Wednesday, November 2, 2011

Apple Is a Screaming Buy: AAPL

Like everything in 2011, earnings season has been one of extremes. Strong reports are rocketing stocks higher, and any hint of poor earnings is sending investors packing.

Take Apple Inc. (NASDAQ:AAPL) for example:

Apple announced that its earnings results came in below analysts’ expectations, the first such miss since 2004. Revenue for the company came in at $28.3 billion, and the company posted $7.05 earnings per share — representing a 3.9% and 3.2% miss, respectively.

However, it’s important to keep in mind that these results represent 39% revenue growth and 54% earnings growth year-over-year. That’s solid growth for a large-cap company, and gross margin remains high at 40.3% compared with 36.9% last year.

The big reason why Apple posted this miss is because they are a victim of their own success. Customers held off on purchasing iPhones this quarter due to rumors that the company would be introducing a newer version in October. Of course that is exactly what happened, and Apple announced first day pre-orders exceeded 1 million units and exceeded the previous record of 600,000.

In total, they sold over 4 million of the new units in the first three days. This represents more than double the 1.7 million sold by Apple last year during the introduction of the iPhone 4. And, considering that Apple sold 17 million iPhones in the last quarter, the company is well on its way for more blowout top- and bottom-line growth.

This is why the stock was not punished on the earnings miss and will quickly approach 52-week high levels. And I highly recommend that you take advantage of this short-term dip and pick up shares of AAPL under $420. The company is a screaming buy at current prices.

Jay Taylor: Turning Hard Times Into Good Times

America’s Energy Abundance Provides Fuel for Economic Optimism

It could be "risk off" for commodities all over again


Commodity Index (CRB) continues to create a series of lower highs inside of a multi-month falling channel. The month of October looks to have been a counter trend rally inside of falling channel at (2). This pattern has been suggesting to get out of or reduce Commodity holdings since the break of support back in May. (CRB Quote here)

The Incurable European Mess

Dear Extended Family,

Gold is headed into the $2000s. The mess in Europe is incurable and can only be damage controlled by QE.

MF Global got busted because credit default swaps did not work. MF Global had their Greek and Euro bond position covered by credit default swaps that they thought would protect them. SURPRISE!

They did not work because the Greek situation of a 50% haircut was given another name than “default” by a select group of Banksters and related parties.

97% of all credit default swaps written are carried by the major US banks. That means 97% of all the credit default swaps are the US usual Bankster suspects that swore to be more conservative in their ways.

If the Greek referendum is determined to represent a Greek default, major US banks will return to public insolvency and be bailed out yet another time because of the fraudulent nature OTC derivatives.

You think that game was rigged? China is coming to the rescue of no one. China specializes in picking up the pieces from troubled areas, not being troubled by troubled areas.

After Europe comes the US as media has been successful in keeping the focus of the problems off the US dollar. The only problem with gold shares is the hedge fund wild men and women that will in the end fail to stop the super bull market that is sure to come.

What is good for gold (QE) is also good for general equities so be careful on those that see doom everywhere.

Playing any one currency today is hard. Better hold a spread and seek to maintain buying power only. Competitive forced devaluation is the tool of strong currencies making it hard for exports in that currency. This is another example of making the Western world economic problems worse by curing the strong currency using liquidity to weaken it.

What today’s economic managers don’t know is Titanic in nature. There is no practical solution to the economic problems of today making gold in all forms desirable long term.

Jim Sinclair

3 Stocks You Should Never Sell: BRK.A, BRK.B, INTC, NGG

Contrary to what some people say, I believe there are stocks that you can hold forever. The term “forever” might mean different things to different people. To me, it means at least 30 years, and probably much longer.

These are companies that, unless something changes drastically, always will deliver. The reason they deliver is that they have done so for a very long time and/or they sell products that are totally essential to the human experience.

Berkshire Hathaway

Berkshire Hathaway (NYSE:BRK.B, BRK.A) is one such company. There are many aspects of Berkshire that elevate it to the Never Sell category, including Warren Buffett’s stewardship. The company also has a decades-long history of consistency in operations, cash flow and simple success. However, I would actually point to the fact that its primary business is insurance, and that it has done such a great job of underwriting that I consider it to be the premier insurer in the nation.

Berkshire also has the broadest possible exposure to consumers with a perfect midlevel brand: the auto insurer Geico. That midlevel appeal is fundamental to the companies Berkshire has purchased over the years. So many of them speak to, and are used by, a massive cross-section of Middle America.

Berkshire doesn’t buy businesses that play in niches. It buys businesses with broad appeal. Berkshire also is so massive, and has so much capital at its disposal, that it is able to make outrageously profitable investments when times are tough — such as its purchase in 2008 of preferred stock in Goldman Sachs. Of course, I’d suggest you purchase the B-class shares of Berkshire, unless you can pony up some $100,000 for the A-class shares.


Intel (NASDAQ:INTC) is the one and only stock to own in the chip sector, as far as I’m concerned. Intel is a de facto global monopoly. No other company comes close.

Yes, I know it isn’t technically a monopoly. There are Advanced Micro Devices (NYSE:AMD) and Nvidia (NASDAQ:NVDA), but by and large Intel essentially owns this product and controls this market. It has 100,000 employees, generates $52 billion in revenue and has gross margins of 62% — far outpacing the margins of AMD (45%) and Nvidia (49%). Intel has a vastly more efficient business, too, as represented by its operating margins of 20%, versus 6.5% and 15% for AMD and Nvidia, respectively. It sits on more than $9 billion in cash and pays a 3.4% dividend. Nothing will replace Intel.

National Grid

National Grid (NYSE:NGG). National what? This is one of those classic, overlooked companies — despite the fact it has a $36 billion market cap. The company owns and operates regulated electricity and gas infrastructure in the United Kingdom and the United States. The key word is “regulated,” which means its rates are effectively locked in for the long term. And those rates generate net margins of 15% and returns on equity of 32.5%.

These are great numbers — it’s not easy to find a company that nets 15 cents on every dollar of revenue. Furthermore, it pays a fantastic dividend of 7.5% — a dividend that has been increasing every year since 1993. It has billions of dollars of cash in the bank, and energy is going to be an ongoing necessity for a very long time.

There are many other companies to never sell, of course, but these three are a bit more diverse than you might expect. The trick is not to always lock yourself into familiar names.

Money Today - November 2011

Money Today is a comprehensive, easy-to-read personal finance magazine that steers clear of the jargon that's common to money-related issues. Most important, it is utilitarian, offering readers clear tips on managing their money.

download it here

This "Forgotten" Tech Stock Could Have 30% Upside: XRX

It's safe to say that the Haloid Photographic Co., founded in Rochester, N.Y, in 1906, is a long forgotten American technology name. Originally, the company manufactured photographic paper and equipment. We've all seen where that business has gone in the new digital age. Luckily, Haloid changed its name to Haloid Xerox in 1958 (dropping the "Haloid" by 1961) and developed a little product called the Xerox 914, the first plain paper photocopier.

There's no arguing the rock-star status of Xerox's (NYSE: XRX) brand. In fact, the word "Xerox" has become the generic reference to photocopying, regardless of what brand of copier you're using. The legendary 914 was even a guest star on AMC's uber-cool show "Mad Men," when the ad agency that serves as the setting for the series purchases the copier, and a hapless junior copywriter shares office space with the technological behemoth. The 914 is even an artifact in the Smithsonian.

But as you read this article on your smartphone or on your computer, you may wonder whether the company is still viable and relevant today. Is the stock, which trades below book value, even worth a look?

Based on its current valuation and the steps the company has taken to adapt, it's worth a serious look.

The times they are a changing'… and Xerox changes with them...
Ironically, Bob Dylan penned the referenced anthem around the time when Xerox's revenue was knocking on half a billion dollars, which was serious bank for 1963. And while it could've been easy for the firm to do very little and go the way of peers such as Polaroid and, presently, Eastman Kodak (NYSE: EK), it hasn't. [My colleague David Sterman thinks Eastman Kodak is headed for big trouble. Read his take here.] Remember, Xerox developed what became the famous Apple (Nasdaq: AAPL) operating system and, although the company viewed it originally as a failure (it sold it to Steve Jobs like you'd sell a broken lawn mower to a hoarder), it's still testament to the company's spirit of innovation.

Xerox still manufactures copiers and printing systems. But, like fellow tech giant IBM, it realized long ago the REAL money was in services, which now represents half of the company's total revenue, mix bringing in more than $10 billion last year alone. Total revenue for the company clocked in at $21.63 billion for 2010, a 42.5% jump from 2009's $15.17 billion. This year, estimates call for $22.62 billion in revenue, not quite as dramatic a jump as the prior year, but going in the right direction, considering all the recession-predicting going on from the television punditry brigade.

While the revenue number is a bit underwhelming, earnings per share (EPS) growth is much more impressive. Third-quarter 2011 EPS came in at $0.26, which was an 18% bump from 2010's third-quarter report of $0.22 a share. Xerox's EPS forecast for the year is $1.10, which would be a stellar 155% jump from 2010's $0.43 per share.

These are great numbers, but the stock's valuation is even more compelling. Shares trade at 0.86 times book value and less than 0.5 times sales. So with the tailwinds of strong earnings growth and a strong brand name, why so cheap? There are a couple of reasons, some real, some not.

Last year, Xerox purchased Affiliated Computer Services for cash, stock and the assumption of debt. While this was a great acquisition for the company's service business (prior to that, Xerox was capable of addressing a $130 billion market. Now, this number sits at nearly a half a trillion), mergers rarely realize their implied synergy instantly. There are still some integration challenges, as is the case with any transaction. Secondly, the company is still having some problems adapting to the supply-chain disruption created by this year's massive Japanese earthquake. Lastly, and the most irrational reason buyers have avoided the stock, is fear of the effect a sluggish economy or even a double-dip recession could have on the company.

But, as always, the herd's medieval fear has created opportunity for smart investors.

When times are tough and companies are cutting everything they can, what's the first thing they do after firing the lower level of middle management? If you blurted out "outsource," you as the late, great Ed McMahon would say to Johnny Carson, "are correct sir!"

As I mentioned earlier, half of Xerox's business mix comes from services ranging from call-center functions to document and billing management. Best of all, the company's customer renewal rate in its service segment is 90%. That's an extremely predictable revenue stream. So, again, let the herd's stupidity work for you. This is a great business that's been priced very inefficiently.

Risks to Consider: While Xerox's revenue and earnings trends are encouraging, the company has a fair amount of debt, even prior to the ACS acquisition. This is primarily due to the company providing equipment financing to its customers. This is also an inherent risk. A slower economy means a challengin business environment, which will translate into a receivables portfolio that can become increasingly soured. Also, the macro picture for the business is worrisome as the world continues to shift toward digital documents, rather than hardcopies. Realizing this, the company is effectively evolving the business to the service segment organically and through acquisition.

Action to Take -->
Last week, I was in a meeting with a couple of portfolio managers who referenced value investing as buying "cigar butt stocks," basically meaning stocks that have been thrown away and will eventually burn out completely, but have one or two puffs left in them. There's no denying Kodak was once a cigar butt. Xerox is a long way away from being thrown out on the sidewalk.

The stock trades at near $8.30 per share, with a forward price-to-earnings (P/E) ratio of about 7 and a dividend yield of 2%. Picking up the stock in this range is a great opportunity to buy a staid tech name, even though no one really considers it a tech name, at a bargain-basement price. A 12-month price target of $11 is reasonable based on potential P/E expansion of about 38% (only to 10 times earnings, which is still value stock territory). This means 2012 earnings, forecasted at $1.19 per share, only need to grow 8% year-over-year. Capital appreciation, plus the dividend, would put the total return at 30%.

Physical Gold and Silver Will be the Only “Financial Assets” to Rise in this Environment

In nearly all cases, I come up with a premise and fashion my RANT around it. I was all ready to write about the silly term “RISK OFF” this morning, a term synonymous with the mindless, computer-generated ALGORITHMS that have DESTROYED American capital markets. As I’ve written exhaustively for some time, the MAJORITY of such algorithms are emitted from GOVERNMENT COMPUTERS; Thus, essentially, the government CREATED the definition of RISK OFF, which apparently means gold and silver are the riskiest assets on earth, and U.S. Treasuries the safest. At this LATE STAGE of global economic annihilation, the financial equivalent of the War Games construct GLOBAL THERMONUCLEAR WAR, the ONLY tool left in America’s arsenal is to PRINT MONEY, MANIPULATE MARKETS, and PRAY for a miracle. But that miracle won’t come, and shortly the modern world will understand the cycle of misery and hardship experienced by countless generations across history.

The reason for changing my topic mid-stream was, obviously, the global meltdown that commenced yesterday afternoon and is gaining momentum this morning, like a speeding locomotive. Mind you, NOTHING positive has occurred in the two months since GLOBAL MELTDOWN II commenced (sending bank stocks to all-time lows and gold to all-time highs), just the aforementioned MONEY PRINTING, MARKET MANIPULATION, and PROPAGANDA to stave off the masses. The financial horrors that nearly destroyed the world in GLOBAL MELTDOWN I are DRAMATICALLY WORSE today, and will be DRAMATICALLY WORSE tomorrow, and the next day, and the next day. I read yesterday that “fortunes will be made and lost in the chaos”, but only part of that statement seems realistic. Yes, PHYSICAL gold and silver will rise to, potentially, EXPONENTIAL levels, but such “fortune” will likely only be enough to keep you solvent in the post-fiat era, an era of financial stress not experienced since the Great Depression. Of course, the U.S. was a strong nation during the 1930s, with little debt, a trade surplus, industrial leadership, a gold standard, and just 120 million citizens. Today, it has been gutted of all industrial prowess, is the most indebted nation on earth, has a fiscal deficit approaching $2 Trillion per annum, 3x as many citizens, and, soon to be learned, NO GOLD.

To long-time readers, what I am writing is nothing new. I am a REALIST, and unfortunately for my critics have been correct about EVERY major macroeconomic call for the past decade. I am not brilliant by any means, but have the rare ability to ignore the LIES so readily accepted by the masses. HUMAN NATURE dictates that evil neither be spoken nor heard, but unfortunately it has a REAL impact on lives, causing death, despair, and despondency. (more)

Bill Fleckenstein: One or Two Year End Game for Money Printing

from King World News:

With stocks tanking and gold and silver consolidate recent gains, today King World News interviewed Bill Fleckenstein, President of Fleckenstein Capital to get his take on where we are headed from here. When asked about the action in the metals, Fleckenstein responded, “First of all gold was down in dollar terms but it was up in terms of many other foreign currencies. Sometimes people will say how can gold be down given what’s going on, a lot of chaos. So if somebody has to liquidate their account because it’s related to MF Global or some other problem related to losses in another market, when there is this much chaos on any one day, what a market does on any one day doesn’t tell you that much.”

Bill Fleckenstein continues: Read More @

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Standout REIT Is a Bear Market Buy: NNN

National Retail Properties (NYSE:NNN) — This fully integrated real estate investment trust (REIT) invests primarily in high-quality, freestanding properties that are leased to nationally recognized retail tenants under long-term triple-net leases.

Revenues are expected to increase by 8% in 2011. Funds from operations (FFO) are expected to increase from $1.53 in 2011 to $1.60 in 2012. NNN pays a dividend of $1.54 for a current yield of 5.64%.

Technically this stock is a standout in a bear market. Note its break from a bear channel in August, a short consolidation followed by a golden cross (50-day moving average crosses up through 200-day moving average), and a positive signal from the stochastic.

NNN is a long-term hold with a price objective of $33-plus. But first it must break the barrier at $27.50. Buy heavy on a break above $28.

Trade of the Day – National Retail Properties (NYSE:NNN)