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If You Only Invested Then…A Little Motivation for Now

August 30th, 2011 by The Dividend Pig  Investing Commentary 25 comments

One of my favorite activities is dreaming about the net worth I will have in 50 years, and how much money I will make each year in dividends.

I could be living in the clouds a bit, but it gives me motivation to keep saving and investing. Luckily, many of the larger dividend paying companies out there offer handy stock calculators that allow you to calculate your investment returns for various periods of time.

Since I plan on holding my stocks as long as I can, I usually go back as far as the calculators will let me. Just for fun, and maybe a little motivation, take a look at what a $10,000 investment, in various companies, would be worth today.

Proctor and Gamble
Had you invested $10,000 in PG in January of 1970, today, you would own 5,727 shares, worth about $363,000 dollars, and an annual dividend payment of $12,026.70

Coca Cola
Coke’s calculator only goes back to 1990 – still, if you had invested $10,000 in January of 1990 in KO, today you would own 1,047 shares, worth approximately $73,143 and with a yearly dividend of $1,968.36.

Walmart
Walmart has been one of the best performing stocks of the past 30 years, so let’s see where you would be today if you were had enough foresight to invest in 1980. If you had bought $10,000 worth of WMT in 1980, today you would own 74,472 shares worth $3.9 million dollars. Your yearly dividend check would be $108,729.

Microsoft
Bill Gates could have made you a very rich man – if you had purchased $10,000 worth of shares during Microsoft’s ipo, today you would own 137,088 shares worth 3.6 million dollars. Annually, you would earn $87,736 in dividends.

Abbott Labs
Using your $10,000 to buy into this health care giant in 1990 would today have earned you 1,319 shares worth $68,000. You would receive a steady, rising paycheck every year, and in 2011 that paycheck would be $2,532.

Altria
In 1970, you would have bought 303 shares of what was then Phillip Morris for $10,000. Today, not counting your stock in spin-offs Kraft and Phillip Morris International, you would own 29,000 shares worth $786,000. Yearly dividend payments would equal $44,080.

Though these figures assume reinvestment of dividends, they do not include any added investment – just imagine how much you could have with added investment! This is the real power of a dividend investing strategy.

These calculators aren’t perfect, and they assume you knew 30 years ago which companies would still be doing well. Still, they offer some great motivation for us just in the beginning years of our investing lives.

Good luck out there!

4 Stocks Expected to Double Sales in 2013

By Michael Vodicka

Published 12/17/2012 - 11:30

After the financial and economic implosion of 2008, many companies were forced to implement drastic operational changes to stay competitive and profitable. That included increasing productivity, reducing labor resources and lowering capital spending to build cash and liquidity. These strategies had a big effect on earnings, and now the S&P 500 is on the cusp of returning to peak earnings last seen in 2007.

#-ad_banner-#But while that big rebound in earnings has been great for stocks (the S&P 500 has more than doubled from its low in March 2009) it also has the private sector sitting at the top of a multi-year expansion in margins and record profitability.
Take Coca-Cola Co. (NYSE: KO [1]), for example. The company's operating margin exploded higher out of the recession in 2009 all the way through 2011, climbing from a 10-year average of 21% to an all-time high above 33% in July of 2011.
What Coke and other big companies found out during the recession is that they could get by with fewer labor resources and increase earnings through simple margin expansion. But now, that three-year margin cycle is showing signs of topping off.
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If even big companies like Coca-Cola are struggling to expand margins any further, then mid and small caps -- which have less pricing power -- are in even deeper trouble. These companies and executives have squeezed everything they can out of spending and labor costs, so future earnings growth will have to be driven by new revenue. The thing is, mid- and small-cap companies have more room to growh, so they are able to post stronger gains than slow-growing blue chips.
Therefore, to enjoy the highest possible returns next year, investors should be focusing on mid- and small-cap stocks with strong projected revenue growth. Here are four companies that fit the bill, with expected sales growth of more than 100% in 2013.
1. Ocwen Financial Corp. (NYSE: OCN [2])
Market cap: $3.6 billion
Projected sales growth: 103%
Ocwen Financial services residential and commercial loans in the United States and internationally. With housing showing big signs of improvement in 2012, Ocwen's share price has rallied 143% on the year. That bullish movement has been driven by surging estimates, with the full-year 2013 earnings jumping an eye-popping 208% to $4.50 a share from 90 days ago. Projected sales growth isn't far behind, with analysts calling for revenue to increase 103% in 2013, reaching almost $1.7 billion.

2. W.P. Carey Inc. (NYSE: WPC [3])Market cap: $3.35 billionProjected sales Growth: 110%
W.P. Carey is a global real estate investment trust (REIT). This stock has been having a great year, with shares up 17% in 2012, which is a solid performance compared with the S&P 500's 12% return. Analysts have recently become more bullish on the company, with the current-year earnings estimate climbing 6% in the last 90 days to $3.51 a share. Next-year's earnings estimate also rose -- about 12% --  to $3.88 a share, a solid 10.5% growth projection. In addition, analysts are looking for year-over-year sales to more than double from $150 million to $314 million. And if the company's forward price-to-earnings (P/E) ratio of 14 is returned to the industry average of 16, then shares would jump another 14%.

3. Endeavour International Corp. (NYSE: END [4])Market cap: $256 millionProjected sales growth: 138%
With a market cap of just $256 million, this is a much more speculative stock than the previous two companies. This oil and gas exploration company has suffered the fate of many other energy companies in 2012, with shares down 30% on the year. The company is on pace for a loss in 2012, but analysts are projecting a big turnaround in 2013, calling for earnings of $1.02 a share, up from a projected loss of $2.84 a share in 2012. That big gain is being fueled by sales growth, with analysts calling for a 138% increase in revenue next year.

4. Allied Nevada Gold Corp. (NYSE: ANV [5])
Market cap: $2.75 billion
Projected sales growth: 161%
Allied Nevada Gold is a gold and silver miner that operates primarily in Nevada. Although Allied has been mostly flat in 2012, with shares down 0.3% on the year, the stock is up an astounding 460% in the past five years as gold and silver prices have hit new multi-year highs. The company is extremely profitable, with analysts calling for earnings of $1.91 per share in 2013, a bullish 183% growth projection. Not far behind is projected sales growth, with analysts projecting revenue to climb an equally impressive 161%.

Risks to Consider: Revenue gains do not always translate into earnings growth, because margin or financial restrictions also weigh in the balance sheet. Companies that increase sales quickly can also be susceptible to sharp declines in sales, as market conditions change.
Action to Take --> These four companies are expected to double their revenue in 2013. This will put them in a great position for big earnings growth. The fact that some of these stocks are being under pressure this year, makes them great picks for value investors in search for next year's best potential gainers.
--Michael Vodicka

This Could Be The #1 Tech Stock for 2013

In the past four to five years, investors have been more squarely focused on the consumer end of the tech landscape, bidding upshares of Apple (Nasdaq: AAPL), Google (Nasdaq: GOOG),Amazon.com (Nasdaq: AMZN) and others.

But on the business end of high-tech, the big winners haven’t been such industry leaders.
Instead, most gains have come from small, but growing software and data-storage providers. But this theme may be upended in 2013, as one of the most dominant companies in the enterprise space regains its mojo.
I’m talking about Cisco Systems (Nasdaq: CSCO), which has had little to show investors during the past five years.

Blocking and tackling
Although the stock chart may give the impression of a company slowly losing relevance, nothing could be further from the truth.

Cisco’s operational performance has been quite solid in recent years, especially when compared to stumbling giants such as

 Hewlett-Packard (NYSE: HPQ)

, 

Dell (Nasdaq: DELL)

, 

Computer Sciences (NYSE: CSC)

, and especially when compared to more direct networking competitors such as

 Juniper Networks (Nasdaq: JNPR)

.

Consider that Cisco has generated a whopping $46 billion in cumulative free cash flow during the past five years.
But Cisco can be taken to task for being a little too content to simply squeeze out cash from a largely mature business. Indeed, shares fell out of bed in the summer of 2011 simply because investors could no longer see a long-term path to growth. A number of the company’s recent acquisitions had failed to deliver promised growth, and Cisco’s end markets — most notably in government and telecom — weren’t looking all that perky.
Yet in recent quarters, management has begun to talk about a sharper game plan that will likely help solidify Cisco’s role in so many markets. The plan involves a number of small steps that are unlikely to lead to explosive sales growth, but should fuel a steady expansion in profit margins and a more linear trend of profit growth.
Here are the five small steps that should add up to solid gains for Cisco’s shareholders in 2013.
1. Going where the action is
Cisco is typically thought of as a networking giant, known for producing the software, switches and routers that run corporate and telecom data networks.
But thanks to heavy spending on research and development and certain acquisitions, Cisco is now very well-positioned for industry leadership in mobile computing, cloud computing, video-delivery services, network security, web conferencing and network storage.
No other vendor in the world can offer clients this comprehensive suite of offerings, a key consideration when information technology managers worry about the interoperability of various technology components in their corporate ecosystem. “The market is moving to buying solutions rather than buying standalone boxes, playing to Cisco’s core strength,” noted analysts at Merrill Lynch.
2. A rising focus on software
The company has set an ambitious target of doubling the revenue it derives from software in the next five years. This, in turn, should lead to a rising take rate for its expanding suite of service offerings. This is a page right out of the IBM (NYSE: IBM)playbook. Cisco’s CEO John Chambers is surely aware of IBM’s 100% stock price gain during the past five years, as investors have come to embrace Big Blue’s linear growth.
You can’t blame Chambers for a bit of IBM envy. IBM carries similar margins today, but its enterprise value-to-sales (EV/Sales) ratio is 40% higher than Cisco’s. That’s why emulating IBM is a wise move.
Furthering the IBM analogy, Chambers understands that IBM’s focus on long-term service contracts leads to much smoother revenue and profit streams. The company aims to boost service revenue from a current 21% of the sales mix to more than 25% within three years.

3. Squeezing out costs and other margin boosters
Cisco has at times been accused of a bit of “porkiness.”
The company has grudgingly embarked on a few major layoffs in its history, but nobody would call Cisco a lean enterprise.
In recent meetings with analysts, however, Chambers has discussed plans to trim down and/or reap synergies where possible in coming quarters.
This helps partially explain why he expects operating profits to grow 3-4 percentage points faster than sales growth in the next few years. (The rising mix of software is another factor). Chambers also understands that profit gains need to be linear if they are to be applauded byWall Street (another lesson taught by Big Blue).
The fact that Cisco’s operating profits fell by $2 billion in fiscal (July) 2009, rose by a similar amount in 2010, fell again in 2011 and rose anew in 2012 is a clear impediment for investors that crave linearity.
4. Tapping emerging markets
Chambers now spends a considerable amount of time on the road in Latin America and Asia.
He’s directed his sales force to treat these markets as a top priority.
The timing is good as many of these markets are now increasingly home to large domestically-grown companies, and not simply the foreign divisions of firms like Wal-Mart (NYSE: WMT) and Coca-Cola (NYSE: KO).
Emerging markets currently represent about $9 billion in annual sales (20% of the entire sales base), though Cisco aims to boost that figure by 10% annually in the next three to five years. To get there, Cisco is developing lower-cost solutions for these price-sensitive markets.
5. Free Cash Flow = Buybacks
Any discussion of Cisco has to touch on the prodigious free cash flow and the long run of share buybacks they have fueled.
The share count has already fallen from 6.8 billion in fiscal 2004 to 5.4 billion at the end of 2011, and considering management’s plan to spend 60% of future cash flow on buybacks and dividends, this trend should continue.
Risks to Consider: To augment growth, Cisco has signaled plans to pursue a fairly hefty acquisition in coming quarters, and such deals can sometimes spook investors.
Action to Take –> Even with all of these growth-inducing steps, Cisco is only likely to boost sales in the mid-to-upper single digits each year, while per-share profit growth is unlikely to exceed 10%. But by delivering these kinds of gains in a steady linear fashion, investors are likely to reward this stock with an ever-higher multiple.
When you include Cisco’s massive $33 billion net cash pile, this becomes a low-multiple stock with a fairly low level of embedded expectations. This means 2013 should represent a fresh perspective for this one-time highflyer as growth kicks in.
– David Sterman
Source: Investment Business Daily

How to Make Money in the Stock Market | Daily Trade Alert

During a radio interview last week, I was asked by the host to explain how Europe’s fiscal problems will play out and the likely impact on the U.S. stock market.

This question is a fine example of why I don’t do many media interviews and why it’s largely a waste of your time to listen to most of the pundits who grant them.

The Eurozone is a mess. That much is clear. But as I told the audience, no one knows how the weak sisters in Europe will resolve their fiscal problems. (Although it’s bound to be instructive for everyone watching.) No one knows what the ultimate fate of the euro will be.

No one knows what the fallout will be in world financial markets.

And to the extent that someone is confident that they do know, history shows they are very likely to be wrong.

Billionaire Ken Fisher doesn’t call the stock market “The Great Humiliator” for nothing.

Europe’s banking and public debt troubles – and their negative ramifications – have dominated world headlines for months.

Only a rank novice (or a perpetual gloom-and-doomer, of which there are many) can believe these developments aren’t currently discounted in global stock and bond prices. That doesn’t mean financial markets won’t go lower. They might. And perhaps they will.

But they can also rally from here. Those who say they can’t imagine how are admittedly suffering from a poverty of the imagination – and I’ll bet took no advantage of fire-sale prices during the recent financial crisis (or even the mini-meltdown last fall).

Share Prices Ultimately Follow Just One Thing…

I’ve said it before but it bears saying again. Economies and world stock markets are affected by the complex interplay of government policies, geopolitical tensions (and war), economic growth, interest rates, inflation, commodity prices, currency values, human psychology (particularly fear and greed), consumer confidence, capital flows, pending elections and potential legislation governing everything from tax rates to corporate regulations.

If you really believe you have all these things figured out, you probably shouldn’t be investing your own money.

But here’s something you can take to the bank: Share prices follow earnings. I challenge you to look back through history and pinpoint even a single public company that increased its profits quarter after quarter, year after year, and the stock didn’t tag along.

As Warren Buffett’s mentor Benjamin Graham famously said, “In the short term, the market is a voting machine, but in the long term it is a weighing machine.” What it weighs, of course, is corporate profits. A company’s true value will in the long run be reflected in its stock price. Bank on it.

If you understand this, you recognize that the current market is handing you a boatload of opportunities. It may not feel that way, but that’s how it always works. You pay a premium to invest in stocks when the outlook is rosy and investors are complacent. The real bargains appear only when there is trouble on the horizon and skepticism is high. (It’s too bad that millions recognize this only in hindsight.)

Right now you should be searching for solid, recession-resistant companies with double-digit sales growth, sustainable profit margins, high returns on equity, and quarterly profits that are likely to surprise on the upside in the weeks ahead.

These companies are likely to thrive – and deliver exceptional returns – to investors who are able to take the broader view, learn from the past and act unemotionally.

Good Investing,

Alexander Green

Source: Investment U

4 Tips For Better Trading

By: Kevin Matras June 02, 2012

When the market is up, trading seems so easy. When the market is down however (like now), it can seem like every stock is going down along with it. But believe it or not, there are plenty of stocks going up right now. Growth stocks, Value stocks, Growth & Income stocks, and Momentum stocks. Some are more conservative, while others are more aggressive. So Which Style is the Best One? The best style or strategy is the one that's in alignment with who you are, or want to be as a trader. Because if you find yourself trading a strategy that's not in alignment with who you are as a trader, or the kinds of stocks you want to be in, you're going find yourself abandoning that strategy the moment the market hits a rough patch. (And the market indeed has hit a rough patch lately.) So let's go over what the four main trading styles are and some tips on how to use them most effectively. Momentum Style Momentum traders look to take advantage of upward trends (or downward trends) in a stock's prices or earnings. They believe that these stocks will continue to head in the same direction because of the momentum that is already behind them. And there's a lot of evidence to support the idea that stocks making new highs have a tendency of making even higher highs. I know some investors shy away from stocks making new 52-week highs. If you're one of them, that's ok. Don't trade them. Remember, the best strategy is the strategy that's right for you. The biggest concern a momentum trader will have (and probably one of the reasons why some people shy away from them) is in determining if the stock is ready to keep moving higher, or if it's getting ready for a fall. Tip 1: I have found that by adding a solid valuation metric to these stocks, you can identify the high flyers that are still bargains from the ones that are overpriced. My all time favorite valuation metric to use with momentum stocks is the Price to Sales ratio; preferably less than 1 or less than the median for its respective industry. And my experience has shown the Price to Sales ratio to be absolutely one of the best ones to use. -------------------------------------------------------------------------------------------------------------- Count on This, Even When the Market Goes Down Today, there's a powerful Zacks tool that enables you to access market-beating strategies that average yearly gains of +19.5%, +27.8%, +54.5% and +67.4%. It also empowers you to create and test your own. You're welcome to try it for 2 weeks free. Plus, you'll also get Zacks' Top 5 Valuation Secrets that could change the way you invest forever. Start today >>-------------------------------------------------------------------------------------------------------------- Aggressive Growth Style Aggressive Growth traders are primarily focused on stocks with aggressive earnings growth or revenue growth (or at least the potential for aggressive growth). You'll often find smaller cap stocks in this category because smaller cap stocks are typically newer companies in the early part of their growth cycle. But a word of caution, it's not as easy as just looking for stocks with the highest growth rates. So don't go out and start looking for stocks with a 500% or 1,000% growth rate. While there will definitely be stocks out there like that and do well -- my studies have shown that those kinds of companies will typically underperform. In fact, often times, you'll see companies with the highest growth rates perform almost as poorly as those with the lowest growth rates. The reason for this is because many growth stocks are priced for perfection. For example: a stock that earns 1 cent, that is then expected to earn 6 cents, is a 500% growth rate. Now let's say, for whatever reason, the analysts now believe they'll only earn 5 cents. That's still a 400% growth rate. But that's also -100 points less than the original growth rate and a -16.6% downward earnings estimate revision. And if you're the person that just got into that stock the day before, and you're wondering why on earth a 400% growth rate stock is going down? That's why! Tip 2: Instead, look for stocks with growth rates above the median for their industry, but with growth rates less than 50%. Why 50%? Because in my testing, I have found that once you get above 50%, the returns start to drop. It's usually because those growth rates are just simply unsustainable. And for the ones above 50% that do pan out, many of them will carry with it a higher degree of risk. So use your head when looking for those kinds of companies, so those shooting stars don't fizzle out on you. Value Style Value investors and traders favor good stocks at great prices over great stocks at good prices. However, this does not mean they have to be cheap stocks in price. The key is the belief that they're undervalued. That they are, for some reason, trading under what their true value or potential really is. The value investor hopes to get in before the market 'discovers' this and moves higher. The value investor will typically need to have a longer time horizon because if that stock has been undervalued, i.e., 'ignored' for a while, it may take a bit of time before that stock gets noticed and makes a move. You can usually spot these kinds of stocks by looking at their valuations like their P/E ratio for example. I know a lot of investors out there look at P/Es. But not all low P/E stocks are good value stocks. Many companies have low P/Es because they don't have any real growth to speak of. They lack earnings power. And people aren't willing to pay up for these stocks because there's nothing to pay up for. Tip 3: The key to finding true value stocks that are ready to move is to make sure there's a catalyst. Buying a stock and sitting with it for years just because you believe it's undervalued won't make you any money. So make sure your value stocks have a catalyst. And nothing can wake up an investor more than the catalyst of upward earnings estimate revisions. My favorite upward earnings estimate revisions are for Q1 and F1 over the last 4 weeks. And if you really want to increase your odds of success, you can also focus in on the Sectors with the best upward earnings estimate revisions as well. It's been said that value investing is one of the most profitable ways to invest. And it's true. While value stocks usually require a longer time horizon; by combining value stocks with the right catalysts, you can find yourself getting into the best value stocks for an immediate price response. Growth and Income Growth and Income investors and traders are looking for good companies with solid revenue that pay a good dividend. Oftentimes, these are more mature, larger-cap companies. Companies that may not have the kinds of spectacular growth rates like some of the younger or smaller companies have (or like they had themselves when they were younger and earlier in their growth cycle as well). But that doesn't mean they're not making money. Far from it. A lot of these companies might be great companies, generating huge amounts of cash. But because of their size, they may not have the same growth opportunities they once had. For example: let's say there was a small-cap company that does $100 million in sales. And someone comes up with a great idea that will increase sales by an additional $100 million. That's great news. And that company is now looking at a 100% growth rate. But apply that to a mid-cap company that does $1 billion in sales and that $100 million idea is now only a 10% increase in sales. Now apply that same $100 million to a company that does $10 billion in sales and that's only a 1% increase. Simply put, for some of these companies, the law of big numbers makes it harder to grow at the same pace that a younger and smaller company is capable of. But the consistency of earnings can be pretty impressive in its own right. And instead of investing all of their earnings back into the company, they reward their shareholders by paying out a portion of their profits in the form of a dividend. Tip 4: Not all dividend paying companies have to be large-cap companies. There are plenty of mid-cap stocks offering exciting dividends with impressive growth prospects as well. So, you don't have to focus in on just the largest of the large-caps. Focus in on the mid-caps and smaller large-caps with the best dividend yields too, and watch your profits grow. By focusing more attention on these, you can increase the growth portion of your growth and income stocks, while still enjoying the income portion you normally would with large-cap stocks. Putting It All Together Picking winning stocks has never been easier once you know what to look for. In fact, you'll find winning stocks all around you. Think about the last car you bought. Once you decided what kind of car you wanted, you probably saw them everywhere. They didn't just magically appear on the road. They were always there. You just became aware of them. And the same can be said for picking stocks. Once you've identified what kind of trader you are and the style that suits you the best, it'll become easier to find stocks with those kinds of characteristics. This can help you take full advantage of the next big move in the market and even outperform the market when the market isn't as cooperative. Where To Start You are invited to begin by looking at the different strategies that come loaded with our Research Wizardprogram. There are strategies for every style of trade. Today, you can see the latest stock picks from all of them and many other proven strategies, including a strategy that has averaged gains of +67.4% per year. And you can also create and test your own. I've arranged for you to try our Research Wizard for 2 weeks free with no obligation at all. Learn more about the Zacks Research Wizard >> Thanks and good trading, Kevin

You Could Double Your Money with This Comeback Stock

In the quest for growth, certain companies seek to acquire rivals as a primary driver to build market share [1]. Management teams justify their motives by promising shareholders they will be able to integrate new purchases to the corporate fold easily, cut costs and move on to the next target efficiently.
The problem is, making acquisitions often doesn't always benefit shareholders if it's a company's only avenue for growth. The market [2] is filled with examples of companies that eventually stretched into larger and riskier acquisitions. Insurance firm Conseco (NYSE: CNO [3]), for instance, acquired rival insurers with reckless abandon throughout the 1990s, but was brought to ruin after it purchased mobile home lender GreenTree Financial for $6 billion in a deal that proved to be unsustainable. In December 2002, Conseco filed for Chapter 11 [4] bankruptcy.
International Business Machines (NYSE: IBM [5]) also spent the 1990s acquiring a wide array of computer hardware, software and consulting rivals such as Sequent Computer Systems, Lotus Notes and a consulting arm of accountant [6] PriceWaterhouseCoopers. But IBM's fate was different. It eventually realized hardware was not the only way to prosper. By focusing on its software and consulting businesses, it could grow profits more effectively. The rest is history. IBM has seen its stock double in the past decade, while the stock market has been flat during the same period.
I see a similar situation playing out in wine and spirits firm Constellation Brands (NYSE: STZ [7]).Like IBM, the company spent the 1990s furiously acquiring rival firms to build market share and sales. In 1993, for example, it acquired Chicago-based spirits importer Barton Brands. This was followed by numerous winery purchases, including Paul Masson, Almaden, Gallo and Simi. The serial buyouts continued and peaked around the time Constellation snapped up Robert Mondavi Winery for $1 billion in 2004. The purchase was a huge coup and was covered in detail in the book The House of Mondavi: The Rise and Fall of an American Wine Dynasty.
Shareholders couldn't have been happier. The stock returned roughly 1,600% from 1992 through June 2005, which ended up being the peak. Eventually, Constellation realized it had bought too many average wine and spirits brands, and was running out of rivals to acquire. Still, 2007 ended up being Constellation's biggest year of sales, with a reported $5.2 billion in revenue. Unfortunately, sales plummeted to $3.8 billion by 2008, and the company lost $2.83 per share.
Since then, Constellation has worked overtime to get its house in order. It has been moving away from lower-end wine and spirits brands, as well as consolidating operations -- including the sale of its Australian, U.K and South African businesses. The sale allowed it to pay down debt from a peak of more than $5 billion in 2008 to $3 billion today.
Given that sales have fallen for nearly five years, most investors are simply assuming Constellation is fading into oblivion. But this couldn't be farther from the truth. Profit growth has been strong recently. Between 2010 and 2011, for example, operating income [8] jumped 61% to $551 million. This represented an impressiveoperating margin [9] of 12.3%, which is well ahead of the industry average of 8.4%.
I like to look at free cash flow [10] as a measure of the excess capital a company generates. From this perspective, Constellation gets a high grade. Free cash flow was also strong in 2011, at $530 million, or $2.53 per diluted share. Better yet, it expects free cash flow to reach as high as $750 million for 2012, or roughly $3.60 per diluted share.
Today, Constellation's remaining businesses consist of higher-end wine and spirits brands, including Ravenswood, Blackstone, Svedka Vodka, and the import rights to Corona and Tsingtao beers in the United States. And this seems to be the sweet spot of the industry. Larger rivals such as Diageo (NYSE: DEO [11])and Brown-Forman (NYSE: BF-B [12]) also own an array of high-end brands, and their stock prices have benefited greatly from this positioning in the market. I expect the same to hold true for Constellation.
    
Action to Take -> Constellation's valuation is extremely compelling. Its forward free cash flow multiple is less than 6 currently, which, to me, implies the market doesn't expect the company to grow ever again. It may take another year for Constellation to find its sales footing, but analysts expect respectable sales growth of 4% in 2013 and total sales of close to $3 billion. Through the next year, I fully expect the market to start realizing Constellation is in a much stronger competitive position.
Fundamentally, it now owns a basket of strong spirits brands that are likely to see stable sales and growth potential. In addition, the free cash flow multiple could rise to the industry average of 12 by the end of 2013. This implies the stock price can double from $21 to $42 in a couple of years. And with any level of sales andprofit [13] growth going forward, the stock could eventually reach $50, which I think is achievable within three years. This type of performance would make IBM investors jealous.

By Ryan Fuhrmann

Published 02/03/2012 - 10:00

How to Turn $1 Into $1.6 Billion

Dollar stores' stock rivals their wares for great value

   

Fifteen years ago, I walked into a 99 Cents Only store. Being an unemployed graduate student, I was eager to save as much money as I could while buying the things one needs to live one’s life. I discovered that you get what you pay for. After loading up on dish soap, paper towels and other staples, I found the quality to be absolute garbage. I vowed never to waste my time or money again.
But a few years ago, I sauntered into a Dollar Tree (NASDAQ:DLTR) because the stock had been doing well and I couldn’t fathom why that was the case. How could there by tens of thousands of these dollar stores when all they sold was junk? As it turns out, they didn’t sell junk anymore. They sold brand-name merchandise. I became a fan.

Evidently, so has the world of private equity and hedge funds. They’ve taken notice of these stores’ great margins, increasing market share and growing earnings (some at 20% annually). I thought it was amazing when hedge fund manager Bill Ackman purchased a ton of stock in Family Dollar (NYSE:FDO). Warren Buffett also took a stake in Dollar General (NYSE:DG). These, however, are nothing compared to the $1.6 billion private buyout of 99 Cents Only Stores that recently just closed. What does this tell us about the  present valuations of the dollar stores — and whether any of them are buys?
The $1.6 billion price tag for 99 Cents Only was 21.6 times 2011 earnings of $74 million, and 1.1 times sales. Dollar Tree’s trailing 12-month earnings are $463 million, so a 21.6 multiple puts its present value right at $10 billion, or exactly what DLTR trades at today, although that is 1.5 times sales.
Family Dollar has $394 million in TTM earnings, and giving it a 21.6 multiple yields $8.5 billion, which is 1 times sales. With only $250 million in net debt, that suggests Family Dollar — presently trading at a market cap of $6.46 billion — might be undervalued by as much as 30%. With the stock trading at $55, it suggests the stock might be worth closer to $70. Perhaps Mr. Ackman is on to something here.
Dollar General is the big kahuna, with TTM net income of $698 million. That 21.6 multiple would make it worth a whopping $15.08 billion, also representing about 1.07 times sales. The present market cap is $14.04 billion, suggesting a modest premium of 7% exists, which might make the stock worth $44. But hang on — DG carries $2.6 billion in net debt, so that wipes out that premium and then some.
Strictly examining the stores on the basis of the buyout, then, it appears Family Dollar is drastically undervalued. It certainly has room for improvement operationally, and Mr. Ackman is known for finding companies that could use fresh eyes and a different approach. I think if you put your faith in Mr. Ackman, you won’t be disappointed.
I’ve always liked Dollar Tree because of its consistency, however, so given its expected 20% earnings growth, it’s likely you won’t go wrong there, either.
As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned stocks
Jan 23, 2012, 12:53 pm EST   |   By Lawrence Meyers, InvestorPlace Contributor

Long Equities and Short The Euro Still Works

The euro has been a good hedge on a portfolio of long stock recently. Equities are attractively valued for a long-term investment; the equity risk premium remains high. But who can think about investing in stocks for the long run and shunning bonds when the Euro sovereign debt crisis rolls on? For us, the solution was to short the Euro as a hedge against long equity positions. The correlation between the two rose during 4Q11, not surprisingly since Europe was driving short-term market moves.

But the ECB’s Long Term Repo Operation committed them to support the banks and, by extension the Euro sovereign governments (barring possibly Greece, which is heading down its own path). Since Europe’s banks are the biggest holders of European sovereign debt, the ECB has in effect become a lender of last resort to its governments. The removal of the Sword of Damocles hanging over markets has been replaced with a more plausible path to a lower Euro. Europe is in recession, the GDP differential between it and the U.S. is likely to exceed 3% this year, and the next move in rates from the ECB is likely down. Meanwhile, the U.S. economy continues to produce steady if unspectacular growth.

It’s still worth holding a short Euro with a long equities position. The tail risk, an unforeseen crisis in Europe, still makes it a worthwhile hedge even while the day-to-day relationship has become slightly more subdued. But they could just both be good investments in their own right. Equities are attractively priced and the threat of a European crisis is receding. The Euro area is in for a period of no-growth while banks recapitalize and governments impose austerity. Long equities and short Euro is not the pairs trade it was, but both look like attractive investments.
Disclosure: Author is Long SPY and Short FXE

Simon Lack, In Pursuit of Value | Jan. 18, 2012, 4:10 PM
Read more: http://inpursuitofvalue.wordpress.com/2012/01/18/long-equities-and-short-the-euro-still-works/#ixzz1k0fw5h3X

5 Ways to Become a Self-Made Millionaire

There is much more to life than making money. But it's safe to say that earning more money can significantly change the course of your life--especially if it's $1 million or more.
If you're wondering how to become a millionaire (and who isn't?), the answer is that most of them are self-made men and women. It's certainly possible to break $1 million mark working at a corporate job, but as most employees can tell you, you often have little say in who gets promoted ahead of you. Not to mention that a big corporate payoff usually takes decades of work. You won't find many millionaires under 35 at Fortune 500 companies.
[See 10 Ways to Start Earning Extra Money Now.]
Entrepreneurs, on the other hand, can take control of their circumstances and create opportunities for earning more money. And they can do it much faster than their corporate counterparts. How can you do the same?
In his best-selling book The Millionaire Fastlane, author MJ DeMarco lays out five paths to earning large amounts of money relatively quickly. Those five are: rental systems, software systems, content systems, distribution systems, and human resource systems. Let's examine all five so that you can choose the best money-making path for your life.
1. Rental Systems. These are money-generating activities that allow you to earn money from others renting your assets. The classic example is real estate. If you rent out a home, apartment, or commercial real estate, your clients will pay you rent each month regardless of how you spend your time. You own the asset, so you reap the rewards.
However, there are many other ways to rent your assets outside of real estate. Artists can license their photos, music, or artistic work. Inventors can patent a process or invention and license it to corporations to use. Owning the rights to a desirable asset and renting it out to others is a great way to boost your wealth.
[See The Worst States for Millionaires.]
2. Software Systems. Software systems generate money with code, and nowadays they usually do it over the Internet. This could be anything from a piece of financial software to an iPhone application--or anything in between.
The primary benefit of software systems is that they scale automatically. Anyone with an Internet connection can access your asset, which is very powerful. Once created, these assets can be scaled and sold to millions of people with very few employees. There are many Internet millionaires because costs are so low and the scale is so large.
3. Content Systems. Content systems are just a fancy way of saying, "I sell information." Selling information could mean you run a newspaper or a magazine. It could also mean that you're an author or a blogger.
Content systems turn people into millionaires when they are replicated many times. You can pair content with the Internet and sell information to millions of blog readers. You can pair content with distribution and sell books to millions of readers. No matter how you do it, content can make you rich if you get it in front of enough people. The best part? All it takes is one brilliant piece of content.
[See From Side Gig to Full-Time Entrepreneur in 10 Steps.]
4. Distribution Systems. Distribution systems are ways of delivering products and services to the masses. Some people want to create the product (think software systems) or information (think content systems), and others want to get it out to the world. That second group is where distribution systems fit in.
Amazon is a giant distributor of goods. They sell almost anything under the sun. Do they make it? Not usually, but they can get it to you. And that makes them very powerful--and wealthy.
Other examples of distribution systems include franchises, restaurant chains, and the iTunes App Store. If you can figure out a way to get good and services into the hands of buyers, then you should have no problem becoming a millionaire.
[See 5 Ways to Leave Your Job.]
5. Human Resource Systems. A human resource system just means, "I have employees running my company for me."
This one is tough because humans need to be managed. Employees need to be told what to do and how to do it. Good employees can build your business, but as a manager you always need to be there in some capacity. It's probably best to master one of the other four systems and then hire people only when truly necessary.
Regardless of the path you choose, these systems are your best bet if you want to become a self-made millionaire.
James Clear is the founder of PassivePanda.com, a website that teaches you how to earn more money, time, and freedom. Join Passive Panda's free newsletter for fresh ideas on earning more 

By James Clear | U.S.News & World Report LP

16 Healthcare Stocks Insiders Want Most

Wish you could know what management really thought about their companies?
One great way for an inside look is to consider the stock buying trends of company insiders. Companies with significant net buying from their insiders (i.e. members of the board and upper management) are viewed favorably by analysts because the buying indicates that insiders who know more about their companies than anybody are bullish about their employers.
We ran a screen on the healthcare sector for stocks seeing the most significant net insider buying over the last six months.
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Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬


We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Do you think these stocks will outperform like insiders expect? Use this list as a starting point for your own analysis.
List sorted by net insider purchases as a percent of sharefloat.
1. Theravance Inc. (THRX): Engages in the discovery, development, and commercialization of small molecule medicines for various therapeutic areas, including respiratory disease, bacterial infections, and central nervous system /pain. Market cap of $1.67B. Net insider shares purchased over the last six months at 5.19M, which is 9.99% of the company's 51.96M share float. The stock is a short squeeze candidate, with a short float at 10.04% (equivalent to 19.12 days of average volume). It's been a rough couple of days for the stock, losing 11.8% over the last week.
2. AMAG Pharmaceuticals, Inc. (AMAG): Engages in the development and commercialization of a therapeutic iron compound to treat iron deficiency anemia (IDA). Market cap of $396.44M. Net insider shares purchased over the last six months at 991.15K, which is 7.36% of the company's 13.46M share float. The stock is a short squeeze candidate, with a short float at 6.92% (equivalent to 6. days of average volume). The stock has gained 5.71% over the last year.
3. Aegerion Pharmaceuticals, Inc. (AEGR): Engages in the development and commercialization of novel therapeutics to treat severe lipid disorders. Market cap of $325.99M. Net insider shares purchased over the  last six months at 695.15K, which is 6.14% of the company's 11.32M share float. It's been a rough couple of days for the stock, losing 5.52% over the last week.
4. Opko Health, Inc. (OPK): Engages in the discovery, development, and commercialization of novel and proprietary technologies primarily in the United States, Chile, and Mexico. Market cap of $1.38B. Net insider shares purchased over the last six months at 6.85M, which is 5.19% of the company's 132.02M share float. The stock has gained 22.94% over the last year.
5. MannKind Corp. (MNKD): Focuses on the discovery, development, and commercialization of therapeutic products for diabetes and cancer. Market cap of $309.96M. Net insider shares purchased over  the last six months at 3.48M, which is 4.69% of the company's 74.22M share float. The stock is a short squeeze candidate, with a short float at 34.64% (equivalent to 40.98 days of average volume). It's been a rough couple of days for the stock, losing 10.27% over the last week.
6. Auxilium Pharmaceuticals Inc. (AUXL): Operates as a specialty biopharmaceutical company primarily in the United States. Market cap of $934.78M. Net insider shares purchased over the last six months at 973.07K, which is 2.20% of the company's 44.15M share float. The stock is a short squeeze candidate, with a short float at 10.27% (equivalent to 6.98 days of average volume). The stock has had a good month, gaining 10.97%.
7. Ardea Biosciences, Inc. (RDEA): Focuses on the discovery and development of small-molecule therapeutics for the treatment of gout and cancer in the United States. Market cap of $432.18M. Net insider  shares purchased over the last six months at 495.55K, which is 2.16% of the company's 22.96M share float. The stock is a short squeeze candidate, with a short float at 7.87% (equivalent to 18.88 days of average volume). The stock has performed poorly over the last month, losing 19.27%.
8. Genomic Health Inc. (GHDX): Focuses on the development and global commercialization of genomic-based clinical laboratory services that analyze the underlying biology of cancer allowing physicians and patients to make individualized treatment decisions. Market cap of $756.22M. Net insider shares purchased over the last six months at 554.75K, which is 2.06% of the company's 26.92M share float. The stock is a short squeeze candidate, with a short float at 6.96% (equivalent to 10.9 days of average volume). The stock has gained 15.94% over the last year.
9. MAKO Surgical Corp. (MAKO): A medical device company, markets its advanced robotic arm solution and orthopedic implants for orthopedic procedures in the United States and internationally. Market cap of $1.17B. Net insider shares purchased over the last six months at 485.14K, which is 1.32% of the company's 36.64M share float. The stock is a short squeeze candidate, with a short float at 27.28% (equivalent to 10.74 days of average volume). The stock has had a couple of great days, gaining 6.98% over the last week.
10. Seattle Genetics Inc. (SGEN): Focuses on the development and commercialization of monoclonal antibody-based therapies for the treatment of cancer and autoimmune diseases in the United States. Market cap of $1.90B. Net insider shares purchased over the last six months at 1.48M, which is 1.30% of the company's 113.40M share float. The stock is a short squeeze candidate, with a short float at 22.38% (equivalent to 13.56 days of average volume). The stock has gained 7.5% over the last year.
11. Regeneron Pharmaceuticals, Inc. (REGN): Develops, and commercializes pharmaceutical products for the treatment of serious medical conditions in the United States. Market cap of $5.35B. Net insider shares purchased over the last six months at 675.38K, which is 0.95% of the company's 70.75M share float. The stock is a short squeeze candidate, with a short float at 12.88% (equivalent to 7.11 days of average volume). The stock has gained 73.87% over the last year.
12. QLT Inc. (QLTI): Engages in the development and commercialization of therapies for the eye. Market cap of $354.79M. Net insider shares purchased over the last six months at 258.32K, which is 0.88% of the company's 29.40M share float. The stock has lost 8.26% over the last year.
13. Medivation, Inc. (MDVN): Focuses on the development of small molecule drugs for the treatment of castration-resistant prostate cancer, Alzheimer's disease, and Huntington disease. Market cap of $1.60B. Net insider shares purchased over the last six months at 87.52K, which is 0.38% of the company's 23.14M share float. The stock has gained 180.54% over the last year.
14. Questcor Pharmaceuticals, Inc. (QCOR): Provides prescription drugs for central nervous system and inflammatory disorders. Market cap of $2.48B. Net insider shares purchased over the last six months at 181.88K, which is 0.33% of the company's 55.74M share float. The stock is a short squeeze candidate, with a short float at 11.71% (equivalent to 6.09 days of average volume). The stock has gained 175.02% over the last year.
15. Idenix Pharmaceuticals Inc. (IDIX): Engages in the discovery and development of drugs for the treatment of human viral and other infectious diseases in the United States and Europe. Market cap of $744.13M. Net insider shares purchased over the last six months at 38.08K, which is 0.06% of the company's 63.49M share float. The stock is a short squeeze candidate, with a short float at 8.37% (equivalent to 6.67 days of average volume). It's been a rough couple of days for the stock, losing 7.24% over the last week.
16. Akorn, Inc. (AKRX): Engages in the manufacture and marketing of diagnostic and therapeutic pharmaceutical products, hospital drugs, and injectable pharmaceuticals in the United States and internationally. Market cap of $1.04B. Net insider shares purchased over the last six months at 33.50K, which is 0.05% of the company's 67.75M share float. The stock has gained 94.87% over the last year.
*Insider data sourced from Yahoo! Finance, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
 By: Kapitall January 8, 2012  |  includes: AEGR, AKRX, AMAG, AUXL, GHDX, IDIX, MAKO, MDVN, MNKD, OPK, QCOR, QLTI, RDEA, REGN, SGEN, THRX
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Meet New Penny Stock: American Airlines

Shares of AMR Corporation—the bankrupt parent company of American Airlines—are soaring Thursday, as the embattled firm makes its debut on the over-the-counter market.

Getty Images

Effective today, the company was delisted from the New York Stock Exchange because the average closing price of its shares fell below the exchange's continued listing minimum share price standard of $1 over a consecutive 30-trading-day-period.

The company now trades under a new symbol AAMRQ [AAMRQ  0.333     0.09  (+36.73%)   ] .

"Trading in AAMRQ has been steady, totaling over 29 million shares since market open this morning, showing that the ability to trade is still very much there," according to the OTC Markets.

But Michael Derchin, airline analyst at CRT Capital, says: “The company is still worth zero. Today’s moves are purely technical and speculative.”

AMR has said that it did not oppose the suspension and delisting of its securities. It also warned investors that “it will likely be difficult to sell AMR securities through the OTC market quickly or at the desired price, if at all”. 

“Trading in the securities of companies in Chapter 11 is highly speculative. AMR cannot predict what the ultimate value of any of its securities may be, and it remains too early to determine whether holders of any such securities will receive any distribution in the Chapter 11 reorganization,” the company said in a press release.

On Wednesday, AMR shares closed at just 24 cents. A year ago, it closed at $8.10 per share. 

By: Karina Frayter  Published: Thursday, 5 Jan 2012 | 12:07 PM ET

5 Buyout Targets for Quick Gains in 2012

By David Sterman

Published 12/21/2011 - 09:00

Executives at chip-equipment maker Lam Research (Nasdaq: LRCX [1]) pulled off a masterstroke this week. A decision to buy Novellus Systems (Nasdaq:NVLS [2]) has the makings of a "home  run," according to Citigroup.
Why? Because the acquisition [3] may boost Lam's earnings per share (EPS) [4] by 35% in 2012, and the $44 share purchase price is well below the $60 target Novellus had reportedly been seeking. The fact that the company settled for a 25% discount tells you it's a buyer's market [5] right now.
And that's good news for investors. Those who can find companies likely to be acquired could find themselves making quick gains as another company comes along and tries to make a deal.
Indeed, the logic behind acquisitions has rarely been so strong. Sales and EPS growth for many companies are finally set to cool in 2012 after robust gains in 2010 and 2011. So the only way to keep the top and bottom lines moving is to spend some of the massive amounts of cash that has been built up during the last few years on acquisitions. (Lam Research had $2 billion in the bank as of the end of September, for example.)
Why haven't we seen more mergers and acquisition (M&A) deals in 2011? Because many executives are loathe to deal when the economy [6] is at risk of falling into recession [7]. A slumping economy can turn a promising deal into an albatross when sales and profits goals become impossible to achieve. Yet it's increasingly clear that the U.S. economy is on the mend. Weekly jobless claims [8] are falling, and other recent economic data points have been more solid than in prior quarters. In effect, the economy should be growing at a slow pace in 2012, but not shrinking, giving merger [9] strategists a smooth environment in which to make deals.
Here are three sectors that may be the focus of M&A dealings in 2012. If you can get in on any of these stocks before these deals transpire, you're likely to reap some nice gains...
1. Chip-equipment stocks: ASM International (Nasdaq: ASMI [10])
It's no coincidence that Lam and Novellus decided to join forces. The entire sector has been consolidating in recent years. Applied Materials' (Nasdaq: AMAT[11]) $4.9 billion purchase of Varian Semiconductor Equipment turned many heads in the industry, not just for the lofty purchase price, but AMAT's signal that key players need a broad arsenal of tools to develop the deepest relationship with chip makers like Intel (Nasdaq: INTC [12]) and Texas Instruments (NYSE: TXN[13]).
Might Netherlands-based ASM International be next? The euro has been falling steadily throughout the fourth quarter, making European businesses even more attractive to U.S. buyers. ASM sells a wide range of chip-making tools, and a recent slowdown in growth after robust top line gains in 2010 has pushed this stock down 40% from its 52-week high [14]. Shares [15] now trade for about 1.5 times trailing sales and less than seven times trailing profits. Any potential buyers can take comfort in the fact that free cash flow [16] has always been strong, regardless of the economic climate, averaging nearly $100 million annually in the past five years.
2. Energy: Sandridge Energy (NYSE: SD [17])
Even as natural gas prices remain depressed, many companies are still aiming to add to the amount of acreage they control, looking ahead to the when gas prices rise and these energy fields yield [18] really impressive returns. Indeed, the energy sector has been the focus of much of the deal-making in 2011, led byKinder Morgan's (NYSE: KMC [19]) $21 billion proposed purchase of El Paso (NYSE: EP [20]) earlier this quarter. This M&A trend should last as long as sector shares remain in a funk.
Who might be in play? Look for companies that have sought to aggressively expand, but now find themselves short of capital to fully exploit their holdings. Sandridge Energy, which owns very attractive real estate [21], has made investors nervous by possibly biting off more than it can chew. "The firm's aggressive development plans point to continued balance sheet [22] tightness over the next several years," note analysts at Morningstar.
Who might look to acquire assets at reasonable prices? Look to the energy firms that have the strongest balance sheets and greatest financial firepower. This means companies such as Apache Corp. (NYSE: APA [23]), Devon Energy (NYSE: DVN [24]) and Noble Energy (NYSE: NBL [25]) could be potential acquirers in 2012.
3. Consumer Products: Clorox (NYSE: CLX [26]), Avon Products (NYSE: AVP [27]) and Spectrum Brands (NYSE: SPB [28])
When it comes to handicapping potential M&A plays, you can look for companies that have already seen buyout [29] interest before. This past summer, corporate raider Carl Icahn set his sights on household goods giant Clorox. He offered $76.50 a share and hinted he'd be willing to go even higher. Clorox's board issued a resounding "no thanks," suggesting shares were worth far more.
Well, since then, shares have pulled back to about $65, so Icahn may look to make another run at Clorox. Might Procter & Gamble (NYSE: PG [30]), with amarket value [31] of $178 billion, look to offer [32] $11 billion or $12 billion for Clorox (or at least $83 per share)? This might be enough to get Clorox's board to play ball, which would help P&G expand its set of brands. From fiscal (June) 2008 to fiscal 2011, P&G's sales slightly rose from $79 billion to $82.5 billion. The top line is expected to expand quite modestly in fiscal 2012 and 2013 as well. Clorox would help jumpstart P&G's flagging top line.
If Clorox still doesn't want to talk about a deal, then P&G may want to check out Avon Products, which has seen its shares fall by half in 2011, erasing $7 billion in market value.
Also, Spectrum Brands, which owns brands such as Rayovac, Remington, Spectracide and George Foreman, has seen its shares move down nearly 30% from the 52-week high. Spectrum's high debt load [33] (with more than $1.5 billion in long-term debt [34]) has spooked some investors. But P&G's $3.5 billion cash hoard could pay off that debt and provide the capital to further extend Spectrum's presence in its various market niches.
Risks to Consider: If the economy slows anew in 2012, then deal-making would likely grind to a halt. You may find yourself stuck with one of these stocks as a result. Keeping that in mind, it's important to find a stock you think is either already fairly solid or has little downside from current levels.

Action to Take --> Keep in mind these are simply buyout candidates, not companies that have been the subject of buyout rumors. But all of these candidates operate solid businesses and would make solid tuck-in acquisitions for bigger rivals in their sectors. Worst case scenario, you may find that scooping up shares of one or more of these companies might make a solid long-term holding. Best case scenario, an acquisition announcement turns into a quick gain.