Zing! Zynga is Off and Running (ZNGA)

With just a quick glance, it would be easy to assume this week's strength from Zynga Inc. (NASDAQ:ZNGA) is just another wild swing from a usually-volatile stock, destined to be undone just as quickly. A closer look at the chart of ZNGA, however, may reveal this isn't the usual ebb and flow from the game-publishing stock. This looks like the beginning of a much bigger breakout.

It's modestly evident on the daily chart, but to fully appreciate just how much upside ZNGA could be on the verge of doling out, you have to zoom out to zoom out to a weekly chart. On it, it becomes clear Zynga has cleared a major hurdle.

Simply put, Zynga Inc. shares have been getting squeezed into the tip of a wedge shape since early 2013. The upper edge of the triangle is the horizontal ceiling around $4.07, while the rising support line that's been in place since early 2013 makes up the lower edge of the wedge. That rising support line actually started to ascend in recent months, and with practically no room left to roam inside that wedge shape, something had to give... and it was the resistance line. ZNGA pushed above that horizontal ceiling at $4.07, and it's not looked back since.

As for the potential longevity of this breakout, there's no way of knowing for sure exactly where and when ZNGA will stop rising. But, bear in mind that the longer the breakout brews, the bigger the breakout move. The buildup period for this breakout lasted for months, so Zynga Inc. may be able to at least get several weeks' worth of traction now that the ball is rolling. A move to $8.00 isn't out of the question, though trades may want to start thinking defensively at anything above $6.00.

Top 5 Blue Chip Stocks To Buy Right Now

The prompt for the breakout was success in the courtroom. As it turns out, Zynga is not going to have to pay an estimated $25 million for the way one of its games plays. Another game designer was claiming that the process used to hand-out in-game rewards was its intellectual property. The judge and jury disagreed, and the market loved the news. Truth be told though, it wasn't a big deal for ZNGA (the company, not the stock) either way. Thing is, the hollowness of the perceived victory doesn't matter. This stock was clearly primed for a breakout. All it needed was a catalyst - and catalyst - to get going. The court-case thing did the trick, catapulting shares into a breakout that had been building up for a long while. Now that it found one, it's off to the races. There's still plenty of meat left on the bone to chase though.

Oh, and just for the record, no, the newfound strength has nothing to do with the company's fundamentals. The Zynga Inc. fundamentals, quite frankly, aren't impressive. Doesn't matter. The market is ready to see ZNGA in a bullish light, and that's good enough for a few weeks' worth of upward momentum.

For more trading ideas and insights like these, be sure to sign up for the free SmallCap Network newsletter.

Bond rates unlikely to soar again

Click the chart to track more bond yields.

NEW YORK (CNNMoney) So much for the bond bubble bursting. And that may be great news for consumers, especially those looking to buy a house or refinance their mortgage.

Treasuries have been rallying since the Federal Reserve decided to delay scaling back, or tapering, its bond buying program last month. The fact that Congress kicked its debt problems to next year helped spur more bond buying too.

That pushed Treasury yields down considerably during the past few weeks, with the 10-year yield sliding to around 2.5%, its lowest level since July. Bond prices and rates move in opposite directions.

How long will rates stay this low? Could they go even lower?

Most bond experts think long-term rates will rise again when the Fed begins to wind down its stimulus program. But that may not happen until sometime in 2014. Analysts also don't expect bond yields to jump as quickly and sharply as they did this summer. Tapering fears pushed the 10-year yield from 1.6% in May to almost 3% by early September.

That dramatic spike led to a sizable increase in mortgage rates during the past few months. As a result, applications for loans to buy new homes dropped. And refinancing activity fell to its lowest levels since the depths of the financial crisis in 2008.

So if long-term bond rates don't surge again in the next few months, that could give consumers who missed out on the last great chance to refinance another opportunity to lock in low rates. Experts said that's the main reason why the Fed is likely to be cautious over the next few months,

"The Fed will be careful to avoid giving the market any surprises that would possibly result in unwanted tightening of credit conditions again," said Gary Thayer, chief macro strategist at We! lls Fargo Advisors.

The Fed is deeply concerned about derailing the housing recovery, which has been one of the bright spots of an otherwise sluggish economic rebound.

"Housing is critical to the recovery, and the big danger to housing is that mortgage rates rise too far or too fast," said Russ Koesterich, chief investment strategist at BlackRock. "The Fed knows this."

So what does this mean for interest rates? Thayer thinks the 10-year Treasury yield will creep up to 2.75% by the end of the year and 3% by the time the Fed begins cutting back on its monthly bond purchases early next year. He's not expecting a dramatic rise after that though, since he thinks the Fed will do what it can to keep interest rates relatively low through the middle of 2016.

  Why there isn't a bond bubble

But another bond expert said rates will remain around where they are now for some time. They could even fall further.

Robert Tipp, chief investment strategist at Prudential Fixed Income, said the Fed must do what it can to keep the 10-year Treasury yield between 2% and 2.5% in order to maintain economic growth of at least 2% a year.

"I don't think you'll see the Fed come out and signal that they are putting of tapering, but they're not willing to risk another debacle where they lose control of the bond market and rates spike so sharply that they threaten the economic recovery," he said.

Carl Icahn Just Bought Another $500 Million Worth of Apple

Apple Inc. (NASDAQ: AAPL) is stuck between a rock and a hard place. Its earnings report and guidance was not strong enough to convince growth investors that the recent move into China is nothing, but something that came too late to make a huge difference. And Carl Icahn is back out swinging against Apple wanting more buybacks.

Icahn now uses Twitter to communicate his messages rapidly, and the latest tweet shows that he just bought $500 million more in Apple stock. He even joked that his buying is the same as the company’s and that he wants the company to win in that race.

Icahn has been pressing for Apple to boost its stock buyback efforts massively. CEO Tim Cook has so far managed to fend off that effort. Unfortunately, Cook is also fending off the temptation to do anything aggressive when it comes to buybacks.

It remains a guess as to what Icahn and Cook will reach for an equilibrium. Having a pre-earnings market cap of almost $500 billion makes it extremely hard for any outsider to get in and make much of a difference when it comes to voting.

Sometimes even billionaires have limits on what they can accomplish. That pertains to Icahn as well.

Apple shares are still down 7.3% (or $40.50) at $510.00, and the 21.3 million shares that had traded as of 11:15 is already basically twice a normal day’s trading volume. Apple traded just under 20 million shares on Monday, going into the earnings report. This is already a record volume day for the past three months.

Source: Twitter

U.S. Stocks Slip as Global Creditors Watch With Trepidation

NEW YORK (TheStreet) -- Major U.S. stock markets were slipping Wednesday as fears of a U.S. default overshadowed promises of more stimulus under Janet Yellen, who is expected to be nominated to succeed Ben Bernanke at the central bank.

The S&P 500 was down 0.31% to 1,650.36 though short-term Treasury yields, that have been particularly sensitive to the activities in Washington, seemed to calm bond markets. The 1-month bill was rising 1/32, diluting the yield to 0.281%.

Yellen's previous statements in support of the Fed's stimulus program have lent support to investors pushing for the central bank to do all it can to assist in the country's economic recovery.

As for the government shutdown that began Oct. 1, Obama said he is willing to negotiate with Republican leaders. Obama said he would begin talks if Republicans move to promptly end the shutdown and raise the debt ceiling, even if it was only for a temporary four to six weeks. The Dow Jones Industrial Average was off 0.16% to 14,753.28. The Nasdaq was lower by 0.91% to 3,661.09. Prior to the Yellen announcement, the Fed is scheduled to release a summary of its September policy meeting, a gathering at which policymakers maintained the current pace of their bond-buying program amid concerns that current fiscal policy is restraining economic growth. The minutes will be released at 2 p.m. K12 Inc. (LRN) shares were plummeting 36.34% to $18.19 after shares of the online education services were cut to "neutral" from "outperform" at Baird and to "market perform" from "outperform" at BMO after the company said that average student enrollments rose 5.7% to 128,550 in the first quarter fiscal 2014 from a year ago, which was below management's own expectations. Ariad Pharmaceuticals (ARIA) shares were plunging 70.89% to $4.98 after the company admitted Wednesday that its leukemia drug Iclusig causes more blood clots and heart-related side effects than previously reported, forcing the company to halt enrollment in Iclusig clinical trials and advise patients currently on the drug to lower the dose. Yum! Brands (YUM) was surrendering 8.37% to $65.31 after the fast-food restaurant group reported third-quarter earnings that were lower than expected as same-store sales in China dropped 11% in the quarter. Men's specialty retailers JoS. A. Bank Clothiers (JOSB) and The Men's Wearhouse (MW) were both surging after JoS. A. Bank confirmed media reports that it has approached Men's Wearhouse to buy the company for $48 a share in cash in a $2.3 billion deal, representing a roughly 42% premium to the closing price of the acquisition target on September 17, the day before the proposal was made. However, The Men's Warehouse on Wednesday rejected the approach saying that it "significantly undervalues" the company. Men's Wearhouse shares were jumping 28.12% to $45.15 and Jos. A. Bank was advancing 8.5% to $45.20. Alcoa (AA) was popping 3.84% to $8.25 after the largest U.S. aluminum producer posted profits that beat analyst forecasts. Follow @atwtse -- Written by Andrea Tse in New York >To contact the writer of this article, click here: Andrea Tse.>

Is The Case Against Tesla Motors (TSLA) Growing?

Electric-car maker Tesla Motors Inc (NASDAQ: TSLA) is up 337.8% since the start of the year – defying the shorts, all of the bears and myself included, but there is a growing case against the stock and it dropped a bit on Monday after a Barron's article appeared over the weekend pointing to "bubble trouble." The Barron's article was more or less a continuation of a lengthy June cover story where the magazine admitted that while Elon Musk's award-winning Model is admirable, they are skeptical that Tesla can cut battery costs enough to deliver a cheaper "Gen 3" car with a 200-mile range by 2017. But if they fail to do so, Barron's suggested that Tesla stock might drop toward $50 and that nothing in its results results changes their view.

Thus far, betting against Tesla and Elon Musk has been a loosing bet for the shorts, but the ground may be shifting. Consider the following considerations:

You Want New Investors to Pay How Much For a Share (PART I)? David Dietze, the President & Chief Investment Strategist at Point View Wealth Management, recently appeared on CNBC to say that investors should not get into Tesla Motors as the stock is just too expensive. To put how expensive into perspective, he pointed out that Tesla intends to sell 40,000 cars and now has a market cap approaching $18 billion while General Electric Company (NYSE: GE) sold 3 million cars and has a market cap around $49 billion. In other words, you are paying 35 times more per car. Sure, people are willing to pay three times for a Tesla car, but paying 35 times more just makes no sense.  David also added that all of the world's other automakers are bound to start piling in if they think there is money to be made in electric cars or hybrids. You Want New Investors to Pay How Much For a Share (PART II)? In a recent CNBC segment, the host noted that if you divide Tesla's market cap by the number of cars its predicted to sell this year (about 21,000), it equals $885,000 per car. However, one of his guests then went on to talk about the massive potential market in Europe where driving distances are shorter and gas is expensive plus bets that Tesla cars become a mass market car rather than an expensive toy. Tesla's Sales Projections are Based on What? During the earnings call, someone asked about the 40,000 units per year by late 2014 comment in the shareholder letter and what its based on. Elon Musk answered:

"Actually it's just based on what we kind of see the demand as like. I mean, right now obviously we are selling in North America at about 20,000 units a year. So, Europe is a similar size market to North America. China is actually bigger and then that doesn't include the rest of Asia Pacific, South America, South Africa, Australia. So it seems like that's a pretty safe number to assume."

In other words, he's pulling numbers out of thin air while investors may want to remember that not every country is going to jump at the idea of implementing generous subsidies and tax breaks so that their wealthiest citizens can buy expensive American electric cars.

First There is Tesla, Then SpaceX and Now the Hyperwhat Thing? Certainly, Elon Musk is a visionary to have helped dream up with Paypal, and then Tesla, and then SpaceX, but the Hyperloop? First of all, he sells a few electric cars mostly to wealthy buyers in the San Francisco Bay area – hardly a revolution just yet and then he has SpaceX venture and now he wants to talk about some sort of Hyperloop. Irrespective of whether or not the last two ideas end up working out, there may come a time when investors wish Elon Musk had concentrated all of his energy on making Tesla work as its still not a sure thing for the long haul. Could the Bulls and the Bears and I Be Missing Something Important?

With all of the above said, there could be something that the Tesla bears and I are missing that was pointed out. On CNBC's Closing Bell's Talking Numbers segment amid all the rosy talk and hype from two Wall Street personalities, one of those personalities made the observation that amid Wall Street's fixation on how many cars are sold, we are failing to see the forest through the trees so to speak in that Tesla has become a major supplier of technology to "old school" car companies. However and even if that is true, one still has to ask whether a $17.66 billion valuation is justified for what might turn out to just be a glorified auto parts company that happens to sell very expensive cars.

DirectTV Sunday Ticket Subscribers May Want a Refund!

Service disruptions on DirecTV’s (DTV) website temporarily interfered with subscribers’ ability to stream National Football League (NFL) games online for the last two Sundays.

Subscribers who paid for NFL Sunday Ticket service through the satellite TV provider could still watch the games on their TVs and through DirecTV’s mobile app. However, since DirecTV prices its NFL Sunday Ticket Max, which includes website streaming, $75 higher than the non-online version, TVPredictions wonders if the company should offer a public refund for affected subscribers.

DirecTV in Trouble With or Without the NFL

Top 10 Stocks To Buy Right Now

The service interruptions on the website lasted about an hour on both Sundays.

TVPredictions noted that DirecTV will often offer partial refunds to customers who take the effort to complain about service problems. The company did not comment on any plans to offer a refund due to the NFL Sunday Ticket website issue.

Shares of DirecTV rose slightly in Tuesday morning trading.

Why This Media Giant Shouldn’t Pass Unnoticed

The media entertainment industry is known for its high range income and significant entry barriers. However, Twenty-First Century Fox Inc. (FOX) has successfully maneuvered the market for decades. This media conglomerate of film studio and television broadcasting not only shines through its domestic market presence, but has also sustained a competitive advantage in international waters via its broadcast satellite television entities. So, let's take a closer look at investment gurus Donald Yacktman and Mario Gabelli (Trades, Portfolio)'s recent share acquisition and decipher why its business model is one to be reckoned with.

Quality and Quantity United

Quality video content has continuously increased in value over the past years, and this firm has a made a point of following the money trail by producing and broadcasting an ample amount of high quality products. From award winning shows like "Modern Family" or "The Simpsons," to its popular sports programming, Twenty-First Century Fox has constantly satisfied the market's thirst for entertainment. The News Corp (NWSA) spin-off, for one, was a highly beneficial strategy for this company, setting it apart as a pure-play entertainment firm. By concentrating resources and management on the cable network business and shaking off Rupert Murdoch's print segment, the firm was able to boost its EBITDA growth as well as its return on capital (ROC). The current metrics of 28.80% and 154% respectively are quite impressive and will be highly beneficial for investors if they can be sustained.

In addition to this, advertisers have recently refocused on Fox, due to its popular news and sports programming. Since these are consumed in real time, they are less vulnerable to digital video recorders that skip commercial breaks. Also, the firm's regional sports network holds local broadcasting rights for college sports, pro baseball and pro basketball teams, leaving it at a strong competitive advantage by creating entry barriers. These content contracts, that last several years before their renewal, establish Fox as the must-have channel for Pay-TV distributors in local markets, guaranteeing the company's dominance in the sports entertainment segment.

International Presence Means Growth Opportunities

One of Twenty-First Century Fox's most attractive features is its large global cable channel portfolio. With channels like FX, Fox Sports and Fox News, the firm's international subscriber growth has risen consistently and will continue to do so for the next decade. In countries like Brazil or Australia, for example, where pay-TV penetration barely reaches 50%, there is plenty of room for growth and expansion. Therefore, the currently generated 15% operating profit in the cable segment could easily grow by a decimal point.

Another enticing aspect of this media giant is its successful film entertainment studio, which provides 75% of all operating profit, as well as a steady stream of cash flow for the televized side of the firm. The hits produced in the film studio are usually fed to the Fox broadcast networks, or Netflix Inc. (NFLX) and Amazon.com Inc. (AMZN), via licensing and distribution agreements. This dual system of content creation and channel ownership is a highly sustainable business model which should help the company overcome any bumps in the road over the next 20 years. Furthermore, Fox channels' high viewer rating is a very attractive feature for producers and writers looking to sell their ideas, which will ensure the firm's quality video content creation in the future.

Although the firm's programming will soon require a new coat of paint, due to audience drops for shows like "American Idol," I still feel bullish about the media giant's future. The film studio's recent motion picture, "12 Years a Slave," won a Golden Globe and is sure to be an Oscar nominee, which will easily boost the firm's box-office receipts in America. Additionally, the company's current price discount of 40% compared to the industry's average is very tempting, given the growth opportunities that lie ahead.  

 

Disclosure: Patricio Kehoe holds no position in any stocks mentioned.

Also check out: Donald Yacktman Undervalued Stocks Donald Yacktman Top Growth Companies Donald Yacktman High Yield stocks, and Stocks that Donald Yacktman keeps buying

Currently 5.00/512345 Rating: 5.0/5 (2 votes)

Subscribe via Email Subscribe RSS Comments Please leave your comment:
More GuruFocus Links

Latest Guru Picks	Value Strategies
Warren Buffett Portfolio	Ben Graham Net-Net
Real Time Picks	Buffett-Munger Screener
Aggregated Portfolio	Undervalued Predictable
ETFs, Options	Low P/S Companies
Insider Trends	10-Year Financials
52-Week Lows	Interactive Charts
Model Portfolios	DCF Calculator
RSS Feed	Monthly Newsletters
The All-In-One Screener	Portfolio Tracking Tool

MORE GURUFOCUS LINKS

Latest Guru Picks	Value Strategies
Warren Buffett Portfolio	Ben Graham Net-Net
Real Time Picks	Buffett-Munger Screener
Aggregated Portfolio	Undervalued Predictable
ETFs, Options	Low P/S Companies
Insider Trends	10-Year Financials
52-Week Lows	Interactive Charts
Model Portfolios	DCF Calculator
RSS Feed	Monthly Newsletters
The All-In-One Screener	Portfolio Tracking Tool

NFLX STOCK PRICE CHART 388.72 (1y: +129%) $(function() { var seriesOptions = [], yAxisOptions = [], name = 'NFLX', display = ''; Highcharts.setOptions({ global: { useUTC: true } }); var d = new Date(); $current_day = d.getDay(); if ($current_day == 5 || $current_day == 0 || $current_day == 6){ day = 4; } else{ day = 7; } seriesOptions[0] = { id : name, animation:false, color: '#4572A7', lineWidth: 1, name : name.toUpperCase() + ' stock price', threshold : null, data : [[1359093600000,169.56],[1359352800000,162.11],[1359439200000,169.12],[1359525600000,167.7],[1359612000000,165.24],[1359698400000,164.8],[1359957600000,174.74],[1360044000000,174.387],[1360130400000,184.41],[1360216800000,181.962],[1360303200000,180.97],[1360562400000,177.89],[1360648800000,177.95],[1360735200000,186.269],[1360821600000,187.4],[1360908000000,189.512],[1361253600000,196.45],[1361340000000,187.12],[1361426400000,187.15],[1361512800000,179.86],[1361772000000,179.32],[1361858400000,184.09],[1361944800000,184.32],[1362031200000,188.08],[1362117600000,189.37],[1362376800000,181.21],[1362463200000,181.73],[1362549600000,182.94],[1362636000000,181.56],[1362722400000,184.7],[1362978000000,180.45],[1363064400000,182.11],[1363150800000,192.36],[1363237200000,188.37],[1363323600000,184.85],[1363582800000,185.59],[1363669200000,181.37],[1363755600000,183.05],[1363842000000,181.99],[1363928400000,181.3],[1364187600000,180.79],[1364274000000,190.61],[1364360400000,190.24],[1364446800000,189.28],[1364792400000,182.43],[1364878800000,176.69],[1364965200000,169.74],[1365051600000,166.69],[1365138000000,164.66],[1365397200000,163.06],[1365483600000,169.36],[1365570000000,166.07],[1365656400000,173.01],[1365742800000,173.2],[1366002000000,176.5],[1366088400000,175.85],[1366174800000,169.36],[1366261200000,163.82],[1366347600000,163.37],[1366606800000,174.37],[1366693200000,216.99],[1366779600000,216.72],[1366866000000,213.75],[1366952400000,215.55],[1367211600000,215.013],[1367298000000,216.07],[1367384400000,212.91],[1367470800000,214.49],[1367557200000,213.45],[1367816400000,210.69],[1367902800000,206.25],[1367989200000,208.61],[1368075600000,216.41],[1368162000000,217.694],[1368421200000,229.379],[1368507600000,233.97],[1368594000000,243.4],[1368680400000,237.03],[1368766800000,239],[1369026000000,239.55],[1369112400000,237.09],[1369198800000,228.56],[1369285200000,226.18],[1369371600000,228.74],[1369717200000,214.19],[1369803600000,215.34],[1369890000000,222.66],[1369976400000,226.25],[1370235600000! ,221.97],[1370322000000,225.31],[1370408400000,223.46],[1370494800000,217.74],[1370581200000,220.22],[1370840400000,220.93],[1370926800000,214.46],[1371013200000,207.64],[1371099600000,215.39],[1371186000000,213.99],[1371445200000,229.23],[1371531600000,228.83],[1371618000000,232.31],[1371704400000,223.52],[1371790800000,216.9],[1372050000000,215.6],[1372136400000,212.9],[1372222800000,212.1],[1372309200000,214.97],[1372395600000,211.09],[1372654800000,224.28],[1372741200000,221.46],[1372827600000,220.91],[13730004000

McDonald's

Russ Kaplan, editor of the Heartland Advisor, looks to the Big Mac as his candidate for the top dividend stock for 2014. Here's his outlook for the fast food restaurant operator.

McDonald's Corporation (MCD) was founded in 1940, and, over the years, they created a strong, loyal customer base. Their menu has broadened, but they keep their timeless favorites.

At a reasonable price, McDonald's has a dividend yield of 3.3%. That income is solid and ranks up with the yields on many bonds.

McDonald's has a history of raising their dividend, which bonds will never do. Since 2009, the dividend has risen five times, and will likely keep rising over time.

In addition to the attractive yield you will receive, McDonald's has the potential for excellent capital gains in the future. It's currently selling in the $95 range, down from this year's high of $104.

The reason it fell was that quarterly revenue has been down with the concern about the need for healthier foods. McDonald's has often faced that, adapted, and always bounced back.

It has a strong international presence, 68% of sales come from outside the United States. This protects it from any downturns in a particular country or particular region. Incomes, and popularity of its products, are particularly on the rise in developing countries.

Subscribe to Heartland Advisor here...

For More 2014 Top Stock Picks

Home Prices Climbed 12.4 Percent in July

Alamy U.S. home prices jumped 12.4 percent in July from a year earlier, reflecting a housing market that's increasingly favoring sellers amid a tight supply of available homes for sale. Real estate data provider CoreLogic said Tuesday that home prices in every state but Delaware climbed on annual basis in July. Also, 99 of the 100 largest cities reported annual price gains. Home prices grew 27 percent in Nevada, to lead all states. CoreLogic also says prices rose 1.8 percent from June, the 17th straight month-over-month increase. Consistent job gains and mortgage rates that are still historically low despite recent upticks are spurring more people to buy homes. That's helped drive prices higher. CoreLogic says U.S. home prices are now within 18 percent of their peak levels reached in April of 2006.

Emerging Stocks Rally as Brazil to India Signal Support

Emerging-market stocks rallied, paring the biggest weekly drop in two months, as countries from Brazil to India signaled they would act to support financial markets. Samsung Electronics Co. drove technology shares higher.

The MSCI Emerging Markets Index increased 1.1 percent to 932.76, trimming its weekly decline to 2.6 percent. Samsung Electronics, the world's largest smartphone maker, jumped 3.2 percent in South Korea. Tata Motors Ltd. (TTMT), owner of Jaguar Land Rover, climbed 3.1 percent in Mumbai. India's rupee rebounded from a record low, while the Brazilian real increased the most in almost two years. Homebuilders paced gains in Sao Paulo, driving the Ibovespa to a third weekly advance.

All 10 groups in the benchmark measure for emerging markets gained today, led by technology and industrial companies. Brazil's central bank stepped up efforts to arrest the world's worst currency decline, announcing a $60 billion intervention program involving currency swaps and loans. The Reserve Bank of India said yesterday that the nation's economic and monetary policies must focus on preserving financial stability.

Central bank actions to curb currency depreciation are a "good first stage," Michael Strauss, who helps oversee about $25 billion of assets as chief investment strategist at Commonfund Group in Wilton, Connecticut, said in a telephone interview today. "They can temper it."

The gauge of developing nations is trading at 9.9 times estimated earnings, below the valuation of developed markets of 13.7. The iShares MSCI Emerging Markets Index exchange-traded fund added 1.2 percent at $38.65. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, slid 5.6 percent to 23.24.

Dollar Loans

Brazil's real climbed the most since September 2011. The central bank will auction $1 billion of dollar loans every Friday starting today and offer the equivalent of $500 million worth of foreign-exchange swaps each day Monday through Thursday. The program will run through Dec. 31. The Ibovespa (IBOV) jumped the most among major emerging-market indexes as Rossi Residencial SA led homebuilders higher, offsetting declines among exporters.

The Borsa Istanbul National 100 Index tumbled to the lowest level since October, extending its weekly drop to 8.5 percent. The Micex Index (INDEXCF) slid 0.3 percent, trimming its gain for the week to 0.9 percent. Benchmark stock gauges in Poland and Hungary also dropped today.

India's S&P BSE Sensex (SENSEX) gained 1.1 percent as Tata Motors extended a two-day rally to 6.2 percent. Bharat Heavy Electricals Ltd., the largest power-equipment maker, soared the most since May 2009. The rupee, which fell to a record 65.56 per dollar yesterday, climbed 2.1 percent.

Stock Sale

China's stocks fell, capping the benchmark index's first weekly loss in five weeks, as financial companies slumped on concern liquidity is tightening before the end of the month. China Merchants Bank Co. (600036) slid 3.2 percent after saying it plans to raise 34.8 billion yuan ($5.7 billion) in the world's second-largest share sale this year. South Korea's Kospi Index (KOSPI) added 1.1 percent as Samsung snapped a five-day slump.

The premium investors demand to own emerging-market debt over U.S. Treasuries rose 0.04 percentage point to 345 basis points, according to JPMorgan Chase & Co.

Carmen Reinhart, a Harvard University economist and co-author of a history of debt crises, said emerging markets are deteriorating as the U.S. recovers and may worsen as global interest rates begin to increase.

"It could get very ugly," Reinhart said today in a Bloomberg Television interview with Sara Eisen from the Federal Reserve's annual conference in Jackson Hole, Wyoming. "Emerging markets had a capital flow bonanza lasting several years, the golden boom years, and the probability of a banking crisis, the probability of a currency crash, the probability of a default, all increase afterward."

Top Portfolio Products: Winklevoss Twins File Bitcoin ETF

New products introduced over the last week include the filing of papers for a Bitcoin ETF; the reassignment of portfolio managers for five Vanguard funds; and Thornburg’s Developing World Fund went global.

In addition, publicly traded REIT Chambers Street Properties was added to the Russell 3000 and Russell Global indexes; and Pacific Life launched a fixed-income promotional campaign.

Here are the latest developments of interest to advisors:

1) Virtual Bitcoin Subject of Actual ETF Filing by Facebook’s Winklevoss Twins

Risk-taking investors skilled in understanding abstract concepts may be excited to hear about the fact that the Winklevoss brothers, best known for their Facebook connection, have with the SEC on Monday to launch a Bitcoin ETF.

Bitcoin is a virtual currency “mined” by people carrying out extremely complex mathematical problems. At present, those who can’t do the math pretty much can’t have the currency, but if Cameron and Tyler Winklevoss, popularly known as the Winklevii, have their way, that may change—sort of.

Those familiar with the virtual money may remember that its value has fluctuated rather spectacularly this year, most particularly in April. Much ado was made of it as a means of evading the Cyprus haircuts on large depositors’ accounts, since Bitcoin has nothing to do with governments and everything to do with hackers (it was reportedly invented by one, or more than one, in 2009). Its value soared, then crashed, leaving a lot of empty purses—oh, wait, they were already empty, since Bitcoin is a virtual currency.

And therein lies the rub. With no physical existence, no stable value (well, as stable as any currency can be) and little real utility in the marketplace—since it’s difficult to buy things with Bitcoin, because it’s not widely accepted—the currency might not seem to be the proper target for an ETF. However, Kathleen Moriarty, a lawyer at Katten Muchin and one of the masterminds of gold and silver ETFs, and even the very first ETF, is involved in the proposal filed with the SEC, and that gives the whole issue a bit more, er, substance. (However, the news calls to mind Cyrano Jones’ statement in Star Trek’s “The Trouble with Tribbles”: “Twice nothing is still nothing.”)

Substance or not, the financial press is full of naysayers heaping scorn on the notion, going so far as to say that the very proposal is going to further blacken the eyes of the ETF industry, already under scrutiny to determine whether ETFs accurately tracked their underlying markets during recent volatile trading. After all, Bitcoin is nothing if not volatile.

5 Best Stocks To Buy For 2014

Bloggers are pointing out numerous drawbacks, such as the fact that the filing takes 12 pages to explain the concept of a Bitcoin (complicated!) and 18 pages to discuss risk factors (scary!). Also, some governments might take the extraordinary step of banning use or ownership of Bitcoin, thereby rendering it less attractive as a freewheeling currency and lessening its draw as a potential investment.

In addition, since one of the attractions of Bitcoin is the ability to avoid taxes, one columnist pointed out that prospective investors in the ETF should realize that any ETF profits, however unlikely they may be to anyone but the Winklevii, would be taxed—thereby negating one of the purposes of Bitcoin.

Thrillseekers may appreciate the roller-coaster effect of the currency, but the smart money (in nonvirtual currency) may be on abstainers rather than investors. At least for now. 3) Thornburg Launches Developing World Fund

Thornburg Investment Management, distributor for Thornburg Global Investment, announced the global launch of the Developing World Fund (THDEVWI), the newest addition to its range of UCITS funds domiciled in Ireland.

THDEVWI, managed by Lewis Kaufman, a managing director, seeks long-term capital appreciation by investing in developing market companies with strong domestic demand. Kaufman seeks companies with ample free cash flow that won’t need to rely on the stock or bond markets for funding during periods of economic distress. The Developing World strategy was launched as a U.S. mutual fund (THDAX) in December 2009.

4) Chambers Street REIT Added to Russell 3000 and Russell Global Indexes

Chambers Street Properties, a publicly traded REIT (CSG) focused on acquiring and managing income-producing industrial and office properties, announced that the company was added as a member of the Russell 3000 and Russell Global indexes after the equity markets closed on June 28.

Chambers Street was included on a preliminary list of additions posted by Russell Investments on June 14.

5) Pacific Life Funds Launches Fixed-Income Promotional Campaign

Pacific Life Funds has launched a new promotional campaign, “Diversify with Corporate Income.” The campaign’s goal is to educate investors about the importance of diversifying their fixed-income investments through corporate income. In exchange for increased risk, says the campaign, corporate fixed-income securities can provide greater opportunities for income as compared to U.S. government securities and thus the strategy can help maintain more stable overall returns in varying economic and market environments.

All five of the PL fixed-income funds — PL Short Duration Income Fund (PLDSX), PL Income Fund (PLIDX), PL Strategic Income Fund (PLSFX), PL Floating Rate Income Fund (PLFRX), and PL High Income Fund (PLHIX) — provide investors with an opportunity to realize the benefits of corporate income. Fund holdings include a combination of investment-grade corporate bonds, high-yield corporate bonds, floating-rate loans, and short-term debt securities.

Pacific Asset Management, the manager of the PL Fixed-Income Funds, specializes in institutional fixed-income asset management, with a focus on corporate income. The members of this team have worked together for over a decade and possess, on average, more than 15 years of investment experience.

Read the June 28 Portfolio Products Roundup at AdvisorOne.

3 Small Caps That Are Ready to Rebound

Popular Posts: These 5 Asset Managers Will Be Big Winners in 2014The 5 Best ETFs for Bargain HuntersTGT – Why Target Stock Could Be Toast Recent Posts: 3 Small Caps That Are Ready to Rebound Can Watson Power IBM Stock to New Highs? UnitedHealth Earnings: Is UNH Stock a Buy After Earnings? View All Posts

By the time the dust settled in 2013, small caps won the day (well, year) — the SPDR S&P SmallCap 600 (SLY) had outperformed the SPDR S&P 500 ETF (SPY) by almost 9 percentage points.

Each time SPY has a good year, it seems SLY has an even better one. Since 2006, when SPY delivered at least 15% annual returns, the ETF of small caps beat SPY on average by 740 basis points. In the years where SPY didn't do well, SLY only did slightly worse.

What kind of year are we in for in 2014? Most Americans see a flat or lower stock market this year while experts seem to be slightly more optimistic, expecting high-single-digit or low-double-digit gains from the S&P 500 in 2014. So really, that's not actually great news for the small-cap index.

With the five-year bull run getting long in the tooth, the route to success might be a modified Dogs of the Dow approach, picking last year's small-cap laggards to be this year's winners. Bespoke Investment Group has a table that shows how 2013′s worst-performing stocks from the S&P 1500 fared in the first week of 2014, and I have picked three small caps from that list that I like to outperform in 2014.

Small Caps to Buy #1: Aeropostale (ARO)

In December, I looked at the trio of teen retailers that includes Aeropostale (ARO), Abercrombie & Fitch (ANF) and American Eagle (AEO).

While I came to the conclusion that AEO has the best business of the bunch, I was confident that an experienced CEO like Aeropostale’s Tom Johnson would be able to return it to profitability in 2014. Considering ARO stock lost 30% in 2013, there’s plenty of repair work ahead.

In recent days, rumors have been flowing that private equity is getting a sniff of its business. Aeropostale tried to sell itself once before in 2011 to no avail. This time, influential investors like Crescendo Partners, Sycamore Partners and Eminence Capital are along for the ride. Johnson's trying to update its fashion while trimming the underperforming stores. Crescendo believes ARO shares are worth $14 to $16 (vs. current prices under $8). I totally agree.

One of two things happens in 2014: Aeropostale is sold to a strategic buyer (but more likely private equity), or Tom Johnson gets the engine restarted and it gets off the schneid.

Either way, ARO stock could be due for big gains. It's a gamble I'd be willing to take.

Small Caps to Buy #2: Liquidity Services (LQDT)

If you're a business or government agency, Liquidity Services (LQDT) might be who you go to in order to sell surplus assets.

Using online marketplaces, LQDT takes a cut of the proceeds. Back in 2008, I recommended LQDT stock when it was trading at $9.50.

It didn’t turn out to be the stress-free stock I thought it would be.

At the time, I had no way of knowing LQDT stock was about to go on a wild ride to $60 and beyond, then down to $20 … in a span of 36 months. 2013 was no exception as its stock lost 45%, the worst year it has had as a public company.

But consider that in 2008 when I recommended Liquidity Services, the company delivered adjusted earnings per share of 51 cents, meaning its price-to-earnings ratio at the time of my pick was almost 19. In 2013, its adjusted EPS were $1.75 for a P/E of 12 times earnings — 37% lower than its valuation in 2008. However, its adjusted EPS is currently in the midst of a walk down from $1.86 in fiscal 2012 to $1.75 in 2013 and estimated in 2014 to be anywhere from $1.76 to $1.60. At the very low end, we're currently talking about a forward P/E of 13.5 — still much lower than back then.

Do I think LQDT will hit $60 again? Not without several years of demonstrable growth in earnings. But a 20%-30% run in 2014 isn't out of the question should it produce better-than-expected results.

At the end of the day, Liquidity Services is a business whose need is an ongoing one. With no debt and lots of cash, I like LQDT’s chances.

Small Caps to Buy #3: Central Garden & Pet (CENTA)

In addition to its stock dropping 36% in 2013, Central Garden & Pet (CENTA) has underperformed the S&P 500 by almost 18 percentage points during the past five years while everyone and their dog — small caps, large caps, whatever — has seen impressive gains over that same period.

Central’s entire board and management team should be thoroughly embarrassed, especially chairman and founder William Brown, who owns 58% of voting CENTA stock.

CENTA is an amalgam of garden and pet products, none of which seem to make money. Five years ago, CENTA had operating profits of $126 million on $1.6 billion in revenue; in fiscal 2013, its revenues were slightly higher over 2009, but its operating profit of $40 million was 68% lower. Instead of increasing profits every year, it's shrinking them.

At this point, you should be wondering why I've picked this turkey to turnaround in 2014.

I'd like to tell you it's because Central Garden & Pet has a new product that’s selling crazy, but that’s just not the case. No, in its Q4 earnings release Dec. 10, CEO John Ranelli had this to say:

"Our financial results are simply unacceptable. While we will see some improvements along the way, it is going to take another year or two to get our performance consistently where we want it to be."

While not very encouraging in the near-term, I feel as though any positive news from CENTA later in the year could spark a big rally in its stock price.

In my mind, this five-year nightmare has been completely factored into to its stock price, which hasn't traded this low ($6.42 today) since early 2009, and then only because of the market crash in late 2008. The pet business is the key to CENTA’s success. If management want to solve the problem permanently, it will sell its garden business and focus on the one that's worth saving.

If that news were to come out, you'd be almost guaranteed a doubler overnight.

As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.

Hospira Touches 52-week High - Analyst Blog

Shares of Hospira Inc. (HSP) soared to a 52-week high of $39.48 towards the end of the trading session on Jul 9, 2013 buoyed by the positive opinion issued by the European Medicines Agency's Committee for Medicinal Products for Human Use (CHMP) regarding the approval of Inflectra (infliximab).

The closing price of this company on that day was $39.44, representing an impressive year-to-date return of 24.1%. Moreover, Perrigo has delivered positive earnings surprises in each of the last four quarters with an average beat of 7.14%. The long-term expected earnings growth rate for this stock is 7.9%.

Favorable CHMP Opinion- A big Positive

Shares of Hospira have been on the upswing ever since the CHMP recommended the approval of Inflectra for the treatment of rheumatoid arthritis, inflammatory bowel disease and plaque psoriasis. We note that Inflectra is the biosimilar version of Johnson & Johnson / Merck & Co. Inc's (JNJ/MRK) blockbuster drug Remicade. Hospira noted in its press release that Inflectra is the first monoclonal antibody therapy to receive a favorable opinion from the CHMP after review through the EMA biosimilars regulatory pathway.

Hospira, which currently markets two biosimilars in Europe, boasts of a strong biosimilars pipeline with 11 candidates in development. Biosimilars, which are generic versions of biologic drugs, are expected to be a significant growth driver in the generics industry in the coming years. The biosimilars market represents huge commercial opportunity with a significant amount of biologic sales slated to lose patent protection in the coming years.

A Stock Worth Considering

Hospira carries a Zacks Rank #3 (Hold). One can consider ResMed Inc. (RMD) a good buying opportunity. This medical stock – sporting a Zacks Rank #2 (Buy) – has performed encouragingly over the last few quarters with potential to rise significantly from current levels.

Top 15 Best Foreign Countries for Retirement: 2014

For those with retirement around the corner or who are already retired, picking a place to retire could be a key element into how fulfilling, meaning financially comfortable, retirement will be. With many early boomers' retirement portfolios punished by the financial crisis and low interest rates, the choice of where to live is even more critical.

International Living magazine released the results of its most recent Global Retirement Index last week, with some familiar countries on the list and some new ones. The magazine bases it index on data gathered from editors, correspondents and experts living in the countries that it ranks.

International Living scored 24 countries in eight categories: real estate, special benefits, cost of living, ease of integration for foreigners, entertainment and amenities, health care, retirement infrastructure and climate.

The “special benefits” International Living considered include government provisions that make it easy for Americans to move to and live in each country. Things like discounts on health care, airfares, utilities, duty fees on imported goods, and property rights and taxes were considered. For the “ease of integration” category, International Living considered how widely English is spoken in the country, the friendliness of locals to foreign residents and the size of the current expat community.

Due to its proximity and similar time zones to the United States, Central and South America are obvious choices for retiree destinations, and several of the countries in the top 15 are from those regions.

(Check out Top 10 Best Foreign Countries for Retirement: 2013 on ThinkAdvisor.)

Of the 24 countries in the index, Cambodia was rated the lowest, with a score of 73.2. Although the country earned a score of 100 in cost of living, it rated a 57 and 58 in special benefits and retirement infrastructure, respectively.

15. Portugal: 82.4

14. Italy: 82.5

13. Nicaragua: 82.6

12. (tie) New Zealand: 83

12. (tie) Ireland: 83

10. Thailand: 83.5

International Living notes that retirees have several choices when it comes to where they want to live in Thailand, depending on what kind of lifestyle they want. The capital, Bangkok, is a major city, while the northern part of the country tends to be more peaceful and less expensive, with proximity to the country’s beaches a highlight of the south.

Wherever they decide to settle down, rent can be as low as $500 a month, and a doctor’s exam in a modern hospital will cost less than $40.

9. Uruguay: 83.7

Uruguay is the second smallest country in South America, and boasts extensive infrastructure and ease of access, according to International Living. It also has an established expat community.

8. Malta: 84.1

Malta, a tiny archipelago about 60 miles south of Sicily, is just over 120 square miles. Despite this, it has a modern airport on the main island of Malta that connects the country with Rome, about an hour away by plane. It has been a member of the European Union since 2004 and has been using the euro since 2008.

English is one of the official languages of Malta, and according to International Living, there are many hints to its 150-year history as a British colony, from red phone booths to driving on the left side of the road.

7. Mexico: 84.2

One of Mexico’s biggest attractions to retirees is the wide variety of lifestyles they can adopt there. Whether they’re looking to retire on a beach or in the city, expats will have as much to do as they want. The cost of living is low, and the ease of integration among the highest on the list.

6. Columbia: 84.2

Although technically tied with Mexico on its total score, Columbia earned the higher spot with a much higher rating in special benefits and retirement infrastructure, and slightly smaller gains in other categories.

International Living noted that Columbia is more developed than some other countries in Latin America, and cost of living and real estate are low.

5. Spain: 85.8

International Living called Spain the “best bargain in Europe.” That’s partly due to the recession, which has driven real estate prices down, but the magazine noted Spain has long been one of the least expensive countries in Europe. In some areas, utilities can be as little as $150, and while meat tends to be more expensive than in the United States, other items like produce, olive oil or wine can be very cheap.

Spain also has excellent private and public health care systems, with access to good hospitals even in rural parts of the country.

4. Costa Rica: 86.8

Costa Rica has long been a favorite destination for expat retirees. One reason is simply that it’s easy for retirees to move there. A couple needs just $1,000 per month in retirement income to qualify for residency.

Another major benefit is the affordability of health care. expats pay a monthly fee based on their income for care that’s free at the time of service.

3. Malaysia: 88.5

The highest-rated Asian country on the list, International Living found a couple can live well in a luxury condo on the coast for about $1,700 per month, including rent. It pointed to Penang Island and the capital, Kuala Lumpur, as centers of excellence in the health care industry.

In addition to having first-world infrastructure, retirees can move their household and car to Malaysia duty-free.

As for visas, retirees can stay in the country on a “social visit pass” that lasts 10 years and automatically renews for an additional 10 years when it expires. Foreign residents just need a fixed deposit of $46,707 and a monthly income from a government pension of at least $3,114.

2. Ecuador: 91.1

Less than one point behind the top spot, Ecuador was knocked out of the No. 1 position, but just barely. The excellent climate and low cost of living that made it the top place holder last year are still there, and International Living noted the country is working to improve its infrastructure. A $680 million airport opened outside Quito in February.

1. Panama: 91.2

International Living noted that Panama won the top spot “by a hair.” In addition to a range of retiree benefits, it has introduced new visas that make it easier to gain residence, and has made great steps to improve its infrastructure. It’s worth mentioning, too, that Panama is largely hurricane free (the last hurricane was Martha in 1969).

Panama uses the dollar, English is widely understood and expats don’t even need to bring electronic converters to use their gadgets.

---

Related stories on ThinkAdvisor:

Will Sirius XM See an Explosive Move Higher?

With shares of Sirius XM (NASDAQ:SIRI) trading around $3.50, is SIRI 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

Sirius XM broadcasts its music, sports, entertainment, comedy, talk, news, traffic, and weather channels in the United States on a subscription fee basis through its two satellite radio systems. Subscribers can also receive its music and other channels over the Internet, including through applications for mobile devices. Audio entertainment has always pleased consumers and is a medium that is here to stay. Sirius XM is looking to expand its audio entertainment channels to every audio medium possible which will surely translate to rising profits. As consumers continue to adopt this technology, look for Sirius XM to gain market share.

T = Technicals on the Stock Chart are Strong

Sirius XM stock has seen an explosive move higher after establishing lows during the 2008 Financial Crisis. The stock is currently trading at multi-year highs and seems to want to keep plowing higher. 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, Sirius XM is trading above its rising key averages which signal neutral to bullish price action in the near-term.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

(Source: Thinkorswim)

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

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Sirius XM Options	35.33%	53%	52%

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

	Put IV Skew	Call IV Skew
June Options	Flat	Average
July 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 significant 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 Increasing 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 Sirius XM’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Sirius XM 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)	0%	104.8%	-50%	1500%
Revenue Growth (Y-O-Y)	11.52%	13.87%	13.74%	12.51%
Earnings Reaction	5.86%	1.26%	0.35%	4.54%

Sirius XM has seen increasing earnings and revenue figures over most of the last four quarters. From these figures, the markets have been excited about Sirius XM’s recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has Sirius XM stock done relative to its peers, Pandora (NYSE:P), Cumulus Media (NASDAQ:CMLS), Dialogic (NASDAQ:DLGC), and sector?

	Hot Warren Buffett Stocks To Watch Right Now Sirius XM	Pandora	Cumulus Media	Dialogic	Sector
Year-to-Date Return	21.80%	80.50%	41.57%	-36.22%	19.33%

Sirius XM has been an average relative performer, year-to-date.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

Conclusion

Sirius XM provides audio entertainment services through growing mediums to consumers of any age. The stock has been exploding higher over the last few years and is now trading at multi-year high prices. Earnings and revenue have been increasing over most of the last four quarters, which has really excited investors. Relative to its strong peers and sector, Sirius XM has been an average year-to-date performer. Look for Sirius XM to OUTPERFORM.

How to be Successful Investing as a Team

We all have strengths and weaknesses when it comes to investing. Working with a team of investors with different ideas and perspectives can bring out the best in everyone, leading to better returns and mitigating risk. Click the video below to find out how.

Everyone knows Amazon is the king of the retail world right now, but at its sky-high valuation, most investors are worried it's the company's share price that will get knocked down instead of competitors'. The Motley Fool's premium report will tell you what's driving the company's growth, and fill you in on reasons to buy and reasons to sell Amazon. The report also has you covered with a full year of free analyst updates to keep you informed as the company's story changes, so click here now to read more.

#pitch{ margin-bottom: 15px; }

More Expert Advice from The Motley Fool

Top Blue Chip Stocks To Own For 2014

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

3M Selling 2 Subsidiaries to Orvis

St. Paul, Minn.-based 3M (NYSE: MMM  ) is selling off two if its subsidiaries.

On Wednesday, 3M announced that it has signed a definitive agreement to sell its Scientific Anglers and Ross Reels fly fishing equipment businesses to privately held The Orvis Company, of Manchester, Vermont.

Post-sale, Orvis says it will continue to operate both businesses independently, and under their respective brand names. Additionally, Orvis says it will maintain the businesses' current operations, facilities, employees, and independent sales representation, while doubling down on customer service, marketing, and product innovation.

Financial terms were not disclosed. This deal is expected to close in the current second quarter of the year.

3M shares were largely unaffected by the news, falling only 0.2% in Wednesday trading, to close at $104.55.

Top 10 Financial Companies To Invest In Right Now

More Expert Advice from The Motley Fool

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

Don't Get Too Worked Up Over Pool's Earnings

It takes money to make money. Most investors know that, but with business media so focused on the "how much," very few investors bother to ask, "How fast?"

When judging a company's prospects, how quickly it turns cash outflows into cash inflows can be just as important as how much profit it's booking in the accounting fantasy world we call "earnings." This is one of the first metrics I check when I'm hunting for the market's best stocks. Today, we'll see how it applies to Pool (Nasdaq: POOL  ) .

Let's break this down
In this series, we measure how swiftly a company turns cash into goods or services and back into cash. We'll use a quick, relatively foolproof tool known as the cash conversion cycle, or CCC for short.

Why does the CCC matter? The less time it takes a firm to convert outgoing cash into incoming cash, the more powerful and flexible its profit engine is. The less money tied up in inventory and accounts receivable, the more available to grow the company, pay investors, or both.

To calculate the cash conversion cycle, add days inventory outstanding to days sales outstanding, then subtract days payable outstanding. Like golf, the lower your score here, the better. The CCC figure for Pool for the trailing 12 months is 77.4.

For younger, fast-growth companies, the CCC can give you valuable insight into the sustainability of that growth. A company that's taking longer to make cash may need to tap financing to keep its momentum. For older, mature companies, the CCC can tell you how well the company is managed. Firms that begin to lose control of the CCC may be losing their clout with their suppliers (who might be demanding stricter payment terms) and customers (who might be demanding more generous terms). This can sometimes be an important signal of future distress -- one most investors are likely to miss.

In this series, I'm most interested in comparing a company's CCC to its prior performance. Here's where I believe all investors need to become trend-watchers. Sure, there may be legitimate reasons for an increase in the CCC, but all things being equal, I want to see this number stay steady or move downward over time.

Source: S&P Capital IQ. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.

Because of the seasonality in some businesses, the CCC for the TTM period may not be strictly comparable to the fiscal-year periods shown in the chart. Even the steadiest-looking businesses on an annual basis will experience some quarterly fluctuations in the CCC. To get an understanding of the usual ebb and flow at Pool, consult the quarterly-period chart below.

Source: S&P Capital IQ. Dollar amounts in millions. FQ = fiscal quarter.

On a 12-month basis, the trend at Pool looks OK. At 77.4 days, it is 0.9 days worse than the five-year average of 76.4 days. The biggest contributor to that degradation was DSO, which worsened 18.9 days when compared to the five-year average.

Considering the numbers on a quarterly basis, the CCC trend at Pool looks OK. At 117.0 days, it is 20.9 days worse than the average of the past eight quarters. Investors will want to keep an eye on this for the future to make sure it doesn't stray too far in the wrong direction. With both 12-month and quarterly CCC running worse than average, Pool gets low marks in this cash-conversion checkup.

Though the CCC can take a little work to calculate, it's definitely worth watching every quarter. You'll be better informed about potential problems, and you'll improve your odds of finding underappreciated home run stocks.

Looking for alternatives to Pool? It takes more than great companies to build a fortune for the future. Learn the basic financial habits of millionaires next door and get focused stock ideas in our free report, "3 Stocks That Will Help You Retire Rich." Click here for instant access to this free report.

Add Pool to My Watchlist.

Preventing a simmering economy from boiling

Seeing the yield on the 10-year Treasury hover above 3%, whether the result of a low-volume trading day or the Federal Reserve's taper policy, is a psychologically significant event that the Fed will be closely watching.

“I'd call it a milestone to see the 10-year yield above 3%,” said Robert Tipp, chief investment strategist for fixed income at Prudential Financial.

“The Fed's tapering decision represents a huge technical adjustment for the bond market,” he added. “When the majority of Federal Reserve Board members agree that it's time to start tapering, it makes a lot of economists question their earlier assumptions, and now people are starting to wonder if maybe there will be fewer economic headwinds next year.”

As with most financial market milestones, this one is represented by just another number. Fact is, the 10-year's current 3.01% yield is only 2 basis points higher than the 2.99% yield reached by the 10-year Treasury on Sept. 6.

But, also as with most financial market milestones, it is the psychological impact that matters most.

“Basically, the economy now is simmering because we're moving in a positive direction but if we heat up too much, interest rates will start to move too quickly,” said Wilmer Stith, co-manager of the Wilmington Broad Market Bond Fund.

It is pure economic jujitsu. On the one hand, rising rates and a steeper yield curve means the economy is stronger.

But, too much of that too quickly and suddenly the economy is at risk of stalling again.

“The main concern right now is whether the positive data trend continues into the first quarter,” said Vishal Khanduja, portfolio manager at Calvert Investments.

“People are feeling more confident about the economy and putting more money into risk assets,” he added. “But Treasury yields are really made up of three things: GDP, inflation and inflation expectaiotns.”

Since both inflation and inflation expectations are actually going lower, it stands to reason that economic growth is currently the lone driver of Treasury yield.

So, the Fed is dealing with both the risk of too much enthusiasm related to the reason for tapering while actually tiptoeing into a tapering mode in the hopes the economy is strong enough to grow on its own without the artificial stimulus of the central bank's bond buying.

“The tapestry of a stronger, more sustainable economy, is taking place. Unfortunately, two Fridays from now, we're going to hit the reset button with some fresh payroll data,” Mr. Stith said. “If unemployment stays the same or moves higher, then all the other stuff doesn't really matter, because the most important statistic to the Fed is payroll data.”

America's Bestselling Retirement "Plan" Is Jeopardizing – of All Things – Your Retirement

I recently received a call from "Russ," a client of mine. He was wondering why the investments he holds at my money management firm have gone up so much more than the money he's entrusted to a major fund broker.

I'd be wondering, too.

That's because, in a year filled with hundreds of 52-week highs and a broad market that climbed roughly 25%, they've managed to "grow" Russ' money all of... 2%?

It didn't take long to find out why.

It's estimated that by 2020, nearly $3.85 trillion will be invested in the same "one-click" mutual fund industry's bestsellers that Russ did: "Target Retirement Funds."

I'm so glad he called.

These "funds of funds" are dangerous. They're far too simplistic, automatically adjusting your investments based largely on one factor: your age. And that just doesn't work anymore.

In fact, these "solutions" are more dangerous than they've ever been...

The Market Doesn't Know - or Care About - Your Birthday

"Target" funds allocate client money to other funds within their respective investment "families," and they do so almost exclusively based on the client's age.

Basically, the older the client, the greater the percentage of the target funds allocated to bond funds rather than equity funds.

That sure sounds good. I mean, who doesn't want an easy retirement solution?

But if successful investing were as simple as knowing your age, then everyone would get it right.

Yet all of the big brokers push these "Target Retirement Funds" now.

Vanguard, Fidelity, T. Rowe Price, Schwab...

And they push them to everyone.

Income investors, retirees, would-be retirees... They even now sell funds that you can tailor to the age when your children will head to college... as if the market cared about our children's ages, too, let alone ours.

Russ found this out just in time...

So Much for "Safety"

My client is 86 years old, and when he told me about his target fund and its underperformance versus my income allocations, I immediately suspected that most of his money was allocated to long-term Treasury and corporate bonds.

Indeed.

Stocks, private-equity funds, business development corporations (BDCs), and other nontraditional income-generating assets have done very well this year.

But bonds, and particularly long-term Treasury bonds, have had a very rough go of it.

For example, the iShares 20+ Year Treasury Bond ETF (TLT), an exchange-traded fund (ETF) that tracks the performance of an index of public obligations of the United States Treasury with a remaining maturity of 20 or more years, is down nearly 17% over the past 12 months.

So much for those "safe" long-term Treasury bonds...

The chart here of TLT shows the bearish trend in this once-hot market segment.

Here's the Problem One reason why Russ' target fund has disappointed this year is because these funds follow an easy-to-understand formula called the "rule of 100."

This rule states that if you want to find out how much of your investment capital you should put into equities, and how much you should put into bonds, then subtract your age from 100, and the resulting sum is how much of your portfolio you should have allocated to equities. The rest is what you should have in bonds. So, if you are 86 years old, then just 14% of your money should be in equities, and the rest in bonds.

Yet given how poorly many bond segments have performed in 2013, this rule has been a miserable failure for income investors.

And this "rule" will continue holding you back from achieving your goals.

You can thank a long-term trend of rising interest rates for that...

The Inevitable Shift Has Begun

The inevitable shift toward rising interest rates, i.e., falling bond prices, means many older investors will be grossly over-allocated to one of the worst-performing market segments at the time when they need income most. With bank savings, CDs, and other "safe" investments yielding next to nothing, income investors simply cannot afford to uncritically follow the formulaic underpinnings at the crux of these target funds.

Today, investors need to be more involved, more aggressive, and just plain smarter when it comes to making investment allocations in their income portfolios.

The plain truth is that the new bond landscape demands that your strategy change along with it. In the current environment, you simply cannot buy and hold long-term bond funds, or formulaic target funds, and hope to achieve the kind of yield and share price appreciation required to generate the total return results that many income investors enjoyed during the bond bull prior to 2013.

It's just not enough today to wait around passively for your income holdings to eke out a 2% gain, the way Russ' did. That barely keeps up with inflation, and it definitely doesn't give you the kind of income most of us need to live the way we want to live.

How I Fixed the Problem

In the end, I advised Russ to exit his Total Retirement Fund, and stop relying on outdated allocation strategies, like the "Rule of 100."

He's much better off in "total return" holdings, like Apollo Investment Corp. (Nasdaq: AINV) which we covered right here, and Kinder Morgan Energy Partners LP (NYSE: KMP), another long-term winner.

After just a few weeks, the move has already paid off for Russ...

More from Robert Hsu:
My Favorite Kind of Money