3D Systems Has Its Eyes on the Stars

Quick. Without Googling the answer, try to name a few of the biggest companies involved in building spacecraft for America.

Lockheed Martin (NYSE: LMT  ) and Boeing (NYSE: BA  ) are of course the most obvious -- so dominant in the industry that they formed a joint venture boldly declaring themselves the "United Launch Alliance."

GenCorp (NYSE: GY  ) probably also comes to mind. It's hard to imagine a company with more of a 1950s space-frontier feel to it than the one that owns Rocketdyne -- a name that could have come straight out of a pulp Heinlein novel.

But if you move beyond the field of the usual suspects, I have another company you might want to consider. It's a small up-and-comer in the industry -- 3D Systems (NYSE: DDD  ) -- and it's perhaps the single company out there today most focused on turning Star Trek from science fiction into science fact.

Grounded on Earth
At the most basic level, 3D Systems' business follows the general rule for companies in the additive manufacturing industry. It manufactures "printers" that companies such as Black & Decker can use to produce "concept models" of equipment they might want to build, at scale, later on. Printers that can be used by companies such as Continental Tire  to create "demonstration" objects, that their sales force can then take on the road with them, to show prospective clients what they might be buying. Printers to produce actual, working parts that companies such as Steeda Autosports can install in cars and test to see if they work in practice, as well as they should in theory.

But beyond the basic bread and butter of its business, 3D Systems has its sights set on much bigger things in the future.

Lost in (thought about) space
Case in point: A few weeks back, NASA announced that it's begun a project to see whether 3-D printing can be used to manufacture replacement parts for the International Space Station ... in space itself. The company NASA chose to help it test this concept is a little private shop going by the name "Made in Space." But one of the companies that Made in Space itself has partnered with to help develop the technology is none other than 3D Systems itself.

Made in Space, NASA, and 3D have the aim of using 3-D printing not just to print stopgap replacement parts in orbit, for use until permanent parts can be shipped up to them. As the technology gets refined and developed, they see a day when large-scale 3-D printers could "print" entire habitable structures for use by astronauts, laboratories for conducting science experiments, and even lightweight spaceships -- which can fly just fine in a vacuum but cannot be built on Earth and lifted up into space, because they'd be too fragile to withstand a rocky ride into orbit.

"Second star to the right, and straight on till morning"
These are all long-term goals, of course. In the more immediate term, 3D has announced this week that it's also teaming up with an ambitious private company -- would-be asteroid miner Planetary Resources -- to use 3-D printing to help build parts for Planetary's series of "ARKYD" spacecraft.

Details on 3D's involvement with Planetary are sketchy at this point. We do know, however, from Planetary's public statements that the company aims to land spacecraft atop asteroids and mine them for raw materials that can be processed into fuel for its rockets, to build "space infrastructure," and eventually to obtain precious metals that can be shipped back to Earth. We also know that Planetary hopes to begin getting this project under way as early as 2015.

It seems likely that 3D's printers, acting in the role of miniature, on-site factories, would play a major role in these efforts. At the very least, it would appear that 3D has found itself another customer for its products -- and kept a customer out of rival Stratasys' (NASDAQ: SSYS  ) clutches. Announcing the team-up, Planetary co-founder Dr. Peter H. Diamandis praised 3D for being "the world's pioneer and leader in 3D printing and advanced manufacturing." This probably is highly suggestive of where Planetary will be doing its 3-D printer shopping in the future.

Foolish takeaway
Skeptics will certainly point out -- and rightly so -- that much of 3D's "space" plans sound like pie in the sky. Partnerships are all well and good, but to truly justify the 100-times earnings price tag investors are being asked to pay for 3D shares, what the company really needs is profits growth.

For now, analysts only expect 3D to grow its profits at about 20% per year over the next five years. That's a lower expectation than what they've posited for Stratasys (30% growth). Then again, at least 3D Systems has profits to grow, while Stratasys is currently GAAP-unprofitable. And the more unconventional places -- like space -- into which 3D looks to expand its business, the greater the potential for the company to grow its profits even faster.

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Hyatt Climbs On Q2 Beat As Rates, Occupancy Rises

Shares of Hyatt Hotels Corp. (H) were ahead by more than 5% in recent trading, following the company's strong second-quarter results.

The company said it earned $112 million, or 70 cents a share, up from $39 million, or 24 cents, a year earlier. Excluding one-time items, adjusted earnings rose to 43 cents a share from 24 cents.

Revenue climbed 7.7% to $1.09 billion.

Analysts were looking for per-share earnings of 30 cents on revenue of $1.07 billion.

Revenue per available room, a widely watched performance metric, grew 7.1% at comparable hotels. Occupancy increased to 79.8% from 79.2% and average daily rates moved up by 6.3%.

Owned and leased hotel operating margin expanded to 27.8% from 26.3%.

The company forecast $250 million in capital expenditures for the fiscal year.

FBR Capital Market's Nikhil Bhalla notes that after three misses in the past year, the Street's estimates have become more conservative. While he isn't surprised that markets are reacting positive to the report, he thinks it is still too early to tell if the results are sustainable, as he sees potential softness for group bookings and volatility for China and India properties.

Hyatt is up 16% in the past year.

The Single Biggest Problem With America's Labor Force

If you had asked investors in March 2009 what the likelihood was that the Dow Jones Industrial Average (DJINDICES: ^DJI  ) and S&P 500 (SNPINDEX: ^GSPC  ) would be hitting new all-time just four years and change down the road, you would probably have generated enough laughs to land your own HBO comedy special. Yet, somehow here we are at, or a fraction off of, a new all-time record closing high despite the unemployment rate running higher than the historical average, and GDP growth trekking lower than the historical norm.

Investor optimism has certainly been a big part of this rally, with higher consumer confidence boosting both consumer and enterprise spending. Improving economic fundamentals and historically low lending rates have also played their role in fueling this uptrend.

An underutilized and unmotivated workforce
However, the way I view it is one key part of the equation on the jobs front continues to dampen any major hope of a sustainable growth-based recovery, as opposed to a temporary cost-cutting-induced move upward.

Last month, we examined a study by Gallup on the state of the American worker with regard to workplace engagement. The results of that study showed that only 30% of the American workforce is actively engaged in their job (i.e., they're innovative and willing to work toward bettering the business). The remaining 70% are either not engaged (52%) and are simply going through the motions, or are actively disengaged (18%) and are actually seeking ways to undermine their employer.  

Today, I intend to dig deeper into that study and examine one of the biggest reason why America's labor force is in big trouble: underemployment.

One measure that the Bureau of Labor Statistics employs that might be a better judge of the overall health of the labor force than the unemployment rate is the labor underutilization rate, commonly referred to as U-6. This figure takes into consideration the number of unemployed persons as well as those who are seeking part-time work but have been forced to take on part-time work for economic reasons. As a percentage of the labor force, it's still an extremely high figure:

Source: Bureau of Labor Statistics. 

Full-time jobs are hard to come by
This is a big problem, especially for our country's youth. According to The Federal Reserve Bank of New York which in June, 44% of all recent college graduates were working at a job that didn't require a college degree. Understandably, for some graduates it's a matter of starting somewhere and working their way up. But for many more, it's a sign of a very difficult job market that's becoming impossible to chisel away at.

The impending implementation of the Patient Protection and Affordable Care Act is also having a decipherable impact on U-6, even if a study from the Federal Reserve Bank of Minneapolis demonstrates that few employers are changing their hiring habits. Regal Entertainment (NYSE: RGC  ) , the nation's largest operator of movie theaters, slashed thousands of its workers' hours to get under the 30-hour weekly average in order to avoid being penalized for not providing health care insurance options to its employees. That point is somewhat moot now with the PPACA employer mandate being pushed back another year, but it's nonetheless a reason why full-time work is becoming difficult to come by in certain sectors.

Advancement is driving engagement
What's particularly interesting about Gallup's findings is that job engagement isn't just lower for recent graduates than high-school graduates – it's lower for all college graduates, regardless of whether or not they've recently graduated. Furthermore, being actively engaged in their job was dependent on the occupation they had. Jobs that required higher levels of skill or for graduates to actively use their degree often resulted in higher engagement scores. Jobs that require less education, or surrounded college graduates with lesser educated coworkers, resulted in less enthusiastic college-educated employees.

Here are Gallup's results of college-educated engagement broken down by occupation type:

Occupation

% Engaged

Manager, executive, or official	32.5%
Professional worker	28.8%
Sales worker	26.8%
Construction or mining worker	26.6%
Installation or repair worker	25.9%
Farming, fishing, or forestry worker	25.7%
Clerical or office worker	25.6%
Service worker	25.2%
Manufacturing or production worker	20.7%
Transportation worker	16%

Source: Gallup. 

We really shouldn't be shocked to see service workers -- think retail or food service -- toward the bottom of this list. Service workers are among the hardest hit by PPACA-related hourly cutbacks, and they often boast some of the lowest pay. Trust me, I've done my penance in the retail world previously and I can vouch for this! What this means is that service-oriented jobs are among the most difficult to keep a workforce engaged, usually resulting in high turnover and little employee cohesiveness.

You may not agree with me on this example, but take McDonald's (NYSE: MCD  ) for instance. McDonald's is arguably the stepping stone by which competing fast-food restaurants have modeled their brand around. But, according to estimates by Fast Food Nation that McDonald's employs 700,000 people in the U.S., and figures from McDonald's itself that it hires 1 million people annually in the U.S., this means the Golden Arches' turnover rate is around 143% per year! With generally low wages, inconsistent hours, and a staff with high turnover, perhaps investors should stop questioning McDonald's lack of innovation for its recently stagnant same-store sales results and start looking inward toward its employee engagement?

The key to turning America's labor force frown upside-down
The real key to success is in ensuring that college graduates are intrigued with their job, challenged on a daily basis, and are surrounded by coworkers who share those same goals. I would propose that some of the best examples of this are Internet-based companies such as Google, which have latched onto America's college graduates and given them a job filled with innumerable perks.

But, I would also extend this example beyond just offering big perks to grads to keep them happy. Simply removing the barriers of advancement often seen as the status gap between executives and employees can go a long way to encouraging engagement in the workplace. Take Red Hat (NYSE: RHT  ) CEO Jim Whitehurst, who chooses to work in a cubicle right along his employees, presumably to set an example that anyone within the office setting is reachable -- even the person in charge.

Whole Foods Market co-CEO John Mackey is another shining example, taking home just a $1 annual salary while capping executive pay at 19 times that of the average store employee.

Making employees realize they're important to the team, giving them a path to advancement, and paying them commensurate to the hard work they put into their college education, are all parts of the equation to really turning the American labor force around.

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Morgan Stanley Gets OK to Complete Smith Barney Acquisition

The final regulatory approvals needed for Morgan Stanley (NYSE: MS  ) to complete its acquisition of Morgan Stanley Smith Barney Holdings (MSSBH) from Citigroup (NYSE: C  ) -- it currently holds a 65% ownership position -- have been received, Morgan Stanley said in a statement today.

Citigroup will receive a previously agreed upon cash payment of $4.7 billion from Morgan Stanley for the remaining 35% of Smith Barney it doesn't already own. The deal is expected to be completed by the end of June. Morgan Stanley will take an estimated $200 million net charge on its fiscal Q2 ending June 30.

In addition to its acquisition of MSSBH's outstanding ownership interest, Morgan Stanley intends to redeem all Class A preferred interests owned by Citigroup for an estimated $2.028 billion, the company said.

Commenting on the deal, James Gorman, Chairman and CEO of Morgan Stanley, said, "This is a historic day for Morgan Stanley. It is the culmination of a multi-year effort to transform our business model into one that offers stronger shareholder returns and greater stability in volatile markets. ... With this milestone behind us, we have added momentum to carry out our full plan to achieve higher shareholder returns."

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Top Heal Care Companies To Buy For 2014

Center Bancorp (CNBC) has been bringing in a lot of money for investors over the past year and even-so, a big majority of it has yet to hit the company's bottom line. As you can see from the graph below, reported net incomes have consistently improved even though the bank has close to have a year's worth of net income tucked away in allowances. And, I'm only talking about the allowance balance after all nonperforming loans are subtracted. It is very necessary to put aside this money but 3.9Xs nonperforming loans puts CNBC at one of the highest coverage ratios I've found (more the result of quickly improving NPLs than management setting aside too much money).

Top Heal Care Companies To Buy For 2014: Emergeo Solutions Worldwide Inc(EMG.V)

Emergeo Solutions Worldwide Inc. develops, integrates, sells, and supports emergency management, environment health and safety, and security software solutions and services in Canada, the United States, the Middle East, and Australia. The company?s product line includes EmerGeo FusionPoint, a Web-based crisis information management system; EmerGeo Mapping software, an open emergency mapping tool that integrates with customer's existing GIS systems, EmerGeo FusionPoint, and Google earth; and Portable EOC. It also offers training, implementation, and integration services. The company was formerly known as EmerGeo Solutions Inc. and changed its name to EmerGeo Solutions Worldwide Inc. in August 2008. EmerGeo Solutions Worldwide Inc. was founded in 2002 and is headquartered in Vancouver, Canada.

Top Heal Care Companies To Buy For 2014: Bunge Limited(BG)

Bunge Limited, through its subsidiaries, engages in the agriculture and food businesses worldwide. Its Agribusiness segment is involved in purchasing, storing, transporting, processing, and selling agricultural commodities and commodity products, such as oilseeds and grains, primarily comprising soybeans, rapeseed or canola, sunflower seed, wheat, and corn. This segment serves animal feed manufacturers, wheat and corn millers, third party edible oil processing companies, and other oilseed processors, as well as livestock, poultry, and aquaculture producers. The company?s Sugar and Bioenergy segment produces and sells sugar and ethanol; generates electricity from burning sugarcane bagasse; and trades and merchandises sugar. As of December 31, 2011, this segment had a total installed capacity of approximately 144 megawatts; and sugarcane plantations of approximately 183,000 hectares under cultivation. Its Edible Oil Products segment offers packaged vegetable, including pack aged and bulk oils, shortenings, margarines, mayonnaise, and other products to baked goods companies, snack food producers, restaurant chains, foodservice distributors, and other food manufacturers. The company?s Milling Products segment produces and sells various wheat flours and bakery mixes; corn-based products; corn milling products primarily comprising dry milled corn meals, flours, and grits, as well as soy-fortified corn meal and corn-soy blend; and packaged milled rice. This segment serves industrial, bakery, and foodservice companies; and companies in food processing sector. Its Fertilizer segment produces, blends, and distributes nitrogen, phosphate, and potash formulations used for the cultivation of soybeans, corn, sugarcane, cotton, wheat, and coffee. This segment also produces single super phosphate; and ammonia, urea, and liquid fertilizers for the agriculture industry. Bunge Limited was founded in 1818 and is headquartered in White Plains, New York.

Advisors' Opinion:

• [By Portfolio Grader]

  Bunge’s (NYSE:BG) ratings are looking better this week, moving up to a C from last week’s A. Bunge is a global agribusiness and food company that operates in the farm-to-consumer food chain. 

• [By David Sterman]

  Bunge (NYSE: BG) is involved in a wide range of agricultural businesses, from fertilizer sales to oilseed processing to wholesale sales of cooking oil. Bunge’s revenue has grown at a rapid pace, and it has topped quarterly profit estimates by an average of 25% in the past four quarters. Shares are currently trading below tangible book value and sport a forward P/E of 8.3.

Top Low Price Stocks To Own Right Now: Sultan Minerals Inc. (SUL.V)

Sultan Minerals Inc. engages in the exploration and development of mineral properties in Canada. The company primarily focuses on the exploration of gold, silver, zinc, lead, molybdenum, tungsten, and other base metals. It holds 100% interests in the Kena gold property, a gold-copper-silver prospect covering approximately 8,173 hectare located near the town of Nelson in southeastern British Columbia; and the Jersey-Emerald property located southeast of the mining community of Salmo property located near Salmo, British Columbia. The company was incorporated in 1989 and is based in Vancouver, Canada.

Barclays Looks for a Path Out of the Murk

Monday was busy for Barclays (NYSE: BCS  ) . The U.K. makes all kinds of fun demands, and it recently came to light that one of those demands was for much, much more capital than Barclays currently has on hand. When I say "more," I of course mean £7 billion more. Yesterday, the bank announced that it would be looking to raise the capital through a new share offering, and today it announced that that offering would be for £5.8 billion. 

Yesterday, the bank was also named in a lawsuit being brought against LIBOR-setting banks by the city of Philadelphia. The city is suing based on the premise that the LIBOR was manipulated by the banks in such a way that hedging instruments that the city used were turned in the banks' favor. 

Barclays also found out that the U.K. may have finally hit the peak for claims against banks based on misselling of payment protection insurance (PPI), a scandal that has caused U.K. banks to set aside £14 billion for potential damages. Barclays has reportedly set aside £2.6 billion, which isn't helping that capital ratio. 

Problem with a capital "P"
The biggest issue facing Barclays is its capital shortage. All U.K. banks are facing the same measures, but some have managed to get their houses in even worse order. Analysts have estimated that Deutsche Bank (NYSE: DB  ) is about 12.3 billion euros shy of its requirement and is going to have to either raise capital or cut down the size of its balance sheet to make the minimum requirements. 

For British banks, capital requirements have become a touchy subject. The shortfall that banks are experiencing has led some to lobby regulators for lower capital requirements, and has some politicians claiming that high requirements are holding the country back. The theory is that the banks have been unwilling to lend since the capital they have on hand is needed to bulk out their assets. 

Barclays fell into the capital shortfall trap along with RBS and Lloyds (NYSE: LYG  ) . Lloyds, especially, is going to be watching how smoothly Barclays' new issuance goes. The bank reported stronger than expected earnings last week, and the success has opened up the possibility that the U.K. government may be able to start selling off its stake. The Barclays' issuance could provide a good temperature check of the market, and help move that action along.

The next steps for Barclays
With so much up in the air, it's no surprise that Barclays shares are bouncing around. The newest fundraising news hit the markets hard, and the stock has fallen more than 10% this week. CEO Antony Jenkins is still hopeful, though, and believes that once the capital has been raised to meet the June 2014 deadline, things should begin growing again. He has also said that some of the damage to the share prices of Barclays, Lloyds, and other U.K. banks comes from the uncertainty around the future of regulation. His hope is that with this round of fundraising, those issues will begin to be resolved, helping lift stock prices.

Overall, there is still clearly risk in investing in Barclays. The bank has committed to increasing its dividend in order to make the newly issued shares more palatable, but that raises the risk that Barclays won't be able to hold on to as much capital in the future -- or that it has to renege on its dividend commitment. I still like Jenkins and the plan he has for Barclays, but things just refuse to settle down into a new normal. Until they do, I'll be nervous.

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REITs: The Writing Is On The Wall

I have been following the markets (as an institutional investor and as an individual) for more than two decades, and there is one observation or pattern that is consistently repeated: When a sector or a market is fully valued or over-valued, you will see institutional exit strategies employed. Put differently, the "smart" money sells into an over-valued market to realize the highest potential profits.

As well, you will notice that when the low hanging growth fruit (we'll call this organic growth) has been picked, merger activity will increase in order to grow further. This can be accomplished through cost cutting and eliminating overlapping positions and taking out physical costs depending on the sector. We'll call this "synergies."

We are currently seeing that in the REIT sector.

Taking a look at the "exit strategy" indicator, we expect that when there are high multiples (rich valuations) more firms will bring properties and REITs to market. The REIT universe (as calculated by BMO) currently trades at an 18x FFO multiple (18.4x forward). To put this in context, it is the highest since the financial crisis, as you would expect and approximately two turns lower than the 2005-2006 time frame (20.7x and 19.8x, respectively). While lower, the current economic environment doesn't make me think it should be at the same level, or for that matter, the level it is at.

Taking a look at the "exit strategy" indicator, we see the big daddy of them all: Blackstone's (BX) proposed IPO of Brixmor (a large chunk of the old Centro Group). This is shaping up to be the biggest retail REIT IPO in decades.

A little background from the SEC S1 filing:

Brixmor is an internally-managed REIT that owns and operates the largest wholly-owned portfolio of grocery-anchored community and neighborhood shopping centers in the United States. Our IPO Portfolio is comprised of 522 shopping centers totaling approximately 87 million sq. ft. of GLA. 521 of ! these shopping centers are 100% owned. Our high quality national portfolio is well diversified by geography, tenancy and retail format, with more than 70% of our shopping centers anchored by market-leading grocers. Our four largest tenants by ABR are The Kroger Co. ("Kroger"), The TJX Companies, Inc. ("TJX Companies"), Publix Super Markets, Inc. ("Publix") and Wal-Mart Stores, Inc. ("Walmart").

As the retail sector trades at an 18x multiple currently with a mere 4.7% FFO growth estimate (versus a 19x and 7.5% growth estimate in the 2005-2006 "go go" years), one might infer -- as I have -- that Blackstone sees this as an opportune time to engage in risk transfer (prior to rising rates and multiple contraction).

Another indicator is the "exit strategy through merger" activity which is also a "growth through merger" strategy. This is one we have been seeing more of recently. Two top examples are American Realty Capital Properties, Inc.'s (ARCP) acquisition of the non-traded REIT American Realty Capital Trust IV ("ARCT IV") and W.P. Carey's (WPC) $2.4B acquisition of the non-traded REIT Corporate Property Associates 16-Global Inc.

Let's go to the tapes:

American Realty focuses on the effect of the transaction on its business more than the rationale from ARCT IV's perspective. Its perspective is stated as such:

Attractive Return to ARCT IV Stockholders: Minimum total return of 31% to ARCT IV stockholders, including a full return of gross invested capital, a 22.5% share premium (assuming the guaranteed floor stock consideration value) and dividends paid since inception, assuming 100% stock election.

As W. P. Carey's President and CEO Trevor Bond stated:

"We are pleased to announce a merger transaction that we believe is beneficial to both W. P. Carey and CPA®:16 - Global investors. In addition to providing liquidity to CPA®:16 - Global investors, it will significantly increase! W. P. Ca! rey's asset base..."

Going a little further back, we see Realty Income (O) becoming the exit strategy for American Realty Capital Trust (here):

Premium to Share Price and Asset Values This transaction enables the shareholders of American Realty Capital Trust to capitalize on the recent upward price movement of the shares of ARCT, and to achieve a premium valuation for their shares. Furthermore, ARCT's assets were acquired at an opportune time in the market. This transaction allows ARCT's shareholders to realize a premium over their purchase price.

In a low interest rate environment, we can also get a decent feel for a company's opinion of share prices. If you are buying a fully (over) priced asset, you want to use the cheapest capital you can. If the market is overvalued, a company's shares are cheap currency. Of the above referenced transactions, we see the following capital being used:

American Realty Capital Properties/American Realty Capital Trust IV:

American Realty Capital Properties offered 2.05 of its shares or $30 in cash for each share of the other REIT. The stock offer is worth about $31 per share.

This I found interesting as there is a cash component, but it is limited to 25% of the ARCT IV shares outstanding and has tax implications.

W.P. Carey/CPA 16:

Subject to the terms and conditions of the merger agreement, CPA®:16 - Global stockholders will receive shares of W. P. Carey common stock for their shares of CPA®:16

Realty Income/ARCT:

The acquisition will be financed by Realty Income directly issuing $1.9 billion of its common stock to American Realty Capital Trust shareholders

The REIT sector as a whole has seen decent returns over the last few years, but has slowed during 2013 and going forward, it should have a difficult time keeping up with the broader market due to a combination of valuation and the prospect of rising rates.

Bottom Line: The REIT sector as a whole appears fully valued given the econom! ic outloo! k as well as the prospect of rising rates. Sector and security selection will be the driving force behind outperformance.

Source: REITs: The Writing Is On The Wall

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

Additional disclosure: This article is for informational purposes only, it is not a recommendation to buy or sell any security and is strictly the opinion of Rubicon Associates LLC. Every investor is strongly encouraged to do their own research prior to investing.

2 Keys to Success for This Diabetes Drug's Second Chance

If at first you don't succeed, try, try again. We've heard that old saw many times, but it's good advice. It's also advice that two big pharmaceutical companies are heeding.

AstraZeneca (NYSE: AZN  ) and Bristol-Myers Squibb (NYSE: BMY  ) announced last week that they are making another attempt at U.S. regulatory approval for diabetes drug Forxiga. Will the two drugmakers be successful this time around? Here are two keys for Forxiga to emerge as a winner.

1. The data must deliver.
The Food and Drug Administration rejected approval of Forxiga in January 2012. Concerns about the drug's benefit-risk profile prompted the agency to request additional clinical data. This decision wasn't a major surprise at the time, considering that an advisory panel had previously recommended against approval of Forxiga because of safety concerns, including possible increased risk of breast and bladder cancers.

AstraZeneca and Bristol-Myers Squibb provided lots of new data with the resubmission. The companies announced that data was given to the FDA for several new clinical studies plus additional long-term data for up to a four-year period from studies submitted in the earlier application. This additional data increased the number of patient-years exposure to Forxiga by 50%.

A decision date for Forxiga has been set for Jan. 11, 2014. FDA approval now hinges on how convincing this new data actually is.

2. The market must make room.
Even if the FDA grants approval for Forxiga, another hurdle remains for ultimate success. The market could become crowded relatively quickly with diabetes drugs that use similar mechanisms of action.

Johnson & Johnson (NYSE: JNJ  ) obtained FDA approval in March for Invokana. Like Forxiga, the drug is a sodium glucose co-transporter 2, or SGLT2 inhibitor. SGLT2 inhibitors work by increasing the amount of glucose expelled in urine.

While J&J scored first with U.S. approval, the company is still seeking regulatory approval in Europe. AstraZeneca and Bristol already obtained European marketing authorization for Forxiga last November. It could be only a matter of time before Forxiga and Invokana go head-to-head in both markets, but they will probably face other competitors not too far down the road.

Eli Lilly (NYSE: LLY  ) and Boehringer Ingelheim submitted a New Drug Application, or NDA, for empagliflozin in March. This head start should enable the two companies to beat AstraZeneca and Bristol to the American market. Lilly and Boehringer also filed for regulatory approval in Europe. 

Pfizer and Merck (NYSE: MRK  ) are working together on development of SGL2 inhibitor ertugliflozin. The drug should begin late-stage trials in the near future. The companies are pursuing use of ertugliflozin as a stand-alone treatment and in combination with Merck's other diabetes drugs, particularly Januvia. 

Chances are...
My take is that AstraZeneca and Bristol-Myers probably have a good shot at winning FDA approval this time around. The FDA approved Invokana, which isn't too terribly different from Forxiga. Reams of new data should help swing the pendulum the other way compared to the first attempt at approval.

Despite what seems like a soon-to-be crowded market for SGLT2 inhibitors, I think there's still plenty of room for all. Analysts project near-blockbuster status for all of the drugs, with some seeing even higher potential.

AstraZeneca and Bristol-Myers Squibb need a success story with Forxiga, because the patent cliff has taken its toll in recent years. Both companies' revenue totals in 2012 dropped 17% compared to 2011.

The problem is that even if Forxiga gains FDA approval and competes effectively in the marketplace, it won't be enough on its own to reverse the downward trend for AstraZeneca and Bristol. Both companies have other pipeline opportunities, but they each need more keys for success than just one or two new drugs.

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Should Investors Buy These Big Buybacks?

Along with announcing earnings, both Halliburton (NYSE: HAL  ) and Schlumberger (NYSE: SLB  ) announced multi-billion-dollar stock buybacks. With so much money on the line, investors have to ask if this is the right move for these two oil-field service giants. Are these stocks cheap enough to warrant the buybacks or should these companies consider other options for those funds?

Photo credit: Flickr/nestorgalina

Before considering what else these companies could or should be doing with all that money, it's a good idea to take a look at what's already been decided. Taking a look at Schlumberger, the company just finished up its previous $8 billion buyback program which was approved in April 2008. This past quarter, the company spent $500 million and was able to snap up 6.8 million shares at an average price of $73.07, basically to complete the authorization. With shares trading about $10 more at the time of this writing, it would appear that the company got a pretty good deal.

However, looking ahead, the company's board has approved a new $10 billion buyback program. It expects to complete this by June 2018. For perspective, the company's market cap is just over $110 billion, so the authorization would equate to about 9% of its currently outstanding shares. Yet with shares trading at 18 times earnings, the stock isn't exactly a screaming bargain.

Halliburton also largely exhausted its previous stock buyback plan after spending a billion dollars to repurchase 23 million shares in the second quarter. The company reloaded its plan so that it now has another $5 billion to repurchase its stock. That would allow the company to buy back about 12% of its outstanding shares. However, like Schlumberger, its stock isn't exactly cheap at more than 21 times earnings.

As long as both companies are opportunistic in the buybacks, then shareholders will do well in the long term. However, buybacks might not be the best option here. In reading through earnings reports and conference call transcripts over the past year, two trends have been very clear in the oil-field service and equipment sector. The North American market is very challenged, while growth is being supplied internationally. One of the big issues in the North American market is competition. This is why I think it would make more sense for these companies to use their cash to reduce the competition by acquiring it.

For example, in warning that its quarter would be rough, Nabors Industries (NYSE: NBR  ) said that it saw weakness in the North American pressure-pumping business while noting that intense competition was really crimping its results. This caused the company to miss earnings estimates by 23% this past quarter. Similarly, Baker Hughes (NYSE: BHI  ) reported that while its pressure-pumping business was improving, it's not driving the company's business because of competition. On the other hand, oil-field services are booming internationally as well as in the deepwater of the Gulf of Mexico where Baker Hughes, in particular, saw record performance. 

It would seem as though there is just too much capacity and competition onshore in North America for oil-field service providers to make the returns you'd expect in light of the fact that oil production in the U.S. is booming. That's why industry consolidation would appear to be a much better way for these companies to spend the money being earmarked for buybacks. It would only strengthen the lead these two have over the rest of the competition.

Intense competition is one reason why these companies might not be the best way to play the energy sector. Instead, a stock that you might want to consider is one that The Motley Fool's analysts have uncovered, which is an under-the-radar company that's dominating its industry. This company is a leading provider of equipment and components used in drilling and production operations, and poised to profit in a big way. To get the name and detailed analysis of this company that will prosper for years to come, check out the special free report: "The Only Energy Stock You'll Ever Need". Don't miss out on this limited-time offer and your opportunity to discover this under-the-radar company before the market does. Click here to access your report -- it's totally free.

Are Electric Vehicles Near a Tipping Point?

Ideal Power Converters won a "National Innovation Award" at the recent TechConnect National Innovation Conference near Washington, D.C. This private company's 3-Port Hybrid Converter reduces costs and improves the efficiency of systems that integrate photovoltaic, grid-storage, and electric-vehicle charging.

IPC believes its technology can disrupt traditional products offered by ABB (NYSE: ABB  ) and Eaton (NYSE: ETN  ) . Our roving reporter Rex Moore caught up with IPC CEO Paul Bundschuh at the conference, and chatted about electric vehicles, and combining grid storage with photovoltaic technology.

A recent Motley Fool report, "2 Automakers to Buy for a Surging Chinese Market", names two global auto giants poised to reap big gains in the world's largest auto market that could drive big rewards for investors. You can read this report right now for free – just click here for instant access.

PetMed Express Beats on Both Top and Bottom Lines

PetMed Express (Nasdaq: PETS  ) reported earnings on July 22. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended June 30 (Q1), PetMed Express beat expectations on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue grew. GAAP earnings per share increased significantly.

Margins increased across the board.

Revenue details
PetMed Express reported revenue of $74.2 million. The seven analysts polled by S&P Capital IQ expected net sales of $70.0 million on the same basis. GAAP reported sales were 7.6% higher than the prior-year quarter's $69.0 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $0.24. The seven earnings estimates compiled by S&P Capital IQ forecast $0.22 per share. GAAP EPS of $0.24 for Q1 were 20% higher than the prior-year quarter's $0.20 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 32.4%, 10 basis points better than the prior-year quarter. Operating margin was 10.1%, 110 basis points better than the prior-year quarter. Net margin was 6.4%, 70 basis points better than the prior-year quarter. (Margins calculated in GAAP terms.)

Looking ahead
Next quarter's average estimate for revenue is $59.0 million. On the bottom line, the average EPS estimate is $0.21.

Next year's average estimate for revenue is $233.3 million. The average EPS estimate is $0.88.

Investor sentiment
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 870 members out of 900 rating the stock outperform, and 30 members rating it underperform. Among 243 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 238 give PetMed Express a green thumbs-up, and five give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on PetMed Express is hold, with an average price target of $12.70.

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Add PetMed Express to My Watchlist.

Top Medical Stocks To Watch For 2014

In this video, Motley Fool industrials analyst Blake Bos reviews the latest earnings report from 3D Systems (NYSE: DDD  ) . Overall, it is a good report: Revenues and earnings slightly exceeded Wall Street expectations. The company maintained its guidance for 2013, but did point out that its tax rates will increase. 3D Systems was a little light on R&D spending, only 7%, so this would be something to watch in the future because growth companies typically spend more. Management noted that new products, including its new Cube X printer, have been selling well, but hard numbers will have to wait until the next quarter. The company plans on focusing on the medical device market and developing synergies with its recently acquired software company. The software acquisition looks particularly promising given its high profit margins.

Top Medical Stocks To Watch For 2014: Cell Therapeutics Inc (CTIC)

Cell Therapeutics, Inc. (CTI), incorporated in 1991, develops, acquires and commercializes treatments for cancer. The Company�� research, development, acquisition and in-licensing activities concentrate on identifying and developing new ways to treat cancer. As of December 31, 2011, CTI focused its efforts on Pixuvri (pixantrone dimaleate) (Pixuvri), OPAXIO (paclitaxel poliglumex) (OPAXIO), tosedostat, brostallicin and bisplatinates. As of December 31, 2011, it developed Pixuvri, an anthracycline derivative for the treatment of hematologic malignancies and solid tumors. Another late-stage drug candidate of the Company, OPAXIO, is being studied as a potential maintenance therapy for women with advanced stage ovarian cancer, who achieve a complete remission following first-line therapy with paclitaxel and carboplatin. As of December 31, 2011, it also developed tosedostat in collaboration with Chroma Therapeutics, Ltd. (Chroma). On May 31, 2012, CTI completed its acquisition gaining worldwide rights to S*BIO Pte Ltd.'s (S*BIO) pacritinib.

Pixuvri

As of December 31, 2011, the Company developed Pixuvri, an aza-anthracenedione derivative, for the treatment of non-Hodgkin�� lymphoma (NHL), and various other hematologic malignancies, and solid tumors. Pixuvri was studied in the Company�� EXTEND, or PIX301, clinical trial, which was a phase III single-agent trial of Pixuvri for patients with relapsed, refractory aggressive NHL who received two or more prior therapies and who were sensitive to treatment with anthracyclines. On September 28, 2011, CTI announced that a second independent radiology assessment of response and progression endpoint data from its PIX301 clinical trial of Pixuvri was achieved with statistical significance. The results of the EXTEND trial met its primary endpoint and showed that patients randomized to treatment with Pixuvri achieved a significantly higher rate of confirmed and unconfirmed complete response compared to patients treated with standard chem! otherapy had a significantly increased overall response rate and experienced a statistically significant improvement in median progression free survival. Pixuvri had predictable and manageable toxicities when administered at the proposed dose and schedule in the EXTEND clinical trial in heavily pre-treated patients. In March 2011, the Company initiated the PIX-R trial to study Pixuvri in combination with rituximab in patients with relapsed/refractory diffuse large B-cell lymphoma (DLBCL). Pixuvri has also been studied in patients with HER2-negative metastatic breast cancer who have tumor progression after at least two, but not more than three, prior chemotherapy regimens. In the second quarter of 2010, the NCCTG opened this phase II study for enrollment. The study is closed to accrual and results are expected to be reported by the NCCTG later in 2012.

OPAXIO

OPAXIO is the Company�� biologically-enhanced chemotherapeutic agent that links paclitaxel to a biodegradable polyglutamate polymer, resulting in a new chemical entity. As of December 31, 2011, the Company focused its development of OPAXIO on ovarian, brain, esophageal, head and neck cancer. OPAXIO was designed to improve the delivery of paclitaxel to tumor tissue while protecting normal tissue from toxic side effects. In November 2010, results were presented by the Brown University Oncology Group from a phase II trial of OPAXIO combined with temozolomide (TMZ), and radiotherapy in patients with newly-diagnosed, high-grade gliomas, a type of brain cancer. The trial demonstrated a high rate of complete and partial responses and a high rate of six month progression free survival (PFS). Based on these results, the Brown University Oncology Group has initiated a randomized, multicenter, phase II study of OPAXIO and standard radiotherapy versus TMZ and radiotherapy for newly diagnosed patients with glioblastoma with an active gene termed MGMT that reduces responsiveness to TMZ. A phase I/II study of OPAXIO combined with radi! otherapy ! and cisplatin was initiated by SUNY Upstate Medical University, in patients with locally advanced head and neck cancer.

Tosedostat

In March 2011, the Company entered into a co-development and license agreement with Chroma Therapeutics, Ltd. (Chroma), providing the Company with marketing and co-development rights to Chroma�� drug candidate, tosedostat, in North, Central and South America. Tosedostat is an oral, aminopeptidase inhibitor that has demonstrated anti-tumor responses in blood related cancers and solid tumors in phase I-II clinical trials. Interim results from the phase II OPAL study of tosedostat in elderly patients with relapsed or refractory acute myeloid leukemia (AML) showed that once-daily, oral doses of tosedostat had predictable and manageable toxicities and results demonstrated response rates, including a high-response rate among patients who received prior hypomethylating agents, which are used to treat myelodysplastic syndrome (MDS), a precursor of AML.

Brostallicin

As of December 31, 2011, the Company developed brostallicin through its wholly owned subsidiary, Systems Medicine LLC, which holds rights to use, develop, import and export brostallicin. Brostallicin is a synthetic deoxyribonucleic acid (DNA) minor groove binding agent that has demonstrated anti-tumor activity and a favorable safety profile in clinical trials, in which more than 230 patients have been treated as of December 31, 2011. The Company uses a genomic-based platform to guide the development of brostallicin. A phase II study of brostallicin in relapsed, refractory soft tissue sarcoma met its predefined activity and safety hurdles and resulted in a first-line phase II clinical trial study that was conducted by the European Organization for Research and Treatment of Cancer (EORTC).

The Company competes with Bristol-Myers Squibb Company, Sanofi-Aventis, Pfizer, Roche Group, Genentech, Inc., Astellas Pharma, Eli Lilly and Company, Celgene, Telik, I! nc., TEVA! Pharmaceuticals Industries Ltd. and PharmaMar.

Top Medical Stocks To Watch For 2014: Cerus Corporation(CERS)

Cerus Corporation, a biomedical products company, engages in the development and commercialization of the INTERCEPT Blood System. The company?s INTERCEPT system is designed to inactivate blood-borne pathogens in donated blood components intended for transfusion. It markets the INTERCEPT system for platelets and plasma primarily in Europe, the Russian Federation, and the Middle East. The company is also developing INTERCEPT Blood System for red blood cells or red blood cell system, which is designed to inactivate blood-borne pathogens in donated red blood cells for transfusion. Cerus Corporation has collaboration agreements with Baxter International, Inc.; and BioOne Corporation, as well as the United States Armed Forces. The company was founded in 1991 and is based in Concord, California.

Advisors' Opinion:

• [By Michael Shulman]

  Cerus (NASDAQ: CERS) developed and markets the INTERCEPT Blood System, which is designed to inactivate blood-borne pathogens in blood components so the blood can be used in transfusions. In other words, it “cleans” donated blood of viruses, bacteria and parasites.

  Cerus is pretty much the only game in town with this remarkable technology, and it has gained approval in most large European countries. Why not the United States? Well, management has not stood up to the FDA. The approval has been held up by one member of the FDA even though Cerus hit the primary endpoints in its pivotal Phase III trial and is receiving grants from the Department of Defense.

  The FDA should quit dragging its feet eventually. There is no scientific or product risk in this stock. Their system works. My target price is $14 in one to three years.

5 Best Safest Stocks To Own Right Now: Spectrum Pharmaceuticals Inc.(SPPI)

Spectrum Pharmaceuticals, Inc., a commercial-stage biotechnology company, primarily focuses on oncology and hematology. The company engages in acquiring, developing, and commercializing a broad and diverse pipeline of late-stage clinical and commercial products. It markets Zevalin, a prescribed form of cancer therapy, radioimmunotherapy; and Fusilev, a novel folate analog formulation and the pharmacologically active isomer of the racemic compound, calcium leucovorin. The company?s drugs in late stage development include Apaziquone, an anti-cancer agent; and Belinostat, a histone deacytelase inhibitor. Its drugs in development also include Ozarelix a luteinizing hormone releasing hormone antagonist, which is in Phase II clinical stage; SPI-1620, a peptide agonist of endothelin B receptors, which is in Phase I clinical stage; and RenaZorb, a lanthanum-based nanoparticle phosphate binding agent, which is in preclinical stage. The company was formerly known as NeoTherapeutics, Inc. and changed its name to Spectrum Pharmaceuticals, Inc. in December 2002. Spectrum Pharmaceuticals, Inc. was founded in 1987 and is based in Henderson, Nevada.

Advisors' Opinion:

• [By Roberto Pedone]

  Another stock that's quickly moving within range of triggering a big time breakout trade isSpectrum Pharmaceuticals (SPPI), which is a commercial stage biotechnology company integrated in commercial and drug development operations, primarily in oncology and hematology. This stock has been destroyed by the short-sellers so far in 2013, with shares off by over 30%.

  If you look at the chart for Spectrum Pharmaceuticals, you'll see that this stock has been trending sideways for the last two months in a consolidation chart pattern, with shares moving between $6.92 on the downside and $7.77 on the upside. This sideways pattern is coming after shares of SPPI gapped down sharply back in March from $12.47 to below $8 a share with heavy downside volume. Shares of SPPI are now quickly moving within range of triggering a major breakout trade above the upper end of its recent sideways chart pattern.

  Market players should now look for long-biased trades in SPPI if it manages to break out above some near-term overhead resistance levels at $7.65 to $7.77 a share and then once it takes out its 50-day at $8 and its gap down day high at $8.26 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 1.43 million shares. If that breakout hits soon, then SPPI will set up to re-fill some of its previous gap down zone that started at $12.47 a share. Some possible upside targets if SPPI gets into that gap with volume are $9.50 to its 200-day at $10.89 a share.

  Traders can look to buy SPPI off any weakness to anticipate that breakout and simply use a stop that sits right below some near-term support levels at $7.09 to $7 a share. One can also buy SPPI off strength once it clears those breakout levels with volume and then simply use a stop at around $7 a share.

  This stock is an absolute favorite target of the short-sellers, since the current short interest as a percentage of the float for SPPI is extremely high at 37.4%. This stock has explosive upside potential if it trades into that gap with volume, so make sure to have it on your breakout trading radar.

• [By Michael Shulman]

  Spectrum Pharmaceuticals (NASDAQ: SPPI) is a commercial-stage biotechnology company with a primary focus in oncology and hematology The company specializes in rescuing treatments abandoned, in development stages, by other companies.

  It has had a tremendous run based on market introductions and partnerships in the past two years, but now has even greater potential for a blockbuster with a drug called Zevalin for non-Hodgkin’s lymphoma. This drug is currently approved as a salvage and adjunct therapy, and the company is in mid-stage trials for the use of Zevalin as a front-line treatment, which would be a much larger market.

  The risk in this stock is high. It could be cut in half or worse on bad news from one of several clinical trials. However, successful trial results could take this stock from under $7 to $32 in one to three years. SPPI could also become a takeover target.

Top Medical Stocks To Watch For 2014: Quintiles Transnational Holdings Inc (Q)

Quintiles Transnational Holdings Inc. is a provider of biopharmaceutical development services and commercial outsourcing services. The Company operates in two segments: Product Development and Integrated Healthcare Services. The Company�� Product Development segment operates as a contract research organization (CRO) focused primarily on Phase II-IV clinical trials and associated laboratory and analytical activities. The Company�� Integrated Healthcare Services segment is a global commercial pharmaceutical sales and service organizations and Integrated Healthcare Services provides a range of services, including commercial services, such as providing contract pharmaceutical sales forces in geographic markets, as well as healthcare business services for the healthcare sector, such as outcome-based and payer and provider services. In August 2012, it acquired Expression Analysis, Inc.

Product Development

Product Development provides services and that allow biopharmaceutical companies to outsource the clinical development process from first in man trials to post-launch monitoring. The Company�� service offering provides the support and functional necessary at each stage of development, as well as the systems and analytical capabilities. Product Development consists of clinical solutions and services and consulting. Clinical solutions and services provides services necessary to develop biopharmaceutical products, including project management and clinical monitoring functions for conducting multi-site trials (generally Phase II-IV) (core clinical) and clinical trial support services that improve clinical trial decision making and include global laboratories, data management, biostatistical, safety and pharmacovigilance, and early clinical development trials, and strategic planning and design services that improve decisions and performance. Consulting provides strategy and management consulting services based on life science and advanced analytics, as well as regulatory and comp! liance consulting services.

The Company competes with Covance, Inc., Pharmaceutical Product Development, Inc., PAREXEL International Corporation, ICON plc, inVentiv Health, Inc. (inVentive), INC Research and PRA International.

Integrated Healthcare Services

Integrated Healthcare Services provides the healthcare industry with both geographic presence and commercial capabilities. The Company�� commercialization services are designed to accelerate the commercial of biopharmaceutical and other health-related products. Service offerings include commercial services (sales representatives, strategy, marketing communications and other areas related to commercialization), outcome research (drug therapy analysis, real-world research and evidence-based medicine, including research studies to prove a drug�� value) and payer and provider services comparative and cost-effectiveness research capabilities, clinical management analytics, decision support services, medication adherence and health outcome optimization services, and Web-based systems for measuring quality improvement.

The Company competes with inVentiv, PDI, Inc., Publicis Selling Solutions, United Drug plc, EPS Corporation and CMIC HOLDINGS Co., Ltd.

Top Medical Stocks To Watch For 2014: Johnson & Johnson(JNJ)

Johnson & Johnson engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. The Consumer segment provides products used in baby care, skin care, oral care, wound care, and women?s health care fields, as well as nutritional, over-the-counter pharmaceutical products, and wellness and prevention platforms under the brands of JOHNSON?S, AVEENO, CLEAN & CLEAR, JOHNSON?S Adult, NEUTROGENA, RoC, LUBRIDERM, DABAO, LISTERINE, REACH, BAND-AID, CAREFREE, STAYFREE, SPLENDA, TYLENOL, SUDAFED, ZYRTEC, MOTRIN IB, and PEPCID AC. The Pharmaceutical segment offers products in various therapeutic areas, such as anti-infective, antipsychotic, contraceptive, dermatology, gastrointestinal, hematology, immunology, neurology, oncology, pain management, and virology. Its principal products include REMICADE for the treatment of immune me diated inflammatory diseases; STELARA for the treatment of moderate to severe plaque psoriasis; SIMPONI, a treatment for adults with moderate to severe rheumatoid arthritis, psoriatic arthritis, and ankylosing spondylitis; VELCADE for the treatment of multiple myeloma; PREZISTA and INTELENCE for treating HIV/AIDS patients; NUCYNTA for moderate to severe acute pain; INVEGA SUSTENNAtm for the acute and maintenance treatment of schizophrenia in adults; RISPERDAL CONSTA for the management of bipolar I disorder and schizophrenia; and PROCRIT to stimulate red blood cell production. The Medical Devices and Diagnostics segment primarily offers circulatory disease management products; orthopaedic joint reconstruction, spinal care, and sports medicine products; surgical care, aesthetics, and women?s health products; blood glucose monitoring and insulin delivery products; professional diagnostic products; and disposable contact lenses. The company was founded in 1886 and is based in Ne w Brunswick, New Jersey.

Advisors' Opinion:

• [By Buffett]

   The world's largest health care company, Johnson & Johnson (JNJ) owns popular brands you've no doubt heard of and used regularly -- such as Tylenol and Band-Aid. But what you might not know is that the company has the No. 1 or No. 2 position in more than half of its product lines. Beyond consumer products, Johnson & Johnson has a strong pharmaceutical division supported by a solid research pipeline, and it is a leader in medical devices.

  All of this has helped Johnson & Johnson produce the kind of steady, long-term earnings growth and profitability that Buffett likes. Earnings have risen in all but two of the past 10 years. And, over the past decade, Johnson & Johnson has produced an average 25.7% return on equity, according to Validea.

  That's well above the 15% minimum Buffett likes -- and a reason he owns 42.6 million shares. Morningstar is bullish on Johnson & Johnson, giving it a four-star (of a possible five) rating.

• [By Sy_Harding]

  Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company has raised distributions for 49 years in a row. The 10 year annual dividend growth rate is 13%/year. The last dividend increase was 5.60% to 57 cents/share. Analysts are expecting that Johnson & Johnson will earn $5.24/share in 2012. I expect that the quarterly dividend will exceed 61 cents/share in 2012. Yield: 3.50%

• [By Michael]

  I really like JNJ.  They are the largest health care company in the world, in an industry that is ever growing.  They have extremely strong brands for consumer products all around the world.  They also have a strong business on the medical technology end as well.  As the world grays with increasing numbers of the elderly, a massive and emerging middle class in the emerging markets and just the nature of the health care industry in general, I think JNJ is very well positioned to take advantage of significant growth over the next decade.  They are also lending money to European banks.  That means they h ave a lot of cash.

• [By Guru Focus]

  Johnson & Johnson (JNJ) has a market capitalization of $179.39 billion. The company employs 117,000 people, generates revenues of $65,030.00 million and has a net income of $9,672.00 million. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $12,841.00 million. Because of these figures, the EBITDA margin is 19.75 percent (operating margin 19.01 percent and the net profit margin finally 14.87 percent).

  Twelve trailing months earnings per share reached a value of $3.48. Last fiscal year, the company paid $2.25 in form of dividends to shareholders.

  Here are the price ratios of the company: The P/E ratio is 18.86, Price/Sales 2.77 and Price/Book ratio is not calculable. Dividend Yield: 3.46 percent. The beta ratio is 0.55.

Top Medical Stocks To Watch For 2014: Algeta ASA (ALGETA.OL)

Algeta ASA is a Norway-based biotechnology company engaged in the development of targeted cancer therapies based on its alpha-pharmaceutical platform. The Company�� principal product is Alpharadin for the treatment of bone metastases resulting from castration-resistant prostate cancer. The Company�� pipeline also includes Alpharadin for the treatment of bone metastases resulting from breast cancer, a combination of Alpharadin with Taxotere for the treatment of bone metastases resulting from prostate cancer and Thorium-227 showing various cancer indications. The Company develops Alpharadin in a development and marketing cooperation with Bayer Schering Pharma. Algeta ASA is active through the two wholly owned subsidiaries, Algeta Innovations AS and Algeta UK Limited. On April 12, 2012, the Company announced that it estabilished a subsidiary active in the United States, Algeta US.

1 Private Company That'll Kill Your Confidence

While China's e-commerce market is set to grow to half a trillion dollars by 2016, that doesn't mean that Amazon  (NASDAQ: AMZN  ) and Dangdang  (NYSE: DANG  ) are bound to benefit the most. In the video below, Fool contributor Kevin Chen explains why it's not that simple, and why Alibaba -- the one company foreigners can't invest in -- should scare investors.

As a private Chinese company, Alibaba is the 800-pound gorilla in the room, commanding 20 to 30 times the market share of Amazon and Dangdang. Because of the economics that surround Ailbaba's market dominance, it's perhaps the only company that will really benefit from China's continued e-commerce boom.

And so far, that's remained true. While Groupon  (NASDAQ: GRPN  ) seemed poised to boost its profits with Chinese growth, Alibaba's own group-buying website, Juhuasuan, may have been one reason Groupon had to close the China door.

Is there a company that can survive Alibaba's full-frontal assault and profit from e-commerce growth? 

Well, there may be one in Mecox Lane. To learn more, click on the video below.

Although Amazon may not have a future in China's e-commerce market, it is still-arguably-the king of the U.S. retail world right now. But at its sky-high valuation, most investors are worried it's the company's share price that will get knocked down instead of competitors'. The Motley Fool's premium report will tell you what's driving the company's growth, and fill you in on reasons to buy and reasons to sell Amazon. The report also has you covered with a full year of free analyst updates to keep you informed as the company's story changes. To access it, just click here now.

20 Great Tax Quotes

As part of tax day, here are 20 famous quips, complaints, and perspectives on the nation's tax code. 

1. "This is too difficult for a mathematician. It takes a philosopher." -- Albert Einstein, on his tax returns

2. "The difference between death and taxes is death doesn't get worse every time Congress meets." -- Will Rogers

3. "Next to being shot at and missed, nothing is quite as satisfying as an income tax refund." -- F.J. Raymond

4. "How much money did you make last year? Mail it in." -- Proposed simplified tax form, Stanton Delaplane

5. "What is the difference between a taxidermist and a tax collector? The taxidermist takes only your skin." --Mark Twain

6. "I want to begin by saying we have had good experience with the Internal Revenue Service; it's the Internal Revenue Code that doesn't work." -- Brian Gloe

7. "Tax reform means, 'Don't tax you, don't tax me. Tax that fellow behind the tree.'" -- Russell Long

8. "Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Form 1040, line 21" -- Actual IRS tax form

9. "A government that robs Peter to pay Paul can always rely on the support of Paul." -- George Bernard Shaw

10. "The income tax has made liars out of more Americans than golf." -- Will Rogers

11. "I think the idea that the hedge fund manager gets lower taxes than the taxi driver or the physics professor is insane. The legislators who leave that policy in place are derelict in their duties to be rational and fair. There are plenty of them in both political parties. It's totally outrageous." -- Charlie Munger

12. "The only thing that hurts more than paying an income tax is not having to pay an income tax." -- Thomas Dewar

13. "People who complain about taxes can be divided into two classes: men and women." -- Unknown

14. "Income tax returns are the most imaginative fiction being written today." -- Herman Wouk

15. "Congress can raise taxes because it can persuade a sizable fraction of the populace that somebody else will pay." -- Milton Friedman

16. "We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle." -- Winston Churchill

17. "There may be liberty and justice for all, but there are tax breaks only for some." -- Martin Sullivan

18. "I think of lotteries as a tax on the mathematically challenged." -- Roger Jones

19. "The difference between tax avoidance and tax evasion is the thickness of a prison wall." -- Denis Healey

20. "In 2009, [Greek] tax collection disintegrated, because it was an election year. ... The first thing a government does in an election year is to pull the tax collectors off the streets." -- George Papaconstantinou, former Greek minister of finance 

A Guide to Your Weekend Investment Reading

In this segment of The Motley Fool's everything-financials show, Where the Money Is, banking analysts Matt Koppenheffer and David Hanson tell investors what they'll be reading this weekend. David plans to zero in on some recent data from Zillow to see what it means to that business, as well as some regional banks.

Matt highlights the importance of digesting some of the under-covered earnings releases.

In addition to discussing their weekend reading, Matt and David tell viewers how they feel about the market's lofty levels and how they think investors should be handling it.

There's still great opportunity left in 2013!
The Motley Fool's chief investment officer has selected his No. 1 stock for this year. Find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.

For even more weekend reading, check out Morgan Housel's articles and eight great reads that he's identified.

You can follow David and Matt on Twitter. 

Top Penny Stocks For 2014

Shares of Monster Beverage (NASDAQ: MNST  ) rose nearly 5% Monday after the company's board of directors approved a $200 million share repurchase program. As management stated recently, the company had already used every penny of the $250 million it authorized for share repurchases less than five months ago, so it looks like they were just itching to continue increasing shareholders' slice of the pie.

Even so, I suppose this latest authorization shouldn't have come as much of a surprise considering the company managed to spend more than $737 million in 2012, buying back shares at an average price of $54.47 per share -- or about 3% below yesterday's closing price.

Does it make sense?
Okay, we get it; the folks at Monster are trying to send investors a not-so-subtle message that they think their stock is undervalued.

Top Penny Stocks For 2014: National Technical Systems Inc.(NTSC)

National Technical Systems, Inc., a diversified technical services company, provides engineering and compliance testing services to the defense, aerospace, telecommunications, automotive, energy, consumer products, and industrial products markets worldwide. The company offers product life-cycle product integrity support services, including design engineering, compliance, testing, certification, quality registration, and program management. It provides conformity assessment and management system registration services, as well as technology services for product certification, product safety testing, and product evaluation. The company also offers management registration and certification services. The company was founded in 1961 and is based in Calabasas, California.

Top Penny Stocks For 2014: Midway Gold Corporation(MDW)

Midway Gold Corp., an exploration stage company, engages in the acquisition, exploration, and development of mineral properties in North America. Its principal properties include the Spring Valley, Midway, Pan, and Gold Rock gold and silver mineral properties located in Nevada; and the Golden Eagle gold mineral property located in Washington. The company was formerly known as Red Emerald Resource Corp. and changed its name to Midway Gold Corp. in July 2002. Midway Gold Corp. was founded in 1996 and is headquartered in Englewood, Colorado.

Advisors' Opinion:

• [By Chuck Carlson]

  The company Midway Gold Corp. (AMEX: MDW) is in charge of exploring and capturing gold deposits in North America.  Midway Gold Corp was alerted by investorgoodies for a buy at $0.61 and it is now currently at $2.32 making over 200% increase in price over a one year period.

• [By Louis Navellier]

  Exploration-stage company Midway Gold Corp. (AMEX: MDW) acquires, explores and develops gold and silver mineral projects in North America. In the past 12 months, MDW has posted extraordinary gains of 197%, compared to gains of about 10% for the broader market indices. Year to date, MDW has watched its stock value increase 118%. This penny stock is trading fairly close to its 52-week high of $2.39, and is a very affordable addition to your portfolio.

Top 10 Penny Stocks To Invest In 2014: Dehaier Medical Systems Limited(DHRM)

Dehaier Medical Systems Limited, through its subsidiaries, designs, develops, and markets respiratory and oxygen homecare products, and other medical devices in the People?s Republic of China. The company also distributes products designed and manufactured by other companies. It offers various medical devices, including C-arm X-ray systems, anesthesia machines, patient monitors, and general hospital products; and respiratory and oxygen homecare products, such as oxygen concentrators, CPAP devices, portable sleep diagnostics, and Rhinitis hyperthermia devices; and air compressors and ventilator trolleys. The company sells its products primarily to distributors, as well as to hospitals, clinics, and government health bureaus directly. Dehaier Medical has a tripartite strategic cooperation agreement with Taiyo Nippon Sanso Shenwei (Shanghai) Medical Gas Co. Ltd. and Beijing Orient Medical Gas Co. Ltd. to develop and distribute oxygen therapy services for the home use market i n Beijing. The company was formerly known as De-Haier Medical Systems Limited and changed its name to Dehaier Medical Systems Limited in June 2005. Dehaier Medical Systems Limited was incorporated in 2003 and is based in Beijing, the People?s Republic of China.

Top Penny Stocks For 2014: Bristow Group Inc (BRS)

Bristow Group Inc., together with its subsidiaries, provides helicopter services to the offshore energy industry primarily in Europe, West Africa, North America, Australia, and internationally. Its helicopters are used principally to transport personnel between onshore bases and offshore platforms, drilling rigs, and installations, as well as to transport time-sensitive equipment to offshore locations. The company also offers helicopter flight training services to commercial pilots and flight instructors through its Bristow Academy with facilities in Titusville, Florida; Concord, California; New Iberia, Louisiana and Gloucestershire, England. In addition, it provides military training; and helicopter repair, engineering support, aircraft leasing, airport management, and search and rescue services. Bristow Group provides its helicopter services to integrated, national, and independent oil and gas companies. As of March 31, 2011, it operated a fleet of 569 aircraft. The comp any was founded in 1969 and is based in Houston, Texas.

When Market Share Matters -- Or Not

You can't discuss smartphones and tablets without coming back to Apple (NASDAQ: AAPL  ) and Samsung. The two giants are crushing the mobile market with impunity, owning about half of the world's device sales between them (not to mention all of the mobile profits).

But why should investors bother to look at market share figures? Isn't the mobile industry big enough for the two of these dueling cowboys -- and more besides?

In this video, Fool contributor Anders Bylund explains why market share matters, but maybe not for the reasons you thought. This is not a game of thrones as much as it is a battle for survival if you're not part of the ruling class. That's bad news for BlackBerry (NASDAQ: BBRY  ) as well as the odd couple of Nokia (NYSE: NOK  ) and Microsoft. The only time the king really matters is when there are no dukes getting within grabbing distance of his crown. Look to Netflix (NASDAQ: NFLX  ) for a modern example of this. In both cases, life is exceedingly hard for the little guys.

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Why Deckers Shares Got Decked

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of footwear specialist Deckers Outdoor (NASDAQ: DECK  ) sank as low as 10% today after its quarterly results disappointed Wall Street.

So what: The stock has rebounded nicely in 2013 on signs of improving fundamentals, but today's second-quarter results -- loss of $29.3 million on a revenue drop of 3% -- coupled with a market-missing forecast reignites worries over waning Ugg popularity. Additionally, gross margins declined 110 basis points over the year-ago period, triggering concerns that management is overinvesting in its less-profitable retail business.

Now what: Management now expects 2013 EPS and revenues to both grow about 8%, implying earnings of $3.73 per share and sales of $1.52 billion, versus Wall Street's view of $3.99 and $1.51 billion. "We remain optimistic about our ability to expand sales and margins as we head into our highest volume sales quarters, and we continue to be excited about the many long-term growth opportunities that we believe exist for our business," said CEO Angel Martinez. With the stock still well off its 52-week lows and trading at a P/E above 15, however, I'd wait for more of a pullback before buying into that optimism.     

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Netflix Should Kill DVDs

If I'm going to upset you -- and I will -- I may as well cut to the chase: Netflix (NASDAQ: NFLX  ) should just get rid of its DVD business.

This is going to be controversial, but I have a feeling you'll agree with me if you're patient enough to hear me out to the end.

Netflix doesn't need its DVD business, and at this point its bread-and-butter appendage is simply holding the company back from its true potential.

Stop shaking your head. Give me a chance to explain. Besides, I have one more point that will rattle you.

Netflix was right about Qwikster
Deep down inside, Netflix has always wanted to unload its mail-based DVD business. Qwikster is now a punch line. It's hard to write the word "Qwikster" without following it up with "fiasco." However, Netflix's plan to separate its streaming business from its original mail-order rentals operations would've been the right call.

Netflix was just early. Consumers were just stupid.

Oh, I just went from upsetting you to making you angry.

Well, let's assess the knocks on Qwikster. Members complained that they would be inconvenienced by having to maintain two separate accounts. The promise to add video games to Qwikster would've made it more competitive with DISH Network's (NASDAQ: DISH  ) Blockbuster and Coinstar's (NASDAQ: CSTR  ) Redbox that offer console title rentals, but subscribers outside of diehard gamers didn't seem to care. Folks were just starting to overcome Netflix's decision to stop offering streaming at no additional cost to unlimited disc-based plans, and now Qwikster was asking them to separate their streams from their discs.

Members complained. Netflix listened. How did subscribers repay Netflix?

Well, there were roughly 15 million disc-based subscribers at the time. Killing off Qwikster didn't stop the exodus.

Quarter

DVD Subs

Change

Q3 2011	13.93 million	--
Q4 2011	11.17 million	(2.76 million)
Q1 2012	10.09 million	(1.08 million)
Q2 2012	9.24 million	(0.85 million)
Q3 2012	8.61 million	(0.63 million)
Q4 2012	8.22 million	(0.39 million)
Q1 2013	7.98 million	(0.24 million)

Source: Netflix.

Netflix has lost nearly half of its DVD subscribers over the past two years. Do you really think it would've lost more if it had gone through with the Qwikster move? I doubt it. If anything, a dedicated site would've helped build some brand equity. Now when folks hear "Netflix," they think "streaming." It's certainly not "discs."

Stream on
Since its inception, Netflix has delivered a total of 4 billion DVDs. That's a lot of discs over the span of more than a decade. Well, it happened to serve more than 4 billion hours of streams during the first three months of this year alone.

There are now 36.3 million streaming accounts worldwide, and that's more than 80% of Netflix's audience. Are we really going to worry about the feelings of the 8 million disc-based customers who may very well be just 4 million disc-spinning fans in two years? What if the DVDs are keeping streaming from improving?

A sound argument can be made that Netflix doesn't need to give up its DVDs. It's still a cash-cow business, and it wasn't until last year's final quarter that Netflix's domestic streaming business surpassed DVD rentals in contribution profit. However, that line item has been shrinking with every passing quarter at Netflix. Why wait until all the squeezing is done? Why not cash in by selling its mail-order business to Coinstar, which would combine the regional distribution centers with its thriving kiosk business or Blockbuster as it tries to offset store closures?

Netflix's DVD business is valuable, but it will become less and less worthy with every passing quarter.

Perhaps more importantly, studios need to know that Netflix is willing to work without a net. They will never give Netflix fresh content that studios know folks can get in Netflix's red signature mailers. It doesn't matter that more than 75% of them don't have a disc-based plan. The possibility is there. However, if you remove that access from the equation, it then becomes a question of whether the content creator wants to reach Netflix's 36.3 million-strong -- and growing -- user base.

I believe that studios would be more likely to crack open their digital catalogs for Netflix if that was the only way in. Yes, I'm going there. Netflix would have a more complete streaming catalog if it had unloaded Qwikster.

Keeping DVD plans around has slowed both Netflix's progress and its destiny.

If you still don't believe me, consider Apple (NASDAQ: AAPL  ) . Do you think it would have a nearly complete digital music library if it also sold CDs? You know the answer, even if you're in denial. The labels realized that digital was the only way into iTunes, so they didn't hold back on content. If Netflix wants to be the iTunes of video streaming, it may as well start acting that way.

Nothing but Netflix
Are you convinced? Have you at least had your beliefs challenged? Share your thoughts in the comment box below.

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Marriott's Timeshare Business Is Looking Great

It may be surprising to hear that hospitality and tourism are the fastest-growing industries in the world. One of the biggest names in the industry, unsurprisingly, is Marriott, which represents a variety of names in hotels, motels, and resorts around the world. As a spin-off from Marriott In late 2011, Marriott Vacations Worldwide (NYSE: VAC  )  is a business that specializes in vacation ownership, otherwise known as timeshares. While thoughts of the quintessential timeshare salesman may bring a sting to your gut, this business offers investors bright prospects on the back of a booming industry. Here's what you need to know about Marriott Vacations.

(Time)Shares up
Marriott Vacations posted impressive earnings last week, with second-quarter profits up sixfold, and revenues growing in the double digits.

Specifically, the company delivered $421 million in sales -- up 10% from $383 million in the year-ago quarter. The Street was expecting in the low 400s, giving investors a cause to rally the stock to its highest price since the IPO in November 2011.

At the bottom of the income statement, things looked even better -- Marriott Vacations posted adjusted earnings of $0.73 per share. This came in substantially higher than the year-ago earnings of $0.33 per share, and far above Wall Street estimates of $0.48 per share. Management credits the growth to increased demand and a favorable mix of inventory.

Marriott Vacations holds two valuable names in the hospitality industry -- the namesake, Marriott Vacation Club, and its premium sister, Ritz Carlton Destination Club. The recent success of the two brands led management to bump up full-year guidance to $1.94 -$2.10 per share, up $0.07 on either end from previous estimates.

Clearly, the company has prospered since its separation from the mothership, but can industry tailwinds continue to push this stock higher?

Future planning
Some investors were concerned with the company's lower year-over-year contract sales and tour volumes -- elements that suggest business will soften going forward. However, as noted by Cantor Fitzgerald, the company's strategies have boosted margins, as evidenced by the 8% growth in room efficiencies and shifts in owner preferences. Investors should also note that the lower contract sales were mainly a matter of closing underperforming sales centers in the Asia-Pacific region.

With the exception of some softness in Europe, the company appears to be firing on all cylinders. 

On a free cash flow basis, the company is expecting in the neighborhood of $120 million to $135 million. This implies a P/FCF of 11.63 times, to 13.08 times. Marriott Vacations is the only current pure play timeshare stock (there is another on the way -- Diamond Resorts International), which makes comps somewhat difficult. And, despite its fantastic growth since its IPO, Marriott Vacations does not appear to be overvalued, especially given the long-term outlook for the industry. The company has found ways to cut costs, as the separation from Marriott International is further and further in the rear view. These efforts should continue to save money over the next few years, especially on a tax basis.

Trading at over 18 times forward earnings, Marriott Vacations is slightly more expensive than its parent company, but the bottom line is that substantial growth tailwinds and wise management make this a compelling play for investors.

 

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Halliburton Pleads Guilty to Destroying Deepwater Horizon Evidence

On April 20, 2010, a massive explosion erupted on an oil rig in the Gulf of Mexico. The explosion, which killed 11 workers and resulted in the largest oil spill in U.S. history, took place on the Deepwater Horizon oil rig, which was owned and operated by Transocean on behalf of BP. The disaster, which stemmed from a blowout in a well that Halliburton (NYSE: HAL  ) had helped to construct, made international news and resulted in extensive follow-up investigations.

Today, a new development in the case emerged, as the Department of Justice announced that Halliburton agreed to plead guilty to destroying evidence after the company conducted its own internal follow-up investigation.

The evidence in question, says the DOJ, showed that on two separate occasions after the incident Halliburton conducted simulations to see if the use of 21 centralizers instead of six would have better ensured safety. Halliburton had previously recommended that BP use 21 of the stabilizing metal devices, but BP ended up using six. The results of each simulation showed that there was, in fact, little meaningful difference between the use of six and 21 centralizers. When the simulations showed this on two separate occasions, the results were ordered to be destroyed by Halliburton.

By signing the guilty plea agreement, Halliburton admits to the criminal nature of its activity and will pay the maximum fine. The company may also be on probation for up to three years and separately made a $55 million contribution to the National Fish and Wildlife Foundation. 

Why D.R. Horton Is Down in the Dumps

The housing recovery may well be under way, but nobody said it'd be smooth sailing. If there was any doubt about that, then the performance of D.R. Horton's (NYSE: DHI  ) shares today should clear things up. After the nation's largest homebuilder reported earnings for the fiscal third quarter this morning, investors and traders responded by sending its shares down by more than 8%.

You'd be excused for concluding that the market's response to D.R. Horton's earnings was an overreaction. For the three months ended June 30, the company earned $146 million, or $0.42 per diluted share. While this was 97% less than the same period last year, it handily beat the consensus estimate of $0.34 per share. In addition, the year-over-year comparison is rendered largely meaningless by a $716.7 million tax benefit the company recorded in the third quarter of 2012.

More importantly, orders for new homes -- which is a key leading indicator for homebuilders given that they don't book revenue until closing -- climbed by 12% over the quarter to 6,822. By comparison, PulteGroup (NYSE: PHM  ) , which also reported earnings today, said its orders declined by a similar magnitude. On top of this, as you can see in the chart above, D.R. Horton increased the number of homes it closed on by 30% to 6,464, and its backlog shot up by 36%.

All things considered, in turn, at least from a fundamental perspective, it was a good quarter for the megahomebuilder.

So what are investors all worked up about today? It's hard to say, other than to assume that it had to do with Pulte's lackluster performance on top of the Commerce Department report yesterday, which showed that new-home prices declined last month and could thereby threaten homebuilder margins going forward.

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