Why the Dow Fell Triple Digits This Morning

Once again, the stock market demonstrated just how temperamental it can get, dropping sharply to start out the week. Most news reports cited two contributing factors: a key decision about Greek sovereign debt that many expect to reach some resolution this week, and U.S. economic data showing that incomes rose but spending stayed relatively flat, pushing the savings rate up to 4%. Just before 10:30 a.m. EST, the Dow Jones Industrials (INDEX: ^DJI  ) were down 119 points to 12,542, while the S&P 500 (INDEX: ^GSPC  ) fell 14 points to 1,302.

Bank of America (NYSE: BAC  ) was the Dow's biggest loser, dropping more than 3% in early trading. The bank made another change in the leadership team at its investment-banking business, according to The Wall Street Journal, further highlighting the difficulties that the company has had in integrating its purchase of Merrill Lynch back in 2009. The move reportedly involves replacing a triumvirate of co-leaders at the unit, choosing one to act as sole leader going forward. With other pressure on B of A, the stock could face a tough time after its strong performance opening 2012.

Disney (NYSE: DIS  ) also dropped sharply, falling more than 2% in early trading. The company announced that its new Disney Fantasy passenger ship will debut in New York City in March. Whether the recent cruise-ship tragedy in the Mediterranean will have a big impact on Disney's cruise business remains to be seen, but investors will be nervous until actual cancellation figures come in.

The only stock bucking the downtrend to rise was Verizon (NYSE: VZ  ) , up just 0.2%. Despite the small gain, the stock has fallen sharply since the beginning of the year, as its exposure to highly subsidized smartphones like the iPhone could put a crimp on margins despite boosting overall revenue.

Paying attention to stock news is smart, but not if it drives you away from long-term thinking. The Motley Fool's latest special report reveals the names of three stocks tailor-made for long-term investors. The report is yours free if you click here -- but don't wait: Do it now before it's gone.

A Bullish Outlook for These Industrial Giants

The following video is part of our "Motley Fool Conversations" series, in which editor and analyst Isaac Pino and technology editor and analyst Andrew Tonner discuss topics across the investing world.

In today's edition, Isaac discusses a solid rebound for the industrial sector. Solid earnings results and impressive numbers from the Commerce Department indicate these companies will continue to thrive in 2012. These companies serve as a bellwether for the broader economy and might be a strong addition for your portfolio given their recent strong performance.

Please enable Javascript to view this video.

These industrial giants are one way to play 2012, but we think there is an even better company poised to dominate emerging markets. Find out about a retailer that's poised to become the Costco of Latin America. We are so excited about this company we have named it Top Stock for 2012. The Motley Fool has compiled a special FREE report outlining this company. In it, you'll discover the company hand-picked by our analysts that's positioned to be a titan of retail in the future. You can access the report -- 100% free of charge -- by clicking here. Fool on!

Supreme Court Sets Aside Ruling on Excessive Mutual Fund Fees

Lending more confusion than clarity to an issue of interest to advisors and their clients, the Supreme Court ruled unanimously on Tuesday, March 30, to set aside a lower court's ruling determining the size of fees an advisor may charge a mutual fund client.

The investors in Oakmark mutual funds who brought the case said that their investment advisor, Harris Associates, had overcharged them. The high court said that the U.S. Circuit Court of Appeals for the 7th Circuit in Chicago used the wrong standard for determining what excessive fees were. The lower court's standard would likely have made it very difficult for investors to sue over excessive fees on mutual funds.

Justice Samuel Alito, writing for the court, said the appeals court should have made its decision based on the widely used standard set in a 1982 case, Gartenberg v. Merrill Lynch Asset Management.

Alito said that for advisors to violate the Gartenberg ruling, "an investment adviser must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm's-length bargaining."

But the March 30 decision offered little guidance for lower courts, which could lead to many more battles between investors and fund advisors over fees. In fact, Alito kicked the ball back to the legislative branch, saying, "The debate is a matter for Congress, not the courts."

The case is Jones v. Harris Associates, 08-586.

To read the text of the Supreme Court's decision, please click here.

To read more about the mutual fund case from the archives of InvestmentAdvisor.com, please click here.

Top Stocks For 2012-1-31-8

AQNM, Aquentium, Inc., AQNM.OB

DrStockPick News Report!

 

 

 

Dr Stock Pick HOT News & Alerts!

Aquentium, Inc. Announces Exclusive Distributorship Opportunities for the Country

of Australia for Its Non-Chemical Sanitation and Food Processing Equipment

 

Friday September 4, 2009

Aquentium, Inc. Announces Exclusive Distributorship Opportunities for the Country of Australia for Its Non-Chemical Sanitation and Food Processing Equipment

North Palm Springs, CA - (WORLD STOCK WIRE Via CRWENEWSWIRE) - September 4, 2009 — Aquentium, Inc. (OTCBB: AQNM) a publicly traded company in the United States of America with a focus on “green technologies” announced today that the company is now offering exclusive distributorship opportunities for its complete line of non-chemical food processing and sanitation equipment for the Country of Australia.

The Aquentium non-chemical sanitation equipment is designed for improved food safety standards both domestically and internationally. The goal at Aquentium is to help prevent contamination of fresh produce, seafood, poultry, meat and any other food products. With the Aquentium non-chemical process, we can extend the shelf life of food product which means higher profits for processors and less waste for the consumer.

The uniqueness of the Aquentium equipment is that ozone is over 50% more effective than chemicals and over 3,000 times faster acting than chemicals. Ultimately, Aquentium believes that we have better technology to combat e-coli, salmonella, listeria and other bacteria or viruses than what most processors are currently using.

Ozone is also safer for the workers since there are no chemicals to handle. Ozone is generated from Oxygen and is non-toxic. With the Aquentium ozone equipment, a processor does not have to stop processing to do plant sanitation. This increases plant production. Furthermore, processors can expect an ROI in under 12 months using the Aquentium equipment.

Ozone was approved by the United States Food and Drug Administration as food additive in 2001,” stated Aquentium President Mark Taggatz..

About Aquentium

Aquentium is a diversified company with an emphasis on green technologies. The company currently has interests in non-chemical sanitation equipment, alternative energy, waste-to-energy, water treatment, food safety, mining, building materials, affordable housing, re-deployable housing, and recycling.

www.aquentium.com

email: ir@aquentium.com

Certain statements in this news release may contain “forward- looking” information within the meaning of rule 175 under the Securities Act of 1933 and Rule 3b-6 under the Securities Act of 1934 and are subject to the safe harbor created by those rules. There can be no assurance that such forward-looking statements will be accurate and actual results and future events could differ materially from those anticipated in such statements.

Mark Taggatz
Aquentium
PO Box 580943
North Palm Springs, CA 92258
USA

Phone: 951-657-8832

Greek debt deal hinges on interest rate impasse

NEW YORK (CNNMoney) -- Greece and its creditors in the private sector are grappling over a key detail of a deal aimed at reducing the nation's overwhelming debt load, according to a top eurozone official.

Disagreements remain over the interest rate private investors will be paid on new bonds they receive in exchange for existing Greek government debt, said Jean-Claude Juncker, who heads the Eurogroup of finance ministers from the 17 nations that use the euro.

But progress has been made on other important aspects of the overall response to the European debt crisis.

Speaking early Tuesday in Brussels, Juncker said the ministers welcomed the "increased convergence" between Greece and its private sector creditors on a crucial debt restructuring.

He said the ministers have asked Greek officials to reach an agreement "in the next few days" on the terms and conditions of the agreement with the Institute of International Finance, which represents Greek bondholders.

Under a deal reached in October, private sector investors and banks agreed to voluntarily accept a 50% writedown on the value of Greek government bonds. In addition, investors agreed to exchange Greek bonds for new securities with longer maturities and lower interest rates.

The aim is to reduce the nation's debt load to 120% of economic output by 2020, from about 160% currently.

The European Union has stipulated that the interest rate on the new bonds must be "clearly below 4%" in order for Greece to reach its long-term debt reduction target, said Juncker. But the terms being discussed imply interest rates "well beyond 3.5% before 2020," he added.

"So negotiations will have to be resumed on that accord," said Juncker. "We don't have a final picture of the PSI [private sector involvement] related issuance."

The ministers also called for the swift implementation of a second bailout program for Greece. Officials from the European Union, International Monetary Fund and the European Central Bank arrived in Athens last week to review the nation's finances and begin negotiating the €130 billion program.

"For every one of us, the future of Greece is clearly in the euro area," said Juncker.

During a separate press conference in Brussels early Tuesday, European Commmission vice president Olli Rehn said progress has been made on the debt talks.

"The building blocks are there to reach an agreement shortly," he said "The talks have progressed well and they are close. It is better to do in January than in February."

Meanwhile, the ministers reported progress on other fronts, including the construction of a so-called financial firewall and the details of a proposed fiscal compact.

Juncker said the Eurogroup has finalized a treaty that would allow the European Stability Mechanism, a permanent bailout fund, to be implemented in July, well ahead of schedule.

The €500 billion ESM would be able to run along side the €440 billion European Financial Stability Facility through 2013, he added.

Klaus Regling, who heads the EFSF, said the recent downgrade by Standard & Poor's of the fund's long-term credit rating would not impact its ability to meet current and future commitments.

Regling also said efforts to leverage the fund's resources have moved forward.

A plan to partially insure government bonds issued by troubled euro area nations should be launched later this month, while a special investment vehicle designed to attract outside capital will be ready soon, he said.

The first phase of the bond insurance scheme has already attracted €60 billion from outside of Europe, said Regling. The second phase will be finalized in February. "I'm confident that the scheme, when needed, will be launched and will attract substantial funds," he said.

A world in chaos? That may be a good thing.

The ministers also made progress on the details of the fiscal compact that eurozone political leaders agreed to late last year that is expected to be signed in March, said Juncker.

The compact aims to increase fiscal discipline across the eurozone. It includes legally binding balanced budget requirements, automatic correction mechanisms and new sanctions for member states that fail to comply with deficit rules.

The ministers praised the efforts of Italian prime minister Mario Monti to stabilize his government's finances and restructure the nation's economy. They also called on the Spanish government to implement planned budget reforms as soon as possible.

"While last year was the year of containing the crisis, this year must be the year of resolving the crisis and bringing the European economy back on the path of sustainable growth and job creation," said Rehn.

-- CNN's Jim Boulden contributed from London 

Companies Hoarding Record Amounts of Cash

As the economy continues to rebound, a number of large companies are simply sitting on cash—benefitting neither investors nor the economy at large. 

These non-financial companies aren’t circulating the money back into the economy. And they’re not paying it out in dividends either. 

For many of these institutions, their assets are around 6% cash, a higher percentage than any seen in a very long time. Theoretically, this is good news. It means companies are bringing in larger profits and cutting down on costs. In short, they’re growing.

And yet the money is just sitting there. Investors in companies such as Apple (NASDAQ: AAPL) are demanding that the money go into dividends. Right now, Apple has approximately $97.6 billion in cash on hand and has yet to pay dividends, though they recently hinted that this may change.

S&P 500 dividend ratios have been falling steadily since the ‘90s, and they’re now well below the average of 54%.

Google (NASDAQ: GOOG) is another company with a big hoard of cash. Andrew Lapthorne joked about how Google will put its cash towards a “space elevator.”

Paying out the cash in dividends, however, won’t benefit the economy as a whole. If the companies give the cash to investors, it fails to circulate it back into the economy when it could otherwise be used in company investments.

Where investors want the dividend payments, politicians would prefer the money go to jobs.

They don’t want the companies running “for cash,” where the economy as a whole receives no benefit from high profit margins. And so these companies are continuing to hoard their cash...

However a new Deloitte poll of business professionals revealed that companies are likely to pursue acquisitions, increase capital budgets, repurchase shares or issue one-time dividend payments in 2012.

"The good news is that cash balances have risen to historic levels, balance sheets are strong and companies have options," according to Justin Silber of Deloitte.  "The bad news is that literally trillions of dollars in corporate cash reserves aren't earning much - if any - return as interest rates remain at historic lows. In the meantime, investors want immediate cash return while looking for boards to defend against market volatility."

"We keep hearing from companies that they're struggling to develop a shared framework and level playing field through which multiple teams can work together to determine the best use for cash reserves in the new year," added Silber. 

"Getting your strategic house in order for cash reserve deployment should be the top resolution for corporate leadership teams in 2012."

 

European Stocks Fall

LONDON—European stocks fell Monday as investors grew increasingly nervous about the lack of a Greek debt-restructuring deal.

The Stoxx Europe 600 Index closed down 1.1% at 252.52. The U.K.'s FTSE 100 Index ended 1.1% lower at 5671.09, Germany's DAX closed down 1% at 6444.45 and France's CAC 40 Index ended down 1.6% at 3265.64.

Banks suffered the brunt of the selling and the Stoxx Europe 600 Index for the sector closed down 3.1%. In London, Royal Bank of Scotland Group dropped 3.5% after its chief executive, Stephen Hester, decided to waive a controversial bonus of just under £1 million ($1.6 million).

With talks between Greece and its private creditors still unresolved, investors' confidence waned and worries about debt contagion set in. Against this backdrop, investors shifted their attention to Portugal, worried it may be the next in line for a second bailout package. Portugal's borrowing costs surged Monday, with the 10-year government bond yield reaching euro-era highs. At the time of the European stock market close, the 10-year Portuguese government bond yield stood at 17.39%.

At the same time, Germany's relationship with Greece was in focus, following weekend reports suggesting Germany would like the EU to have veto powers over the Greek budget.

Earlier in the day, Italy sold a total of €7.475 billion ($9.88 billion) out of a targeted €8 billion of Treasury bonds. "All in all, demand wasn't too bad but some caution seems to have prevailed, given the recent tightening of Italian spreads versus Germany and the recent downgrade by Fitch, which was expected but still not much welcomed," said Newedge.

Late Friday, ratings agency Fitch downgraded Italy, Spain, Belgium, Slovenia and Cyprus and cut its outlook in Ireland, noting concerns about further monetary shocks in the euro zone and the divergence of monetary and credit conditions in the region.

Meanwhile, in terms of economic data, there was little to get excited about on either side of the Atlantic. The euro-zone Economic Sentiment Indicator for January came in at 93.4 and although this was a slight improvement on December's of 92.8, it still fell short of expectations for a reading of 93.6. Newedge pointed out that the increase remains consistent with sluggish activity in the region in the first quarter of 2012. "We would not read it as a sign of a sharp rebound," it said. In the U.S., data on personal income and spending for December were a mixed bag, showing investors chose to save more, although income was a little ahead of expectations.

As European markets closed, the EU summit was getting under way in Brussels, with the endorsement of the European Stability Mechanism and agreement on the new 'fiscal compact' top of the agenda. Greek private sector involvement will also be up for discussion. However, market participants weren't billing it as any great event.

By the time of the European stock markets close, the common currency was trading at $1.3103 from $1.3219 late Friday in New York. Sterling last traded at $1.5672 from $1.5734. Elsewhere, the dollar was at 76.39 yen from 76.69 yen.

Among commodities, light, sweet crude for March delivery was down 39 cents at $99.17 on the New York Mercantile Exchange. Gold for February delivery was down $2.00 at $1730.20 per troy ounce late in Europe on the Comex division of Nymex.

SM: Estimated Tax Payments - Will You Owe?

For most of us, tax day comes just once a year on or around April 15. But for people who owe estimated taxes, Uncle Sam expects a check four times a year. Unfortunately, one of those poor quarterly taxpayers may be you if any of the following applies to your situation.

• You cashed in some serious stock market winners this year but haven't changed your withholding.
• You or your spouse became self-employed and now owe income and self-employment taxes for your efforts.
• You finally decided to hire a nanny and pay her federal payroll tax. You can do this in quarterly payments or in one lump sum when you file your taxes in April. (But you may owe interest if you wait until April.) For more details, see our story "The Nanny Tax."
• You have income from other sources that you forgot to consider (or had no way of knowing about) when you filled out your W-4 for 2012.

More Tax Links

• Find Your Marginal Tax Rate
• Find Your Average Tax Rate
• Will You Owe Estate Taxes?

Now that I've gotten thousands of you scared, let me tell you who should not worry about estimated taxes even if one of the above holds true. Anyone who expects his 2012 tax bill net of salary withholding to be under $1,000. Any U.S. citizen or resident whose tax bill for 2011 was zero. You are exempt.

As for the rest of you, please keep reading. I've tried to be brief, but the rules are complex. So anyone wanting more information should download IRS Publication 505 from the IRS Web site.

The Fundamentals Estimated tax payments for the 2012 tax year are due on April 17, June 15, Sept. 17 of 2011 and Jan. 15 of 2012. If you underpay one or more installments, you get charged interest until the day you catch up. However, the government charges a very reasonable rate: only 3% at the time this was written, subject to change each quarter. (So if you want to pay off your 18% credit card balance instead, go ahead.) Any payments outstanding after April 15 next year are subject to a 0.5% per month "failure to pay" penalty on top of the interest. All payments should be accompanied by Form 1040-ES, which you can also download from the IRS Web site. It takes just a few seconds to fill out (honest).

So How Much Do I Owe? If you want to completely avoid any interest charges, you must cough up enough to satisfy any one of four "safe-harbor" guidelines. Remember to include any withholding when calculating your payments.

• The first safe harbor is only for folks with 2011 adjusted gross income of $150,000 or less. You will be safe for 2012 if you pay in at least the tax liability number shown on last year's return (the amount on line 61 of Form 1040 reduced by any tax credits).
• If your 2011 adjusted gross income was over $150,000, you are covered if you pay in at least 110% of last year's tax liability.

Regardless of your income level last year, you are cool with the feds if you pay in at least 90% of whatever this year's tax bill turns out to be. Obviously, this requires some guesswork on your part. Hence the term "estimated taxes."

Finally, if this year's income starts off low and ends up high (say because you have huge fourth-quarter capital gains), you should probably use the "annualized method." This is an exception to the general rule that your four estimated tax payments should be equal. Under the annualized method, estimated payments correspond to your cash flow, so you won't owe big installments on the earlier due dates before you have the money to pay them. Unfortunately, the calculations are fairly difficult. (See the instructions to Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts.)

You are free to use whichever of the above safe harbors does the best job of minimizing or deferring your estimated tax payments. However, if you don't successfully pull into one of the safe harbors, you'll be charged interest on the payment shortfalls. You can calculate the interest yourself when you file your 2012 return (using Form 2210) or let the IRS do the math and bill you.

Example: You figure you'll owe the government $20,000 for this year (2012), but only $12,000 will be withheld from your salary. Obviously, you'll be underpaid to the tune of $8,000. But there's no need to make any estimated payments if your 2011 tax bill was $12,000 or less (assuming 2011 adjusted gross income was $150,000 or less). The first safe harbor listed above gets you off the hook. But if last year's tax bill was $15,000, you'll need to make $3,000 in estimated payments ($750 each) to reserve your safe-harbor berth.

What If I Miss a Payment? You won't be the only one. You have several alternatives to avoid or at least minimize the interest-charge hit.

Say you extended your 2011 return and will be getting a $2,000 refund. After reading this, you are surprised to find out you owe $3,000 in estimated payments for 2012 ($750 for each quarter). Here's the easy solution: When you file your 2011 return, tell the IRS you only want $500 back (by entering that amount on line 73 of your 1040). You can use the other $1,500 to cover your April and June estimated payments (enter $1,500 on line 75 of your 2011 return). Then stay on track by making the last two payments by the Sept. 17, 2012, and Jan. 15, 2013, deadlines.

You can also reduce or eliminate the interest-charge hit from missed estimated tax payments by increasing your salary withholding. Do this by filing a new Form W-4 with your employer. For example, say you owe a total of $3,000 in estimated payments. If you can jack up your withholding between now and year's end by that amount, your estimated tax obligations vaporize.

Finally, you can stop the interest-charge bleeding simply by making oversized estimated payments to compensate for earlier underpayments. Say you missed the $750 payment due on April 17. If you pay in $1,500 on June 15, you're all caught up. Of course, you'll be charged two months' interest on the $750 shortfall, but the interest is only a few bucks.

So you see, even if the estimated-tax rules apply to you, there are easy ways to lessen the pain.

How One Bull Is Playing the Sara Lee Rally

By David Russell

Sara Lee (SLE) has been ripping higher, and at least one big trader it looking for the food stock to keep rallying.

optionMONSTER's Heat Seeker tracking program detected the purchase of 165,000 April 10 calls for $3.80 and $3.90 against open interest of 11,801 contracts. The trade drove options volume in the name to 246 times greater than average.

SLE rose 2.13 percent to $13.90 and is up 19 percent in the last month. The maker of Sara Lee bread, Angus Franks, and Kiwi shoe polish has been on a tear after raising its 2010 earnings forecast on Feb. 4 and adding $2 billion of share repurchases less than two weeks later.

The stock spent December and January to push through resistance at the $12 level, which had been support in before the market crashed in late 2008. Now that it's broken free, some chart watchers may expect SLE to rally to about the $15 level where it peaked two years ago.

Purchasing in-the-money options lets the investor leverage modest gains in the stock. Because their delta is 1, the calls will appreciate dollar for dollar with the share price. If the stock climbs 8 percent to $15, the calls will appreciate about 28 percent. (See our Education section)

Overall in the SLE, calls outnumbered puts by a bullish 448-to-1 ratio, according to the Heat Seeker.

(Chart courtesy of tradeMONSTER)

Solid Quarter for Federal-Mogul: Full Speed Ahead

Federal-Mogul Corporation (FDML) has revealed a profit of $46 million or 43 cents per share in the fourth quarter of 2009, in stark contrast to a loss of $532 million or $5.36 per share in the year-ago quarter.

The profit also significantly increased from the Zacks Consensus Estimate of 14 cents per share. The improvement was attributable to higher sales and effective restructuring and cost reduction initiatives.

Sales increased 8% to $1.4 billion in the quarter. This was driven by Federal-Mogul’s continued effort to expand its market share position manufacturing capacity and engineering presence in China, India, Brazil and other growth markets which have performed better during the global automotive downturn.

Consequently, about 7% of the total revenue was generated outside the U.S., Canada and Europe in the quarter, representing a 24% increase over the prior-year quarter.

Gross margin improved to $225 million or 16% of sales in the quarter from $183 million or 13.9% of sales in the same period of 2008. This reflected the benefits from restructuring and cost reduction initiatives during 2009.

Annual Results

Federal-Mogul witnessed a narrower loss of $33 million or 46 cents per share in full-year 2009 versus a loss of $465 million or $4.69 per share in the previous year. However, the loss was wider than the Zacks Consensus Estimate of a loss of 35 cents per share.

Sales in the year dipped 22% to $5.3 billion due to a downturn in the global automotive and financial market. On a constant dollar basis, the company's sales were down 19% on a year-over-year basis.

Financial Position

Federal-Mogul had cash and cash equivalents of $1 billion as of December 31, 2009, an improvement from $888 million as of December 31, 2008. Long-term debt was $2.8 billion as of that date. Long-term debt to capitalization ratio was as high as 73%.

In 2009, cash flow from operations decreased to $328 million from $627 million in the previous year. However, capital expenditures declined as well to $176 million from $320 million in 2008.

Based in Southfield, Michigan, Federal-Mogul -- which operates as a subsidiary of Icahn Enterprises, L.P. -- is a manufacturer and distributor of parts, components, modules and systems to the automotive, small engine, heavy-duty, marine, railroad, aerospace and industrial markets worldwide. Its principal customers include original equipment manufacturers of vehicles and industrial products, and aftermarket retailers and wholesalers.

Federal-Mogul is a Zacks #2 Rank (Buy) stock. Based on the strong results, the stock price improved more than 2% to $16.11 after the market closed yesterday.

Today in Commodities: Gains and Pains

Depending on your positioning, traders experienced gains and pains this week with wild swings in both directions. The 100-day MA held on the week in Crude oil, and if we can overcome the 50-day next week, we should see fresh contract highs. Our favored trades are scaling into futures a few months out or purchasing July $5 bull call spreads. Natural gas was down marginally on the week, but as long as the lows from the fall hold we suggest lightly scaling into longs. Clients were buyers of May 50 cent bull call spreads this week. The indices continue to climb the wall of worry making fresh 2 1/2 year highs. Bulls remain in control … I remain perplexed, but have given up fighting this trend.

The U.S. dollar should continue lower so aggressive traders can probe the long side of all crosses with the exception of the Loonie, as we could see a retracement after the 1.4% appreciation in recent weeks.

Clients remain on the sidelines in livestock, looking to buy a break in lean hogs and live cattle.

Gold is overbought and the move in silver has become parabolic. Both metals in the medium term should see higher ground, but we’re sticking to our guns a correction first. Some clients established bearish option plays in April gold this week, anticipating a trade back near $1335/1345.

When I checked last evening, cotton was up limit and by the day’s end today prices had reversed to be down limit, a key reversal … stay tuned. For several weeks now we’ve been advising bearish option plays in cotton and coffee; could we finally be getting a break?

Agriculture should trade lower across the board; corn, soybeans and wheat. We continue to think buying new crop corn on this break is the best strategy. Chart damage was done in soybeans and wheat, so we expect more downside in those two crops than corn -- trade accordingly.

Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results

Buffett Buying Brasil Foods? Or Is Something Lost in Translation?

There are reports today that Warren Buffett's Berkshire Hathaway (BRK.B) is buying shares in Brasil Foods (BRFS). These reports are very possibly true. But still weird. I am seeing something in the U.S. reports that I’m not seeing in the Portuguese report I could find. However, I can’t read Portuguese. So I assume reporters at places like Bloomberg understand the Portuguese report better than I do.

U.S. sources all seem to be talking about a report in a Brazilian paper. When I check that paper’s website this is the only report I see.

In the original Portuguese:

O megainvestidor Warren Buffett chegou ao Brasil. Executivos da BRF -Brasil Foods contaram a investidores, durante reunião promovida pelo BTG Pactual, que gestores da Berkshire Hathaway, empresa de investimentos do bilionário americano, visitaram o país e estiveram em unidades da empresa. Depois de conhecerem a companhia, formada pela união de Sadia e Perdigão, iniciaram compras das ações na bolsa.

And now in the Google Translated English:

The investor Warren Buffett arrived in Brazil. Executives of BRF-Brazil Foods told investors during a meeting sponsored by BTG Pactual that managers of Berkshire Hathaway, an investment company of billionaire American, visited the country and have been in business units. After becoming aware of the company, formed by the union of Sadia and Perdigao, began buying shares in the stock market.

But, like I said, I can’t read Portuguese so I’m assuming Google Translate and I are missing something here and there are actually fund managers mentioned in some report in Brazil.

If you can read Portuguese, perhaps you see that mention above.

Even if there is such a mention, I don’t believe it.

I believe Warren Buffett may be buying stock in Brasil Foods. I just don’t believe he sent any “fund managers” to Brazil. Someone from Berkshire may have visited. But unless it was Warren Buffett or Charlie Munger, it’s unlikely to have been anyone Americans would call a fund manager.

Regardless, Berkshire Hathaway may own stock in Brasil Foods.

If it does, I’m sure Warren Buffett hates that someone at Brasil Foods opened his or her yap at an investor conference.

It’s like Posco (PKX) all over again.

Which pays better: Government or private sector?

NEW YORK (CNNMoney) -- Which is the better gig: The federal government or the private sector?

It depends in part on education levels, according to a report put out Monday by the Congressional Budget Office.

Federal workers with a master's degree or less are better compensated on average than their similarly educated private sector peers, CBO found.

Those with professional degrees or doctorates, however, do less well than they might working for a large business.

The CBO measured the differences in salary and benefits between the two workforces.

Federal and private-sector workers with bachelor's degrees earned the same hourly wage on average. But those working for the federal government enjoyed average benefits that were worth 46% more. (See where the top-paying companies are.)

Federal workers with no more than a high school education are paid 21% more on average than their private-sector peers, and have average benefits worth 72% more.

White House to propose small raise for federal workers

The premium working for Uncle Sam disappears, however, for those with advanced degrees such as law degrees and Ph.D.s. Their average wages were about 23% less than they might be in the private sector, while their benefits were roughly on par.

In fiscal year 2011, the CBO estimates that the government paid 16% more in salary and benefits combined than it would have for a comparable workforce in the private sector.

The 2.3 million federal civilian employees represent less than 2% of the total U.S. workforce. Fully a third of federal workers are in professional occupations, such as science and engineering -- almost twice that of private-sector workers.

Union membership is nearly three times higher than in the private sector, where 8% of workers belong to a union.

Colleen Kelly, president of NTEU -- the largest independent union of federal employees -- took exception to the CBO's findings. Kelly cited Bureau of Labor Statistics data showing a pay gap of 26% in favor of private sector workers.

Obama focuses on income inequality

The CBO noted in its report that it incorporated BLS data but used a different methodology. And it acknowledged that its estimates of the differences in benefits between the two sectors are more uncertain than its estimates of the differences in wages.

The CBO report was conducted at the request of Sen. Jeff Sessions, the top Republican on the Senate Budget Committee.

Compensation for federal government jobs has become a hot-button issue in the highly fractious debate over how to curb deficits.

Federal workers' pay has been in lawmakers' crosshairs for the past year. In December 2010, Congress and President Obama signed off on a two-year federal pay freeze.

Since then, there have been proposals to extend the freeze and reduce the size of the federal workforce though attrition.

Most recently, however, the White House said the president will propose a 0.5% pay increase for federal workers for 2013. That's not enough to keep pace with inflation, and it is below the more than 2% increase in private wages over the past year. But federal workers welcomed the proposal as a step in the right direction. 

Calendar Spreads Pay Larger Premiums

Calendar spreads are a great modification of the diagonal option spread strategy. The calendar spread is useful when you are more uncertain about the direction of the market and want to increase the effectiveness of the hedge during periods of market volatility. If you are new to this concept, click here for the first article in the series on diagonal spreads or selling covered calls on LEAPS Calendar Spreads.

A calendar spread consists of two options.

• 1. The first option is a long call with a long-term expiration date. Usually traders will use LEAPS or options with expiration dates longer than a year. This is just like the long-term call used in the diagonal spread strategy.
• 2. The second option is a short call with a short-term expiration. That position is also similar to the short call used in the diagonal spread with one difference – it has the same strike price as the long call you purchased. The identical expiration date is what makes this a calendar spread. If you need some help understanding how to sell an option, click here.

The ratio of the premium received from the short call to the price you paid for the long call is much larger than the same ratio in the diagonal spread. However, because the short call has a lower strike price, there are smaller potential profits if the market breaks out to the upside. In the video, I will cover the details of entering a sample options calendar spread.

The larger premium compared to the amount invested in the long call creates a larger hedge against downside movement in the market. If prices drop, the larger premium from the short call will offset more losses than the short call in a diagonal spread.

This is a great way to implement the benefits of a diagonal spread in the market when you are uncertain and not very bullish.

Diagonal spreads and calendar spreads are commonly known as “time spreads” and illustrate just two popular variations of the option spreads concept.

The best way to make sure you are familiar with the trade is to experiment through paper trading. The practice will help you see how prices change as the market moves.

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How The Failed AT&T Merger Deal Affects These 5 Stocks

The telecom industry represents one of the most difficult markets to break into as a result of the tremendous amount of pressure that is placed on providers to meet coverage demands and develop a strong infrastructure. This is beneficial to investors so they can identify companies which are strong in the market and companies which should be avoided. One of the largest stories currently impacting the telecommunications market is seen with the failed acquisition of T-Mobile USA (DTEGY.PK) by AT&T Inc (T).

It was announced by AT&T in December of 2011 that it had ended its bid to acquire T-Mobile as a result of a significant amount of resistance from the Federal Communications Commission, the Department of Justice as well as from leading competitors. This ended the possibility of AT&T taking a strong jump in wireless service providers in the U.S. cellular market, possibly leaping from 31.9% control to 42.9%. The missed opportunity of AT&T to take a commanding lead in communication services as a result of this loss has proven beneficial to competitors seeking to boost their success in the wake of the merger failure. The following addresses five telecom stocks which could be affected by the results of this failed merger in the telecom industry.

CenturyLink, Inc. (CTL) - CenturyLink's merger with Quest last year was a brilliant decision that, in my opinion, will yield significant opportunities for cost-cutting synergies relating to sales and administration. By my calculations, the merger added approximately $1 per share on a discounted cash flow basis to CenturyLinks's fair value. CenturyLink represents a company that is currently on the rise, slowly increasing its market capitalization and capturing new consumers every day. For a smaller company this creates promising signs of continued progress, which is why I would recommend this telecom stock to any investor seeking investment into this field. This recommendation is supported by the advantages related to this investment found with the high dividend yield currently distributing around 7.78%. When you combine this factor with the quarterly revenue growth of 162.93% I believe it promises to be a strong investment to pursue.

Verizon Communications (VZ) - No company could have been more pleased to hear of the mergers failure then AT&T's leading competitor Verizon. Remaining a mere 0.8% behind AT&T in relation to U.S. cellular control, the success of this merger would have been devastating to maintaining market control. As AT&T is required to rebound from its $4 billion loss, Verizon can continue to expand its network coverage and increase features such as the 4G LTE network which is available in 195 nationwide markets with full deployment expected by the conclusion of 2013. I would strongly recommend an investor select Verizon as a telecom investment when you address the high percentage of cellular market control, 31.1% in the U.S. combined with the struggle of AT&T. This highly attractive possibility along with the fact that it has been reported that Verizon just added 1.2 million subscribers onto plans with contracts (the second best result during the previous two years), this company appears to be benefiting from the current market.

Frontier Communications Corporation (FTR) - Similar to the failed merger benefits previously mentioned with CenturyLink, Frontier has the promise of a smaller company finding greater success when the larger competitors are restricted in size. However, following the current patterns set by Frontier I would recommend an investor hold off on this investment for the time being. This is because Standard & Poor's recently altered its outlook of the company, removing its rating of stable and changing it to negative. This has only helped in further declining the company's stock value as it has seen a steady drop of 53% in the last 12 months. If the company is able to overcome its current revenue and cash flow problems there is great hope considering its current market value is around $4 where it should be closer to $10. I would avoid investing in the company now but watch for recovery since there is a great possibility for growth and a chance to capitalize on an incredibly high dividend yield of 17.40%.

AT&T -It is true that AT&T has had some unfortunate news with the failed merger of T-Mobile but there is a silver lining on the horizon. Even without the addition of T-Mobile, AT&T has a controlling interest of 31.9% of market share for providers in the U.S. Cellular Market. Expansion of their own 4G LTE grid will help to increase consumer interest as the value of smart phones continues to increase. Following the stock drop in December as a result of the press release regarding T-Mobile, AT&T has rebounded and is currently trading close to its target price of about $32. Together with a higher dividend yield of 6.04%, this company still represents an industry leader that I would recommend investing into.

France Telecom (FTE) - With the current fluctuations seen in the European markets most investors are hesitant about pursuing foreign investment. While this is often advisable, the telecom industry is a market that should be viewed through rose colored glasses as a result of the constant demand individuals, businesses and governments have related to the importance of communication. France Telecom is currently underperforming in the NYSE as a result of the current fluctuations in European markets and I believe this represents an opportunity for investors to purchase a quality stock while it is undervalued. This company features a market capitalization of $40.05 billion and offers a dividend yield of an incredible 12.83%. As European markets slowly recover I can see a swift boost in this stock which will prove financially beneficial to early investors.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Supermedia: Update on 2009 Financials

This is an update to my previous postfrom Jan. 6, 2010.

Supermedia (SPMD) just announced its financial results for the year ending Dec. 31, 2009. The company reports financial reports on a GAAP basis, but also reports on an adjusted non-GAAP basis. I have used the non-GAAP numbers here since they adjust for unique costs relating to the reorganization, restructuring, impairments and other non-recurring costs.

	2009	2008	% change
Revenue	2,512	2,973	-15.5
EBITDA	856	1,272	-32.7

Advertising Sales were down 18.7%.

The adjusted net income for 2009 was $439 million. Based on the new SPMD shares outstanding of 15 million, SPMD may report as much as $30 earnings per share for 2010. A lot will depend on whether management can reduce or eliminate further drops in revenue.

The market seems to like this report, and the SPMD stock price has appreciated over 10% the last few days.

Full Disclosure: Long SPMD

3 Oil & Gas Dividend Stocks To Consider, 2 To Avoid

The consistently growing volatility of governments in the Middle East is beginning to motivate Western governments to seek out natural resources from elsewhere. This gives energy companies with holdings outside of the region an advantage in the future, as more of the world's energy production moves to companies with interests in South America, Norway, Canada, the United States and Asia. As political tensions continue to grow and relations break down between Iran and Western nations that include the European Union, the United Kingdom and the United States, the prices for oil and natural gas will be greatly affected in favor of energy companies that are perfectly poised to benefit. Which of the following energy companies are positioned for long term success and will provide the greatest benefit to income investors seeking residual and compoundable returns over a long period?

Exxon Mobil (XOM) is in a position that puts it at an advantage when compared to the rest of the world's oil super majors that allows for it to compete for resources effectively while other super majors struggle to locate large wells that are not already owned by governments. Many of the government owned resources in the world are being held until energy giants are forced to pay their high asking prices in order to tap into them, which is forcing the super majors to compete for resources in deep waters or oil sands. Exxon Mobil is in the greatest position to benefit due to its commitment over the last decade to explore cleaner and more efficient energy and the means to harvest it.

Exxon Mobil stock has grown from $77 per share to $86 over three year and provides a quarterly dividend of $0.47 per share, which was increased from $0.44 in the first quarter of 2011. The dividend provides about a 2% yield, which isn't extraordinary, but this is a safe and dependable company in an unpredictable market that I believe has the chance to show increased stock value and a higher dividend in the future. I see this as a great long term position to take if you are patient and able to wait for long term results.

Spectra Energy Partners (SEP) is a master limited partnership set up for Spectra Energy (SE) after it became an offshoot of Duke Energy (DUK) in 2006. The company owns interests in many pipeline assets in the Gulf of Mexico and its parent, Spectra Energy, is one of the largest natural gas pipeline companies on the North American continent. Spectra Energy Partners has increased its dividend half a cent per quarter over the last year and is currently paying out at $0.475 at a ratio of 1.19 at the end of 2011. In previous years, this ratio was much smaller, and I believe that this company has the assets to continue providing the dividend in the future, which currently provides a yield of nearly 6%. I believe this is a worthy buy that is liable to provide continued growth over time.

Global Partners, LP (GLP) acts as an energy middleman, purchasing refined oil from around the world and reselling it commercially and through wholesale. Its quarterly dividend has remained constant at $0.50 per share over the last four quarters. However, it is now paying out at a ratio of 6.25 while its profits begin to dwindle, making me question the health of Global Partners over the long term. I would wait to see if the company is able to support its dividend through growth before taking a position here, and would look elsewhere for the time being.

China Chemical & Petroleum Corporation, otherwise known as Sinopec (SNP) provides 50% of China's crude oil output through 34 refineries, making it one of the largest refiners of oil in the world. While this company has great growth potential, it only pays out a biannual dividend, making it less attractive to income investors who would use the dividend to compound their gains through reinvestment. It also only offers a 2% yield, which makes it less attractive than Exxon Mobil, which provides its dividend quarterly. I think that there are some better choices than Sinopec to consider in the energy sector, even though Sinopec has quite a bit of growth potential over time.

Statoil (STO) pulls the majority of its resources from the Norwegian Continental Shelf, but is looking for other international interests to help facilitate its growth. Its stock rose from $17 per share to $25 over the past three years and its biannual dividend has risen over its last four payouts from $0.44 to $0.97 per share. While I would prefer the ability to compound my returns quarterly, the growing dividend makes this an attractive stock to me and I believe it will produce greater returns in the future.

Spectra Energy Partners pays the highest sustainable dividend in this group, but I believe Exxon Mobil is the most stable company on the list and has the opportunity for steady and continued growth. Statoil is also attractive because its yield is currently around 4% and it looks like it will only provide greater returns over time.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Hot Stock Alert – Cadence Design surges on Q4 Results

Shares of Cadence Design Systems Inc. (NASDAQ: CDNS) soared in today�s trading after the company announced its fourth-quarter and fiscal year 2010 financial results.

Cadence reported fourth-quarter revenue of $249 million, compared with $220 million reported for the same period in 2009. The company reported GAAP net loss of $21 million, or $0.08 per share, compared with a net income of $2 million, or $0.02 per share reported for the same period in 2009.

For fiscal year 2010, Cadence reported revenue of $936 million, compared with $853 million reported in 2009. The company�s net income for fiscal year 2010 came in at $142 million, or $0.54 per share, compared with a net loss of $150 million, or $0.58 per share reported in 2009.

On a non-GAAP basis, the company reported net income of $18 million, or $0.07 per share, for the fourth quarter of fiscal 2010. For the same period in fiscal year 2009, the company reported non-GAAP net income of $15 million, or $0.06 per share. For fiscal year 2010, the company�s non-GAAP net income stood at $53 million, or $0.20 per share, compared with a non-GAAP net loss of $16 million, or $0.06 per share reported in fiscal 2009.

Commenting on the fourth-quarter and fiscal year 2010 financial results, Lip-Bu Tan, president and CEO of Cadence Design Systems, said that the Cadence team delivered a strong performance in the fourth quarter. an further said that revenue, operating and cash flow all improved in the period and fiscal year 2010 and that throughout the year, the company strengthened key customer and partner relationships.

Following the announcement of fourth-quarter results, shares of Cadence soared in today�s trading. The stock reached a 52-week high of $9.57 in today�s trading, and ended the day 7.02% higher at $9.54, with volume up from daily average of 2.05 million to 12.09 million.

Cadence shares have a 52-week range of $5.36-$9.57. In the last one year, the stock gained 55.43%.

Cadence Design Systems is a San Jose, California-based developer of electronic design automation, software and hardware.

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Top Stocks For 2012-2-1-15

DrStockPick.com Stock Report!

Tuesday September 8, 2009

Flow International Corporation (Nasdaq: FLOW), the world’s leading developer and manufacturer of industrial waterjet machines for cutting and cleaning applications, today announced that it has closed the public offering of 7,825,000 of its common shares at $2.10 per share. Net proceeds from the offering are approximately $14.9 million. Flow has granted the underwriter an option to purchase up to an additional 1,173,750 shares of common stock at the public offering price, less the underwriting commission, within 30 days following pricing.

PSEG Power LLC, a wholly-owned subsidiary of Public Service Enterprise Group Incorporated (NYSE: PEG), announced today the expiration and results of its offer (the “exchange offer”) to eligible holders to exchange any and all of the outstanding 8.50% Senior Notes due 2011 (the “Energy Holdings notes”) of its affiliate, PSEG Energy Holdings, L.L.C., held by them for newly-issued PSEG Power 5.32% Senior Notes due 2016 (the “Power notes”), fully and unconditionally guaranteed by PSEG Power’s three principal operating subsidiaries (the “subsidiary guarantees”), plus a cash payment plus a cash early participation payment, if eligible.

Commercial Vehicle Group, Inc. (Nasdaq: CVGI) announced today that it has been awarded a new contract to supply Navistar Inc.’s Heavy Truck Product Group with interior trim products. CVG plans to produce the new interior airline cabinets and other materials at the Company’s Trim Products facility in Concord, North Carolina. The start of production is scheduled to begin in the first quarter of 2010. The additional Navistar business is expected to generate between $4 and $5.5 million in annual revenues based on sales forecasts for next year.

As the celebration of Grandparent’s Day marks its 30th anniversary, American Greetings Corp. (NYSE: AM) has introduced a fun, memorable and innovative way to say thanks with the new recordable photo frame card. These displayable cards allow the sender to not only add a photo of the recipient’s adorable grandchildren, but also add their voices, which can be played back with the push of a button. The new offering is particularly appropriate for the holiday, because it focuses on what is most important for any grandparent, their grandchildren.

Aeolus Pharmaceuticals, Inc. (OTC Bulletin Board:AOLS) announced today that it has initiated a study to confirm the efficacy of AEOL 10150 as a countermeasure to nuclear and radiological exposure in non-human primates. AEOL 10150 has previously demonstrated a statistically significant survival advantage when given to mice after exposure to radiation. The new study is designed to test the efficacy of AEOL 10150 as a treatment for damage to the lungs due to exposure to radiation and to begin establishing an animal model that can be validated and could be utilized by the U.S. Food and Drug Administration (US FDA) for approval of a countermeasure for Pulmonary Acute Radiation Syndrome under the “Animal Rule”.

Dale Jarrett Racing Adventure, Inc. (OTC Bulletin Board: DJRT), a “Full Throttle” lifetime experience company, today commented on material mid-quarter accomplishments for the company. As of August 31st, the company has recorded a 14% increase in year-to-date sales over 2008. This report also gives the company the opportunity to highlight some related accomplishments. First, over the course of the past 8 months the company has been building an ongoing relationship with a new international corporate client. We can now report that total revenues from this growing relationship have surpassed $250,000 this year as we continue to plan new outings for this year and beyond. To respond to this growing vertical market, we have increased our sales staff and established a dedicated corporate marketing division. This team of experienced sales people will focus exclusively on expanding our growing list of satisfied corporate clients.

Agribusiness Stocks Double-Whammied

By Brad Zigler

Real-Time Monetary Inflation (Last 12 Months): 1.1%.

Yesterday was an object lesson in systematic risk. Tuesday, the U.S. markets played catch-up with the Mideast turmoil after the Presidents Day holiday. Metals and oil shot up while equities tumbled.

Some stocks slid further than others. Among the hardest-hit were agribusiness issues, off nearly 4% against the S&P 500's 2% slide. Equity market risk wasn't the only drag on ags, though. The commodities in which many agribusiness companies deal also slipped 2% on Tuesday.

That much-touted commodity stock leverage (think gold miners) that worked so well until a year ago is now working against ags. Agribusiness stocks' relative strength over commodity futures started to break down in March 2010 and, after attempts to reestablish itself, appears likely to break down further.

Relative Strength: Agribusiness Stocks vs. Futures

The recent wobbliness in agribusiness stocks was telegraphed at the top of the month when put prices on the Market Vectors Agribusiness ETF (MOO) started inflating (see "Agribusiness Stocks Show Worrying Signs"). If nothing else, holders of ag stocks, or the ETF proxy, are nervous enough now to hedge their positions with puts.

The thinking behind the hedge is simple. Adding a put to a long stock position effectively transforms stock or ETF ownership into call ownership. Suppose, for example, you bought the MOO fund at $50 back in December. You've got, ostensibly, $50 of risk in the position and an unlimited upside. If you become nervous about the ag sector's near-term prospects, but don't want to take a short-term capital gain (MOO's now trading around $54), you could buy a $50 May put for 75 cents a share.

That 75 cents ($75 per 100-share contract) gives you the right, but not the obligation, to sell your MOO shares at $50 through mid-April, no matter the fund's actual market price. Even if the fund shares sink to oblivion, you can "put" the shares to the option grantor at 50 bucks. Your breakeven on the deal - at the put's expiration date - is $50.75. At any MOO price above that, you make money. In fact, you've retained the unlimited upside of the long ETF position, reduced only by the put premium paid. If, for example, you expected MOO to hit $57 by Tax Day, you'd make $7 a share with the naked stock. Hedged with the put, you'd make $6.25. At $58, the differential results would be $8 vs. $7.25. And so on.

With a judicious protective put purchase, you can afford to hold a long ETF or stock position until you reach your upside price objective or cross the threshold for long-term capital gain/loss treatment.

MOO put premiums peaked, relatively speaking, back on Feb. 11. They're comparatively cheap now, but may not remain so. After all, MOO is down another 2.6% today.

We'd like to get a consensus from the holders of the MOO ETF. Let us know what you're going to do here - go naked with your long fund position or hedge with puts?

Verastem: Killing Cancer At The Root

SUMMARY

Verastem (VSTM) priced at $10, the mid-point of the $9 to $11 filing range. Demand was solid though as the deal size was increased from 4.5 to 5.5 million shares. The company has a promising but deeply scientific and complicated story that includes improved treatments for cancer and personalized diagnostics. VSTM is a bet on some good science and IP targeting cancer stem cells and the management team and advisory board that will play out over a decade. Another name investors might wish to look into is Viral Genetics which is another early stage company with science and technology that disrupts cellular metabolism.

MORE ON MANAGEMENT & SCIENCE

As far as management goes it's an impressive team. The co-founder/CEO Christoph Westphal has chalked up several major successes including Alnylam (ALNY) $461M market cap), Momenta (MNTA) $775M market cap) and two others that were acquired by large drug companies [Glaxo (GSK) and Lilly (LLY)].

The scientific advisory board is outstanding. The mix of talent, expertise and accomplishment suggests that Verastem has a scientific network that will give them best possible access to developing science and potential partners in the ecosystem. Some biotechnology types talk about Verastem as a possible "next Vertex" which is another very successful small-molecule biotechnology company based in Cambridge, MA.

Vertex (VRTX) is a $1B+ revenue company that has reached profitability and has pipeline of additional drugs that will fuel further growth. Investors should note that Vertex has been a very long term and extremely volatile stock. Just over the last decade the shares declined for nearly a few years (2002-2005) before quadrupling in 2006. Since then the stock has been "basically flat" but with gyrations from $15 to $55 during that time period!

Although it's a complex story the "money shot" for Verastem illustrates the potential the company has to have a major impact on treating cancer. Verastem basically targets the "root" of tumor to accomplish total removal rather than just a reduction. 1

In order to accomplish this Verastem has developed technology to find the specific cancer stem cells and create molecules that inhibit their formation and growth.

Along with clinical drug development Verastem is developing companion diagnostics tools to provide more individualized treatments known to be more effective.

1 Scientific illustrations are sourced from the Verastem IPO roadshow presentation.

In terms of meaningful developments the two lead clinical candidates are scheduled for IND in 2012, Phase I trials in 2013 and potential Phase II trials in 2014 and into 2015. This isn't a short-term story by any measure.

Verastem has some "special sauce" in addition to their management team and advisory board. The company has expertise and patents around the identification and targeting of cancer stem cells, inhibitors to cancer stem cell growth and some high-throughput screening tools.

There are myriad approaches to getting the jobs done at the cellular level these days and many are promising. Investors intrigued by this area should also look at Viral Genetics (VRAL.PK), which has developed impressive science and IP around technology that can selectively disrupt cellular metabolic process to accomplish a broad range of end-points.

Verastem is definitely one of the development stage companies in this space to keep an eye on. The fact that there is solid investor demand for Verastem is encouraging in the fight against cancer.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Top Stocks For 2012-2-1-8

REDWOOD CITY, Calif.–(CRWENEWSWIRE)– Openwave Systems Inc. (Nasdaq:OPWV) today said it filed complaints against Apple Inc. and Research In Motion Limited in order to protect its intellectual property on how mobile devices connect to the Internet.

The complaint, filed at the International Trade Commission (ITC) in Washington, DC, requests that the ITC bar the import of smartphones and tablet computers that infringe Openwave patents, including, but not limited to, Apple�s iPhone 3G, iPhone 3GS, iPhone 4, iPod Touch, iPad and iPad 2; and RIM�s Blackberry Curve 9330 and Blackberry PlayBook. Openwave also filed a similar complaint in federal district court in Delaware.

�Openwave invented technologies that became foundational to the mobile Internet. We believe that these large companies should pay us for the use of our technologies, particularly in light of the substantial revenue these companies have earned from devices that use our intellectual property,� said Ken Denman, Chief Executive Officer of Openwave. �Before filing these complaints, we approached both of these companies numerous times in an attempt to negotiate a license of our technology with them and did not receive a substantive response.�

For more than 15 years, Openwave has pioneered the development and patenting of mobile Internet technologies. Openwave was the first company in 1997 to enable operators to deploy mobile Internet browsing, and the first in 2001 with technology that enables photo messaging. The company owns approximately 200 patents that support its software business with telecommunications operators worldwide.

�In the end, litigation is the only way we can defend our rights against these large companies that have effectively refused to license the use of the technologies we invented, are using today, and are continuing to develop for our customers,� Mr. Denman said. �We are proud that our technology is helping deliver such a rich mobile internet experience to consumers around the world.�

The Openwave complaints specifically allege that Apple and RIM infringe upon five Openwave patents. These patents cover technology that gives consumers access to the Internet from their mobile devices:

Openwave�s 212 patent generally allows a user to use e-mail applications on a mobile device when the network is unavailable � such as when a user is on an airplane. For more information, please refer to the complaint, page 8.
Openwave�s 409 patent generally allows the mobile device to operate seamlessly, and securely, with a server over a wireless network. For more information, please refer to the complaint, page 10.
Openwave�s 037 patent generally allows access to updated versions of applications on mobile devices. For more information, please refer to the complaint, page 9.
Openwave�s 447 patent generally allows consumers to experience an improved user experience in navigating through various pages of information without delay. For more information, please refer to the complaint, page 12.
Openwave�s 608 patent generally relates to cloud computing. For example, the 608 patent enables data to be accessed or shared by different devices such as mobile handsets or computers. For more information, please refer to the complaint, page 6.

�As it became clear that these large companies would not substantively cooperate with us, the Company carefully evaluated its legal position and litigation prospects. We believe that our legal position is strong and our prospects of prevailing are very good,� said Mr. Denman. �In our analysis, this is our best option to unlock the substantial value of our intellectual property. The ITC process typically results in judgments within 15-18 months. We anticipate that a favorable judgment will lead the companies to negotiate licensing agreements with us.�

Openwave has posted a letter to its shareholders describing the litigation, as well as the complaint as it is filed and other related materials, on its website at www.openwave.com.

About Openwave

Openwave Systems Inc. is a global software innovator delivering all-Internet Protocol (all-IP) mediation and messaging solutions that enable communication service providers to create and deliver smarter services.

Openwave helped pioneer the mobile Internet during the mid-1990s, and holds many foundational patents on how mobile devices connect to the Internet. Openwave�s software enabled many industry firsts for its operator customers, including Internet browsing via a cell phone, messaging of photos via a cell phone, and the world�s first Wireless Access Protocol (WAP) deployment.

Today, Openwave provides communication service providers with all-Internet Protocol (all-IP) mediation and messaging solutions. Its mediation software enables carriers to get more from their systems as they meet the rising demand that the mobile Internet is placing on their hardware. Its messaging software enables carriers to better manage and protect their messaging content and enables consumers to better share rich content.

Building on its mobile data heritage, Openwave mobilizes the Internet with data-driven solutions that comprehensively enhance IP traffic and increase the value of the mobile network. Openwave arms its customers with a 360-degree view of network activity plus the tools to help them proactively optimize network resources (Congestion Control), react to user behavior with smarter data plans and services (Price Plan Innovation), and deliver a contextually relevant messaging experience (Converged Messaging).

Openwave is a global company with a blue chip customer base spanning North America, Latin America, Australia and New Zealand, Asia, Africa, Europe, and the Middle East. Openwave is headquartered in Redwood City, California.

Cautionary Language Regarding Forward-Looking Statements

The statements in this press release with respect to the beliefs of Openwave regarding the prospects of the litigation it has launched, and the effects that a favorable outcome in the litigation will have, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1943 and Section 27A of the Securities Act of 1933. These forward-looking statements are subject to many risks and uncertainties that could cause actual results to differ materially from those projected. Notwithstanding changes that may occur with respect to matters relating to these forward looking statements, Openwave assumes no obligation to update the forward-looking statements included in this press release except as required by law.

In particular, the following risks, among others, could cause actual results to differ materially from those projected: (a) intellectual property litigation is inherently uncertain, and no outcome can be guaranteed; (b) other entities may assert rights to Openwave�s intellectual property, which could weaken Openwave�s position in the litigation; (c) the cost of litigation is uncertain and could be very high, which could cause Openwave to settle the litigation for amounts less than amounts to which it believes it is entitled; (d) defendents in the litigation may assert counterclaims which may reduce the strength of Openwave�s claims; and (e) those risks discussed in Openwave�s filings with the U.S. Securities and Exchange Commission (”SEC”), including under the caption �Risk Factors� in the company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2011. These documents are available through the SEC’s Electronic Data Gathering Analysis and Retrieval system (EDGAR) at www.sec.gov or from Openwave’s website at www.openwave.com.

Source: Openwave Systems Inc.

Contact:

Openwave Systems Inc.
Investor Relations
Mike Bishop
investor@openwave.com
Tel: 650-480-4461
or
Public Relations
Vikki Herrera
Vikki.Herrera@openwave.com
Tel: 650-480-6753
or
Media Relations
Rosemary Wilson
The Abernathy MacGregor Group
213-630-6550 (P)
310-488-8751 (M)
rdw@abmac.com

THIS IS NOT A RECOMMENDATION TO BUY OR SELL ANY SECURITY!

Guidewire Software: Insurance Industry Software

SUMMARY

Guidewire Software (GWRE) priced above their filing range recently at $13 versus the $11 mid-point and has traded strongly in the aftermarket to $17. The company provides a software solution to P&C1 insurance companies for policy management, claims and billing. Revenues of $200M are growing at 20% with attractive gross and operating margins. License revenues are growing at a faster rate and effectively a large portion of their revenues are recurring. At the higher price the shares are close to our IV of $15. The company has an opportunity to expand into the "big data" segment of the business which could open up additional opportunities and boost valuation.

POSITIVES, NEUTRALS AND NEGATIVES

+ Large opportunity - The P&C insurance industry is large and spends over $14B2 on software and services. Most of the existing technology is old, highly customized, inflexible and expensive to maintain.

+ Size & customer base - At a $200M revenue run rate and a broad mix of over 100 insurance companies as customers, along with good integration partners, Guidewire is well-established in the market.

+ Attractive business model - Contracts are multi-year renewable with a portion tied to the revenues of the client's insurance business. This gives the company high visibility and a large recurring revenue base.

+ The management team may not be the most fun group at a party but it's one with much industry experience combining a range of backgrounds in insurance, banking and technology.

= The valuation is reasonable. At the prior mid-point of $11 it was attractive. The price of $17 is in the range of our IV of $15.

= Although we view it as a + the nature of the business and the management team is long-term. Markets can be unfriendly to increased investment levels or deferred revenues. This could increase volatility but may provide better entry points for new investors in Guidewire depending on the circumstances.

- Investors have tended towards "hotter" growth companies of late and some strong but mundane growth stories have not received as much interest. Guidewire could be one of these in the after-market.

- Having to pay $10M to Accenture to settle claims is included in the S-1 and should be behind the company but management hasn't spent time addressing it.

- Projected spending levels on sales and marketing seem high and if sales cycles lengthen near-term results might still disappoint on the bottom line. Increasing sales costs might not be well-received.

1 Property & Casualty Insurance is about protecting things as opposed to life and health insurance.
2 According to Gartner Group.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

5 Undervalued Energy Stocks

Price to earnings ratio is the most commonly used investment metric. The assessment of relative changes in PE ratio over the course of time highlights the low and high multiples investors are willing to pay for the current and future earnings of a company. Most investors would like to compare the current PE of the company with its historical averages. Comparing a company's current P/E ratio with benchmarks such as its historical P/E average can help a value investor determine if the stock is cheap, fully valued or overpriced. We identified the top 5 energy stocks trading below or near the average of its yearly low P/E for the last 5 years. These securities are pretty undervalued compared to other securities in this sector.

EOG Resources (EOG): EOG Resources, Inc. and its subsidiaries engage in the exploration, development, production and marketing of natural gas and crude oil primarily in the United States, Canada, the Republic of Trinidad and Tobago, the United Kingdom and the People's Republic of China. The Company has a Return on Assets (ROA) of 0.81% and a Return on Equity (ROE) of 1.59%. The company is trading with a Return on Invested Capital (ROIC) of 1.14%. The company is trading at 27.22 times current earnings multiple. The average of the minimum forward price to earnings multiples over the last 5 years for the company is 29.08 and the average price to earnings multiples in the same period is 44.08.The Stock is expected to grow at 54.11% over the next 5 years. The company is valued at $434.7 using the minimum earnings multiples and $658.9 using the average earnings multiples over the last 5 years. EOG is currently trading at $105.90, raising $7.39 or 7.5% this year.

Baker Hughes Inc (BHI): Baker Hughes Incorporated is engaged in the oilfield services industry. Baker Hughes is a supplier of oilfield services, products, technology and systems to the worldwide oil and natural gas industry. The company also provides industrial and other products and services to the downstream refining, and process and pipeline industries. The company has a ROA of 4.7% and a ROE of 7.59%. The company is trading with a ROIC of 6.00%. BHI is trading at 12.38 times current earnings multiple. The average of the minimum forward price to earnings multiples over the last 5 years for the company is 11.72 and the average price to earnings multiples in the same period is 20.31.The Stock is expected to grow at 26.11% over the next 5 years. The company is valued at $98.9 using the minimum earnings multiples and $171.4 using the average earnings multiples over the last 5 years. BHI is currently trading at $49.13, raising $0.94 or 1.93% this year.

Halliburton Co (HAL): Halliburton company provides various products and services to the energy industry for the exploration, development and production of oil and natural gas worldwide. It operates in two segments: Completion and Production, Drilling and Evaluation. The company has a ROA of 12% and a ROE of 21.56%. HAL is trading with a ROIC of 15.56%. The Stock is trading at 11.94 times current earnings multiple. The average of the minimum forward price to earnings multiples over the last 5 years for the company is 9.23 and the average price to earnings multiples in the same period is 15.59.The company is expected to grow at 22.89% over the next 5 years. HAL is valued at $54.8 using the minimum earnings multiples and $92.6 using the average earnings multiples over the last 5 years. HAL is currently trading at $36.78, raising $2.13 or 6.17% this year.

Peabody Energy Corp (BTU): Peabody Energy Corporation and its subsidiaries engage in the exploration, mining and production of coal. Peabody mines and sells thermal coal to electric utilities and metallurgical coal to industrial customers. BTU has a ROA of 7.3% and a ROE of 18.41%. BTU is trading with a ROIC of 11.13%. The company is trading at 9.68 times current earnings multiple. The average of the minimum forward price to earnings multiples over the last 5 years for the company is 8.95 and the average price to earnings multiples in the same period is 16.76. BTU is expected to grow at 15.60% over the next 5 years. BTU is valued at $43.1 using the minimum earnings multiples and $80.7 using the average earnings multiples over the last 5 years. BTU is currently trading at $35.31, raising $2.2 or 6.64% this year.

CONSOL Energy Inc (CNX): CONSOL Energy Inc. engages in the production of multi-fuel energy and provision of energy services primarily to the electric power generation industry in the United States. The company involves in the mining, preparation and marketing of steam coal primarily to electric power generation industry and metallurgical coal to steel and coke producers. The company has a ROA of 3.5% and a ROE of 14.66%. The company is trading with a ROIC of 7.41%. The company is trading at 12.95 times current earnings multiple. The average of the minimum forward price to earnings multiples over the last 5 years for the company is 10.78 and the average price to earnings multiples in the same period is 18.88. CNX is expected to grow at 19.32% over the next 5 years. The stock is valued at $39.6 using the minimum earnings multiples and $69.3 using the average earnings multiples over the last 5 years. CNX is currently trading at $35.74, falling $0.85 or 2.32% this year.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Predict the Dow Contest Update: Where Do You Think the Dow Will Close?

The Dow Jones Industrial Average ended its six-week losing streak last week as fears of debt defaults eased and the global economy appeared to improve.

The blue-chip bellwether rose for the third straight day yesterday (Monday) to close at 12,080.38 as bargain-hunters moved in and investor concerns about a Greek debt default continued to ease.

But where does the Dow go from here?

That's what we're asking Money Morning's readers as part of our "Predict the Dow/Win an iPad2" contest, which started last week. We're asking readers to predict where the Dow will be when the second quarter comes to a close on June 30. Deadline for entries is June 26.

Margaret Riddagh of Wilmington isn't sanguine about the market's outlook. She sees a second-quarter Dow close of 11,489.25 - a drop of more than 500 points, or about 5%, from present levels.

"I believe that the market will reflect more closely how the economy is really doing," she wrote with her entry. "The decline will start slow but continue as people realize that bad times are ahead, due to governmental policies."

Blake Springer of Charlotte is really bearish, predicting a second-quarter Dow close of 10,672.32 - a point that's about 11% from yesterday's late-afternoon trading.

"Continuous falls [will stoke] fears of raising the debt ceiling, leading to inflation and the unloading of Treasury bonds," he wrote. "This, among other things, will drive the Dow down."

Karen Owens of Gainesville, FL, falls into the bullish camp, predicting a second-quarter close of 12,424.33 - which she acknowledges is partly a guess.

However, Owens did note that "I believe something will be worked out for the Greek debt and the market will be hugely relieved" - enough, in fact, to ignite a rally.

What do you think? Give us your best guess and qualify for a chance to win a top-of-the-line Apple Inc. (Nasdaq: AAPL) iPad2 (MSRP $829). And if you really want to have some fun, forward the contest to family members or friends - and challenge them to see which of you can get the closest to the actual second-quarter Dow close.

For all the rules and details, check out our official contest site (PredictTheDow.com). Or just click here.

Pricing Anomalies In Pari Passu Preferreds Present Fleeting Opportunities

In the markets for thinly traded preferred stocks, it's not uncommon to see small pricing deviations for pari passu (essentially identical) issues. A company routinely has an 8.0% A series that is $25.00 at market close concurrent to the 8.0% B Series' $24.625 close; the astute investor interested in these issues, obviously, buys the discounted series for its higher yield and cost basis advantage.

In real market dynamics of the last few years however, the skews have been exaggerated. When fear supplants reason or true financial analysis, compromised shareholders might have to sell into a void. They need or want liquidity in a dearth of buyers…prices plunge.

This was the trading tape for 3rd and 4th quarter 2008 and for the first 70 days of 2009. We saw it again in August, September and the first days of October 2011. What I'd like to address now is a subtler, stranger phenomenon. One that will recur, year to year, and provide predictable opportunities for profit.

The investor demographic for new preferred equity offerings is both individual and institutional investor, but, because that's where the money is, it's mostly institutional. The behavior in the aftermarket of each type of investor is different. The mutual fund holder of preferred shares that have no market for sellers may have to sell to satisfy redemption requests, regardless of pricing. Too often, the individual investor will convince himself that the further the price declines, the stronger the reason to get out while he can. Both lose.

The example, and possible opportunity, I introduce is Hersha Hospitality Trust (HT). Hersha Hospitality is a Real Estate Investment Trust (REIT) that owns and operates hotels in many major East Coast markets….New York, Washington D.C., Philadelphia. Like all hotel companies, during the recession they suffered declines in average occupancy and Revenue Per Available Room (REVPAR). In the second quarter of 2009 Hersha slashed the quarterly dividend on its common shares by 72% from $0.18 to $0.05 to conserve cash, but the lodging sector is recovering and in the second quarter of 2011 Hersha raised the common's quarterly dividend from $0.05 to $0.06.

Also in the second quarter of 2011, Hersha issued 4,600,000 shares of Series B Preferred stock (HT-B). The company already had a Series A Preferred (HT-A) for which it issued 2,400,000 shares in August 2005. Both Series, A & B, are 8.00% cumulative, redeemable preferred. They each have a $25.00 redemption preference. They each pay $2.00/share/annum. They each sit just senior to the common shares in Hersha's capital structure. Pari passu.

It seems the shares of two nearly identical issues from the same company, trading on the same exchanges would price nearly identically in day-to-day trading, but in the last half of 2011 the Hersha issues diverged. From the time of its May issuance, HT-B initially bounced around trading at prices within a couple percent of its $25 nominal value; just about where HT-A was trading. But by early August heightening awareness of the looming trouble in European Sovereign debt, the downgrade of U.S. credit ratings, sustainingly high unemployment, and the disappointingly slow economic recovery combined to create market hysterias reminiscent of the 2008 financial crisis.

Historically, during times of investor panic, thinly traded, small-cap issues (e.g. REIT preferred shares), can sustain the most damage. On August 5th, on volume of just 11,400 shares, HT-A opened at $24.50 then plunged to $16.60 before closing at $23.63 for a decline of 3.8% from the prior session's close. That same day, on 43,000 shares volume, HT-B opened at $24.03, fell to a low of $22.16, and closed at $22.53, down 6.2% for the day. In subsequent days the markets calmed a bit and by August 15, HT-A again traded north of $24. HT-B, on the other hand, never fully regained its footing; it hit a low of $18.55 on August 11 and meandered between $20.50 and $23.50 for the remainder of the year. HT-B closed 2011 at $22.10.

Markets were generally in a recovery mode in December 2011, so you have to ponder what factors are depressing certain issues that don't respond to market trends. REITs in general performed well last year with the MSCI US REIT Index (RMS) posting a total return of 8.69%, so HT-B's downturn doesn't jibe with sector trends. Instead, I suspect HT-B was a new issue, forgotten, cut loose and cast adrift in last August 's financial markets turmoil. When things stabilized, very few remembered the birth or existence of this little $100 million issue. As the year came to a close, investors found more value in HT-B as a current year tax-loss sale than they did as a high yielding long position. They sold into a market with very few buyers and those buyers were offering only $22.

HT-B closed 2011 at $22.10, 7.8% below the $23.97 closing price of its identical twin HT-A and a stunning 11.6% discount to its $25 par value. HT-B's $22 price delivers an impressive 9.05% yield against purchase price in this environment of the sub 2.0% 10 year Treasury. A thorough analysis of Hersha's capital structure should detail that payment of the rising dividend on HT's common stock is subordinate to payment of its preferred dividends; the preferred dividend has some cushion. If sufficient calm soon returns to equity markets and HT-B regains the $25 normalized price of its twin, HT-A, December 30th purchasers can tack on more than 13% capital appreciation for a 2012 total return in excess of 22%.

In the first four weeks of 2012 we approached a normalized market; on January 30 HT-A closed at $24.96 (up 4.1%) and HT-B closed at $23.99 (up 8.5%). Both issues and the common will declare the next dividend in March and, if investor panic has abated, the share prices should rise to the occasion.

The above described pricing anomalies are surprisingly common and they are caused by a variety of factors. More than 200 issues exist in the realm of REIT preferreds. Study the issuing companies' capital structures. Familiarize yourself with each company's operations and those of their sector peers. Stay current with each company's financial performance. Examine historical pricing for given issues in both calm and volatile markets. Fully prepared in this fashion, you can wait and watch for opportunity.

Investors should always consider risks of liquidity and pricing and total loss of capital before taking a position in any security.

Disclosure: 2nd Market Capital Advisory and its affiliated accounts are long HT-B at the time of this writing.

Europe Data Fuels U.S. Futures

The higher it has climbed, the more skeptics it has attracted.

But the Dow Jones Industrial Average has marched steadily upward anyway, defying doubters and brushing up against a nearly four-year high.

Enlarge Image

Close

On Wednesday, the blue-chip index tacked on 83.55 points, or 0.66%, to 12716.46, one day after closing out a January that was its best opening month to a year since 1997.

Earlier in the session, the Dow surged 152 points, bringing it within 26 points of a level it last reached in May 2008. But those early gains evaporated in late trading, extending the Dow's string of days without a triple-digit move in either direction. The blue-chip index hasn't seen such a move since Jan. 3, a 20-day period of calm that has surprised many on Wall Street who had expected more whippy volatility in 2012.

Wednesday's gain—indeed, the performance so far this year—underscores that the rally has yet to find widespread support among investors. Many on Wall Street concede that the global economic outlook looks less dangerous today than it did late last year, a belief that was bolstered Wednesday by solid manufacturing reports around the globe.

Fluor and BHP Billiton Team Up for Rapid Growth

Fluor Corporation (FLR) announced that its joint venture with Sinclair Knight Merz was awarded a contract by BHP Billiton (BHP) to execute the next phase of its Rapid Growth Program. The focus of the project will be the continued expansion of BHP Billiton's iron ore operations in the Pilbara Region of Western Australia.

Fluor booked approximately $500 million in the company's fourth quarter of 2009. The Fluor SKM Iron Ore Joint Venture's scope includes overall program management activities and engineering, procurement and construction management [EPCM] services for specific elements of the mine, port and rail works.

Since 2001, Fluor, as part of the Mine & Port Development Joint Venture with SKM, has provided engineering, procurement, and construction management services to BHP Billiton Iron Ore, and has successfully delivered Rapid Growth Projects 1, 2, 3 and 4 and is working on Rapid Growth Projects 5 and 6.

Recently the company also announced that Elecnor S.A. has awarded it an engineering services contract for a new 50 megawatt [MW] concentrating solar power [CSP] plant in Badajoz , Spain. Fluor will book the undisclosed contract value in the first quarter of 2010. Fluor will provide detailed engineering and other associated services for the project. When complete, the 50 MW CSP generating facility will capture solar energy using parabolic trough mirrors and will ultimately convert the energy into electricity through a steam turbine generator.

DuPont Engineering has also awarded the company a construction, maintenance and services contract for nine sites throughout the U.S. and Puerto Rico. This new contract includes seven existing sites in which Fluor already serves, plus two additional sites in Kinston , N.C. and Manati, Puerto Rico.

Fluor is a Fortune 500 company that delivers engineering, procurement, construction, maintenance [EPCM] and project management services to governments and clients in diverse industries around the world. Clients value Fluor's dependability, expertise, and safety to execute complex projects around the world. Major competitors include ABB Ltd. (ABB) and Foster Wheeler (FWLT)

Author's Disclosure: none

Top Stocks For 2012-2-1-13

License Fee Revenues increase 139% and GAAP Net Earnings Increase 67% for the quarter

ATLANTA–(CRWENEWSWIRE)– American Software, Inc. (NASDAQ:AMSWA) today reported preliminary financial results for the first quarter of fiscal year 2012, delivering a 139% increase in first quarter license fee revenues and a 67% increase in GAAP net earnings when compared to the same period last year. The Company has achieved 42 consecutive quarters of profitability and 32 consecutive quarters of providing dividend distributions to shareholders.

Key first quarter financial highlights:

Total revenues for the quarter ended July 31, 2011 were $23.7 million, an increase of 24% over the comparable period last year.
Software license fee revenues for the quarter ended July 31, 2011 were $6.7 million, an increase of 139% over the same period last year.
Services and other revenues for the quarter ended July 31, 2011 were $9.3 million compared to $9.2 million the same period last year.
Maintenance revenues for the quarter ended July 31, 2011 were $7.8 million, an increase of 10% over the comparable period last year.
Operating earnings for the quarter ended July 31, 2011 were $3.6 million, an increase of 78% compared to the same period last year.
GAAP net earnings for the quarter ended July 31, 2011 were $2.3 million or $0.09 per fully diluted share, an increase of 67% over the first quarter of fiscal 2011.
Adjusted net earnings for the quarter ended July 31, 2011, which excludes stock-based compensation expense and acquisition-related amortization of intangibles, were $2.6 million or $0.10 per fully diluted share, an increase of 56% compared to $1.6 million or $0.06 per fully diluted share for the same period last year, which excluded stock-based compensation expense and acquisition-related amortization of intangibles.
Adjusted EBITDA increased 77% to $5.0 million in the quarter ended July 31, 2011, from $2.8 million in the quarter ended July 31, 2010. Adjusted EBITDA represents GAAP net income adjusted for amortization of intangibles, depreciation, interest income, income tax provision, stock-based compensation, and other significant non-routine operating and non-operating income and expense items, if applicable.

The Company is including adjusted EBITDA, adjusted net earnings and adjusted net earnings per share in the summary financial information provided with this press release as supplemental information relating to its operating results. This financial information is not in accordance with, or an alternative for, GAAP compliant financial information and may be different from non-GAAP net earnings and non-GAAP per share measures used by other companies. The Company believes that this presentation of adjusted net earnings and adjusted net earnings per share provides useful information to investors regarding certain additional financial and business trends relating to its financial condition and results of operations.

The overall financial condition of the Company remains strong, with no debt and with cash and investments of approximately $52.8 million as of July 31, 2011.

�American Software posted a strong performance for the first quarter of fiscal year 2012, achieving a 67% increase in GAAP net earnings fueled by a 139% increase in license fee revenue,� stated James C. Edenfield, president and CEO of American Software. �With 42 consecutive quarters of profitability combined with consistent growth in our global customer base and aggressive investment in research and development, American Software is well positioned with a robust portfolio of innovative enterprise application solutions and deep supply chain expertise.�

�Our sustained profitability has allowed the Company to provide a tangible benefit to our shareholders with a quarterly dividend for 32 consecutive quarters,� said Edenfield. �On August 22, 2011 our Board of Directors authorized the Company’s next quarterly dividend of $0.09 per common share, which is payable on December 2, 2011 to shareholders of record at the close of business on November 18, 2011. This will mark the 33rd consecutive quarter in which the Board of Directors has declared a dividend distribution to our shareholders.�

Additional highlights for the first quarter of fiscal year 2012 include:

Customers and Channels:

Notable new and existing customers placing orders with the Company in the first quarter include: Actron Air, Advanced Energy Industries, BRK Brands, McWilliams Wine Group, Ossur Europe, Rentokil Initial Plc, Sandvik AB, and Triboro Quilt Manufacturing.
During the quarter, software license agreements were signed with customers located in 15 countries including: Australia, Belgium, Brazil, Cyprus, France, Germany, Iceland, Poland, the Netherlands, New Zealand, Singapore, South Africa, Sweden, the United Kingdom, and the United States.
Logility, a wholly-owned subsidiary of the Company, announced Verizon Wireless received the �Sailing to New Heights with Logility� award. Presented at Logility�s �Connections 2011: Navigate the Voyage to Supply Chain Excellence,� the award recognizes a company which has demonstrated exceptional innovation in its effort to develop and implement a collaborative supply chain process that significantly improves operations.
Logility customer Berry Plastics was honored by Managing Automation magazine as a 2011 Progressive Manufacturer for its success in increasing visibility, improving forecast accuracy and removing cost from the supply chain through the timely acquisition and use of demand signals and collaborative vendor managed inventory (VMI) with Logility Voyager Solutions�.
During the quarter, Logility partnered with APICS to produce an educational webcast entitled �Inventory Optimization: Synchronizing Your Supply Chain.� The educational webcast featured Logility customer Havi Global Solutions and addressed best practices for enhanced customer service, increased visibility and improved margins through the use of multi echelon inventory optimization (MEIO).
Demand Management, a wholly-owned subsidiary of Logility, was named Microsoft Dynamics ISV of the Year for the United States. This distinction recognizes a partner that is dedicated to delivering solutions that meet diverse customer needs. Key criteria for the award include outstanding sales performance, thorough technological expertise on Microsoft Dynamics products and services, and feedback from Microsoft team members.
Demand Management and enVista, a leading enterprise and supply chain consulting services firm and Microsoft Reseller Partner, announced an alliance that will enable mutual customers to leverage the benefits, savings and robust capabilities of demand planning and forecast management solutions, along with supply chain management offerings and consulting expertise. The venture will include formalized strategic co-marketing and sales initiatives between both companies.
Demand Management announced that Certified Transmission Rebuilders, one of the largest independent remanufacturers of automotive transmissions in the United States, was named a 2011 Progressive Manufacturer by Managing Automation magazine. The recognition is based on Certified Transmission Rebuilders� effective use of the Demand Solutions� Advanced Planning and Scheduling solution.
New Generation Computing� (NGC�), a wholly-owned subsidiary of the Company, announced that T-Shirt International implemented an upgrade version of NGC�s ERP software. An NGC ERP customer since 2000, TSI has experienced significant growth, including a merger and the acquisition of a new production facility in Indiana. To keep pace with its expanding business, TSI upgraded its existing ERP system to increase efficiency and productivity.
NGC announced that Aeropostale, the rapidly growing mall-based retailer known for designing and producing high-quality casual apparel and accessories for teens and children, has turned to NGC�s supply chain solution to improve visibility, collaboration and communication between its vendors and international licensees.
NGC announced collegiate fashion designer Vesi Incorporated selected NCG�s PLM and ERP software. NGC’s solutions will be implemented in Vesi Incorporated operations across all of its brands in order to provide transparency throughout the company, improve collaboration with overseas vendors, and streamline reporting and business processes.

Company and Technology:

Logility Voyager Solutions received TEC Certification following a rigorous independent evaluation from the industry analyst team at Technology Evaluation Centers. The Logility Voyager Solutions supply chain suite is positioned as a dominant player in the TEC Supply Chain Management Focus Indicator.
As a part of its ongoing commitment to supply chain innovation and thought leadership, Logility sponsored primary research with the Aberdeen Group to evaluate the latest trends and best practice for demand management. The Aberdeen Group�s new report, �Demand Management: Bridging External Market Inputs with Internal Statistical Forecasting�, is available on www.logility.com and highlights the practices of 157 manufacturing and distribution companies and the challenges these companies face accurately predicting and fulfilling customer demand.
Logility was named by Business Leader Magazine as one of the top small businesses in the South for its growth, achievements and community service. Logility was one of just 30 companies in the Atlanta area to make the list.
Supply Chain Digest recognized Logility Voyager Inventory Optimization as the May 2011 Cool New Product of the Month. Editor and former industry analyst Dan Gilmore highlighted the software�s unique ability to be deployed as a stand-alone inventory optimization solution as well as part of the comprehensive Logility Voyager Solutions suite.
Supply & Demand Chain Executive magazine named Logility, Demand Management, and NGC to the 2011 Supply & Demand Chain Executive 100 for each company�s accomplishments in helping customers realize exceptional benefits through the deployment of their software solutions. Additionally, Logility customer American Italian Pasta Co. was selected as one of the top supply chain projects of 2011 for results achieved with Logility Voyager Solutions.
Consumer Goods Technology magazine named Demand Management a top 10 supply chain company. The 2011 Consumer Goods Technology Reader’s Choice surveyed more than 150 consumer goods business and IT executives to identify the solutions and solution providers they valued most. Each respondent rated Demand Solutions based on the customer experience, including implementation and use.
Demand Management was named one of Inbound Logistics magazine�s Top 100 Logistics IT Providers for 2011.

About American Software, Inc.

Atlanta-based American Software provides demand-driven supply chain management and enterprise software solutions, backed by more than 40 years of industry experience, that drive value for companies regardless of market conditions. Logility, Inc., a wholly-owned subsidiary of American Software, is a leading provider of supply chain management solutions for companies of all sizes. Logility Voyager Solutions� is a comprehensive suite, which includes supply chain visibility; demand, inventory and replenishment planning; Sales and Operations Planning (S&OP); inventory and supply optimization; manufacturing planning and scheduling; transportation planning and management; and warehouse management. Demand Management, Inc., a wholly-owned subsidiary of Logility, delivers supply chain solutions to small and midsized manufacturers, distributors and retailers. Demand Management�s Demand Solutions� suite is widely deployed and globally recognized for forecasting, demand planning and point-of-sale analysis. Logility and Demand Management proudly serve customers such as Arch Chemicals, Avery Dennison Corporation, McCain Foods, Pernod Ricard, Sigma Aldrich, and VF Corp. New Generation Computing Inc. (NGC), a wholly-owned subsidiary of American Software, provides PLM, Global Sourcing and ERP solutions to the fashion, apparel, footwear, and retail industries. NGC�s global customers include A|X Armani Exchange, Carter�s, Maggy London, Hugo Boss, Parigi Group, and Tristan America. For more information about American Software, please visit www.amsoftware.com, call (800) 726-2946 or email: ask@amsoftware.com.

Forward-Looking Statements

This press release contains forward-looking statements that are subject to substantial risks and uncertainties. There are a number of factors that could cause actual results to differ materially from those anticipated by statements made herein. These factors include, but are not limited to, continuing U.S. and global economic uncertainty, the timing and degree of business recovery, unpredictability and the irregular pattern of future revenues, dependence on particular market segments or customers, competitive pressures, delays, product liability and warranty claims and other risks associated with new product development, undetected software errors, market acceptance of the Company�s products, technological complexity, the challenges and risks associated with integration of acquired product lines, companies and services, as well as a number of other risk factors that could affect the Company�s future performance. For further information about risks the Company could experience as well as other information, please refer to the Company’s Form 10-K for the year ended April 30, 2011 and other reports and documents subsequently filed with the Securities and Exchange Commission. For more information, contact: Vincent C. Klinges, Chief Financial Officer, American Software, Inc., (404) 264-5477 or fax: (404) 237-8868.

Logility is a registered trademark and Logility Voyager Solutions is a trademark of Logility, Inc., Demand Solutions is a registered trademark of Demand Management, Inc., and NGC and New Generation Computing, Inc. are registered trademarks of New Generation Computing. Other products mentioned in this document are registered, trademarked or service marked by their respective owners.

AMERICAN SOFTWARE, INC.
Consolidated Statements of Operations Information
(In thousands, except per share data, unaudited)
			First Quarter Ended
			July 31,
				2011				2010			Pct Chg.
Revenues:
	License		$	6,688			$	2,794			139	%
	Services & other			9,267				9,231			0	%
	Maintenance			7,754				7,069			10	%
		Total Revenues		23,709				19,094			24	%
Cost of Revenues:
	License			1,835				693			165	%
	Services & other			6,917				6,551			6	%
	Maintenance			1,765				1,656			7	%
		Total Cost of Revenues		10,517				8,900			18	%
Gross Margin				13,192				10,194			29	%
Operating expenses:
	Research and development			2,554				2,408			6	%
	Less: capitalized development			(604	)			(631	)		(4	%)
	Sales and marketing			4,306				3,317			30	%
	General and administrative			3,116				2,842			10	%
	Provision for doubtful accounts			91				28			225	%
	Amortization of acquisition-related intangibles			135				214			(37	%)
		Total Operating Expenses		9,598				8,178			17	%
Operating Earnings				3,594				2,016			78	%
	Interest Income & Other, Net			(13	)			241			nm
Earnings Before Income Taxes				3,581				2,257			59	%
Income Tax Expense				1,293				884			46	%
Net Earnings			$	2,288			$	1,373			67	%
Earnings per common share: (1)
	Basic		$	0.09			$	0.05			80	%
	Diluted		$	0.09			$	0.05			80	%
Weighted average number of common shares outstanding:
		Basic		26,130				25,540
		Diluted		26,788				25,926

AMERICAN SOFTWARE, INC.
NON-GAAP MEASURES OF PERFORMANCE
(In thousands, except per share data, unaudited)
		First Quarter Ended
		July 31,
			2011				2010			Pct Chg.
NON-GAAP EARNINGS PER SHARE:
Net Earnings (GAAP Basis)		$	2,288			$	1,373			67	%
Income tax provision			1,293				884			46	%
Interest Income & Other, Net			13				(241	)		(105	%)
Amortization of intangibles			796				250			218	%
Depreciation			300				309			(3	%)
EBITDA (earnings before interest, taxes, depreciation and amortization)			4,690				2,575			82	%
Stock-based compensation			284				228			25	%
Adjusted EBITDA		$	4,974			$	2,803			77	%
EBITDA, as a percentage of revenue			20	%			13	%
Adjusted EBITDA, as a percentage of revenue			21	%			15	%
		First Quarter Ended
		July 31,
			2011				2010			Pct Chg.
NON-GAAP EARNINGS PER SHARE:
Net Earnings (GAAP Basis)		$	2,288			$	1,373			67	%
Amortization of acquisition-related intangibles (2)			86				130			(34	%)
Stock-based compensation (2)			180				139			29	%
Adjusted Net Earnings		$	2,554			$	1,642			56	%
Adjusted non-GAAP diluted earnings per share		$	0.10			$	0.06			67	%
(1) - Basic per share amounts are the same for Class A and Class B shares. Diluted per share amounts for Class A shares are shown above. Diluted per share for Class B shares under the two-class method are $0.09 and $0.05 for the three months ended July 31, 2011 and 2010, respectively.
(2) - Tax affected using the effective tax rate for the three months period ended July 31, 2011 and 2010.
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American SOFTWARE, INC.
Consolidated Balance Sheet Information
(In thousands)
(Unaudited)
			July 31,			April 30,
				2011			2011
Cash and Short-term Investments			$	42,546		$	44,567
Accounts Receivable:
	Billed			14,546			14,409
	Unbilled			5,450			4,151
Total Accounts Receivable, net				19,996			18,560
Prepaids & Other				2,450			2,918
Deferred Tax Asset				77			77
Current Assets				65,069			66,122
Investments - Non-current				10,244			10,844
PP&E, net				5,543			5,723
Capitalized Software, net				7,540			7,562
Goodwill				12,601			12,601
Other Intangibles, net				1,721			1,880
Other Non-current Assets				100			100
Total Assets			$	102,818		$	104,832
Accounts Payable			$	908		$	1,011
Accrued Compensation and Related costs				2,444			4,245
Dividend Payable				2,360			2,345
Other Current Liabilities				4,825			4,493
Deferred Revenues				16,105			17,307
		Current Liabilities		26,642			29,401
Deferred Tax Liability - Long term				1,065			1,375
Shareholders’ Equity				75,111			74,056
Total Liabilities & Shareholders’ Equity			$	102,818		$	104,832

Source: American Software, Inc.

Contact:

American Software, Inc.
Vincent C. Klinges, 404-264-5477
Chief Financial Officer

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