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

Thursday, October 30, 2014

Nvidia's Innovation Is a Long-Term Catalyst for the Stock

Nvidia (NVDA) reported a solid set of numbers for the second quarter that was broadly in line with the estimates. In fact, its earnings exceeded the expectations led by strong growth in gaming, data-center and cloud, and mobile operations. The chip maker is best known for its components used in computers and video games that produce high visual effects. The company has been expanding its product mix to counter tough competition and also to adapt to the changes in the industry. Starting with its numbers, let's have a detailed analysis of this stock.

Results and beyond

Its revenue for the quarter rose 13% to $1.1 billion and came in line with the analysts expectations. Earnings rose to 30 cents a share compared to 23 cents last year, and topped the consensus estimate of 19 cents per share.

The numbers seem to be quite decent and reflect the company's expanding business. As already mentioned, Nvidia is venturing into new segments in order to stand its ground in a highly competitive environment. The chip maker benefited from the expansion into cars and cloud computing, which was evident in its numbers during the quarter. Nvidia's Tegra technology has been incorporated in various cars such as in some of the recent models of BMW . Similarly, Volkswagen Passat will incorporate Tegra for its infotainment system and going forward, Nvidia has various such orders in this segment. Its Tegra processor revenue for cars rose 74% during the quarter, which is a significant achievement and will further strengthen its balance sheet in the days to come.

The Tegra system is also used in smartphones; however in this segment Nvidia had to face tough competition from its peers such as Qualcomm, which has considerably higher market share in smartphones and tablets. Consequently, it shifted its focus to the entertainment industry and navigation systems in cars. In this direction, the company launched Shield, which is its own indigenously developed tablet. The tablet is designed to attract gaming enthusiasts, which will strengthen its presence in the industry.

Chips are driving growth

In the gaming segment, GeForce is yet another strong hold for the company, which powers around 100 million PC's around the world. The recently launched GeForce GTX GPU is even more enhanced than its previous versions, which has the capability to take on the latest generation gaming consoles. Thus, GeForce is a strong product for the company, which delivered solid results in the past and is expected to continue the same momentum in the coming years.

Apart from gamers, GPUs (graphic processing unit) are used extensively by professionals involved in designing. For instance, Abode Illustrator is used for designing purposes and its performance can be enhanced using Nvidia's Quadro GPU, making the experience even better. Therefore, the workstation market also presents huge potential for Nvidia to grow. Tesla also had a strong quarter with record numbers, and the momentum continues that will further add to both its top and bottom line in the days ahead.

In cloud computing, the company made significant progress by offering servers embedded with Nvidia chips to companies such as IBM, Dell and HP. Along with this, many large enterprises are kicking the tires for its GRID graphics technology for use in data centers. During the quarter Nvidia launched GRID test drives, which according to the management will be great help to enterprise IT professionals. It received a great response with more than 10,000 users in the first eight weeks of its launch.

After a strong set of numbers during the quarter, the company is well positioned to deliver similar growth in the third quarter as well. The company has a positive outlook on PC sales in the coming months. Along with this, its entry into cars and data centers is seen as a great a potential, which will further strengthen its business.

Conclusion

Nvidia has a trailing P/E of 20.6 and an improving forward P/E of 17.1, which is a positive cue of strong fundamentals. In addition, the company had a strong performance during the quarter, which was better than its peers and the management is optimistic for the upcoming quarters as well. In a statement to Reuters, FBR analyst Chris Rolland said "They're doing better than their peers. … The Tegra number was better than expected." All in all, the company has a strong outlook and seems to be well positioned for growth.

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Tuesday, October 28, 2014

Google searching for cancer cure

Eric Schmidt's artificial intelligence prediction NEW YORK (CNNMoney) Google is searching for a cancer cure.

The company announced Tuesday that it is experimenting with designing nanoparticles that would detect cancer and other diseases before their onset.

Andrew Conrad, head of Google (GOOG) Life Sciences division, said it would be to the body what an oil change is to a car.

"Can you imagine changing your oil when the engine is broken?" said Conrad, who made the announcement at the Wall Street Journal Digital conference.

Conrad said it's time for healthcare to become more proactive than reactive.

Google is working on a wearable device that would detect changes by monitoring nanoparticles in a person's body. That way, they could detect minor swings in tumor cells and other diseases before it becomes a problem, Conrad said.

This would not be Google's first foray into healthcare.

Google has partnered with Alcon and Novartis (NVS) to make a smart contact lens that measures the glucose levels in diabetics' tears.

The company's research lab is already in the midst of a study involving 10,000 people for its nanoparticle platform, but is looking for partners to help scale it.

Google's announcement was certainly opposite of Apple's.

On Monday, Apple (AAPL, Tech30) CEO Tim Cook told the same audience: "I don't see Apple getting into cancer research ...That's well beyond our expertise."

Monday, October 27, 2014

5 Stocks Poised for Breakouts

DELAFIELD, Wis. (Stockpickr) -- Trading stocks that trigger major breakouts can lead to massive profits. Once a stock trends to a new high or takes out a prior overhead resistance point, then it's free to find new buyers and momentum players who can ultimately push the stock significantly higher.

Must Read: Warren Buffett's Top 10 Dividend Stocks

Breakout candidates are something that I tweet about on a daily basis. I frequently tweet out high-probability setups, breakout plays and stocks that are acting technically bullish. These are the stocks that often go on to make monster moves to the upside. What's great about breakout trading is that you focus on trend, price and volume. You don't have to concern yourself with anything else. The charts do all the talking.

Trading breakouts is not a new game on Wall Street. This strategy has been mastered by legendary traders such as William O'Neal, Stan Weinstein and Nicolas Darvas. These pros know that once a stock starts to break out above past resistance levels and hold above those breakout prices, then it can easily trend significantly higher.

With that in mind, here's a look at five stocks that are setting up to break out and trade higher from current levels.

Must Read: 10 Stocks Carl Icahn Loves in 2014

Five Prime Therapeutics

A clinical-stage biotechnology stock that's moving very quickly within range of triggering a near-term breakout trade is Five Prime Therapeutics (FPRX), which focuses on the discovery and development of protein therapeutics that block cancer and inflammatory disease processes. This stock has been hit hard by the bears so far in 2014, with shares down 23%.

If you take a look at the chart for Five Prime Therapeutics, you'll notice that this stock has just started to bounce higher here right above its 50-day moving average of $11.93 a share. That bounce is coming after shares of FPRX recently formed a major bottoming chart pattern, since this stock found buying interest each time it pulled back to right around $11.40 to $11.30 a share. Shares of FPRX are now quickly moving within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in FPRX if it manages to break out above some key near-term overhead resistance levels at $12.91 to $12.94 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 106,706 shares. If that breakout triggers soon, then FPRX will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $14.33 to $15 a share, or even $16.94 a share.

Traders can look to buy FPRX off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $11.93 a share. One can also buy FPRX off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Must Read: 5 Stocks Insiders Love Right Now

ANI Pharmaceuticals

Another stock that's starting to move within range of triggering a big breakout trade is ANI Pharmaceuticals (ANIP), which develops, manufactures and markets branded and generic prescription pharmaceuticals. This stock has been in play with the bulls so far in 2014, with shares ripping higher by 49%.

If you take a glance at the chart for ANI Pharmaceuticals, you'll see that this stock has just started to rip higher here right above its 50-day moving average of $28.16 and back above its 200-day moving average of $29.42 a share. That sharp rip to the upside on Friday also pushed shares of ANIP into breakout territory, since the stock took out some near-term overhead resistance at $29.74. Shares of ANIP are now quickly moving within range of triggering a much bigger breakout trade above some key overhead resistance levels.

Traders should now look for long-biased trades in ANIP if it manages to break out above some near-term overhead resistance levels at $30.36 to $30.45 a share and then above some past resistance levels at $31.88 to $32.75 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 174,094 shares. If that breakout develops soon, then ANIP will set up to re-test or possibly take out its next major overhead resistance levels at $36.34 to its 52-week high at $38.74 a share.

Traders can look to buy ANIP off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $28.16 a share or just below some more near-term support at $27 a share. One could also buy ANIP off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Must Read: Sell These 5 Toxic Stocks Before November

Kratos Defense & Security Solutions

A security and protection services stock that's starting to trend within range of triggering a near-term breakout trade is Kratos Defense & Security Solutions (KTOS), which provides mission critical products, solutions and services primarily for the U.S. Government. This stock has been downtrending a bit so far in 2014, with shares off by 11.9%.

If you take a glance at the chart for Kratos Defense & Security Solutions, you'll notice that this stock spiked sharply higher here on last Friday right above some near-term support at $6.27 a share with strong upside volume flows. Volume on Friday registered 640,000 shares, which is well above its three-month average of 397,255 a shares. That spike also pushed shares of KTOS into breakout territory, since the stock took out some near-term overhead resistance at $6.70 a share. Shares of KTOS are now quickly moving within range of triggering another near-term breakout trade.

Traders should now look for long-biased trades in KTOS if it manages to break out above its 50-day moving average of $6.94 a share and then above more near-term support around $7 a share with high volume. Watch for a sustained move or close above those levels with volume that registers near or above its three-month average action of 397,255 shares. If that breakout materializes soon, then KTOS will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $7.51 to $8 a share. Any high-volume move above $8 to $8.14 will then give KTOS a chance to tag $8.75 to $9 a share.

Traders can look to buy KTOS off weakness to anticipate that breakout and simply use a stop that sits right below some near-term support at $6.27 a share. One can also buy KTOS off strength once it starts to move above those breakout levels share with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Must Read: Book Double the Gains With These Shareholder Yield Champs

Castlight Health

A cloud-based software player that's starting to trend within range of triggering a near-term breakout trade is Castlight Health (CSLT), which has software that enables enterprises to control their health care costs. This stock has been destroyed so far in 2014 by the sellers, with shares down huge by 70%.

If you take a glance at the chart for Castlight Health, you'll see that this stock has just started to bounce right above some near-term support at $10.84 a share. That bounce is also coming above some previous support from mid-August at $10.56 a share. Shares of CSLT are now starting to trend within range of triggering a near-term breakout trade above some key overhead resistance levels.

Traders should now look for long-biased trades in CSLT if it manages to break out above some near-term overhead resistance levels at $12.19 to $12.27 a share and above its 50-day moving average of $12.26 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 volume of 1.37 million shares. If that breakout begins soon, then CSLT will set up to re-test or possibly take out its next major overhead resistance levels at $13.36 to $15.10 a share.

Traders can look to buy CSLT off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $10.84 to $10.56 a share. One can also buy CSLT off strength once it starts to bust above those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Must Read: 5 Stocks Under $10 Set to Soar

Infoblox

My final breakout trading prospect is communication equipment player Infoblox (BLOX), which develops, markets and sells automated network control solutions worldwide. This stock has been destroyed by the sellers so far in 2014, with shares off sharply by 53%.

If you look at the chart for Infoblox, you'll notice that this stock just recently formed a double bottom chart pattern at $13.38 to $13.31 a share. Following that bottom, shares of BLOX have started to uptrend right above its 50-day moving average. That uptrend is now quickly pushing shares of BLOX within range of triggering a major breakout trade above some key near-term overhead resistance.

Traders should now look for long-biased trades in BLOX if it manages to break out above Friday's intraday high of $15.29 a share and then above some key near-term overhead resistance at $15.44 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 913,968 shares. If that breakout gets set off soon, then BLOX will set up to re-fill some of its previous gap-down-day zone from May that started just above $20 a share.

Traders can look to buy BLOX off weakness to anticipate that breakout and simply use a stop that sits just below its 50-day moving average of $13.95 a share, or near those double bottom support levels. One can also buy BLOX off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a conformable percentage from your entry point.

Must Read: 10 Stocks Billionaire John Paulson Loves in 2014

To see more breakout candidates, check out the Breakout Stocks of the Week portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

Friday, October 24, 2014

3M the Cash Generation Machine in the Industrials Segment

In this article, let's take a look at 3M Company (MMM), a $90.04 billion market cap, diversified global company that operates as a diversified technology company with manufacturing operations in around 70 countries worldwide. I was impressed how the company survived the last U.S. recession, reducing working capital to increase free cash flow and remaining profitable.

R&D

R&D is a strong competitive advantage because 3M focuses on the introduction of new products at high margins. Every year the company spent between 5.5% and 6% of sales to R&D. Unlike its competitors, the firm operates in different end markets and geographies, where it uses its scale and distribution channels to achieve lower costs than it peers. The firm permits that its engineers can dedicate certain time to their individual pursuits, searching for patents and new ideas, which could help internally driven growth.

The idea of constantly trying to refresh its product portfolio, has impacted revenue growth, which was higher than global GDP. Also, in the past ten years, it has achieved returns better than its cost of capital with adequate operating margins about 20%.

Last, we may not forget that 3M has the cash generation machine which one of the best in the diversified industrial peer group.

Well diversified

The diversification across product and markets offset any specific poor result. The largest contributor to revenue is "adhesives and tapes" within the industrial segment, which makes up 10.5% of consolidated revenue, followed by the automotive and aftermarket business which contributes with 9.5% of revenues. The other 27 business lines make up the residual.

Excellent track record

3M has an attractive dividend policy showing its commitment to return cash to investors in the form of dividends as it has increased its dividend for 56 consecutive years. The current dividend yield is 2.3%, which is quite good, to protect the purchasing power, especially considering the consistency of track-record dividends payments and favorable expectations regarding dividend growth and share repurchases for the next years. The company recently announced a plan to return cash to shareholders through accelerated repurchases and dividends, increasing the payout ratio to diversified industrial peers.

Revenues, margins and profitability

Looking at profitability, the revenue growth (4.92%) has outpaced the industry average. Earnings per share increased by 11.2% in the most recent quarter compared to the same quarter a year ago ($1.91 vs $1.71). During the past fiscal year, the company increased its bottom line. It earned $6.72 versus $6.31 in the previous year. This year, Wall Street expects an improvement in earnings ($7.45 versus $6.72).

Finally, let´s compare the best measure of performance for a firm's management: the return on equity. The ROE is useful for comparing the profitability of a company to that of other firms in the same industry.

Ticker	Company	ROE (%)
MMM	3M	27.32
GE	General Electric Co.	10.16
JNJ	Johnson & Johnson	28.23
	Industry Median	7.63

The company has a current ratio of 27.32% which is higher than the industry median and the one exhibited by General Electric Co. (GE). In general, analysts consider ROE ratios in the 15-20% range as representing attractive levels for investment, so this ROE looks very attractive. So for investors looking at those levels, Johnson & Johnson (JNJ) could be the option. It is very important to understand this metric before investing, and it is important to look at the trend in ROE over time. It is great to see such a good level during so many years.

Relative Valuation

In terms of valuation, the stock sells at a trailing P/E of 19.6x, trading at a discount compared to an average of 22.1x for the industry. To use another metric, its price-to-book ratio of 5.24x indicates a premium versus the industry average of 1.7x while the price-to-sales ratio of 2.99x is above the industry average of 0.97x. That P/E indicates that the stock is relatively undervalued and seems to be an attractive investment relative to its peers.

As we can see in the next chart, the stock price has an interesting upward trend in the five-year period. If you had invested $10,000 five years ago, today you could have $20,292, that is a 15.2% compound annual growth rate (CAGR). Further, 3M has demonstrated a pattern of positive earnings per share growth over the past two years.

Final comment

As outlined in the article, several growth catalysts make me feel bullish on this stock because I think 3M will successfully integrate acquisitions and continue to make innovations, while diversifying across end markets. Further, efforts in R&D should help improve its product vitality, pricing and longer-term profitability.

Valuation is another key reason in considering 3M as an investment. So in this opportunity, I would recommend fundamental investors to consider this attractive option for their long-term portfolios.

Hedge fund gurus like Ray Dalio (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Ken Fisher (Trades, Portfolio) and Jean-Marie Eveillard (Trades, Portfolio) added this stock to their portfolios in the first quarter of 2014, as well as Diamond Hill Capital (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio).

Disclosure: Omar Venerio holds no position in any stocks mentioned

Also check out: Ray Dalio Undervalued Stocks Ray Dalio Top Growth Companies Ray Dalio High Yield stocks, and Stocks that Ray Dalio keeps buying Mario Gabelli Undervalued Stocks Mario Gabelli Top Growth Companies Mario Gabelli High Yield stocks, and Stocks that Mario Gabelli keeps buying Ken Fisher Undervalued Stocks Ken Fisher Top Growth Companies Ken Fisher High Yield stocks, and Stocks that Ken Fisher keeps buying Jean-Marie Evei Undervalued Stocks Jean-Marie Evei Top Growth Companies Jean-Marie Evei High Yield stocks, and Stocks that Jean-Marie Evei keeps buyingAbout the author:ovenerioWe provide independent fundamental research and hedge fund and insider trading focused investigation.

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Thursday, October 23, 2014

Is It Time to Buy American Tower Corporation's Stock?

Image source: American Tower.

Is American Tower (NYSE: AMT ) a buy today, one week before the cell tower operator reports third-quarter results? Spoiler alert: I opened a real-money position in this stock a month ago, and American Tower has done absolutely nothing to undermine my analysis since then.

In short, there's much to love about this stock and very little to dislike.

What's so special about American Tower?
Despite its flag-waving corporate name, American Tower runs a global business with operations on five continents. In particular, the company is open for business in exciting growth markets including India, South America, and Africa. As the next billion people connect to the Internet and to modern communications networks, American Tower will play a part where the growth opportunities are the richest.

This international focus sets American Tower apart from rivals Crown Castle (NYSE: CCI ) and SBA Communications (NASDAQ: SBAC ) .

Seventy-five percent of SBA's towers sit on American soil. The domestic part of Crown Castle's operations rises to 96% since less than 2,000 towers come from a recent expansion in Australia. But American Tower owns or leases 40,700 towers in foreign markets, alongside 28,500 U.S. sites. That's 59% international operations and only 41% domestic. And the company is still busy buying out established foreign tower networks, accelerating its international expansion.

This is the key feature that makes American Tower vastly more attractive than its industry peers. You should also know that American Tower sports a 19% net profit margin today, while Crown Castle stops at 4.7% and SBA isn't profitable. So investors get a premium combination of proven moneymaking success and a promising future.

Image source: American Tower.

What about the nosebleed valuation?
Value-hunting investors might balk at American Tower's sky-high price-to-earnings ratio, currently hovering near 53 times trailing earnings.

The stock does indeed trade at nosebleed valuations -- but you get what you pay for.

The strong business prospects ahead could motivate American Tower investments for growth investors. Value hunters would be more interested in this chart:

AMT Revenue (TTM) Chart

AMT Revenue (TTM) data by YCharts.

Notice the gray stripe, outlining the global economic crisis of 2008-2009. American Tower's revenue didn't even stutter during this event, but kept rising like clockwork -- and getting ready for acceleration in the post-crisis years.

The long-term nature of American Tower's contracts delivers this ultra-stable revenue curve, immune to nearly any disaster or economic downturn.

It's a rare double-punch combination that made me add American Tower to my own portfolio in September. Nothing has changed since then, and shares are trading within 2% of my entry price. I'd be just as comfortable buying this stock at current prices, with the next quarterly report on the near horizon.

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Wednesday, October 22, 2014

One Reason SAP (SAP) Stock Closed Up Today

NEW YORK (TheStreet) -- Shares of SAP SE (SAP) closed up 0.59% to $66.07 on Tuesday after JMP Securities maintained its "market perform" rating for the company.

The firm said it reiterated its rating for the German multinational software company because of better than expected revenue.

"SAP saw strong growth in its cloud business (up 41% y/y) and solid growth in its support revenue (up 8% y/y) as it shifts business more and more to the cloud," said "JMP analysts Patrick Walravens and Peter Lowry. "We believe this is absolutely the right strategy, even if it causes near-term compression in operating profits."

Must Read: Warren Buffett's 25 Favorite Stocks STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more. Separately, TheStreet Ratings team rates SAP SE as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation: "We rate SAP SE (SAP) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income." Highlights from the analysis by TheStreet Ratings Team goes as follows: Despite its growing revenue, the company underperformed as compared with the industry average of 11.5%. Since the same quarter one year prior, revenues slightly increased by 5.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share. SAP's debt-to-equity ratio is very low at 0.26 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.95 is somewhat weak and could be cause for future problems. The gross profit margin for SAP SE is currently very high, coming in at 74.81%. Regardless of SAP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 13.41% trails the industry average. The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Software industry and the overall market, SAP SE's return on equity exceeds that of both the industry average and the S&P 500. You can view the full analysis from the report here: SAP Ratings Report STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Monday, October 20, 2014

Report: Square weighs potential sale

Mobile-payments service Square on Monday denied a report it is talking with several tech giants about a possible acquisition.

The San Francisco-based company, led by Twitter co-founder Jack Dorsey, took issue with a story in the Wall Street Journal that said Square discussed a potential deal with Google, and engaged in informal talks with Apple and eBay's PayPal division about an acquisition. The Journal cited "people familiar with the matter."

Square spokesman Aaron Zamost said the company has not talked with Google, and it has "never seriously considered" selling to another company. In a separate statement to the Journal, PayPal dismissed claims it held discussions with Square.

"We have never seriously considered selling to anyone or been in any talks to do so," Zamost said in a statement.

The report says Square lost $100 million last year, more than in 2012.

Should Square sell and forsake its long-rumored IPO plans, it will haven fallen short of the promise affixed to it and the mobile-payments industry.

Last fall, the Journal reported Square had been in talks with banks to launch an initial public offering this year.

Research firm Gartner estimates more than 450 million mobile-payment users will account for $721 billion in transactions worldwide by 2017.

The start-up, meanwhile, has raised about $340 million from at least four rounds of equity financing since 2009, but has burned through half of it, the Journal reported, citing anonymous sources.

Along the way, Square has partnered with several major retailers, including Starbucks and Whole Foods Markets.

Since its device and app became available in 2010, Square has gained millions of customers. It has added services the past year that could eventually be more profitable — such as Square Cash, which helps people send money to friends via e-mail, and Square Market, a digital marketplace for small businesses.

Square Stand lets stores track customer data.

Follow Brett Molina on T! witter: @bam923.

Sunday, October 19, 2014

Ketchum calls controversial automatic data collection key to catching rogue brokers

CARDS, finra, richard g. ketchum, rogue brokers

Bloomberg News

A top priority for Finra is to remove rogue brokers from the financial industry — and a key element in doing so is a proposed automatic data collection system that has caused controversy among member firms — according to the head of the self regulatory organization.

In an April 11 interview with InvestmentNews, Richard G. Ketchum, chairman and chief executive of the Financial Industry Regulatory Authority Inc., said that Finra is “laser-focused on the issue of high-risk brokers.”

He added that the Comprehensive Automated Risk Data System is a “critical step” in enhancing the broker-dealer regulator's ability to monitor suspicious trading activity and target brokers who may be hurting investors.

The financial industry and others have criticized the size and scope of the CARDS proposal in dozens of comment letters. They also have questioned whether the system would expose sensitive investor information, even though Finra has said it will not collect personally identifiable information in the process.

In the interview, Mr. Ketchum also addressed other rules the regulator is pursuing.

“My goal is to continue to make Finra a steadily better and better regulator where we have responsibility — which is broker-dealers and market integrity through oversight of the markets,” he said.

IN: Can you provide an update on what you're doing to address brokers who land at new firms after being disciplined or fired?

Mr. Ketchum: Basically, our approach is a three-legged stool. With respect to those brokers where we believe they are involved in fraudulent activity, whether it be Ponzi schemes or egregious sales of specific unsuitable securities — that's being handled by Cam Funkhouser's fraud unit. We are feeding more and more high-risk broker investigations into our enforcement division so that we can meet our real desire, which is to reduce the time it takes to identify people who are really harming investors and move them out of the industry. And, third, we're culling far more data to try to identify risky brokers, even if not clearly violative brokers, and making that a significant focus of our exams. We're doing more and more branch office exams for that reason.

IN: You think that CARDS will play a role in this effort?

Mr. Ketchum: It's for exactly reasons like [those outlined above] that we want to take the next step with respect to our CARDS concept release and be able to have an even broader database. Our ability to move to a surveillance mode where we're able to identify concerns of specific securities, risky credit on an ongoing basis rather than based on complaints and exams would be a huge step forward. CARDS will be a critical step in that.

IN: You've received! many comment letters about CARDS. What is the next step?

Mr. Ketchum: We have a few comments in. We will thoroughly evaluate those. We recognize this is a complex product. We are working with firms to help us think through various issues involved in the final design of a CARDS project. A large number of firms have been great about participating from that standpoint. My hope would be that we talk to the board about next steps in July.

IN: Do you think you have assuaged fears about investor privacy when it comes to CARDS?

Mr. Ketchum: Many of the fears about investor privacy should have been assuaged by the fact that we're no longer requiring detailed personal information. I have no doubt, when you look three to five years down the road, this is how all regulators are going to be able to work. It makes no sense with the capabilities to manage data today for us to be focusing our programming on visiting firms on a periodic basis. It is time for us to combine that with … ongoing surveillance. We'll be able to reduce burdens on firms and we'll be able to protect investors better. [CARDS] is absolutely the most important tool to do that.

IN: What BrokerCheck improvements should we anticipate?

Mr. Ketchum: We are looking toward the [April] board meeting and will have some discussions. We are going to do a thorough review of our database to identify instances where we see underreporting — and we will continue to look at the categories that should be disclosed. Stay tuned. After the board meeting, I think we'll have more to say.

IN: What is the status of the proposal to add a BrokerCheck link to brokers' websites and social media?

Mr. Ketchum: It will be back out publicly, I hope, in a couple more weeks. There are a just a few complexities with respect to how it works with social media. We will be putting that out for notice very shortly.

IN: What is the regulatory issue that keeps you up at night?

Mr. Ketchum: I always start with complex products, in terms of leveraged products, ! in an env! ironment which is very uncertain with respect to interest rates and market performance. The selling issues, the conflicts issues around the industry and how the industry handles those are always issue one. The fixed-income market has become a more critical market in terms of individual investors. Both Finra and the [Municipal Securities Rulemaking Board] are just going to continue to focus attention there.

Tuesday, October 14, 2014

Apple Has No Idea How Streaming Music Works

PORTLAND, Ore. (TheStreet) -- Apple (AAPL) is watching its iTunes Radio streaming service flounder because it doesn't understand the most fundamental truth about streaming music customers.

We're not listening to streaming music services so we can find the next song to buy. We're listening and subscribing to them so we don't have to buy songs anymore.

That is what nobody in the industry wants to talk about. Regardless of whether Pandora (P) manages to keep pace with competitors like Beats Music and Spotify, the streaming music subscription model is out there and isn't going away anytime soon. Oh, and it's making the a la carte, $1.25-a-song download model look foolish by comparison.

As Billboard noted earlier this week, only 1% to 2% of iTunes Radio listeners have hit the "buy" button to download the song they've been listening to since the service launched in September. At the same time, the number of music downloads has declined by more than 15%. That's a big problem when Apple's iTunes controls almost 90% of the U.S. music download market, but is the third-largest pure music streaming service after Pandora and iHeartRadio, according to Edison Research. That means that last year's slight downtick in digital album sales, the first of its kind, and 8% drop in digital track sales recorded by Nielsen Soundscan fell squarely on Apple's shoulders. Meanwhile, the 32% jump in music streams (not including Pandora) went to AOL (AOL), Cricket, Medianet, Rdio, Rhapsody, Slacker, Spotify, YouTube (owned by Google (GOOG)), Vevo (a joint venture in which Google has an stake), Zune and a whole lot of platforms not named iTunes. Though iTunes sales grew 25% its 2013 fiscal year to $16.1 billion, making up 9.4% of Apple's overall revenue, iTunes' music sales have cratered, according to estimates from mobile industry research group Asymco. It hasn't gotten any better in 2014, as Nielsen notes digital track sales dropped 12.5% in the first quarter from 2013 and digital album sales dove 14.2% over the same span. That's roughly the rate at which music lovers have been abandoning the compact disc each year since 2007. This isn't a Pandora issue or a digital radio issue: It's a straight subscription streaming issue. Interactive streaming like that offered by Spotify, Deezer and Beats Music increased volume to 34.28 billion streams in the first quarter of the year from 25.44 billion streams during the same period in 2013. With music executives putting 1,500 streams at the equivalent of a full digital album, streaming equivalent albums have increased by 10.1 million units so far this year as download sales dropped by roughly 9 million units, according to Nielsen.

Stock quotes in this article: AAPL, P, AOL, GOOG

Simply put, music fans are swapping pay-as-you-go downloads for streaming subscriptions that let them listen to anything they want without having to pay each time they fall in love with a song. Bob Lefsetz over at The Big Picture did his best to grab Apple and the music industry at large by the collar and shake it into consciousness last year by noting that music's future isn't in sales -- unless you're really into vinyl -- but in streaming spins. Imagine Dragons didn't get to the Grammys on album sales and airplay and Calvin Harris didn't become one of the biggest DJs in the world by waiting for iTunes preorders. The metrics have changed, but so has the listening public.

If the recent slumping download numbers haven't made it clear, let us spell it out for you: It's been a long time since the older segments of the music marketplace got their first iPods. It's been more than a decade since iTunes started doling out downloads and just about as long since crafting playlists was something anyone but the most patient of party hosts or wedding planners took joy in doing. A device or iTunes library stocked with thousands of songs isn't a point of pride anymore: It's an onerous chore.

Our libraries of digital music are looking as neglected as big Case Logic binders full of CDs, with iTunes users listening to only 19% of their more than 5,000-song libraries as recently as 2011. Older music listeners don't want to play curator anymore and a younger generation that's grown up with streaming music never had to. That decline in downloads and continued slide in CD sales suggests they'll never have to.

"The a-la-carte consumption model is 11 years old and at this point the decline in the U.S. download sales seems unstoppable; it doesn't seem like the store is refreshable," said one record label about the once-indispensable iTunes. And that's how Apple, of the dancing iPod silhouettes and indie-rock jingles, got caught sleeping after the aughts ended. The company that was once well ahead of the music industry suddenly became part of it and contracted its various illnesses: Hubris, adamance, greed. As great a force as Apple was in driving the last great music format change away from CDs and to lower-quality digital files, it now joins the labels in being dragged toward the subscription streaming future. -- Written by Jason Notte in Portland, Ore. >To contact the writer of this article, click here: Jason Notte. >To follow the writer on Twitter, go to http://twitter.com/notteham. >To submit a news tip, send an email to: tips@thestreet.com. RELATED STORIES: >>Why I'm Not Going To The Rock And Roll Hall Of Fame Induction Ceremony >>Our Early Record Store Day Shopping List >>Sorry Cadillac, We're Not Ready For Jerks Yet

Stock quotes in this article: AAPL, P, AOL, GOOG Jason Notte is a reporter for TheStreet. His writing has appeared in The New York Times, The Huffington Post, Esquire.com, Time Out New York, the Boston Herald, the Boston Phoenix, the Metro newspaper and the Colorado Springs Independent. He previously served as the political and global affairs editor for Metro U.S., layout editor for Boston Now, assistant news editor for the Herald News of West Paterson, N.J., editor of Go Out! Magazine in Hoboken, N.J., and copy editor and lifestyle editor at the Jersey Journal in Jersey City, N.J.

Sunday, October 12, 2014

Procter & Gamble: Dog Days are Over?

Procter & Gamble (PG) unloaded most of its pet care business on Mars Inc today, although the deal has done little to lift Procter & Gamble’s shares today.

Associated Press

Shares of Procter & Gamble have gained 0.1% to $81.44 at 2:06 p.m. today, while Unilever (UL) has risen 0.6% to $43.96, Colgate-Palmolive (CL) is little changed at $65.65 and Kimberly-Clark (KMB) has advanced 0.5% to $111.31.

Citigroup’s explains why Procter & Gamble’s decision (Hint: It has little to do with the financials):

[Procter & Gamble] said that the one-time EPS impact from the divestiture and ongoing EPS dilution are not expected to have a material impact on FY15 results. [Procter & Gamble] said that net cash proceeds from the transaction would be used for general corporate purposes (let's hope that means more share buyback!).

But Much Important Psychologically — Since his return to [Procter & Gamble] last summer, CEO A.G. Lafley has stated repeatedly that he believes there is up to 10% of [Procter & Gamble's] portfolio that could/should be divested due to chronic underperformance. Thus far, [Procter & Gamble's] divestitures have been immaterial (bleach and a plan to sell MDVip). We are happy that [Procter & Gamble] is taking decisive action to exit pet food, given the drag it has represented on [Procter & Gamble's] business over the years (probably more of a distraction to mgmt as opposed to a real financial cost, but a drag nonetheless). We hope there are more similar divestitures to come.

Shares of Procter & Gamble are little changed this year, while Unilever has gained 6.7%, Colgate-Palmolive has ticked up 0.6% and Kimberly-Clark has gained 6.5%.

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