheming, slaughtering family, but family just the same.

Their futures may be uncertain, but their fortunes (or whatever they leave to their heirs) needn't be. Let's imagine what stocks these characters would invest in if they were building a nest egg while trying to conquer Westeros.

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Although this is probably obvious, none of the characters mentioned above actually own any of the stocks mentioned above because, well, they're fictional characters. Katrina Chan does own shares of Apple and Berkshire Hathaway. You can follow her on Twitter @katrinachan. The Motley Fool recommends Apple, Berkshire Hathaway, Goldman Sachs, and LinkedIn. The Motley Fool owns shares of Apple, Berkshire Hathaway, and LinkedIn.

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Midday Report: UBS Releases List of 14 Favorite Stocks

DailyFinance Staff — 2013-04-02T12:30:00+00:00

Filed under: Stock Picks, Market News

Produced by Drew Trachtenberg

Stocks have soared to record levels this year, but one brokerage firm says there are still plenty of profits left to mine.

After the market's stellar first-quarter gains, UBS (UBS) is out with a new list of favorite stocks. According to 24/7 Wall Street, UBS names 14 stocks for which it sets target prices at least 25 percent above current levels.

Some are household names like Citigroup (C) and Delta Air Lines (DAL), but there are a number of companies on the list that you may not be familiar with.

There are two energy-related stocks - Halliburton (HAL) and Cobalt International (CIE). Halliburton shares have already jumped 15 percent this year, but the UBS price target sees it gaining another 33 percent.

Robert Nickelsberg/Getty ImagesTwo employees of Halliburton Company moves between large pump trucks at a natural gas well site.

Delta is another one that has soared already this year, up 37 percent. It's the only transport company to make the list.

There are a couple of others that have also had good runs already this year. Newcastle Investment (NCT), a real estate investment trust, is up 26 percent. And software maker Infoblox (BLOX) has gained 18 percent. It went public a year ago.

UBS also has a pair of drug and bio-pharmaceutical companies on the list. Warner Chilcott (WCRX) may be a bounce-back story. Its shares have lost 40 percent of their value since last May, and it recently warned that earnings this year are likely to fall short of Wall Street estimates. Alexion Pharmaceuticals (ALXN) is another against-the-grain pick. Last week it received a warning letter from the FDA, which said the company has failed to comply with good manufacturing practices.

Along the same line, UBS likes Monster Beverage (MNST), even though the company has been under fire recently because of possible links between its energy drinks and health problems.

Arch Coal (ACI) is the lowest priced stock on the list, trading just above $5 a share. The UBS target is $9. Like other coal companies, Arch has cut production at several mines because of weak demand for coal-based electricity. The stock has tumbled 29 percent so far this year.

Rounding out the list are Whole Foods (WFM), the retailer Ross Stores (ROST), TIBCO Software (TIBX), and Kraton Performance Polymers (KRA).

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5 Stocks That Have More Than Doubled in 2013

Rick Aristotle Munarriz — 2013-04-01T15:15:00+00:00

Filed under: Energy, Netflix, Stock Picks, Earnings, Industry News, Investing

Ronda Churchill/Bloomberg News

The first quarter was a great one for investors. The tech-heavy Nasdaq rose by more than 8 percent, and the S&P 500 fared even better, soaring 10 percent.

Naturally, there are companies that performed better than that. In fact, a handful more than doubled over the past three months. Wondering which companies you'll want to kick yourself for missing out on? Let's go over a few of them.

Caesars Entertainment (CZR) -- Up 129 percent

Wall Street's biggest winner was Caesars Entertainment, even though the casino operator isn't exactly hitting the jackpot, financially speaking. Revenue declined in its latest quarter, and Caesars isn't expected to turn a profit again until 2016 at the earliest.

So why are investors wagering on Caesars if it seems to be a bad bet fundamentally? Online gambling: Caesars is well positioned to cash in if revenue-hungry states free up restrictions on Internet-based gambling.

In the meantime, Caesars is investing in its properties, opening the Nobu Hotel and Restaurant at Caesars Palace in February and hoping to open the Linq entertainment district by the end of the year.

Consumer Portfolio Services (CPSS) -- Up 118 percent

The market has rewarded risk-takers so far in 2013, and Consumer Portfolio Services is no stranger to risk.

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The specialty finance company buys retail installment sales contracts from auto dealerships that have a hard time lining up traditional financing for their customers. We're talking about car buyers with crummy credit scores.

This is a risky business, but it's paying off for the financier at a time when auto sales are booming and the economy is showing signs of life. Plus, Consumer Portfolio Services knows that the loans are secured by late-model used vehicles that can be reclaimed from deadbeat drivers.

Consumer Portfolio Services posted better-than-expected quarterly results in February. Revenue climbed by 11 percent, and adjusted earnings of $0.16 a share drove past the pros parked at $0.12 a share.

SunPower (SPWR) -- Up 105 percent

There's been a dark cloud over solar energy for investors lately, but even so, SunPower has been a shining star.

Unlike most solar firms, which are based out of China, SunPower is a sun-loving Californian. Many of its deals for solar panels and systems stem from homebuilders, schools, businesses, and utility companies in this country. SunPower is also profitable, at least on an adjusted basis. With oil and gas prices still too high for comfort, don't be surprised if solar energy bounces back.

Netflix (NFLX) -- Up 104 percent

No one's laughing at the company behind the short-lived Qwikster fiasco these days. Netflix has been on fire since it bottomed out last summer, more than tripling in that time. A surge in streaming customers and a surprisingly quick return to profitability despite the heavy costs of expanding into dozens of overseas markets have transformed Netflix into the toast of Wall Street.

Analysts have been scrambling to raise their profit targets. Three months ago, Wall Street was banking on earnings of $0.40 a share this year and $1.41 a share in 2014. Now those same analysts see a profit of $1.37 a share in 2013 and $2.99 a share come next year.

Republic Airways (RJET) -- Up 103 percent

Airlines have historically been lousy investments. But investors have been piling on board again.

Consolidation is easing up pricing pressures, and an improving economy finds passengers booking corporate and leisure travel again.

Republic Airways is the company behind its namesake airlines as well as Frontier. Analysts see Republic earning $1.52 a share this year and $1.82 a share next year, pricing the shares at just six times next year's projected profitability. This is a cyclical business, but that's too tempting a valuation even after the nifty double.

Motley Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. Try any of our newsletter services free for 30 days.

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5 Offensive and Defensive Funds to Strengthen Your Portfolio

Dan Caplinger — 2013-03-27T05:00:00+00:00

Filed under: Stock Picks, Alternative Investment, Mutual Funds, Index Funds, Dividend Stocks

Richard Drew/AP

Investors are getting more excited about the stock market now that it has fully recovered from the financial crisis and started to set new record highs. But if you're looking to invest now, you have to protect yourself from the possibility that the long bull market could reverse itself.

It's always tough both financially and psychologically to recover from immediate losses on investments you just bought, so taking steps to avoid big losses is well worth the effort.

With that goal in mind, here are five exchange-traded funds that can strengthen your portfolio against the threat of a possible stock-market decline while still giving you exposure to further gains if the bull market continues.

iShares MSCI USA Minimum Volatility (USMV)
This ETF seeks out stocks that tend to rise and fall more gently than the overall stock market. With a concentration on health-care stocks like Eli Lilly & Co. (LLY) and consumer-oriented stocks like cereal giant General Mills Inc. (GIS), the iShares ETF focuses on stocks with defensive characteristics that hold up well under any economic environment. That won't keep the fund from losing money in a falling stock market, but it should help reduce the extent of your losses. And with low costs of just 0.15 percent annually, the ETF doesn't charge a ton to give you that protection.

PowerShares S&P 500 Low Volatility (SPLV)
Like the iShares ETF above, this fund focuses on low-volatility stocks in defensive industries. But the mix of investments in the PowerShares ETF is different, as it concentrates largely on utility stocks, which make up more than 30 percent of the fund's portfolio right now. Utility giants Southern Co. (SO) and Consolidated Edison Inc. (ED) provide strong dividend income, and their ability to rely on regulated income from millions of utility customers gives them security even when the economy starts to falter. The fund's costs of 0.25 percent per year are a bit higher than the iShares ETF but are still reasonable for ETFs generally.

PowerShares S&P 500 BuyWrite (PBP)
At first glance, this ETF looks a lot like a typical index-tracking fund, owning Apple Inc. (AAPL), ExxonMobil Corp. (XOM), and many of the other big companies in the S&P 500. But the twist this ETF uses is to write covered call options against that stock, boosting income at the expense of giving up some of the upside in its stock holdings. During bull markets, that strategy underperforms the overall market, but it produces more favorable results when stocks decline. With expenses of 0.75 percent, the strategy is a bit pricey, but it's still an interesting way to protect against the full impact of a downturn.

iShares S&P Preferred (PFF)
Stocks come in two flavors: common and preferred. This ETF focuses on the latter, as preferred stock traditionally produces more income with less volatility, acting less like regular stock and more like bonds and other fixed-income investments. Preferred stock still has risk, particularly from interest-rate changes as prices tend to fall when rates rise, and the iShares ETF has substantial exposure to financial companies. Still, with a yield of nearly 6 percent over the past 12 months, the ETF gives income investors the protection and dividends they want.

Vanguard Dividend Appreciation (VIG)
Most income investors seek out stocks that pay the highest yields they can find. But as defensive plays, stocks with long track records of increasing dividends steadily and consistently behave much better during bear markets, as they have the capacity to keep making their payouts even in tough times. The Vanguard ETF comes with rock-bottom expenses of 0.13 percent per year, and while its yield of around 2.2 percent doesn't stand up to more yield-focused investments, its protective capacity is very valuable in the current market environment.

Protect Yourself
Don't let record highs for the stock market keep you from investing, but don't be foolhardy with your investments either. These five ETFs have favorable characteristics that you should consider for your portfolio right now.

Motley Fool contributor Dan Caplinger owns shares of Apple and Vanguard Dividend Appreciation ETF. The Motley Fool recommends Apple and Southern Company. The Motley Fool owns shares of Apple. You can try any of our newsletter services free for 30 days.

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The Greatest Business Rivalries of All Time

CNNMoney — 2013-03-23T06:00:00+00:00

Filed under: Stock Picks, Industry News, Investing

Cassandra Hubbart, DailyFinance

There was the time Thomas Edison electrocuted an elephant to demonstrate the danger of a competitor's technology. The day that Nike (NKE), desperate for an advantage over a surging Reebok, signed a college hoops player named Michael Jordan. And the time the Central Pacific Railroad laid an astounding 10 miles of track in 24 hours to grab government payments that the hated Union Pacific would otherwise claim.

Rivalries make great stories, and the greatest rivalries make the greatest tales -- reason enough to read the following portraits of brilliance, skullduggery, nobility, mendacity, victory, and failure. But if you're the driven type who demands more practical benefits, you'll find those here too. After all, monumental business battles have changed the world. We cannot imagine life without cellphones or the Internet, but if tiny MCI hadn't challenged the titanic AT&T (T) (the No. 4 rivalry in our ranking), the communications revolution would have played out much differently. Steve Jobs and Bill Gates (No. 6) ended up selling few competing products yet contended for 35 years to impose radically different visions on the world of computing. And a global economy that couldn't function without air travel is far faster and better because Airbus and Boeing (BA) (No. 9) have had to fight each other every day for 40 years.

But powerful rivalries can be blinding, obscuring events beyond the combatants' battlefield. Coke (KO) and Pepsi (PEP) (No. 1) were so busy pounding the daylights out of each other that they missed an entirely new notion, and today, inconceivably, the bestselling energy drink in U.S. convenience stores isn't made by either company. (It's Red Bull.) General Motors (GM) and Ford (F) obsessed over each other until one day Toyota (TM) had stolen the bulk of their profits.

What comes through most strongly in these stories is each conflict's sheer human intensity. Only a brave novelist would have imagined the brother vs. brother saga of Adidas vs. Puma (No. 20). Venice vs. Genoa (No. 7) may look like a dusty tale of feuding city-states, but it set the tone for hundreds of years of European competition. The rivalry between the railroads was economic, ethnic, and spectacular, involving sabotage, deception, and death.

Who needs such lessons? Oh, right, you do. So think of these dramas as guilt-free pleasures. Then, well prepared for the task, go forth and pulverize your rivals.

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The 5 Best Companies in America: You Won't Know Most of Them

The Motley Fool — 2013-03-22T08:45:00+00:00

Filed under: Company News, Google, Stock Picks, Investing

Tom Strickland, Bloomberg News via Getty Images

There are dozens of ways to evaluate and measure the success of a company -- from customer service to employee satisfaction to profits, payouts, peer rankings, and more.

From an investor's perspective, however, the measures that traditionally receive the most acclaim are rapid earnings growth and a rising stock price.

Too bad this approach to analysis is severely flawed.

Had you based your investing decisions on rapid earnings growth and rising share prices, there would have been no question that Countrywide fit the bill to a T. The nation's largest mortgage lender certainly delighted its shareholders with huge profits from 2003 to 2006. Alas, the company drove itself into bankruptcy by mistreating its employees, homeowners, and mortgage investors -- three key stakeholders in its core business.

On a more mundane level, anyone who's ever had to deal with a surly checkout clerk can tell you that failing to look after employees and customers can result in lost future business for a retailer.

Of, For, and By the People

A lot of people are involved in a company's success -- or failure. As professor Ed Freeman of the Darden School of Business at the University of Virginia puts it, "Business is about how customers, suppliers, employees, financiers, communities, and managers interact and create value." Several studies suggest that companies that focus on multiple stakeholders tend to achieve better financial performance over the long term.

So which companies have got the mix right? Which ones are able to benefit all stakeholders?

The Best Company in America Is ... What?

For the past several months The Motley Fool has been compiling data and analyzing more than 1,700 public companies to discover the 25 best public companies in America, measured by their success in serving investors, customers, employees, and the world at large.

Some of the names will be familiar to you. Costco earns a spot, as does Aflac, Intel, Whole Foods, Coach, and Starbucks. But there are many you may not have heard of -- and as an investor, that's a shame.

Here are the five that rose to the top of the list. You can get more details on how we made the rankings, and link out to the entire top 25 list from the last slide in our gallery.

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The Motley Fool recommends Apple, Cisco Systems, Cummins, and Teradata. The Motley Fool owns shares of Apple, Cummins, General Electric Company, and Northrop Grumman. Try any of our newsletter services free for 30 days.

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'Desperate Housewives' Rachel Fox Whomps the Market As a Day Trader

Caroline Bennett — 2013-03-08T11:07:00+00:00

Filed under: Stock Picks, Market News, Entertainment Industry, People, Investing

Rachel Fox played Kayla Scavo, Felicity Huffman's scary stepdaughter, on "Desperate Housewives." Five years later, at the ripe old age of 16, she has finally come clean about her addiction ... to investing.

The stock market has become a favorite hobby for Fox, so much so that she has started a blog -- the catchy "Fox on Stocks" -- where she dishes investing advice, lessons on using stop-limit orders, and specific stock picks (both long and short).

So far, she's achieved results many pros would envy: Fox's returns have beaten the S&P 500 -- she allegedly made a 30.4 percent gain last year, compared to the S&P's 13 percent.

Is it just dumb luck, or does this teenager know something that you don't?

Play Money Then, Real Money Now

Fox credits her mother for first sparking her stock market passion. She taught her to invest using play money as a child. Now she's investing with real money, which means real, tangible gains and losses. Even at a young age, she's not without her share of Wall Street horror stories.

Fox's worst stock buy, she says, was made on the advice of a family friend at a Thanksgiving dinner. The $2 stock was apparently destined to hit $10, but instead dwindled into a penny stock.

A much better result came when she shorted iconic jeweler Tiffany (TIF) immediately before the company's disappointing Jan. 10 earnings call, after which the stock dropped from $63.12 to $59.49. She knew the stock was going to dip, she says, because she was paying attention to the company's financial expectations.

Turns out Tiffany had lowered its outlook before it released earnings. By acting at exactly the right moment, Fox was able to swoop in and gobble up some sweet returns as a result.

High Risk, High Rewards

Clearly, this is one teenager who does her homework. Every day, Fox pores over the financial news sites and annual reports. Like her idol, Warren Buffett, she says she ignores the sensational white noise of day-to-day news feeds.

She has also given a lot of thought to what her individual investing strategy is. And while she has been successful so far, that doesn't mean her strategy is right for other investors. In short, Fox likes to day-trade. After all, she can afford to take risks; she is a young, successful actress who likely has little in the way of debt right now.

Last year, Fox made a remarkable 338 trades. Not only would the fees (and potential taxes) associated with this high number of transactions hurt an investor's overall returns, but the risks involved could easily exceed the tolerance of an average investor, burdened by student loans, bills, and a mortgage or rent payments.

On her blog, Fox is candid about the dangers inherent in her style of investing versus standard investing practices. The difference? Investing generally consists of holding a stock for a much longer time period (at the Motley Fool, we generally think of five years as a good minimum) versus the knee-jerk decisions that can come out of day-trading.

For the old fuddy-duddies, Fox writes in a blog post: "While I much prefer making my money quickly and in a "high-risk = high reward" fashion, long term investing is great for people who are older or people who are more comfortable with safer investments."

At the end of the day, it's good that Fox understands her methods won't work for everyone. Some of her tips, like flipping a stock immediately after its earnings are released, are too extreme for the everyday investor.

However, it's clear that Fox has thoroughly studied this stuff. She is a smart young woman and a good role model for brainy teenage girls everywhere. If she can keep her head on straight, the investing world might be hearing from her for a long time to come.

Caroline Bennett is a Motley Fool contributing writer.

Photo Credit: Larry Busacca/Getty Images for Tribeca Film Festival

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Warren Buffett's 5 Favorite Stocks

Dan Caplinger — 2013-03-08T05:00:00+00:00

Filed under: IBM, Coca-Cola Company, Stock Picks, Wells Fargo, Warren Buffett, Investing

Everyone wants to know what Warren Buffett is buying. As one of the world's most-followed investors, he has a track record that would make anyone jealous. Shares of his Berkshire Hathaway (BRK-A) have climbed from $7 per share when he started buying the stock in 1962 to more than $150,000 recently, making buy-and-hold investors rich over that half-century.

To get some insight into Buffett's latest thing, let's take a look at Berkshire's portfolio of stocks to find out which ones Buffett likes best -- and expects to buy more of in the near future.

1. Wells Fargo (WFC), $15.8 billion invested

One of the nation's largest banks, Wells Fargo held up remarkably well during the financial crisis in 2008, which helped its shareholders avoid the heavy losses that other bank stocks suffered. Although its acquisition of Wachovia exposed it to substantial amounts of bad mortgage loans, Wells Fargo's conservative approach toward its own core banking business helped minimize its losses. With its long-term focus on meeting customer needs, Wells Fargo's philosophy matches well with Buffett's, helping explain why Berkshire added another 17 million shares of Wells Fargo to its portfolio during the fourth quarter of 2012.

2. Coca-Cola (KO), $15.5 billion invested

Coca-Cola boasts the most valuable brand in the world and a straightforward business model that has kept it in good standing in Berkshire's portfolio for decades. Despite the ever-rising controversy over the role of sugary beverages in the obesity epidemic, Coke has the growth potential of billions of emerging-market consumers to boost its -- and shareholders' -- fortunes in the years to come.

3. IBM (IBM), $14.1 billion invested

IBM is a relatively recent acquisition for Buffett: Berkshire only announced its position in the tech giant in 2011. Some investors questioned the move. It not only ran counter to Buffett's long-standing aversion to tech stocks -- a distaste that dates back to the 1990s tech boom -- but also uncharacteristically came when IBM had already more than doubled from its 2008 lows. Yet IBM has demonstrated both its commitment to earnings growth and its flexibility, adapting well in advance to changing conditions that have crushed other players in the hardware industry. Those attractive characteristics represent what Buffett often looks for in a stock, and that explains why he added another $120 million in IBM shares during the last quarter.

4. American Express (AXP), $9.7 billion invested

Buffett started buying shares of American Express 20 years ago, and even now, he doesn't leave home without the company. His initial move came during tough times for AmEx, when it was losing market share to rival card networks, but AmEx refocused on its core, affluent customers and built up a cachet of exclusivity that has served it well ever since. It has faced a lot of pressure from mobile-payment companies trying to get into the payment-processing business. But AmEx has recently made a move to greatly expand its client base by launching its Bluebird prepaid debit card -- a low-cost card aimed at potential cardholders with far lower income levels than its traditional customers. Success in that demographic could lead to a new period of explosive growth for AmEx.

5. Procter & Gamble (PG), $4.1 billion invested

Consumer giant Procter & Gamble wraps up the top five, even though Buffett sold off almost 24 million shares throughout 2012. In an interview in October, Buffett cited high valuations as his reason behind the sale. Yet other investors have had trouble with P&G's tepid growth, especially in emerging markets, and have noted problems with new-product rollouts. Even though he doesn't seem have the same confidence in Procter & Gamble that he has in his other top positions, the stock still represents a big chunk of Buffett's overall holdings.

Should You Follow Buffett?

Most of these stocks have been part of Buffett's overall investing strategy for quite a while, so with the possible exception of Procter & Gamble, Buffett would almost certainly say that they're appropriate investments for the long haul. They may not rise this month or this year, but with favorable long-term prospects, these stocks are worth a closer look if you have a long-enough time horizon to weather any short-term bumps in the road.

Motley Fool contributor Dan Caplinger owns shares of Berkshire Hathaway and warrants on Wells Fargo. The Motley Fool recommends American Express, Berkshire Hathaway, Coca-Cola, Procter & Gamble, and Wells Fargo. The Motley Fool owns shares of Berkshire Hathaway, IBM, and Wells Fargo. Try any of our newsletter services free for 30 days.

Photo: Nicholas Kamm, AFP, GettyImages

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Investing Hints From the Newest Forbes Billionaires

Bruce Watson — 2013-03-05T14:52:00+00:00

Filed under: Stock Picks, CEOs, Entrepreneurs, Investing, Saving

When it comes to getting rich, the best textbook may be Forbes' list of the world's billionaires. After all, who better to show the right steps to financial freedom than the men (and, increasingly, women) who have already gotten there? And, with a new list fresh off the presses, what better time could there be to reap their wisdom?

Looking at the list, one of the first lessons is that the shortest path to wealth goes through the delivery room. Whether you're talking about the Waltons or the Kochs, the Bulgari brothers or the Mars mob, it's clear that things go a lot easier if you can start off with a few million from mom and dad. Heck, even for famed self-made mogul Bill Gates and newcomer fashion maven Tory Burch, it didn't hurt to come from a rich family.

Those looking for guidance from the Forbes list will quickly realize, however, that it generally shows where the most profitable places in the world were, not where they will be. With the benefit of a few decades of hindsight, it seems obvious that telecom, personal computers and low-cost retailing were smart places to put your money. But when Carlos Slim, Michael Dell and Sam Walton were starting out, their business plans may have seemed insane.

Sponsored Links

But that doesn't mean that you can't pick up some valuable lessons from the list. If you're looking for places to invest your savings, a good place to start is with the newest members of the billionaires club. After all, these are the people who have most recently latched onto a new economic opportunity, a new business model, or a new market segment. In other words, they're the ones who have the best ideas at where the market may be heading.

Unless, of course, they're the Bulgari brothers, in which case, they're just damned lucky.

At any rate, here are some lessons you can glean from the latest list:

Fashion

There has always been a lot of money in fashion, but in the last year, improved distribution, smart marketing, and increased consolidation have mixed to put some of the biggest names in fashion onto the billionaires list. For example, Renzo Rosso, the creator of Diesel jeans, made the list this year after snapping up a passel of other brands, including Maison Martin Margiela and Viktor & Rolf. Other European brand names that managed to make the list include Paolo and Nicola Bulgari, Domenico Dolce and Stefano Gabbana and French Cosmetics scion Bris Rocher.

A little closer to home, American designer Tory Burch also joined the list, making her America's second-youngest self-made female billionaire. Spanx inventor Sara Blakely beat her by five years.

Mid-Level Retailers

It's no secret that bargain retail companies like Walmart, Target and Dollar General have often been good recessionary bets. But the billionaires list suggests that more mid-level retailers, the kind of places with a definite identity, which people tend to visit for a bit more of a splurge, are starting to look like solid bets. The world's biggest gainer on the billionaires list is Spanish mogul Amancio Ortega, the majority owner of Inditex, one of the world's largest clothing brands. And, as Zara, Inditex's main brand, pushes further into the American market, it seems likely that Ortega's position will get even stronger.

And Zara is only one of many mid-level retailers that are doing quite well. Anders Povlsen, the owner of Danish retailer Bestseller, also found his way onto the Forbes list this year, as did Edward Stack, CEO of Dick's Sporting Goods.

Look Farther From Home

As some of the earlier entries suggested, many of the biggest areas for consumer growth are outside the U.S. And, for that matter, so are many of the newest billionaires. For example, Fernando Belmont, who made the list this year, did so at the helm of Yanbal International, a cosmetics company that sells its wares door-to-door in Latin America.

And Belmont is hardly the only non-American commercial mogul to get on the list this year. India's M.A. Yusuff Ali, for example, joined the list as CEO of the LuLu Group, one of the fastest-growing retail chains in the world. (And not to be confused with the entirely unrelated Lululemon Athletica, though that company's founder, Chip Wilson, is on the list too.) Similarly, China's Zhau Xiaoguang, leader of the NeoGlory jewelry group, made her way onto the list by selling costume jewelry in a thousand stores throughout China.

Pharmaceuticals

For anyone who has paid attention to demographics over the past few years, the ever-increasing profitability of pharmaceuticals should come as no surprise. In Israel, newly-minted billionaire Mori Arkin rode the trend, selling his family's pharmaceutical company for stock in an even larger drug company, which he then diversified, investing in several other medical firms. South African billionaire Stephen Saad followed a similar route: His company, Aspen Pharmacare, is the largest drug concern on the Johannesburg stock exchange.

Creating Creators

As the Facebook saga has unfolded over the past few years, one thing has become clear: The era of democratized web content creation is here to stay. And, riding this trend, entrepreneurs who are willing and able to bring users closer to information and provide them with the tools to create will increasingly fill the ranks of the world's richest people. Arkady Volozh, the founder of Russia's largest search engine, recently made his way onto the Forbes list. Meanwhile, China's Lei Jun worked his way to $1.75 billion as CEO of Xiaomi, one of China's fastest-growing smartphone companies.

Not surprisingly, this trend continued in the U.S. as well. One of the country's newest billionaires, Nicholas Woodman, joined the list when his company, GoPro, was valued at $2.25 billion. The firm makes high-impact digital video cameras that enable extreme sports enthusiasts to record and share their exploits.

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

Photo Credit: Vittorio Zunino Celotto, Getty Images

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