Best Stocks For 2014, Best Stocks To Buy For 2014: April 2014

Wednesday, April 30, 2014

Costco Is Worth the Premium

There is no doubt about the fact that a sizeable chunk of the world population has been touched by the Internet and that people have now gone online for most things like shopping, medical help and even raising funds for start-ups. While this is definitely a positive step in terms of technology advancement, this shift to the online world has done reasonable damage to the offline retail industry comprising of huge retail chains like Wal-Mart (WMT), Target Corp (TGT) and Costco (COST). However, Costco has been above the rest in terms of delivering consistent results because of its robust membership model, high employee morale and effective cost management.

Reasonable Numbers

For the second quarter of 2014, Costco's earnings slid to $1.05 per share from $1.24 per share, a year ago. Though the company's last year earnings were impacted by a $52 million or $0.14 per share tax benefit, the current earnings are still a few notches below the prior-year period. Sales were up by approximately 6% in quarter two on an overall basis and 3% on a comp basis. As management pointed out, the four-week period between Thanksgiving and Christmas saw weak sales as compared to the previous year mainly because of a snowy weather prevalent at that time.

The Might of e-Commerce

Besides the large collection of items that online websites boast, these e-commerce websites have also introduced the customers to a plethora of discount deals and other membership benefits. As such, customers have become more focused on the value-for-money aspect with regard to their purchases and scouting for the best deals. Costco is a fantastic alternative in brick-and-mortar retail stores, whose membership model bestows privileged benefits to customers at reasonable cost and thus, matches up with the might of e-retailing.

Costco's Membership Model Is a Hit

The data for the second quarter shows the effectiveness of Costco's membership model. New membership signups in the second quarter company-wide were up 13% year over year while the overall membership fees were up by 4% yyear over year to $550 million. Also, the paid executive memberships stood to the right of 14 million in the quarter, approximately an increase of 2,00,000 since the end of first quarter; it is significant to note that this type of membership represents approximately two-thirds of Costco's total sales.

I have given all these numbers to highlight quite an important point that a major chunk of this retail giant's revenue comes from membership fees as compared to product sales, unlike other chains like Wal-Mart and Target Corp. This is one of the reasons that Costco's quarterly result is notches better than Wal-Mart, which reported a decline of 0.4% in same-store sales for 14 weeks ended on Jan. 31. The reason that Wal-Mart's earnings beat consensus estimates by a whisker was the fact that analysts had lowered their expectations after the announcement of guidance warnings made by the company.

Wal-Mart's Dividend Announcement Was a Shocker

Wal-Mart's performance was affected by similar factors as Costco including harsh weather conditions, fluctuation in currency and strengthening presence of online retail enterprises. However, the event that actually jolted the investor community was an increase of a mere 2% in annual dividend, a considerable aberration from Wal-Mart's strong dividend history. As per past data, this dividend increase is the smallest in the last 10 years and could imply a negative foreseeable future.

This being said, it should also be factored in that brick and mortar retailers faced certain generic unfavorable conditions in December and this poor performance could be a one-off case. It is actually impressive to see that Wal-Mart is at least stepping up its game in e-retailing, which is under its control and can be leveraged. For instance, this report points out the company's plans to push for an e-retailing business model in India similar to that of Amazon (AMZN) and eBay (EBAY). This is a significant step from the company considering the fact that it failed to establish brick and mortar stores in the country after hanging there for almost six years.

Final Words

It is evidently clear that Costco's strength revolves around it membership model and the ability to provide a no-frills shopping experience to its privileged members at a low price. Additionally, the retail giant is making strides in the organic foods business, a growing segment of the grocery industry. As Richard Galanti pointed out in the earnings call: The organic business is big and growing fast and will provide a robust revenue stream for the future.

To sum it up, Costco is an ideal candidate for investment for the following reasons:

1. The threatening growth of online retail business has already done good damage to the brick-and-mortar stores. However, Costco's strong membership model has enabled it to build and sustain its revenues, making it the best pick among all the retail chains.

2. For the quarter, comparable store sales grew by around 3%, in spite of a weak economy and unfavorable business conditions. The primary reason for this growth is the huge discount, i.e. around 55% that members can avail of by purchasing from warehouse clubs. Thus, low prices and commendable quality have been consistently upheld by the company through its warehouse purchase model, and it is going to be a key element of Costco's future growth.

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Tuesday, April 29, 2014

5 Worst Sectors to Avoid This Week

Popular Posts: Hottest Energy Stocks Now – RIG SDRL TDW ESV7 Biotechnology Stocks to Buy Now10 Best “Strong Buy” Stocks — POWR EQM TPL and more Recent Posts: Hottest Healthcare Stocks Now – CLDX LCI IMGN ALNY Biggest Movers in Financial Stocks Now – FLT AFL GNW AGO Biggest Movers in Technology Stocks Now – ULTI FLDM CDNS LNKD View All Posts

According to the Portfolio Grader database this week, the reit, metals and mining, water utilities, independent power and renewable electricity producers and energy services sectors are at the bottom.

The reit sector is dragging, with 80% of its stocks (124 out of 155) rated a “sell”. Hatteras Financial (), DDR Corp. () and Health Care REIT, Inc. () are pushing the sector down with F grades. The worst performer in this sector is Hatteras Financial, which saw its price sink 26.9% in the last 12 months.

The metals and mining sector is trailing behind others this week, with 67% of its stocks (61 out of 91) rated a “sell”. Newmont Mining Corporation (), Gold Fields Limited Sponsored ADR () and Schnitzer Steel Industries, Inc. Class A () are dragging down the sector overall, each earning a low grade of F. Over the last 12 months, Gold Fields Limited Sponsored ADR is the worst performer in this sector, with a 71.3% decline.

The water utilities sector looks weak, with 67% of its stocks (4 out of 6) rated a “sell”. With an overall grade of D, Companhia de Saneamento Basico do Estado de Sao Paulo SABESP Sponsored ADR (), SJW Corp. () and Aqua America, Inc. () are weighing down the sector. Companhia de Saneamento Basico do Estado de Sao Paulo SABESP Sponsored ADR is performing worst overall in the sector, with an 81.9% decline over the last 12 months.

The independent power and renewable electricity producers sector is lagging this week with 67% of its stocks (6 out of 9) rated a “sell”. Among independent power and renewable electricity producers stocks, TransAlta Corporation (), Empresa Nacional de Electricidad S.A. Sponsored ADR () and Calpine Corporation () are lingering near the bottom with grades of F. The worst performer in this sector is TransAlta Corporation, which saw its price sink 39.4% in the last 12 months.

With 60% of its stocks (38 out of 63) rated “sell,” the energy services sector is struggling this week. Out of the energy services stocks, McDermott International, Inc. (), ION Geophysical Corporation () and Tidewater () are near the bottom with F’s. McDermott International, Inc. is the worst stock in its sector, with the company’s share price falling 29.1% in the last 12 months.

Louis Navellier’s proprietary Portfolio Grader stock ranking system assesses roughly 5,000 companies every week based on a number of fundamental and quantitative measures. Stocks are given a letter grade based on their results — with A being “strong buy,” and F being “strong sell.” Explore the tool here.

Monday, April 28, 2014

Treasurys sell off as week of data begins

NEW YORK (MarketWatch) — Treasury prices slid Monday ahead of a slew of data releases that market participants expect to show a revival in springtime growth, after a cold winter that was blamed for temporarily choking off economic improvement.

On deck this week is a report on first-quarter gross-domestic product on Wednesday, which is forecast to show that U.S. growth slowed substantially in the first quarter. But as the winter weather thawed, more recent numbers like an April nonfarm payrolls report on Friday may show a bounce back, with activity that was delayed in the first quarter being pushed to the second quarter.

/quotes/zigman/4868283/delayed 10_YEAR 2.71, +0.05, +1.88% 10-year Treasury yield

"My belief is that we are going to receive a 'data bounce-back' due to weather tainted figures we saw in the last several months," said Thomas di Galoma, head of fixed-income rates at ED&F Man Capital Markets, in a note to clients.

The 10-year Treasury note (10_YEAR) yield, which rises as prices fall, was up 3.5 basis points on the day at 2.702%. The benchmark yield has largely been trading within a range between 2.60% and 2.80% over the last few months, but a spurt of positive data could prompt the yield to break out of its range higher, according to di Galoma.

The 30-year bond (30_YEAR) yield rose 4.5 basis points to 3.486% and the 5-year note (5_YEAR) yield was up 2 basis points at 1.748%.

Treasurys mostly recovered from morning losses as stocks began selling off mid-day, but the fixed-income market once again turned lower, finishing the session near their intraday lows, as equities recovered to finish the day mostly higher .

"It's more of a stocks story," said Michael Pond, head of global inflation-linked research at Barclays.

Treasury losses had accelerated Monday morning after data showed pending home sales rose for the first time in nine months. An index kept by the National Association of Realtors rose by 3.4% in March to 97.4, up from 94.2 in February.

The surge in economic releases this week is thought to inform the market on when the Federal Reserve may begin raising its key lending rate, which could bring Treasury yields higher along with it. The central bank has said it will look at a number of indicators about the labor market's health and the level of inflation as it decides when the pace of economic growth justifies raising rates.

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Since the Fed began shifting the market's focus toward its guidance on the future path of the fed funds rate, investors have tended to price in earlier rate hikes as the economy improves, and push back expectations amid soft numbers.

"Volatility is apt to increase when economic data of interest to the Fed and markets point to potential changes in the policy outlook. Nevertheless, volatility will likely remain contained by very powerful short- and long-run forces related to the economic outlook," said Tony Crescenzi, market strategist and portfolio manager at Pimco, in a note to clients. He added that because the policy rate is likely to remain below the long-term normal in this economic cycle, investors shouldn't take a "sky is falling approach" of worrying too much about rate hikes.

Treasurys prices rose for four sessions last week as investors flocked to the safety of U.S. government debt amid fears of escalating violence between Ukraine and Russia. On Sunday, pro-Russia rebels in eastern Ukraine publicly showed western military observers who they had taken hostage. Meanwhile, the U.S. imposed new sanctions on Russia.

Wolff: Publishers as beggars

Last week, a letter arrived from my friend Jacob Weisberg, who runs Slate, the venerable Web magazine. Weisberg's letter was not to me, specifically, but to friends of Slate, proposing — or really imploring — that we join a special category of loyalists and voluntarily contribute to the magazine. Like NPR or PBS. Or crowdfunding.

Such a plea seemed, on the face of it, alarming, an admission of flaws in the basic business. If Slate's virtues, intelligence and style didn't immediately move us, we should contribute $50 a year if for no other reason, the letter said, than as a personal favor to Jacob. (A variety of letters are going around from other Slate managers asking "friends" to subscribe as a personal favor to them. I have written my check.)

But the other detail in the letter that jumped out at me was Jacob saying he had been at Slate for 17 years. This is long enough to be a publishing epoch. During it, Slate has gone from one of the first indigenous Web publishing ventures to one competing with ever-more-indigenous players such as BuzzFeed, The Huffington Post and Upworthy, hardly recognizable in traditional publishing terms at all.

Slate has always been something of an experiment. It began as a way for Microsoft to help prove its Internet bona fides. Microsoft hired a noted editor, Michael Kinsley, and gave him free rein to translate best practices of intelligent magazines into a digital format. (This was successful enough for Slate to become, for many years, a leading source of talent for many prestigious mainstream publications.) When it outlived is usefulness to Microsoft, it was adopted by the Graham family, then-owner of The Washington Post. It is still owned by the Grahams after the sale of the Post last year to Amazon founder and CEO Jeff Bezos, but it likely has outlived its usefulness to them.

So the experiment is, in a sense, ongoing: Can Internet economics support a class publishing venture?

Perhaps this is an unfair test. After all, in any 17-year perio! d in my long magazine career, I have seen a wide variety of inspired magazines hit the dust. On the other hand, the analogue world, to give it its due, has certainly supported many literate and artful magazines, something that seems less true about the Internet. It disgorges information, useful and useless, but not taste or sensibility.

The new membership program at 'Slate.'(Photo: Slate)

Now, taste and sensibility have been things that advertisers paid a premium for — a model Slate thought could be transferred to the Internet. But either there is a paucity of taste and sensibility on the Internet, or it doesn't shine brightly enough to be a digital business. Hence, publishers have adjusted to the lack of premium advertising by becoming vast traffic funnels instead of exclusive harbors.

Some publishers are trying pay walls to help make up for lost advertising, but Weisberg, in his letter, said the obvious: Pay walls are difficult to implement, and you risk losing much of what you've gained.

Even The New York Times, which has a successful pay wall, is now resorting to a premium, pay-more-to-identify-more, plea.

In part, this is a hopeful new idea in publishing, that there might be something beyond advertising and circulation and, behaviorally, that there is something beyond reading (another imperiled part of the publishing model). That belonging is a business.

Or, as with NPR and PBS, that liberal guilt might become another revenue stream.

On the other hand, what also is suggested here, or what ought to be considered, is that the two pillars of conventional upscale publishing — brand advertising and discrete audiences — don't work very well on the Internet.

High-margin brand advertising is an amalgam of not only ! marketing! strategy but of corporate ego — it needs to make the advertiser as well as the audience feel good about themselves. Nobody has yet figured out quite how to do this among deficit-attention, low-margin, buy-this-product junk ads that populate the Internet.

As for discrete audiences, particularly ones not defined by interest, but by, well, taste and sensibility, that's a snobbery that's almost anti-digital, partly explaining the rise of such leveled, mass-market panderers as BuzzFeed. It used to be that the extraordinary accomplishment of a magazine was to not only bring together a specific audience but also to define it — often in a way that it did not even know itself — give it purpose, indeed, membership. But the vast new business of Internet middlemen now claim, quite convincingly, that they can, with all the Internet's data markers, identify and reproduce any audience at will, without the advertiser having to pay the publisher a premium price for reaching this unique audience.

Audiences are basic commodities, easily reproducible.

There remains a grit-their-teeth belief among high-end publishers that there will be a way to become self-sustaining and even figure out a growth model in the digital world, that it is a process of experimentation and that, even after 17 years or so, the Internet is still young, that if the audience is here, advertising — profitable advertising — must eventually follow. And subscriptions. And premium memberships. And… and…

But, too, maybe the experiment proves that print was better.

Ford Motor Company's Overlooked Vehicle Is Solving One of Its Biggest Problems

Ford's 2014 Fiesta. Source: Ford Motor Company.

Man, oh man, does my generation make for an easy target or what? The millennials have been called many things; most descriptions aren't the most pleasant. We've been called narcissistic, selfish, lazy, and entitled, and many assume the most important thing on our agenda is capturing the next viral selfie pic.

Millennials are unique, it's true, and it poses a serious problem for automakers trying to connect with and attract America's younger car buyers. Ford (NYSE: F ) appears to be a step ahead of the automotive industry and is using a unique strategy with an often overlooked vehicle, at least in America: the Fiesta.

Fiesta movement
Unique marketing has been vital for the Fiesta's connection with millennials. Ford unleashed what it called the Fiesta movement years ago; the original strategy followed a number of "agents" which documented their experiences with the Fiesta through paid media, social media, and experiential events.

It was a hit, and agents traveled over 1 million miles in the Fiestas, created more than 50,000 pieces of original content, which generated nearly 30 million views through social media. Ford's back at it and is currently working through its next Fiesta marketing movement.

With the Fiesta helping lead the charge, Ford grew its retail share of the millennial market faster than any other automotive brand since 2009, according to Polk's retail registration data through mid-2013. Ford grew its retail share among car buyers between the ages of 18 to 34 years old by 80%, compared with 35% for the overall industry -- a pace that would soon make it the top choice for young buyers.

Why it matters
This is a huge deal for the folks at the Blue Oval for a couple of reasons. One, with automakers' future bloodline of car buyers turning to other modes of transportation at a faster rate, being the top auto choice for millennials will be vital to growing market share.

Another big reason attracting young buyers is key to a bright future is because the automotive industry is extremely loyal. Once consumers have bought into a brand, more often than not, they stick with that company for their second purchase -- a purchase that is typically more profitable.

So how does strong automotive loyalty help Ford more than competitors? Simple. Over the past couple of years, Ford has topped the industry in consumer loyalty. The folks at the Blue Oval are attracting younger buyers at a faster pace than competitors, and keeping more consumers within their brands -- a virtuous cycle that bodes well for the company's future.

While that's all well and good, Ford isn't resting on its laurels and is planning to take it one step further with the Fiesta. Meet the Fiesta ST, and as Ford cleverly put it, the performance-oriented subcompact is going to need a bigger trophy room.

Enter the Fiesta ST
Ford's banking that its ST version of the Fiesta is going to further the base model's gains in regions and age groups typically dominated by import brands.

"Common knowledge had it that this group didn't care about driving, or if they did, they opted for import brands," said Amy Marentic, Ford marketing manager, global small and medium cars, in a press release. "But the feedback we're getting from customers and the awards Fiesta ST keeps winning prove again and again we really accomplished something special."

Since hitting dealerships late last summer the 2014 Fiesta ST has racked up an impressive 22 awards across the industry through a combination of factors: performance, handling and value, according to Ford. Not only are critics impressed, but the Fiesta ST is also taking the base model's accomplishments with younger buyers a step further.

Consider that 50% of Fiesta ST buyers are under 35 years old, compared with just 23% of overall Ford brand customers. The average age of buyers is 39, which is 10 years younger than Ford's mainstream brand. Furthermore, these younger buyers are more affluent; 54% have at least a bachelor's degree and 30% have a household income of at least $100,000.

Ford's done an incredibly impressive job turning its business around since the recession, which forced two of its competitors into bankruptcy. While sales of the Fiesta don't compare with larger sedans in the U.S., it was crowned the best-selling subcompact globally last year with over 735,000 registrations. Even without huge sales figures in the U.S. market, Ford is taking a vital step here with its strategy to solve one of its most important problems: attracting new and younger buyers.

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Sunday, April 27, 2014

5 REITs to Trade for August Gains

BALTIMORE (Stockpickr) -- A handful of REITs are setting up for big moves this August.

While most investors have been fixated on the stock market's climb in 2013, many market participants haven't noticed the roller coaster ride that real estate investment trusts (better known as REITs) have seen this year.

REITs started out the year as a favorite asset class, but things took a turn at the end of May as real estate-linked assets corrected much harder than stocks. As I write, the SPDR Dow Jones REIT ETF (RWR), for instance, is only up 6.8% year to date -- compare that with the 18% rally in the S&P 500.

Despite that underperformance, as a group, REITs are showing far more technical diversity than any other sector -- and that means that there are trades to be made right now. That's why we're taking a technical look at the trading setups brewing in five REITstoday.

For the unfamiliar, technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock's price action and trends. Once the domain of cloistered trading teams on Wall Street, technicals can help top traders make consistently profitable trades and can aid fundamental investors in better planning their stock execution.

So, without further ado, let's take a look at five technical setups worth trading now.

Extra Space Storage

Up first is Extra Space Storage (EXR), a $5 billion self-storage facility owner. EXR has posted strong performance for 2013, rallying close to 19% since the calendar flipped over to January. That's more or less on par with the performance of the S&P, but it's a whole lot stronger than most REITs. That outsized relative strength looks ready to carry over to the second half of the year.

That's because EXR is currently forming an ascending triangle pattern, a price setup that's formed by a horizontal resistance level to the upside and uptrending support to the downside. Essentially, as shares of EXR bounce in between those two technical levels, they're getting squeezed closer and closer to a breakout above resistance -- at $45 in this case. When that breakout happens, traders have a buy signal in shares.

EXR's pattern isn't exactly textbook, but that doesn't change the trading implications in this stock. Momentum adds some extra confidence to EXR's ability to break out; 14-day RSI turned bullish just last week. After EXR clears $45, keep a tight protective stop in place.

Pebblebrook Hotel Trust

Small-cap hotel investment REIT Pebblebrook Hotel Trust (PEB) is setting up a similar pattern to the one in EXR -- with a few exceptions.

PEB isn't forming an ascending triangle; support isn't in the same sort of uptrend in this stock. Instead, PEB is forming a rounding pattern with resistance at $28. Rounding patterns look just like they sound -- they indicate a shift in control from sellers to buyers. While this setup is most common as a "bottoming" pattern, PEB's price action doesn't change the implications if shares can break out above $28. That's our buy signal.

Whenever you're looking at any technical price pattern, it's critical to think in terms of buyers and sellers. Triangles, rectangles and other price pattern names are a good quick way to explain what's going on in this stock, but they're not the reason it's tradable. Instead, it all comes down to supply and demand for shares.

That resistance line at $28 is a price where there's an excess of supply of shares; in other words, it's a place where sellers have been more eager to take recent gains and sell their shares than buyers have been to buy. That's what makes the move above it so significant -- a breakout indicates that buyers are finally strong enough to absorb all of the excess supply above that price level. Wait for that signal to happen before you jump into this stock.

Newcastle Investment

You don't have to be an expert technical analyst to figure out what's going on in shares of Newcastle Investment (NCT) -- a quick glance at the chart will do. NCT has been in an uptrend since the end of December, rallying as it got pushed by tailwinds in the real estate sector and then spun off its residential financing unit into New Residential Investment (NRZ) in May.

Adjusting shares of NCT for the spinoff gives us the chart above.

As you might expect, the best time to be a buyer in NCT is on a bounce off of support. Buying off a support bounce makes sense for two big reasons: It's the spot where shares have the furthest to move up before they hit resistance, and it's the spot where the risk is the least (because shares have the least room to move lower before you know you're wrong).

The fact that NCT has managed to clear its previous swing high from May speaks volumes about this stock's relative strength right now. Historically, high relative strength tends to continue to outperform the market for another three to 10 months. That puts NCT owners in a good position for the second part of 2013.

MFA Financial

We're seeing the exact opposite setup in shares of MFA Financial (MFA). Unlike NCT, shares of MFA have been in a well-defined downtrend since the middle of May. That high probability range puts this stock's likely target price lower for the end of August.

Since the best time to buy an uptrend is at support, it makes sense that the best time to sell a stock in a downtrend is at trendline resistance. That's the exact level that MFA is testing this week. If you own MFA right now, it makes sense to be a seller on the first semblance of a bounce lower.

Momentum provides some extra confirmation here too. RSI has been suck down in bearish territory since the uptrend began in May. Oscillators like RSI tend to become range-bound when stocks' price action trends. I'd look for a move above 50 on RSI as a precondition to a move higher in price.

Retail Properties of America

Last up is Retail Properties of America (RPAI), a $4 billion trust that owns and operates shopping centers. RPAI is another bearish setup right now -- shares are currently forming a descending triangle, the opposite of the bullish setup we looked at in EXR. Here's how to trade it.

The descending triangle is a price setup that's formed by horizontal support -- in this case at $14.25 -- and downtrending resistance. As shares get squeezed closer to that support level at $14.25, the probability is increasing that we'll see a breakdown below support. When that happens, it makes sense to sell (or short) shares. If you decide on the latter, it makes sense to keep a protective stop on the other side of the 50-day moving average -- it's acted as a decent proxy for resistance over the course of this setup.

Don't be early on this trade. The broad market is still in a primary uptrend, and that makes any shorts counter-trend trades right now. RPAI doesn't become a high probability downside name until that excess demand at $14.25 gets absorbed by sellers.

To see this week's trades in action, check out the Technical Setups for the Week portfolio on Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.

Amazon.com: This Teflon Stock Hits a New High

On Thursday afternoon, Amazon.com (NASDAQ: AMZN ) reported a small loss for Q2, missing analyst estimates for EPS of $0.05. Revenue grew 22% year over year to $15.7 billion, meeting analyst expectations. The strengthening of the U.S. dollar over the past year was partly to blame; holding exchange rates constant, revenue growth would have been 25%.

The outlook for Q3 was also disappointing. Management expects revenue to grow in the range of 12%-24% year over year, implying further deceleration at the midpoint. Moreover, Amazon expects to post an operating loss of $440 million to $65 million. The company has recently been offering very conservative guidance on operating income, but given the magnitude of the projected loss, it seems unlikely that Amazon will reach breakeven this quarter.

Amazon's mixed results and weaker-than-expected guidance led Therese Poletti of MarketWatch to state that "Amazon investors may start to get fed up." Poletti notes that Amazon trades for more than 100 times forward earnings estimates, far ahead of e-commerce rivals like eBay (NASDAQ: EBAY ) . Yet while Amazon initially dropped after-hours following the report, the stock surged to an all-time high on Friday.

AMZN Chart

Amazon.com Five-Year Price Chart. Data by YCharts

For now, Amazon seems like a "Teflon stock": bad news slides right off. Most Wall Street analysts seemed to ignore or discount the bad aspects of Thursday's report, instead focusing on positive operating income, increases in gross profit, or other factors that seem more bullish.

However, with Amazon's market cap now approaching $150 billion, the company will have to produce tens of billions of dollars of annual cash flow at some point down the road to support long-term share appreciation. None of Amazon's businesses seem likely to produce this level of profitability in the foreseeable future. Investors should instead consider locking in profits now.

Bright spots
There certainly were some bright spots in Amazon's earnings report. While the international segment is being weighed down by currency fluctuations and economic weakness abroad, North American sales grew an impressive 30% year over year, showing some acceleration from the prior quarter.

That said, growth in the "electronics and general merchandise" category -- which makes up about two-thirds of Amazon's total sales -- is clearly on a downward trajectory. North American sales in that category grew 31% last quarter, after growing 41% in Q2 2012 and 67% in Q2 2011. As this category continues to mature, its growth rate will moderate even further.

A similar trend has already played out in the media business, where Amazon got its start. Despite investing lots of money in the Kindle line of e-readers and tablets in order to drive content sales, North American media sales have grown by just 15% year to date, following 17% growth last year.

20% growth is unsustainable
Many analysts seem to expect Amazon to continue growing the top line by 20% annually for many more years. That projection implies that Amazon will be able to do something no other retailer has ever achieved, by defying the natural pattern of slowing revenue growth caused by scale. (Think of it this way: If you have $50 billion in annual sales, you can grow by 20% by adding $10 billion the next year; if you start with $200 billion in annual sales, you would need to add $40 billion in one year to hit 20% growth.)

Wal-Mart (NYSE: WMT ) , which today seems like a lumbering behemoth, was once in the position that Amazon occupies now. In the early 1990s, Wal-Mart regularly grew revenue by more than 20% annually, and it even achieved revenue growth of 20% in FY 2000, when sales jumped from less than $138 billion to $165 billion. However, from that point onward, Wal-Mart's revenue growth rate has inexorably moved toward the low-mid single digit range that is normal today.

The same process is bound to play out at Amazon, and the only question is how quickly growth will decelerate. If you measure Amazon by "gross merchandise value" by including total sales generated by third-party sellers on Amazon's site, Amazon already generates nearly $100 billion in annual sales (or more, based on some estimates). Just as Wal-Mart's growth eventually hit a wall as it ran short of new markets and categories to penetrate, Amazon's will, too.

Foolish bottom line
I expect Amazon's revenue growth rate to slip below the 20% threshold for good in the next two to three years. At some point further down the road -- perhaps 10 years from now, perhaps 15 -- the growth rate will drop into the single digits.

There's nothing unusual or "bad" about any of this; Amazon.com's business is clearly very healthy. The problem is Amazon's runaway stock price. Not only does the stock have a forward P/E above 100, but it would have a very high valuation even if operating margins immediately returned to historical highs.

Analysts' uber-bullish expectations are setting up long-term investors for disappointment down the road. The company's long-term upside simply cannot justify today's stock price. Eventually Amazon's Teflon will wear off, and when it does, the stock is likely to drop significantly.

Amazon and Wal-Mart are locked in a battle for retail supremacy. If you want to learn more about how Amazon and another mass retailer are challenging Wal-Mart's dominance, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.

Saturday, April 26, 2014

Smartphone Screen Size: What Will Apple Do Next?

The trend is unmistakable: Smartphone screens are getting larger and larger. Where will it all end?

That was one of the questions addressed recently at CE Week in New York City. According to Mashable, which hosted a panel on "The Battle Over Smartphone Screen Size," it's impossible to buy a top Google Android phone these days with a screen smaller than 4.7 inches. Apple (NASDAQ: AAPL ) is still lagging in this area -- its iPhone 5 finally stepped up to a 4-inch display -- but there's speculation it will have to go larger as well.

Our roving reporter Rex Moore was in New York, and spoke with Mashable's Lance Ulanoff about Apple's next step in screen size for the iPhone and iPad.

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Corvette unveiled for Atlantic, Pacific coasts

The East Coast is about sophistication. The West Coast is about fun and adventure.

The East Coast is about where you went to college. The West Coast is about, well, what kind of car you drive.

Hoping to appeal to both, Chevrolet just unveiled two special editions of the 2015 Corvette Stingray. The Atlantic convertible bespeaks of luxury while the Pacific coupe plays up performance. They go on sale later this year, having showed up last late year at the SEMA aftermarket parts show in Las Vegas.

They are among the early special editions of one of the most highly sought-after sports cars on the market. They come early in the Stingray's young life, unusual given how special packages are usually used to freshen up aging models.

"One of the design goals for the Corvette Stingray was to provide customers with the flexibility to tailor the car to their personality," said Kirk Bennion, Corvette exterior design manager, in a statement. "The Atlantic and Pacific Design Packages were originally designed to showcase how the Stingray could be configured as a luxury sport GT car or as a high-performance motorsport car."

One of a pair of right- and left-coast-themed concepts, this Blade Silver Convertible model represents the Atlantic side, with sophisticated styling enhancements resembling the details and refinement of a private jet. The exterior wears new Carbon Flash Metallic front splitter, rocker extensions and rear lower diffuser, along with Fusion Gray headlamp housings and hood accents.(Photo: Frenak/Chevrolet)

The luxury GT-focused Atlantic convertible will have extra touches like a front Z06 splitter, gray exterior vents, hood graphics, chrome wheels, a special underhood liner, splash guards, rear license plate frame and a set of custo! m luggage.

Meanwhile, over at the Pacific coupe package, expect full-length racing stripes, CFZ carbon-fiber ground effects package, visible carbon-fiber roof panel, rear spoiler, red brake calipers, competition sport seats, custom splash guards, rear license plate frame and an indoor car cover.

Both come with an eight-speed automatic transmission with paddle shifters in addition to a standard seven-speed manual.

Visa: ‘Modest Bump in the Road,’ Immodest Drop

Visa (V) swiped its earnings card only to find out that it’s been rejected.

Bloomberg

The credit-card company said it earned $2.20 cents a share, beating forecasts for $2.18, on sales of $3.16 billion, below the Street consensus for $3.19 billion. Visa also said that revenue would slow during the second quarter as a result of sanctions imposed on Russia and a stronger dollar.

Jefferies’ Jason Kupferberg and team call Visa’s results a ‘modest bump in the road” but remain optimistic:

Shares of V will understandably trade lower…given: 1) narrowing of net rev growth guidance to the lower part of the range, 2) slightly more softening in x-border volume growth, 3) uncertainty re Russia, 4) obtuse messaging around tax rate guidance. However, we were encouraged by recovery in most all April metrics and higher operating margin guidance. The long-term story is intact.

The uncertainty around Russia could also weigh on MasterCard’s (MA) results when it releases earnings on May 1, Kupferberg says.

Shares of Visa have dropped 4.1% to $200.82 at 2:38 p.m., while MasterCard has fallen 4.2% to $71.25. Visa’s drop is also weighing heavily on the Dow Jones Industrial Average, thanks to its big drop, which is more than twice the size of Intel’s (INTC) 1.7% decline and Goldman Sachs’ (GS) 1.6% fall put together, and having the highest price in the price-weighted Dow. The Dow has fallen 0.8% to 16,362.27.

Thursday, April 24, 2014

Aussie Inflation Eases

Well, maybe it was too good to last. After the raft of better-than-expected economic data over the past couple of months, the Australian economy finally posted a key figure that fell short of the consensus forecast.

The country's Consumer Price Index (CPI), one of the main measures of inflation, rose 0.6 percent sequentially during the first quarter, following a rise of 0.8 percent in the fourth quarter of 2013.

The latest result was two-tenths of a percentage point below economists' expectations. On a year-over-year basis, the CPI increased by 2.9 percent, which was three-tenths of a percentage point below the consensus forecast.

The most significant price rises this quarter were for tobacco, up 6.7 percent, automotive fuel, which rose 4.1 percent, medical and hospital services, which climbed 1.9 percent, and pharmaceutical products, which increased by 6.1 percent.

Tobacco and medical expenses rose due to changes in government policy, including an increase in a federal excise tax for the former and a reduction in subsidies for the latter.

At the same time, furniture prices fell 4.3 percent, maintenance and repair of motor vehicles dropped 3.3 percent, and international holiday travel and accommodation decreased by 2.4 percent.

While consumers typically dread the prospect of inflation, when an economy is emerging from a period of weakness a rise in prices can actually signal a further rebound. And central banks have the ability to choke off inflation before it gets out of control, except during periods of stagflation, when weak growth is accompanied by rising prices.

By contrast, disinflation, or even outright deflation, can quickly spiral out of control. When that happens, even an extraordinarily accommodative monetary policy can do little to offset fearful human psychology, such as what occurred during the Global Financial Crisis.

In fact, inflation targeting is the p! rimary mandate of the Reserve Bank of Australia (RBA). The goal of the central bank's monetary policy is to achieve an inflation rate of 2 percent to 3 percent, on average, over the course of a cycle.

The RBA defines the inflation target as a medium-term average, rather than as a rate (or band of rates) that must be held at all times. This allows for flexibility in policymaking as the bank waits for the effect of a change in interest rates to flow through to the economy, which for some sectors can take as long as two years.

The central bank has been on a rate-cutting cycle since late 2011, with the last decrease in the benchmark cash rate this past August bringing short-term rates to an all-time low of 2.5 percent. Prior to the latest data on the CPI, traders had been betting the RBA would be forced to hike rates later this year, particularly after the surprise jump in the CPI for the fourth quarter.

But with the slackening in inflation more recently, most central bank watchers now believe interest rates will be stable for the duration of 2014. Indeed, financial markets are pricing in a 56 percent chance of a rate hike over the next year, down from 92 percent prior to the CPI release, according to data aggregated by Credit Suisse.

That's good news at this stage of the cycle because policymakers are keen for non-resource sectors to lead the economy now that mining investment is on the wane.

And a rate hike at this juncture would not only threaten the strength of rate-sensitive sectors such as real estate, it would also boost the exchange rate and undercut exports.

In response, the Australian dollar, which had been in rally mode in the three months since hitting a three-year low of USD0.868 in late January, continued its long-awaited correction. The aussie currently trades near USD0.929, down about 1.4 percent from its year-to-date high.

Equity investors also appreciated the fact that the RBA now has additional breathing room to hold rates steady. The S&P/! ASX 200 h! it a post-Global Financial Crisis high of 5517.8, with a total return of 118.9 percent since its bottom in March 2009.

Advanced Micro Devices (AMD) Breaks an Earnings Loosing Streak (Plus Other Good News)

On the eve of Good Friday after the market had closed on Thursday, small cap chip stock Advanced Micro Devices, Inc (NYSE: AMD) did something unusual after its latest earnings report: It did not sink after its latest earnings reports. I should mention that we previously had an open position in Advanced Micro Devices in our SmallCap Network Elite Opportunity (SCN EO) portfolio from last summer up until late January when we locked in a small loss. We got out in part because while we believe in the company's potential over the long term, our SCN EO is a trading rather than a buy and hold portfolio plus AMD's shares sank yet again after the company reported earnings – a repeat of what happened after three previous earnings reports. However, the latest earnings report appears to have sent most of the bears (and many of the bashers who just hate this stock) into hibernation when you consider the following good news:

The AMD Earnings Report. On Thursday after the market closed, Advanced Micro Devices reported revenue of $1.40 billion for a 12% sequential decrease and a 28% year-over-year increase as sales at the company's solutions business (which supplies PCs) dropped 12% while the graphics and visual solutions unit's sales more than doubled to $734 million. In addition, AMD reported operating income of $49 million verses an operating loss of $98 million; non-GAAP operating income of $66 million verses an operating loss of $46 million; net loss of $20 million verses a net loss of $146 million; and a non-GAAP net income of $12 million verses a non-GAAP net loss of $94 million. Those results were better than analysts' expectations.

AMD an "Under the Radar" Transition Story. FBR Capital raised its price target on Advanced Micro Devices for to $6.00 from $5.50 and noted:

"We believe Advanced Micro Devices' 'under the radar' transition story is a key driver of value, although potentially messy. While structural PC headwinds are discouraging, we believe that AMD's non-PC segments will more than replace lost PC revenue over the next few years. Excluding another severe macro downturn, cash levels are now more than sufficient and net debt should be worked down for at least the next few years. In our view, the company has wisely directed its strategic focus away from the core PC market and toward gaming APUs, micro servers, and custom- embedded processors, areas its larger competitor is less focused on."

"Seeing Some Successes" in the Turnaround. Ascendiant Capital analyst Cody Acree was quoted in a Reuters article as saying:

"This is a company that's still in the midst of a very long-term turnaround but you're seeing some successes. None of this is a flip of a switch overnight. It's a plodding quarterly restructuring that really is going to change who AMD is."

Other Analysts Remain More Cautious. Not all analysts are excited about AMD's prospects as Nomura Equity Research's Romit Shah reiterated a Neutral rating along with a $4 price target and raised his 2014 estimates to $5.88 billion and 12 cents per share from a prior $5.67 billion and 6 cents per share. MKM Partners' Ian Ing also reiterated a Neutral rating and a $4.10 price target but he raised his 2014 estimates to $6.12 billion in revenue and 24 cents EPS from a prior $5.82 billion and 12 cents per share. Ing commented:

"We remain skeptical on ARM processors and micro-servers, and wary of potential PC share declines. Longer term AMD appears very much on track at building a sustained revenue stream of long-life designs (3-5 years or more) in adjacent computing areas. This could prove to be a better strategy than focusing on the highest volume PC and smartphone sockets with 9-12 month design cycles."

Bernstein Research's Stacy Rasgon reiterated an Underperform rating; but he raised his price target to $3 from $2.50 plus raised his 2014 estimate to $5.95 billion in revenue and 17 cents per share from a prior $5.72 billion and 6 cents per share. He also commented:

"We admit, we were wrong on the trajectory of AMD's revenue profile in Q2; and (at least for the moment) the collapse of PC revenues that we have seen in recent quarters stabilized a bit (with revenue declines about in-line with the market)."

Credit Suisse's John Pitzer reiterated an Underperform rating and a $3 price target, commenting:

"while we do recognize and commend that the Company is making progress, we will continue to stay on the sidelines until we have conviction relative to AMD's earnings upside potential… To be clear, AMD is making good progress in Computing Solutions segment with operating margins close to break-even at revenue levels that historically generated large losses – unfortunately, we see near-term profitability upside limited from current levels."

Pitzer raised his estimates for this year to $5.95 billion and 12 cent per share from a prior $5.66 billion and 8 cents per share.

Share Performance. On Tuesday, Advanced Micro Devices rose 4.37% to $4.30 (AMD has a 52 week trading range of $2.43 to $4.65 a share) for a market cap of $3.12 billion plus the stock is up 11.7% since the start of the year, up 74.1% over the past year and up 20.8% over the past five years. However, the following performance chart does show AMD's volatility:

Finally, here is a look at the latest technical chart for AMD:

Given the above news, it might be time for the AMD bears and bashers to find another stock to short (or bash….)

SmallCap Network Elite Opportunity (SCN EO) has an open position in AMD. To find out what other open positions SCN EO currently has, and to learn why so many traders and investors are relying on this premium subscription service, click here to find out more.

Wednesday, April 23, 2014

Many low-wage workers not protected by minimum wage

President Obama supports a Senate bill that would gradually raise the $2.13 an hour wage base for tipped workers to 70% of the full minimum wage.

NEW YORK (CNNMoney) President Obama's push to raise the federal minimum wage to $10.10 an hour, coupled with recent state-level increases, is welcome news for many people getting by on small paychecks.

But not every low-wage worker has to be paid the minimum wage.

That's because a crazy patchwork of rules and exemptions lets employers pay some kinds of workers below the full minimum wage -- in some cases, well below.

The rules are complex at the federal and state levels. But here's a partial list of how they treat certain classes of workers.

Disabled workers: Under federal law, employers may apply for a special certificate to pay less than the minimum wage to anyone "whose earning or productive capacity is impaired by a physical or mental disability, including those relating to age or injury."

The rule was established in 1938 and has hardly changed since. It was originally intended to encourage businesses to hire veterans with disabilities in an industrial economy, according to the National Disability Rights Network.

But today it's used primarily to employ disabled people in what are called sheltered workshops that often involve some form of manual labor -- such as packing boxes, doing laundry or printing t-shirts.

An estimated 400,000 disabled people hold such jobs. And their hourly pay is based on the employer's assessment of their productivity relative to the productivity of non-disabled workers.

Groups like the National Disability Rights Network and the American Association of People with Disabilities contend that the subminimum wage rule is out-of-step with today's economy and disabled workers should be ! paid at least the prevailing minimum wage.

Anyone working for very small businesses: Under federal law, an employer doesn't have to pay the minimum wage to a worker if the company's annual gross sales are less than $500,000 and if it doesn't do any business across state lines, according to Tsedeye Gebreselassie, a staff attorney at the National Employment Law Project.

Teenage trainees: Federal law allows employers to pay $4.25 an hour -- $3 less than the current federal minimum -- to anyone under 20 for the first 90 days of employment, according to the Congressional Research Service.

Maryland, which just increased its state minimum wage to $10.10, now exempts those under 20 for the first 180 days, during which employers are allowed to pay them 15% less than the state minimum.

Federal law also lets employers pay 85% of the federal minimum (or $6.16/hour) to full-time students working in retail or service businesses, in an agricultural occupation, or at an institute of higher education.

They are also allowed to pay just 75% of the minimum wage (or $5.44/hour) to students who are employed part-time as part of a vocational training program at an accredited school.

Tipped workers: Currently, under federal law, employers only need to pay tipped workers a minimum wage of $2.13 an hour -- if that wage plus the tips push the worker's pay to at least the $7.25 federal minimum.

But those who advocate for higher wages for tipped workers say that provision is very hard to enforce with employers.

A bill that the Senate is likely to consider next week would raise the federal minimum to $10.10 and also gradually raise the $2.13 minimum for tipped workers to 70% of the federal minimum.

Among states, there's a hodgepodge of rules.

The road to! a minimu! m wage

Seven states require employers to pay tipped workers the state's full minimum on top of any tips those workers receive, according to NELP.

In at least 24 other states, companies must pay tipped workers a subminimum wage that is higher than the $2.13 required at the federal level.

But even where that's the case, there can be wrinkles. For instance, even though Maryland increased its state minimum wage, it did not raise tipped workers' base hourly wage of $3.63. Instead it chose to freeze it at that level.

That's a step back, according to the Economic Policy Institute's David Cooper. Why? Because previously, Maryland had mandated that tipped workers' base wage be set at 50% of the state minimum, which is now set to gradually increase to $10.10 from $7.25.

Some agricultural employees: Workers who are immediate relatives of an agricultural employer do not have minimum wage protection at the federal level, nor do some other agricultural workers with certain hours and job duty requirements.

Practically, this exemption usually applies only to very small family farms. The vast majority of farm workers are covered under minimum wage laws, NELP's Gebreselassie said.

Home care aides: Until now, home care workers who are hired primarily to dress, feed, bathe and otherwise attend to an infirm person's daily needs at home typically haven't received federal minimum wage protection.

But that will change on Jan. 1, 2015. Under a new set of rules governing "companionship services," home care agencies must pay such aides at least the full minimum wage. If the aide is employed solely by a private household, they may still be exempt from minimum wage protection but only if their primary duties fall within a much narrower definition of companion services.

Other exempt workers: Other groups exempt from federal minimum wage protection include newspaper delivery people, occasional babysitters, employees of small circulation newspapers, those e! lected to! state and local government offices (and their staffs); and anyone who works for some seasonal businesses such as amusement parks and summer camps.

Fighting Investors' Greatest Enemy: Overconfidence

"I always thought the brain was the most wonderful organ in my body; and then one day it occurred to me, 'Wait a minute, who's telling me that?'" -- Emo Philips

Financial analytics firm Dalbar calculates the actual returns earned by investors compared with the S&P 500. Its latest reading is cringeworthy: The average stock investor earned an average annual return of 3.83% from 1990 to 2010, vs. 9.14% for the S&P 500.

That gap is more than can be explained by management fees or the underperformance delivered by the average mutual fund's poor skills. Something else is eroding investment returns.

And that something else is you.

You buy when you shouldn't. You sell when you shouldn't. You think you're capable of doing things you probably aren't. You are, in other words, overconfident in your skills as an investor.

You've probably heard of the Lake Woebegon effect with drivers -- the vast majority of drivers claim they have above-average driving skills. This even holds true for drivers surveyed in the hospital after being injured in car accidents that they caused.

The same overconfidence affects investors.

Markus Glaser of Munich School of Management and Martin Weber of the University of Manheim once asked a group of investors a simple question: How have you done at investing?

Just like drivers, more than half assumed they outperformed the average investor.

But the study found something even more disturbing. The researchers asked investors to estimate their annual returns, and then compared those estimates to the investors' actual returns by checking their brokerage statements. Investors were quite literally clueless about how their investments performed, overestimating their returns by more than 11 percentage points per year. The average investor painfully lags an index fund and thinks he's Warren Buffett, basically.

Part of this is understandable. Investing is hard. We spend untold hours talking with advisors, researching new ideas, watching CNBC, and listening to pundits. Most investors have uncomfortably little to show for their effort, so they resort to convincing themselves otherwise. Jason Zweig writes in his book Your Money and Your Brain:

By fibbing ourselves, we can give a needed boost to our self-esteem. After all, none of us is perfect, and daily life brings us into constant collision with our own incompetence and inadequacies. If we did not ignore most of that negative feedback -- and counteract it by creating what psychologists call "positive illusions" -- our self-esteem would go through the floor.

We're also overconfident because hindsight bias fools us into thinking big events like the financial crisis were easy to predict, and thus will be easy to predict in the future. In his book Thinking, Fast and Slow, Daniel Kahneman writes:

Our tendency to construct and believe coherent narratives of the past makes it difficult for us to accept the limits of our forecasting ability. The illusion that we understand the past fosters overconfidence in our ability to predict the future.

When you are overconfident, all sorts of dangerous behaviors arise that throw your investing results off track.

For one, your predictions will likely become less accurate. Philip Tetlock, a psychologist at U.C. Berkeley, studied expert predictions and found that those who were most confident in their forecasts actually had the worst track records. Confident forecasters tend to have broad, unwavering views about how the world works -- think of investors who were assured hyperinflation was right around the corner -- while those who make good predictions know that the world is more nuanced and are constantly updating their views.

As confidence rises, your perception of risk also diminishes. The best example of this is the hedge fund Long Term Capital Management, a team of investors stacked with PhDs and Nobel laureates who became so confident in their ability to predict markets that they borrowed $250 for every $1 of their investors' money ... and went broke soon after. Financial advisor Carl Richards says, "risk is what's left over when you think you've thought of everything else." When you're overconfident, you're not thinking about much to begin with.

Overcoming overconfidence is easier said than done. But two things might help.

One, become fiercely objective when measuring your success as an investor. Don't just assume you've done well because the Dow is at an all-time high and your portfolio has gone up, too. Measure exactly how you've done. Most investors will be surprised to see their returns versus a benchmark -- some pleasantly, others humbled off the ledge of overconfidence.

Two, talk to someone about your investments who is in a different emotional state than you are. The odds of making a good decision while in the heat of panic, euphoria, or any other emotion tied to overconfidence are low. I run most of my financial decisions by fellow Fool Matt Koppenheffer. He thinks differently than I do and is more level-headed in areas I tend to get emotional about. It's a tremendous benefit, and I encourage everyone to find a "finance buddy" with whom to do the same.

Every investor needs confidence. But Mae West wasn't right: Too much of a good thing isn't always wonderful.

Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics.

Possible Problems Down the Road for the New Zynga CEO

In the following video, Fool contributor Matt Thalman discusses why he thinks a few problems may arise in the future for Zynga's (NASDAQ: ZNGA ) new CEO, Don Mattrick, and the company's founder and former CEO, Mark Pincus. Pincus started Zynga from scratch and built it to the company that it currently is, and although he's now passing the reins to the next guy, he will still be the chief product officer and chairman of the board and will control 61% of the voting rights. While time will tell whether Pincus can fully relinquish control of his company to another guy, shareholders will be along for the ride, and it's not one Matt wants to be on.

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.

Tuesday, April 22, 2014

Best European Companies To Invest In 2015

The U.S. dollar may be in long-term decline, but don't be surprised if the greenback enjoys a multiyear cycle of buoyancy during this decade. A number of factors are combining to support U.S. dollar strength versus other world currencies. These include:

The winding down of quantitative easing. The Federal Reserve believes that on balance, the U.S. economy has recovered enough for it to proceed with scaling back its monthly purchase of U.S. Treasuries and U.S. agency mortgage-backed securities. Rising interest rates will support a firmer dollar. The U.S. economy is strengthening, and growth may actually accelerate beyond the current 1.8% quarterly GDP increase: Some economists expect U.S. growth as high as 4% in 2014. Remember the BRIC countries? China is struggling to contain a credit bubble, and Brazil, India, and Russia are each facing unexpected quarterly growth slowdowns. As these countries fight to maintain their growth, their currencies will continue to be vulnerable against the dollar. The eurozone is still recovering from its ill-fated foray into austerity. New worries in Portugal and Greece are just the latest sign of fiscal fright on the European continent.

What does an appreciating dollar mean for your stock portfolio? Although well-run companies with multinational operations may be poised to post handsome returns in the long run, this is not a bad time to consider investing in corporations that derive most of their sales from within the United States. The reason is twofold: Such companies will benefit directly from the improving domestic economy, and what they earn in dollars they will keep, versus U.S.-based multinationals, which will face some revenue erosion as worldwide currencies slacken against the dollar.

Best European Companies To Invest In 2015: Telefonica SA(TEF)

Telefonica, S.A. provides fixed and mobile telephony services primarily in Spain, rest of Europe, and Latin America. Its fixed telecommunication services include PSTN lines; ISDN accesses; public telephone; local, domestic, and international long distance and fixed-to-mobile communications; corporate communications; video telephony; supplementary and business-oriented value-added services; network services; leasing and sale of handset equipment; and telephony information services. The company?s Internet and broadband multimedia services comprise Internet service provider service; portal and network services; retail and wholesale broadband access; narrowband switched access to Internet; naked ADSL, a broadband connection; residential-oriented value-added services; companies-oriented value-added services; television services, such as IPTV, cable television, and satellite television; and Fiber to the Home, a service for high speed Internet access and digital video recording. Its data and business-solutions services principally include leased lines; virtual private network services; fiber optics services; the provision of hosting and application; outsourcing and consultancy services; desktop services; and system integration and professional services. The company?s wholesale services for telecommunication operators primarily comprise domestic interconnection services; international wholesale services; leased lines for other operators? network deployment; local loop leasing under the unbundled local loop regulation framework; and bit stream services. It also offers various mobile and related services and products that include mobile voice services, value added services, mobile data and Internet services, wholesale services, corporate services, roaming, fixed wireless, and trunking and paging services. The company has a strategic alliance with China Unicom (Hong Kong) Limited. Telefonica, S.A. was founded in 1924 and is headquartered in Madrid, Spai n.

Advisors' Opinion:

[By Holly LaFon]
Charlie: Yes, I have a question. Do you think the opportunity is more in stocks or in debt, or both? If you look at Spain, the biggest companies in Spain, one is a bank, Bank Santander (STD). The other is Telefonica (TEF), a phone company. What other opportunities do you see there?

Best European Companies To Invest In 2015: Fresenius Medical Care Corporation (FMS)

Fresenius Medical Care AG & Co. KGaA, a dialysis company, provides products and services for patients with chronic kidney diseases. As of May 12, 2011, it provided dialysis care services to 216,942 patients through its network of 2,769 dialysis clinics primarily in North America, Europe, Latin America, the Asia-Pacific, and Africa. The company also develops and manufactures various dialysis products, including hemodialysis machines, dialyzers, hemofilters, dialysis fluid filters, tubing systems, fistula needles, dialysis related equipment, acute hemodialysis machines, plasma filters, acute tubing systems and cassettes, catheters, and related disposable products for chronic hemodialysis, acute therapy, home therapy, and therapeutic apheresis, as well as dialysis drugs. In addition, it provides laboratory services. Fresenius Medical sells its products through distributors. The company was founded in 1996 and is headquartered in Bad Homburg, Germany.

Advisors' Opinion:

[By John Udovich]
Small cap dialysis stock Rockwell Medical Inc (NASDAQ: RMTI) looks set to decline when the market opens after Brean Capital initiated coverage with a sell rating and a price target of $4.00, meaning it might be time to take a closer look at what is going on with the stock along with�the performance of large cap dialysis stocks DaVita Healthcare Partners (NYSE: DVA)�and Fresenius Medical Care (NYSE: FMS) along with small cap dialysis stocks NxStage Medical, Inc (NASDAQ: NXTM).�
[By Louie Grint]
Still unaffected
First, Fresenius Medical Care (NYSE: FMS ) is the No. 1 global provider of dialysis equipment. It enjoys leading market share of almost 33% in its home country.

Top High Dividend Stocks To Invest In Right Now: STMicroelectronics N.V.(STM)

STMicroelectronics N.V., an independent semiconductor company, engages in the design, development, manufacture, and marketing of a range of semiconductor integrated circuits and discrete devices. Its products include discrete and standard commodity components, application-specific integrated circuits, custom devices and semi-custom devices, and application-specific standard products for analog, digital, and mixed-signal applications. The company also offers subsystems and modules for the telecommunications, automotive, and industrial markets comprising mobile phone accessories, battery chargers, ISDN power supplies, and in-vehicle equipment for electronic toll payment, as well as provides Smartcard products. Its products are used in various microelectronic applications consisting of automotive products, computer peripherals, telecommunications systems, consumer products, industrial automation, and control systems. The company sells its products through distributors and ret ailers. STMicroelectronics N.V. was founded in 1987 and is headquartered in Geneva, Switzerland.

Advisors' Opinion:

[By Vanina Egea]
Reed Elsevier NV (ENL) is a diversified publisher and information provider. It works on a wide range of market segments that include scientific, technical and medical (STM); legal; risks solutions and business information and exhibitions. The key of the company�� growth, however, lies almost exclusively in two brands: Elsevier and LexisNexis.

Best European Companies To Invest In 2015: Aercap Holdings N.V. (AER)

AerCap Holdings N.V., through its subsidiaries, operates as an integrated aviation company worldwide. It engages in leasing and trading aircraft and engines; and selling parts. The company also provides aircraft management services, as well as aircraft and limited engine MRO services, and aircraft disassembly services through its repair stations. In addition, it offers aircraft services, including remarketing aircraft; collecting rental and maintenance payments, monitoring aircraft maintenance, monitoring and enforcing contract compliance, and accepting delivery and redelivery of aircraft; conducting ongoing lessee financial performance reviews; inspecting the leased aircraft; coordinating technical modifications to aircraft to meet new lessee requirements; conducting restructurings negotiations in connection with lease defaults; repossessing aircraft; arranging and monitoring insurance coverage; registering and de-registering aircraft; arranging for aircraft and aircraft engine valuations; and providing market research. The company?s management services include leasing and remarketing, cash management and treasury, technical advisory, and accounting and administrative services. As of March 31, 2011, it owned 272 aircraft and 95 engines, which it leased under operating leases to 118 lessees in 53 countries. The company was founded in 1995 and is headquartered in Schiphol, the Netherlands.

Advisors' Opinion:

[By Roberto Pedone]
AerCap (AER) provides aircraft leasing and aviation finance services. This stock closed up 3.3% at $18 in Wednesday's trading session.

Wednesday's Volume: 740,000

Three-Month Average Volume: 318,589

Volume % Change: 85%

From a technical perspective, AER jumped higher here right above its 50-day moving average of $17.27 with above-average volume. This stock has been uptrending strong for the last five months, with shares moving higher from its low of $14.84 to its recent high of $18.16. During that uptrend, shares of AER have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of AER within range of triggering a near-term breakout trade. That trade will hit if AER manages to take out its 52-week high at $18.16 with high volume.

Traders should now look for long-biased trades in AER as long as it's trending above its 50-day at $17.27 or above more near-term support at $17.17 and then once it sustains a move or close above its 52-week high at $18.16 with volume that's near or above 318,589 shares. If that breakout hits soon, then AER will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $20 to $23.

Best European Companies To Invest In 2015: BP p.l.c.(BP)

BP p.l.c. provides fuel for transportation, energy for heat and light, retail services, and petrochemicals products. Its Exploration and Production segment engages in the oil and natural gas exploration, field development, and production; midstream transportation, and storage and processing; and marketing and trading of natural gas, including liquefied natural gas (LNG), and power and natural gas liquids (NGL). This segment has exploration and production activities in Angola, Azerbaijan, Canada, Egypt, Norway, Russia, Trinidad and Tobago, the United Kingdom, and the United States, as well as in Asia, Australasia, South America, North Africa, and the Middle East. This segment also owns and manages crude oil and natural gas pipelines; processing facilities and export terminals; and LNG processing and transportation, as well as NGL extraction facilities. BP p.l.c. has interests in the Trans-Alaska pipeline system, the Forties pipeline system, the Central Area transmission sys tem pipeline, the South Caucasus Pipeline, and Baku-Tbilisi-Ceyhan pipeline, as well as in LNG plants located in Trinidad, Indonesia, and Australia. The company?s Refining and Marketing segment involves in the supply and trading, refining, manufacturing, marketing, and transportation of crude oil, petroleum, and petrochemicals products and related services to wholesale and retail customers primarily under the BP, Castrol, ARCO, and Aral brands. Its Other Businesses and Corporate segment produces and markets rolled aluminum products, as well as generates energy through wind, solar, biofuels, hydrogen, and carbon capture and storage sources; and engages in shipping activities. The company was founded in 1889 and is headquartered in London, the United Kingdom.

Advisors' Opinion:

[By Tyler Crowe]
The energy industry and, in essence, the entire geopolitical landscape completely changed on May 26, 1908. It was on this day that George Reynolds tapped an oil reserve in modern-day Iran, the very first oil discovery in the Middle East. That well, which was the beginning of the company we know today as BP (NYSE: BP ) , also set the foundation for the Middle East to be the predominant oil-producing force around the world. Today, though, that position is starting to slowly slip away. Let's take a look at why oil production in the Middle East is not what it once was and what we can expect in the future.

Best European Companies To Invest In 2015: TotalFinaElf S.A.(TOT)

TOTAL S.A., together with its subsidiaries, operates as an integrated oil and gas company worldwide. The company operates through three segments: Upstream, Downstream, and Chemicals. The Upstream segment engages in the exploration, development, and production of oil and natural gas. It also involves in the transportation, trade, and marketing of natural gas and liquefied natural gas (LNG), as well as in LNG re-gasification and natural gas storage operations. In addition, this segment engages in the shipping and trade of liquefied petroleum gas (LPG); power generation from gas-fired power plants, nuclear, or renewable energies; production, trade, and marketing of coal, as well as in solar power systems and technology operations. As of December 31, 2010, it had combined proved reserves of 10,695 Mboe of oil and gas. The Downstream segment involves in refining, marketing, trading, and shipping crude oil and petroleum products. It also produces a range of specialty products, s uch as lubricants, LPG, jet fuel, special fluids, bitumen, marine fuels, and petrochemical feedstock. This segment holds interests in 24 refineries located in Europe, the United States, the French West Indies, Africa, and China, as well as operates a network of 17,490 service stations. The Chemicals segment produces base chemicals, including petrochemicals and fertilizers, as well as engages in rubber processing, resins, adhesives, and electroplating activities. TOTAL S.A. was founded in 1924 and is based in Paris, France.

Advisors' Opinion:

[By Tyler Crowe]
2. Geopolitical risk. Oil is a very delicate commodity, and any potential disruption of supply could lead to large changes in prices. During the Libyan revolution, Total (NYSE: TOT ) , BP (NYSE: BP ) , and several other oil companies halted operations, and a country that was once repsonsible for 1.6 million barrels per day came to an almost screeching halt. From January to May 2011, as�Libyan�oil�prosecution�had tumbled 88%, Brent crude jumped almost 30% even though Libya supplied only 0.5% of total global exports.

Best European Companies To Invest In 2015: British American Tobacco Industries p.l.c.(BTI)

British American Tobacco p.l.c., through its subsidiaries, engages in the manufacture, distribution, and sale of tobacco products. The company offers cigars, cigarettes, smokeless snus, roll-your-own, and pipe tobacco products under the Dunhill, Kent, Lucky Strike, Pall Mall, Vogue, Viceroy, Kool, Rothmans, Peter Stuyvesant, Benson & Hedges, and State Express 555 brand names. It has operations in the Asia-Pacific, the Americas, eastern and western Europe, Africa, and the Middle East. The company was founded in 1902 and is headquartered in London, the United Kingdom. British American Tobacco p.l.c. operates independently of Remgro Ltd. as of November 03, 2008.

Advisors' Opinion:

[By Royston Wild]
Bubbly activity in these developing geographies can create large opportunities for many London-listed firms. Today, I am looking at�British American Tobacco� (LSE: BATS ) �(NYSE: BTI) and assessing whether its operations in these regions are likely to underpin solid earnings growth.
[By Royston Wild]
I am currently looking at the dividend prospects of�British American Tobacco� (LSE: BATS ) (NYSEMKT: BTI ) and assessing whether the company is an appetizing pick for income investors.
[By Editor , Dividend Growth Investor]
The company�� largest competitors include British American Tobacco (BTI), Imperial Tobacco (ITYBY) and Japan Tobacco.

Earnings per share have doubled over the preceding 7 years to $5.17 in 2012. The company expects earnings to reach $5.37-$5.42 per share in 2013, followed by a 6-8% increase in 2014. Despite the near-term slowdown in earnings per share, the company is committed to growing currency neutral EPS by 10-12% per year after 2015.
[By GuruFocus]
The decade low yield of tobacco stocks can be clearly seen from our new interactive charts, which are embedded below. The chart shows the dividend yield of three tobacco stocks: Reynolds American (RAI), Philip Morris International (PM) and British American Tobacco (BTI).

Best European Companies To Invest In 2015: Aegon NV(AEG)

AEGON N.V. provides life insurance, pensions, and asset management products and services worldwide. The company?s life insurance products include traditional, term, universal, whole, and other life insurance products sold as part of defined benefit pension plans, endowment policies, post-retirement annuity products, and group risk products; supplemental health insurance products comprise accidental death, other injury, critical illness, hospital indemnity, medicare supplement, and student health; specialty lines consists of travel, membership, and creditor products; and long term care insurance products for policyholders who require care due to a chronic illness or cognitive impairment. It also offers a range of savings and retirement products and services, including mutual funds, and fixed and variable annuities, savings accounts and investment contracts, segregated funds, guaranteed investment accounts, and single premium immediate annuities, as well as investment advice to individuals. In addition, the company offers employer solutions and pensions, such as retirement plans, pension plans, and pension-related products and services; investment products, including onshore and offshore bonds, and trusts; reinsurance products and solutions to life insurance and financial services companies; general insurance products comprising house, car, and fire insurance; and asset management products and services, including general account assets, unit-linked funds, and third party activities. AEGON N.V. markets its products through independent and career agents, financial planners, registered representatives, independent marketing organizations, banks, broker-dealers, benefit consulting firms, wirehouses, affinity groups, institutional partners, independent managing general agencies, and specialized financial advisors, as well as through online, direct, and worksite marketing. The company was founded in 1900 and is headquartered in The Hague, the Netherl ands.

Advisors' Opinion:

[By Will Ashworth]
Assuming it delivers on its outlook for 2014, its current free cash flow yield is a very enticing 20%. This isn�� a growth stock, but its brands still possess hidden value. As cheap stocks go, it�� very attractive.
Cheap Stocks to Buy: Aegon (AEG)
It�� not often that you can buy a $19 billion market cap for under 10 bucks. Aegon�� a Dutch insurance company that�� had a rough ride over the past few years, and its stock�� suffered as a result. In the late ’90s AEG stock traded around $60 — it hasn�� been anywhere close since. However, it�� got some good assets that should bear fruit in the years to come. Aegon has 12,000 employees in the Americas doing business primarily under the Transamerica brand, which has been a part of AEG since 1999.

Lululemon Challenged by Lawsuits

Sometimes, you get in one of those ruts where even the little things don't seem to go quite right. You get a flat tire, the store is out of marmalade, and you trip going up the escalator. It wouldn't be so bad if a few things were going right, but they just aren't. lululemon athletica (NASDAQ: LULU ) feels your pain. The company just keeps finding itself on the receiving end of mediocre news.

First the company lost out on sales when it was forced to recall its overly sheer pants, then it lost its chief product officer, and then its CEO announced her departure. Now, Lululemon is under fire from investors, who have filed several class action lawsuits against the yoga retailer regarding its product issues. Will it ever fully recover?

The problem with pants
The first lawsuit alleges that Lululemon misled investors about the real cost associated with the company's earlier sheer pants issue. It claims that during the time between the announcement of the issue and the newest earnings release, management talked up the speed and efficiency of its problem-solving, while secretly planning to remove CEO Christine Day from office.

Depending on your point of view, Day's departure is either an unrelated event or the second casualty in the sheer-pants scandal. Product Officer Sheree Waterson left in April, in a not-so-subtly timed announcement that coincided with Lululemon's "how we're going to fix this" press release.

The shortage of fabric for the pants caused a meaningful dent in Lululemon's sales last quarter. The company admitted to having to write off $17.5 million of unusable Luon -- the fabric used in the pants -- due to the quality issue. The shortage also contributed to a 90-basis-point product margin decline.

That opened the door for competition, which resulted in a hit to Lululemon's same-store sales growth. In its most recent earnings call, Under Armour called out the strong performance in its studio line in the first quarter. That line competes with Lululemon's yogawear, and likely saw an uptick due to the market leader's product issues.

Who knew what
The issue isn't how bad the situation is, though -- it's what Lululemon said about the situation. The more detailed lawsuit has three claims against the company. First, that it purposefully cut down on Luon quality to boost its margins. Second, that the company then went on to discount its clothing in order to keep market share. Finally, that Day's removal had been in the works for some time. All of these things were going on, the suit claims, while the company put on a shining, "everything is fine" face for investors.

The press releases from the time in question certainly seem to put a good face on things. The announcement about the issue came on March 18, and then by April 3, the whole thing was sorted out.

On its fourth-quarter conference call and in its earnings release on March 21, the company updated its guidance for the quarter and year, based on a fall in comparable sales. It then met those expectations in the first quarter, for which results were announced last month. On the call, it said that the annual earnings-per-share impact would be around $0.21.

In the end, it seems hard to say that Lululemon was anything less than clear about the impact of the Luon shortage. While further investigation may show that the lawsuits are well-founded, the public face of the company seems fine to me. I understand investors' frustration, though. The stock is down 17% year to date, but there should be at least a little bounce once a new CEO is found. The company still seems fundamentally strong, although it needs to figure out its competitive position. For now, I'm still tentatively bullish on Lululemon.

The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.

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