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Intel's Results Probably Spell Bad News for AMD

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As many investors are aware, there are only two PC processor suppliers left: Intel and Advanced Micro Devices . Further, as investors are probably aware, the PC market has been fairly weak in light of the growth of tablets and smartphones. However, on Intel's earnings call, the company reported PC chip unit shipments that were up 1% year over year, with average selling prices down 3%. This is extremely discouraging for AMD's upcoming earnings report.

This suggests some pretty intense market share loss
According to IDC, the PC market saw unit shipments decline year over year by about 4.4%. Right off the bat, it should be pretty clear that if total units were down 4.4%, then Intel's 1% unit increase means that Intel gained some pretty significant market share, particularly at the low end with Bay Trail-M.

However, what's interesting is that if you assume that Intel has 80% market share and AMD 20%, a 1% unit increase on Intel's part on a 4.4% decline would suggest that AMD lost 460 basis points of share. While I do agree that AMD lost share, the magnitude of the share loss probably wasn't that extreme. So what explains that difference?


Inventory correction and classification issues
On the call, Intel noted that the reason for the disconnect between its unit increase during the quarter and the IDC estimates was partially because PC OEMs had been operating with extremely lean inventory levels and were beginning to bolster then a bit. Something that management also didn't mention is that IDC probably counts netbooks as PCs but doesn't count 2-in-1 tablets with Intel Core processors inside, which also probably added to this disparity. AMD's presence in 2-in-1 designs is fairly minimal, though, so it's still negative for AMD.

What to expect when AMD reports?
The good news is that AMD is already guiding for a 16% sequential decline in the current quarter. This is probably due to a fall-off in game console-related chip shipments as well as an expectation of share loss and a weak PC market. Now, where things could go well for AMD is that it had been modeling in a 10% decline in the PC TAM and probably was not oblivious to the share-loss story that was going on. This still gives AMD room to surprise moderately to the upside.

The important thing, though, will be the Q2 guide. The sell-side is currently looking for $1.36 billion in sales (roughly flat to Q1's $1.34 billion expectation). If AMD isn't able to reverse the share loss that it's currently seeing in PCs, then even this number could be optimistic as the slightly positive effects of seasonality (Intel is guiding to $13 billion for Q2 -- up about 2% quarter-over-quarter) could be offset by the share loss.

Foolish bottom line
It's tough to be bullish on AMD at this point. While the game console revenue stream is nice (and perhaps other semi-custom wins will begin to contribute soon), the PC processor market still makes up the majority of the company's revenues. Until AMD can stabilize and grow its share here, it will continue to suffer the double-whammy of an industry in slight decline and share loss within a declining market. This is hardly the stuff that great long ideas are made of.

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The article Intel's Results Probably Spell Bad News for AMD originally appeared on Fool.com.

Ashraf Eassa owns shares of Intel. The Motley Fool recommends and owns shares of Apple and Intel. 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 Pep Boys Fell

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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 The Pep Boys -- Manny, Moe, and Jack  were looking rusty today, falling as much as 16% and finishing down 15% after a disappointing earnings report.

So what: The automotive aftermarket chain badly missed the mark on the bottom line, reporting a net loss of $0.06 on expectations of a $0.05-per-share profit. Revenue, meanwhile, increased 0.2% on an even calendar basis to $495.7 million, but that was also well below the consensus at $531.2 million as comparable sales were down 2.4%. CEO Mike Odell noted that several components of the business are continuing to grow, including service revenue and customer counts, but a drop in tire pricing weighed on profits, which he expects to continue through the first half of the year. 


Now what: Pep Boys shares hit a 52-week low on the news, as this was the fourth straight quarter that the company has missed earnings estimates. Notably, shares of competitors such as Advance Auto Parts and O'Reilly Auto Parts  are trading near 52-week highs, making Pep Boys' problems seem deeper than tire prices. Given the continued weakness in tire pricing expected, shares could fall further. I'd like to see an earnings beat and positive comps before getting bullish on Pep Boys.

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The article Why Shares of Pep Boys Fell originally appeared on Fool.com.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of O'Reilly Automotive. 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 Twitter, Trina Solar, and Benefitfocus Jumped Today

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Investors have had a pessimistic attitude about the stock market nearly all year, with advances inevitably giving way to declines. But stocks proved their resiliency today, as broad-market indexes regained their footing even after plunging to substantial declines in midday trading. With major markets posting gains of a quarter-percent to a half-percent, though, the jumps in Twitter , Trina Solar , and Benefitfocus were much more noteworthy and came on company-specific news that heartened shareholders.

Twitter soared 11% after several positive developments for the social-media company. Of primary importance were reports that indicated that major institutional investors in Twitter plan not to sell their shares even when Twitter's lockup period ends early next month. With the potential for insiders and large investors to sell nearly 475 million Twitter shares once the lockup expires, ordinary investors were nervous about the possible share-price decline resulting from massive selling pressure. Yet with the Wall Street Journal having found that holders of about a third of Twitter's shares won't sell next month, the stock bounced higher. The hiring of a key competitor's mapping-software executive and Twitter's purchase of data-analytics company Gnip also raised optimism about the rising social-media star.

Trina Solar rose 6%, regaining almost all of the ground it lost Monday when it announced that its first-quarter shipment volumes would miss previous guidance. At first glance a plunge of 130 megawatts was extremely scary, especially as it marked about a fifth of its total module-shipment volume for the quarter. Yet shareholders apparently reconsidered and took solace in the fact that Trina reiterated its full-year shipment guidance, arguing that it fully expects that shipments to the European Union will resume normal levels as soon as Trina can agree on minimum-import prices under new trade rules. Moreover, with expected boosts in gross margins, Trina could well remain profitable this quarter, giving the company another victory compared to more troubled times in the recent past.


Benefitfocus jumped 8% after the cloud-based human resources services provider announced that it had brought on a major new client. Propane company AmeriGas picked Benefitfocus to help AmeriGas administer benefits for its workforce of nearly 9,000 employees, including benefits enrollment and communication services. Given the extensive network that AmeriGas has, spanning 1,200 locations throughout the nation, a cloud-based solution is almost a necessity. Yet by choosing Benefitfocus for a multi-year agreement, AmeriGas gave its vote of confidence that the upstart cloud-software provider can meet its HR needs, and that's a valuable commodity in an industry full of similar up-and-coming cloud HR providers.

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The article Why Twitter, Trina Solar, and Benefitfocus Jumped Today originally appeared on Fool.com.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Twitter. 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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Chipmaker Atmel Looks Like a Sound Long-Term Bet

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Semiconductor company Atmel is primarily known for its microcontrollers that are used in various touchscreen applications. The company's chips are used in Microsoft and Samsung's products, which is why it has a big market to tap into on the back of growth in mobile devices and Windows 8.1 systems. 

Atmel has been continually upgrading its product portfolio. It has recorded a number of design wins and certifications to strengthen its chances of benefiting from different opportunities going forward. Let's take a look at how the company is positioned and if it is a good long-term investment.

A strong product portfolio
Atmel has increased its market share in the core microcontroller business, achieving strong momentum with its new products. The introduction of a record number of new 32-bit core microcontroller products has helped Atmel strengthen its position in the market.


Atmel's new touch product portfolio, including the new T series of touchscreen controllers, should enable it to benefit from large-screen applications and gain market share in smartphones and small to mid-sized tablets. Also, Atmel's XSense metal mesh sensors are now in volume production and are being shipped to multiple customers, including Tier 1 OEMs such as HP and Asus. 

Atmel is focused on making its products more efficient. For example, its new SAMA5D3 devices are small and can take higher temperatures while maintaining a high level of performance and low-power operations. The device is used in industrial applications, including home and building automation, medical electronics, and consumer applications.

Atmel's latest ARM Cortex-M4-based microcontrollers combine high performance and ultra-low power in a small form factor. The company is targeting battery-powered consumer applications such as smartphones, tablets, and ultrabooks, along with wearables and audio devices with these solutions. Further, Atmel has expanded its sensor partner program with the addition of Hillcrest Labs to develop turnkey sensor hub solutions to drive demand in the smartphone category.

Key customers to drive growth
Atmel had recorded a key design win in mobile devices last year with Samsung. The company provided its microcontroller for the Galaxy S4 Mini. This year, Samsung plans to release a mini version of its latest Galaxy S5 phone as well. Given that Atmel provides cheap and low-power components, it might win a spot in the Galaxy S5 Mini this year since it is a cheaper device.

In addition, Samsung's growing clout in the tablet market should also help Atmel benefit from growth in tablet shipments. According to ZDNet, Samsung's worldwide tablet market share in the first quarter increased to 23%, with the company shipping 14 million tablets. Samsung is targeting both emerging markets and developed countries with its tablet portfolio this year, and it aims to become the market leader by overtaking Apple. This is great news for a Samsung supplier such as Atmel.

On the other hand, in the large-screen windows device market, Atmel is actively engaged in well over 225 different Windows 8 and Windows 8.1 programs. It has won multiple designs and is expanding its presence in the tablet market, driven by the superior performance of its new T series products.

Atmel had supplied the two chips for Microsoft's Surface 2 tablet. This could be a big boost for Atmel since Microsoft's Surface sales had more than doubled on a sequential basis last quarter. The Windows tablet raked in $893 million in sales in the holiday season.  

The sharp uptick in Surface sales is a positive indicator for Microsoft, and the same can be said about Atmel. In addition, since support for Windows XP devices has been ended, and the Windows 8.1 operating system is gradually gaining momentum, Atmel can expect a boost in sales of touchscreen computing systems. 

Bottom line
Atmel has a lot of good stuff going for it. The company's new products are gaining momentum, and the growth in sales of customers such as Samsung and Microsoft should help expand its addressable market. The stock might have underperformed the NASDAQ index in the last year, with gains of just 17%, but it still looks like a good investment considering the prospects. 

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The article Chipmaker Atmel Looks Like a Sound Long-Term Bet originally appeared on Fool.com.

Ayush Singh has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. 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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Apple and Microsoft Dashboards: Coming to a Car Near You

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Source: Flickr user smoothgroover22.

Apple's  March announcement of the car dashboard software CarPlay has been swiftly met by a Microsoft  demo at the April Build conference, currently called "Windows in the Car." The two big tech companies (three, if you count Google's rumored infotainment system) are now open rivals in the auto tech industry. But it is unlikely that consumers will be forced to choose between systems for long -- automakers stand to gain by offering consumers an option between systems.


Leapfrogging toward vehicle tech
Apple, with year-over-year revenue growth at 5.7% in the first quarter, is currently hovering above the industry average of 4.7% growth. Deutsche Bank recently set a $650 price target for the company, expecting further growth from Apple's latest product offerings, including CarPlay.

CarPlay seeks to put iPhone apps and interfaces on the dashboard, in either large touchscreens or more traditional buttons and knobs, based on the carmaker involved. Currently, Apple has deals with Ferrari, Honda, Hyundai, Mercedes-Benz, and Volvo to bring CarPlay to market in the 2014 models of their cars, most due for sale by year's end. Equipped with this software and an iPhone 5 or later model, drivers will be able to launch Apple's music, driving, information and communication apps while in front of the steering wheel.

Microsoft's latest entry in the dashboard sector, while only a demo, looks similar. Using a dashboard touchscreen, users can access Microsoft apps like Maps and Xbox Radio in an interface familiar to those who have used Microsoft's panel-like layout before. Like CarPlay, "Windows in the Car" will also be able to play third-party apps like Pandora and Spotify (look out, traditional radio). The software uses the Mirrorlink connectivity standard, which has already won the support of Volkswagen, Honda, Toyota, and Citroen.

However, Microsoft has some baggage in this area in the form of the Sync system developed by Ford with Windows software. According to rumors back in February, Ford is dropping Windows in favor of BlackBerry's QNX programming to save money. That would have left Microsoft out of the dashboard game, but the "Windows in the Car" announcement indicates the company still intends to offer Apple future competition, albeit in a different format.

Investors appeared uncertain by this back-and-forth development. After rising 6.4% thus far in 2014, Microsoft's share price fell 0.18% on the news, down to $39.80, and then eased down to hover around $39.40 in early April.

Spoiled for choice
While developers are busy snapping up separate car brands for their first market movements, the future of dashboard software is likely to be all-inclusive. Ford's global technologist John Ellis acknowledged this when he told The New York Times, "Ford sells cars... and it would not be in our best interest to limit ourselves."

As Fool Daniel Kline noted, Microsoft, Apple, and perhaps Google are invested in the auto sector because they see it as a way to win long-term customers. If you buy a car with CarPlay, you are committing to using Apple phones for years down the road. Automakers approach the scenario from the opposite direction: It is in their interest to offer buyers as many choices as possible. As car tech evolves, brands will probably move from picking sides to offering customers a choice to install Apple, Microsoft, or Google software. It makes sense, encourages dashboard competition, and gives the buyer more power. Automakers who try to form an exclusive relationship with a tech company may regret the move in a couple of years.

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The article Apple and Microsoft Dashboards: Coming to a Car Near You originally appeared on Fool.com.

Tyler Lacoma has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. 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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Will Today's Earnings Send the Dow Jones Industrials to New Record Highs?

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The Dow Jones Industrials jumped 89 points on Tuesday, but the most notable thing about the Dow's movements was that the average managed to recover from an intraday drop of nearly 200 points -- from being up 100 points to being down 100 points -- on the way toward its eventual winning day. Between positive earnings results from Coca-Cola and Johnson & Johnson and this afternoon's favorable release from Intel , could the Dow make a push to new record highs?

How earnings could send the Dow soaring
Each of the earnings announcements Tuesday had broader lessons for investors in the Dow Jones Industrials. For Coca-Cola, expectations were extremely low, with controversies over the possible health effects of its carbonated beverages exacerbating existing challenges as U.S. consumers have already started moving toward non-carbonated drinks. But Coca-Cola managed to deliver growth where it needed it most: from emerging markets, where currency-adjusted revenue rose 12% in China, 6% in India, and 7% in Latin America. Contrast that to the 1% decline in North America, and you can see where mature consumer stocks need to keep focusing their efforts on higher-growth markets worldwide.

Johnson & Johnson had generated more optimism coming into its report, and once again, the health-care conglomerate's pharmaceutical division delivered outpaced growth with a 12% increase in segment revenue. By contrast, medical devices just barely managed to post positive growth, while consumer-oriented products actually saw sales decline. Some concerns about what may prove to be a limited window of opportunity for hepatitis-C standout Olysio could hold back growth later this year or next year, but for now, Johnson & Johnson has found a viable way to hold back the headwinds from Obamacare on its device business and produce lasting growth.

Source: Intel.


Finally, Intel's earnings could point to further gains for the Dow tomorrow, as the tech giant managed to top earnings expectations even though it missed slightly on the revenue side. In making its pitch to enter the mobile-device business, Intel said that it expects to ship 40 million tablet-computer chips this year. Yet given the operating losses that Intel's mobile and communications group suffered, investors might take more heart from data-center and Internet of Things revenue, which posted much more impressive growth.

For the Dow Jones Industrials, the key to earnings season isn't so much the results themselves but rather the response that each company makes to find new ways to grow. If the innovative spirit of the Dow's component companies shines through, then the Dow could easily pick up the couple of percentage points needed to set new all-time record highs.

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The article Will Today's Earnings Send the Dow Jones Industrials to New Record Highs? originally appeared on Fool.com.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Coca-Cola, Intel, and Johnson & Johnson and has options on Coca-Cola. 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 hhgregg, Inc. Dropped

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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 hhgregg were heading south today, falling as much as 15% and finishing down 10% after providing disappointing preliminary earnings results.

So what: The electronics retailer estimated a 9.9% decline in revenue to $538.3 million for the fourth quarter, ending March 31, with a comparable sales drop of 9.9% on large declines in consumer electronics and computing and wireless categories. Because of the drop, management now expects an adjusted per-share loss of $0.25, well below analyst estimates of a $0.10 profit. The Wall Street revenue consensus had stood at $552.1 million.  


Now what: CEO Dennis May said the company "faced a number of headwinds in the quarter" including extreme weather, but it managed to deliver its 11th straight comparable sales increase in appliances, which, with electronics sales flagging, has become the focus of the company's transformation strategy. Still, appliances make up just about half of the company's sales so it will need to do something about plummeting electronics sales. I'm also concerned about the company's badly missing its own guidance,and would expect shares to continue to fall unless it can reverse its sharp sales decline. 

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The article Why Shares of hhgregg, Inc. Dropped originally appeared on Fool.com.

Jeremy Bowman 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 Facebook Threatened by Twitter?

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Twitter recently expanded its partnership with research firm Kantar. The partnership will mark the start of a program to make a better use of real-time data generated by Twitter users. Does this mean Twitter will hurt Facebook ? In fact, Facebook can do much the same thing. Also, its efforts in the video advertisement sector, along with the growth of its search ad revenue, will ensure that it is not eclipsed by Twitter.

Facebook and real-time data
A real-time data analysis is crucial if organizations are to avoid a delay in information gathering. Gartner is projecting a 45%-per-year average growth rate for social media, social network, and content analysis from 2011-2016. To make a big gain from the market, Facebook is beginning to master identifying real-time moments. It recently made some changes to its Power Editor. With its larger user base, Facebook can generate more real-time data than Twitter.


The video advertisement sector
Facebook's strength, like Twitter's, is in the advertising sector. In the fourth quarter, the company recorded 90% of its $2.59 billion revenue from its advertising business. A little over 90% of Twitter's fourth-quarter sales, equal to $220 million, were derived from ad-related activities.

However, Business Insider Intelligence is forecasting that online video ad revenue will increase by 35% to more than $9 billion in 2016. To  benefit from that, Facebook is prepared to launch video advertisements to compete with Twitter. In the case of Twitter, the company has been meeting with agencies and brands, showing off its ad product road map in an attempt to counter Facebook's push into the video ad market. Facebook and Twitter are poised to capitalize on the video advertisement segment. However, one look at their prospects in the ad market shows Facebook is positioned to make more money.

The search ads sector
Facebook and Twitter remain the biggest threats to Google in the online advertisement market. According to Gartner, worldwide mobile advertising revenue will reach $24.5 billion in 2016. Facebook and Twitter want to exploit the situation. In March, Facebook released Graph Search to find answers to questions asked by its users. Twitter has made its promoted accounts appear at the top of Twitter search, which serves as another selling point for the company.

However, Facebook's revenue from its advertising business, helped by search ads, was $2.34 billion in the fourth quarter. Emarketer has predicted Facebook will gain 9% of the market by 2015. Twitter, on the other hand, is expected to gain 2.2% of the market share by the same year, up from 0.6% two years ago. Twitter has an expanding business model revolving around search ads, but Facebook is a winner in this department.

A threat to Facebook and Twitter
Google has built a powerful platform based on video and search engine advertisements. It reported a revenue of $16.86 billion for the fourth quarter, an increase of 17% compared to the fourth quarter of 2012. In the video ad sector, YouTube channeled more than $5.5 billion in sales last year. Estimates from Emarketer indicate that U.S. digital video ad spending will nearly double in four years. YouTube's advertising revenue makes it very important in Google's future plans.

Final Foolish thought
Facebook's recent acquisitions have raised eyebrows, but the company has an eye on the future. The company's experiments at optimizing real-time data, initiatives in the video advertisement sector, and the rise in its search revenue make it a compelling buy.

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The article Is Facebook Threatened by Twitter? originally appeared on Fool.com.

Mark Girland has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google (C shares), and Twitter. The Motley Fool owns shares of Facebook and Google (C shares). 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 Coca-Cola and Twitter Jumped

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After a mid-day dip into negative territory, stocks gained in the afternoon to finish in the green, led in part by strong earnings reports by two Dow Jones Industrial Average  components, Coke and Johnson & Johnson. For the day, the Dow finished up 89 points or 0.6%, while the S&P 500 jumped 0.7%, and the Nasdaq gained just 0.3% as momentum names continued to struggle.

In this morning's economic reports, the consumer price index rose 0.2% in March just ahead of expectations at 0.1%, indicating that inflation is still under control and that consumer prices were not affected by a larger increase in wholesale prices last month. Year-over-year the CPI was up 1.5%. Elsewhere, an index for New York State manufacturing showed slower growth than expected in April at a level of 1.3 versus estimates of 7.5.

Coca-Cola  was the big winner on the Dow today, rising 3.7% after reporting earnings this morning. The beverage giant actually saw a global decline in soda sales for the first time in 15 years, but that was countered by growth in non-carbonated drinks as overall volume increased 2%. Adjusted EPS fell from $0.46 a year ago to $0.44, because of currency weakness, but that was in line with estimates, while revenue fell 4% to $10.58 billion, ahead of estimates of $10.55 billion. On a constant-currency basis, sales increased 2% as the company was affected by the emerging-market currency crisis. European sales were particularly weak as soda volume fell 5% and unit case volume dropped 4%, but growth in emerging markets made up for it as volume sales in China jumped 12%. CEO Muhtar Kent said the company was making "meaningful progress" across its strategic initiatives. The jump in share price was a little surprising, considering the results were only in line with estimates, but investors seem to be happy with the volume increase and the emerging-market growth. Still, Coke sees currency headwinds of 7% on 2014 operating income, so profits are likely to suffer.


Twitter  shares were also flying higher today, up 11% after announcing an acquisition of one of its data partners, Gnip, for an undisclosed amount. Analysts see the move as evidence that Twitter wants to do more to monetize its data as the social network in the past had sold the data from its tweets to a small group of companies like Gnip, which analyzed the data and sold it corporate buyers. Separately, the company also said it hired former Google executive Daniel Graf as its new product chief. Graf will be charged with the task of making the site more user friendly. While the two moves are no guarantee on an improved performance, the acquisition, in particular, would seem to promise greater profits in the future for the tech upstart.

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The article Why Coca-Cola and Twitter Jumped originally appeared on Fool.com.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola, Google (A and C shares), Johnson & Johnson, and Twitter; owns shares of Coca-Cola, Google (A and C shares), and Johnson & Johnson; and has options on Coca-Cola. 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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Will Apple and Google Join the Tech Free Fall?

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In case you didn't know it there has been an exodus from tech and biotech stocks so far in 2014. Since January 1, the tech-heavy NASDAQ Composite Index has fallen over 5%. The 100 biggest stocks in that index, the NASDAQ 100, are off by 4% this year. 

Some individual stocks like Amazon.com  have taken even more of a beating, as Amazon.com is down 21% since mid-March (and 15% since Jan. 1). The shares of other companies in the index, like Apple , which comprises 20% of the NASDAQ by capitalization value, and Google , have not fallen quite as much so far this year.

^IXIC Chart


^IXIC data by YCharts

Will Apple and Google soon join the list of free-falling stocks? Is Amazon down for the count after its fantastic run-up?

Buy a good company at a fair price
The prime reason for the Amazon sell-off was probably perceived valuation. Even after the three-month-plus plunge shares of Amazon are selling for over 500 times the company's earnings. Earlier this year, the P/E for the stock reached a stratospheric 1,403. Investors don't think it is worth buying in at elevated valuation levels in spite of the company's double-digit revenue growth rate over the last few years, great management vision and execution, and domination of its markets. 

The stocks in the NASDAQ Composite have an average P/E of 18.4. This is slightly elevated over historic standards, although it remains below the levels where it sat when the tech bubble burst about 14 years ago. The multiple was 90.2 back then. The 2000 bloodbath in tech probably will not repeat. 

Apple and Google (A shares) have reasonable multiples of 13 and 15 respectively which are below the overall index multiple and the long-term averages for the companies. Investors may not see their shares as overpriced and that might help explain why these stocks haven't fallen as steeply. 

Searching for fire
The decline at Amazon probably won't continue unabated and Apple and Google most likely won't join the e-commerce giant in its current slide. All three companies are high-flyers in their markets and they have continually released new products that have helped grow their businesses. Patient investors have been rewarded. 

Amazon just announced Fire TV with the intent of helping to boost sales of its digital content via the living room, much like what the Kindle tablet device already does. Although Fire TV probably won't move the needle a lot it will contribute to the company's long-term growth. Also, the company still has its top-performing e-commerce and web hosting businesses humming along nicely.

Apple has been rewarding investors with stock buybacks and dividends to tide things over until a new product comes along. Smartphones and tablets, where the company ranks either No. 1 or No. 2 in both market share and profit, may not continue on upward growth trajectories forever. Therefore, a new product will be important for the future. The rumors on the Street indicate that Apple will offer at least one new product or service this year. Whether it is a smart watch, an improved TV set-top box with a content-sharing agreement with cable companies, a platform for mobile retail payments, or an iPhone with a larger screen remains to be seen. 

Google is constantly refining its cash cow business, Search, and complimenting it by venturing into other areas such as interconnected home devices (Nest thermostats, smoke and CO detectors), TV (Chromecast dongle), driver-less cars, fiber-optic networks, and blimps that provide wireless access to rural areas. The company is developing analytics that show that the ads that brick-and-mortar retailers place on its web search results pages are indeed paying off and this could result in even more success down the line. 

Foolish conclusion
The recent tech sell-off is getting much media attention. Nobody can predict how long the drop will continue with any degree of accuracy. However, much of the hype probably is not warranted. The overall market valuation doesn't look all that scary in comparison with the big bubble of 14 years ago. Unless earnings growth drops or disappears altogether over the long-term, things look OK. 

One prominent member of the tech-heavy NASDAQ Composite index, Amazon, has dropped even more than the overall market. Two other big members of the index, Apple, which is the top dog by capitalization, and Google, have also sold off but not by as much. 

However, the three companies probably will not stay down for long. Amazon and Google have very wide moats and they are the dominant players in the markets where they compete. Apple is poised for further growth down the road with anticipated new products and services. If the past is any guide, when users snapped up new Apple products by the millions, the good times will continue in Cupertino. 

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The article Will Apple and Google Join the Tech Free Fall? originally appeared on Fool.com.

Mark Morelli owns shares of Apple. The Motley Fool recommends Amazon.com, Apple, and Google (C shares). The Motley Fool owns shares of Amazon.com, Apple, and Google (C shares). 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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J&J's Headache-Relieving Earnings, Coke's Healthy Earnings in Emerging Markets, and Yahoo!'s "Turnar

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With so many corporate earnings reports to digest this week, we just want to sit down to some Game of Thrones and pig out on whatever that new jalapeno-pineapple-infused chicken dish is at Domino's. The Dow Jones Industrial Average jumped 89 points Tuesday as some headline companies announced their first-quarter performances.

1. Yahoo! jumps on turnaround hopes
Purple might be the new black. After reporting earnings late Tuesday afternoon, shares of Internet giant Yahoo! jumped nearly 7% in after-hours trading after a half-decent performance to kick off 2014. Yahoo!'s $1.08 billion in sales matched Wall Street's expectations, driven by a 9% rise in search revenues to $444 million and steadily growing 430 million mobile users.

So why are investors pumped? Because of Yahoo!'s exclamation point-worthy 24% stake in the Alibaba Group, the e-commerce mammoth of Asia. Not only did the megasite recently announce its initial public offering in the U.S. later this fall, but Yahoo! also reported Tuesday that Alibaba's revenues rose 66% to $3.1 billion last quarter. Not too shabby.

The takeaway is that Wall Street has been keeping a close eye on the once-struggling Yahoo! ever since Marissa Mayer became CEO in late 2012. In addition to rebranding with a new logo, word on the street is that Mayer is now planning to budget millions of dollars for half-hour Yahoo! comedy shows and other turnaround tricks. Investors are excited for anything that will prevent the company from disappearing like your middle-school AOL screen name.

2. Coca-Cola stock pops, despite flat sales
Sip on this. Classic American beverage phenom Coca-Cola announced first-quarter earnings Tuesday that dropped 2% compared with the year before. That's actually what Wall Street expected, but overall drink sales were up 2%. Some caffeine-worthy highlights in emerging markets and non-soda drinks made the results impressive.
 
So why did the stock rise 3.7% Tuesday? Emerging markets. Sales in countries without nationwide indoor plumbing are booming (up 12% in China, 6% in Russia, and 4% in Brazil). The proud Atlanta-based member of the Dow also hopes that Brazil's 2014 World Cup and 2016 Summer Olympics sell Coca-Cola as well as its sponsorships did in the Atlanta '96 Olympics (the Games with the weird, '90s-looking mascot, Izzy, that you thought was kind of cool as a kid).
 
The bad news was that volumes of carbonated soft drinks (i.e., "pop" for our readers up north) dropped 1% globally, the first quarterly decline for Coke since 1999. But that drop is led by the U.S. and other developed countries in Europe. Apparently word is out that consuming mountains of sugar is bad for you and people are listening (thanks, First Lady Michelle Obama and former New York City Mayor Michael Bloomberg).
 
The takeaway is that sales of non-carbonated drinks, like PowerAde and Vitamin Water, grew 8%. These "other" Coke products represent only 25% of the company's global sales, but health campaigns and global warming (Coke's polar bears are sweating in this heat) continue to discourage people in developed countries from drinking soda.
 
3. Johnson & Johnson earnings ease investors' pain
Their profits were so nice, they named it twice. Shares of pharmaceutical legend Johnson & Johnson rose 2.1% Tuesday after reporting first-quarter earnings -- JNJ's $18.1 billion in revenues from January through March were a 3.5% rise from the same period last year, while profits popped almost 8%.

Drugs are bad, but prescription drugs are good -- especially for JNJ over the past few months. While the company pops out rock stars of the medical world, like Aveeno and Listerine, its worldwide pharmaceutical sales jumped over 10%. Leading the charge were HIV drug Prezista, psoriasis drug Stelara, and (just in time for SAT season) ADHD drug Concerta.

The takeaway is that investors can finally take a chill pill. Back in January, Johnson & Johnson had lowered its forecasts for 2014 as a number of its patents expire. But the company's first-quarter performance made Wall Street feel better than a couple of pops of Vicodin, and JNJ raised its 2014 full-year earnings forecasts as a result.

Wednesday:
  • March housing starts
  • Federal Reserve Chairwoman Janet Yellen speaks
  • First-quarter earnings reports: Google, Bank of America, Credit Suisse

MarketSnacks Fact of the Day: The average U.S. employee takes only half of his or her eligible vacation days -- and over 60% still work via email on vacay.

As originally published on MarketSnacks.com


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The article J&J's Headache-Relieving Earnings, Coke's Healthy Earnings in Emerging Markets, and Yahoo!'s "Turnaround" Earnings originally appeared on Fool.com.

Jack Kramer and Nick Martell have no position in any stocks mentioned. The Motley Fool recommends Bank of America, Berkshire Hathaway, Coca-Cola, Google (A and C shares), Johnson & Johnson, and Yahoo!; owns shares of Bank of America, Berkshire Hathaway, Coca-Cola, Google (A and C shares), and Johnson & Johnson; and has options on Coca-Cola. 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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What Could Make Bank of America's Stock Soar When It Reports Earnings on Wednesday

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If you're an investor in Bank of America , there's one thing you should watch when the bank reports earnings on Wednesday: its expenses.

Just to be clear, we already know that Bank of America's first-quarter earnings will be anemic compared to competitors like JPMorgan Chase and Wells Fargo. Since the beginning of the year, analysts have reduced their earnings-per-share estimates for the nation's second-largest bank by 83%, dropping them from $0.30 per share down to $0.05.


The main catalyst for the downgrade was Bank of America's $9.5 billion settlement with the Federal Housing Finance Agency, entered into at the end of March. Among other things, the deal calls for a $6.3 billion cash payment and is expected to reduce the bank's earnings by $0.21 per share in the most recent quarter.

But this is an isolated event. The more critical issue concerns Bank of America's overall expense base. As you can see in the chart below, operating expenses consume an industry-leading 77.8% of the bank's revenue, leaving behind little profit to distribute to shareholders and boost book value.

It's for this reason that investors would be wise to watch and listen for two things when Bank of America publishes its results on Wednesday. The first concerns the added expense of regulatory compliance. If there was one theme that coursed through the annual reports of the nation's biggest banks, this was it.

"Compliance has become a top priority for our industry," said US Bancorp CEO Richard Davis. "Never before have we focused so much time, technology, money and brainpower on such an enterprisewide undertaking," noted JPMorgan CEO Jamie Dimon. And M&T Bank CEO Robert Wilmers talked at length about the efforts his bank is taking to comply with the heightened regulatory regime.

The second thing to watch is Bank of America's "legacy assets and servicing" subdivision, or LAS, which houses the lion's share of its toxic assets dating back to the financial crisis. This is the epicenter of the bank's problems, akin to Citigroup's "bad bank" Citi Holdings, and it's the primary drag on Bank of America's expenses and therefore earnings.

More specifically, as I've discussed before, there are three particular metrics that investors should keep their eyes on in this regard: (1) the noninterest expense associated with its LAS unit, (2) the number of LAS employees on staff, and (3) the quantity of third-party mortgages that LAS services. All three have been, and should continue to be, on the decline and the faster the descent the better for shareholders.

Will Bank of America's first-quarter earnings pleasantly surprise analysts like Citigroup or disappoint investors like JPMorgan? That remains to be seen. But looking beyond a single quarter, there's simply no question that Bank of America's expenses are the primary albatross hanging around its neck.

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The article What Could Make Bank of America's Stock Soar When It Reports Earnings on Wednesday originally appeared on Fool.com.

John Maxfield previously owned 1,000 shares of Bank of America but sold them (with much regret) at the end of last week to fund a down payment on a house. The Motley Fool recommends and owns shares of Bank of America. 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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Intel's Mobile Group Loses Over $3 Billion in 2013

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For the longest time, it wasn't quite clear just how much Intel's mobile group was losing. Indeed, since the mobile group's results were part of the "Other Intel Architecture" group for the past several years, it was hard to separate that division from the more profitable "intelligent systems" group. Intel has now reorganized its reporting to give investors more clarity on what exactly is going on.


During 2013, Intel's Mobile and Communications group generated $1.375 billion in
revenue. On that revenue base, Intel lost $3.15 billion. Now, without knowing the gross margin profile of that division, it's hard to get a handle on the operating expenses. That being said, if we assume that the division (which mostly consists of low-end 2G/3G modems and a handful of apps processors) does gross margins in the 40% range, then this would suggest operating expenses of about $3.7 billion.

For Intel to break even -- assuming that operating expenses stay roughly flat -- at about the 50% gross margin level, the company would need to do about $7.4 billion annually. Now, do keep in mind that this represents a pretty serious chunk of the mobile market (modems, connectivity, and apps processors), so it'll take quite a bit to get to breakeven, let alone profitability.



According to Strategy Analytics, the smartphone apps processor market is set to be worth a whopping $30 billion by
2018. The tablet processor market should be worth a cool $7.2 billion by 2018, again according to Strategy Analytics. If Intel can capture 35% of the tablet apps processor market and about 25% of the smartphone apps processor markets, that works out to over $10 billion in sales for the company -- not even including discrete cellular modems.

That may seem aggressive, but given the trajectory Intel is on with both its tablet and smartphone offerings, getting this kind of share in tablet/phone apps processors actually seems quite reasonable. This is a long-term game, however, and investors shouldn't expect wild profitability over the next few years (although the massive losses should come down nicely over the next couple of years).


Many will rightly note that Intel's mobile group losses are so wide that they wipe out over half of the operating profit of the company's datacenter business. However, focusing on short-term profits and ignoring the long-term strategic goals is the key to failure. Intel knows it needs to be a big player in both smartphones and tablets; otherwise it risks irrelevance. Intel is spending what it needs to in order to win, and long-term investors should understand that these "big losses" are a necessary move.

Indeed, with mobile-chip giant Qualcomm investing probably at over $3 billion a year and given its first-mover advantage, it's neither easy nor cheap to catch up with such a behemoth. Qualcomm's mobile IP is best-in-class from the CPU to the modem, and developing all of that and building upon it requires a large investment. But if Intel's investments are successful, there will be a great long-term payoff.

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The article Intel's Mobile Group Loses Over $3 Billion in 2013 originally appeared on Fool.com.

Ashraf Eassa owns shares of Intel. The Motley Fool recommends Apple and Intel and owns shares of Apple, Intel, and Qualcomm. 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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3 Keys to Relieve Money Stress

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Frustrated bankrupt man.
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By Sharon Epperson

Americans owe more than $1 trillion in student loan debt. The total credit card debt for all U.S. households is more than $850 billion, while mortgage payments add up to more than $8 trillion.

In total, U.S. households owe more than $11 trillion in debt, up 3.7 percent over last year, according to the American Household Credit Card Debt Statistic. It's enough to stress anyone out.

If you're one of the many trying to pay off this type of debt, you may carry financial anxiety constantly. For many, money is equivalent to stress. But there are ways to reduce your stress -- and your debt load.

Dr. Deepak Chopra is a physician, best-selling author and co-founder of the Chopra Center for Wellbeing -- a place where people can experience emotional freedom and physical healing through guiding principles that restore balance and nurture health. To help the endless worries over money, he recommends three strategies:

1. Don't spend money that you don't have.

The most practical way to begin is to not "spend money that you haven't earned to buy things that you don't need to impress people that you don't like," Chopra said. That mind-set, he explained, is essential in preventing an unnecessary buildup of debt.

2. Buy experience, not things.

Although many studies show that money can't buy happiness, Dr. Chopra recommends that if you are going to splurge, buy experience, not things.

"You'll get bored with whatever you buy in a few months, but if you spend it on an experience like going on a vacation or going with your family for dinner or watching a movie, then you have the experience to look forward to," he said.

3. Save at least 10 percent of what you earn.

Finally, Dr. Chopra recommends making sure that you "save a little bit every month, even if it's 10 percent of what you earn." Sticking to this principle early on can make a great impact in overcoming financial stress.


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Wal-Mart Stakes Its Claim in the Organic Marketplace. Should You Buy?

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Wal-Mart plans to stake its claim in the organic grocery market place by reviving the Wild Oats line of organic goods. Wal-Mart is widely known as the nation's largest grocer. Some analysts believe this deal will pressure other companies like Whole Foods Market and The Fresh Market to lower their prices.

While the effect of Wal-Mart's entry into the organic sector remains to be seen, the company believes it can sell its organic goods at a discount in comparison with those of its premium competitors.

"We know our customers are interested in purchasing organic products and, traditionally, those customers have had to pay more," said Jack Sinclair, executive vice president of grocery at Walmart U.S. "We are changing that and creating a new price position for organic groceries that increases access."


The organic alliance at a glance
Wal-Mart will introduce nearly 100 Wild Oats products this year as part of the line. The leading grocery store claims prices will be at least 25% lower than those of national-brand organic products. Wal-Mart already offers its customers an array of fresh produce, dairy, meat, and packaged goods.

In addition to beefing up its organic buffet by offering Wild Oats products, the big box food retailer is expanding other categories like yogurt, produce, deli, and bakery. In particular, some of the organic products that will now be available include canned tomatoes, various spices, and Wild Oats' ready-to-prepare skillet meals.

Wild Oats will have an opportunity to reintroduce its brand. The company was founded in 1987 in Boulder, CO and it had grown to 110 stores which operated across 24 states and Canada at its peak. Whole Foods gobbled up Wild Oats in 2007, but by 2009 it was forced to spin the business off in the face of antitrust challenges.

In short, Wal-Mart hopes to use its massive size to push organic food prices down and make these products more affordable to its customers. The company believes it will be able to do this by making longer-term commitments with producers like tomato growers so they will have an incentive to grow more.

"Prices are going to have to come down," Sinclair noted.

What this means for the organic grocery sector
Wal-Mart aims to stake a bigger claim in the organic market as consumers of different income levels become more health-conscious. Given its scale, with more than 4,000 stores operating in the U.S., the company has the ability to drive prices down in the organic grocery sector.

However, the question remains as to whether or not Wal-Mart will be able to capture market share by harvesting customers from its competitors in the green grocer sector. Customers who frequent these organic shops do not fit into the same demographic as the customary Wal-Mart shopper.

That being said, some analysts believe that this could prompt a green grocer like Whole Foods to lower its prices. On the one hand, lower prices could manifest in tighter margins for an outfit like Whole Foods. However, the company may also become more attractive to consumers who believe that the prices are a bit out of reach.

Whole Foods is still a good buy
Whole Foods is still the leader in the organic market in the U.S. However, prior to the Wal-Mart announcement, Whole Foods had already revised its guidance for 2014. The company anticipates that its sales will grow in a range of 11%-12% for the year -- down from the previous guidance of 11%-13%. Whole Foods also foresees earnings per share in the range of $1.58-$1.65 per share -- down from its previous expectations of $1.65-$1.69 per share.

However, Whole Foods remains strong in a number of ways. The company continues to pay a dividend, and it intends to continue with stock repurchases this year to the tune of $300 million which will support its earnings growth. The company currently has more than 100 stores in its development food chain and it believes that demand would support 1,200 stores in the U.S.

Another challenge for The Fresh Market
The Fresh Market had a tough year in 2013 as it experienced a slowdown in sales across its store base. While the company attributed this to changing economic conditions and falling consumer confidence, competition from other organic grocers might have affected the company's same-store sales numbers.

The Fresh Market ultimately posted earnings per share of $0.39 -- a 9% decline year-over-year. It blamed the sales decline on weaker sales and margins. Looking ahead into 2014, the company anticipates lower earnings than what it had called for in its previous guidance -- it gave a range of $1.56-$1.66 per share. Finally, the Fresh Market had already announced a restructuring plan that called for closing four underperforming stores in California and Texas.

 In other words, Wal-Mart's push into the organic grocer sector may add to the stiff winds The Fresh Market is already facing.

The last green word
Wal-Mart stands to gain from its venture with Wild Oats as well as other recent initiatives aimed at boosting its sales. Meanwhile, Whole Foods will continue to maintain its niche and it is poised for future growth. Ultimately, Wal-Mart's green alliance with Wild Oats is a trifecta. The green grocer sector can benefit from competition, and this is green news for consumers and investors alike who look to go long on the green.

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The article Wal-Mart Stakes Its Claim in the Organic Marketplace. Should You Buy? originally appeared on Fool.com.

John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Kyle Colona has no position in any stocks mentioned. The Motley Fool recommends The Fresh Market and Whole Foods Market. The Motley Fool owns shares of Whole Foods Market. 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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Why Sears Holdings Corp Shares Jumped

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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 Sears Holdings Corp  were recovering today, jumping as much as 17% after a board member increased his stake in the company.

So what: Director Thomas J. Tisch today revealed that, during the last two days, he had purchased 475,000 shares in the aging retailer at an average price of $33.56, about 0.5% of shares outstanding, more than doubling his holdings, to 933,000. Sears shares have lost nearly half their value since last fall as the company has spun off key assets such as Lands' End, and a portion of Sears Canada, and put up continually declining sales and wide losses.


Now what: Tisch likely believed that shares were cheap after the recent slide as Sears, with its operating losses, has been viewed by analysts and investors as an asset play. As the retailer separates from more of its subsidiaries, however, the company is looking less appealing. The performance of Lands' End, whose shares have fallen more than 20% since its debut two weeks ago, indicates that future spinoffs may not be so eagerly awaited. Unless Tisch is privy to a piece of blockbuster information, today's jump seems like a decoy. I'd expect shares to continue falling during the long term.

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The article Why Sears Holdings Corp Shares Jumped originally appeared on Fool.com.

Jeremy Bowman 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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This Apple Inc. iWatch Rumor Could Be Huge

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To turn the common news phrase on its head, you definitely did not hear it here first, but tech giant Apple's iWatch is coming, and it's going to be big.

We're heading into an exciting time of year across the board for Apple investors everywhere. Next week, the consumer electronics giant reports its FY 2014 Q2 earnings after the bell on the 23rd. Investors everywhere will be looking to glean at least some kind of new information about what Apple may or may not have up its sleeve for the rest of the year.

We've heard plenty of talk about Apple's interest in a mobile payments option, a la Apple CEO Tim Cook's reference to it on Apple's last conference call, but I'm a firm believer that Apple's much-discussed iWatch will also make its way into Apple's product launch schedule later this year.


And in that vein, a new rumor recently broke regarding Apple's coming wearable. And if it holds any merit, it could have big implications for Apple and its shareholders in the year ahead.

Apple's iWatch supply chain secrets
According a widely circulated report from the Chinese newspaper the Economic Daily News, Apple has already finalized its supply chain partners that will assist it in the assembly of its impending iWatch.

The newspaper claims Apple has chosen the Taiwan-based electronics assembly company Quanta Computer as the exclusive assembly partner for its iWatch. And perhaps even more interestingly, the report also claims Apple has contracted Quanta Computer to build roughly 65 million iWatches in the first year alone. The report states that other well-known Apple assembly partners, including the highly controversial Foxconn and Inventec, were also in the running to secure the iWatch contract, but Quanta Computer was able to edge out the competition.

The report goes one step further into the downstream aspects of Apple's supply chain as well. For instance, it claims that, like other Apple chips, the iWatch will be powered by a custom chip that will be designed by Apple but manufactured by Apple's ultimate frenemy Samsung. In addition, the report also asserts that Apple will enlist the material sapphire, and presumably Apple's sapphire sugar daddy GT Advanced Technologies, to comprise the outer casing of the iWatch.

Now, there's certainly something at least slightly alarming about the specificity within this report, although it isn't exactly going out on a limb in highlighting Samsung as the chip-fab partner and GT Advanced Technologies as the sapphire supplier, either. However, this is perhaps the most detailed report I've come across in breaking down which company will handle which specific aspects of taking Apple's iWatch from concept to creation, and that's certainly significant.

Money to be made
Regardless, if Apple indeed plans to build to the 65 million unit estimate given above, Apple clearly has the strength of its convictions about this next-generation device.

I've argued in the past that in order for smartwatches as a category to penetrate into the mainstream, they'll need to contain some kind of functionality beyond that of today's smartphones. And in my mind, the best bet at present, especially given Apple's recent acquisition and hiring movements, is some kind of advanced emphasis on biometrics that a smartphone simply won't be able to match. Either way if the 65 million unit figure is true, it clearly implies Apple is expecting a strong consumer response when the iWatch becomes available.

The report skips over any pricing specifics. However, in looking at a rough comp today, Samsung is selling its Galaxy Gear smartwatch for $249. Apple tends to price toward the high end of any market in which it operates, so it could clearly price above this point. But purely for illustrative purposes, this would mean Apple could be looking at a cool $16.2 billion revenue opportunity in year one alone. The global watch industry is an extremely high-margin space, with gross margins typically sitting somewhere in the 60% range. Since it will use different inputs than the average watch, it's not clear whether Apple will be able to generate margins in the same neighborhood, but the high-level point I'm trying to make is that Apple stands to make a lot of money right away from this new device.

So, this storyline should obviously be taken with its requisite grain of salt, as is the case with virtually all Apple product storylines. However, especially given the degree of specificity involved, this is also a report deserving of Apple investors' attention, certainly.

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The article This Apple Inc. iWatch Rumor Could Be Huge originally appeared on Fool.com.

Andrew Tonner owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. 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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Why Galectin Therapeutics Inc. Shares Jumped

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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 Galectin Thersapeutics , a clinical-stage biopharmaceutical focused on developing therapies to treat fibrotic diseases and cancer, advanced as much as 12% after announcing the dosing of its first patient in the second cohort of a phase 1 study for GR-MD-02.

So what: The buzz surrounding GR-MD-02 is that it treats nonalcoholic steatohepatitis, or NASH, a serious disease characterized by fatty buildup in the liver that could affect as much as 5% of the U.S population, meaning there's a wide moat opportunity for treatment. This next dosing cohort will involve patients receiving four mg/kg of GR-MD-02, which is double the dose of the first cohort in its phase 1 dose-escalating studies. The first cohort, if you recall, demonstrated both safety and tolerability, which is the common primary endpoint of phase 1 studies.


Now what: Shareholders are certainly loving the relief rally on the heels of today's press release, but they should also realize that we haven't even hit the meat and potatoes of GR-MD-02's efficacy yet, which is what's really going to add some differentiation to this therapy. I would suggest not getting too wrapped up by the word "NASH" in any drug's indication at the moment, and would stick to the sidelines until we have top-line efficacy data from a mid-stage study.

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The article Why Galectin Therapeutics Inc. Shares Jumped originally appeared on Fool.com.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. 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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La-Z-Boy Incorporated Gets Busy Restructuring

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La-Z-Boy is not living up to its name -- and that's a good thing.

Shares of the iconic recliner-maker have gained 43% over the past 12 months, easily topping the performance of the S&P 500. But La-Z-Boy isn't resting on its laurels. With sales up an anemic 3% in the most recently reported quarter, management announced a plan Wednesday to jump-start sales growth, and get earnings going again as well.

The headline news at La-Z-Boy is a plan to shift production of casegoods (hint: to remember what these are, think of hardwood "bookcases," and, by extension, chests of drawers, dressers, cabinets, and similar items made of wood) overseas. Up till now, casegoods accounting for about 10% of the company's revenue -- largely bedroom furniture -- have been produced at the company's Hudson, N.C., facility. Henceforth, La-Z-Boy will source wood furniture from Asia, while Hudson takes over warehouse and furniture repair functions from La-Z-Boy's two facilities in Wilkesboro, N.C., both of which will be shuttered and sold.


La-Z-Boy expects to halt furniture production in Hudson by the end of Q2 2015, i.e., this October, and anticipates laying off about 100 employees.

From a financial perspective, La-Z-Boy says all of this restructuring will cost it $0.15 to $0.17 per share. La-Z-Boy expects to report these as charges to earnings, most of which will show up in fiscal Q4 2014 (i.e., this current quarter), with the balance coming in the first and second quarters of fiscal 2015.

Additionally, La-Z-Boy says it will put its Lea Industries youth furniture business up for sale. As with casegoods, La-Z-Boy noted concerns about Lea's business size as driving its decision -- raising the question: If La-Z-Boy, the biggest publicly traded furniture company in the country, is having trouble with profitability, what does this mean for smaller players?

Hooker turns the tables on bigger La-Z-Boy
Actually, the news for the other guys might not be as bad as you'd think. Smaller rival Hooker Furniture , for example, was faster than La-Z-Boy in moving to an offshoring model for its products. And as we learned in Tuesday's earnings report, Hooker's business is actually growing faster than La-Z-Boy's.

Fiscal 2013 saw Hooker's sales rise 4.5%. And Hooker is expanding its business as La-Z-Boy slims down. Hooker has set up two new divisions -- H Contract, which makes furniture for "upscale senior living facilities," and Homeware, a direct-to-consumer e-commerce operation marketing "fresh, fashionable furnishings that are parcel delivery shippable and easily assembled" for millennials. Both target what Hooker believes will be growth markets in the future.

Of the two furniture makers, Hooker seems to be the one with more business momentum on its side. 

Say goodbye to "Made in China"
La-Z-Boy has finally discovered the concept of outsourcing U.S. manufacturing to Asia. But is it coming late to this game? After years of losing manufacturing market share to countries abroad for decades, America may once again be in a position to dominate the global manufacturing landscape thanks to a single, revolutionary technology: 3-D printing. Although this sounds like something out of a science fiction novel, the success of 3-D 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.

The article La-Z-Boy Incorporated Gets Busy Restructuring originally appeared on Fool.com.

Rich Smith 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 BHP Will Fail Once Again in Acquiring PotashCorp

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If rumors are to be believed, BHP Billiton is about to make another run at acquiring PotashCorp of Saskatchewan , and shares of the fertilizer giant rose 3% the other day on the speculation. Investors, though, shouldn't put too much stock that the Anglo-Australian mining concern will be any more successful than it was back in 2010, if it even tries at all, though the Globe and Mail says the landscape may have shifted enough that a combination of the two might now be possible.

Source: PotashCorp.

BHP's previous attempt was killed by the Canadian government after the miner incautiously said it would market the fertilizer on its own after it withdrew from Canpotex, the North American potash marketing group from which the government receives a substantial stream of revenues.

Since then, however, the industry was launched into turmoil following the breakup last year of Canpotex's rival, the Belarusian Potash Corp. cartel, when Uralkali made a bid for market share by separating from its partner Belaruskali. The price of potash tumbled in the aftermath and trades now just above $300 per tonne, down from the $424-per-tonne price it commanded in 2012 and below even the $332 per tonne at the end of 2013.


Because of its failure to buy PotashCorp, however, BHP moved on to establish the fertilizer ingredient as its "fifth pillar" of support by buying the massive Jansen deposit in Saskatchewan, right in PotashCorp's backyard. When it becomes operational, Jansen is expected to have an output of 10 million tonnes a year for more than 50 years, making it one of the world's largest potash mines.

Potash deposits in Saskatchewan. Source: PotashCorp.

Canada with some 10 billion tonnes of recoverable potash deposits, is home to half the world's reserves, and almost all of them are located in Saskatchewan. Russia is a distant second, with around 2 billion tonnes and Belarus comes in third at 1 billion tonnes. To further amplify the concentration, only a handful of companies globally control the vast majority of its production, and PotashCorp is the biggest.

BHP is in the process now of shedding assets like nickel, manganese, and aluminum so that it can better focus on iron ore, copper, coal, petroleum, and potash. A combination of Jansen and PotashCorp's mines in the region, which produced 7.8 million tons in 2013, would give it even greater clout and control over the fertilizer ingredient.

Source: PotashCorp.

Potash isn't traded on exchanges like other commodities, but rather its price is determined by negotiations between buyers and sellers. With far and away the largest and best reserves of potash in the world, a combined company would be able to exert undue influence that many market regulators would undoubtedly look askance at.

The industry has already gone through lawsuits alleging price-fixing schemes. Even disposing of lesser mines would not lessen the impact a merger of these two giants would have on the industry, one beyond even the scope of a reunion of Belarusian Potash Corp.

It may be fun to imagine these two joining forces, but even with the changes that have occurred in the industry, it's hard to believe the merger would be allow to pass muster.

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The article Why BHP Will Fail Once Again in Acquiring PotashCorp originally appeared on Fool.com.

Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of PotashCorp. 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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