Why Operating Margins is a key valuation parameter

Before we begin to discuss the details, we should broadly take a look at the various expense components that determine a company's operating margin. These include variable expenses, semi-variable expenses and fixed costs.
Variable expenses are those expenses that change in proportion with the sales or business activity. Fixed costs are expenses that a company incurs regardless of the business activity. Semi-variable expenses are a mixture of fixed and variable components. For most of the manufacturing companies, costs are fixed until production is at a certain level. If production exceeds that level, the costs tend to become variable.

Example of fixed costs include interest costs, salaries (office employees), electricity (office), amongst others. Examples of variable costs are raw materials, sales and marketing costs, amongst others. A very common example of a semi-variable cost is wages. A company needs to pay its labour a fixed amount, even if production levels are low or if there is no production activity taking place at all. However, if and when production activity accelerates, the staff may work overtime. Subsequently, they will get paid for the same. The overtime wages, in this case, is the semi-variable cost.

Operating margin: Operating margin is a measurement of the proportion of a company's revenue leftover after paying for the variable costs of production. A healthy operating margin is required for a company to be able to pay for its fixed costs. The higher the margin, the better it is for the company as it indicates its operating efficiency. Operating margin is calculated by subtracting the operating expenses from sales, and then dividing the balance by the sales figure. The formula is shown below -

Operating margins = (Net sales - Total operating expenses)/ Net sales * 100

Now that we have a basic idea of what operating margin is, we shall take a look at some factors that determine a company's or an industry's operating margin.

As you would be aware, operating margins differ for each industry. The reasons behind the same are various. Some of them may include the regulatory nature of the business, the intensity of competition, the phase of the industry (life cycle), segmental presence within an industry (niche businesses), geographical presence, brand power, bargaining power of buyers and suppliers, raw material procuring policies and their impact on realisations, amongst others. Many a times, these factors coincide and complement each other. Operating margins also differ significantly for companies within a particular industry. At the end of the day, how a company manages the above (in addition to many others) aspects are essentially what differentiate the leaders from the inefficient players.

Companies forming part of sectors such as telecom and Information Technology (IT) tend to earn the highest operating margins, while sectors such as auto and FMCG garner the lowest margins.

Companies forming part of the auto industry garner one of the lowest margins mainly on account of stiff competition and high dependence on raw material costs (in turn, realisations). An auto manufacturer may not be in a position to fully pass on the rise in raw material cost to its customers as it would end up impacting its car sales as customers would choose a cheaper alternative (considering that there is stiff competition within the industry). For these reasons, the auto industry remains a high-volume, low-margin business. Similar would be the case for FMCG companies.

An example of a low-volume, high margin business would be that of software products or heavy engineering. As software companies develop products in-house, they are able to earn higher margins as sales volumes increase. But when compared to IT services, the quantum of the revenue is relatively much lower. Similarly, for engineering companies, when the component of pure engineering is high on a particular project, the company tends to earn higher margins (on that particular project) as opposed to pure construction or project activities.

Conclusion: We hope that you may have got a better understanding of operating margins and their key determinants after reading this article. As we mention time and again, we recommend investors to study and analyse operating performance of companies from a long term perspective to get a better understanding. In the next article of this series, we shall take a look at interest and depreciation costs and how one could view them.

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How to interpret key expenses of a company

How to gauge and analyse revenues of a company

Is Barrick Gold Undervalued?

With shares of Barrick Gold (NYSE:ABX) trading around $15, is ABX an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Barrick Gold is engaged in the production and sale of gold, as well as exploration and mine development. The company also produces copper and holds other interests, which include a nickel development project. Barrick Gold’s business is organized into seven primary operating segments: four regional gold businesses, a global copper business unit, an oil and gas business, and a capital projects group. Its gold, copper, nickel, and oil and gas businesses and interests are dispersed around the world.

Gold prices continue to decline, as demand for this precious metal is not what it once was. The future doesn’t look so bright from the perspective of commodity-focused companies, as prices around the world continue to drop. Look for changes in gold, oil, and gas prices to have significant effects on the future profits of companies like Barrick Gold.

T = Technicals on the Stock Chart are Weak

Barrick Gold stock has seen a disastrous decline over the last couple of years. The stock is now trading at lows not seen in over a decade. Analyzing the price trend and its strength can be done using key simple moving averages.

What are the key moving averages? They are the 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Barrick Gold is trading below its declining key averages, which signal neutral to bearish price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Barrick Gold options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Barrick Gold Options	62.35%	63%	61%

What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
August Options	Steep	Average
September Options	Steep	Average

As of today, there is average demand from call buyers or sellers, and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts, and are leaning neutral to bearish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates, and what that means for Barrick’s stock.

E = Earnings Are Decreasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. The last four quarterly earnings announcement reactions can also help gauge investor sentiment on Barrick Gold’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Barrick Gold look like, and more importantly, how did the markets like these numbers?

	2013 Q1	2012 Q4	2012 Q3	2012 Q2
Earnings Growth (Y-O-Y)	-18.27%	-418.65%	-54.41%	-35.34%
Revenue Growth (Y-O-Y)	-5.68%	11.35%	-13.47%	-4.04%
Earnings Reaction	4.26%	1.04%	-7.43%	-6.59%

Barrick Gold has seen decreasing earnings and revenue figures over the last four quarters. From these numbers, the markets have had mixed feelings about Barrick Gold’s recent earnings announcements.

P = Poor Relative Performance Versus Peers and Sector

How has Barrick Gold stock done relative to its peers, Goldcorp (NYSE:GG), Newmont Mining (NYSE:NEM), Freeport McMoRan (NYSE:FCX), and the overall sector?

	Barrick Gold	Goldcorp	Newmont Mining	Freeport McMoRan	Sector
Year-to-Date Return	-56.78%	-29.81%	-41.11%	-17.92%	-47.55%

In a weak sector, Barrick Gold has been a poor relative performer, year-to-date.

Conclusion

Barrick Gold is a gold mining firm that also has interests in copper, nickel, oil, and gas projects around the world. The company’s stock hasn’t done very well in the last two years, and is now trading at lows not seen in over a decade. Over the last four quarters, earnings and revenue figures have declined, which has produced mixed feelings among investors in the company. Relative to its weak peers and sector, Barrick Gold has been a poor year-to-date performer. STAY AWAY from Barrick Gold for now.

Defeat at J.C. Penney Hurts Ackman as Performance Trails

As Bill Ackman, the largest shareholder of J.C. Penney Co. (JCP), agreed to leave the company's board, the retailer's managers weren't the only ones breathing a sigh of relief.

Investors viewing the departure as good news were pushing the shares 3.2 percent higher at the start of trading yesterday. For an activist like Ackman, whose involvement in a company's management is meant to boost the share price, it was a bad ending to a disastrous investment. After two-and-a-half years on the board and potential losses of more than $700 million, he had declared defeat and the market had applauded.

It's been a tough year for Ackman. His $11.2 billion Pershing Square Capital Management LP is trailing many of its biggest rivals this year with a 3.7 percent return through July in his largest fund. In addition to J.C. Penney, he's lost about $320 million on a bet against Herbalife Ltd. (HLF), a weight-loss and nutritional supplement company. Carl Icahn and George Soros's family office have taken the other side of the bet, helping the shares double in value this year. The defeats weigh on Ackman as he seeks to rally shareholder support for his latest target, Air Products & Chemicals Inc.

"Being an activist investor is all about reputation, and such high-profile losses as J.C. Penney and Herbalife may hinder him when he tries to throw his weight around at Air Products and other companies," said Brad Alford, head of Atlanta-based Alpha Capital Management LLC, which runs two mutual funds that invest in hedge-fund strategies. "His recent batting average would send him to the minors."

Getting Blame

Since joining the board of J.C. Penney in February 2011, Ackman had been the architect of a major shift in strategy. He pushed to replace Mike Ullman as chief executive officer, and hired Ron Johnson, the executive who helped build Apple Inc.'s retail stores. Johnson ended discounting and remade the stores into collections of boutiques. The strategy flopped with customers, resulting in a $985 million loss for the year ended in February as sales plunged 25 percent to the lowest level since at least 1987. Johnson was ousted in April and replaced by Ullman.

Ackman, in an interview yesterday with Charlie Rose, said he got "too much credit" for helping to recruit Johnson.

"It was really the collective decision of the board to bring him on," Ackman said. "And when the business failed, I probably got too much of the blame over the trouble we've had in the last year for recruiting Ron. That's the risk of my business."

Soros Backing

Ackman drew the board's anger last week by making a letter to his fellow directors public. In the missive, Ackman told the board members that he had persuaded former J.C. Penney CEO Allen Questrom to agree to return as chairman if he approved of the next CEO. The 73-year-old Questrom, in an interview last week, said returning as chairman was "a long shot" that hinged on directors forming "a positive board and an aggressive board to help solve the problems" and a new CEO with retail experience being hired.

At least two investors, Soros Fund Management LLC and Glenview Capital Management LLC, supported the current executives, according to people familiar with the situation.

After gaining as much as 3.2 percent, J.C. Penney shares ended yesterday down 3.7 percent, in part on concern that Ackman will sell his almost 18 percent stake in the company, said Michael Binetti, an analyst at UBS AG in New York.

Pershing's potential sale "is likely to remain a significant stock overhang in the near term," he wrote in an e-mailed research report.

General Growth

Ackman's career has been dotted with both high-profile wins and jaw-dropping losses. He raised a $2 billion fund to invest in retailer Target Corp. (TGT) in 2007, and then lost 90 percent of the money in the next two years. At the time he called it "one of the greatest disappointments" of his career.

Among his wins, Ackman helped rescue General Growth Properties Inc. (GGP), the second-largest U.S. mall owner, from near-collapse by pushing it to file for bankruptcy, which it did in 2009, when he also won a board seat. The salvage effort "turned $60 million into $1.6 billion," Ackman told Bloomberg News in 2011, and contributed to his flagship fund's net return of 29 percent in 2010.

He staged a boardroom coup at Canadian Pacific Railway Ltd. in 2012 after which the stock almost tripled.

Pershing Square has climbed about 20 percent a year since its founding in January 2004, compared with a 6.6 percent return on the Standard & Poor's 500 Index.

Trailing Loeb

Even with Canadian Pacific win in his portfolio, his returns have lagged behind rivals including Dan Loeb's Third Point, which has climbed 16 percent this year through the end of July and Nelson Peltz's Trian Partners Ltd., which has jumped 25 percent through July 26. Richard Perry's Perry Partners International Inc., which recently bought shares in J.C. Penney, is up 11 percent through July 26th.

Pershing Square in July raised a single-stock fund to invest alongside his main fund in Allentown, Pennsylvania-based Air Products. He bought a $2 billion stake in the company, which instituted a shareholder-rights plan to prevent any one investor from gaining too much control right before Ackman made his wager public on July 31.

Ackman has yet to outline any changes he wants made at the company, whose shares are down 1.6 percent since the day before he disclosed the stake.

Ackman's recent sluggish performance has hurt him with investors. As of May, he was about $500 million short of the $3 billion he wants to raise for a publicly traded fund that he wants to list on the London Stock Exchange. He's now expecting to list the fund next year, two years behind his original plan.

Soros Pulls

At least one large investor has pulled money over Pershing Square's performance. Soros Fund Management, the family office of billionaire Soros, asked to pull about $250 million from Pershing last year. Because Ackman's firm only gives back a portion of investor cash each quarter, Soros won't get all its money back until next year.

Some senior analysts have departed. Scott Ferguson, who had been at Pershing since 2003, left last year to found New York-based Sachem Head Capital Management LP. Mick McGuire quit in 2009 to found Marcato Capital Management LLC in San Francisco. He had worked with Ackman since 2005.

Perhaps the biggest embarrassment to Ackman this year has been the very public fight over Herbalife, which he said was operating like a pyramid scheme. In December, he shorted 20 million shares of the company, valued at about $1 billion, announcing his wager in a three-hour presentation at the Sohn Investment Conference in New York. In an interview on Bloomberg Television, he called it "the highest conviction I have ever had about any investment I have ever made, full stop."

Herbalife has repeatedly denied the accusations made by Ackman.

Icahn Feud

Since that pronouncement, investors including Icahn and Soros's family office have bought up the shares. Loeb, who purchased shares and eventually sold them, said the stock could climb to near $70. In a statement on Jan. 25, Icahn said that Ackman was taking "inordinate risks" with a bet that could become the "mother of all short squeezes."

A trader who borrows and then sells stock in anticipation of a decline can incur hefty losses if others start buying the same shares in unison, pushing the price up in a so-called short squeeze.

First Fund

For Ackman, who started his first hedge fund at the age of 26, three months out of Harvard Business School in Boston, his fight over Herbalife and J.C. Penney isn't so unusual. His investing strategy marries intense research with a high level of showmanship. He flipped burgers for half a day at a McDonald's in Florida when he was trying to get the company to sell more of its restaurants to franchisees, and outlined his Target plans by showing 163 PowerPoint slides at a press conference.

From his youth growing up in Chappaqua, a New York City suburb, Ackman has been sure of himself. He once recalled for an audience at a conference that his father, Lawrence, a real estate investor, told him he could do anything, and that he believed it.

He started his first hedge fund with Harvard classmate David Berkowitz and raised $3 million, even though neither had any professional experience. Their clients included the billionaire Ziff family, former owners of Ziff-Davis Publishing Co., and Martin Peretz, editor-in-chief of the New Republic and Ackman's former Social Studies professor at Harvard, where he also got an undergraduate degree.

'Brick Wall'

When Berkowitz and Ackman started Gotham Partners Management Co. in September 1992, they leased a windowless Park Avenue office from brokerage firm Furman Selz Financial Services Ltd. In the first five years the firm posted returns of about 40 percent a year, and assets peaked at $580 million.

Ackman expanded the breadth of the fund's investments in 1997 into private equity. Gotham was forced to liquidate its holdings in 2003 after it received substantial redemption requests following a failed merger between two of the firm's investments.

"Ackman's ego disallows him from recognizing, much less respecting or fearing, all the deleterious outcomes outside the winning one on which he obsesses," said Robert Chapman, the founder of Chapman Capital LLC in Manhattan Beach, California and a holder of Herbalife shares. "Tunnel vision on Wall Street usually has a brick wall at the other end."

Ackman told Charlie Rose that 23 of his 26 active investments are best described as home runs and whether he's a good investor or not is fairly easy to ascertain.

"Ultimately, investors are only as good as their track records," he said.

HighTower Rolls Out Mercer Portfolio Tool

HighTower says it is the first U.S. wealth management firm to offer advisors access to the Mercer Advisor Portal.

The Chicago-based company, which is owned by its advisors, said early Monday that the portal means advisors and their clients will now benefit from institutional manager research methodology.

"The financial crisis highlighted the critical need for an evolution in investment selection and portfolio construction, and the Mercer Advisor Portal [or MAP] offers advisors an innovative alternative to traditional portfolio modeling approaches that rely primarily on quantitative analysis," said Matthias Paul Kuhlmey, partner, managing director and head of Global Investment Solutions at HighTower, in a press release.

"Mercer's dedication to creating tools that improve advisor performance aligns perfectly with HighTower's commitment to deliver innovation to its advisor partners through sophisticated investment selections, technology and research," Kuhlmey said.

According to HighTower, MAP combines historical performance analysis and forward-looking research provided by Mercer's 100-plus researchers worldwide, who monitor more than 25,000 investment strategies. Mercer says it developed MAP as part of the ongoing growth of its wealth management consulting and solutions work last year.

"HighTower's adoption of our platform enables them to provide their advisors with unique qualitative and forward-looking tools to choose best-in-breed investment managers and deliver on their commitment to clients," said Cara Williams, senior partner and global head of wealth management and technology solutions at Mercer, in a statement. "Clients will benefit tremendously from their HighTower advisors having access to Mercer's unparalleled institutional-grade research, which will help them make more informed decisions to achieve their financial goals."

HighTower recently expanded its partnership development team. It hired Thomas Brown as an executive director and East Coast relationship manager and Frank Epinger as an executive director and relationship manager for the West Coast and Midwest. They are based in New York and Los Angeles, respectively, and report to Michael Parker, national director of HighTower partnership.

In late March, HighTower said MK Wealth Management, an advisory team on Long Island, joined its partnership, representing the 10th time in the past 12 months that a new team has joined the firm. This represented the 37th team moving to HighTower since its 2007 inception. It now includes 33 teams, with client assets totaling a reported $25 billion.

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Check out Elliot Weissbluth: The 2013 IA 25 Extended Profile.

Noah Rallies 25% After Chinese Wealth Management Boosts Outlook

Noah Holdings Ltd. (NOAH), a Chinese wealth-management company, jumped to the highest level in more than two years in New York after raising its 2013 profit estimate.

Noah's American depositary receipts surged 25 percent to $16.28 as of 12:53 p.m., gaining the most since February 2012. They earlier soared as much as 27 percent. Trading volume was six times the daily average over the past three months, data compiled by Bloomberg showed.

The Shanghai-based company raised its 2013 adjusted net income forecast to as much as $55 million in a statement yesterday, 49 percent more than an estimate of up to $37 million given on May 6. Noah is scheduled to report second-quarter earnings on Aug. 21.

"We were surprised by Noah's big upside revision to its 2013 profit guidance, which was far ahead of our previous estimate," Ella Ji, an analyst at Oppenheimer & Co. in New York, said by phone. "The big growth is likely to benefit from its good performance in real-estate fund management business."

Ji raised Noah to outperform, an equivalent to buy, from market perform in a note, setting a price target of $18.

Triumph Group Hits 52-Week High - Analyst Blog

On Jul 8, 2013, the shares of Triumph Group Inc. (TGI) hit a 52-week high of $82.06. Triumph Group registered positive earnings surprises in the last four quarters, with an average beat of 11.28%.

The ongoing improvement in the commercial aviation market will boost the company's future prospects. Recently, Triumph Group received a $1.7 billion contract from Brazilian aircraft manufacturer, Embraer SA (ERJ), to provide aeronautical services.

Triumph Group also supplies aerospace structures to The Boeing Company (BA) and Airbus. The shower of orders for these two companies at the recently concluded Paris Air show could open up new opportunities for Triumph Group. Europe's Airbus notched up orders for 466 planes worth $70 billion in sales at the show while Boeing inked agreements for 442 planes worth $66 billion.

Triumph Group made two strategic acquisitions this year. Both these acquisitions will complement the company's operations and will be immediately accretive to its earnings.

Triumph Group projects ongoing earnings for fiscal 2014 in the range of $6.30 to $6.40 per share, up from $6.21 per share earned in fiscal 2013. The company expects total revenue in the range of $3.8 billion to $4.0 billion.

We expect long-term earnings growth of 13.15% on the back of sales growth of 36.49%. The Zacks Consensus Estimate for 2013 of $6.37 is on the higher end of the guided range, reflecting an estimated year-over-year growth of 2.56%.

The strong financial position of Triumph Group enables it to reward its shareholders through dividend payments. In fiscal 2013, the company paid dividends worth $8 million to its shareholders.

Triumph Group currently retains a Zacks Rank #3 (Hold). Meanwhile Astronics Corp. (ATRO) with a Zacks Rank #1 (Strong Buy) is worth considering.

Bull of the Day: Tesla Motors (TSLA) - Bull of the Day

2013 has been an incredible year for the automotive industry, but it has been particularly outstanding for newcomer Tesla Motors (TSLA). The electric car manufacturer has made a name for itself thanks to solid sales and earnings that crushed estimates, while the cool factor of its vehicles have also helped the firm to gain some recognition.

These factors have allowed TSLA's stock price to surge this year, as strong results and optimism over electric car demand in the future pushed the stock up to new heights. In fact, TSLA shares have added about 250% since the start of the year, and over 340% in the trailing one year period, making the company one of the hottest stocks in the market, and a favorite pick among growth investors.

Given this incredible surge, many are likely wondering if the run can continue for TSLA heading into the end of the year. If you look at analyst expectations for the company though, there is plenty of reason to believe that TSLA can keep this streak alive and put up some more solid gains.

TSLA Estimates in Focus

Analysts remain extremely bullish on the company and we have seen some estimate revisions higher in the past few weeks. This has helped to push the current year consensus from a loss of 77 cents a share 30 days ago, to its current level of a loss of 60 cents a share today.

Current quarter and next quarter estimates have also risen over the past thirty days too, suggesting that analysts like the firm's prospects in the short term as well.

This move higher in the estimates picture also helps to push the Earnings ESP for the current quarter up to 16.67%. So, the firm could be poised to beat estimates this quarter, at least when looking at this metric.



Growth Rates Still Incredible

Beyond this favorable estimate picture, it is also worth noting that growth levels for TSLA are still quite impressive! . The company is expected to see growth of 81% for the current year, and an astounding 173% for the next year period.

This is especially incredible when you consider where the company was, and where the firm is expected to go in the future. The year ago EPS for the company was $-.68/share and current projections for the 2014 year call for earnings of $0.50/share. Clearly, the firm is on the right track and is well on its way to becoming a formidable player in the automotive market.

Bottom Line

This soaring estimate picture and strong growth outlook has helped TSLA to earn a Zacks Rank #1 (Strong Buy), suggesting that the company will outperform other stocks in the near future. If that wasn't enough, the stock also has a Zacks Recommendation of 'Outperform', meaning that the long-term future for TSLA is quite bright as well.

It is also worth noting that the firm is in great company, as the broad automotive industry is coming back strong. In fact, the automotive-domestic Zacks Industry is currently Ranked in the top 10%, so there are definitely some industry tailwinds too.

Given these factors, it looks like Tesla, even at its current levels, may still be a great candidate for a portfolio. There are not only positive industry trends behind the firm, but a variety of company specific points—such as strong growth rates and increased optimism from analysts—which suggest that there is still time to get in on this amazing growth story.

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Cummins Hikes Dividend by 25% - Analyst Blog

Cummins Inc. (CMI) announced a 25% increase in its quarterly dividend to 62.50 cents per share from 50 cents. The company will pay the cash dividend on Sep 3, 2013 to shareholders of record as on Aug 22, 2013. Following the announcement, shares of Cummins increased 1.62% to close at $112.62 on Jul 9.

Last year in July, Cummins had increased its quarterly dividend by 25% to 50 cents per share from 40 cents, which was paid on Sep 1, 2012. With this hike, the company has now increased its dividend by 257% over the last four years.

In Dec 2012, Cummins also announced the share repurchase program of up to $1 billion. The company expects that these shareholder-friendly moves will enhance the company's shareholders value.

Cummins is a leading worldwide designer, manufacturer and distributor of diesel and natural gas engines, electric power generation systems, and engine-related components, fuel systems, controls and air handling systems. Currently, the company retains a Zacks Rank #4 (Sell).

Cummins posted a sharp 39.5% fall in earnings to $1.44 per share in the first quarter of 2013 from $2.38 in the same quarter of 2012 (all excluding special items), missing the Zacks Consensus Estimate of $1.86. Lower earnings were attributable to weaker demand in the company's most geographies and end markets. Revenues in the quarter dipped 12% to $3.9 billion, which was marginally lower than the Zacks Consensus Estimate of $4.0 billion.

We expect that Cummins will benefit from new emission standards, fuel economy improvement and favorable trends for its Power Generation business. In addition, the company invested heavily in capacity expansion and the introduction of new products in the engine division will have favorable impact in the long run.

Other stocks that are performing well in the industry include Visteon Corp. (VC), Power Solutions International, Inc. (PSIX) and Weichai Power Co. Ltd (WEICY). Visteon carry a Zacks Rank #1 (Strong Buy), while Power Solutions and W! eichai Power are Zacks Rank #2 (Buy) stocks.

10 Best Small Cap Stocks To Buy Right Now

 Oh sure... it's all fun and games when prices are going straight up.

 

But as the old saying goes... What goes up must come down. And the straighter up it goes, the faster it drops...

 

 Take the utility sector, for example...

 

We first warned about the dangers of the parabolic move in utility stocks a few weeks ago. You can see what has happened to the sector since then...

 

10 Best Small Cap Stocks To Buy Right Now: Rackspace Hosting Inc(RAX)

Rackspace Hosting, Inc. operates in the hosting and cloud computing industry. It provides information technology (IT) as a service, managing Web-based IT systems for small and medium-sized businesses, as well as large enterprises worldwide. The company?s service suite includes dedicated hosting comprising customer management portal and other management tools that manage data center, network, hardware devices, and operating system software; and cloud computing that enables customers to provide and manage a pool of computing resources, as well as delivery of computing resources to business when they need them. It offers cloud servers, cloud files, and cloud sites, as well as cloud applications, such as email, collaboration, and file back-ups; and hybrid hosting that provides a combination of dedicated hosting and cloud computing services. The company also offers customer support services. It sells its service suite through direct sales teams, third-party channel partners, an d online ordering. The company was formerly known as Rackspace.com, Inc. and changed its name to Rackspace Hosting, Inc. in June 2008. Rackspace Hosting, Inc. was founded in 1998 and is headquartered in San Antonio, Texas.

Advisors' Opinion:

• [By Sherry Jim]  

  This computing specialist that provides web-based IT systems has soared 60%+ in the past year.  With a P/S above 3 and Price to Cash of 10 this stock is poised to continue to soar and outperform it’s peers. $25 in a year is a realistic bet.

10 Best Small Cap Stocks To Buy Right Now: Hot Topic Inc.(HOTT)

Hot Topic, Inc., together with its subsidiaries, operates as a mall- and Web-based specialty retailer in the United States. The company operates Hot Topic and Torrid store concepts, as well as an e-space music discovery concept, ShockHound. Its Hot Topic stores sell music/pop culture-licensed merchandise, including tee shirts, hats, posters, stickers, patches, postcards, books, novelty accessories, CDs, and DVDs; and music/pop culture-influenced merchandise comprising women?s and men?s apparel and accessories, such as woven and knit tops, skirts, pants, shorts, jackets, shoes, costume jewelry, body jewelry, sunglasses, cosmetics, leather accessories, and gift items for young men and women primarily between the ages of 12 and 22. The company?s Torrid stores sells casual and dressy jeans and pants, fashion and novelty tops, sweaters, skirts, jackets, dresses, hosiery, shoes, intimate apparel, and fashion accessories for various lifestyles for plus-size females primarily betw een the ages of 15 and 29. As of July 30, 2011, it operated 636 Hot Topic stores in 50 states, Puerto Rico, and Canada; 145 Torrid stores; and Internet stores, hottopic.com and torrid.com. The company was founded in 1988 and is headquartered in City of Industry, California.

Advisors' Opinion:

• [By Wyatt Research]

  The teen retailer reported its same-store sales rose 0.4 percent, with same-store sales at its Torrid chain for overweight teens rising 7 percent. Analysts were expecting a decline.

Top 5 Value Companies To Invest In Right Now: ATA Inc.(ATAI)

ATA Inc., through its subsidiaries, provides computer-based testing services in the People?s Republic of China. It offers services for the creation and delivery of computer-based tests utilizing its test delivery platform, proprietary testing technologies, and testing services; and provides logistical support services relating to test administration. The company?s computer-based testing services are used for professional licensure and certification tests in various industries, including information technology (IT) services, banking, securities, teaching, and insurance. Its e-testing platform integrates various aspects of the test delivery process for computer-based tests ranging from test form compilation to test scoring, and results analysis. ATA also provides career-oriented educational services, such as single course programs, degree major course programs, and pre-occupational training programs focusing on preparing students to pass IT and other vocational certification tests; test preparation and training programs and services to test candidates preparing to take professional certification tests in securities, futures, banking, insurance and teaching industries; online test preparation and training platform for the securities and banking industries; and test preparation software for the teaching industry. In addition, the company offers HR select employee assessment solution, an online system that utilizes its proprietary software and an inventory of test titles to help employers improve the efficiency and accuracy of their employee recruitment process. As of March 31, 2010, it had contractual relationships with 1,988 ATA authorized test centers. The company serves Chinese governmental agencies, professional associations, IT vendors, and Chinese educational institutions, as well as individual test preparation services. ATA Inc. was founded in 1999 and is based in Beijing, the People?s Republic of China.

Advisors' Opinion:

• [By Wyatt Research Staff]

  The Chinese-based educator spiked higher recently after it exceeded analysts' expectations. Revenue and adjusted earnings soared 78% and 269%, respectively. Its long-term annual growth rate is 15%.

  Analysts at Zacks Investment Research upgraded shares from "neutral" to "outperform". 

10 Best Small Cap Stocks To Buy Right Now: Voyager Oil & Gas Inc.(VOG)

Voyager Oil & Gas, Inc. engages in the exploration and production of oil and gas in the United States. It primarily focuses on oil shale resource prospects in Montana, North Dakota, Colorado, and Wyoming. As of May 17, 2011, the company controlled approximately 141,500 net acres in the five primary prospect areas comprising 28,000 net acres targeting the Bakken/Three Forks in North Dakota and Montana; 14,200 net acres targeting the Niobrara formation in Colorado and Wyoming; 800 net acres targeting a Red River prospect in Montana; 33,500 net acres in a joint venture targeting the Heath Shale formation in Musselshell, Petroleum, Garfield, and Fergus counties of Montana; and 65,000 net acres in a joint venture in the Tiger Ridge gas field in Blaine, Hill, and Chouteau counties of Montana. It supplies energy and fuel for industrial, commercial, and individual consumers. The company is based in Billings, Montana.

Advisors' Opinion:

• [By SmallCap Investor]

  Shares of this explorer, which has operations in the Western U.S., crossed back above $3 and have risen 40 percent in the past month, amid increasing investor interest in companies drilling in the Bakken region.

10 Best Small Cap Stocks To Buy Right Now: OCZ Technology Group Inc(OCZ)

OCZ Technology Group, Inc. designs, develops, manufactures, and distributes computer components for computing devices and systems worldwide. It primarily offers solid state drives, flash memory storage, memory modules, thermal management solutions, AC/DC switching power supply units, and computer gaming solutions. The company?s products are used in industrial equipment and computer systems; computer and computer gaming solutions; mission critical servers and high end workstations; personal computer (PC) upgrades to extend the useable life of existing PCs; high performance computing and scientific computing; video and music editing; home theatre PCs and digital home convergence products; and digital photography and digital image manipulation computers. OCZ Technology Group, Inc. offers its products to retailers, on-line retailers, original equipment manufacturers, systems integrators, and distributors. The company was founded in 2002 and is headquartered in San Jose, Califo rnia.

Advisors' Opinion:

• [By Wyatt Research]

  The maker of solid state drives for computers reported revenue more than doubled and posted adjusted net income of 1 cent per share. It predicted a full-year revenue rise of at least 65 percent. The share price has jumped 210 percent in the past year.

10 Best Small Cap Stocks To Buy Right Now: Texas Instruments Incorporated(TXN)

Texas Instruments Incorporated engages in the design and sale of semiconductors to electronics designers and manufacturers worldwide. The company?s Analog segment offers high-performance analog products comprising standard analog semiconductors, such as amplifiers, data converters, and interface semiconductors; high-volume analog and logic products; and power management semiconductors and line-powered systems. Its Embedded Processing segment includes DSPs that perform mathematical computations to process and enhance digital data; and microcontrollers, which are designed to control a set of specific tasks for electronic equipment. The company?s Wireless segment designs, manufactures, and sells application processors and connectivity products. Its Other segment offers smaller semiconductor products, which include DLP products that are primarily used in projectors to create high-definition images; and application-specific integrated circuits. This segment also provides handhe ld graphing and scientific calculators, as well as licenses technologies to other electronic companies. The company serves the communications, computing, industrial, consumer electronics, automotive, and education sectors. Texas Instruments Incorporated sells its products through a direct sales force, distributors, and third-party sales representatives. It has collaboration agreements with PLX Technology Inc.; Neonode, Inc.; and Ubiquisys Ltd. The company was founded in 1938 and is headquartered in Dallas, Texas.

Advisors' Opinion:

• [By Paul Goodwin]  

  How do they make their money? TXN makes the PA Duplexer Module and the CDMA PA that goes into every iPhone. With a PEG ratio of 0.2 reveals huge discount compared to peers. This is a cash rich company and one I feel will be a strong performer within the next year.

10 Best Small Cap Stocks To Buy Right Now: InterDigital Inc.(IDCC)

Interdigital, Inc. engages in the design and development of digital wireless technology solutions. The company offers technology solutions for use in digital cellular and wireless products and networks, including 2G, 3G, 4G, and IEEE 802-related products and networks. It holds patents related to the fundamental technologies that enable wireless communications. The company licenses its patents to equipment producers that manufacture, use, and sell digital cellular and IEEE 802-related products; and licenses or sells mobile broadband modem solutions, including modem IP, know-how, and reference platforms to mobile device manufacturers, semiconductor companies, and other equipment producers that manufacture, use, and sell digital cellular products. InterDigital?s solutions are incorporated in various products comprising mobile devices, such as cellular phones, tablets, notebook computers, and wireless personal digital assistants; wireless infrastructure equipment, such as base stations; and components, dongles, and modules for wireless devices. The company was founded in 1972 and is headquartered in King of Prussia, Pennsylvania.

Advisors' Opinion:

• [By SmallCap Investor]

  The wireless technology company said it's exploring its options, including a possible sale, following last month's successful auction of Nortel Networks intellectual property which brought in $4.5 billion. IDCC owns about 1,300 patents related to mobile phone technology.

• [By CRWE]

  InterDigital, Inc. (NASDAQ:IDCC) reported that certain of its subsidiaries have completed the previously announced sale of roughly 1,700 patents and patent applications to Intel Corporation for $375 million in cash.

10 Best Small Cap Stocks To Buy Right Now: Achillion Pharmaceuticals Inc.(ACHN)

Achillion Pharmaceuticals, Inc., a biopharmaceutical company, engages in the discovery, development, and commercialization of treatments for infectious diseases. The company focuses on the development of antivirals for the treatment of chronic hepatitis C; and the development of antibacterials for the treatment of resistant bacterial infections. Its drug candidates for the treatment of chronic HCV include ACH-1625, a protease inhibitor, which is in phase IIa clinical trial for the treatment of chronic HCV; ACH-2684, a pangenotypic protease inhibitor, which is in phase I clinical trial for the treatment of chronic HCV infection; and NS5A inhibitors for the treatment of chronic HCV infection, including ACH-2928, which is to enter a phase I clinical trial, as well as various additional NS5A inhibitors in preclinical development. Its pipeline of product candidates also includes ACH-702 and ACH-2881 for drug resistant bacterial infections; elvucitabine for HIV infection; and AC H-1095 for HCV infection. The company was founded in 1998 and is based in New Haven, Connecticut.

Advisors' Opinion:

• [By Brian Nichols]

  Achillion is an odd play because it has both the most upside and the most downside of any stock on this list. The company's developing and testing its hepatitis C treating drug, ACH-1625, which is currently in phase II. The results of initial testing have consisted of ups and downs, but after many years and a long process, ACH-1625, appears to be on the right track for an FDA approval.

  The upside in shares of ACHN comes from two places: encouraging data from trials and its likelihood of being acquired. In my opinion, ACHN has a very high chance of being acquired in the next 6 months. Both Pharmasset (VRUS) and Inhibitex (INHX) were acquired over the last 5 months with insanely large premiums. VRUS was purchased at a 81% premium and INHX for a 182% premium. ACHN is perhaps the most speculative, but it could also be purchased the cheapest.

  The stock's recently pulled back after a downgrade and is trading much lower over the last couple weeks. The stock's trend reminds me so much of INHX; the month following the VRUS acquisition when INHX traded higher by nearly 300%. But then after the one-month gain, INHX lost its momentum and traded lower by 40% before being acquired with a 182% premium. INHX traded higher after the VRUS purchase because investors thought it would also be acquired, because of its hepatitis C candidate. ACHN is following the same trend, from November 12 till January 13 the stock more than doubled, but has since retraced.

  At $10 I think ACHN is a buy, it does have a good HCV candidate, and I believe that big pharma will bid to acquire ACHN in the near future. However, the risk in ACHN is if the company's not acquired, then it could have significant loss over the next year. But in a competitive biotechnology industry I believe the reward is worth the risk, and that a large pharma company will take the chance and purchase ACHN in an attempt to stay competitive and capitalize on the trend of investors being bullish on HCV treating drugs.

10 Best Small Cap Stocks To Buy Right Now: FuelCell Energy Inc.(FCEL)

FuelCell Energy, Inc., together with its subsidiaries, engages in the development, manufacturing, and sale of high temperature fuel cells for clean electric power generation primarily in South Korea, the United States, Germany, Canada, and Japan. The company offers proprietary carbonate Direct FuelCell Power Plants that electrochemically produce electricity from hydrocarbon fuels, such as natural gas and biogas. Its fuel cells operate on a range of hydrocarbon fuels, including natural gas, renewable biogas, propane, methanol, coal gas, and coal mine methane. The company also develops carbonate fuel cells, planar solid oxide fuel cell technology, and other fuel cell technologies. It provides its products to universities; manufacturers; mission critical institutions, such as correction facilities and government installations; hotels; and natural gas letdown stations, as well as to customers who use renewable biogas for fuel, including municipal water treatment facilities, br eweries, and food processors. The company was founded in 1969 and is headquartered in Danbury, Connecticut.

Advisors' Opinion:

• [By SmallCap Investor]

  The developer of stationary fuel cells used by commercial and government customers might be headed for a rebound from a pullback that began this spring - which has left the stock down 39 percent year-to-date.

10 Best Small Cap Stocks To Buy Right Now: Sify Technologies Limited(SIFY)

Sify Technologies Limited provides enterprise and consumer Internet services primarily in India. The company offers various corporate network/data services comprising e-commerce and network connectivity solutions, such as end-to-end services network, application, and security services; voice origination and termination services; co-location and managed hosting services; and system integration services for data centre build, hardware distribution, security solutions, and turnkey projects. It also provides application services, including SLEMS and Microsoft Exchange messaging platforms; I-test for online assessment and LiveWire, which enable management of training processes across the organization; document management system for the management of documents electronically; and Forum, a forward supply chain solution. In addition, the company operates e-Ports that offer browsing, chat, email, gaming, utility bill payment, travel ticketing, hotel booking, mobile recharge, Intern et telephony, and online share trading services; and portals, which provide news, views, reviews, interactions, and services in the areas of movies, sports, finance, food, videos, astrology, online games, shopping, and travel, as well as offers content offerings and broadband services. Further, it provides infrastructure management services, such as network management, datacenter and helpdesk outsourcing, desktop and storage outsourcing, IT security outsourcing, LAN and WAN outsourcing, database and telecom outsourcing, and application monitoring and management services to automotive, chemical, media, and financial enterprises; and virtualization design, integration, and deployment services for servers, storage, networks, and end user clients. Sify has approximately 1,278 e-Ports in 200 towns and cities; and serves 1,06,000 broadband subscribers through 1500 cable TV Operators. The company, formerly known as Sify Limited, was founded in 1995 and is based in Chennai, India. Advisors' Opinion:

• [By Wyatt Research Staff]

  Shares of SIFY skyrocketed last week after the company announced a new partnership with Saudi telecom. SIFY will provide ICT services to the Middle East's largest telecom carrier.

  Shares of the Indian-based internet and network services have doubled over the past four months.

Will Sprint Nextel Be a Hot Investment?

With shares of Sprint Nextel (NYSE:S) trading around $7, is S an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Sprint Nextel offers wireless and landline communications products and services to individuals and businesses in the United States. It offers voice and data transmission services to subscribers in all 50 states, Puerto Rico, and the United States Virgin Islands under the Sprint corporate brand, which includes its retail brands of Sprint, Nextel, Boost Mobile, Virgin Mobile, and Assurance Wireless. An increasing share of the population is opting for these communications products and services, fueling profits for Sprint Nextel. As the desire to connect with others continues to rise, profits and the stock price should follow.

T = Technicals on the Stock Chart are Strong

Sprint Nextel stock has really suffered in recent years but looks to have formed a value base over the last few years. The stock has now broken above this value base and may be seeking higher prices. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Sprint Nextel is trading slightly above its rising key averages, which signal neutral to bullish price action in the near-term.

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(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Sprint Nextel options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Sprint Nextel Options	38.23%	30%	26%

What does this mean? This means that investors or traders are buying a small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
July Options	Flat	Average
August Options	Flat	Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Sprint Nextel’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Sprint Nextel look like and more importantly, how did the markets like these numbers?

	2013 Q1	2012 Q4	2012 Q3	2012 Q2
Earnings Growth (Y-O-Y)	27.59%	-1.22%	-160%	-64.29%
Revenue Growth (Y-O-Y)	0.68%	3.24%	5.16%	6.40%
Earnings Reaction	-0.14%	-0.51%	-1.77%	20.17%

Sprint Nextel has seen decreasing earnings and increasing revenue figures over the last four quarters. From these numbers, the markets have been a bit confused about Sprint Nextel’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Sprint Nextel stock done relative to its peers, AT&T (NYSE:T), Verizon (NYSE:VZ), T-Mobile (NYSE:TMUS), and sector?

	Sprint Nextel	AT&T	Verizon	T-Mobile	Sector
Year-to-Date Return	28.84%	7.53%	19.09%	12.63%	13.31%

Sprint Nextel has been a relative performance leader, year-to-date.

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Conclusion

Sprint Nextel allows consumers and companies to communicate at increasing efficiency through its wireless and wireline technologies. The stock has witnessed a good amount of selling pressure but is now seeing a strong bounce from a solid base formed in recent years. Over the last four quarters, investors in the company have been a bit confused as earnings have decreased while revenues have increased. Relative to its peers and sector, Sprint Nextel has been a year-to-date performance leader. Look for Sprint Nextel to continue to OUTPERFORM.

Best Warren Buffett Companies To Own In Right Now

Shareholders at the Berkshire Hathaway (NYSE: BRK-B  ) annual meeting saw a unique sight: Warren Buffett invited Doug Kass -- a certified Berkshire short-seller -- to ask tough questions throughout the day. Motley Fool analysts Joe Magyer and Rex Moore, who were in Omaha, offer their thoughts on the bear experiment.

Thanks to the savvy of investing legend Warren Buffett, Berkshire Hathaway's book value per share has grown a mind-blowing 586,817% over the past 48 years. But with Buffett aging and Berkshire rapidly evolving, is this insurance conglomerate still a buy today? In The Motley Fool's premium report on the company, Berkshire expert Joe Magyer provides investors with key reasons to buy as well as important risks to watch out for. Click here now for instant access to Joe's take on Berkshire!

Best Warren Buffett Companies To Own In Right Now: Nokia Oyj (NOK)

Nokia Corporation (Nokia) has three operating segments: Devices & Services; NAVTEQ, and Nokia Siemens Networks. Devices & Services is responsible for developing and managing the Company�� portfolio of mobile products, as well as designing and developing services, including applications and content. NAVTEQ is a provider of digital map information and related location-based content and services for mobile navigation devices, automotive navigation systems, Internet-based mapping applications, and government and business solutions. Nokia Siemens Networks provides mobile and fixed network infrastructure, communications and networks service platforms, as well as professional services and business solutions, to operators and service providers. In April 2010, the Company completed the acquisition of Novarra, Inc. and MetaCarta Inc. In September 2010, Nokia acquired Motally, Inc. In December 2010, Renesas Electronics Corporation acquired Nokia�� Wireless Modem business. In August 2012, the Company sold a portfolio consisting of over 500 patents and patent applications worldwide to Vringo Inc.

Mobile Phones

Nokia produces a range of mobile phones based on the Series 30 and Series 40 operating systems. These products have voice capability, basic messaging and calendar features, and, increasingly, color displays, radios, basic cameras and Bluetooth functionality. Series 30-based mobile phones do not provide Internet connectivity, access to Ovi or offer opportunities for application development by third parties. During 2010, its portfolio of Series 30-based mobile phones included the Nokia 1616, equipped with a long-lasting anti-dust keypad, frequency modulation (FM) radio, a flashlight, and a display that makes viewing information on the small screen easier. Its Series 40 operating system powers the mobile phone models and supports more functionalities and applications, such as Internet connectivity and access to its services.

Series 40 is open to third-party developers! to build Java and Adobe Flash Lite applications and content, which they can make available through the Ovi Store. It combines a touchscreen and a traditional phone keypad, is equipped with a five megapixel camera, quad-band for voice calling and third generation (3G), high speed packet access (HSPA) and wireless fidelity (WiFi) connectivity for data in a bushed aluminum finish. Other additions to the Company�� portfolio included the Nokia C3 Touch & Type, a stainless steel device, which also combines the touch screen and traditional phone keypad, and the Nokia 2690, memory card slot, and which gives access to Ovi Mail and features an FM radio and video graphics array (VGA) camera. It is also incorporating some of the software features and related services popular in its smartphones into the Series 40-based mobile phones. These include the new Ovi Web browser, which is based on the browser technology. It also offers Ovi Mail, a free e-mail service designed for users in emerging markets with Internet-enabled devices.

Smartphones

Nokia�� smartphones are based on the Symbian operating system, which supports an array of functionalities and provides opportunities for the development of applications and content by third parties. During 2010, Nokia also offered a product built on the Linux-based Maemo operating system. The Company makes smartphones for a range of consumer groups, offering Internet access, entertainment, location-based and other services, applications and content. With smartphones, its product categories include music players, cameras, pocketable computers, gaming consoles and navigation devices.

During 2010, the Company introduced a family of smartphones based on a new generation of the Symbian operating system. These were the Nokia N8, a smartphone crafted from anodized aluminum and available in a range of colors, and which offers imaging, video and entertainment capabilities; the Nokia C7, a sleek, full-touch smartphone crafted from stainless stee! l and gla! ss that is designed to appeal to social networkers; the Nokia C6-01, a smaller, full-touch smartphone that features Nokia ClearBlack display technology for outdoor visibility; and the Nokia E7, a business smartphone equipped with a full keyboard and 4-inch touchscreen display also featuring Nokia ClearBlack technology.

During 2010, the Company introduced a number of models based on the Symbian operating system, including the Nokia C6-00, a messaging-optimized smartphone with a 3.2-inch high definition (HD) touchscreen display, a slide out four-row QWERTY keyboard and a five megapixel camera; and the Nokia E5, a messaging-optimized QWERTY smartphone that builds on the Nokia E71 and Nokia E72. The Company also manufactures and sells luxury mobile devices under the Vertu brand. Vertu has more than 600 points of sale globally, including more than 90 Vertu boutiques, in almost 70 countries worldwide.

NAVTEQ

NAVTEQ Corporation (NAVTEQ) offers context and geographical services through Ovi Maps to a range of location-based services, such as pedestrian navigation, traffic and public transport information, local services and city guides, integration with social networks and contextual advertising. In January 2010, Nokia introduced a new version of Ovi Maps for its smartphones, which includes navigation to the user, and it is using NAVTEQ�� digital map information and related location-based content in this offering. This new version of Ovi Maps includes car and pedestrian navigation features, such as turn-by-turn voice guidance. During 2010, the Company�� NAVTEQ launched its new advanced mapping collection technology, NAVTEQ True. During 2010, its NAVTEQ launched Natural Guidance, a product to enable guidance in a human manner through the use of descriptive reference cues.

NAVTEQ�� map database enables the Company�� customers to offer navigation, route planning, location-based services and other geographic information-based products and services to con! sumer and! commercial users. NAVTEQ provides its database to mobile device and handset manufacturers, automobile manufacturers and dealers, navigation systems manufacturers, software developers, Internet portals, parcel and overnight delivery services companies and governmental and quasi- governmental entities, among others. The products and services incorporating NAVTEQ map data include Advanced Driver Assistance Systems, Dynamic navigation, Route planning, Location-based services and Geographic information systems. Advanced Driver Assistance Systems are in-vehicle applications that require geographic data, such as curve, slope, speed limits and highly detailed geometry. Dynamic navigation is real-time, detailed turn-by-turn route guidance, which can be provided to end-users through vehicle navigation systems, as well as through Global Positioning System (GPS)-enabled handheld navigation devices, and other mobile devices.

Route planning consists of driving directions, route optimization and map display through services provided by Internet portals and through computer software for personal and commercial use. Location-based services include location-specific information services, providing information about people and places that is tailored to the proximity of the specific user. The applications using NAVTEQ�� map database include points of interest locators, mobile directory assistance services, emergency response systems and vehicle-based telematics services. Geographic information systems render geographic representations of information and assets for management analysis and decision making. In addition, NAVTEQ has a traffic and logistics data collection network in which it processes traffic incident and event information, along with traffic flow data collected through its network of roadside sensors and from GPS data records from Nokia devices and other NAVTEQ customers, in order to provide detailed traffic information to radio and television stations, in-vehicle and mobile navigation systems! , Interne! t sites and mobile device users.

NAVTEQ�� map database is a representation of road transportation networks in Europe, North America, Australia, Asia and other regions around the world. This database offers geographic coverage, including data at various levels of detail for 84 countries on six continents, covering more than 19 million miles of roadway worldwide. The most detailed coverage includes road, route and related travel information, including attributes collected by road segment that are essential for routing and navigation, such as road classifications, details regarding ramps, road barriers, sign information, street names and addresses and traffic rules and regulations. In addition, the database includes over 50 million points of interest, such as airports, hotels, restaurants, retailers, civic offices and cultural sites.

Nokia Siemens Networks

Nokia Siemens Networks has three business units: network systems; global services; and business solutions. Nokia Siemens Networks is jointly owned by Nokia and Siemens. Nokia Siemens Networks is a provider of telecommunications infrastructure hardware, software and professional services globally. Nokia Siemens Networks��customers include network operators, such as Bharti Airtel, Deutsche Telecom, France Telecom, Telefonica O2 and Vodafone, as well as service providers, such as Unitech and XO Communications. Nokia Siemens Networks has a products and services portfolio designed to address the needs of communication service providers. Nokia Siemens Networks provides its products and services to more than 600 communication service providers in over 150 countries and has systems serving in excess of 1.5 billion subscribers.

Network systems offers communication service providers both fixed and mobile network infrastructure, including Nokia Siemens Networks��Flexi Multiradio base stations, a software defined radio supporting global system for mobile (GSM), 3G and LTE radio technologies, packet product! s, optica! l transport systems and broadband access equipment. For wireless networks, Network Systems develops and manufactures GSM/EDGE and WCDMA/HSPA radio access networks for network operators. It also develops products, such as I-HSPA and new technologies, such as LTE to support the uptake of mobile data services. For fixed line networks, Network Systems focuses on transport networks. Network Systems provides the fundamental elements for high-speed transmission through optical and microwave networks, including packet-oriented technologies, such as Carrier Ethernet and traditional protocols, such as time-division multiplexing (TDM).

Global services business unit offers network operators a range of professional services, including network planning and optimization, the management of network operations and the care and maintenance of software and hardware, and a range of network implementation and turnkey solutions. As of December 31, 2010, 180 million global subscribers were managed througt Nokia Siemens Networks��global delivery hubs. Global services consists of three businesses, which include managed services, which offers network planning and optimization and the management of network operations, with the market share position in India, Latin America and the Middle East and Africa; care, which offers software and hardware maintenance, proactive and multi-vendor care and competence development services, dealing with one million global hardware service transactions, and network implementation, which offers project management and turnkey implementations and energy efficient sites, remotely activating a site every two minutes, 365 days per year.

Business solutions offers products to communication service providers for business and operations support systems and customer experience management, such as charging and billing software, service management software and subscriber database management, and products that enable enhancement and delivery of services across multiple networks and d! evices an! d convergent service control and network security, together with services related to consulting, product implementation, support and care, systems integration and managed services. Business solutions offer products for five areas, as well as services relating to consulting, product implementation, support and care, systems integration and managed services includes business support systems; operations support systems; customer experience management; service enablement and delivery, and converged service control.

The Company competes with Google, HTC, LG, Motorola, Samsung, Sony Ericsson, Apple, Tele Atlas, CISCO, NEC and Motorola.

Best Warren Buffett Companies To Own In Right Now: NCI Inc.(NCIT)

NCI, Inc. provides information technology (IT) and professional services and solutions to the United States Federal Government defense, intelligence, and civilian agencies. It offers enterprise systems management services, including infrastructure operations and management; outsourcing and managed; infrastructure consolidation and modernization; public/private cloud computing; planning and disaster recovery; virtual desktop infrastructure; application and network management; network design, implementation, and migration; network monitoring and performance evaluation; multi-site environments; and data center modernization and consolidation. The company also provides network engineering services comprising architecture development and design; protocol and topology optimization; disaster response planning and recovery; installation, test, and evaluation; network configuration and compliance audit; network security evaluation; protocol and topology optimization; reliability an d contingency assessment; requirements analysis; redundant routing/switching solutions; and enterprise vulnerability management. In addition, it offers cybersecurity and information assurance services consisting of intrusion detection/prevention system development; public key infrastructure implementation; certification and accreditation; computer forensics and ediscovery; policy and procedures development; threat assessment and mitigation; products evaluation and integration; security test and evaluation; cybersecurity fusion centers; and risk management and continuous monitoring. Further, the company provides software development and systems engineering services; program management and lifecycle support services; professional engineering, logistics, and support services; health IT and informatics services; and modeling, simulation, and training services. NCI, Inc. is headquartered in Reston, Virginia.

Hot Value Stocks To Own For 2014: MONDI PLC ORD EUR0.20 WI(MNDI.L)

Mondi plc operates as an international paper and packaging company worldwide. It principally engages in the manufacture and sale of packaging paper, converted packaging products, and uncoated fine paper (UFP) products. The company produces hardwood and softwood pulp; UFP under the Color Copy, MAESTRO, and IQ, as well as the Russian Snegurochka and South African ROTATRIM brands; virgin and recycled containerboards for corrugated packaging applications; and corrugated packaging products, including conventional boxes and trays, point-of-sale displays, and shelf-ready and heavy-duty packaging. It also provides kraft papers used in supermarket shelves, and specialized packaging and heavy-duty industrial applications; industrial bags used in packaging cement, chemicals, seeds, animal feed, flour, milk powder, automotive parts, and organic bio-waste; extrusion coating products, release liners, and consumer packaging products; newsprint and telephone directory paper products; and carbon neutral office paper. In addition, the company offers films and laminate products that consist of printed laminates and barrier materials, consumer films, industrial films, and biodegradable films; and consumer bags, such as pouches, reclosable bags, paper-based bags, labels, and microwaveable packaging products. Further, it provides application engineering services, consisting of pre and post-sales technical consultancy, and training services. Mondi plc serves automotive, building, and construction; chemicals and dangerous goods; farming and agriculture; food; industrial paper and packaging; medical and pharmaceutical; office and printing paper; pet food; photographic and graphic; and toiletries and hygiene industries. The company was founded in 1967 and is based in Addlestone, the United Kingdom.

Best Warren Buffett Companies To Own In Right Now: MGIC Investment Corp (MTG)

MGIC Investment Corporation (MGIC), incorporated June 21, 1984, is a holding company and through wholly owned subsidiaries is a private mortgage insurer in the United States. As of December 31, 2012, its principal mortgage insurance subsidiaries, Mortgage Guaranty Insurance Corporation (MGIC) and MGIC Indemnity Corporation (MIC), were each licensed in all 50 states of the United States, the District of Columbia and Puerto Rico. During the year ending December 31, 2012, the Company wrote new insurance in each of those jurisdictions in MGIC and/or MIC. The Company capitalized MIC to write new insurance in certain jurisdictions where MGIC no longer meets, and is unable to obtain a waiver of, those jurisdictions��minimum capital requirements. Private mortgage insurance covers losses from homeowner defaults on residential mortgage loans, reducing and, in some instances, eliminating the loss to the insured institution if the homeowner defaults.

Mortgage Insurance

Primary insurance provides mortgage default protection on individual loans and covers unpaid loan principal, delinquent interest and certain expenses associated with the default and subsequent foreclosure. Primary insurance is written on first mortgage loans secured by owner occupied single-family homes, which are one-to-four family homes and condominiums. Primary insurance is also written on first liens secured by non-owner occupied single-family homes, which are referred to in the home mortgage lending industry as investor loans, and on vacation or second homes. Primary coverage can be used on any type of residential mortgage loan instrument approved by the mortgage insurer.

When a borrower refinances a mortgage loan insured by the Company by paying it off in full with the proceeds of a new mortgage that is also insured by it, the insurance on that existing mortgage is cancelled, and insurance on the new mortgage is considered to be new primary insurance written. Therefore, continuation of its coverage fr! om a refinanced loan to a new loan results in both a cancellation of insurance and new insurance written. When a lender and borrower modify a loan rather than replace it with a new one, or enter into a new loan pursuant to a loan modification program, its insurance continues without being cancelled assuming that the Company consent to the modification or new loan.

The borrower�� mortgage loan instrument requires the borrower to pay the mortgage insurance premium. There are several payment plans available to the borrower, or lender, as the case may be. Under the monthly premium plan, the borrower or lender pays it a monthly premium payment to provide only one month of coverage. Under the annual premium plan, an annual premium is paid to it in advance, and it earns and recognizes the premium over the next 12 months of coverage, with annual renewal premiums paid in advance thereafter and earned over the subsequent 12 months of coverage. Under the single premium plan, the borrower or lender pays it a single payment covering a specified term exceeding twelve months.

Pool insurance is used as an additional credit enhancement for certain secondary market mortgage transactions. Pool insurance covers the excess of the loss on a defaulted mortgage loan which exceeds the claim payment under the primary coverage, if primary insurance is required on that mortgage loan, as well as the total loss on a defaulted mortgage loan which did not require primary insurance. Pool insurance is used as an additional credit enhancement for certain secondary market mortgage transactions. Pool insurance covers the excess of the loss on a defaulted mortgage loan, which exceeds the claim payment under the primary coverage, if primary insurance is required on that mortgage loan, as well as the total loss on a defaulted mortgage loan which did not require primary insurance. In general, the loans insured by it in Wall Street bulk transactions consisted of loans with reduced underwriting documentation; cash out! refinanc! es, which exceed the standard underwriting requirements of the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively GSEs); A- loans; subprime loans, and jumbo loans.

Other Products and Services

The Company has participated in risk sharing arrangements with the GSEs and captive mortgage reinsurance arrangements with subsidiaries of certain mortgage lenders, which reinsure a portion of the risk on loans originated or serviced by the lenders, which have MGIC primary insurance. It provides information regarding captive mortgage reinsurance arrangements to the New York Department of Insurance (known as the New York Department of Financial Services), the Minnesota Department of Commerce and the Department of Housing and Urban Development, (HUD). It performs contract underwriting services for lenders, in which it judges whether the data relating to the borrower and the loan contained in the lender�� mortgage loan application file comply with the lender�� loan underwriting guidelines. It also provides an interface to submit data to the automated underwriting systems of the GSEs, which independently judge the data. These services are provided for loans, which require private mortgage insurance, as well as for loans that do not require private mortgage insurance. It provides mortgage services for the mortgage finance industry, such as portfolio retention and secondary marketing of mortgages.

The Company competes with Federal Housing Administration, Veterans Administration, PMI Mortgage Insurance Company, Genworth Mortgage Insurance Corporation, United Guaranty Residential Insurance Company, Radian Guaranty Inc., CMG Mortgage Insurance Company, and Essent Guaranty, Inc.

Best Warren Buffett Companies To Own In Right Now: Nuveen Select Tax Free Income Portfolio III(NXR)

Nuveen Select Tax-Free Income Portfolio 3 is a closed-ended fixed income mutual fund launched by Nuveen Investments Inc. It is co-managed by Nuveen Fund Advisors, Inc and Nuveen Asset Management, LLC. The fund invests in the fixed income markets of United States. It invests in the investment-grade municipal securities rated Baa and BBB or better. The fund benchmarks the performance of its portfolio against the Standard & Poor?s (S&P) National Municipal Bond Index and Lipper General and Insured Unleveraged Municipal Debt Funds Average. Nuveen Select Tax-Free Income Portfolio 3 was formed on July 24, 1992 and is domiciled in the United States.

Best Warren Buffett Companies To Own In Right Now: bebe stores inc.(BEBE)

bebe stores, inc. engages in the design, development, and production of women?s apparel and accessories. Its products include a range of separates, tops, dresses, active wear, and accessories in career, evening, casual, and active lifestyle categories. The company markets its products under the bebe, BEBE SPORT, bbsp, and 2b bebe brand names targeting 21 to 34-year-old woman. As of July 2, 2011, it operated 252 retail stores, and an online store at bebe.com in the United States, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Japan, and Canada, as well as 60 international licensee operated stores in south east Asia, the United Arab Emirates, Israel, Russia, Mexico, and Turkey. The company was founded in 1976 and is headquartered in Brisbane, California.

Advisors' Opinion:

• [By Wyatt Research]

  The women's apparel retailer reported fiscal fourth-quarter sales and same-store sales both rose 7 percent. The stock is up 30 percent year-to-date.

Leverage: What It Is And How It Works

Leverage is an investment strategy of using borrowed money to generate outsized investment returns. Before getting into greater detail on how leverage works in an investment context, it is useful to have a broad understanding of the general topic. Let's start with a familiar example.

Most people have gone to an automobile dealership and admired the new vehicles available to purchase. A significant number of car shoppers have left the lot with a brand new car, even though they could not afford to pay for that car in cash. To obtain the car, these buyers borrowed the money. They then gave the borrowed money to the car dealer in exchange for the vehicle.

If the cost of a vehicle is $20,000 and a buyer hands over $2,000 in cash and $18,000 in borrowed money in exchange for the vehicle, the buyer's cash outlay was only 10% of the vehicle's purchase price. Using borrowed money to pay 90% of the cost enabled the buyer to obtain a significantly more expensive vehicle than what could have been purchased using only available personal cash. Instead of driving around in a battered $2,000 jalopy, the buyer is cruising around town in a shiny new car, having used leverage to acquire a better vehicle than he/she could have purchased using only available cash on hand.

From an investment perspective, this buyer was levered 10 to one (10:1). That is to say, the ratio of personal cash to borrowed cash is $1 in personal cash for every $10 spent. Now, let's take the example a step further.

If the buyer in our automobile example was able to drive away from the dealership and immediately sell that car for $22,000, the buyer would pocket $2,000 in profit from a $2,000 investment, ignoring the interest expense. Mathematically speaking, that would be a 100% return on the buyer's investment. By contrast, consider the case if the buyer has paid cash for the car, without taking out a loan, and then immediately sold the car for $22,000. With a $20,000 initial investment resulting in $2,000 profit, the buyer would have generated a 10% return on the investment. While a 10% return is certainly nice, it pales in comparison to the 100% return that could have been generated using leverage.

Other Everyday Use of Leverage Moving beyond the new car example, the use of leverage can be applied to real estate, stocks, bonds, commodities, currencies and other investments. Consider a real estate investor who has $50,000 in cash. That investor could use that money to buy one home valued at $50,000. If that home could be quickly sold for $55,000, the investor would have gained $5,000. If that same investor used the original $50,000 in cash to put a $5,000 down payment on 10 different homes valued at $50,000 each, financed the rest of the money, and then sold all 10 homes for $55,000 each, the investor's profit would have been $50,000 - an astounding 100% return on investment.
The use of leverage in real estate investing is similar to the way it can be used in the stock market. Margin loans, futures contracts and options are a few of the more common methods investors use to add leverage to their portfolios. Just as in the real estate example, a limited amount of money can be employed to control a larger amount of stock than would be possible through a direct purchase made with available cash. Bond-market investors can also use leverage. Consider a scenario in which the interest rate on a one-year loan is 1% while the interest rate on a 10-year loan is 5%. By borrowing money at the short-term rate and investing it at the long-term rate, an investor can profit from the difference in rates. Indirect Use of Leverage
Investors who are not comfortable employing leverage directly have a variety of ways to access leverage indirectly. They can invest in companies that use leverage in the normal course of their business. An automaker, for example, could borrow money to build a new factory. The new factory would enable the automaker to increase the number of cars it produces, thereby increasing profits.

Through balance sheet analysis, investors can study the debt and equity on the books of various firms and can choose to invest in companies that put leverage to work on behalf of their businesses. Statistics such as Return on Equity, Debt to Equity and Return on Capital Employed help investors determine how companies are deploying capital and how much of that capital has been borrowed. To properly evaluate these statistics, it is important to keep in mind that leverage comes in several varieties, including operating, financial and combined leverage. Understanding these concepts is critical to analyzing their use. If reading spreadsheets and conducting fundamental analysis is not your cup of tea, you can purchase mutual funds or exchange-traded funds that use leverage. By using these vehicles, you can delegate the research and investment decisions to experts.

Downside of Leverage
Leverage is a multi-faceted and complex tool. The theory sounds great, and in reality the use of leverage can be quite profitable, but the reverse is also true.

Revisiting a few of our earlier examples illustrates the point. Consider that automobile purchaser using leverage to acquire a $20,000 vehicle with a down payment of just $2,000. The minute that new car leaves the lot, its value drops because it is now a "used" car instead of a "new" one. So, that $20,000 car may be worth $19,000 just a few hours later. A month later, the buyer will need to make a payment in exchange for the $18,000 loan used to purchase the vehicle. More often than not, that loan charges interest. By the time the loan is paid off, once the interest payments are factored in, the buyer may have spent $25,000 or more for a vehicle that is now valued at $10,000. If the buyer had not used leverage to buy the car, the amount of money lost on the purchase would have been lower.

In the housing purchase example, the investor used five down payments of $5,000 each to purchase 10 homes valued at $50,000 each. If real estate prices fall and those homes are now worth only $45,000 each, the investor would take a $50,000 loss (100% of the initial amount invested) if the homes were sold. If the value of the homes fell to $40,000 each, the buyer's potential loss of $100,000 is 200% of the original investment amount. In each scenario, the buyer would also need to continue making mortgage payments (including interest) and insurance payments in addition to periodic home maintenance. In this scenario, the losses can add up quickly and the amounts lost become substantial.

A similar concept applies to the fixed-income investor who took out a short-term loan at 1% interest to invest in a loan that paid 5%. If short-term interest rates rise to 6%, and the investor is only earning 5% on the long-term investment, the investor loses money.

The Bottom Line
When it comes to leverage, unless you are a professional trader and your losses will be covered by your employer, leveraged investing should probably not be your primary investment strategy. If you are not a professional and you choose to use leverage, don't invest more than you can afford to lose. Also, be sure to conduct careful research and make prudent decisions. This approach is more likely to result in a positive outcome than blindly investing in a hot trend based on your observation that other people are making money in real estate, currencies, stocks or some other investment vehicle that has become so popular that investors are borrowing money to buy it.

Why Targa Resources Is Poised to Keep Poppin'

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, midstream natural gas services specialist Targa Resources Partners  (NYSE: NGLS  ) has earned a coveted five-star ranking.

With that in mind, let's take a closer look at Targa and see what CAPS investors are saying about the stock right now.

Targa facts

Headquarters (founded)	Houston, Texas (2006)
Market Cap	$5.0 billion
Industry	Oil and gas storage and transportation
Trailing-12-Month Revenue	$5.6 billion
Management	CEO Joe Perkins COO Michael Heim
Return on Equity (average, past 3 years)	13.6%
Cash/Debt	$102.1 million / $2.5 billion
Dividend Yield	5.7%
Competitors	BP Enterprise Products Partners ONEOK Partners

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 94% of the 286 members who have rated Targa believe the stock will outperform the S&P 500 going forward.   

Earlier today, one of those Fools, AnsgarJohn, succinctly summed up the Targa bull case for our community:

Targa Resources Partners (NGLS) is in the right place at the right time to take advantage of the midcontinent boom in the U.S. production of natural gas liquids, a key feedstock for the chemical industry. This master limited partnership has just made its first acquisition in the Bakken Shale formation, adding an oil pipeline to its natural gas liquids focus. ...

Distributions have grown at an average annual rate of 12.5% over the last five years. (Master limited partnerships are tax-advantaged vehicles best owned outside a retirement account. Part of the annual distribution is treated as a return of capital and is not taxed until you sell the units.)

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Samsung Throws Google a Bone

Despite all of Samsung's recent attempts to undermine Google (NASDAQ: GOOG  ) in its newest Galaxy S4, primarily by replicating and marketing its own software and services over Google's, the South Korean giant is now tossing the search juggernaut a bone.

Google had its hands full yesterday on the first day of its I/O developer conference in San Francisco, announcing a wide swath of new offerings. Perhaps one of the most surprising developments was that Google and Samsung would soon begin offering a version of the Galaxy S4 running stock Android 4.2 Jelly Bean, ditching Samsung's TouchWiz interface and software modifications.

It's not branded a Nexus device, but that's effectively what this is. Google noted it would offer a "Nexus user experience." The model will sell at the unsubsidized price of $649 directly through Google Play, and be an unlocked GSM model with LTE support.

Galaxy S4 running stock Android. Source: Google.

Make no mistake: this move isn't about Samsung growing unit sales. This is a gesture of good faith intended to smooth over any kinks in Samsung's relationship with Google.

A peace offering
Google's Nexus program is an ambitious attempt to remove carrier middlemen and sell directly to consumers. That also entails removing carrier subsidies. We already know that the subset of smartphone buyers willing to pay full retail price for devices is extremely small. That's partly why Google's current flagship Nexus 4 sells for $299. One of the Nexus 4's biggest drawbacks is the lack of LTE support, which was necessitated by Google's broad international strategy for the singular model as well as cost and engineering considerations.

Samsung is already making a GSM model that's compatible with LTE networks in the U.S., so it takes very little effort to make one with stock Android. Since the stock GS4 is being sold through Google Play, presumably it will also receive software updates directly from Google, as opposed to most Androids, whose updates are bottlenecked by carriers and OEMs.

It should also be clear that Samsung isn't hurting for unit sales at this juncture. The company is currently the No. 1 smartphone vendor in the world, shipping an estimated 70.7 million units in the first quarter. In fact, I'd wager that Samsung specifically doesn't want this stock GS4 to sell well, because its success would only contribute to Samsung's commoditization. The last thing that Samsung wants is for people to express massive interest in only its hardware at a time when it wants consumers to buy into its software and services.

Google and Samsung have collaborated on Nexus devices in the past. In fact, Samsung built two of the four Nexus smartphones that Google has launched over the years, the Nexus S and Galaxy Nexus. HTC built the original Nexus One and LG makes the current Nexus 4.

Some people will purchase the stock GS4, but it will hardly be a mainstream device and Samsung certainly prefers it that way.

As one of the most dominant Internet companies ever, Google has made a habit of driving strong returns for its shareholders. However, like many other web companies, it's also struggling to adapt to an increasingly mobile world. Despite gaining an enviable lead with its Android operating system, the market isn't sold. That's why it's more important than ever to understand each piece of Google's sprawling empire. In The Motley Fool's new premium research report on Google, we break down the risks and potential rewards for Google investors. Simply click here now to unlock your copy of this invaluable resource.

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