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What You Must Know Now to Avoid the Obamacare Penalty

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medical treatment and cost...
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For millions of Americans, time is running out to get qualifying health-insurance coverage under the Patient Protection and Affordable Care Act, better known as Obamacare. Yet even though penalties under Obamacare for not having coverage can be expensive for many families, what many don't know is that there are extensive exemptions that could prevent you from having to pay those penalties.

Understanding the Obamacare Penalty

One confusing aspect of the penalties under Obamacare is the complex calculations to figure out how much you owe.

To come up with your penalty for 2014, you have to look at two numbers. You calculate one of those numbers by taking $95 per adult and $47.50 per child in your family, and then taking either the total amount or the family maximum of $285, whichever is less. The second number comes from looking at your income, subtracting your appropriate tax-filing threshold of $10,000 for single filers and $20,000 for joint filers, and then multiplying the result by 1 percent. Whichever of those two numbers is greater is the amount of penalties that you'll owe if you don't have qualifying coverage or have an exemption.

In part to respond to the confusion about calculating penalties , the House of Representatives is expected to vote on legislation to eliminate the Obamacare penalty for the remainder of 2014. But there's no guarantee that would become law, leaving those without an exemption on the hook for penalties.

In addition, it's important to realize that even if you have insurance, you might still owe penalties under Obamacare. To avoid penalties, your coverage has to include certain basic benefits that, such as maternity care and mental-health care.

Many Ways to Be Exempt From Obamacare Penalties

The list of allowable exemptions from Obamacare is surprisingly long. The first is that you're allowed not to be covered for three months of the year, which is what makes the March 31 deadline so important. Those who don't have to file tax returns due to low income don't owe a penalty, nor do members of federally recognized Native American tribes, health-care sharing ministries, religious sects with objections to insurance, incarcerated prisoners and those who don't have legal immigration status.

One of the most important exemptions is the financial standard. If the lowest-cost coverage available would cost more than 8 percent of your household income, then you won't owe a penalty if you don't obtain that coverage.

In addition, you can qualify for many hardship exemptions. The hardship exemption application form from the government's Health Insurance Marketplace website lists 13 categories of exemptions as well as a 14th category for "other hardships." Some categories require no supporting evidence, such as those who are homeless or recently suffered domestic violence. Others require only basic documentation, including having received notice of eviction or foreclosure, getting a shut-off notice from a utility, having filed for bankruptcy or having suffered property damage due to a natural disaster.

Also among the exemptions are:
  • The death of a close family member.
  • Having medical expenses that you could pay at some point in the past two years.
  • Having unexpected higher costs from caring for a family member.
  • Having a child denied for Medicaid and Children's Health Insurance Program coverage, with another person required to provide medical support to the child.
  • Denial of Medicaid because your state didn't expand its Medicaid program.
  • Notice of cancellation of existing insurance, with other plans being unaffordable.
  • Having gotten a favorable eligibility appeals notice.
You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger or on Google+.

 

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There's Not One Home for Sale in San Francisco That an Average Teacher Can Afford

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The Victorian houses of Alamo Square
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This week, the real estate listings website Redfin published a startling statistic. In the entire city of San Francisco, not one home or apartment is available on the market for under $220,000, which the site says is affordable for a typical teacher in the city. Statewide, just 17 percent of homes for sale are affordable for teachers. With the tech industry booming and the Google Bus quickly becoming a cultural icon, it's not a surprise that San Francisco faces an affordability crisis. But how can it have become so dramatic? The answers boil down to two factors: San Francisco's hot real estate market and dwindling income for city teachers.

First, the real estate market. This is pretty straightforward. San Francisco is the single least-affordable housing market in the country, according to the real estate website Trulia (TRLA). As Trulia's chart shows, the median sales price has more than doubled since 2000 and is up 11.5 percent just in the past year.


Now, on to the teachers. If you look at Redfin's data, you'll see that San Francisco has the second-lowest median salary of teachers for any county in California. That's despite having a higher cost of living than other areas in the state and a thriving private sector, thanks to the knowledge economy.

Redfin used data from 2012, and I've pulled stats for the city that included the 2012-2013 school year, when the average teacher's pay rose about $4,000. (Like many cities in the state, San Francisco boosted some education spending last year, in part because districts had more revenue from a new statewide tax voters approved in 2012.) When you take inflation into account, even with that boost San Francisco's teachers earned 12 percent less in 2013 than they did in 2002.


Why are teachers paid so much less than elsewhere in the state? One clue could be that San Francisco's high costs and mediocre school districts cause families to flee the city. Indeed less than 11 percent of city residents are between 5 and 20 years old, compared with 20 percent of the population nationally. The big drop-off in San Francisco's younger residents generally happened in the 1970s and has fallen more slowly since, but the share is down about 10 percent over the past decade.



Having fewer residents with kids may make taxpayers place less value on funding education, which could lead to relative pay reductions (as opposed to just hiring fewer teachers). This is a cyclical problem: Families leave the city, in part, because of poor schools, which tends to reduce investment and the allocation of resources to improve the district.

Whether the affordability squeeze in San Francisco ever eases will partly depend on whether the housing market cools off-and whether the wealth pouring into the city ever translates to higher pay for middle class workers, including the city's teachers.

Weise is a reporter for Bloomberg Businessweek in New York. Follow her on Twitter @kyweise.

 

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Big Investors Snapping Up Delinquent Mortgages to Foreclose - and Rent

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C93M40 House for rent  House; for; rent; house; rent; people; no; people; outdoors; outside; home; bungalow; property; real; est
Alamy

By Heather Perlberg and John Gittelsohn

With home prices rising, big real estate investors have discovered another source of cheap property: bad mortgages. American Homes 4 Rent (AMH), the second-largest single-family landlord after Blackstone Group (BX), Barry Sternlicht's Starwood Waypoint Residential Trust and Altisource Residential (RESI) are stepping up acquisitions of nonperforming loans (also known as NPLs) to expand their holdings of homes to operate as rental properties.

Hedge funds, private equity firms and real estate investment trusts, which have raised more than $20 billion to purchase rental homes, are buying mortgages as banks face new regulations that make it more expensive to hold soured loans. The Department of Housing and Urban Development is also auctioning loans to stem losses at the financially troubled Federal Housing Administration.

The shift to buying loans comes after the pace of foreclosures slowed and house prices jumped in Atlanta, Phoenix, and other hard-hit markets where investors have made the most purchases. Average home prices in Phoenix have risen 44 percent since hitting bottom in September 2011, according to the S&P/Case-Shiller Home Price Indices. Atlanta prices are up 37 percent since March 2012. Paying more for homes makes it harder for landlords to make money from rentals. "Our NPL acquisition strategy will continue to give us access to properties and healthy markets nationwide," Altisource Chairman William Erbey said on a Feb. 20 call with investors. The company bought 13,000 delinquent loans last year.

The large-scale loan purchases raise concern among housing advocates that residents may be displaced or transformed into renters of their former houses, according to Kevin Stein, associate director of the California Reinvestment Coalition, a San Francisco tenant and consumer advocacy group. "They should be modifying those loans to keep the homeowner in there, but it runs counter to their business model," Stein says. "They shouldn't be in the business of buying distressed loans for the purpose of foreclosing on people."

Sales of Nonperforming Mortgages Soar to $34.7 Billion

Douglas Brien, co-chief executive officer of Starwood Waypoint, says his company plans to give delinquent residents a chance to stay put as owners or renters. "Our intent is to approach some of these folks where it just doesn't look like they're going to get caught up on their loans," he says. The company can "offer them the opportunities to stay in their homes and keep their kids in the same school."

Starwood Waypoint and its predecessor companies have paid $220 million for 1,736 nonperforming loans since 2012, according to a January presentation to investors. That's about $127,000 per distressed loan, compared with $140,000 per rental home. Brien estimates 30 percent to 50 percent of the nonperforming loans will end up as rentals for the company. In other cases, the borrowers will resume paying the loans after a modification, or Starwood Waypoint will sell the homes because the location or quality doesn't match its investment criteria. "We're always going to take the outcome that's most economically beneficial," he says.

About $34.7 billion in nonperforming mortgages were sold last year, up from $13.1 billion in 2012, says William David Tobin, principal of Mission Capital, a real estate loan broker. Altisource CEO Ashish Pandey predicts that more than $40 billion may be sold this year.

Homes acquired through NPLs have often gone years without maintenance as the owners struggled to pay debts, adding to renovation costs for investors who take them over. Loans on homes subject to foreclosure filings in December were an average 920 days delinquent, up from 255 days late in January 2008, according to data provider Black Knight Financial Services. That makes them too much trouble for investors like Jon Daurio, a co-founder of Kondaur Capital, which started buying delinquent loans in 2007. "The longer the borrower is in a house that's nonperforming, the amount of deferred maintenance just grows and grows and grows," says Daurio, who left Kondaur in 2011. "For me, it's too risky."

 

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Berkshire Hathaway's 4Q Profit Gains on Improving Economy

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Berkshire Hathaway's 4Q Profit Up 10%
Nati Harnik/APBerkshire Hathaway Chairman and CEO Warren Buffett.
By JOSH FUNK

OMAHA, Neb. -- Warren Buffett's company said Saturday that fourth-quarter earnings rose 10 percent to nearly $5 billion as its insurance, rail and energy businesses generated major gains in the improving economy.

Berkshire Hathaway's insurance companies, which include Geico and General Reinsurance, reported a $394 million underwriting profit for the final three months of 2013, compared with a $19 million loss a year earlier. The Omaha, Neb., company also benefited from the strong performance of its non-insurance companies including BNSF railroad and electric utility MidAmerican Energy.

Berkshire Hathaway (BRK-A) (BRK-B) owns roughly 80 subsidiaries, including railroad, clothing, furniture and jewelry firms. Its insurance and utility businesses typically account for more than half of the company's net income. The company also has major investments in such companies as Coca-Cola (KO), IBM (IBM) and Wells Fargo (WFC), and last year bought NV Energy and a major stake in H.J. Heinz.

Berkshire's fourth-quarter report and Buffett's annual letter to shareholders released Saturday show the company doesn't face any significant business issues in the coming year, said author and investor Jeff Matthews, who wrote "Warren Buffett's Successor: Who It Is and Why It Matters."

"Life is good at Berkshire Hathaway," Matthews said Saturday.

Quarterly net income rose to $4.99 billion on revenue of $47.05 billion from $4.55 billion on revenue of $44.72 billion in 2012.
Buffett has said he thinks operating earnings are a better measure of how Berkshire is performing because they aren't affected by swings in the paper value of investments and derivatives. Operating earnings, which exclude investments and derivatives, grew to $3.78 billion, or $2,297 per Class A share.

Berkshire earned $19.48 billion for 2013 on total revenue of $182.15 billion. That's up from $14.82 billion in profit and revenue of $162.46 billion in 2012. Strong gains in the value of its investments and derivative contracts added $4.3 billion to the results, up from $2.2 billion the previous year. That included gains Berkshire recorded last fall as it redeemed warrants for General Electric (GE) and Goldman Sachs (GS) stock and Mars and Wrigley repaid Berkshire for an investment made during the financial crisis.


Buffett's 2014 Annual Letter

 

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Why Darden Got Crushed Monday

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Source: Wikimedia Commons

After the company reported its third-quarter expectations for its 2014 fiscal year, shares of Darden Restaurants sank around 6%. In the release, management announced preliminary results for the quarter that bring into question whether the Red Lobster operations are the only struggling aspect of the business. However, due to inclement weather, is it possible that the company's lackluster expectations are being overblown by the market and that, instead of selling, investors should be buying?


Darden's rough quarter
For the quarter, Darden expects earnings per share to come in at $0.82. This represents a 12% shortfall in comparison with the $0.93 analysts had estimated and the projection is nearly 20% lower than the $1.02 per share the company reported for the same quarter last year. In part, this likely involves higher costs in relation to sales, but lower revenue could also impact this figure.

If management is correct, Darden should see a significant decline in comparable-store sales for the quarter, as we can see in the table below:

Source: Darden Restaurants

Based on the table above, we can see that Darden experienced significant declines in sales in its Red Lobster and Olive Garden chains during the three-month time-frame. The worst performer, by far, was the company's Red Lobster segment, which saw sales fall 8.8% between December and February.

Source: Darden Restaurants

The primary driver behind the company's sales drop was a decline in comparable-store traffic. In the three-month period ending in February, traffic fell by an average of 14.3%. Just as with comparable-store sales, Olive Garden performed considerably better than this result (but far from great) with an average 7.5% drop in traffic. Not even the company's LongHorn Steakhouse segment, which saw comparable-store sales rise 0.3% for the quarter, experienced positive traffic.

Now, in all fairness, if you adjust for poor weather the company's performance was slightly better. For the quarter, comparable-store sales would have risen 2.9% at LongHorn and dropped 2.8% and 6.2% at Olive Garden and Red Lobster, respectively.

How does Darden stack up to its peers?
Comparing Darden's performance in recent years to those of other restaurant conglomerates can give us a pretty good idea of how attractive the investment might be to the Foolish investor.

Over the past five years, revenue at Darden has risen 18.5% from $7.2 billion to $8.6 billion. Over this same time-frame the business's profitability has also increased, but it has risen at a slower rate than the business' revenue as competitors like Chipotle Mexican Grill and Panera Bread Company take customers from both fast-food and casual-dining companies. Between 2009 and 2013, Darden's net income rose about 11% from $372.2 million to $411.9 million.

In juxtaposition, DineEquity , the parent of Applebee's and IHOP, saw its revenue fall 55% from $1.4 billion to $640.5 million. Before you think that the company is about to go bust because of this, you should know that the restaurant chain has been undergoing a radical transformation over the past few years.

During this time-frame, the business has refocused its efforts away from opening and operating restaurant-owned locations and it has, instead, put energy into making the company franchise-oriented. As of its most recent annual report, the company boasted that 99% of its locations were now franchised.

The downside to this approach is that it usually brings in lower revenue, but it results in higher margins. Between 2009 and 2013, the company's net income actually rose 109% from $34.4 million to $72 million. Whether this can continue or not will have to be seen, but the results thus far have proven promising.

Another company that we should look at is Yum! Brands . Over the past five years, the parent company of Pizza Hut, Taco Bell, and KFC has seen its revenue expand 21% from $10.8 billion to $13.1 billion. At first glance, this seems impressive, but competition has adversely affected the company's bottom line.

Between 2009 and 2013, Yum! saw its net income rise only 2% from $1.07 billion to $1.09 billion. The primary driver behind the company's lackluster profits has been a deterioration of its business in the United States and China. Also, in 2013, the company booked a significant loss due to the writedown of its Little Sheep acquisition in China. Without its one-time impairment, the business's net income would have risen 21% over this five-year period.

Foolish takeaway
Based on the data it looks as though Darden has had a nice run, but this may be coming to an end. Due to the advent of quick-casual chains like Chipotle and Panera, the company's prospects have started to decline. This negative news could signal a buying opportunity for the Foolish investor who believes that the hype is overblown and the company's future is bright. However, for those who question the actions of Darden's management and would still like to own a restaurant conglomerate, it wouldn't be a bad idea to take a look at Yum! or DineEquity.

The Motley Fool's Best of the Best
Based on the data provided, it looks unlikely that Darden could be the best investment to hold for 2014.  Given this likelihood, is it possible that the company could turn around and deliver shareholders an amazing return, or is there a better opportunity at hand?

There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

The article Why Darden Got Crushed Monday originally appeared on Fool.com.

Daniel Jones has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and Panera Bread. The Motley Fool owns shares of Chipotle Mexican Grill and Panera Bread. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Facebook Inc. Looks to the Stars for Growth

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When Facebook first announced last summer that it would work with six tech partners on the Internet.org initiative, the project seemed like it was as much about public relations as reality. Bringing the Internet to the world's 5 billion nonconnected folks had a nice, philanthropic sound to it, but the reality seemed a bit far-fetched.

Part of the reason Internet.org felt PR-ish is that Facebook CEO Mark Zuckerberg, at 29 years old and worth a net $28.5 billion, isn't necessarily the first billionaire who comes to mind when the topic of giving arises. A lot of people still think hoodies, youth, and all that money. To his credit, Zuckerberg doesn't belabor his philanthropic efforts, he just goes about his business -- like giving nearly $1 billion to a Silicon Valley nonprofit a few months ago. And if recent rumors prove true, Zuckerberg is taking tangible steps to bring Internet connectivity to the world, while also giving Facebook's long-term growth plans a boost.

Internet.org
Not being able to use the Internet may be hard to fathom for many of us. For a growing percentage of the U.S. population, going to the store or walking the dog without losing ourselves online via a smartphone seems ludicrous. But a full two-thirds of the world's population doesn't have access to the Internet, which is what Internet.org hopes to remedy.


The access roadblocks for most of the world fall into three categories. One is accessibility. In the world's emerging markets, such as large parts of Africa, there simply aren't Internet alternatives available. For those that do, making data plans affordable is another challenge Facebook and team need to overcome. Spending $60 or $70 a month for Internet access, let alone buying the smartphone or other device needed to get online, can be cost prohibitive.

The third challenge is streaming data more efficiently. Providing affordable Internet access to remote areas isn't likely to include the bandwidth and speed most of us take for granted, at least initially. Improving network efficiency and streamlining the sending and receiving of information using data compression technologies will also help to keep costs down.

Rumor has it
You may recall that early last summer Google began testing its Project Loon. Despite its unfortunate name, Project Loon came with good intentions: bringing Internet access to remote and underserved regions of the world. In Google's case, what made Project Loon, well, loony, was it used odd-shaped balloons designed to ride the winds of the upper atmosphere.

Facebook's plan to bring Internet access to the masses, assuming the rumors are true, seem a bit more sensible: use as many as 11,000 solar-powered unmanned aerial vehicles, or UAVs, to start, to circle remote areas just as satellites would, and beam down Internet connections. Facebook, according to the scuttlebutt, is in talks to acquire drone maker Titan Aerospace for an estimated $60 million.

The UAVs would circle above 60,000 feet, thereby avoiding FAA regulatory oversight. Impressively, Titan Aerospace said its drones can fly as long as five years using nothing but the power of the sun. Facebook's Internet access plan is more plausible than Project Loon, though you have to admire Google's willingness to think outside the box.

The business case
When you write a check to your favorite charity, you probably do so because you believe in its mission, whatever that may be. But that doesn't prevent you from taking the tax break that comes along with the contribution, and why not? The same concept applies to Facebook and its Internet.org partners, along with Google and other companies seeking to do good.

Bringing emerging markets into the 21st century is the right thing to do. But there are long-term upsides for Facebook, too. Five billion non-Facebook users is a massive, untapped market. It will be some time before Internet users in Africa and other emerging markets get online, let alone are able to act on Facebook's advertising, but the potential is undeniable. Helping those in need and building long-term value at the same time? Not a bad combination.

Take advantage of cutting-edge technologies
Every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980's, before the consumer computing boom. Or purchasing stock in e-commerce pioneer Amazon.com in the late 1990's, when they were nothing more than an upstart online bookstore. The problem is, many investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play", and then watch as it grows in EXPLOSIVE lock-step with it's industry. Our expert team of equity analysts has identified 1 stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

 
 
 
 
 
 
 

The article Facebook Inc. Looks to the Stars for Growth originally appeared on Fool.com.

Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Facebook and Google. The Motley Fool owns shares of Facebook and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Learning What Works in the Retail Industry

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Steven Tanger joined Tanger Factory Outlet Centers , founded by his father in 1981, as the company's fourth employee. The company had grown to 13 outlet centers by 1992, and the following year became the first outlet center developer to be listed on the New York Stock Exchange as a publicly traded REIT, under ticker symbol SKT. Tanger has been president and CEO since 2009, and the company's portfolio, growing steadily, now includes more than 40 outlet centers across the U.S. and in Canada.

Tanger's approach to outlet malls has grown and evolved with the company over its three-decade existence. From a single 35,000-foot strip mall in North Carolina to 44 outlet centers in midmarket and tourist destinations nationwide, Tanger keeps a close eye on what works.

These retailers clearly know what works
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Tom Gardner: The emphasis on location means that you have your particular model of what you look for when trying to identify a great location for your next outlet mall. I just want to go through a few of the factors, and have you explain why that's relevant. Why is it relevant to have a million people within 30-40 miles, with an average income level of $65,000 per household?

Steve Tanger: We are a regional shopping destination. We like to put our shopping centers on an interstate or a major highway system, at the interchange, so that our customers can get on and off the interstate easily, and it's great visibility.

Unlike other neighborhood shopping centers, or a regional mall, that look at population and density and family household and incomes within a one-, three-, and five-mile radius, we look at five-, 10-, and 20-mile radiuses, because we draw from that amount of distance.

We have found, based on our experience in developing probably 40-45 of these already, that we have kind of a matrix of success, and that's what we look for, as a minimum. Household income and base population.

Gardner: And 5 million tourist visits a year.

Tanger: We have basically two types of different centers. One is a tourist location; let's say Riverhead, N.Y., which is at the east end of Long Island. You have the tourists going to the wine country, Splish Splash, all the attractions in the Hamptons, the North Shore and the South Shore of Long Island. That's a tourist location.

Or Branson, Mo.; or Myrtle Beach, S.C.; or Sevierville, Tenn.; or Foley, Ala. These are tourist locations.

Then we have mid-market or in-market centers, like National Harbor, which is both. National Harbor will attract the 35 million tourists a year to Washington, D.C., but also the permanent population in Virginia, Maryland, and the District.

So, we have two different types of studies and profiles.

Gardner: Were these profiles evident in 1984, and you've just tweaked them over time, or did you have major discoveries in finding these factors?

We have so many business owners that are part of our Motley Fool membership base, and they're always interested in the journey that somebody takes toward discovering the new factors that matter most. Has this been set and tweaked -- and almost a strategic model that could be put semi on autopilot -- or has it been a process of discovery and a lot of change over the last, let's say, 20 years?

Tanger: It's been a process of discovery that changes every day, because if you don't change it, you lose it. The first center we opened, of about 35,000 feet in Burlington, N.C. -- a little strip center -- would not really be successful today. We constantly tweak the format.

It evolved from Burlington to small, out-of-the-way tourist areas like North Conway, N.H.; Kittery, Maine; Martinsburg, W.V.; places you've probably never heard of or never went to. But we went where our tenants wanted to go, because in the early '80s, the very fine tenants looked at this as a clearance store and they didn't want to compete against the department stores. But they wanted their brand out there, and they needed to clear excess inventory and to turn it into cash.

Then, we came a little bit closer in and we built, effectively, very nice buildings surrounding a parking lot; a classic strip-center type of location -- if you look at it, almost a "C" -- it's up, across, and down.

Then, probably 10 years ago, that evolved to what we call a racetrack design, which, if you look at a regional mall and take the roof off, is what we do. You have a center of the donut, then you have a loop around, and then outside, so you have concentric circles. You walk around the racetrack, and you can look to your left and to your right, and you have a store on either side. It's a very efficient model, and the parking lot surrounds the buildings, as opposed to buildings surround the parking lot.

That is the evolution of our base model. We are testing one now -- I don't know if we'll find another site after this -- but in Foxwoods, Conn., we are building a bridge connecting the Grand Pequot Hotel and the MGM Grand Hotel casino floors. It will be about a 325,000-square-foot shopping center, but on a bridge. It will just be like one aisle way and you turn to your left or turn to your right, there's a store on either side.

That's an interesting format; very expensive engineering task to build, but we're under construction now.

The article Learning What Works in the Retail Industry originally appeared on Fool.com.

Tom Gardner and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Why Shares of Capstone Turbine Corporation Popped Today

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Share of micro-turbine maker Capstone Turbine Corporation are up 13% today after receiving a new order.

So what: This morning, the company announced orders for two Capstone C800s and a Capstone C1000 for use in two Southern California hospitals. The deals total 2.6 MW and are expected to be commissioned in late 2014.  


Now what: This is really business as usual for Capstone and isn't reason to change your investment thesis today. The company still lost $12.9 million in 2013 and barely grew revenue at all, which isn't good for a company that's in an emerging market. This is a company I can't get excited about unti growth picks up significantly or it makes a profit, which both seem far off right now.

A better play in energy
Imagine a company that rents a very specific and valuable piece of machinery for $41,000 per hour. (That's almost as much as the average American makes in a year!) And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we're calling OPEC's Worst Nightmare. Just click here to uncover the name of this industry-leading stock, and join Buffett in his quest for a veritable landslide of profits!

The article Why Shares of Capstone Turbine Corporation Popped Today originally appeared on Fool.com.

Travis Hoium and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Why Shares of SunEdison Inc. Rose Today

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of solar project builder SunEdison Inc. jumped 12% today after being upgraded by an analyst.

So what: Morgan Stanley's Timothy Radcliff was the analyst who helped push the stock higher, upgrading the stock to "overweight" and putting a $24 price target on shares. He said the commercial-scale solar market may be as big as 129 GW by 2018 and investors will be rushing to build projects in 2016 when tax credits run out.  


Now what: SunEdison is one of the first project builders to begin keeping projects on the balance sheet to push down to a yieldco, which could unlock value this year. I think that makes the stock an interesting play, but let's not forget that it's not yet profitable the way other project builders are. It will have to prove the ability to build projects profitably to keep on the run it's been on, and I just think there are better solar plays out there.

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The article Why Shares of SunEdison Inc. Rose Today originally appeared on Fool.com.

Travis Hoium and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Why Shares of Trina Solar Limited Jumped Today

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of solar manufacturer Trina Solar Limited jumped 11% today after announcing earnings.

So what: Fourth-quarter revenue was down 4% sequentially to $525.6 million on a slight decline in module shipments. But the company did report net income of $9.6 million, or $0.13 per share, which was well ahead of the two-cent loss analysts expected.  


Now what: It's a positive to be reporting a profit, but given that China installed around 12 GW of solar last year, the numbers could have been better. Still, Trina Solar has a better balance sheet and income statement than peers and may have the capacity to build the next generation of solar capacity this year or next. I don't think this was an outstanding report, because there wasn't much of a profit in an outstanding quarter for solar, but the market disagrees today, and shares were up big.

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The article Why Shares of Trina Solar Limited Jumped Today originally appeared on Fool.com.

Travis Hoium and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Why Zynga Inc., Isis Pharmaceuticals, and Vipshop Holdings Ltd. Are Today's 3 Best Stocks

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The S&P 500's had a whale of a year so far in 2014 after a sluggish start to the year, and it put on quite a show today after Monday's shellacking. The S&P notched a new record high at the market close today, gaining 1.3% on a day when most stocks across the market surged into the green in a big way.

Monday's bane of fears over a Russia-Ukraine conflict wore off today, helping restore confidence to a market shaken by the outbreak of the standoff in Eastern Europe. The announcement of a scheduled end to Russian military exercises on the Ukraine border today helped, especially as no major economic reports left the Ukraine showdown as the sole market-shaking news of the day. However, with Western and Russian leadership still at odds over events in Crimea, expect more to come from the drama in the coming weeks as Kiev's new leadership tries to sort out the situation.

Stocks from the energy sector to the defense industry have paid close attention to the situation, but out of all the day's best stocks today, the three best gainers came from industries such as video games and biotech, as Zynga , Isis Pharmaceuticals , and VipShop Holdings .


Let's start off with Zynga, as shares of the social gaming firm climbed 8% today. That's continuing the astronomical start Zynga's posted to kick off 2014, as the stock's jumped more than 32% year to date with only two months in the books. Today's jump excited investors after Zynga announced it will push a handful of its biggest titles to smartphones and tablets in the very near future, chasing after the lucrative mobile market in the hopes of reigniting growth.

Zynga's taking its popular Words With Friends and Zynga Poker to mobile soon, and the company's also planning to launch a new edition of its FarmVille 2 simulator. It's part of CEO Don Mattrick's goal of becoming the dominant free-to-play game developer in Western markets, but it'll be a challenge capturing the top spot in a crowded and competitive mobile gaming market. For today, however, investors have rallied behind the potential in a stock that's suffered since its IPO despite this year's gains.

Elsewhere on the markets, Isis Pharmaceuticals rallied back from its recent slip by gaining 8.7% today. The stock took a beating after disappointing investors in its most recent earnings report, posting revenue that gained 113% year over year yet still wasn't enough to keep the company from losing more than $24 million in net earnings for the quarter, a huge jump year over year. Part of the trouble came from Isis's recent climb, as the stock's jumped more than 200% over the past year. Isis plans to kick off phase 3 trials for two of its antisense drugs in the near future, but don't expect this company's unprofitable streak to end anytime soon. Today's pullback shows that investors still are behind this developmental biotech, however -- and with plenty of cash on hand, Isis still has plenty of time to unlock the promise of its drug pipeline.

Neither Isis nor Zynga matched up with today's big gainer, however. Vipshop Holdings jumped a whopping 32.6% today. The China-based online retailer crushed its fourth quarter earnings, posting adjusted earnings per share of 49 cents, a figure that not only smashed analyst expectations of 41 cents per share but also grew tremendously over the 16 cents per share quarterly earnings that Vipshop posted a year ago. The company's first quarter revenue projections also came in much higher than analysts had projected, and investors were quick to capitalize. It's all optimism right now around Vipshop, but with the stock up more than 400% over the past year and valuations jumping, the company will have to hit all the right marks to match the market's rosy expectations.

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The article Why Zynga Inc., Isis Pharmaceuticals, and Vipshop Holdings Ltd. Are Today's 3 Best Stocks originally appeared on Fool.com.

Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends Isis Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Why Plug Power Inc.'s Shares Popped Again Today

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of fuel-cell maker Plug Power Inc. jumped another 15% today, touching a new 52-week high after being upgraded by an analyst.

So what: Cowen and Co. increased their price target on the stock to $5.50 from $5 and said the recent fuel-cell deal with Wal-Mart could be replicated with other large distributors. The analysts are expecting more such contracts and said the recurring revenue from such deals will be significant.  


Now what: Before going out and buying shares on this analyst note, keep in mind that shares closed yesterday above the $5.50 price target. The company's market cap currently stands at $686.4 million and revenue over the past 12 months was just $24.5 million. There's going to need to be a massive improvement in operations very quickly to justify that valuation, which will keep me out of the stock today.

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The article Why Plug Power Inc.'s Shares Popped Again Today originally appeared on Fool.com.

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Forest Labs Submits NDA for Alzheimer's Drug Combination

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Forest Laboratories has taken a big step toward approval for a combination treatment to battle Alzheimer's dementia. The company announced that it, together with privately held Adamas Pharmaceuticals, has submitted a New Drug Application to the Food and Drug Administration for a fixed-dose combination of memantine HCl extended release, and donepezil HCl. The combination is to be used to treat of patients with moderate to severe Alzheimer's dementia.

The blended medication takes the form of an oral capsule that is administered once daily. For patients who have difficulty swallowing, the capsules can be opened and the contents sprinkled on soft food.

Last month, Forest signed an agreement to be acquired by Actavis , for a combination of cash and equity totaling roughly $25 billion, or $89.48 per share. Today, the stock closed at $99.36. 

The article Forest Labs Submits NDA for Alzheimer's Drug Combination originally appeared on Fool.com.

Eric Volkman has no position in any stocks mentioned. Nor does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Is Lowe's The Future Of Home Improvement?

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Source: Lowe's

After reporting earnings on Feb. 26, Lowe's  saw its shares rise more than 5%. The company posted strong results for the fourth quarter of 2013, which was enough to rouse investor enthusiasm. Given this jump in market cap, is Mr. Market signaling that Lowe's might be the future of home improvement, or is the business overextended?


Earnings were strong!
For the quarter, Lowe's reported revenue of $11.7 billion. This represents a nearly 6% jump in sales compared to the $11 billion the company reported in the year-ago quarter and suggests that business is alive and well. In its earnings release, management highlights a 3.9% rise in comparable-store sales for the quarter as the primary driver behind the company's revenue jump.

Looking at profitability, Lowe's did even better. For the quarter, the company's earnings per share soared 11.5% from $0.26 to $0.29. This increase in profitability was attributable to a 6.3% jump in net income but was largely due to a 6.7% drop in the number of shares outstanding.

As the business has grown, the company's management has taken every opportunity to buy back shares. During the quarter, the company repurchased $958 million worth of its shares and announced that it plans to acquire up to another $6.3 billion worth of shares moving forward.

But how does Lowe's stack up to its peers?
Based on Lowe's earnings results, it looks like the company has a great deal of potential for the Foolish investor. Over the past five years, the business saw its revenue rise 13% from $47.2 billion to $53.4 billion, while its net income jumped an impressive 28% from $1.8 billion to $2.3 billion. Although these results were strong, does this put the company as a top contender for growth in its field, or does it fall short?

For starters, let's look at Lumber Liquidators . Over the past five years, the company saw its revenue jump a whopping 84% from $544.6 million to $1 billion. This jump in sales may make Lowe's look bad, but investors should consider the differences between the two before comparing.

With a market cap of $3 billion, the company is a decent size but is less than 6% the size of Lowe's, which has a market cap of nearly $53 billion. Given this disparity, it's only natural that Lumber Liquidators should have the ability to grow faster than Lowe's, while a larger company should, in theory, grow faster, right? Right!? Well, not entirely.

You see, over the same time frame, Home Depot  increased its revenue by 19% from $66.2 billion to $78.8 billion. On top of having higher revenue, the company's market cap of $116 billion makes the home-improvement giant more than twice the size of Lowe's.

Looking at profitability, we see a similar occurrence. Over the past five years, Lumber Liquidators has seen its net income rise an impressive 188% from $26.9 million to $77.4 million. Just as in the case of its top-line growth, the company can thank its relatively small size for its growth in profitability. However, there is one caveat.

With a smaller company that is growing rapidly, it's only natural to expect for its profits to be somewhat depressed. The reason here is twofold. First, the company may try to compete with its larger competitors on the basis of price so as to draw in customers. Second, margins may be pressured because smaller companies tend to lack the same buying power than rivals like Home Depot or Lowe's have.

Analyzing the net profit margin of each business, we see the following five-year pattern below:

Source: MSN Money

As we can see, Lumber Liquidators has seen its profitability spike from 3.9% in 2011 to 7.7% in 2013, while Lowe's has reported numbers that hover around 4% consistently. In each of these years, Lumber Liquidators has outperformed its much larger rival. Meanwhile, Home Depot, which has seen its net income rise 102% from $2.7 billion to $5.4 billion, reported a steady uptrend from a net profit margin of 4% to 6.8%.

Foolish takeaway
Based on the performance of each home-improvement company, Lowe's looks like it's at the bottom of the barrel. Not only has revenue growth trailed that of Lumber Liquidators and Home Depot, but Lowe's rise in profits has been anything but beautiful. Moving forward, there is the chance for the business to turn things around; but it looks as though the Foolish investor may want to consider analyzing Home Depot and Lumber Liquidators in greater detail before rendering an investment decision.

Lowe's has had a mediocre past, but is it a "forever" stock?
Despite the so-so performance of Lowe's in recent years, is it possible that the home improvement outlet a company to own forever or are there better opportunities for the Foolish investor?

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The article Is Lowe's The Future Of Home Improvement? originally appeared on Fool.com.

Daniel Jones has no position in any stocks mentioned. The Motley Fool recommends Home Depot and Lumber Liquidators. The Motley Fool owns shares of Lumber Liquidators. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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If You Can't Make Your Drug a Blockbuster, Sue Your Competitor

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Amarin's lawyers sure are keeping busy.

The company is appealing the Food and Drug Administration's decision to rescind the Special Protocol Assessment, or SPA, for its fish oil pill Vascepa. The SPA would allow the biotech to gain expanded approval to treat patients with moderately high triglyceride levels while waiting for an outcomes study in that population. The FDA pulled the SPA because it now wants to see the results of the outcomes study to confirm Vascepa is not only lowering triglyceride levels, but also reducing heart attacks and strokes.

Amarin is also suing the FDA over the agency's decision to only give Vascepa three years of exclusivity rather than designating it as a New Chemical Entity, which would entitle the drug to five years of exclusivity. Vascepa is a purified fish oil, but the FDA apparently decided that it wasn't different enough from GlaxoSmithKline's Lovaza to justify designating it as a New Chemical Entity.

Source: Amarin


And today the company announced it's suing AstraZeneca over its fish oil pill Epanova. The pharma giant acquired the drug when it purchased Omthera Pharmaceuticals last year. Amarin claims that its patent covers "lowering triglycerides by administering a pharmaceutical composition that includes amounts of EPA [eicosapentaenoic acid] as free acid, and no more than about 30% DHA [docosahexaenoic acid]."

EPA and DHA are two types of omega3 fatty acids found in fish oils. Amarin developed Vascepa as purified EPA because there's a hypothesis that DHA may actually increase bad LDL cholesterol. DHA makes up about 45% of the omega3 fatty acids in GlaxoSmithKline's Lovaza, and the drug increased LDL cholesterol by 44% in the pivotal study used to approve the drug. Vascepa on the other hand, lowered LDL cholesterol by 5%.

As best I can tell -- there's less info on Epanova because it's not approved yet -- AstraZeneca's drug fits the definition that Amarin claims to have covered. The bigger question is whether the patent is valid. In general, method of use patents like this one are a lot harder to defend than composition of matter patents.

Even if the chance for a positive outcome of each lawsuit/appeal is relatively low, it's probably worth whatever Amarin is paying the lawyers. Of course, the return on investment depends on sales of Vascepa and Epanova. Amarin has struggled to gain traction with Vascepa, selling just $10 million worth of the drug in the fourth quarter. If AstraZeneca has similar problems marketing Epanova, blocking or trying to gain a royalty on the drug won't be worth much to Amarin.

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The article If You Can't Make Your Drug a Blockbuster, Sue Your Competitor originally appeared on Fool.com.

Brian Orelli and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Is AutoZone Still the Auto Parts King?

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The nation's biggest auto parts retailer, AutoZone , continues to post strong results in what is a very conducive automotive environment. As the average vehicle age in the United States remains near its all-time high, do-it-yourself repair and car accessories are in great demand. Expanding its store count in the U.S. and Mexico, AutoZone is set to continue benefiting from industry tailwinds. In its recent earnings report, AutoZone posted all-around strong figures, but also a sizable increase in expenses -- prompting a minor market sell-off. The short-term moves and trends of the stock are largely irrelevant, and investors should remain focused on the long-term stability of this auto replacement parts giant.

Speeding ahead
Sales grew 7.3% for AutoZone's fiscal second quarter, led by a domestic same-store sales increase of 4.3% and new store openings in the United States and Mexico. While the company's operating profit grew roughly in line with sales -- up 6.2% -- that gain was mitigated by an 11% rise in operating expenses.

Management attributed the spike in expenses mainly to a timing shift in advertising spending.


The extreme winter weather on the U.S. East Coast (crippling to many businesses) proved a great boost for AutoZone's business. Even with the rocketing expenses, adjusted net income climbed an impressive 17.8% to $5.63 per share, which was $0.09 ahead of analyst estimates. This marks the 30th consecutive quarter in which AutoZone has grown earnings in the double digits.

Competition
Looking ahead, there is little doubt that business will continue to go well for AutoZone considering the industry tailwinds and company-specific advantages. Still, investors should note that No. 2 player Advance Auto Parts is on its rival's heels.

After completing a major, $2 billion acquisition of General Parts in late 2013, Advance Auto Parts has positioned itself well for a relatively recent but crucial trend in the industry -- mechanic-based auto repair. It's certainly not a new concept, but as today's vehicles get more and more advanced, requiring technical know-how, the ability for the average Joe to do a self-fix suffers.

AutoZone isn't in the repair business itself, but it is increasingly focusing on commercial sales channels for selling parts to garages and similar car repair businesses.

A buy today?
The company's domestic business is mature and faces a strengthened competitive landscape, with Advance Auto Parts equaling its store count and just behind AutoZone's sales figures. The Mexico business leaves plenty of room for expansion, in addition to the handful of stores that AutoZone has in Brazil -- a successful experiment thus far.

 At 15.12 times expected forward earnings, the company seems reasonably priced compared to Advance Auto Parts (15.25 times). On an EV/EBITDA basis, AutoZone is marginally richer at 10.9 times. All in all, the market appears to value equally the respective growth trajectories. Does AutoZone present a better opportunity than Advance Auto? It's tough to say. The latter's focus on mechanic repairs is a compelling strategy, though AutoZone's tactic of remaining a parts supplier resonates well, too.

Both companies are strong candidates for investors seeking fairly priced growth in the coming years.

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The article Is AutoZone Still the Auto Parts King? originally appeared on Fool.com.

Michael Lewis has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Craig Venter's Latest Startup Gets $70 Million to Sequence Loads of Genomes

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J. Craig Venter, the human genome pioneer, today unveiled a new San Diego-based venture with an ambitious goal of providing whole genome sequencing and cell-therapy-based diagnostic services for patients.

Venter said he co-founded the company, Human Longevity, or HLI, with Robert Hariri, who oversaw Celgene Cellular Therapeutics and Peter Diamandis of the X Prize Foundation. The company already has raised $70 million in Series A venture financing that includes a Malaysian investment fund that also is the lead investor of another Venter venture, Synthetic Genomics, San Diego-based Illumina, and other individual investors.

Venter plans to serve as the chairman and CEO of both HLI and San Diego-based Synthetic Genomics, which he co-founded in 2005 to engineer genes within organisms so they can produce fuel, chemicals, medicines, and nutritional products.

The HLI effort, which Venter and others repeatedly described as "unprecedented" in a conference call this morning, will initially focus on basic research and development, sequencing every cancer patient who comes into the UC San Diego Moores Cancer Center, as well as other patients with diabetes, obesity, heart and liver diseases, and dementia.


In a statement this morning, HLI says it has established collaborative research and development partnerships with UC San Diego, Metabolon, and the J. Craig Venter Institute. North Carolina-based Metabolon is expected to provide information about patients' metabolytes, key chemicals in their blood.

HLI also has formed a Biome Healthcare division, led by Karen Nelson, to generate gene sequencing data of the microbiome for many patients. The microbiome consists of all the microbes that live in the human gut (and elsewhere in and on the human body). New research by Nelson and others suggest that such bacteria play a key role in human health and disease.

The early goal at HLI is to sequence 40,000 human genomes a year, and amass the world's largest database of human genome sequences. HLI plans to combine its human genome data with microbiome data and phenotype databases to develop new treatments, including stem cell therapies, for aging-related diseases. Eventually, HLI intends to sequence 100,000 human genomes a year.

"We will be using that [data] to make numerous new discoveries in preventative medicine," Venter said. "We think this will have a huge impact on changing the cost of medicine and broad human health."

HLI plans to make money by providing access to its database to pharmaceutical, biotechnology and academic organizations, gene sequencing, and by developing new medical diagnostics and therapeutics. As HLI's genome-sequencing capacity increases, the company plans to sequence people of all ages -- from infants to super centenarians -- including those who are healthy as well as those with disease.

Genomic data would be shared among researchers participating in the effort, although Venter said details about protecting patient privacy are still being worked out.

DFJ partner Steve Jurvetson, who said he's an investor in HLI, asked Venter during the call to compare the effort to BGI China, one of the world's premier gene sequencing centers. BGI says on its U.S. website that it has relationships with 17 out of the top 20 global pharmaceutical companies as part of its suite of commercial science, health, agricultural, and informatics services.

Venter answered that HLI will be working with more advanced gene sequencing equipment (Illumina's HiSeq X Ten Sequencing Systems) and will have higher throughput capabilities. But he added that there is plenty of room for gene sequencing services. In fact, Venter envisions a future where genome sequencing is done routinely for every patient admitted to a hospital.

"We cannot have enough players in the human genome sequencing field," Venter said. "We're just trying to elevate it to a new level."

With $70 million in initial funding, "We think that will carry us through the first 18 months as we build these operations," Venter said. HLI already is using laboratories in San Diego for high-throughput microbiome and human genome sequencing, and has plans to build a new facility near the UC San Diego campus. HLI plans to hire about 100 scientists and others over the next year, Venter said.

"This is a revolution in biomedical research," said David A. Brenner, vice chancellor for health sciences and dean of the UC San Diego School of Medicine. "This is the first time ever as physician-scientists that we have had the opportunity to handle very large datasets and to be able to compare the genetics of a patient with the microbiome, as Dr. Nelson said, and with the metabolytes in the blood to try to gain new insights into our understanding of disease pathogenesis, into diagnoses, and hopefully, into new therapies and cures."

Biotech isn't the only revolutionary industry that investors are talking about
For the first time since the early days of this country, we're in a position to dominate the global manufacturing landscape thanks to a single, revolutionary technology: 3D printing. Although this sounds like something out of a science fiction novel, the success of 3D printing is already a foregone conclusion to many manufacturers around the world. The trick now is to identify the companies -- and thereby the stocks -- that will prevail in the battle for market share. To see the three companies that are currently positioned to do so, simply download our invaluable free report on the topic by clicking here now.

This article originally appeared on Xconomy, along with:

The article Craig Venter's Latest Startup Gets $70 Million to Sequence Loads of Genomes originally appeared on Fool.com.

Bruce V. Bigelow has no position in any stocks mentioned. The Motley Fool recommends Celgene and Illumina. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Starbucks, McDonald's, and Yum! Brands: The Breakfast War Is Getting Hotter

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Breakfast is becoming an increasingly important battlefield in the fast-food war, involving industry giants such as Starbucks , McDonald's , and Yum! Brands . Which one will win the competition for the most important meal of the day?

Starbucks is much more than coffee
Starbucks announced on Tuesday the launch of four new breakfast sandwiches: ham and Swiss on a croissant; spinach, sun dried tomatoes, and cheese on ciabatta; egg and cheddar on toast; and a reduced-calorie egg white, bacon, and cheese on English muffin.


Source: Starbucks.

The company has a big advantage in the competition for breakfast because of the popularity of its coffee products, and the Starbucks brand is a big differentiating factor when competing versus companies such as McDonald's or Yum! Brands' Taco Bell.

Even if coffee and other drinks traditionally carry higher gross margins than food products, adding more food offerings to the company´s menu has been a powerful growth driver for Starbucks in terms of increasing comparable store sales lately.

According to Chief Financial Officer Troy Alstead, during the company's latest earnings press conference:

Food continues to be a disproportionate driver to our comp and product launches helping to propel those results. There have been very significant successes thus far, including for some sales that have doubled versus our prior offering.

Starbucks is naturally positioned to compete in the high end segment of the pricing spectrum, offering high-quality products by leveraging the acquisition of La Boulange and capitalizing the value of its brand and differentiated customer experience.

McDonald's plays defense
McDonald's is going through a really negative period lately, especially when it comes to sales in the centrally important U.S. market: Comparable sales in the country declined by a worrisome 3.3% during January.

Harsh weather conditions were probably partially responsible for such a dismal performance, but sales figures have been quite week over the past several quarters, so the company´s problems go well beyond unfriendly weather.

The company owns a leading market position in breakfast thanks to the popularity of its Egg McMuffin and other competitively priced products. In addition, McDonald's is strengthening its breakfast menu by broadening its McCafe stores with a reinvigorated coffee and food menu.

Source: McDonald´s.

McDonald's is also analyzing the possibility of extending its breakfast hours to beyond 10:30, which is something many customers are reportedly requesting, particularly when it comes to weekends.

The move would mean considerable logistical and operational challenges for the company, though. Offering lunch and breakfast at the same time could be problematic because of limited kitchen space, and service quality is already under pressure at McDonald's, so management needs to give careful consideration to this idea and its implications on areas such as service speed and quality.

Yum! Brands wants you to have a spicy breakfast
Yum! Brads' Taco Bell has been experimenting with breakfast products in select locations since 2012, and the company has recently announced that it will go national with its breakfast products on March 27. 

The company is targeting millennials by offering competitive prices and portable products that can be held in one hand. Products will include a waffle taco, a breakfast burrito, and cinnamon pastries, among other food products that Taco Bell will complement with coffee and juice. The company will offer breakfast until 11:00, half an hour later than McDonald's.  

Source: Yum! Brands.

If extending breakfast hours could be challenging for McDonald's, Yum! Brands will not have it much easier when rolling out a breakfast menu to nearly 5,500 Taco Bell locations. However, if the company has decided to finally go across the country with breakfast, that´s probably an indication of strong demand and promising growth prospects, at least as evaluated by management.

Like McDonald's, Taco Bell is traditionally focused on low prices, so the company will most likely be aggressive in its pricing strategy when it comes to breakfast, too. Taco Bell's decision to enter breakfast is probably a more direct competitive threat for McDonald's, and not so much for Starbucks, which competes in the premium segment.

Bottom line
McDonald's and Yum! Brands have always been active competitors, and breakfast seems to be the next battle between the fast-food giants. As for Starbucks, the company's track record in product innovation, combined with brand differentiation and leadership in quality coffee, means that Starbucks is particularly well positioned to continue gaining participation in the segment.

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The article Starbucks, McDonald's, and Yum! Brands: The Breakfast War Is Getting Hotter originally appeared on Fool.com.

Andrés Cardenal has no position in any stocks mentioned. The Motley Fool recommends and owns shares of McDonald's and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Can Pfizer Overcome Its Patent Woes?

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As with a number of its pharmaceutical peers, Pfizer is struggling to overcome the loss of patents on many of its key blockbuster drugs. The company continues to invest in its pipeline and, in the long run, this is the most logical (and successful) means of arresting the decline in sales and ensuring the company achieves impressive levels of top-line growth.

However, Pfizer is seeking to combat the loss of one of its patents in a different manner. While it may not completely stop the decline in sales, it could go some way to improving the current outlook for the company and also buy it a little more time to find a replacement blockbuster.

Over-the-counter statin
Lipitor is a blockbuster cholesterol pill (owned by Pfizer) whose annual sales have fallen from more than $10 billion in 2010 to just above $2 billion in 2013. That's a fall of around 80% in just three years, and it highlights the hugely negative impact that generics can have on a blockbuster drug like Lipitor.


As well as seeking to replace Lipitor with another blockbuster drug, Pfizer is also pushing ahead with efforts to sell Lipitor over the counter. Pfizer recently commenced a clinical trial to see if consumers taking an over-the-counter Lipitor follow the instructions on the label and get their own blood tests to see if the drug is lowering their cholesterol.

Of course, doubts remain as to whether an over-the-counter version of Lipitor could ever be approved. Recent changes in clinical guidelines for treating people with cholesterol-reducing statins place greater weight on more complex assessments of general health factors (such as muscle weakness that can be caused by statins) than simple targets. However, if the over-the-counter version of Lipitor is passed, it is estimated that sales of more than $1 billion per year could be generated. Although this is substantially lower than the $10 billion from 2010, it is better than sales declining to lower than $1 billion as a result of continued generic pressure.

Pfizer is not the only company that has attempted to produce an over-the-counter version of a blockbuster drug. Merck , for instance, had its proposals to produce an over-the-counter version of the statin Mevacor rejected by the FDA because of concerns that consumers couldn't correctly monitor the change in cholesterol levels and other potential side effects. Pfizer says that it will use "new and creative ways" to communicate usage instructions to overcome this potential hurdle.

Drug developments elsewhere
As with Pfizer, Merck is facing the challenge of countering the threat from generic competition. However, 2014 has seen positive developments surrounding its PD-1 drug, MK-3475. Indeed, Merck announced plans to partner with Pfizer and two other major biopharma companies (Amgen and Incyte) in January, with the group all set to combine MK-3475 with other drugs in clinical trials.

Despite this, it appears as though Bristol-Myers Squibb's competitor to MK-3475, nivolumab, could be a thorn in its side. Indeed, research released just this week showed that 62% of patients taking the immunotherapy were alive after one year and 43% were still alive after taking the drug for two years. The results seem to be positive, and nivolumab results could be a potential catalyst for the company in 2014.

Of course, Pfizer's attempts to sell an over-the-counter version of its Lipitor statin is not a means of replacing the blockbuster drug. Clearly, $1 billion of potential annual revenue from the over-the-counter drug (if it is approved) is not going to replace the $8 billion of annual revenue lost as a result of generic competition. To replace this, Pfizer will need to continue to develop its drug pipeline, and on this front it has enjoyed considerable success in recent months, with its breast cancer drug, palbociclib, meeting its goals for a midstage study. It is estimated that the drug could eventually generate more than $3 billion in annual sales, if approved.

An effective combination
So, Pfizer seems to be responding logically to the threat of generic competition resulting from patent expiration. Not only is it continuing to develop its drug pipeline and seek replacements for former blockbuster drugs, it is also seeking to mitigate the impact of generic drugs through developing an over-the-counter offering of Lipitor. Doing so could buy it some extra time (and revenue) and help the company to more effectively counter its patent woes. 

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The article Can Pfizer Overcome Its Patent Woes? originally appeared on Fool.com.

Peter Stephens has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Chipotle's Tofu Turning Point

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Welcome to the fast-food big leagues, tofu. Chipotle Mexican Grill this week introduced Sofritas to its stores in Boston and New York. That rollout brings the total number of locations that offer the soy-based ingredient to more than half of its 1,600 restaurants -- a quick climb for a protein that was selling at just seven spots a year ago.

Source: Chipotle Mexican Grill.


When Chipotle first tested Sofritas in San Francisco last year, co-CEO Steve Ells hinted at its potential for a much bigger audience. The braised tofu stuffing was "conceived with vegetarians and vegans in mind," he said at the time, "but it's so delicious that we believe it will have broad appeal on taste alone."

Ells was right: The ingredient is already responsible for 3% of Chipotle's sales. And the company says that almost half of the customers ordering it aren't vegetarians -- they're meat eaters looking for something besides the traditional chicken, pork, and beef options that currently dominate fast-food menus.

Here are a few interesting facts that you might not know about Chipotle's new taco and burrito stuffing:

  • It's rare. Sofritas is the company's first menu addition since introducing salads in 2005. While fast-food giants often rely on new and limited-time products to boost traffic, Chipotle hardly makes any food changes, focusing instead on consistency and throughput.
  • It's Asian. Sofritas was inspired by a tofu offering at Chipotle's sister chain, ShopHouse, its new fast-casual Asian kitchen concept.
  • It's in short supply. The biggest reason it hasn't yet been rolled out to all of Chipotle's locations isn't demand -- it's supply: Chipotle gets all of its tofu from a single organic producer in Oakland, Calif. That soy beanery has no doubt had to adjust to spiking production volumes as the ingredient was introduced at hundreds of restaurants last year.

Chipotle is selling Sofritas at about 800 locations nationwide, on its way to all 1,600 restaurants eventually. Sure, that's tiny compared to McDonald's 14,000-store footprint. However, I wouldn't be so quick to dismiss tofu as a niche protein that can't challenge the McNuggets of the industry. 

Keep in mind that Chipotle's restaurant base grew by 11% last year and the company logged a scorching 6% bounce in comparable-store sales, or comps. At the same time, McDonald's suffered its first drop in comps in a decade while adding less than 1% to its store base. No, Sofritas isn't the next Big Mac. But it's a key part of a fast-growing chain, and will likely introduce tofu into many more Americans' diets over the coming years.

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The article Chipotle's Tofu Turning Point originally appeared on Fool.com.

Demitrios Kalogeropoulos owns shares of McDonald's. The Motley Fool recommends and owns shares of Chipotle Mexican Grill and McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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