Growth sectors looking bullish

Early April's volatility and mini-correction have given way to bullish action in growth sectors that could pave the way for higher equity prices ahead.

Although most investors focus on major indexes like the Dow Jones Industrial Average, S&P 500 and Nasdaq, much can be learned from a quick "look under the hood" at specific sectors that are on the move.

So far this year, significant strength has been seen in oil, health care, materials and utilities, and this action reflects what has thus far been a confusing period for the overall stock market.

Oil and materials are considered "growth" sectors because strength here is indicative of rising economic activity, while health care and utilities are considered "defensive" sectors and a place to go when "risk off" conditions prevail.

Now, however, as April showers give way to May flowers, we see a noticeable rotation toward growth sectors as investors regain confidence after April's early volatility.

Recent days have seen significant strength in the transportation sector as the Dow Jones Transportation Average set an all-time record high on April 22. Transportation, of course, reflects economic growth and activity as goods and people move around the world, and strength here is a bullish indication for the broader market.

Other areas showing increased signs of life are oil, gasoline and industrials.

Oil and gasoline have been in sharp uptrends even though the summer vacation and driving season are more than a month away. Gasoline prices are on the rise and oil prices have been supported by tensions in Ukraine and improving economic data.

Regarding the industrial sector, the Dow is on a renewed uptrend and within striking distance of its all-time high.

Looking farther around the sector landscape, technology and small caps, two of the hardest hit during the April sell-off, are also moving higher. These two are considered to be leading "risk on" sectors, and though they've started to climb, they still have! some distance to travel before again challenging all-time highs.

In spite of the bullishness, the utility sector is still showing strength over the past 30 days. This is a cautionary indication as money tends to leave this defensive sector during truly robust rallies. More weakness here would add credence to the bullish case for major U.S. indexes.

Overall, the April mini-correction turned the corner on April 11 and growth sectors and the major indexes have been showing notable strength since then. The next big test for U.S. markets lies at resistance levels marked by highs set on April 2 for the Dow Jones Industrial Average at 16, 573 and the S&P 500 at 1890.

A sustained breakout to new highs would set the stage for a further advance while another failure here would likely take the air out of the recent rally. As always, Mr. Market will tell us what he has in mind. For the moment, a "green flag" is flying in a favorable breeze for U.S. equities.

China Makes Tiffany a Top Investment

Tiffany (NYSE: TIF  ) is down more than 5% during the last month. It tumbled earlier this year on a weak earnings report and has yet to recover. But this could be offering investors a great buying opportunity. Given its exposure to high-end consumers, Tiffany remains one of the most resilient investments in the market. That's because high-end shoppers are less susceptible to economic declines.

Why shares are weak
On an adjusted basis (adjusted for arbitration proceedings), Tiffany's earnings were $1.47 a share during the fourth quarter. Wall Street was looking for $1.51 a share. And the company also guided 2014 earnings below analysts' expectations. 2014 earnings per share are expected to come in at $4.05 to $4.15, per the company, while Wall Street had been looking for $4.31.

There are bright spots
One of the key opportunities for Tiffany is abroad, namely in the Asian market. During the January-ended quarter, Asia-Pacific sales were up 23% year over year. China should be one of the brightest spots for Tiffany going forward. A decade ago, Tiffany only had 11 stores in China. Now it has 45. And China already has the second-largest jewelry market, but it's set to keep growing given the rising middle-class in the country. Also helping it grow will be the rise in penetration of engagement rings in the country.

There's also a changing dynamic in China that should help Tiffany. In the U.S., it's common practice to give an engagement ring, but not so much in China. About 80% of marriages in the U.S. involve an engagement ring, but that number is as low as 30% in China. With the affluence in China growing, that number could see the same type of growth that engagement rings saw in the U.S. in the mid-1900's. From the 1940's to 1960's, engagement ring usage rose from 10% to 50%.

Another key aspect is that many Chinese residents are shopping at Tiffany abroad. And China travel is increasing, which is a big positive for Tiffany. Tourism by Chinese (those traveling outside of China) has grown by nearly 25% annually over the last decade.

What about the other high-end retailer?
Coach (NYSE: COH  ) is still facing challenges when it comes to its U.S. market share. Michael Kors appears to be taking market share on the domestic front, with Coach's North America same-store sales falling nearly 14% in the December-ended quarter. Coach has been relying more on international markets and the men's business to help hedge the North American decline.

But this fall it could see a return to glory. That's when Coach is launching a new line that is spearheaded by Stuart Vevers. Vevers joined in the fall of last year as creative director. Vevers previously worked at the likes of Mulberry and Louis Vuitton.

The industry gets a little smaller
One risk to Tiffany might be the joining of forces by two of the largest jewelers in the U.S., Signet Jewelers (NYSE: SIG  ) and Zale. The acquisition of Zale by Signet will strengthen Signet's market share to 16% for U.S. retail jewelers.

From an investment perspective, shares of Signet are up big on the acquisition news. Signet is up nearly 28% year to date. That has put Signet's P/E up to 17.5 based on next year's earnings estimates. That's above where the company has historically traded.

The other thing worth noting is that Signet operates on a bit of a different level than Tiffany, catering more to the mid-market versus the high-end market. Signet's key brands are Kay Jewelers and Jared The Galleria Of Jewelry.

How shares stack up
As mentioned, Signet is already trading at a 17.5 forward P/E. Tiffany trades at a slightly higher forward P/E, at 18.3. Meanwhile, Coach's is 14.5. But Tiffany's P/E is still at a slight discount to its 10-year average of 21.5 And both Coach and Tiffany offer investors a dividend yield. Tiffany's dividend yield is at 1.6% and Coach's is at 2.7%. And only one of the 26 analysts following Tiffany have a sell rating on the stock.

Bottom line
Both Coach and Tiffany are brand leaders, holding strong positions in the accessory market. Coach offers a solid dividend yield, but Tiffany has one of the best opportunities out there for tapping into the rising prosperity of China. For investors who still need a high-end retailer in their portfolio, Tiffany is worth a look.

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Netflix's Growth Story Is Not Over

Brett Icahn and fund co-manager David Schechter are of the opinion that Netflix (NFLX) can rise further as it accelerates its global expansion. Carl Icahn (Trades, Portfolio) has stated that he cut his Netflix position because it had become too big.The claims of Icahn Jr. and Schechter also deserve a closer look, as despite trading at a P/E of more than 400 both are bullish on the company. It looks like that the two of them are analyzing Netflix along the same lines as MKM Partners, which had upgraded Netflix's price target from $285 to $370 last year and stated that its market cap could reach a whopping $75 billion by 2020.In my opinion, MKM's valuation, although wildly positive, shouldn't be ruled out. Even if the company couldn't achieve the projected $75 billion in market cap, it should get close to the figure. The reasons behind this bullish thesis aren't hard to find. First, according to MKM analyst Rob Sanderson, the video streaming market in the U.S. is worth $200 billion and Netflix's trailing twelve months' revenue is only $4.14 billion. This means that Netflix has a lot of room to grow revenue.What would drive growth?The company has been adding subscribers at a pretty good rate. It saw an addition of 1.3 million new subscribers in the U.S. in the previous quarter, near the higher end of its guidance of 690,000-1.49 million. More impressively, Netflix's international subscribers jumped a whopping 1.44 million. In this way, Netflix ended the quarter with more than 40 million subscribers.The company's strategy of making its original content along with carrying content from other studios has worked well. This helped Netflix bring in revenue of $1.1 billion, at par with estimates, while earnings of 52 cents per share were well ahead of the 49 cents consensus.Netflix has now overtaken HBO in terms of subscribers as it aims to become a web-based television network. It is reportedly engaged in negotiations with U.S. cable TV providers such as Suddenlink Communications, Cox Communications, RCN Tele! com Services, and Atlantic Broadband Finance for content. If Netflix succeeds in getting itself onto cable networks and is integrated into set-top boxes, its usage would most probably increase.A big marketEven MKM Partners' analysis suggests that the "economics of entertainment video will be redistributed with the shift to Internet-delivered services." That's probably the reason why Netflix's partnership with cable operators such as Virgin in the U.K. and ComHem in Sweden could turn out to be lucrative. Sanderson states that cable operators in the U.K. view Netflix as a "must-have" service, and as the company moves into other international markets in the future, its international subscriber count can exceed its U.S. subscriber base.In countries such as India, where broadband penetration is still low, Netflix can find a big market. The number of households with a TV in the country is projected to multiply from around 160 million at present to 200 million in the next four years. This growth will be driven by an increase in cable digitization and direct-to-home services. Penetration in such mass markets could be a big boon for Netflix and help it grow its revenue substantially.Analysts are also bullish about the company's prospects with as many as 12 brokerages raising their price targets on the stock. Analysts at Morgan Stanley expect Netflix to add 4.2 million subscribers in the fourth quarter. Looking forward, CEO Reed Hastings is of the opinion that Netflix can reach 60 million to 90 million subscribers internationally in the future.ConclusionNetflix has a big playing field ahead of it and it isn't hard to see why Brett Icahn and Schechter are still bullish. As I said above, Netflix might not be worth $75 billion by 2020 as MKM suggests, but it can surely continue growing as it taps into more markets and expands its wings.

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Will These Numbers from Marathon Petroleum Be Good Enough for You?

Marathon Petroleum (NYSE: MPC  ) is expected to report Q2 earnings on Aug. 1. Here's what Wall Street wants to see:

The 10-second takeaway
Comparing the upcoming quarter to the prior-year quarter, average analyst estimates predict Marathon Petroleum's revenues will grow 14.1% and EPS will contract -21.7%.

The average estimate for revenue is $23.12 billion. On the bottom line, the average EPS estimate is $1.98.

Revenue details
Last quarter, Marathon Petroleum reported revenue of $23.35 billion. GAAP reported sales were 16% higher than the prior-year quarter's $18.89 billion.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
Last quarter, EPS came in at $2.17. GAAP EPS of $2.17 for Q1 were 28% higher than the prior-year quarter's $1.70 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Recent performance
For the preceding quarter, gross margin was 8.1%, 10 basis points better than the prior-year quarter. Operating margin was 5.3%, 30 basis points better than the prior-year quarter. Net margin was 3.3%, 10 basis points better than the prior-year quarter.

Looking ahead

The full year's average estimate for revenue is $93.31 billion. The average EPS estimate is $8.11.

Investor sentiment
The stock has a five-star rating (out of five) at Motley Fool CAPS, with 191 members out of 198 rating the stock outperform, and seven members rating it underperform. Among 52 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 52 give Marathon Petroleum a green thumbs-up, and give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Marathon Petroleum is outperform, with an average price target of $88.41.

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Tesla: Elon Musk Gets Paid How Much?

Poor Elon Musk. After getting more than $78 million in options, the founder of Tesla Motors (TSLA) was paid just $69,989 in options and cash in 2013, according to a filing today.

REUTERS

Bloomberg explains:

Musk's large option award in 2012 was intended as compensation over a 10-year term, based on achieving specific goals, the company said in the filing. Those include the market capitalization reaching $43.2 billion within a decade; it's $25.8 billion now and was $3.9 billion at the end of 2012.

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To get the full value, Tesla also must expand its lineup with the Model X sport-utility vehicle, a lower-priced sedan, and raise its electric vehicle production to 300,000 units annually with Musk still at the company.

Of course, he does own 23% of the shares in the $25.6 billion company. Tesla dropped 3.9% to $199.85 today.

Why RigNet's Earnings May Not Be So Hot

Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.

Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.

Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on RigNet (Nasdaq: RNET  ) , whose recent revenue and earnings are plotted below.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.

Over the past 12 months, RigNet generated $8.0 million cash while it booked net income of $13.2 million. That means it turned 4.4% of its revenue into FCF. That sounds OK. However, FCF is less than net income. Ideally, we'd like to see the opposite.

All cash is not equal
Unfortunately, the cash flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash flows are of high quality. What does that mean? To me, it means they need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).

For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable for the short term) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it's ordinary in recessionary times, and you can only increase collections so much. Finally, adding stock-based compensation expense back to cash flows is questionable when a company hands out a lot of equity to employees and uses cash in later periods to buy back those shares.

So how does the cash flow at RigNet look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. TTM = trailing 12 months.

When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.

With questionable cash flows amounting to only 1.0% of operating cash flow, RigNet's cash flows look clean. Within the questionable cash flow figure plotted in the TTM period above, stock-based compensation and related tax benefits provided the biggest boost, at 9.6% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed 71.7% of cash from operations.

A Foolish final thought
Most investors don't keep tabs on their companies' cash flow. I think that's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated home-run stocks that provide the market's best returns.

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We can help you keep tabs on your companies with My Watchlist, our free, personalized stock tracking service.

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An Interview With Zillow's Mortgage Expert, Erin Lantz

The Motley Fool is in Seattle, visiting online home and real estate marketplace Zillow. Today we meet with Zillow Mortgage Marketplace Director Erin Lantz to learn more about how ZMM works and whom it serves.

Erin shares ZMM's experiences and outlook on the mortgage market, its own strengths and challenges going forward, and its direct-to-consumer philosophy.

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Austin Smith: Hey, Fools. Austin Smith here, and I'm joined by Erin Lantz, director of the Zillow Mortgage Marketplace. First of all, thank you for taking the time.

Mortgage is obviously a very significant part of your revenue stream. I'm wondering if you could just give those people who are unaware maybe the 30,000-foot view of what it is and how it's driving part of Zillow's growth today.

Erin Lantz: Zillow Mortgage Marketplace, or ZMM as we call it, is a comparison-shopping site for borrowers to compare a whole bunch of different lender quotes on an apples-to-apples basis.

The way we make money is, lenders pay us to advertise their quotes on ZMM. It's a cost-per-click model, so we charge lenders somewhere between $0 and $12 per click. The average is around $3 per click, and we monetize the same way on site and on mobile.

Smith: What sort of factors are impacting that CPC number?

Lantz: We have a dynamic pricing model that changes all the time.

Smith: Got to keep them guessing.

Lantz: Exactly. Exactly. What we're trying to get a gauge on is the demand to quote a particular borrower's loan request. You can imagine that a borrower who comes in with really great credit and a lot of money down in a very high-priced state, there might be a lot of demand for lenders to quote that borrower, so that would be a higher-priced click.

Smith: Are your borrowers all sorts of banks? Just big institutions? Who makes up that audience that's advertising?

Lantz: We have hundreds of different lenders, and they're really the whole gamut. We've got the small brokers, we've got mid-market correspondent lenders, we've got online lenders with big call center staffs, and we've got the big national banks.

Smith: Do you guys do any vetting of these lenders to ensure the quality of the mortgages that people are getting? Is there some sort of process for filtering out the good or the bad there?

Lantz: When we launched ZMM back in 2008, part of the model originally was make this transparent and self-regulating.

The core of that is our ratings and reviews platform. We have over 30,000 ratings and reviews, so that makes it quite self-regulating. You'll see as lenders get bad reviews, they'll stop getting contacts or they'll get fewer contacts, and the inverse is true for lenders who get great reviews.

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That's the self-regulating piece, but then we also have a quality assurance team for mortgage that does the extra layer of regulation, so they're vetting lenders before they get online, they're mystery shopping them periodically to make sure every lender is honoring the quotes that they post, and they'll investigate any quotes that are flagged as suspicious and they'll take them down if necessary.

Smith: It seems like there's been a big boom in refinancing. I'm wondering two things, maybe -- how that's impacting your mortgage arm, and what sort of trajectory you guys see in the refinancing boom, if you guys could comment on that?

Lantz: Definitely. Historically low mortgage rates have been a boon for refinancers. Zillow Mortgage Marketplace gets most of its traffic from Zillow, from people looking to buy homes, so we're actually mostly purchase loan requests.

We definitely see ... refis are an important part. Underwater refinances are an important part of our business -- we're the only marketplace where you can get quotes for HARP or FHA Streamline if you're underwater -- but mostly borrowers on ZMM are looking for mortgages to purchase a home.

As the interest rates rise -- we expect rates to remain fairly low for the next 12 to 18 months -- but as they rise, refis will fall down, and we expect the purchase component to fill most of that gap. Again, given where we stand, over-indexed on purchase, we're pretty comfortable about how we can manage that transition.

Smith: What does that makeup look like? You said, obviously, as rates go up refis go down, maybe new purchases would go up. Is it a one-to-one comparison? How does that shake out, at least from what you guys see on the lead-gen end?

Lantz: From an overall market perspective, I think if you look at the MBA, they're forecasting the market would shrink somewhat but purchases will almost fill the gap left by refi, so the overall market will contract somewhat.

One of the X factors is the extension of the HARP program. Whereas much of the market was forecast to contract, I think extending HARPs from 2013 ending to 2015 is pushing out the length of the refi boom. But overall we think the market will contract somewhat, but purchases will fill much of the gap left from the refi market.

Smith: Given that somebody who's refinancing, I guess I would assume -- correct me if I'm wrong -- since they've already been vetted and qualified once before that the cost per click would be significantly higher than on a new purchase lead? Or am I misunderstanding that?

Lantz: I wouldn't characterize that as the rationale for why refis are higher, but you're right. In today's market, refi clicks are typically higher.

The reason is, you're either in the money or you're out of the money. If you're in the money, you're probably interested in closing right then, so you're just an easier, lower "manufacturing cost" borrower for a lender to close.

The lender doesn't have to worry about "do you have enough of a down payment saved up," and all those types of -- does the seller actually agree to sell you the property you're buying -- so there's just less transaction risk that makes the transaction fall out. Refis are easier.

Smith: OK, got it.

Lantz: In the purchase market they're harder, and when you've got an easy refi and a difficult purchase, the lender behavior is to focus on the easy refi, so although we do see purchase clicks at a lower overall cost right now, we expect as lenders have to focus on purchase and are searching for more volume, they'll get more efficient and we'll have more demand for those purchase contacts.

I think that positions us well from a pricing leverage standpoint.

The other thing that's happening is, as lenders need to learn how to do, purchase well, they're looking to technology, they're looking to lead management tools like Moretech to help them do a better job converting those contacts, which are hard to convert because you have to stay in touch with that borrower for three months, six months at a time.

As lenders develop those skills, we think those purchase contacts will become more valuable to them.

Smith: What sort of impact do overall rates have on your CPC? If it's a higher rate and maybe the lenders get a little bit more from the transaction, does your cost per click go up a little bit? What's the dynamic there?

Lantz: The interest rate environment doesn't impact our click pricing, so unrelated. The rate environment is important, particularly to the refi market, in terms of the size of the addressable market, so how many consumers are in the money, and how interested are they in transacting at that time?

Smith: Are you seeing any sort of loosening of credit standards as the market thaws a little bit, or are things still pretty tight?

Lantz: We're starting to see a little bit of that, mostly around the lower ... we're seeing a little bit more lender activity around lower down payment borrowers or slightly lower FICO bands than we were a few years ago, but we're nowhere near where we were at the boom-year levels.

Looking at some of the ZMM data, since the last three years ago, we've seen borrowers with lower down payments are getting about three times more lenders willing to quote on their request.

Smith: Interesting.

Lantz: So, a little bit of movement there, but again, mostly we're not nearly as close to where we were back in the boom years, by any means.

The other factor there is that lenders are really busy in this low-interest-rate environment, so we're not seeing them have much incentive to try to widen their guidelines, because they've got more business than they can handle in the current guideline box.

Smith: What sort of makeup of mortgage leads are you seeing people take? ARMs were sort of the dynamite of the financial crisis. Are you seeing ARMs popular again? Is it 30-year fixed, 15-year fixed? What's the makeup of how mortgages are getting delivered today?

Lantz: The vast majority are 30-year fixed. We are starting to see a little bit more shorter-term fixed-rate mortgages, so a 15-year fixed, especially because rates are so low that we're seeing some borrowers are able to move from a 30 to a 15 and have an insignificant increase on their monthly payment even though they're reducing their term considerably. We're seeing a bit more of the shorter-term, but most everything is fixed and almost all of it's 30-year fixed.

Smith: As homebuying recovers a little bit, who are you guys seeing -- on the mortgage end -- buying these homes? Is it first-time homebuyers? I know we mentioned there was a lot of refi, so we know that that's in there. Investors? What's the makeup looking like?

Lantz: Looking at February data of overall market, we see about 35% of buyers are first-time homebuyers, but it's really hard right now to get a good handle on who the buyers are, because inventory is so tight -- so there's a lot of people who would like to buy who can't buy because they can't find a home -- so it's hard to get a really great handle on that.

Certainly we're also seeing investor activity in the market overall, and in certain markets that were hit hardest by the recession -- some markets like Phoenix -- we've seen really rapid 20% appreciation year over year from a lot of investor activity.

It's a mix, and I think it'll evolve as equity rebounds, prices rise, and as the rate environment changes.

Smith: If we were to maybe understand regional impacts on this division, what sort of trends do you see happening as far as mortgage leads on a city by city basis? If a city like Phoenix, let's say they see a rapid price appreciation. Do you then see that followed by a huge number of lead gen, or are you guys on the front end of that, or is there no impact?

Lantz: I don't think there's that type of impact. I think the larger geo impacts are going to be around buyer activity in those markets, as well as online and mobile usage in those markets. Those are the consumers that are finding ZMM.

Now, about a third of our ZMM users are finding us on their mobile devices, on phones and tablets, so as we see those buyers skewing maybe toward different regional areas we might see more activity from that, but the home-pricing nuances are less driving what's going on in the mortgage marketplace.

Smith: Where do you see ZMM in a few years contributing to Zillow as a division? What should we be looking forward to?

Lantz: We think that we have far and away the best consumer experience for mortgages. It's the way to find the lowest rates, lender ratings and reviews; you can shop anonymously -- so you contact your lenders, not the other way around -- you can find us on mobile, you can get all sorts of products, even underwater products, so bar none, the best experience out there.

We see a time when everyone who's in the market for a mortgage at least comes to check what their offer is, relative to what they can find on ZMM. But now we are less than one half of 1% of that market.

Smith: So there's a lot of potential. Best product, a lot of potential. That's a good formula to be in, I guess.

Lantz: Yes.

Smith: Do you have any advice for people looking to take out a mortgage today, looking to buy a home? Common pitfalls that they should avoid?

Lantz: The No. 1 thing is be sure to shop around. I can't tell you how many times we see people who spend all this time and money and energy negotiating the price that they're going to pay for their home, and then they get to the very last point when they need to actually buy it, and they've spent no time looking into their mortgage options.

We think it's really important. Even small changes in your interest rate can mean thousands of dollars over the life of your loan, so shopping around, making an informed decision, and working with a lender that will take care of you is absolutely the biggest piece of advice.

Smith: As people look at the Zillow Mortgage Marketplace division, what are some of the real strengths that you guys have in that division?

Lantz: Starting out with our position of leadership in mobile, we were in mobile early and -- really, to our surprise -- we're seeing extreme consumer adoption of even complex products like mortgage shopping on mobile. I think that's a place where we're really well positioned.

Secondly, on the purchase side, especially given our organic source of traffic from Zillow and seeing what we've been talking about, we know that refis are not going to be here forever, so we feel like we're in a real position of strength being deep in the real estate vertical and deep in the purchase market.

As rates rise, we're well positioned to introduce lenders to a continued stream of purchase contacts and give lenders the tools to convert those more effectively. I think that's where we feel really strong.

The biggest challenge is letting people know about us. Most people on Zillow still don't know that we exist, that ZMM is part of Zillow, and certainly off of Zillow, our awareness is limited. That's a huge opportunity for us, especially given the size of the market.

We estimate lenders spend $11 billion a year to advertise home loans to consumers, and we're just a small fraction of that. Gaining a bigger piece of that and building awareness of ZMM as the place for consumers to find lenders, I think that's the biggest challenge that we're facing right now.

Smith: Any strategies for getting that awareness out there that you'd care to share?

Lantz: Sure. Mobile is part of that. We've got mobile apps, so if you're searching for a mortgage calculator or mortgage rates, you'll see us in the App Store. We're also investing heavily in SEO, so we rank well for those terms.

Again, trying to find sources of traffic outside of Zillow, and then obviously within Zillow we're working on merchandising and making sure that the value proposition of ZMM is well articulated and obvious to consumers in the market to buy or refinance and at the right time in that process.

Smith: Is there any opportunity to maybe get better integrated with the Premier Agents? Logical that if you hand off leads to people and they start to convert a certain amount, their buyers are going to start looking for mortgages. Is there an opportunity there, or are there restrictions? I'm not quite sure what the dynamic is for participating in that lead-gen process.

Lantz: Historically, our focus has been direct to consumer, and that's really where we're focused right now.

We just think that there's a tremendous opportunity to empower consumers with more information so that they can then have a conversation with their agent about whichever lender they want to use, whether it's the one they found on ZMM or the one that their agent recommended, or the one that they used before, for their last transaction.

Our view is start with consumer empowerment, and we think ZMM direct to the consumer is the right place to do that, and then enable those conversations with other professionals that they're working with on the transaction.

Nokia Replaces BlackBerry at Gi Group

Chalk up another win for Nokia (NYSE: NOK  ) .

Following on the heels of reports last week, that Russia's Mobile Telesystems has halted orders of Apple iPhones for resale to its customers, Nokia announced that one of its own customers has chosen the Nokia Lumia smartphone to replace BlackBerry (NASDAQ: BBRY  ) mobile devices used by its workforce.

On Tuesday, Nokia confirmed that Italian human resources firm Gi Group "has chosen Nokia Lumia as its business smartphone, replacing BlackBerry" among its workforce of more than 800 employees in 19 countries around the world. Henceforth, Gi Group employees will be equipped with Lumia 925s, 820s, and 620s, all able to "seamlessly operate with Gi Group's Microsoft Outlook mail and Microsoft Office applications."

Hot Telecom Stocks To Invest In Right Now

Gi Group HR manager Barbara Cottini was quoted citing the need "to connect with colleagues and access and edit Microsoft Office documents, wherever they happen to be" as a key factor in choosing the Microsoft (NASDAQ: MSFT  ) -powered Lumia over the BlackBerry.

Despite the good news, Nokia shares traded down 3% Tuesday, to $4 a share.

Here's Who Will Save Disney Stock From "The Lone Ranger"

On the heels of The Lone Ranger's failure at the box office so far, analysts are estimating that Disney  (NYSE: DIS  ) may be forced to take a writedown of at least $100 million -- similar to last year's $200 million writedown for John Carter.

If that's the case, then why has Disney stock risen around 2% so far this week?

According to Fool contributor Steve Symington in the following interview with the Fool's Alison Southwick, investors aren't (and shouldn't be) worried about Disney stock in part because the stellar $1.2 billion global performance of Iron Man 3 should be more than enough to offset the dominant entertainment company's Lone Ranger losses.

But what do you think? Please watch the following video to get Steve's full take, and then let us know whether you think Disney stock is still a "buy" in spite of The Lone Ranger's dismal take so far.

It's also easy to forget Disney's reach doesn't stop end with the big screen. The future of television begins now ... with an all-out $2.2 trillion media war that pits cable companies such as Cox, Comcast, and Time Warner against technology giants such as Apple, Google, and Netflix. The Motley Fool's shocking video presentation reveals the secret Steve Jobs took to his grave and explains why the only real winners are these three lesser-known power players that film your favorite shows. Click here to watch today!

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Second General Motors recall delayed by years

GM CEO Mary Barra recently faced questions on Capitol Hill about the automaker's delayed recall for an ignition switch flaw.

NEW YORK (CNNMoney) General Motors and government safety regulators now have a second recall to answer for.

The first involved long delays in initiating a recall tied to defective ignition switches that could shut off a car's power while driving. General Motors (GM, Fortune 500) knew of the problem in 2004, but the recall that now totals 2.6 million cars was announced only this past February.

A second recall, announced in late March, involved problems with power steering and affected 1.3 million U.S. vehicles, including Saturn Ions from model years 2004 to 2007. Twelve accidents have been tied to the defect, though no deaths.

The first report of a Saturn Ion power steering issue was sent to the government's National Highway Traffic Safety Agency in June 2004.

Newly-released documents show NHTSA opened an investigation into the problem in September 2011.

The documents reveal thousands of customer reports of power steering issues: nearly 4,800 complaints and over 30,000 warranty claims.

It wasn't clear why the Saturn Ion vehicles were not included in a 2010 power steering recall of about 1 million GM vehicles. The documents show GM told regulators the power steering system in the Ions is the same as in those recalled vehicles.

A GM spokesman declined to provide additional comment, pointing CNN and the Associated Press, which first reported the new documents, to GM's statement in March announcing the power steering recall. "With these safety recalls and lifetime warranties, we are going after every car that might have this problem, and we are going to make it right," the automaker's vice president for vehicle safety, Jeff Boyer, said, adding past efforts had not been enough.

  Timeline: What went wrong at GM

NHTSA said that when GM announced the recall, it "was actively working to bring this investigation to a resolution." The statement also touted the agency's safety efforts that contributed to bring "vehicle fatalities to historic, all-time lows."

The loss of power steering increases crash risk, although the vehicle can still be steered manually, NHTSA said. GM identified three possible causes, including! faults with the power steering motor.

--CNN's Mike Ahlers contributed to this report

Tesla shares close well down; fire report hurts

Tesla Motors share prices continued to slide today, lingering around $144 before opening, then falling to close at $139.91. That's down $11.25, or 7.4%, from the previous day's close.

Since Tesla announced its third-quarter earnings after trading hours Tuesday, the stock has dropped 20.9%.

After falling to less than $140 today, shares began to inch back up as investors perceived a bargain. But reports of a third Tesla Model S crash fire snuffed the mini-rally and the shares turned back down.

About 22.1 million shares were traded, a very big day for Tesla stock. Average lately has been 10 million, according to NASDAQ.

Barclays analyst Brian Johnson has been saying the right price is $141. He didn't issue any new advice to clients today.

Tesla shares had closed Wednesday at $151.16, which was down 14.5% from the previous day.

FIRES: Third fire in Tesla Model S reported

EARNINGS REPORT: Q3 results don't satisfy all

Tesla's founder and CEO, Elon Musk, said Oct. 24, "The stock price that we have is more than we have any right to deserve." That day, Tesla closed at $173.15 up 5%.

His comment knocked a few bucks off the price the next few days, but by Nov. 4, the day before the Q3 earnings report, it had topped the Oct. 24 trades.

Musk has declined to say if the latest thumping is an overreaction, or a smart correction.

Despite the recent declines, Tesla stock is up 313% this year.

On Tuesday, after the close of NASDAQ trading, Tesla said it made $16 million, or 12 cents a share, in the third quarter, using adjusted non-GAAP methods. That was a penny more than analysts expected.

Under GAAP, though, it posted a $38 million loss, or 32 cents a share. That was worse than the 25-cent loss analysts forecast.

The stock's 52-week high is $194.50, the low is $29.85.

5 Most Common 401(k) Plan Red Flags

There are five red flags defined contribution plan sponsors should watch for when evaluating their plan performance, according to research by Judy Diamond Associates, who provides sales prospecting and plan analysis tools for benefits brokers, financial advisors, plan providers and carriers serving the employee benefits and retirement markets.

The flags indicate whether a plan is underperforming, is poorly designed or has reached certain thresholds that suggest it may need new services.

“Identifying the most common problems and challenges facing the almost 600,000 401(k) plans nationwide can empower financial advisors to address the concerns that are keeping their clients up at night,” said Eric Ryles, managing director of Judy Diamond Associates. “In that way, our subscribers are able to better prepare their clients for the future and cement their own status as a consultant and valued partner, rather than ‘just’ a 401(k) vendor.”

Judy Diamond Associates based its research on the most recent 401(k) plan disclosure documents released by the Department of Labor.

Red flags are key indicators of a plan’s general health and are valuable as a sales prospect for an advisor or other provider. 

The five most common 401(k) plan red flags (in reverse order) are:

5. Corrective distributions issued: Judy Diamond found 63,349 plans that fell into this category. Plans that issue corrective distributions may be experiencing flaws in the way their plans were designed or rolled out. Participation rates and employee contribution levels at these plans may be lacking and they may be receptive to better advice, education and products from new providers.

4. Reduced employer contributions: Judy Diamond found 63,694 plans that reduced their contributions. Plans that reduce their employer contributions may benefit from better plan design.

3. Plan recently terminated: Judy Diamond found 68,222 plans that fell into this category. Recently terminated plans may offer advisors opportunities to roll participants over into individual retirement accounts.

 

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2. High average account balance: Judy Diamond found 109,287 401(k) plans that fell into this category. Having a high average account balance per participant indicates that there may be participants who are nearing retirement and approaching the need for new, individual financial advice.

1. Bottom 10% in employer contributions: In its research Judy Diamond identified 184,442 plans that fall into this category. The bottom 10% is calculated based on the value of the contribution, not the number of plans offering each value. That means that a clustering of plans around certain values, especially zero, can result in more than 10% of plans offering employer contributions ranked in the bottom 10% by value.

-- Related ThinkAdvisor stories:

These CEOs Will Make You Rich

We're sharing this edition of Private Briefing with you because it contains some of Bill's best insight into what turns good companies into great ones - and how you can profit from them. Bill's readers profit from analysis like this all the time...

During the 30 years I've spent as a business journalist and financial columnist, I've developed a long list of personal axioms that have helped me identify "Best of Breed" investments.

These axioms touch on such topic areas as finance, marketing, intellectual property, and even competitive threats. But some of the most important of my personal investment aphorisms have to do with leadership and a company's management team.

And leadership starts with the CEO.

As one of my precepts holds, "A good CEO can create a very strong company. But a great CEO can create an empire."

Just like these...

Build an Empire of Profits

The example I usually use to illustrate this axiom is John F. "Jack" Welch Jr., who ran General Electric Co. (NYSE: GE) from 1981 to 2001.

Welch had already been with GE for two decades prior to becoming the head honcho and had a well-earned reputation as a maverick.

When he took over as chairman and CEO in 1981, he inherited a moribund industrial company with a stultifying bureaucracy, an oversized workforce, and many laggard businesses. One of his edicts stated that every GE business had to be either No. 1 or No. 2 in its respective market; those that couldn't meet this requirement would be sold, broken up, or shut down.

In the years to come, Welch restructured GE's business holdings, bought some businesses and sold others, and carved out unneeded layers of management. He also slashed business-unit work forces while leaving the underlying business alone - a corporate version of the "Neutron Bomb" invention of the time. The parallels earned Welch his "Neutron Jack" sobriquet, a nickname he was said to despise.

Welch's results ultimately silenced any critics: During his tenure at GE, the company's value rose 4,000%. His retirement came with a severance of $417 million - the largest in history. And GE hasn't been the same company since.

As I've mentioned in past Private Briefing columns, I had the opportunity to interview Welch. And I followed his career - and results - with a deep interest. And when I related this story to a colleague a week or so ago, it served as a bit of inspiration... giving me an idea of something we could do here - for you.

It's something I believe will put some real money in your pocket.

So let's take a look ...

An Intriguing Conversation...

A week or so ago, I related this story about Welch to Radical Technology Profits Editor Michael Robinson. Like me, he had an earlier career as a journalist, so we were quickly in synch in analyzing the importance of leadership.

Wanting to capitalize on Michael's tech-sector expertise, I ended up issuing a bit of a challenge.

"We see the long-term gains that Welch was able to generate for his shareholders," I told Michael. "So, what if we turn our attention to the tech sector - your bailiwick - and 'handicap' the five CEOs that we'd want to take the same kind of long-term trip with? A lot of these companies have probably enjoyed some pretty dramatic gains already. But those are the 'trees'... and we can't lose sight of the reality that the kind of long-term returns that Welch generated for GE shareholders are actually the 'forest.' I'm betting that if we use your insights into the global tech sector, we could identify the 'Neutron Jacks' of the digital world - folks with vision and the ability to create a venture that can evolve, adapt, and grow with the changes technology brings."

I could tell that Michael was locked in on what I was saying, because he immediately added: "And the great thing, Bill, is that - with GE, as great as it was at the time - you're still talking about an industrial company. Here we'll be talking about tech firms. And, for that reason alone, you'd have to think that, over the same long-haul period, the returns that we'll be talking about will be much, much more than were realized by Welch."

Three final thoughts: First, we decided to handicap five CEOs instead of just one in the interest of diversification... not every one of these will play all the way out. And, second, we chose established CEOs - those with a track record already. A startup might generate stratospheric returns, but that wasn't the point of this exercise. Finally, we wanted to do this now, reasoning that any kind of an extended sell-off might give you the chance to establish positions in these stocks at even lower prices than they're trading at today.

The breakdown I present now is the result of a lot of legwork by Michael - with a few contributions from me...

Top Tech CEO No. 1

Elon Musk, of Tesla Motors

Best known as a co-founder of electric-vehicle (EV) firm Tesla Motors Inc. (Nasdaq: TSLA), Musk showed a burning desire to turn his technical talents into money very early in life.

Raised in his native South Africa and later in Canada, Musk learned computer programming at age 12. Working by himself, he programmed a video game that he then sold for $500.

Peanuts, to be sure, but the experience was an inspiration to Musk - an epiphany, in fact, that high-tech was the pathway to success - and wealth.

After earning his physics degree from the University of Pennsylvania and business degree from Wharton, Musk turned his passion for business into a string of successes.

He helped launch Zip2, a software company later sold for $305 million, netting Musk $22 million for his shares. He then developed PayPal, which later sold to eBay Inc. (Nasdaq: EBAY) for $1.5 billion. At the time, Musk owned 11.7% of the company, making his stake worth roughly $175 million.

In 2002, he founded SpaceX with $100 million of his own money. Less than six years later, the company received a $1.6 billion NASA contract. In 2012, the firm made history as the first commercial company to launch and dock a vehicle at the International Space Station (ISS).

Besides serving as Tesla's CEO, Musk is chairman of the board at SolarCity Corp. (Nasdaq: SCTY). Over his career, he's received countless awards.

In 2007, Inc. magazine named him "Entrepreneur of the Year" for his involvement with Tesla and SpaceX. And in 2011, Forbes named him one of "America's 20 Most Powerful CEOs 40 and Under."

Along the way, Tesla's shareholders have done extremely well. Since Tesla's initial public offering (IPO) back in 2010, the stock has returned nearly 1,100%.

Tesla's shares have sold off sharply of late. But the lower they go, the more interested we get. Musk is a proven builder. And he's still standing at the starting line of what we believe will be a very profitable career for those willing to go along for the ride.

Top Tech CEO No. 2

Reed Hastings, of Netflix

A natural whiz at math, Hastings didn't start out in business. Instead, he joined the Peace Corps, serving in places like Switzerland and Africa.

With public service under his belt, Hastings went back to school, eventually receiving a Master's Degree in computer science from Stanford. In 1991, he founded Pure Software, which provided debugging and troubleshooting services.

Then came Netflix...

Hastings founded the company in 1998, as a through-the-mail movie-rental business. The company began with a subscription format focused on physical media like videotapes and DVDs.

It was here that Hastings showed he was a visionary exec, and not a caretaker.

The "experts" up on Wall Street thought the company would have a tough time moving to a web-based platform.

Hastings proved them wrong.

He recast Netflix Inc. (Nasdaq: NFLX) as a dominant player in the burgeoning market for online movies. And the company has won awards for its original TV shows.

Hastings also is pushing the boundaries of the format by moving Netflix into ultra-high-definition TV (UHDTV), a Next-Big-Thing technology that could ignite the next spending boom in broadcasting. (Indeed, one of our favorite recommendations - which allowed Private Briefing subscribers to double their money in just a few months last year - is a play on this "4K" technology.)

Today, Netflix has 44 million subscribers in more than 40 countries around the world. The stunner: The company says its subscribers watch more than a billion hours of its streaming service each month.

Hastings has done incredibly well by his shareholders. With a $22 billion market cap, the stock trades at $378 a share. Over the past five years, it's gained 920%.

Top Tech CEO No. 3

Jeff Bezos, of Amazon.com

You'd think the King of E-Commerce would have started his career in high tech.

But after getting degrees in electrical engineering and computer science, Bezos beat a path to Wall Street, becoming a vice president for Bankers Trust. He later became a senior veep at D.E. Shaw & Co., a firm known for its computer-driven trading know-how.

In 1994, Bezos chucked that life... for a different one.

He and his wife packed up and moved from New York to Seattle. On the cross-country drive, Bezos banged out Amazon.com Inc.'s (Nasdaq: AMZN) initial business plan.

In turning Amazon from bookseller into the world's largest online retailer, he became a master marketer - with a gift for cross-selling, up-selling... while leaving his customers feeling thrilled with their purchases. He pioneered the use of one-click ordering and encouraged customers to review products, a comforting feature that attracts new buyers and builds loyalty.

In 2009, he orchestrated the purchase of online shoe-seller Zappos Inc. for $850 million. Zappos still ranks as one of the more respected e-commerce brands.

As a classic growth entrepreneur, Bezos also has paid attention to product handling that drives down overhead. In 2012, Amazon bought robotics player Kiva Systems Inc. for $775 million.

And he turned a company "surplus" into a whole new business when he parlayed the extra space on Amazon's servers into a commanding lead in Cloud Computing. In fact, The Wall Street Journal estimates that Amazon Web Services has annual sales of at least $3 billion.

At its recent stock price of $350 a share, Amazon has a market value of $170 billion. Over the past five years, the stock has gained 410%. I got to interview Bezos back in the early 2000s. And he's even more impressive today than he was back then.

Top Tech CEO No. 4

Larry Page, of Google

It's no surprise that Page ended up in computer science: Because he grew up in a high-tech household, Page was a true product of his environment. Page's father, Carl, earned a doctorate in the subject in 1965 and is considered a trailblazer in artificial intelligence (AI).

This may explain why Page has steadily moved Google Inc. (Nasdaq: GOOG) beyond search - first with the "Mobile Wave" and Cloud Computing, and now into such areas as "wearables," Google Glass, robotics, and autonomous vehicles.

In fact, he makes the cut for this list of remarkable tech CEOs as much for his vision as for the cash he's put into shareholders' pockets.

Page followed the path that his father had blazed. He received a Bachelor's Degree in computer engineering and later a Master's in computer science.

In 1998, while pursuing his doctorate from Stanford University, Page co-founded Google with partner Sergey Brin, serving as the company's president of products.

And he has a reputation as a very big thinker. In recent months, Google has acquired at least seven robotics companies and a handful of others directly involved with artificial intelligence.

Of course, neither Page nor Google will disclose exactly what these moves mean for the company's future. But this is the company that hired Ray Kurzweil, the futurist who's famous for predicting the blend of man and machine that's referred to as the "Singularity."

In that context, Google Glass, driverless cars, and Google's new AndroidWear operating system for wearable tech points to a vision of a hyper-connected world - with Google as the axis.

Page ranked 24th on the Forbes list of billionaires in 2011. The next year, he placed 27th on the Bloomberg Billionaires Index, with an estimated net worth of $21.1 billion.

Like the other execs on this list, Page's shareholders have done well. Since he took over the CEO spot back on April 4, 2011, Google's stock price has roughly doubled to its current $1,150. Over the past five years, GOOG shares have soared 240%. The company is worth $390 billion.

Top Tech CEO No. 5

Dave Cote, of Honeywell International

Honeywell International Inc. (NYSE: HON) CEO Dave Cote is proof positive that CEOs can come from humble beginnings, too.

His parents were a homemaker and a gas-station owner. As a teen in New Hampshire, he worked at his dad's garage and also washed cars. He dropped out of college for a year and became a commercial fisherman.

After returning to school so he could one day support his family, Cote quickly earned a reputation as a strong leader. Known for being extremely decisive, he began his steady climb to the top management spot at a company that's a world leader in aerospace.

The trade journal Institutional Investor recently name Cote the "Best CEO" in Honeywell's industry segment. Last year, Chief Executive magazine named Cote "CEO of the Year." And Barron's has recognized him as one of the world's best CEOs.

This spring, Cote will be inducted to the Horatio Alger Association of Distinguished Americans. The group recognizes leaders who have demonstrated courage and character in overcoming obstacles on the road to success.

The timing of all this is intriguing: Cote recently announced a new strategic plan for Honeywell.

The first part of Cote's new vision calls for Honeywell to boost its current 1.9% dividend and buy back $5 billion in stock. But the plan also seeks growth: It calls for the company to make acquisitions of as much as $10 billion.

Cote is clearly a strategic thinker. But he's also got the hard-charging drive needed to make that plan come to life.

And he's already rewarded shareholders.

After a five-year surge that's taken the shares up 214%, Honeywell's $90 stock price gives the company a market value of $73 billion. And the dividend payouts have also boosted shareholder returns.

Investing fads come and go, and Wall Street turns itself inside out worrying about quarter-to-quarter numbers and whether guidance is a penny above, or a penny below, some artificial projections.

And when sell-offs start, most investors feel most comfortable when running to the sidelines - which locks in their losses and guarantees that they'll miss the eventual rebound.

But we're different. We're sharpening our pencils and are clicking our ballpoint pens: If this sell-off deepens, we now have a partial "shopping list" of stocks we want to own.

That shopping list carries the heading "Strong CEO Companies."

Now we just have to decide at what price we wish to buy.

We're going to help you with that, too.

American Heritage Expands its Footprint (MDBX, AHII, ERBB)

When Tranzbyte Corp. (OTCMKTS:ERBB) and Medbox Inc. (OTCMKTS:MDBX) both announced they would be unveiling vending machines to dispense medical marijuana and/or recreational marijuana, fans and supporters of hemp/pot applauded the ease of access, but even some of the most die-hard supporters saw potential problems. Although the machines made by MDBX and ERBB would only dispense marijuana if a strong verification procedure had been successfully performed, there was just something a little un-nerving about an un-manned metal box that - given the right hacking capabilities - could be fooled into giving marijuana to someone who shouldn't have it. Or barring that, the machines (which are admittedly solid and stout) could still be vandalized, broken, or even outright stolen if left unprotected. Those are long shots, granted, but thieves know few bounds.

The philosophical underpinnings that prompted the devices to be made by Medbox and Tranzbyte, however, are still sound... consumers want convenience, and vendors don't want to have to incur the expense of staffing retail outlets whenever and wherever a consumer gets the urge.

Enter American Heritage International Inc. (OTCBB:AHII). No, it's not marijuana play. It's also not a maker of marijuana vending machines. It's an electronic cigarette maker still in its initial expansion phase, and seeing the potential of vending machines (but without the risk and potential legal hurdles of marijuana vending machines), the company announced this morning it has inked a deal with a major operator of vending machines to sell its e-cigs.

Initial, American Heritage International will see its line of electronic cigarettes sold in 330 vending machines in the Las Vegas area. The vendor has thousands of self-serve vending spots under its umbrella, however, so this relationship could open a lot of doors for AHII.

And, it's very much a right time/right place/right product situation for American Heritage International Inc. Last year, e-cig sales surpassed the $1 billion mark, and are projected to drive $3 billion in revenue this year. By 2047, electronic cigarette sales are projected to surpass sales of traditional tobacco cigarettes. The high-growth period for these stocks is going to be the ramp-up in sales over the next few years, and with no clear leader in the fast-growing space yet [NJOY owns 40% of the market, but that's a tentative lead], AHII has just as much opportunity to take the lead as anyone else in the electronic cigarette space.

Indeed, American Heritage may have something of an inside route to the leaderboard of the e-cig world. Its cigarettes are the only ones that actually look like a real cigarette rather than a ballpoint pen, and its cigarettes are the only e-cigs that are currently made in the United States where their manufacture can be monitored; most others are made in China. Better still, in recent comparative testing, most consumers preferred AHII electronic cigarettes to other brands. For the same reason the company's products are favorites in retail establishments, its products should do well in vending machines.
 
Bottom line? While it may not be game-changing for the company, adding 330 vending machines to its distribution network is nothing to sneeze at. In time it will make a noticeable dent in the American Heritage International Inc. top line, and that's without the vending company adding the electronic cigarettes to other locations. If and when other locations are added, it could be a real boon for AHII, in terms of revenue as well as sheer exposure. Perhaps best of all, unlike the vending machines being made by Tranzbyte or Medbox, e-cigs aren't likely to hit any kind of regulatory or legal headwind except for those that are already in place for traditional tobacco cigarettes.

For more on American Heritage, its investor presentation PDF offers the most insight. The corporate website can be found here.

Lawsuit: CME aided high-frequency traders

Three traders have accused the world's largest futures market of letting high-frequency traders get an improper advance look at price and market data and execute trades using the data before other market participants.

In a federal lawsuit seeking class-action status, the traders alleged that the CME Group secretly maintained the practice from 2007 through this month and financially victimized an untold number of market participants by engaging in "a fraud on the marketplace."

The traders charged that CME, owner of the Chicago Mercantile Exchange and Chicago Board of Trade, falsely assured all market participants that their exchange fees and data-fees gave them access to financial data "in real time."

But high-frequency traders, equipped with powerful computing equipment that can receive and execute trades on financial data in tiny fractions of a second, got the market information before anyone else, according to the April 11 lawsuit filed in the Northern District of Illinois.

By allowing the procedure and failing to disclose it to all traders, the CME "institutionalized market manipulation and created an opaque and hidden marketplace for financial futures," the lawsuit charged.

The case was filed amid government and regulatory probes examining whether high-frequency traders have an unfair edge over competitors. The investigations have gained increased public focus with last month's publication of "Flash Boys," a critical examination of high-frequency trading by author Michael Lewis.

In response, the CME Group said the lawsuit was "devoid of any facts supporting the allegations" and demonstrated "a fundamental misunderstanding of how our markets operate."

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"It is sad when plaintiffs' lawyers bring a suit based on a desire for publicity, and in the rush to file a suit fail to undertake even the most! basic effort to determine if there is any basis for their allegations," said the CME Group, calling the case "without merit."

The lawsuit was filed on behalf of futures traders William Braman, Mark Mendelson and John Simms, but seeks class-action status to represent other market participants allegedly damaged by preferential treatment of high-frequency trading.

The action accuses the CME Group of fraud, fraudulent concealment, market manipulation and disseminating false information. It seeks unspecified compensation for financial damages.

3 Things Magnum Hunter Resources Must Do to Win Back Investors

It's been a tough year for investors of Magnum Hunter Resources (NYSE: MHR  ) . As I write this, shares are down about 18% on the year, though shares had been down by more than 37% after the company announced that it was ditching its auditor. While the stock has slowly recovered, the company has three major action items to accomplish if it wants to win back investors.

1. File an annual report
It's nearly June and the company has yet to file its annual report. Magnum Hunter has hired BDO as its new auditor and the new target is to have the report completed by the end of June. Once the report is out, investors will have a much better picture of the company.

In addition to the report, investors will want to see if there are any impairments to be made to the company's assets, as well as if there will be any issues with its debt covenants. Once these uncertainties are cleared up, investors can really focus on the business' performance and potential instead of these distractions.

2. Finish refocusing
Earlier this year Magnum Hunter closed the sale of the bulk of its Eagle Ford Shale assets. The deal brought in about $400 million; however, it marked a peculiar transition away from liquids and back toward natural gas. Not only did the company sell this oil-rich production but it is now earmarking half of its planned 2013 Eagle Ford capital budget to its gassy acreage in Appalachia.

Magnum Hunter isn't finished with its transition plan as it has about $100 million-$150 million of additional non-core asset sales to complete this year. On top of that, the company needs to make a decision as to whether it will monetize its midstream assets which could be worth more than $750 million. Once investors have clarity as to what direction the company will be going, it should be a big confidence booster. Investors hate uncertainty and right now there is just too much of it at Magnum Hunter.

3. Execute its plan
Once the company can get past all this uncertainty it needs to execute on its plan to grow production and eventually turn the company that can generate significant free cash flow. It has a long way to go, but clarity here could be coming soon. For example, the company just started drilling its first well into the Utica Shale. The play isn't turning out how some producers had hoped which is adding to the company's risk. Devon Energy (NYSE: DVN  ) , for example is bailing on the play after its first few wells didn't turn out that well. The risk for Magnum Hunter is that its wells turn out to be duds. It doesn't have Devon's balance sheet strength, nor vast portfolio of opportunities to be drilling dry holes.

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The other important area to watch is the Bakken. Magnum Hunter expects participate in the drilling of 30 wells this year while seeing the potential to drill more than 500 future wells. The company will need to be mindful of well costs which can range substantially. Last year, top Bakken producer Continental Resources (NYSE: CLR  ) was able to drill operated wells for about $9.2 million each, however, non-operated wells that it participated in had a weighted average well cost of $11.3 million. This year the company has gotten well costs down to $8.3 million while hoping to shave another $100,000 off of its well costs before the end of the year.

On the other end of the spectrum, Kodiak Oil & Gas (NYSE: KOG  ) spends about $10 million to drill its Bakken wells. The math in getting well costs down is pretty compelling. At the current cost to drill a well, Kodiak will drill about 75 wells this year; however, if it was able to cut its costs closer to Continental's levels the company could drill more than a dozen additional wells. For Magnum Hunter this means it needs to keep its well costs under control so that it can stretch its limited capital resources as far as possible.

Final Foolish thoughts
Magnum Hunter has a lot on its plate this year. The company needs to ensure that it provides its investors with an annual report as soon as possible in order to remove that cloud of uncertainty. In addition to that, the company needs to complete its refocusing efforts and then execute to grow the company into one that generates sustainable cash flow. If it's able to do those three things then it should be able to win back the confidence of investors and prove the doubters to be wrong. 

With all the uncertainty surrounding the stock, investors might want to look elsewhere. Kodiak Oil & Gas, for example is a much more dynamic growth story at the moment. The company offers great opportunities, however, with those opportunities come great risks. To find out whether Kodiak is currently a buy or a sell, you're invited to check out The Motley Fool's premium research report on the company, which comes with a full year of updates and analysis as key news breaks. To get started simply click here now.

Wall Street wonders when stock slide will end

Is the worst over?

After last week's sizable stock market downdraft, which crushed the Nasdaq's priciest and riskiest names the most, investors will be watching to see if the bleeding stops when trading resumes Monday -- or if the pain spreads in a more significant way to the market's blue chips.

There's one big difference between the current pullback and the steep drop to start the year: The losses this time are concentrated in pockets of the market deemed speculative, such as technology, biotech and small-company stocks.

The Nasdaq, home to many former high-fliers, has plunged 8.2% since its March 5 high, vs. a 5.8% drop during its early-year dive that ended Feb 3. The blue chip Dow Jones industrial average, which fell 7.3% at the start of 2014 before rallying back within 4 points of its record close, is down 3.3% in the current funk.

"The more conservative names have been holding up well, and the more aggressive names are in a bear market," says Patrick Adams, a portfolio manager at PVG Asset Management.

The upshot: Investors with less-aggressive and more-diversified portfolios haven't suffered portfolio-crippling losses, at least not yet.

The most pain has been inflicted on popular stocks that shot up the most in 2013 and earlier this year, only to flame out as the "momentum" trade reversed.

The iShares Nasdaq Biotechnology ETF is in bear-market territory, defined as a drop of 20%, after plunging 22% since its late-February peak. The recent slide has also trimmed the value of video-streaming service Netflix's shares by 29% and shaved 20% off social media darling Facebook's shares.

The early-year pullback was sparked by turbulence in emerging markets and the initial shock over the Federal Reserve's move to reduce its market-friendly stimulus. The current rout is being driven by investors exiting a slice of the market that's been riding high on momentum buying that drove prices to frothy levels akin to bubble-type valuations in 2000.

The ingredients! for a broader market correction are in place, Adams warns.

"We have not seen broad-based selling yet, but we will," he says, adding that he thinks a "slow-moving top is forming" and that a full-fledged bear market is coming.

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Corporate earnings growth has stalled, says a bearish Adams. Investors are becoming more risk averse as the aging bull pushes deeper into its fifth year. The shift in Fed policy to less stimulus represents a new headwind. The later stages of the market's run to record highs, he adds, smacks of speculation and hasn't been backed by good enough readings on the economy or earnings.

Investors get fresh readings this week on retail sales, manufacturing and housing, as well as profit reports from 54 S&P 500 companies.

"The market sucked everyone in last year," says Adams. "I don't think it will let investors out without punishing them."

Optimists, like Dan Chung, CEO and chief investment officer at Fred Alger Management, insist the broad market is holding up just fine, and that the market dip has created money-making opportunities.

"Given how sizable the sell-off has been in high-growth areas, the S&P 500's (small loss) shows remarkable strength," says Chung. "It reinforces the thesis that dips should be bought."

Working in the bulls' favor, Chung adds, is the fact that many key warning flags that point to a bigger downturn are absent. The S&P 500 is currently trading at a price-to-earnings ratio below levels seen at prior bull-market peaks. Long-term interest rates are also far below levels typically present at market tops.

Authors Guild asks court to rule against Google

NEW YORK (AP) — Saying Google is stealing business from online book retailers, the Authors Guild asked a federal appeals court Friday to reinstate its lawsuit contending that the Internet giant is violating copyright laws with its massive book digitization project.

The Guild filed papers with the 2nd U.S. Circuit Court of Appeals in Manhattan, saying that Google's effort to create the world's largest digital library was violating the rights of authors and stifling competition in the busy Internet book sales market.

Google declined to comment on the Authors Guild's effort to reverse a November ruling in favor of the Mountain View, Calif.-based company.

The Guild asked the court to hold Google liable and to return the case to the lower court for remedies. Its lawsuit sought $750 for each of the more than 20 million copyright books that Google has already copied.

"Google is yanking readers out of online bookstores," Authors Guild President Roxana Robinson said in a statement. "Google digitized authors' works in order to lure book buyers away from online booksellers to its turf, seeking to bring countless eyeballs to its ads."

She said Congress should create a national digital library.

In appeals arguments, Guild lawyers argued Google was also unfairly boosting its advertising revenues and stifling competition.

The Guild's lawyers said Google shocked the literary community in December 2004 when it launched its library project by partnering with some of the world's largest libraries "to gain free access to millions of copyright-protected books."

"Google emptied the shelves of libraries and delivered truckloads of printed books to scanning centers, where the books were converted into digital format," the Guild's lawyers said.

They wrote that the library project was designed to lure potential book purchasers away from online retailers like Amazon.com and drive them to Google.

But Judge Denny Chin concluded Google did not run afoul of copyright laws b! ecause it only shows snippets from the books in its database. He said it would be difficult for anyone to read any of the works in their entirety by repeatedly entering different search requests.

He also said the company's library project provided a "transformative purpose" by giving new life to out-of-print and old books that had been forgotten.

"In my view, Google Books provides significant public benefits," Chin wrote.

Associated Press Writer Michael Liedtke in San Francisco contributed to this report

Why is Amazon paying workers up to $5K to quit?

NASHVILLE, Tenn. — Amazon.com hopes the workers in its scores of fulfillment centers across the USA are happy in their jobs.

But if they're not and would rather be doing something else, Amazon has a deal: The company will pay them a bonus — up to $5,000 — to leave.

In a program that Amazon aptly calls Pay to Quit, those who aren't committed to their jobs are urged to leave on their own and can get $2,000 in severance pay in the first year of employment with the bonus topping out at $5,000 in the fourth year.

Amazon founder and CEO Jeff Bezos explained the program in his 2013 letter to shareholders, released this week.

"Pay to Quit is pretty simple," he said. "Once a year, we offer to pay our associates to quit. The first year the offer is made, it's for $2,000. Then it goes up $1,000 a year until it reaches $5,000."

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"The headline on the offer is 'Please Don't Take This Offer,'" he noted. "We hope they don't take the offer. We want them to stay."

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But why make such an offer at all?

In the long run, an employee staying somewhere they don't want to be isn't healthy for the employee or the company.

-

"The goal is to encourage folks to take a moment and think about what they really want," Bezos said in the letter. "In the long run, an employee staying somewhere they don't want to be isn't healthy for the employee or the company."

Zappos.com, an Amazon subsidiary that sells shoes and other apparel, started the program, Bezos said. Amazon purchased Zappos in 2009 for $850 million.

Only workers in the fulfillment centers, where customer orders are packed and shipped, are eligible for the program, Amazon spokeswoman Kelly Cheeseman said.

"A small percentage of em! ployees take the offer," she said. "We want them to stay, but we also only want people who want to be here. It encourages them to think about what they want."

Amazon also offers an education program, Career Choice, in which the company pre-pays 95% of the tuition for workers who want to "take courses for in-demand fields, such as airplane mechanic or nursing, regardless of whether the skills are relevant to a career at Amazon," Bezos said in the shareholders' letter.

The goal of both programs "is to enable choice," he said.

"We know that for some of our fulfillment center employees, Amazon will be a career," he said. "For others, Amazon might be a stepping stone on the way to a job somewhere else — a job that may require new skills. If the right training can make the difference, we want to help."

The tuition program isn't limited to the fulfillment centers, Cheeseman said. It's open to all hourly employees at Amazon.

4 Auto Parts Stocks to Buy Now

Popular Posts: 7 Biotechnology Stocks to Buy Now15 Oil and Gas Stocks to Sell Now10 Oil and Gas Stocks to Buy Now Recent Posts: 3 Service Stocks to Buy Now 4 Specialty Retail Stocks to Buy Now 4 Auto Parts Stocks to Buy Now View All Posts

This week, four auto parts stocks are improving their overall ratings on Portfolio Grader. Each of these stocks is rated an “A” (“strong buy”) or “B” overall (“buy”).

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BorgWarner () is progressing from last week’s rating of B (“buy”) as the company improves to an A (“strong buy”) this week. BorgWarner is a supplier of highly engineered systems and components, mainly for powertrain applications. In Portfolio Grader’s specific subcategory of Equity, BWA also gets an A. .

This week, Dorman Products, Inc.’s () ratings are up from a B last week to an A. Dorman Products supplies automotive replacement parts, fasteners, and service line products primarily for the automotive aftermarket. .

China Automotive Systems, Inc.’s () grade is moving up to a B (“buy”) this week from last week’s C (“hold”). China Automotive System designs, markets, and sells custom-designed stained glass and leaded glass artifacts. .

Federal-Mogul Corporation () shows solid improvement this week. The company’s rating rises from a C to a B. Federal-Mogul supplies products, services and solutions to automotive, light commercial, heavy-duty truck, off-highway, agricultural, marine, rail, and industrial markets. .

Louis Navellier’s proprietary Portfolio Grader stock ranking system assesses roughly 5,000 companies every week based on a number of fundamental and quantitative measures. Stocks are given a letter grade based on their results — with A being “strong buy,” and F being “strong sell.” Explore the tool here.

Why Safe Bulkers Is Bouncing Back

On Wednesday, Safe Bulkers (NYSE: SB  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Safe Bulkers isn't the biggest name in the shipping industry, but it has suffered through many of the same economic challenges that its larger peers have faced. But with some signs that the environment for shipping companies may finally be starting to improve, the industry is hoping to bounce back from its long period of weakness. Let's take an early look at what's been happening with Safe Bulkers over the past quarter and what we're likely to see in its quarterly report.

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Stats on Safe Bulkers

Analyst EPS Estimate	$0.21
Change From Year-Ago EPS	(34%)
Revenue Estimate	$40.14 million
Change From Year-Ago Revenue	(10.4%)
Earnings Beats in Past 4 Quarters	3

Source: Yahoo! Finance.

Can Safe Bulkers ship shareholders some better earnings this quarter?
Analysts have continued to have negative views on earnings at Safe Bulkers, recently cutting their consensus estimates for the first quarter by $0.06 per share and chopping $0.27 from their full-year 2013 EPS estimates. But the stock has risen despite that bad sentiment, with shares up more than 33% since early February.

The reason for the disconnect between earnings and stock performance has to do with the changing fundamentals for shipping overall. For years, shipping companies both on the dry-bulk and the tanker side of the industry have suffered from weakness in the global economy after having built huge numbers of new ships during better times. That forced Overseas Shipholding Group to seek bankruptcy protection late last year and has left tanker giant Frontline (NYSE: FRO  ) under considerable financial pressure as it continues to labor under a substantial debt load.

As a result, shippers have reversed course on their shipbuilding prospects. DryShips (NASDAQ: DRYS  ) ended up having to pay $21.4 million in order to get rid of two tanker-ships that were under construction, concluding that it was worth it to avoid having to pay the costs of maintenance and upkeep in a weak environment. Safe Bulkers CFO Konstantinos Adamopoulos said in March that he expected a net capacity increase of just 35 million deadweight tonnes for the industry, well below the 100 million that the current schedule of industry vessel completions would suggest.

The slowing rate of capacity increase should help bolster shipping rates, and that in turn has investors recognizing the value proposition among shipping companies. With valuations knocked down to rock-bottom levels, even the hint of good news has been enough to send Safe Bulkers and its peers rising sharply.

In Safe Bulkers' quarterly report, look closely at the shipping rates that the company has been able to get recently for its vessels. Any upturn for the industry will first show itself in shipping rates, and while it may take a while for industry fundamentals to assert themselves, the key will be how much they're able to bolster profits for Safe Bulkers and its peers.

The best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

Click here to add Safe Bulkers to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.