Democrats and Republicans are united in the belief that fiscal drama in Congress that's transfixed both Wall Street and Main Street over the past few days is crazy, we are talking Charley Sheen in all his "tiger's blood and Adonis DNA" glory. Someone walking down the street wearing a tinfoil hat to prevent his brain from being "probed." Whatever Miley Cyrus was supposed to be doing at the recent VMA awards.
The government is on the verge of its first shutdown in 17 years because some Republican members in the House are insisting that President Obama either delay or repeal parts of Obamacare, his signature legislative achievement. Obama and his Democratic allies in Congress have vowed to quash any efforts to gut the law, technically called the Affordable Care Act.
If the federal government shuts down, CNN estimates that about 783,000 government workers will be furloughed as will thousands of contract employees that support them. People who need everything from a passport to a gun permit to a federal loan would have to wait as would paychecks to members of the Armed Forces. National parks would be shuttered as would the Smithsonian Museums, one of the most popular tourist attractions in Washington. Processing of oil and gas permits on federal lands would grind to a halt.
Of course, the longer it lasts, the worse a shutdown's impact will have on the U.S. economy. Mark Zandi of Moody's Economy.com estimates that U.S. Gross Domestic Product could be lowered by a whopping 1.4% in the quarter, which would be huge. Remember, the U.S. economy only grew by 2.5% in the second quarter A prolonged shutdown could send consumer confidence into a downward spiral that could last years.
"This is the most broken I have seen our decision-making process," former Congressional Budget Office head Alice Rivlin is quoted by California Health Line as saying. "And all this is happening when the whole world is looking to us for stability and leadership. So you might wonder, '! Have they lost their minds?'
"The answer is yes," she added.
The trade publication said Rivlin's audience burst into a round of applause.
According to the Office of Management and Budget, The shutdowns in 1996 cost U.S. taxpayers $1.4 billion. Adjusted for inflation this works out to more than $2 billion in today's dollars, As Politico noted, federal workers who miss paychecks will get paid back eventually. It will certainly not be cheap to restart the parts of the governments that were shut down.
But as Congress plays a game of fiscal chicken with the government shutdown, Wall Street is becoming increasingly worried about the debt ceiling. The government is expected to hit its borrowing limit, which it needs to fund its activities sometime in October. Though some people have tried to compare the U.S. with cash-strapped countries such as Greece, there is a critical condition. Greece needed several bailouts because it couldn't afford to pay its bills. The U.S. can afford to pay its creditors but sometimes threatens not to, a situation that in 2011 cost the US its AAA bond rating.
The situation in Washington is unnerving to Wall Street which abhors uncertainty of any sort, especially when it could potentially threaten the full faith and credit of the U.S. Unfortunately, the debate over the shutdown and debt ceiling will never end. Members of Congress can revisit the issues when the budgeting process starts again next year.
Politicians from both parties keep repeating the same mistakes over and over, never learning from them. That's what makes the current debate in Congress more sad than anything else.
Follow Jonathan Berr on Twitter@jdberr and at Berr's World.
Disclosure - At the time of writing, the author did not own shares of any company mentioned in this article.
Monday, September 30, 2013
Sunday, September 29, 2013
A Primer On The MACD
Learning to trade in the direction of short-term momentum can be a difficult task at the best of times, but it is exponentially more difficult when one is unaware of the appropriate tools that can help. This article will focus on the most popular indicator used in technical analysis, the moving average convergence divergence (MACD). Gerald Appel developed this indicator in the 1960s, and although its name sounds very complicated, it's really quite simple to use. Read on to learn how you can start looking for ways to incorporate this powerful tool into your trading strategy.
Background Knowledge
The popularity of the MACD is largely due to its ability to help quickly spot increasing short-term momentum. However, before we jump into the inner workings of the MACD, it is important to completely understand the relationship between a short-term and long-term moving average.
As you can see from the chart below, many traders will watch for a short-term moving average (blue line) to cross above a longer-term moving average (red line) and use this to signal increasing upward momentum. This bullish crossover suggests that the price has recently been rising at a faster rate than it has in the past, so it is a common technical buy sign. Conversely, a short-term moving average crossing below a longer-term average is used to illustrate that the asset's price has been moving downward at a faster rate, and that it may be a good time to sell.
The Indicator
Notice how the moving averages diverge away from each other in Figure 1 as the strength of the momentum increases. The MACD was designed to profit from this divergence by analyzing the difference between the two exponential moving averages. Specifically, the value for the long-term moving average is subtracted from the short-term average, and the result is plotted onto a chart. The periods used to calculate the MACD can be easily customized to fit any strategy, but traders will commonly rely on the default settings of 12- and 26-day periods.
A positive MACD value, created when the short-term average is above the longer-term average, is used to signal increasing upward momentum. This value can also be used to suggest that traders may want to refrain from taking short positions until a signal suggests it is appropriate. On the other hand, falling negative MACD values suggest that the downtrend is getting stronger, and that it may not be the best time to buy.
Transaction Signals
It has become standard to plot a separate moving average alongside the MACD, which is used to create a clear signal of shifting momentum. A signal line, also known as the trigger line, is created by taking a nine-period moving average of the MACD. This is found plotted alongside the indicator on the chart. As you can see in Figure 2, transaction signals are generated when the MACD line (the solid line) crosses through the signal line (nine-period exponential moving average (EMA) - dotted blue line).
The basic bullish signal (buy sign) occurs when the MACD line (the solid line) crosses above the signal line (the dotted line), and the basic bearish signal (sell sign) is generated when the MACD crosses below the signal line. Traders who attempt to profit from bullish MACD crosses that occur when the indicator is below zero should be aware that they are attempting to profit from a change in momentum direction, while the moving averages are still suggesting that the security could experience a short-term sell-off. This bullish crossover can often correctly predict the reversal in the trend as shown in Figure 2, but it is often considered riskier than if the MACD were above zero.
Another common signal that many traders watch for occurs when the indicator travels in the opposite direction of the asset, known as divergence. This concept takes further study and is often used by experienced traders.
The Centerline
As mentioned earlier, the MACD indicator is calculated by taking the difference between a short-term moving average (12-day EMA) and a longer-term moving average (26-day EMA). Given this construction, the value of the MACD indicator must be equal to zero each time the two moving averages cross over each other. As you can see in Figure 3, a cross through the zero line is a very simple method that can be used to identify the direction of the trend and the key points when momentum is building.
Advantages
In the previous examples, the various signals generated by this indicator are easily interpreted and can be quickly incorporated into any short-term trading strategy. At the most basic level, the MACD indicator is a very useful tool that can help traders ensure that short-term direction is working in their favor.
Drawbacks
The biggest disadvantage of using this indicator to generate transaction signals is that a trader can get whipsawed in and out of a position several times before being able to capture a strong change in momentum. As you can see in the chart, the lagging aspect of this indicator can generate several transaction signals during a prolonged move, and this may cause the trader to realize several unimpressive gains or even small losses during the rally.
Traders should be aware that the whipsaw effect can be severe in both trending and range-bound markets, because relatively small movements can cause the indicator to change directions quickly. The large number of false signals can result in a trader taking many losses. When commissions are factored into the equation, this strategy can become very expensive.
Another MACD drawback is its inability to make comparisons between different securities. Because the MACD is the dollar value between the two moving averages, the reading for differently priced stocks provides little insight when comparing a number of assets to each other. In an attempt to fix this problem, many technical analysts will use the percentage price oscillator, which is calculated in a similar fashion as the MACD, but analyzes the percentage difference between the moving averages rather than the dollar amount.
Conclusion
The MACD indicator is the most popular tool in technical analysis, because it gives traders the ability to quickly and easily identify the short-term trend direction. The clear transaction signals help minimize the subjectivity involved in trading, and the crosses over the signal line make it easy for traders to ensure that they are trading in the direction of momentum. Very few indicators in technical analysis have proved to be more reliable than the MACD, and this relatively simple indicator can quickly be incorporated into any short-term trading strategy.
Background Knowledge
The popularity of the MACD is largely due to its ability to help quickly spot increasing short-term momentum. However, before we jump into the inner workings of the MACD, it is important to completely understand the relationship between a short-term and long-term moving average.
As you can see from the chart below, many traders will watch for a short-term moving average (blue line) to cross above a longer-term moving average (red line) and use this to signal increasing upward momentum. This bullish crossover suggests that the price has recently been rising at a faster rate than it has in the past, so it is a common technical buy sign. Conversely, a short-term moving average crossing below a longer-term average is used to illustrate that the asset's price has been moving downward at a faster rate, and that it may be a good time to sell.
 |
| Figure 1 |
The Indicator
Notice how the moving averages diverge away from each other in Figure 1 as the strength of the momentum increases. The MACD was designed to profit from this divergence by analyzing the difference between the two exponential moving averages. Specifically, the value for the long-term moving average is subtracted from the short-term average, and the result is plotted onto a chart. The periods used to calculate the MACD can be easily customized to fit any strategy, but traders will commonly rely on the default settings of 12- and 26-day periods.
A positive MACD value, created when the short-term average is above the longer-term average, is used to signal increasing upward momentum. This value can also be used to suggest that traders may want to refrain from taking short positions until a signal suggests it is appropriate. On the other hand, falling negative MACD values suggest that the downtrend is getting stronger, and that it may not be the best time to buy.
Transaction Signals
It has become standard to plot a separate moving average alongside the MACD, which is used to create a clear signal of shifting momentum. A signal line, also known as the trigger line, is created by taking a nine-period moving average of the MACD. This is found plotted alongside the indicator on the chart. As you can see in Figure 2, transaction signals are generated when the MACD line (the solid line) crosses through the signal line (nine-period exponential moving average (EMA) - dotted blue line).
The basic bullish signal (buy sign) occurs when the MACD line (the solid line) crosses above the signal line (the dotted line), and the basic bearish signal (sell sign) is generated when the MACD crosses below the signal line. Traders who attempt to profit from bullish MACD crosses that occur when the indicator is below zero should be aware that they are attempting to profit from a change in momentum direction, while the moving averages are still suggesting that the security could experience a short-term sell-off. This bullish crossover can often correctly predict the reversal in the trend as shown in Figure 2, but it is often considered riskier than if the MACD were above zero.
 |
| Figure 2 |
The Centerline
As mentioned earlier, the MACD indicator is calculated by taking the difference between a short-term moving average (12-day EMA) and a longer-term moving average (26-day EMA). Given this construction, the value of the MACD indicator must be equal to zero each time the two moving averages cross over each other. As you can see in Figure 3, a cross through the zero line is a very simple method that can be used to identify the direction of the trend and the key points when momentum is building.
 |
| Figure 3 |
Advantages
In the previous examples, the various signals generated by this indicator are easily interpreted and can be quickly incorporated into any short-term trading strategy. At the most basic level, the MACD indicator is a very useful tool that can help traders ensure that short-term direction is working in their favor.
Drawbacks
The biggest disadvantage of using this indicator to generate transaction signals is that a trader can get whipsawed in and out of a position several times before being able to capture a strong change in momentum. As you can see in the chart, the lagging aspect of this indicator can generate several transaction signals during a prolonged move, and this may cause the trader to realize several unimpressive gains or even small losses during the rally.
 |
| Figure 4 |
Traders should be aware that the whipsaw effect can be severe in both trending and range-bound markets, because relatively small movements can cause the indicator to change directions quickly. The large number of false signals can result in a trader taking many losses. When commissions are factored into the equation, this strategy can become very expensive.
Another MACD drawback is its inability to make comparisons between different securities. Because the MACD is the dollar value between the two moving averages, the reading for differently priced stocks provides little insight when comparing a number of assets to each other. In an attempt to fix this problem, many technical analysts will use the percentage price oscillator, which is calculated in a similar fashion as the MACD, but analyzes the percentage difference between the moving averages rather than the dollar amount.
Conclusion
The MACD indicator is the most popular tool in technical analysis, because it gives traders the ability to quickly and easily identify the short-term trend direction. The clear transaction signals help minimize the subjectivity involved in trading, and the crosses over the signal line make it easy for traders to ensure that they are trading in the direction of momentum. Very few indicators in technical analysis have proved to be more reliable than the MACD, and this relatively simple indicator can quickly be incorporated into any short-term trading strategy.
Saturday, September 28, 2013
Top Gold Companies To Own In Right Now
After months of watching prices fall, silver bulls at last have some good news... They finally have an "extreme" condition working in their favor. Regular readers know we urge every trader to become a "connoisseur of extremes." This means monitoring the market for extreme situations where valuations, technical readings, and sentiment are badly out of whack. These extreme, "out of whack" situations often precede big price moves. And right now, we have such an extreme in the silver market. This extreme was created by a giant "blowout" in silver over the last 10 months. In September 2012, silver was trading over $34 an ounce. Earlier this summer, it dropped below $19. In other words, silver lost nearly 50% of its value. (Gold lost "only" 33%.) That massive drop has put investor sentiment toward silver in extreme territory...
Top Gold Companies To Own In Right Now: Thompson Creek Metals Company Inc.(TC)
Thompson Creek Metals Company Inc., through its subsidiaries, engages in mining, milling, processing, and marketing molybdenum products in the United States and Canada. The company?s principal properties include the Thompson Creek Mine and mill in Idaho; a metallurgical roasting facility in Langeloth, Pennsylvania; and a joint venture interest in the Endako Mine, mill, and roasting facility in British Columbia. It also holds interests in development projects comprising the Davidson molybdenum property and the Berg copper-molybdenum-silver property located in northern British Columbia; the Howard?s Pass property, a lead and zinc project situated in the Yukon territory-northwest territories border; and the Maze Lake property, a gold project located in the Kivalliq district of Nunavut. The company produces molybdenum products, primarily molybdic oxide and ferromolybdenum, as well as soluble technical oxide, pure molybdenum tri-oxide, and high purity molybdenum disulfide. As o f December 31, 2010, its consolidated recoverable proven and probable ore reserves totaled 462.2 million pounds of contained molybdenum in the Thompson Creek Mine and the Endako Mine. The company was formerly known as Blue Pearl Mining Ltd. and changed its name to Thompson Creek Metals Company Inc. in May 2007. Thompson Creek Metals Company Inc. is based in Denver, Colorado.
Advisors' Opinion:- [By Jon C. Ogg]
Thompson Creek Metals Co. Inc. (NYSE: TC) was at 54% discount to its book value of $8.30 per share at the time, and the stock price of $3.90 is up from $3.03 Deutsche Bank’s team nailed upside of more than 28% here. Its price target was $4 at the time versus a consensus target of $4.50 at the time. The 52-week range here is $2.42 to $4.55, but we would point out that the consensus price target is $3.93.
Top Gold Companies To Own In Right Now: NEW GOLD INC.(NGD)
New Gold Inc. engages in the acquisition, exploration, extraction, processing, and reclamation of mineral properties. The company primarily explore for gold, silver, and copper deposits. Its operating properties include the Mesquite gold mine in the United States; the Cerro San Pedro gold-silver mine in Mexico; and the Peak gold-copper mine in Australia. The company also has development projects, including the New Afton gold, silver, and copper project in Canada; and a 30% interest in the El Morro copper-gold project in Chile. The company was formerly known as DRC Resources Corporation and changed its name to New Gold Inc. in June 2005. New Gold Inc. was founded in 1980 and is headquartered in Vancouver, Canada.
Advisors' Opinion:- [By Ben Levisohn]
Even bad news has failed to dent the rise in gold stocks today. NewGold (NGD), for instance, has gained 1.8% to $7.49 despite the fact that the wall of one of its mines collapsed. The Wall Street Journal has the details:
- [By Ben Levisohn]
Bridges favorite stocks include Goldcorp, Newmont, Eldorado Gold (EGO) and New Gold (NGD).
Note, however, that these recommendations are all qualified in one way or another. Investors should keep that in mind before going all in on the gold miners.
Top 5 Gold Stocks To Own Right Now: Iamgold Corporation(IAG)
IAMGOLD Corporation, together with its subsidiaries, engages in the exploration, development, and production of mineral resource properties worldwide. It primarily explores for gold, silver, zinc, copper, niobium, diamonds, and other metals. The company holds interests in eight operating gold mines, a niobium producer, a diamond royalty, and exploration and development projects located in Africa and the Americas. Its advanced exploration and development projects include the Westwood project in Canada; and the Quimsacocha project, which consists of 3 mining concessions covering an aggregate area of approximately 8,030 hectares in Ecuador. The company was formerly known as IAMGOLD International African Mining Gold Corporation and changed its name to IAMGOLD Corporation in June 1997. IAMGOLD Corporation was founded in 1990 and is based in Toronto, Canada.
Advisors' Opinion:- [By Michael Blair]
IAMGOLD (IAG) is one of my favorite gold stocks principally because it is a relatively high cost producer with long lived mines. That paradox arises since high cost producers have the most volatility when gold prices change. If they are operating close to break even, a relatively small rise in gold prices makes them quite profitable. Conversely, when prices fall they bleed all over the floor.
- [By Holly LaFon]
He increased his holdings in gold companies in the fourth quarter accordingly. Gold stocks he found attractive in the fourth quarter are: Novagold Resources (NG), Randgold Resources (GOLD), Iamgold Corp. (IAG), Barrick Gold Corp. (ABX), Agnico Eagle (AEM) and International Tower Hill (THM).
Top Gold Companies To Own In Right Now: Newmont Mining Corporation(Holding Company)
Newmont Mining Corporation, together with its subsidiaries, engages in the acquisition, exploration, and production of gold and copper properties. The company?s assets or operations are located in the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand, and Mexico. As of December 31, 2009, it had proven and probable gold reserves of approximately 93.5 million equity ounces and an aggregate land position of approximately 27,500 square miles. The company was founded in 1916 and is headquartered in Greenwood Village, Colorado.
Top Gold Companies To Own In Right Now: Australian Dollar(AU)
AngloGold Ashanti Limited primarily engages in the exploration and production of gold. It also produces silver, uranium oxide, and sulfuric acid. The company conducts gold-mining operations in South Africa; continental Africa, including Ghana, Guinea, Mali, Namibia, and Tanzania; Australia; and the Americas, which include Argentina, Brazil, and the United States. It also has mining or exploration operations in the Democratic Republic of the Congo, Guinea, and Colombia. As of December 31, 2010, the company had proved and probable gold reserves of 71.2 million ounces. The company has a strategic alliance with Thani Dubai Mining Limited to explore, develop, and operate mines across the Middle East and parts of North Africa. AngloGold Ashanti Limited, formerly known as Vaal Reefs Exploration and Mining Company Limited, was founded in 1944 and is headquartered in Johannesburg, South Africa.
Advisors' Opinion:- [By Holly LaFon]
The second largest market cap company, at $11.22 billion, is Anglogold Ashanti Ltd. (AU). Its afternoon stock price of $29.15 is within 5% of its three-year low, and has experienced a more significant drop than Newmont ��it is down 44.9% from its high price of $52.86 a share.
- [By Profit Confidential]
Graham Ehm, Executive Vice President of South African-based AngloGold Ashanti Limited (NYSE: AU), one of the biggest gold producers in the global economy, stated the company is looking to save $500 million over the next 18 months, as capital expenditures will only be going towards their highest-quality assets. (Source: Mining Weekly, August 5, 2013.)
- [By Sally Jones]
Anglogold Ashanti Limited (AU)
Down 65% over 12 months, Anglogold Ashanti Limited has a market cap of $4.85 billion, and trades with a P/E of 8.10.
Top Gold Companies To Own In Right Now: Northgate Minerals Corporation(NXG)
Northgate Minerals Corporation, together with its subsidiaries, engages in exploring, developing, processing, and mining gold and copper deposits in Canada and Australia. Its principal producing assets include 100% interests in the Fosterville and Stawell Gold mines in Victoria, Australia; and the Kemess South mine located in north-central British Columbia, Canada. The company was formerly known as Northgate Exploration Limited and changed its name to Northgate Minerals Corporation in May 2004. Northgate Minerals Corporation was founded in 1919 and is headquartered in Toronto, Canada.
Friday, September 27, 2013
Mississippian Oil Play: Another Setback?
There is hardly another horizontal oil play in North America that would have caused so much controversy and polarized opinions as the Mississippian Lime. In the latest development this week, an Associated Press article (which was widely re-printed by regional and oil & gas-related publications) reported another high-profile departure from the play by a major exploration company. According to AP, Royal Dutch Shell's (RDS.A, RDS.B) spokesman confirmed that the company is selling off its vast 600,000-acre Mississippian Lime position in nine Kansas counties, including 45 producing wells, after the company's strategic review concluded in July that the assets do not meet its targets. The acreage is located in Barber, Harper, Kingman, Pratt, McPherson, Sedgwick, Sumner, Rice and Reno counties in Kansas.
Mississippian Lime Play Limits (Per SandRidge Energy)
(click to enlarge)
Shell's acreage includes areas that would be considered part of the play's "traditional core" (acreage in Barber, Harper and Sumner counties adjacent to the Kansas-Oklahoma state line) as well as areas located in the play's "extension" to the north (including McPherson, Rice, Reno, Pratt, and Sedgwick counties). Shell's departure continues the consolidation trend in this enormous play, with activity clustering around select areas that are better understood from a geophysical perspective, have demonstrated higher rates of drilling success, and have critical mass of production infrastructure.
Shell's decision follows retrenchment by several other heavyweight exploration peers who had initially accumulated massive acreage positions on the Kansas side of the play.
SandRidge Energy (SD), the most active driller and largest leaseholder in the Mississippian Lime, has substantially curtailed its initial plan to ramp up its drilling program in the play to 45+ rigs an! d is currently running 22 rigs instead. SandRidge has made it clear that "holding" acreage is not a priority for the company and certain (and potentially very substantial) parts of its acreage position - which currently stands at 1.9 million net acres - may be left to expire undrilled. As SandRidge has focused its capital allocation to a six-county area (map below), many of its leases in the play's northern extension may end up released.
(click to enlarge)
(Source: SandRidge Energy September 2013 Investor Presentation)
Similar to SandRidge, Chesapeake Energy (CHK) seems to have limited its focus primarily to the better delineated portion of the play in northern Oklahoma, and, following the formation of a joint venture with Sinopec, seems unlikely to increase capital allocation to drilling activity in the extension area in the near term. In fact, Chesapeake has recently released some of its leases in the play due to expirations.
(click to enlarge)
(Source: Chesapeake Energy's February 2013 Investor Presentation)
Earlier this year, after almost a year of active but unsuccessful marketing of a Mississippian Lime Joint Venture and following several mixed test results, Encana Corporation (ECA) designated its ~320,000 net Mississippian Lime acres in Kansas for sale. In July, Encana followed with a decision to divest its remaining acreage in Osage County in Oklahoma, including seven producing wells.
(click to enlarge)
(Source: Encana Corporation)
Apache Corporation (APA), which had leased a large 580,000-acre position in northern Kansas and Nebraska (map below) and ini! tially sp! oke with enthusiasm about the multiple-objective potential the area had to offer, has kept a surprisingly low drilling profile in the area.
(click to enlarge)
(Source: Apache Corporation)
In general, a disappointingly low number of horizontal test wells have been drilled in central and northwestern Kansas since the play took off in 2010. The map below shows that the vast majority of horizontal wells (producing wells are shown with black dots and spud wells are shown with purple dots) drilled during the past four years is concentrated within a very limited area in the south-central part of the state, while exploratory effort in the extension area has been scarce.
(click to enlarge)
In aggregate, it appears that over 3 million acres of Mississippian Lime leases in Kansas that were assembled by various operators in frenzied leasing campaigns during the 2010-2012 period may end up largely untested during their primary terms, with much of those lands likely coming available for new leasing in the near future.
While the sheer amount of acreage that was leased in the play may impress, it is important to keep in mind that monetary loss to operators from relinquishing their acreage undrilled is in fact quite moderate. With lease bonuses in the extension area of the play often running at $150 per acre or less, leasing a half a million acre position may cost a large operator less than $100 million, including transaction costs. This explains the relative ease with which companies part with their leaseholds once they determine that drilling economics fall below corporate return thresholds.
It is also worth noting that joint venture transactions (the highly lucrative promoting business that has become a major source of ! income an! d almost an addiction for North American operators), have potential to cover, often by a very high factor, the cost of leasing and testing a large block of acreage. Proceeds received from JV monetizations in the play by just three operators - SandRidge, Chesapeake, and Devon - approach $3 billion in aggregate. This figure alone vastly exceeds all losses to all operators across the play from lease expirations.
SandRidge raised $1.5 billion in cash and drilling carries in their two JV transactions, with Repsol and Atinum;Chesapeake Energy received $1 billion in cash from selling an interest in a Mississippian Lime JV to Sinopec;Devon Energy (DVN) raised $2.5 billion in cash and drilling carries in a "Five Emerging Plays" Joint Venture with Sinopec, which included Mississippian Lime ($0.5 billion allocated to Miss Lime for the purposes of this discussion).While the extension area may have lost, at least for the time being, the sponsorship of several important operators, drilling activity in the play's core, including southern Kansas counties, has continued unabated. Kansas well statistics through June (the latest month available) show a healthy pace of growth in total production volumes and the number of wells being turned in-line.
(click to enlarge)
(click to enlarge)
(click to enlarge)
The departure of several significant participants is certainly disappointing news for the Mississippian Lime. However, the process is only natural for a play that has an areal extent of over 17 million acres. The Mississippian needs to consolidate and establish a firm track record of success before! it can a! ttract a new wave of external capital and start growing again.
Disclaimer: Opinions expressed in this article by the author are not an investment recommendation and are not meant to be relied upon in investment decisions. The author is not acting in an investment advisor capacity. This article is not an investment research report. The author's opinions expressed herein address only select aspects of potential investment in securities of the companies mentioned in the text and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author's best judgment as of the date of publication, and are subject to change without notice.
Source: Mississippian Oil Play: Another Setback?Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)
Wednesday, September 25, 2013
Zynga (ZNGA) is Ready to Roll Post-Earnings, If....
Call it a hunch (because that's all it is), but I've got a feeling Zynga Inc. (NASDAQ:ZNGA) is on the verge of a major recovery effort. Between the chart, the news, and a fresh perspective under a new CEO, it just looks like ZNGA could finally take off.
Just so there's no confusion, stepping into a ZNGA trade now would be a high-risk trade. The company reports earnings after the close today, and that could do anything to the stock. Good news could drive a poor response for shares if new CEO Don Mattrick doesn't spin things the right way. Conversely, bad news could still lead Zynga shares in a bullish mode if the outlook is good here. There's a lot of psychology to it, and not all of it is rational.
First things first... the chart, which is actually what got my attention in the first place. After a miserable 2012 that drove shares from a high of more than $15.00 to a low of $2.09, the bleeding stopped late last year. The stock even perked up in early 2013, prompting speculation/hope that Zynga might actually come around and finally fulfill the promise the market expected way back in late 2011 when the company IPO'd.
It wasn't to be, however. ZNGA hit a ceiling around $3.65 in mid-February. It hit the same ceiling in early April, and again in mid-May.... and again in mid-July. Although Zynga Inc. pushed above that level very briefly in March, it's pretty clear that the $3.65 mark is a huge line in the sand.
It's not a reason to doubt the upside potential here, though, especially given everything else we can glean from the ZNGA chart. In the meantime, we've seen bullish crosses of all the key moving average lines, and while the stock was in this sideways-movement mode, we saw frequent instances of those moving averages playing a support role for the stock. This bought shares the time they needed - and helped lay the foundation - to get the breakout rally underway. Now all we need is a nudge, and Thursday's post-close earnings report may give us that nudge.
For what it's worth, the actual numbers we're going to hear Thursday evening mean little. Last quarter's results were driven under the guidance of founder and now-former CEO Mark Pincus. Though the company still has to work with and report those numbers, for all intents and purposes, the slate has been cleaned with traders; all eyes and ears are focused on what Mattrick will say about the future.
Also for what it's worth, though the market wants to be optimistic, this isn't a situation where the smart move is to step into a Zynga trade in front of earnings based on the shape of the chart. There's a ton of potential upside that's built in here, and yes, waiting for a break above $3.65 does leave some money on the table. There's plenty of upside above $3.65 once/if ZNGA proves itself though. Patience.
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Tuesday, September 24, 2013
My Top 2 Bill Gates Picks
The Internet would not have grown as quickly as it did without Bill Gates. The Microsoft founder standardized software for the personal computers that are now linked together on the Internet.
From our current perspective, it is obvious that software needs to be compatible with other software. But, in the 1980s, before Microsoft made Gates a billionaire, it was actually common to find computers even within a single office with different operating systems and software products like word processing. Gates saw through the disorder and provided standards that made PCs more useful, setting the stage for the Internet.
His investment style shows a similar ability to create order. According to recent SEC filings, Gates controls more than $17 billion worth of stock market investments through the Bill and Melinda Gates Foundation. Of all the thousands of potential investments, this fortune is invested in only 21 stocks. Gates obviously likes to focus his attention on just a few opportunities at any one time.
His largest investment is in Berkshire Hathaway (NYSE: BRK-B). The Gates Foundation owns more than $8 billion worth of this stock. Bill Gates also sits on the Board of Directors of Berkshire Hathaway and has access to the investment insights of Warren Buffett.
It is interesting to note that Gates did not make any new buys in the three months that ended June 30, 2013. He did sell five stocks that made up only a small part of his portfolio.
We can see that Gates is a patient and selective investor. As individual investors, it can be difficult to be as patient as a billionaire. Meeting our financial goals generally requires us to earn a profit on our investments in a reasonable amount of time. To do this, I developed a trading system that identifies timely buying opportunities.
I start with a list of stocks owned by great investors like Gates. He has access to brilliant analysts, and they have selected each stock based on its long-term potential. I then look for the stocks on that list that are moving higher faster than the rest of the market and are increasing cash flow.
Relative strength (RS) is a way to identify stocks that are moving higher now. It ranks all investments on a scale of 0 (weakest) to 100 (strongest). A number of research studies show stocks that have moved up the most in the past six months (those with high RS) are likely to outperform the market in the next six months.
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Cash flow growth is often seen among stock market ! winners. This is a fundamental measure that is usually more reliable than earnings.
My system buys when RS is high and cash flow is growing. From the list of stocks in the Gates Foundation, only two are considered buys using these rules right now.
Known for environmentally friendly products, Ecolab (NYSE: ECL) is a consumer goods company that serves a variety of markets. The company offers cleaners and sanitizers for washing dishes and kitchen equipment for the food service industry, and housekeeping supplies for the hospitality industry. It also provides products for the health care, industrial and energy markets.
Revenue topped $12 billion in the past 12 months. Growth in earnings per share (EPS) averaged 12.65% a year over the past five years and is expected to accelerate to more than 15% a year in the next five years. Free cash flow has turned positive in the past 12 months and increased almost 50% in the last year.
Investors have pushed the stock price up nearly 35% since the beginning of the year, and ECL has an RS rank of 100, meaning it has been a top performer in the stock market over the past six months.
Grupo Televisa (NYSE: TV) provides programming and cable and satellite services to viewers in the U.S., Mexico, the Dominican Republic and other countries. The company reported more than $5.5 billion in revenue over the past 12 months and earnings of more than $680 million, or $1.10 per share. Cash flow per share doubled in the past 12 months.
Grupo Televisa is up only 6% since the beginning of the year, but has an RS rank of 72, just above the buy level of 70 I use for this indicator.
As I mentioned earlier, following market "gurus" like Bill Gates is one of the best ways to make money in the stock market. Investors should consider joining Bill Gates as long-term shareholders of ECL and TV.
But Gates is just one of the 20 investing gurus I follow. And as I just showed you, it's not as simple as looking at their portfolio and buying! what the! y hold. Timing also matters.
I've come out with a new free report that helps you understand exactly how you can beat the best gurus in the world at their own game. To get access to the free report,"How to Outperform Soros, Icahn... or Even Buffett," click here.
Monday, September 23, 2013
Once Burned, Short Sellers Are Again Targeting This Stock
When it comes to shorting a stock, one of two outcomes emerge: You were correct, and shares plunge as anticipated. Or you were wrong, and shares rally higher, causing considerable pain.
But for short sellers in Green Mountain Coffee Roasters (Nasdaq: GMCR), there's another outcome: They've been badly burned as shares have surged, but they insist they've been right all along, and it's only a matter of time before the stock crashes and burns.
When I first laid out the thesis in place by short seller David Einhorn roughly two years ago, I concluded: "Einhorn scores some strong points, most notably that the company has failed to generate real cash out of this business and may fail to do so once the key patents expire in 11 months. Even assuming that Einhorn is too bearish, this stock still looks expensive."
The stock quickly fell out of bed, as I noted a month later and by the summer of 2012, shares were universally loathed. Yet in the past 12 months, shares of Green Mountain Coffee Roasters have mounted a stunning comeback.
Short sellers must have assumed this stock was dead in the water, but after this sharp recent rebound, they're back at it: The short interest rose to a 12-month high of 32 million shares at the end of August, representing 26% of the stock's float and the equivalent of six days of trading volume.
The Real Numbers?
On the face of it, you'd think short sellers are focusing on Green Mountain's rapid deceleration in sales growth. Revenue rose at least 39% every year from fiscal years 2006 through 2012, but the top line is expected to rise just 10% in fiscal 2013 and 2014. (A big spike in profit margins will enable net income to grow at a much faster pace.)
Shares trade for less than 25 times projected 2014 profits, which isn't especially alarming either, considering the brand's seemingly strong resonance with customers.
But some short sellers think the company's numbers are a work of fiction. They claim that management is erroneously identifying products shipped to distributors as end-user sales. The New York Times raised these concerns earlier this month.
I have some qualms about the Times' analysis. My main concern: Green Mountain has a lot to lose -- and little to gain -- by artificially inflating sales figures, other than to cause pain to short sellers. And that seems like an unlikely motivation. Why would the company risk its reputation on such moves, especially after it endured a costly investigation from the Securities and Exchange Commission (SEC) less than two years ago?
Dubious Plans For Growth
During a meeting with analysts Sept. 10, management ran through a series of new niches the company may pursue. One such rumored move: Products that mimic SodaStream's (Nasdaq: SODA) carbonated beverage dispensers.
 | ||
| © Green Mountain Coffee Roasters | ||
| Regardless of the success of other initiatives, the main driver of this business will still be the K-cups. |
This is a management team has shown a deft touch in terms of cultivating the single-serve Keurig K-cup phenomenon. So when management hints at new growth initiatives, you have to assume they'll meet with a degree of success.
My concerns instead stem from the brutal nature of food packaging and retailing. Private-label K-cup suppliers are gaining traction, forcing Green Mountain to lower its prices for these "razor blades" in the process.
Regardless of the success of other initiatives, the main driver of this business will still be the K-cups. And management's moves to protect that business are underwhelming. As an example, Merrill Lynch analysts say the (soon-to-be-launched) Keurig 2.0 platform "is intended to provide an enhanced (and proprietary) brewing process, which, if successful, will discourage additional development of unlicensed production."
Really? The response to growing private label competition is to make sure that new machines won't work with private-label K-cups? That seems absurd.
Consumers will migrate to other machines that work with the growing proliferation of K-cup options, all of which are cheaper than Green Mountain's offerings. The effort to design an "enhanced brewing process" also seems curious. Few consumers seem to feel that current K-cup offerings are disappointing. It's akin to Starbucks (Nasdaq: SBUX) saying, "Our coffee used to be good, but we're making it better." That's not what a Starbucks customer is looking to hear.
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Green Mountain aims to aggressively roll out new products over the next 12 months, which explains why some investors have been pushing this stock back up. Yet as Merrill's analysts conclude, "Most of this will come down to how consumers respond."
Short sellers expect these new growth initiatives will be underwhelming -- and not robust enough to mask a slowdown in the core K-cup business.
Risks to Consider: As an upside risk, Green Mountain's international penetration is fairly low, and entry into new large markets could invigorate K-cup growth.
Action To Take --> It's unwise to ignore the accounting allegations raised by The New York Times. But that shouldn't be the sole pillar of your investment thesis. Instead, it's the likelihood that this company is not the growth company it once was. Merrill Lynch, for example, sees free cash flow rising from $425 million in fiscal 2013 to just $453 million two years from now. That doesn't seem to justify the company's $13 billion valuation.
P.S. Did you know SodaStream is increasing its profits 12 times faster than Coca-Cola and 60 times faster than Pepsi? That kind of growth has us predicting it will capture major shares of Coke's and Pepsi's market share next year. If you think that's a bold call, might be interested to know that our previous predictions have given investors 89%... 92%... 293%... and even 310% gains in a year. To hear our latest, click here.
Sunday, September 22, 2013
Top Biotech Stocks To Buy For 2014
From the impact of Obamacare to cutting-edge research, biotech buyouts to FDA decisions, The Motley Fool's health-care team sits down each week�to discuss the most fascinating developments in health-care and their implications for long-term investors. In this week's edition, the team talks about the coming trend of penalizing unhealthy employees, the importance of drug branding, the avian flu outbreak, one stock investors need to watch, and more.
In the following segment, health-care analyst David Williamson gives an update on the avian flu outbreak in China, how a flu drug helped propel Roche's strong first quarter, and a new vaccine that should be ready for the next flu season. Watch and learn more about the perils, profits, and prevention of the flu.
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Top Biotech Stocks To Buy For 2014: Dendreon Corporation(DNDN)
Dendreon Corporation, a biotechnology company, engages in the discovery, development, and commercialization of therapeutics to enhance cancer treatment options for patients. The company offers active cellular immunotherapy and small molecule product candidates to treat various cancers. Its product candidates comprise Provenge (sipuleucel-T), an active cellular immunotherapy for the treatment of metastatic, castrate-resistant prostate cancer; DN24-02, an investigational active immunotherapy for the treatment of patients with bladder, breast, ovarian, and other solid tumors expressing HER2/neu; and TRPM8, a small molecule agonist to transient receptor potential ion channel, for multiple cancers. The company also has a range of products in preclinical studies, which include Carcinoembryonic antigen for the treatment of lung, colon, and breast cancer; and Carbonic AnhydraseIX for the treatment of kidney cancer. Dendreon Corporation was founded in 1992 and is headquartered in S eattle, Washington.
Top Biotech Stocks To Buy For 2014: Telik Inc (TELK)
Telik, Inc. (Telik), incorporated in 1988, is a clinical-stage drug development company focused on discovering and developing small molecule drugs to treat cancer. The Company discovers its product candidates using the Company�� drug discovery technology, Target-Related Affinity Profiling (TRAP). TELINTRA, its principal drug product candidate in clinical development, is a small molecule glutathione analog inhibitor of the enzyme glutathione S-transferase P1-1 (GST P1-1). TELCYTA, its other product candidate, is a small molecule cancer drug product candidate designed to be activated in cancer cells.
Clinical Product Development
TELINTRA is the Company�� lead small molecule product candidate in clinical development for the treatment of blood disorders, including cancer. It has a mechanism of action and acts by inhibiting GST P1-1, an enzyme that is involved in the control of cellular growth and differentiation. Inhibition of GST P1-1 results in the activation of the signaling molecule Jun kinase, a regulator of the function of blood precursor cells. Preclinical tests show that TELINTRA is capable of causing the death or apoptosis of leukemic or malignant blood cells, while stimulating the growth and development of normal blood precursor cells. TELINTRA has been studied in Myelodysplastic Syndrome (MDS) using two formulations. A liposomal formulation was developed for intravenous administration of TELINTRA and was used in Phase I and Phase II studies in MDS patients. The results from the Phase II intravenous liposomal TELINTRA clinical trials demonstrated that TELINTRA treatment was associated with improvement in all three types of blood cell levels in patients with all types of MDS, including those in intermediate and high-risk groups. An oral dosage formulation (tablet) was subsequently developed and results from a Phase I study with TELINTRA tablets showed clinical activity and the formulation to be well tolerated. In June 2011, the Company initiated a Phase II clinical ! trial to evaluate TELINTRA tablets. In October 2011, the Company initiated an additional Phase IIb clinical trial to evaluate TELINTRA tablets. '
The activity and safety profile of tablet formulation allowed the Company to complete a Phase II trial of TELINTRA tablets in MDS. The primary objective of the Phase II TELINTRA tablet study was to determine the efficacy of TELINTRA. A multivariate logistic regression analysis was conducted to identify MDS disease prognostic factors associated with erythroid improvement response rates, including prior MDS treatment, age, gender, the international prognostic scoring system (IPSS), risk, Eastern Cooperative Group performance status, years from MDS diagnosis, MDS World Health Organization subtypes, anemia only versus anemia plus other cytopenias, dose schedule and starting dose. Results from this study show that TELINTRA is the first GSTP1-1 enzyme inhibitor shown to cause clinically reductions in red blood cell transfusions, including transfusion independence in low to intermediate-1 risk MDS patients, as well as improvement in platelet count and white blood cell levels in certain patients. TELINTRA, administered orally twice daily, appeared to be convenient and flexible for chronic treatment administration.
TELCYTA is a small molecule drug product candidate that the Company is developed for the treatment of cancer. TELCYTA binds to GST. TELCYTA has been evaluated in multiple Phase II and Phase III clinical trials, including trials using TELCYTA as monotherapy and in combination regimens in ovarian, non-small cell lung, breast and colorectal cancer. Results from these clinical trials indicate that TELCYTA monotherapy was generally well-tolerated, with mostly mild to moderate side effects, particularly when compared to the side effects and toxicities of standard chemotherapeutic drugs. When TELCYTA was evaluated in combination with standard chemotherapeutic drugs, the tolerability of the combinations was similar to that expected of each! drug alo! ne.
Clinical activity including objective tumor responses and/or disease stabilization was reported in the TELCYTA Phase II trials; however, TELCYTA did not meet its primary endpoints in the Phase III studies. Positive results from a Phase I-IIa multicenter, dose-ranging study of TELCYTA in combination with carboplatin and paclitaxel as first-line therapy for patients with non-small cell lung cancer, or NSCLC, were published in a peer reviewed publication. Clinical data demonstrated positive results of TELCYTA in combination with carboplatin and paclitaxel in the treatment of first-line lung cancer followed by TELCYTA maintenance therapy. As of December 31, 2011, the Company had an on-going investigator-led study at a single site of TELCYTA in patients with refractory or relapsed mantle cell lymphoma, diffuse B cell lymphoma, and multiple myeloma.
Preclinical Drug Product Development
The Company has a small molecule compound, TLK60404, in preclinical development that inhibits both Aurora kinase and VEGFR kinase. Aurora kinase is a signaling enzyme whose function is required for cancer cell division, while VEGF plays a key role in tumor blood vessel formation, ensuring an adequate supply of nutrients to support tumor growth. These lead compounds prevented tumor growth in preclinical models of human colon cancer and human leukemia by inhibiting both Aurora kinase and VEGFR kinase. A development drug product candidate, TLK60404, has been selected.
The Company, using its TRAP technology has discovered TLK60357, a novel, potent small molecule inhibitor of cell division. TLK60357 inhibits the formation of microtubules that are necessary for cancer cell growth leading to persistent G2/M cancer cell cycle block and subsequent cell death. This compound demonstrates potent broad-spectrum anticancer activity against a number of human cancer cells. This compound also displays oral efficacy in multiple, standard preclinical models of cancer. TLK60596, a potent VG! FR kinase! inhibitor, blocks the formation of new blood vessels in tumors. Oral administration of TLK60596 to animal models of human colon cancer reduced tumor growth.
Top 5 Dividend Stocks To Own Right Now: Cell Therapeutics Inc (CTIC)
Cell Therapeutics, Inc. (CTI), incorporated in 1991, develops, acquires and commercializes treatments for cancer. The Company�� research, development, acquisition and in-licensing activities concentrate on identifying and developing new ways to treat cancer. As of December 31, 2011, CTI focused its efforts on Pixuvri (pixantrone dimaleate) (Pixuvri), OPAXIO (paclitaxel poliglumex) (OPAXIO), tosedostat, brostallicin and bisplatinates. As of December 31, 2011, it developed Pixuvri, an anthracycline derivative for the treatment of hematologic malignancies and solid tumors. Another late-stage drug candidate of the Company, OPAXIO, is being studied as a potential maintenance therapy for women with advanced stage ovarian cancer, who achieve a complete remission following first-line therapy with paclitaxel and carboplatin. As of December 31, 2011, it also developed tosedostat in collaboration with Chroma Therapeutics, Ltd. (Chroma). On May 31, 2012, CTI completed its acquisition gaining worldwide rights to S*BIO Pte Ltd.'s (S*BIO) pacritinib.
Pixuvri
As of December 31, 2011, the Company developed Pixuvri, an aza-anthracenedione derivative, for the treatment of non-Hodgkin�� lymphoma (NHL), and various other hematologic malignancies, and solid tumors. Pixuvri was studied in the Company�� EXTEND, or PIX301, clinical trial, which was a phase III single-agent trial of Pixuvri for patients with relapsed, refractory aggressive NHL who received two or more prior therapies and who were sensitive to treatment with anthracyclines. On September 28, 2011, CTI announced that a second independent radiology assessment of response and progression endpoint data from its PIX301 clinical trial of Pixuvri was achieved with statistical significance. The results of the EXTEND trial met its primary endpoint and showed that patients randomized to treatment with Pixuvri achieved a significantly higher rate of confirmed and unconfirmed complete response compared to patients treated with standard chem! otherapy had a significantly increased overall response rate and experienced a statistically significant improvement in median progression free survival. Pixuvri had predictable and manageable toxicities when administered at the proposed dose and schedule in the EXTEND clinical trial in heavily pre-treated patients. In March 2011, the Company initiated the PIX-R trial to study Pixuvri in combination with rituximab in patients with relapsed/refractory diffuse large B-cell lymphoma (DLBCL). Pixuvri has also been studied in patients with HER2-negative metastatic breast cancer who have tumor progression after at least two, but not more than three, prior chemotherapy regimens. In the second quarter of 2010, the NCCTG opened this phase II study for enrollment. The study is closed to accrual and results are expected to be reported by the NCCTG later in 2012.
OPAXIO
OPAXIO is the Company�� biologically-enhanced chemotherapeutic agent that links paclitaxel to a biodegradable polyglutamate polymer, resulting in a new chemical entity. As of December 31, 2011, the Company focused its development of OPAXIO on ovarian, brain, esophageal, head and neck cancer. OPAXIO was designed to improve the delivery of paclitaxel to tumor tissue while protecting normal tissue from toxic side effects. In November 2010, results were presented by the Brown University Oncology Group from a phase II trial of OPAXIO combined with temozolomide (TMZ), and radiotherapy in patients with newly-diagnosed, high-grade gliomas, a type of brain cancer. The trial demonstrated a high rate of complete and partial responses and a high rate of six month progression free survival (PFS). Based on these results, the Brown University Oncology Group has initiated a randomized, multicenter, phase II study of OPAXIO and standard radiotherapy versus TMZ and radiotherapy for newly diagnosed patients with glioblastoma with an active gene termed MGMT that reduces responsiveness to TMZ. A phase I/II study of OPAXIO combined with radi! otherapy ! and cisplatin was initiated by SUNY Upstate Medical University, in patients with locally advanced head and neck cancer.
Tosedostat
In March 2011, the Company entered into a co-development and license agreement with Chroma Therapeutics, Ltd. (Chroma), providing the Company with marketing and co-development rights to Chroma�� drug candidate, tosedostat, in North, Central and South America. Tosedostat is an oral, aminopeptidase inhibitor that has demonstrated anti-tumor responses in blood related cancers and solid tumors in phase I-II clinical trials. Interim results from the phase II OPAL study of tosedostat in elderly patients with relapsed or refractory acute myeloid leukemia (AML) showed that once-daily, oral doses of tosedostat had predictable and manageable toxicities and results demonstrated response rates, including a high-response rate among patients who received prior hypomethylating agents, which are used to treat myelodysplastic syndrome (MDS), a precursor of AML.
Brostallicin
As of December 31, 2011, the Company developed brostallicin through its wholly owned subsidiary, Systems Medicine LLC, which holds rights to use, develop, import and export brostallicin. Brostallicin is a synthetic deoxyribonucleic acid (DNA) minor groove binding agent that has demonstrated anti-tumor activity and a favorable safety profile in clinical trials, in which more than 230 patients have been treated as of December 31, 2011. The Company uses a genomic-based platform to guide the development of brostallicin. A phase II study of brostallicin in relapsed, refractory soft tissue sarcoma met its predefined activity and safety hurdles and resulted in a first-line phase II clinical trial study that was conducted by the European Organization for Research and Treatment of Cancer (EORTC).
The Company competes with Bristol-Myers Squibb Company, Sanofi-Aventis, Pfizer, Roche Group, Genentech, Inc., Astellas Pharma, Eli Lilly and Company, Celgene, Telik, I! nc., TEVA! Pharmaceuticals Industries Ltd. and PharmaMar.
Top Biotech Stocks To Buy For 2014: Cannabis Science Inc (CBIS)
Cannabis Science, Inc., incorporated on May 4, 2007, is a development-stage company. The Company is engaged in the creation of cannabis-based medicines, both with and without psychoactive properties, to treats disease and the symptoms of disease, as well as for general health maintenance. On February 9, 2012, the Company acquired GGECO University, Inc. (GGECO). On March 21, 2012, the Company acquired Cannabis Consulting Inc. (CCI Group).
The Company is engaged in medical marijuana research and development. The Company works with world authorities on phytocannabinoid science targeting critical illnesses, and adheres to scientific methodologies to develop, produce, and commercialize phytocannabinoid-based pharmaceutical products.
Top Biotech Stocks To Buy For 2014: Fuse Science Inc (DROP)
Fuse Science, Inc. ( Fuse Science), incorporated on September 21, 1988, is a consumer products holding company. The Company maintains the rights to sublingual and transdermal delivery systems for bioactive agents that can effectively encapsulate and charge many varying molecules in order to produce complete product formulations which can be consumed orally, applied topically or delivered otherwise sublingually or transdermally, thereby bypassing the gastrointestinal tract and entering the blood stream directly. The Fuse Science technology is designed to accelerate conveyance of medicines or nutrients relative to traditional pills and liquids and can enhance how consumers receive these products. In December 2012, the Company launched its initial DROP products, PowerFuse, an energy formulation in a concentrated drop and ElectroFuse, an electrolyte formula in a concentrated drop, online, with the expansion into targeted retail distribution channels.
The Company is developing formulations and devices, which are compatible with alternative delivery systems for energy, medicines, vitamins and minerals, among other bioactives. These alternative systems include, but are not limited to, sublingual, transdermal and buccal drug delivery methods. use Science has developed and continues to advance, in conjunction with its scientific team, sublingual and transdermal delivery systems for bioactives that can effectively encapsulate and charge varying molecules in order to produce product formulations which can be consumed orally, applied topically or otherwise delivered sublingually or transdermally, thereby bypassing the gastrointestinal tract and entering the blood stream directly. The delivery technology is consists of encapsulation vesicles and ion exchange permeation enhancers. This technology utilizes a gradient across the mucosa membrane to help deliver the bioactive more efficiently through the mucosa.
The Company�� products consist of EnerJel, PowerFuse and ElectroFuse. Ene! rJel is a topical product leveraging some of its technology, which is designed to address muscle fatigue and soreness, before, during and after physical activity. The product contains a natural anti-inflammatory and energy source which is directly applied to the problem area. PowerFuse contains natural ingredients, causes no sugar crash with zero calories and less than half the caffeine of an eight ounce cup of premium coffee. It is available in a great tasting Berry Blast Flavor. ElectroFuse contains natural ingredients, causes no sugar crash with zero calories, is easily portable and is available in a great tasting Salty-Sweet flavor.
Saturday, September 21, 2013
'Mad Money' Lightning Round: Cisco Is Smokin'
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NEW YORK (TheStreet) -- Here's what Jim Cramer had to say about some of the stocks callers offered up during the "Mad Money Lightning Round" Tuesday evening:
ARM Holdings (ARMH): "This stock is building an empire and is the semiconductor to own. I also like Intel (INTC)."
Baidu.com (BIDU): "Let's hold off on that one." Coach (COH): "I'm holding off. They have not delivered the past few quarters." Zoltek (ZOLT): "I've been looking at this one. These are basic American companies that are doing well." Cisco Systems (CSCO): "I think this one is coming back. Business is smokin'. Buy, buy, buy." Arena Pharmaceuticals (ARNA): "No, I've not liked this one for awhile. I don't want to touch this stock." To read a full recap of "Mad Money" on CNBC, click here. To sign up for Jim Cramer's free Booyah! newsletter with all of his latest articles and videos please click here. To watch replays of Cramer's video segments, visit the Mad Money page on CNBC. -- Written by Scott Rutt in Washington, D.C. To email Scott about this article, click here: Scott Rutt Follow Scott on Twitter @ScottRutt or get updates on Facebook, ScottRuttDC
Thursday, September 19, 2013
PVH Corp. Posts Higher Q2 EPS; Beats Estimates (PVH)
PVH Corp. (PVH
The New York, NY-based clothing company announced non-GAAP EPS of $1.39, which was up from last year’s Q2 EPS figure of $1.28, and above the analysts’ estimate of $1.37. GAAP results came in at a 20 cent loss per share due to acquisition, integration and restructuring costs associated with the company’s acquisition of Warnaco Group.
On the revenues front, PVH posted quarterly results of $1.965 billion, a 47% increase from last year’s Q2 figure, and above the analysts’ estimate of $1.89 billion. The uptick in revenues was primarily due to the revenues from the newly acquired Warnaco.
PVH shares were up $2.14, or 1.62%, at the end of trading on Monday. The company’s stock is up 16.25% YTD.
Monday, September 16, 2013
Friday Closing Bell: Mixed Close on Jobs Report, Syria Worries
September 6, 2013: U.S. markets opened higher on Friday morning while even though this morning's report on employment was weak because most traders believed that the weak report would convince the Fed to delay tapering its asset purchases. Comments by Russia's President Putin that his country would side with Syria in the event of an attack on the country sent equities plunging before they pulled back roughly to their opening levels. At the closing bell stocks were barely off the flat line.
European and Latin American markets closed higher today, while Asian markets closed mixed.
WTI crude oil closed the week at $110.53 a barrel, up 2% for the day and up 2.7% for the week.
Monday's calendar includes a speech by San Francisco Fed President John Williams and the following data releases and events (all times Eastern):
11:30 a.m. – 3- and 6-month bill auctions 3:00 p.m. – Consumer credit reportHere are the closing bell levels for Friday:
S&P500 1,639.75 (+0.09; +0.01%) DJIA 14,922.50 (-14.98; -0.10%) NASDAQ 3,660.01 (+1.23; +0.03%) 10YR TNOTE 2.935% (+0.53125) Gold $1,386.50 (+13.50; +1%) Euro/Dollar: 1.3176 (+0.0058; +0.43%)Big Earnings Movers: Specialty retailer Quiksilver Inc. (NYSE: ZQK) is up 31.7% at $6.85. Smith & Wesson Holding Corp. (NASDAQ: SWHC) is down 10.2% at $10.31 after issuing weak guidance. Mattress Firm Holding Corp. (NASDAQ: MFRM) is down 14.6% at $35.59. Korn/Ferry International (NYSE: KFY) is up 11.2% at $20.81 after posting a new 52-week high of $20.93 earlier. VeriFone Systems Inc. (NYSE: PAY) is up 10.1% at $22.81. Zumiez Inc. (NASDAQ: ZUMZ) is up 11.2% at $28.11.
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Stocks on the move: Facebook Inc. (NASDAQ: FB) posted a new 52-week high of $44.61 and is up 3% to $43.94. Advanced Micro Devices Inc. (NYSE: AMD) is up 4.7% at $3.57. Kior Corp. (NASDAQ: KIOR) is down 13.4% at $1.49. Yelp Inc. (NYSE: YELP) is up 5.9% at $62.40 after posting a new 52-week high of $64.38 earlier today.
In all, 105 stocks put up new 52-week highs today, while 36 stocks posted new lows.
Friday, September 13, 2013
What Do These Factors Say About Comcast?
With shares of Comcast (NASDAQ:CMCSA) trading around $43, is CMCSA 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
Comcast is is a provider of entertainment, information, and communications products and services. The company operates in five segments: Cable Communications, Cable Networks, Broadcast Television, Filmed Entertainment, and Theme Parks. Comcast offers television, video, high-speed Internet, and voice services to residential and business customers. It also operates NBC and Telemundo broadcast networks; provides filmed entertainment under the Universal Pictures, Focus Features, and Illumination names; and operates theme parks, studios, and a dining, retail, and entertainment complex. The company reaches a large audience through all of its mediums. As a multimedia giant, look for Comcast to provide the products and services that consumers and companies enjoy.
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T = Technicals on the Stock Chart are Strong
Comcast stock has seen a consistent uptrend after breaking out just last year. The stock has been exploding higher and is now trading at all-time high prices. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Comcast is trading above its rising key averages which signal neutral to bullish price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of Comcast options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| Comcast Options | 18.8% | 10% | 9% |
What does this mean? This means that investors or traders are buying a very low 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 very low 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 Comcast’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Comcast look like, and more importantly, how did the markets like these numbers?
Best Low Price Companies To Own For 20142013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | 20% | 20.09% | 136.4% | 35.14% |
| Revenue Growth (Y-O-Y) | 2.9% | 5.95% | 15.38% | 6.13% |
| Earnings Reaction | 1.35% | 0.85% | 3.3% | 3.07% |
Comcast has seen increasing earnings and revenue figures over the last four quarters. From these figures, the markets have been pleased with Comcast’s recent earnings announcements.
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P = Excellent Relative Performance Versus Peers and Sector
How has Comcast stock done relative to its peers, DirecTV (NASDAQ:DTV), Dish Network (NASDAQ:DISH), Time Warner Cable (NYSE:TWC), and sector?
| Comcast | DirecTV | Dish Network | Time Warner Cable | Sector | |
| Year-to-Date Return | 16.11% | 28.97% | 7.14% | 1.89% | 12.58% |
Comcast has been a relative performance leader, year-to-date.
Conclusion
Comcast provides valuable multimedia and entertainment products and services to a growing audience. The stock has recently broken out, exploded to all-time high prices, and sees no signs of slowing. Earnings and revenue numbers have been rising, over the last four quarters, which has really excited investors. Relative to its peers and sector, Comcast has been one of the year-to-date performance leaders. Look for Comcast to continue to OUTPERFORM.
Wednesday, September 11, 2013
Can GlaxoSmithKline Break Higher?
With shares of GlaxoSmithKline (NYSE:GSK) trading around $52, is GSK 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 MovementGlaxoSmithKline is global health care group engaged in the discovery, development, manufacturing, and marketing of pharmaceutical products. These products include vaccines, over-the-counter medicines, and health-related consumer products. GlaxoSmithKline's principal pharmaceutical products include medicines in these areas: respiratory, antivirals, central nervous system, cardiovascular and urogenital, metabolic, antibacterials, oncology and emesis, dermatology, rare diseases, immuno-inflammation, vaccines, and HIV.
The company operates in three primary areas of business: pharmaceuticals, vaccines, and consumer health care. Through its areas of business, GlaxoSmithKline is able to positively affect the lives of many consumers around the world that require their medications.
T = Technicals on the Stock Chart are StrongGlaxoSmithKline stock been on a strong run in recent years. The stock has whipsawed a bit but looks to be getting ready to test 52-week highs. Analyzing the price trend and its strength can be done by using key simple moving averages.
What are the key moving averages? They are the 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, GlaxoSmithKline is trading above its rising key averages, which signal neutral to bullish price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of GlaxoSmithKline options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| GlaxoSmithKline Options | 17.35% | 3% | 0% |
What does this mean? This means that investors or traders are buying a very small amount of call and put options contracts, compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| August Options | Flat | Average |
| September Options | Flat | Average |
As of today, there is 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 very small amount of call and put option contracts, and are leaning neutral to bullish over the next two months.
On the next page, let’s take a look at earnings and revenue growth rates, and what that means for Glaxo’s stock.
E = Earnings Are Decreasing Quarter-Over-QuarterRising stock prices are often strongly correlated with rising earnings and revenue growth rates. The last four quarterly earnings announcement reactions can also help gauge investor sentiment on GlaxoSmithKline’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for GlaxoSmithKline 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) | -28.21% | -26.92% | -15.12% | 12.86% |
| Revenue Growth (Y-O-Y) | -7.20% | -1.91% | -6.99% | -6.76% |
| Earnings Reaction | 0.01% | 0.73% | -0.99% | -1.21% |
GlaxoSmithKline has seen decreasing earnings and revenue figures over most of the last four quarters. From these numbers, it seems the markets have had mixed feelings about GlaxoSmithKline’s recent earnings announcements.
P = Excellent Relative Performance Versus Peers and SectorHow has GlaxoSmithKline stock done relative to its peers, Pfizer (NYSE:PFE), Merck (NYSE:MRK), Novartis (NYSE:NVS), and the overall sector?
| GlaxoSmithKline | Pfizer | Merck | Novartis | Sector | |
| Year-to-Date Return | 21.56% | 14.36% | 18.32% | 15.97% | 16.73% |
GlaxoSmithKline has been a relative performance leader, year-to-date.
ConclusionGlaxoSmithKline is a health care group that engages in many aspects of pharmaceutical business around the world. The stock has been trending higher over the last few years, and is now trading near 52-week highs. Over the last four quarters, earnings and revenue figures have been declining, which has produced mixed feelings among investors. Relative to its peers and sector, GlaxoSmithKline has been a year-to-date performance leader. Look for GlaxoSmithKline to OUTPERFORM.
Tuesday, September 10, 2013
U.S. Consumers Borrowing More Again
The Federal Reserve reported on Monday afternoon that total outstanding U.S. consumer credit rose 4.4% in July, from a revised estimate of $2.842 trillion in June to $2.852 trillion. A total of $850 billion is revolving credit while $2 trillion is non-revolving. Consumer credit in the Fed's G.19 report includes short- and medium-term credit to individuals, and does not include home mortgages.
Revolving credit, which includes credit card debt, was down 2.6% in July after dropping 5.2% in June. Non-revolving credit, which includes car loans and student student loans, rose 7.4% in July after a 9.5% jump in June.
The jump in new car sales in July likely drove the non-revolving portion of consumer debt. Another jump could then be predicted for August, when new car sales were even higher than they were in July.
As for student loans, JPMorgan Chase & Co. (NYSE: JPM) announced last week that it planned to get out of the student lending business as more scrutiny from regulators and federal government programs are taking a larger share of the business. The federal government's consumer lending total in July was $571.9 billion, more than triple the total outstanding at the end of 2010.
Monday, September 9, 2013
Oppenheimer Institutional Portfolio Managers Favor Communications Equipment Stocks
In a secular bull market rally, sectors tend to go up and down on a favorable basis as they become either overbought or just lose momentum. The Institutional Portfolio team at Oppenheimer highlighted that the communications equipment sector has shown two months of notable improvement. The breadth of analyst revisions and secularly depressed valuations create a compelling industry-level opportunity for relative outperformance. Most importantly, they point out that valuations are remaining at generational lows. The communications equipment arena looks best positioned to outperform, while limiting downside risks. Here are the top stocks to buy at Oppenheimer in the sector.
ADTRAN Inc. (NASDAQ: ADTN) is a leading global provider of networking and communications equipment. Its products enable voice, data, video and Internet communications across a variety of network infrastructures. ADTRAN solutions are currently in use by service providers, private enterprises, government organizations and millions of individual users worldwide. The Thomson/First Call price target for the stock is $22, and investors receive a 1.4% dividend.
Arris Enterprises Inc. (NASDAQ: ARRS) has become a major competitive threat to Cisco after its acquisition of the set-top box business of Motorola Mobility. IHS estimated that the global set-top box shipment will grow 8% year-over-year to 269 million units in 2013 from 250 million units in 2012. This is further expected to increase 6% in 2014 to 286 million units and another 1% in 2015 to 290 million units. Moreover, IHS also estimated that the global set-top box revenues will reach a record-high $22.2 billion in 2013. The consensus price target for Arris is $17.25.
Ciena Corp. (NASDAQ: CIEN) is a top stock to buy at Oppenheimer and also was recently raised to Outperform at William Blair. Ciena provides communications networking equipment, software and services that support the transport, switching, aggregation and management of voice, video and data traffic worldwide. The consensus price target for the stock is $23.
Cisco Systems Inc. (NASDAQ: CSCO) is a mega-cap tech stock that has roared back into the game. The company is moving to be an innovator in providing the automobile industry with the Cisco enterprise-grade, seamless wireless network switching technology, which is highly secure and is designed to connect passengers to the right network based on their location on the road and their user preference. It is the complete Internet and communications experience for tomorrow's driver today. The consensus price objective for this top tech name is $27. Investors are paid a 2.6% dividend.
F5 Networks Inc. (NASDAQ: FFIV) had truly become an out-of-favor stock recently. It blew away earnings, and the stock responded well. Despite some continued weakness in telecom spending, the rest of the year looks very positive for the company. The consensus price objective stands at $95.
Harmonic Inc. (NASDAQ: HLIT) is a top small cap name to buy at Oppenheimer. Revenue in the second quarter totaled $117.1 million, and bookings were $126.3 million. Non-GAAP net income was $5.6 million, or $0.05 per share. That bottom-line result is a welcome improvement compared to the adjusted net loss of $0.02 per share a year ago. The stock was up as much as 16% after earnings, and it may be a top name to own for the rest of the year. The consensus price target for the stock is $7.
Juniper Networks Inc. (NYSE: JNPR) announced in June a plan to repurchase $1 billion in stock and added an additional $1 billion when they announced preliminary earnings on July 23. The consensus price for this top tech name is $22.
Qualcomm Inc. (NASDAQ: QCOM) rounds out the top communications equipment stocks to buy at Oppenheimer. The company reported fantastic third-quarter results. Revenue surged 35% year-over-year to $6.2 billion, handily exceeding consensus estimates. Non-GAAP earnings per share jumped 21% year-over-year to $1.03, roughly in-line with consensus estimates. Free cash flow was fantastic at $1.85 billion, equivalent to 30% of revenue. The consensus price target for this top tech name is $75. Investors receive a 2.1% dividend.
The Institutional Portfolio managers at Oppenheimer think that earnings revisions, sentiment and alpha momentum can be used as tools from a contrarian or trend-following perspective toward identifying future periods of outperformance. The communications equipment sector may be poised to lead in the second half of the year, and their stocks to buy may be timely portfolio additions now.
Saturday, September 7, 2013
Can Nike Continue This Bull Run?
With shares of Nike (NYSE:NKE) trading around $66, is NKE 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 MovementNike is engaged in the design, development, and worldwide marketing and selling of footwear, apparel, equipment, accessories and services. The company sells its products to retail accounts, through retail stores and Internet sales, and through a mix of independent distributors and licensees around the world. Nike focuses its product offerings in seven key categories: Running, Basketball, Soccer, Men's Training, Women's Training, Nike Sportswear, and Action Sports. It also markets products designed for kids, as well as for other athletic and recreational uses.
Recently, Nike delivered earnings and revenue figures that beat Wall Street's expectations. Looking around, many consumers and companies are advocating and opting for a lifestyle that involves more outdoor and physical activity. As this movement continues, Nike is a company that is poised to see increased demand.
T = Technicals on the Stock Chart are StrongNike stock has been flying higher over the last several years. The stock is now trading near all-time high prices and does not look like it wants to slow down. 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, Nike is trading above its rising key averages which signal neutral to bullish price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of Nike options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| Nike Options | 19.28% | 36% | 34% |
What does this mean? This means that investors or traders are buying a small amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| August Options | Flat | Average |
| September Options | Best Financial Companies To Watch For 2014Flat | Average |
As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bullish over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Improving Quarter-Over-QuarterRising 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 Nike’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Nike 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) | 24.52% | 58.33% | -16.00% | -9.56% |
| Revenue Growth (Y-O-Y) | 7.39% | 9.39% | 7.37% | 9.67% |
| Earnings Reaction | 2.18% | 11.06% | 6.16% | -1.12% |
Nike has seen improving earnings and rising revenue figures over the last four quarters. From these numbers, the markets have been upbeat about Nike’s recent earnings announcements.
P = Average Relative Performance Versus Peers and SectorHow has Nike stock done relative to its peers, Under Armour (NYSE:UA), Crocs (NASDAQ:CROX), Deckers Outdoor (NASDAQ:DECK), and sector?
| Nike | Under Armour | Crocs | Deckers Outdoor | Sector | |
| Year-to-Date Return | 28.82% | 42.55% | -0.14% | 46.73% | 22.61% |
In a very strong sector, Nike has been an average performer, year-to-date.
ConclusionNike provides athletes and beginners alike with athletic and fitness footwear, apparel, and related products. The company recently reported earnings that has sat well with investors. The stock is currently consolidating near all-time high prices and looks poised to head higher. Over the last four quarters, investors in the company have been upbeat as earnings have been improving while revenue figures have been rising. Relative to its very strong peers and sector, Nike has been an average year-to-date performer. Look for Nike to OUTPERFORM.
Thursday, September 5, 2013
Microsoft To Buy Nokia's Mobile Business For $5B
Less than two weeks after Microsoft Microsoft announced its CEO was set to retire, the company has announced another sweeping change: it's buying Nokia Nokia's storied handset business for 3.79 billion euros ($5 billion), licensing its patents and boldly challenging Samsung and Apple in the battle to win the global smartphone market.
The announcement brings an end to Nokia's three-decades-long adventure selling mobile phones, as well as speculation about a future sale to Redmond, dating back to the moment Nokia announced a former Microsoft executive, Stephen Elop, would take the reins in September 2010. That speculation intensified five months later when Elop announced a strategic partnership between Nokia and Microsoft, in which Nokia would use Windows Phone as its primary operating system.
Microsoft said Monday that Elop would now step down as CEO of Nokia and return to Microsoft as vice president of the company's "devices" team.
It added that the transaction would see Nokia's flagship Lumia brand of smartphones and the low-cost Asha line, transfer to its ownership. The acquisition would close in the first quarter of 2014, subject to approval by Nokia's shareholders and regulators, and be "significantly accretive" to earnings.
Nokia will hold a press conference Tuesday, Sept. 3, at 11am local time in Finland, and an extraordinary-shareholders' meeting on Nov. 19th.
"It's a bold step into the future – a win-win for employees, shareholders and consumers of both companies," Microsoft's outgoing chief executive, Steve Ballmer, said in an official statement. History may look back on the deal as Ballmer's swan song.
Forbes contributor Tero Kuittinen called Nokia's price tag "shockingly low," considering that the company's Lumia range has gained some traction recently; it sold roughly 7.4 million units in the second quarter of 2013. But he points out that the company's Asha range of low-cost phones may have come under pricing pressure from cheaper Android phones being shipped to emerging markets.
The $5 billion price tag for Nokia's handset unit is indeed less than the $8.5 billion in cash that Microsoft paid for Skype in 2011.
At the close of the transaction, Microsoft expects approximately 32,000 people from Nokia to become its employees, including 4,700 people in Finland and 18,300 people "directly involved in manufacturing, assembly and packaging of products worldwide." The company said these transferring operations generated roughly 14.9 billion euros ($19.7 billion) or about half of Nokia's net sales for fiscal year 2012.
The remnants of Nokia will be effectively be a telecoms equipment company. It will retain ownership of the company's patent portfolio, and license them to Microsoft for a 10-year period, as part of a separate, $2.2 billion patent deal. Microsoft will also license technology from Nokia's proprietary mapping platform, known as HERE, for four years.
Microsoft is additionally granting Nokia a 1.5 billion euro ($2 billion) loan in the form of convertible notes, which Microsoft says it will fund from "overseas resources."
Microsoft had reportedly come close to buying Nokia's mobile business earlier this year, but the talks are said to have fallen through.
Hot Tech Stocks To Own For 2014
UPDATE, Sept. 2 21:56 PST: Steve Ballmer sent the following e-mail out to Microsoft employees about two hours ago:
From: Steve Ballmer
To: MS FTEs
Date: Sep. 2, 8:00 PM PDT (Sep. 3, 6:00 AM EET)
Subject: Accelerating Growth
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