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Could the Obamacare Dream Turn Into a Nightmare for This Industry?

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If we were to draw two columns -- one for winners from the Patient Protection and Affordable Care Act, or PPACA, and another for losers -- the word "hospitals" would probably be listed near the top in the winner's column. Large hospital chains Health Management Association and Tenet Healthcare , have seen their stocks more than double over the past year, while Community Health Systems is up around 75%.

Investors flocked to hospital stocks in anticipation of the full implementation of PPACA, commonly referred to as Obamacare. In the minds of many, Obamacare presented a dream come true for helping hospitals to flourish. But could that dream now be turning into a nightmare for the industry?

Pleasant dreams
Many hospitals currently write off large amounts of bad debt when patients can't pay for services. They also often face competition from specialty physician-owned hospitals that are sometimes accused of cherry-picking the most lucrative patients with generous insurance benefits.


Key components of Obamacare sounded great to hospital operators. Medicaid would be expanded in all of the states to cover more uninsured Americans. The legislation's employer mandate promised to force all but the smallest employers to provide health insurance with extensive benefits or pay steep fines. Likewise, most individuals not covered by their employers or through government programs would be required to purchase insurance or pay fines. The dream of reducing those huge bad debt write-offs seemed attainable.

Obamacare also prohibited the establishment of new physician-owned hospitals. For ones already in existence, the bill placed restrictions on expansion. While Obamacare didn't fulfill the wildest dreams of hospitals not run by physicians, it seemed to deliver some pleasant changes to the status quo.

Rude awakenings
The biggest drawback for Obamacare was that hospitals had to go along with $155 billion in Medicare and Medicaid cuts. That wasn't considered too bad, though, since they would get that money back and then some, with all of those previously uninsured patients gaining insurance. Unfortunately, there have been a few rude awakenings disrupting the dream.

First, the Supreme Court ruled last summer that Obamacare's requirement that states expand Medicaid was unconstitutional. As of last count, 18 states opted to either not expand Medicaid or are leaning in that direction.

Earlier this month, the White House delayed implementation of the employer mandate that was scheduled to go into effect in 2014. The House of Representatives is also pushing forward with a proposed delay of the individual mandate.

Meanwhile, those Medicare and Medicaid cuts are scheduled to move forward. This has prompted calls by the American Hospital Association to push back the cuts along with the employer mandate, especially since the employer mandate delay "comes at a time when there is significant uncertainty regarding Medicaid expansion."

What about those physician-owned hospitals? They're actually making more money under Obamacare. Of the physician-owned hospitals eligible for quality incentives enacted by the law, 75% are receiving higher reimbursement. For hospitals not owned by physicians, 74% received penalties rather than incentive payments.

Nightmares ahead?
Investors are still banking on having millions of newly insured Americans help hospitals' financial performance. However, the possibility exists that the dreams could turn into nightmares.

Employers have been adding more part-time workers than full-timers, and in some cases, they're converting their full-timers to part-timers. Paul Dales, senior U.S. economist at Capital Economics, says companies may be seeking to avoid paying for insurance as required by Obamacare

The key to success for Obamacare's individual mandate is for young Americans who are currently uninsured to buy insurance through health insurance exchanges. That might prove more difficult than initially thought. ADP Research Institute found that only half of young adults with coverage through their employers take advantage of it. ADP's Tim Clifford says the penalties for individuals who don't buy insurance are "kind of invisible," since they aren't assessed until taxes are filed and are "probably not enough to change behavior."

Even if we assume that these concerns are overblown and Obamacare results in significantly fewer uninsured patients, hospitals could have another worry. Paul Keckley, executive director for the Deloitte Center for Health Solutions, recently told hospital executives that "there is no scenario, looking forward, where bad debt goes down."

Deloitte ran multiple models assessing the impact of Obamacare, only to find that the assumption of reduced bad-debt write-offs that many hospitals have counted on could be wrong. A key issue is that an increasingly higher percentage of hospitals' bad debt actually stems from patients who have insurance. Insured patients with high deductibles often don't pay what they owe.

Winners column
A potential bright spot remains for some hospitals, though, even if many of the earlier dreams fade away. Obamacare is one of several factors pushing hospitals toward consolidation to achieve efficiencies. Tenet, for example, recently announced plans to buy Vanguard Health Systems . If the deal goes through, the combined organization will include 79 hospitals and 157 outpatient clinics. There has also been buzz that Community Health Systems might buy HMA.

The efficiencies resulting from consolidation are nice, but an even greater advantage could come from the pricing leverage obtained as a result of larger scale. One study found that hospitals raised prices 40% after mergers that absorbed nearby rivals. Such cost savings and pricing powers could keep large hospitals in the Obamacare winner's column despite the other issues. Unfortunately, they could add to the loser's column, too.

Are you wondering whether you will be a winner or loser with Obamacare? The Motley Fool's new free report, "Everything You Need to Know About Obamacare," lets you know how your health insurance, your taxes, and your portfolio could be affected. Click here to read more. 

The article Could the Obamacare Dream Turn Into a Nightmare for This Industry? originally appeared on Fool.com.

Fool contributor Keith Speights 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 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Boeing's F-15 on Target for Largest Foreign Arms Sale in U.S. History

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The U.S. is in the middle of major defense budget cuts because of sequestration, but Saudi Arabia is clearly not in the same predicament. In fact, the Royal Saudi Air Force, or RSAF, is in the middle of a fleet modernization program and has gone on a veritable shopping spree with U.S defense contractors. More pointedly, this latest venture is the largest foreign arms sale in U.S. history. For Boeing's F-15SA, in particular, this is excellent news. 

Photo: U.S. Air Force, via Wikimedia Commons. 


Boeing on target
In 2011, Air Force officials announced that the RSAF would purchase 84 new Boeing F-15SA fighters and upgrade 70 of its current F-15C/D Eagle Fleet aircraft to the SA configuration -- since reduced to 68 upgrades -- in a deal worth $3.5 billion for Boeing, and part of a $29.4 billion foreign military sale between the U.S. and Saudi Arabia.

Since then, Boeing's F-15SA successfully completed its maiden voyage, and met all of the test objectives, on Feb. 20, and in a financial statement released on July 3, Boeing revealed that three F-15SAs had been delivered for the flight trials campaign. Although the report didn't specify delivery to Saudi Arabia, the RSAF is currently the only customer for the new F-15SA. 

Put together, these reports indicate that Boeing's F-15SA is on track for its scheduled 2015 delivery to the Kingdom of Saudi Arabia. Further, Col. Robert Stambaugh, the Air Force Security Assistance program manager for the F-15SA program at Robins Air Foce Base, Ga., stated, "Completing this major milestone in less than one year after program implementation was truly remarkable." Great news for Boeing. It's also great news for Lockheed Martin , which is helping with modernization of the F-15s, for the fixed price of $253.4 million.  

Clear skies ahead
The news that Boeing is on track with its F-15SA is certainly welcome, especially given the latest issues with the Dreamliner. And while nothing is certain regarding an on-time delivery of the F-15SAs, right now, it looks promising.

Boeing has had a rocky few weeks, but that doesn't mean its future isn't bright. Still, there are some things to consider before investing in Boeing. A recent Motley Fool report, "3 Strong Buys for a Global Economic Recovery," outlines three companies, including Boeing, that could take off when the global economy gains steam. Click here to read the free full report!

The article Boeing's F-15 on Target for Largest Foreign Arms Sale in U.S. History originally appeared on Fool.com.

Fool contributor Katie Spence has no position in any stocks mentioned. Follow her on Twitter: @TMFKSpenceThe Motley Fool owns shares of Lockheed Martin. 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 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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UnitedHealthcare IRONKIDS Lake Stevens Fun Run Energizes Youth About Healthy Living Through "IRONMAN

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UnitedHealthcare IRONKIDS Lake Stevens Fun Run Energizes Youth About Healthy Living Through "IRONMAN" Races

LAKE STEVENS, Wash.--(BUSINESS WIRE)-- The UnitedHealthcare IRONKIDS Lake Stevens Fun Run raced around North Cove Park in Lake Stevens Washington today. UnitedHealthcare mascot "Dr. Health E. Hound" joined Mayor Vern Little and more than 100 kids and their families during kick-off and medal ceremony for the 1-mile course aimed to help stem the rising tide of childhood obesity through exercise and healthy lifestyles.

Kids at the starting line of the UnitedHealthcare IRONKIDS Lake Stevens Fun Run. Photo Credit: Kim D ...

Kids at the starting line of the UnitedHealthcare IRONKIDS Lake Stevens Fun Run. Photo Credit: Kim Doyel


UnitedHealthcare is sponsoring 10 IRONKIDS events - nine running races and a triathlon - in seven states. Today's Fun Run included hundreds of young "triathletes to be", ages 3 to 15. The company provided complimentary tickets to the race and weekend-long IRONMAN activities to local youth from the Lake Stevens Boys & Girls Club and Sea Mar, enabling youth who often face barriers to good health, to compete in the event.

Children from low-income and low-education households are three-times more likely to suffer from obesity, which is a leading risk factor for diabetes, heart disease and many cancers, according to America's Health Rankings®, an annual comprehensive assessment of the nation's health on a state-by-state basis. Childhood obesity has tripled since 1980 with nearly one in every three children being overweight or obese (U.S. Centers for Disease Control and Prevention). Washington ranks 18th in the country with almost 1.4 million adults estimated to be obese (United Health Foundation's Annual Health Rankings).

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KEYWORDS:   United States  North America  Minnesota  Washington

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The article UnitedHealthcare IRONKIDS Lake Stevens Fun Run Energizes Youth About Healthy Living Through "IRONMAN" Races originally appeared on Fool.com.

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 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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The Future Cure for High Cholesterol

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The Motley Fool's health-care show Market Checkup focuses this week on cholesterol, one of America's most notable health-care concerns.

High cholesterol may not seem particularly dangerous on the surface, but when you add up the amount of at-risk Americans (71 million) and its link to the nation's most prevalent killer (heart disease, at 600,000 deaths per year), the gravity of the situation becomes quickly apparent. The good news is that pharmaceutical products and healthier lifestyles have contributed to combat this problem head-on.

In this video, health-care analysts David Williamson and Max Macaluso discuss the next wave of high-cholesterol-reducing drugs: PCSK9 inhibitors. These are injected biologic products that are producing startling results in clinical trials. Find out how one woman's genetic defect helped inspire a treatment revolution, which stocks are at the cutting edge of this research, and how doctors may receive this new class of drugs.


Rising health-care costs continue to be a hotly debated topic, and even legendary investor Warren Buffett called this trend "the tapeworm that's eating at American competitiveness." To learn more about what's happening to the health care system -- and how to potentially profit from this trend -- click here for free, immediate access.

Follow David on Twitter: @MotleyDavid.

The article The Future Cure for High Cholesterol originally appeared on Fool.com.

David Williamson, Max Macaluso, Ph.D., and The Motley Fool have no position in any of the stocks mentioned. Follow David on Twitter: @MotleyDavidTry 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 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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These Are the World's 10 Most Optimistic Countries

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Have you ever had a bad day that was completely turned around because you were surrounding by a happy group of friends or co-workers? I know I have, and chances are you've experienced something similar as well. That's because happiness is contagious, and surrounding yourself with happy friends and co-workers can certainly make a positive impact on your life.

The best part is that happiness has a real world translation when it comes to the business world as well. A happier and more optimistic society has a better chance of success and growth than an unhappy society.

Just yesterday, I examined the world's 10 most pessimistic countries according to a recent poll by Gallup, and we learned that many are from debt-riddled Europe. With little prospect of a rebound anytime soon and high unemployment rates, there's not many reasons to be optimistic. However, there are two sides to this coin.

Source: Sarah Reid, Flickr.


The happy truth
Other regions of the world are on the cusp of a huge growth spurt, and many citizens of those countries feel quite confident that they'll be better off five years from now. Like the survey we looked at last night, Gallup based its findings on the Cantril Self-Anchoring Striving Scale that ranks respondents views of the present and five years into the future with a rating scale of 0 to 10 (10 being the most optimistic rating). Yet again, the findings weren't a huge surprise, but they do lend credence on a few ways that you could use this optimism to your advantage in the investing world.

Here are the 10 most optimistic countries, according to Gallup:

Country

% Optimists

Burkina Faso

95%

Comoros

95%

Niger

94%

Benin

94%

Guinea

94%

Somaliland Region

94%

Chad

93%

Rwanda

93%

Senegal

90%

Turkmenistan

89%

Source: Gallup.

There's no need to break out the Magic 8-Ball here to see that Africa is a big point of optimism over the next five years. I have three contentions as to why optimism in this region remains so high.

For starters, some African nations don't have anywhere to go but up. Burkina Faso, for example, is among the poorest nations in the world on a per-capita GDP basis. However, from 2004 through 2012, its GDP has grown by nearly 145%. Although it represents just a minuscule amount of worldwide GDP, this can represent a huge jump in employment and quality of life for residents of Burkina Faso.

The second contention for optimism in this region relates to the largely untapped mineral resources of Africa. One source of potential growth is oil, which can be quite abundant in the some of the aforementioned countries. Chevron , for instance, undertook two projects in Chad beginning in 2000: the development of the Doba crude oil fields, and the building and operation of a system of pipelines capable of delivering that oil to a transport terminal in Cameroon. Robust oil prices can certainly pack a punch for African economies, and it certainly has helped attract big business partners such as Chevron.

The third reason I see optimism growing is that multinational corporations are turning to Africa for its rapid growth potential. Even excluding oil and mining, which are two big reasons multinationals invest in Africa, other sectors of the African economy are ripe to take off. Perhaps no sector exhibits such promise as financial services. Credit payment facilitator MasterCard is counting on Africa to drive its bottom-line growth for decades to come. It has spearheaded a 13 million-card rollout in Nigeria of National Identity Smart Cards and is working on getting some 68% of unbanked South African citizens into the world of plastic.

A smart way to play this optimism rather than guessing which one company might benefit the most is to turn to the ETF realm. Buying a basket of African stocks would spread out your risk and presumably give you a better chance at success. The Market Vectors Africa Index ETF is one such basket ETF that I recently trumpeted as an intriguing option over the long run. It's actually heavily weighted to the financial sector (about 37% of its holdings), but it's diversified enough that the fund holds 109 separate companies and pays out a 3.5% yield!

Source: White House, commons.wikimedia.org.

Don't forget about domestic markets
Although the U.S. isn't among the most optimistic countries in the world as named by Gallup, it's hard to negate the idea that optimistic investors can't push the markets even higher. Optimism can drive citizens to invest, and that, in turn, can push an already extended market even higher.

For the Dow Jones Industrial Average and broader-based S&P 500 the reality of solid economic data is already there. July's National Association of Home Builders/Wells Fargo Housing Market Index came in at a reading of 57, the highest reading since Jan. 2006. Consumer delinquencies on credit cards are also either at or near historic lows for all the big credit service lenders. In sum, the housing market is on solid footing, and for money center banks it's back to business as usual.

Furthermore, the unemployment rate, while not exactly plummeting, has been on a steady downslope, as optimism has spread to enterprises that have added to their payrolls accordingly.

Another aspect you might consider is that even with Africa being the most optimistic region, nearly all of the Dow's 30 components understands this, and a good portion of the S&P 500's have plans to expand to Africa, or have already opened up shop there.

U.S. businesses are certainly going where the growth is, and it appears you can take advantage of that by investing in individual companies with African continent exposure, picking up some African ETFs, or, if you're really risk-averse, banking on the U.S. markets in which many of the largest companies by market value already have exposure to growth in Africa.

With the American markets reaching new highs, investors and pundits alike are skeptical about future growth. But since we know optimism is contagious, they shouldn't be. Many global regions are still stuck in neutral, and their resurgence could result in windfall profits for select companies. A recent Motley Fool report, "3 Strong Buys for a Global Economic Recovery," outlines three companies that could take off when the global economy gains steam. Click here to read the full report!

The article These Are the World's 10 Most Optimistic Countries originally appeared on Fool.com.

Fool contributor 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. The Motley Fool owns shares of, and recommends, MasterCard and Wells Fargo. It also recommends Chevron. 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 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Middleby's CEO on How to Make Successful Acquisitions

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In the following video interview, Motley Fool CEO Tom Gardner speaks with Middleby CEO Selim Bassoul. Since becoming CEO in 2000, Bassoul has led a remarkable transformation at Middleby, the cooking equipment maker, turning the stock into a nearly 50-bagger over that time. In the video, Bassoul discusses his thought process for the success of an acquisition.

Middleby is one of Tom Gardner's favorite stocks, but you can never have too many great companies in your portfolio. If you're looking for more ideas, our chief investment officer has selected a different stock as his favorite for this year. Find out which stock it is in the free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.


Tom Gardner: So fundamentally, you're trying to gather ideas, learn what your competitors are doing right by their customers, so you can make sure to deploy those with your customers. You're not trying to take those customers away. And I guess fundamentally what's been happening at Middleby is as you've been growing, you've been buying some of your competitors. So the way you broaden your customer base, learning as you have and as you go, and then finding the smaller companies that you admire most, and acquiring them.

Selim Bassoul: In fact, most of our acquisitions have come from customers buying from somebody else. And they tell me, "Why don't you buy this company? They have a great technology and you don't have it in your field." So we go back and buy that technology because we don't have it in-house, and we're not ashamed to say that not all of the things invented at Middleby have been good, or sometimes we've gone on the advice of somebody who's buying a technology that we didn't have and have gone out and acquired CookTek, TurboChef, NECO.

Gardner: How many acquisitions have you made in the 13 years of your being -- ?

Bassoul: Over 40; around maybe 50.

Gardner: So let's talk about acquisitions, and I have some stats right here that I want to, if I were brilliant I would have remembered all these, but there have been studies by so many different organizations on the success rate of acquisitions. So the numbers turn out to be something like 15 to 25% of all acquisitions are value creating. A second statistic I saw of a landmark 20-year study is that 44% of all acquisitions are divested within seven years because they weren't successful.

So if you're making 40 acquisitions and the majority of acquisitions that companies make are not valuable, why have the acquisitions at Middleby succeeded? What is your checklist on making acquisitions? Because we know that there are CEOs that make acquisitions for a lot of reasons that might not be about long-term value creation, so why is it different at Middleby?

Bassoul: Well, I can tell you the reasons that we don't make an acquisition. Growth, or size, or buying a market. So all those three reasons, we will not go after an acquisition to buy a market.

Gardner: And most people would think that, in fact I really don't know where your answer is going here, so I'll just say most people would think when an acquisition is going to happen, it's about growth, size, or buying a market.

Bassoul: I think, Tom, there is a lot cheaper way to attack growth. I can discount my product and go after a market. I can go steal my competitor's engineers and get some type of a product emulation. We buy a company because we believe that they have two things that are important to us. One, they have the ability to be already a brand and a patented technology, that is already disruptive. That will take us many, many years to get to.

Number two, the ability to buy it and retain the management so that that management allows us to basically, with some capital infused by us and some DNA from Middleby, whether it's taking them internationally ... is that in five years or less, would like to have the multiples of that acquisition translate into a price of five times multiple or less after the acquisition integration. Would like also to be accretive in no more than 18 months.

So let's repeat the three things. One, it has to have a brand with a disruptive technology.

Gardner: That's patented.

Bassoul: That's patented. Number two, we need to be able to get within five years or less to a five times multiple or less after we realize the synergies and the integration benefits. Number three, it has to be accretive in 18 months or less.

The article Middleby's CEO on How to Make Successful Acquisitions originally appeared on Fool.com.

Tom Gardner owns shares of Middleby. The Motley Fool recommends and owns shares of Middleby. 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 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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"The Walking Dead" and "Game of Thrones" Are Even More Popular Than You Think

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Among all the San Diego Comic-Con rituals, none is so common or frustrating as waiting. Arriving at the show early Friday bought me a spot in line about eight hours away from entering Hall H and the high-interest panels for The Walking Dead and Game of Thrones.

Lines and waiting, two Comic-Con traditions. Photo credit: Tim Beyers.


I didn't stay, and as I'll relay in a different article, that turned out to be a wonderful choice. Comic-Con offers such a bounty of opportunities to see and discuss great content that it's tough to be disappointed with the experience.

Take the Nickelodeon panel. Fans behind me in line for Ballroom 20 couldn't have cared less about a later panel for Walt Disney's forthcoming Agents of S.H.I.E.L.D., which I was there to see. Rather, they were there to scream and shout for Avatar: The Legend of Korra, an animated series whose second season kicks off in September. Book One: Air drew 4.3 million viewers per episode, a huge win for an animated show and Nick parent Viacom .

Meanwhile, over at Hall H, the teeming masses willing to pay to wait hours for just a chance to see The Walking Dead and Game of Thrones, among other panels, suggest that enthusiasm is still building for both shows. Can you imagine? AMC Networks and The Walking Dead already beat all comers as the fall's top-rated scripted show. These are the same viewers who no doubt spent hours in makeup to attend Comic-Con as zombies.

For some, "walkers" and "biters" are The Walking Dead's most popular characters. Sources: AMC, Pinterest.

For Time Warner and HBO, Game of Thrones Season 3 ended in bloody fashion, with many questions left unanswered. That fans who dressed up as Starks and Lannisters and spent hours in line speaks to their hunger for more.

Can they lift GoT in the same way that horror nerds pushed TWD to new highs? Right now, that seems likely. Game of Thrones is up for 16 Emmy awards after attracting more than 13 million viewers per episode last season, once you factor in replays, downloads, and the like.

This, Fool, is why media stocks are so hot right now. By the looks of the lines at Comic-Con, the rally won't end soon. Do you agree? Disagree? Leave a comment to let us know what you think.

Of course, there's more to the changing TV landscape than invading zombies and the lords and ladies of Westeros. The Motley Fool's new free report "Who Will Own the Future of Television?" details the forces disrupting traditional TV networks and the opportunities they offer to enterprising investors. Click here to read the full report!

The article "The Walking Dead" and "Game of Thrones" Are Even More Popular Than You Think originally appeared on Fool.com.

Fool contributor Tim Beyers is a member of the  Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Walt Disney and Time Warner at the time of publication. Check out Tim's Web home and portfolio holdings, or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.The Motley Fool recommends AMC Networks and Walt Disney and owns shares of Walt Disney. 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 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Microsoft's Timing Couldn't Be Worse

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Last week, Microsoft reported earnings that sent shares reeling, thanks in large part to a disheartening $900 million inventory charge related to the software giant's Surface RT tablets.

That's a troubling admission that the company was aiming too high with the device that represents Microsoft's biggest entry into first-party hardware. That includes both in terms of price and unit forecasts. At the initial price point of $500, it was going up against Apple's iPad, and Microsoft had reportedly ordered more than 3 million of them. Over the first two quarters, it shipped 1.8 million, including the newer Surface Pro (which was not related to the inventory charge).

A couple of months ago, Microsoft launched an all-out anti-iPad ad campaign targeting Apple's flagship tablet. The company used the same marketing strategy that Apple had used against it years ago, playfully goading its rival and calling out its weaknesses. Microsoft has since released a series of other spots that highlight Surface's advantages.


No less than a day later, Microsoft put out another ad poking at the iPad; considering the inventory writedown, the timing couldn't be worse.

The first shot was actually quite clever, but the subsequent commercials have been less inspiring. In the latest, Microsoft calls out the lack of USB port, integrated kickstand, or keyboard accessory, and then follows up by comparing the $599 price tag to the Surface's recently reduced $349 price point, both for a 32 GB model.

Microsoft is getting more aggressive with taking shots at the iPad, suggesting it won't end well for Apple's tablet. This time, Microsoft is comparing the iPad directly to its Surface, while in prior ads it would compare the iPad to a tablet made by a third-party OEM such as ASUS or Dell.

Of course, Apple has never had a problem selling iPads and has never taken any inventory writedowns approaching $1 billion, but that's not something that Microsoft should be proud of.

It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged among the five kings of tech. Click here to keep reading.

The article Microsoft's Timing Couldn't Be Worse originally appeared on Fool.com.

Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends and owns shares of Apple and Microsoft. 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 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Does Best Buy's Stock Live Up to Its Name?

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Since its founding in 1966, Best Buy has been a promised land for tech consumers who want to get their hands on the latest and greatest offerings. Customers could look at, and often try out, what they're interested in and then make their purchases on the spot.

That trend is fading fast in the online era. Customers no longer do a lot of their shopping in the bricks-and-mortar stores that made Best Buy so successful. Instead, they're looking toward online retailers such as Amazon.com .

BBY Revenue Quarterly YoY Growth Chart


BBY Revenue Quarterly YoY Growth data by YCharts

As consumers shift toward online retail, Best Buy faces hard times. Revenues have been showing negative growth since the end of 2011, with the most recent quarter shrinking by 9.6%.

Out with the old, in with the new?
Amazon should send Best Buy a thank-you note for effectively acting as its product showroom. More and more, consumers have been leaving Best Buy stores empty-handed and logging on to Amazon when they get home. While they're there, customers can search through just about anything they could ask for at competitive prices -- much more than they could get at Best Buy.

Amazon is clearly the go-to hub for e-commerce regarding just about any type of product. On top of that, the company has been doing a great job expanding product lines of its own, such as the Kindle. According to the its April 25 conference call, of Amazon's top 10 selling products, all 10 of them are Kindle or digital-related.

Where Best Buy's revenue generation has been struggling as of late, Amazon has been posting solid numbers. Yearly revenue growth has been strictly positive, showing rates in the 20%-30% range for two years running.

Let's talk quantity
However, the numbers at Best Buy may not be quite as bad as they seem, since management attributes 7.1% of its revenue contraction since 2011 to a shift in fiscal-quarter dates. Of the remaining portion, comparable-store sales were down by just 1.2% compared with the same quarter in 2012.

With the help of new CEO Hubert Joly, Best Buy is incorporating a new business strategy called "Renew Blue," in which the company will hope to increase store sales through the use of partnerships, such as the ones it has already secured with Samsung and Microsoft. These agreements should go a long way in increasing Best Buy's store image and marketability.

On top of revamping its bricks-and-mortar stores, Best Buy is investing heavily in e-commerce and is already finding success, including a 16.3% increase in domestic comparable online sales.

But when it comes to success at bricks-and-mortar companies, one company stands above the pack. Costco Wholesale is similar to Amazon, in that it sells a vast array of products, from deli meats to electronics.

COST Days Inventory Outstanding Chart

COST Days Inventory Outstanding data by YCharts

Costco has its own select product lines, but much of its business centers on selling high volumes of products to customers at prices that are only possible by selling in bulk. Costco's revenues have been rock-solid, maintaining a growth rate of around 10% for the past two years. Accordingly, for Costco to maintain healthy margins, it must have a high rate of inventory turnover, and it's done just that. Costco's inventory turnover is cyclical, but it retains a predictable and healthy pattern.

In the past, my research has incorporated a Motley Fool Earnings Quality score, or EQ, that taps into a database that ranks individual stocks. The database designates an "A" through "F" weekly ranking, based on price, cash flow, revenue, and relative strength, among other things. Stocks with poor earnings quality tend to underperform, so we look for trends that might predict future outcomes.

Stock

Current Price

July 17, 2012, Price

% Increase / Decrease 

EQ Score

Best Buy

$28.50

$18.8

36.1%

B

Amazon

$308.70

$216.9

29.7%

F

Costco

$117

$96

21.9%

F

All three stocks have performed well in the past year. Even though Best Buy has struggled to grow its revenues, the stock has climbed with the market and has been the best performer of the bunch. Part of the reason it has such a higher EQ over Amazon or Costco is that expectations were so low that any acceleration in the fundamental trends were likely to lead to outsized stock-price performance.

If management can execute its "Renew Blue" plan effectively, then Best Buy stock could continue to climb as the company finds even greater success.

The article Does Best Buy's Stock Live Up to Its Name? originally appeared on Fool.com.

Fool contributor John Del Vecchio, CFA, is the co-manager of the Ranger Equity Bear ETF and index provider to the Forensic Accounting ETF. He is also co-author of the book What's Behind the Numbers? with fellow Fool Tom Jacobs. He has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Amazon.com and Costco Wholesale. 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 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Why United Technologies Earnings Should Fly Higher Soon

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United Technologies is scheduled to release its quarterly earnings report on Tuesday, but investors haven't bothered waiting to start the celebration, as they've bid the stock to new all-time highs. Yet even though analysts are expecting a slight drop in net income this quarter, United Technologies earnings should start benefiting in the near future from the company's newly expanded presence in the aerospace industry.

United Technologies has grown considerably thanks to its acquisition last year of aerospace supplier Goodrich, strengthening its position within the Dow Jones Industrials . With so much potential in the aerospace business, the company is in a great position to capitalize on growth opportunities from a variety of players in the industry. Let's take an early look at what's been happening with United Technologies over the past quarter and what we're likely to see in its quarterly report.

Stats on United Technologies

Analyst EPS Estimate

$1.57

Change From Year-Ago EPS

(3.1%)

Revenue Estimate

$16.37 billion

Change From Year-Ago Revenue

18.6%

Earnings Beats in Past 4 Quarters

4


Source: Yahoo! Finance.

When will United Technologies earnings start flying higher?
Analysts have stuck by their calls on United Tech's earnings in recent months, keeping their estimates stable both for the June quarter and for the full 2013 year. That hasn't held the stock back, though, which has climbed 11% since mid-April.

Like many companies, United Technologies has been doing a good job of fighting revenue headwinds by boosting margins and squeezing out more profits. In its first quarter, United Tech fell short of sales estimates by half a billion dollars, but it managed to produce a dime-per-share earnings beat and reiterated its full-year earnings guidance.

The big driver for United Tech's future growth is the commercial aerospace industry. Aircraft manufacturer Boeing believes that demand for new planes will come in at around $4.8 trillion over the next 20 years, and between United Tech's long-standing Pratt & Whitney engine business and Goodrich providing components like electrical power systems and aircraft wheels and brakes, United Tech should reap its fair share of that big pie.

But United Tech isn't just involved in commercial aircraft. Earlier this month, its engines played a key role in the launch of Northrop Grumman's X-47B unmanned aircraft. Although defense-related business has suffered from budget cuts and the constraints of sequestration, it remains an important part of United Tech's overall strategy. A successful test flight recently for United Tech's Sikorsky MH-60R helicopters in connection with a sale to the Australian Defense Ministry also shows the company's international appeal.

In the United Technologies earnings report, be sure to remember to look at the company's Otis elevator business. In the midst of stronger economic growth in the U.S., the elevator business could see nice gains if construction activity starts to pick up. That would provide a much-needed tailwind for United Tech's prospects that could be the catalyst for further gains in its stock.

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

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

The article Why United Technologies Earnings Should Fly Higher Soon originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool owns shares of Northrop Grumman. 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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Did Someone Just Cure AIDS for $200,000?

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Is this the AIDS cure we've been waiting for?

According to multiple reports, Harvard researchers Timothy Henrich and Daniel Kuritzkes have recently noted a surprising side-effect to cancer treatments performed on two separate patients who also happen to be HIV-positive.

After undergoing bone marrow transplants to treat cancers of the blood, both men were later discovered to have no trace of HIV left in their system.


Encouraged by the results, the patients have since stopped taking anti-HIV drug treatments. Seven weeks later (for one patient), and 15 weeks later (for the other), the virus has not returned. And while the researchers are hesitant to pronounce the men "cured" -- warning that there's still a risk the virus can resurface even months after initially disappearing -- they do cautiously concede that the patients are "doing very well."

First, do no harm
The doctors' caution is understandable for many reasons -- first and foremost is the fear of raising hopes that a cure may have been found for one of the world's most intractable diseases, only to have to dash that hope later.

Experts also warn that bone marrow transplant is a truly unpleasant experience -- and in many cases not a practical solution to AIDS because of the cost and complexity of the procedure.

All that being said, the hope for a cure to AIDS springs eternal, and in this case at least, even the fantastic cost of a bone marrow transplant operation may turn out to be a bargain relative to the cost of treating the disease over a lifetime.

When the treatment is worse than the cure
Consider: According to the National Institutes of Health, what this translates into for a patient living out the projected life expectancy of 24.2 years post-infection is a lifetime cost of up to $618,900 per adult.

That's the "good" news. The bad news is that other sources put the cost of treating an HIV infection at as much as $5,000 a month, with the bulk of the charges going to pay for drugs.

Should a patient beat the odds, and survive to live out a 50-year lifespan post-infection, that could add up to as much as $3 million in treatment costs. But what if we could cut that figure down by a factor of 15?

That's the far-off potential suggested by the Harvard transplant results. According to the American Cancer Society, an allogeneic bone marrow transplant from a donor can cost as much as $200,000. That's hardly cheap, but it's much cheaper than $3 million.

What does it mean to investors?
One industry for which "cheaper" does not necessarily mean "better," however, is Big Pharma, which makes big money under the current system of "treating" AIDS until death.

This is money -- revenue streams -- that could be put at risk if an actual cure for the disease is (or has already been) discovered.

Major pharma names Bristol-Myers Squibb  and Merck , for example, each generated in excess of $1 billion from HIV-drug sales in 2010. Indeed, two Bristol-Myers drugs -- Reyataz and Sustiva, combined to produce $2.85 billion that year.

Gilead Sciences , reportedly holding a 40% market share in the HIV-drugs market, recorded $3.2 billion in sales of Atripla alone in 2011. AIDS is also a multimillion-dollar market for heavyweights Johnson & Johnson  and Pfizer .

With doctors still insisting that "transplantation is not a viable option for people with HIV on a broad scale because of its costs and complexity," these revenue streams look safe for the time being. That said, the cases of the two patients, still HIV-free weeks after their transplants, promise a day perhaps not too far off, when this treatable disease does in fact become curable.

As Kevin Robert Frost, chief executive of The Foundation of AIDS Research, opines: "These new cases could lead us to new approaches to treating, and ultimately even eradicating, HIV."

Meanwhile, the implementation of Obamacare continues marching forward (in fits and starts). How will the nation's new health care policy affect you? The Motley Fool's new free report "Everything You Need to Know About Obamacare" lets you know how your health insurance, your taxes, and your portfolio could be affected. Click here to read more. 

The article Did Someone Just Cure AIDS for $200,000? originally appeared on Fool.com.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Gilead Sciences and Johnson & Johnson and owns shares of Johnson & Johnson. 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 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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5 Surprising Losers of 2013

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Lots of stocks are getting as hot as some of the temperatures we're seeing around the country, but there's still no shortage of disappointments. Despite the rallying exchanges, there are plenty of companies that have bucked the trend to sport double-digit percentage losses so far in 2013.

Some of the names may be surprising, so let's take a closer look at five of this year's most surprising sinkers.

Company

July 17

YTD Loss

BlackBerry

$9.12

23%

Rackspace

$43.84

41%

ZAGG

$4.86

34%

Barrick Gold

$15.74

55%

Ebix

$11.10

31%

Source: Yahoo! Finance.


Let's start with BlackBerry. The smartphone pioneer has had a rough run in recent years, but things seemed to be picking up as 2012 came to a close. The stock had nearly doubled after bottoming out in the mid-single digits late in the summer, and things got even better in January, when BlackBerry officially unveiled its updated mobile operating system.

Unfortunately, the devices running the ballyhooed BB10 platform failed to live up to the hype. BlackBerry wound up selling just 2.7 million BB10 smartphones in its latest quarter, and that's not good enough as it continues to yield market share.

Rackspace wasn't very popular at the time of its IPO. The Web-hosting speedster was hoping to price its shares as high as $17, settling for $12.50 and wrapping up its first day of trading at $10.01. It got worse. Six months later, Rackspace bottomed out at $4. The story got a lot better after that, as business picked up and a push to host cloud-based applications paid off. The stock went on to be a 20-bagger when it peaked late last year.

Things haven't played out so well in 2013, with the shares losing more than 40% of their value. After back-to-back quarterly disappointments and weak guidance as cutthroat competition pressures pricing, Rackspace has been hit hard -- yet it's still trading at more than 50 times next year's earnings.

ZAGG makes third-party accessories for smartphones, tablets, and other consumer-electronics gadgetry. Its invisibleSHIELD -- a thin, protective film placed over touchscreens -- put it on the map, but ZAGG expanded beyond being a one-trick pony by moving into keyboard covers, chargers, and headphones.

The stock was rocked in May after a dreadful quarter. ZAGG earned just half of what Wall Street was expecting, and sales fell 7%. Analysts were banking on 20% top-line growth. And just when it seemed as if things couldn't get any worse, ZAGG lowered its outlook again this past week.

Barrick Gold has shed more than half of its value this year. Gold stocks have gotten slammed in 2013, and gold prices have posted a double-digit percentage decline, frustrating asset allocators who figured buying into the yellow metal would offset some of the inflationary pressures and hedge against geopolitical uncertainties.

However, Barrick's been hit harder than its peers after the development of its Pascua-Lama Project in Chile was suspended this year, with environmental concerns blocking the proposed mining. Class action lawsuits have started piling up since then, accusing Barrick of making misleading statements and concealing information.

Finally, Ebix has been dogged by bearish attacks for its accounting practices for some time, but the fast-growing insurance software provider seemed to be getting the last laugh back in April, when a Goldman Sachs affiliate offered to cash investors out at $20 a share. The $820 million deal seemed to justify Ebix's accounting, but the love didn't last.

The buyer walked away after a U.S. criminal probe into Ebix's accounting practices was initiated last month. Ouch.

Ready for a bounce
If you owned some of these losers, how about following the smart money into winners?

With the U.S. relying on the rest of the world for such a large percentage of our goods, many investors are ready for the end of the "made in China" era. Well, it may be here. Read all about the biggest industry disrupters since the personal computer in 3 Stocks to Own for the New Industrial Revolution. Just click here to learn more.

The article 5 Surprising Losers of 2013 originally appeared on Fool.com.

Rick Munarriz owns shares of Ebix. The Motley Fool recommends Goldman Sachs and Rackspace Hosting. 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 President Obama's Emissions Proposal Means for Natural Gas

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In a speech at Georgetown University late last month, President Obama outlined a detailed plan for tackling the pressing issue of climate change.

One of the main goals he discussed was reducing annual carbon pollution in half over the next two decades. To move closer to this goal, he plans to reduce greenhouse gas emissions from U.S. power plants by empowering the Environmental Protection Agency to establish carbon pollution standards for both new and existing power plants.

While the coal industry didn't take too kindly to his proposal, his words were surely well received by natural gas companies. Let's take a closer look at why the president's proposal could lead to a substantial increase in natural gas demand over the next several years.


Obama's proposal and future natural gas demand
According to industry analysts, President Obama's plan to cut carbon emissions from U.S. power plants could mean an additional 4 billion to 8 billion cubic feet per day of natural gas demand growth over the next decade.

"Using the National Resources Defense Council's notional 1,500 [pounds of CO2 emissions per kilowatt hour] as a starting point implies an incremental retirement of about 70 GW of coal-fired capacity by 2020 over and above approximately 40 GW of expected retirements associated with the MATS rule," said ClearView Energy Partners' analyst Kevin Book in a note released after the speech.

The basic idea is that the president's proposal to limit carbon emissions will give power plants incentive to use more natural gas instead of coal. That's because coal and natural gas compete directly for market share in the U.S. power-generation market. Though this market has historically been dominated by coal, gas suddenly became a much more attractive alternative as its price plunged to a decade low last spring.

Other natural gas demand drivers
In addition to demand from utilities, other key drivers of future demand for natural gas include industrial and petrochemical firms, LNG exports, and, to a lesser extent, residential and commercial conversion. Another wildcard source of demand may also come from the transport industry, where demand for natural gas-powered trucks has soared in recent years and is likely to increase further.

For instance, Waste Management has amassed a fleet of around 2,000 trucks that are powered by compressed natural gas and plans to add more, while UPS recently announced plans to purchase 285 more gas-powered trucks next year.

Even some of the largest players in the railroad industry, including Berkshire Hathaway's Burlington Northern Santa Fe, Union Pacific, and Norfolk Southern, are carefully studying the costs and benefits of converting their freight trains' engines to burn natural gas instead of diesel. BNSF, for instance, is using units from General Electric and Caterpillar , the biggest manufactures of locomotives in the world, to determine whether it wants to convert some of its trains to run of a mix of natural gas and diesel.

In all, these trends paint a highly bullish picture for the future of natural gas demand. Over the next five to seven years, we may see up to 20 billion cubic feet per day of incremental demand, according to Enterprise Products Partners , a leading midstream firm. As I have argued before, I believe that there's a good chance that gas demand could outpace supply in the future, which suggests to me that natural gas prices are likely to move much higher over the next three to five years.

Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. That's why The Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

The article What President Obama's Emissions Proposal Means for Natural Gas originally appeared on Fool.com.

Fool contributor Arjun Sreekumar has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway, Enterprise Products Partners, UPS, and Waste Management and owns shares of Berkshire Hathaway, General Electric, and Waste Management. 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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A Troubling Trend Emerging in the Gold Industry

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This past April, Newmont Mining  cut its payout to investors by almost 18% to $0.35 a share. Last month, Australia's Newcrest Mining said it was suspending its dividend payment for the last quarter of its fiscal year. And on Tuesday, Eldorado Gold said it was halving its exploration budget, slashing its capex budget by more than a third, and at its next board meeting would take up consideration of the miner's dividend policy. 

If gold prices don't recover soon, expect more miners to follow suit, particularly those with high debt and capital requirements such as Barrick Gold.

Budgets for gold miners were set when the metal's price was much higher, but now that they've tumbled, there are few options left. Hitting the capital markets doesn't look palatable at the moment as a means of raising money, since their stock prices are already in the basement, and while many began cutting their capital budgets, they've also pushed further out their production schedules as a means of conserving cash. Now the only piggy bank they have left to stick their hands into are their dividend payments.


Like Newmont, many miners adopted a dividend policy that was linked to the price of gold. Very cool for investors when gold was regularly hitting new highs, not so much now that the yellow metal's price has been hit hard. When it cut its payout earlier this year, Newmont said it was based on an average first-quarter price for gold of $1,632 per ounce. Yesterday gold closed 22% lower from that level at $1,274 an ounce.

The same thing happened in May to silver miner Hecla Mining , when it was forced to hack its dividend 80% to account for silver's new lower value of around $29 an ounce. The payout fell from $0.0125 per share to $0.0025, and silver has tumbled further, closing this past week below $20 an ounce.

In addition to the precious metal-linked dividend, another trend that developed during 2012 was paying dividends in actual gold or silver bullion. Yet investors in those miners have learned that doesn't protect you from the fallout of falling prices, either. Gold Resources shareholders saw their dividend payment cut in half in May, from $0.06 per share to $0.03.

Silver Wheaton sought to eliminate volatility by pegging its payout to the operating cash flows it generated in the previous quarter, something AuRico Gold just latched onto. The silver miner noted at the time that its revenues are primarily derived from the sale of silver, with its operating cash costs essentially fixed at approximately US$4 for every ounce of silver sold.

However, the silver streamer found that it didn't eliminate volatility at all and just changed over to a new schedule of basing its payout on cash flows generated over the past year. Needless to say, Silver Wheaton's dividend payment has begun sliding as well.

The fevered hope at the moment is that precious-metal prices continue their slow climb back, or at the very least don't fall further. That way, the spending cuts and production delays these companies have engineered will be enough to stave off having to cut their payouts further. Yet if price weakness returns, look for gold to lose even more of its luster.

When gold is good, it shines, When its bad, it's dirtier than a lump of coal. Since 2000, gold has outshined the stock market with strong returns, but more recently has become a canary in a coal mine. The Motley Fool's new free report "The Best Way to Play Gold Right Now" dissects the recent volatility and provides a guide for gold investing. Click here to read the full report today!

The article A Troubling Trend Emerging in the Gold Industry originally appeared on Fool.com.

Fool contributor Rich Duprey 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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How Much Could Medicare for All Save You?

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The government put a key piece of Obamacare back on the shelf last week, when it announced that companies employing more than 50 workers will have an extra year to begin offering health insurance without facing fines.

Whether you consider this good news or bad news probably depends on whether you were a fan or a foe of the Affordable Care Act in the first place.

But could it be that the ACA isn't really needed at all? Could an alternative idea -- "Medicare for all" -- actually do a better job of controlling medical costs, and making health care affordable for Americans?

Obamacare -- but cheaper 
A new survey released by the number-crunching technocrats at NerdWallet last month clearly illustrates how extending Medicare coverage to all Americans might cut costs for everyone. According to NerdWallet, Medicare generally pays out no more than $0.27 for every dollar that hospitals bill it for medical services -- a savings of 73%. Put another way, an uninsured patient receiving the same care as is provided to a patient covered by Medicare can expect to pay nearly four times more.


And that's just the average. Echoing the findings of a Time magazine report earlier this year, NW's health care survey noted that the prices charged by various hospitals offering the same procedure can vary widely. As you can see in the far-right column of NW's pricing chart, you could easily end up paying 30 to 40 times more for a stay at one hospital than at a hospital down the road, for the same treatment.

Obamacare... but more efficient 
How does a 73 percent discount on medical bills compare to what's promised under the ACA?

Well, under the current structure, Obamacare works as a plan to require patients to sign up for private health insurance plans. Yet according to Forbes, many of these private insurers offer their members discounts of as little as 20 percent off hospitals' ordinary pricing.

One of the standouts, Blue Cross plans from WellPoint , is sometimes able to negotiate discounts as large as 60 percent -- still far short of the average discount of 73 percent at Medicare.

Obamacare... but better 
Harvard Medical School visiting professors David Himmelstein and Steffie Woolhandler recently noted on the pages of The New York Times that a Medicare-for-all health care system -- known commonly as "single-payer" -- is an incredibly efficient operation, costs-wise.

On average, only 2 percent of the revenues that flow through Medicare are needed to cover overhead costs. In contrast, patients who subscribe to private health insurance spend 14 percent of their money -- seven times more -- just paying for the overhead costs doctors incur from juggling the multitude of insurance procedures required for different patients subscribing to insurance plans.

Other commenters, such as Dr. Dave Dvorak, writing in the April 2013 issue of Minnesota Medicine , put the cost of Obamacare even higher, arguing that "a staggering 31 percent of U.S. health care spending goes toward administrative costs, rather than care itself." As Dr. Dvorak notes, while "Obamacare ... is expected to extend coverage to 32 million more Americans," it does this by "expanding the current fragmented, inefficient system" and will likely "do little to rein in health care spending."

In contrast, the U.S. government itself agrees that the ACA -- the system we've settled upon instead of offering Medicare-for-all -- costs more than a move to a cheaper, more efficient, and better single-payer system. The U.S. Government Accountability Office calculates that a switch to single-payer would shave $400 billion a year off the national health care bill.

Little wonder, then, that a 2008 survey published in the Annals of Internal Medicine found that 59 percent of physicians polled support Medicare-for-all.

A government takeover? 
So Medicare-for-all is cheaper, more efficient, and better than Obamacare -- but isn't it a "government takeover" of health care?

It needn't be.

If an individual consumer thinks he's better off with a private health insurance plan from WellPoint -- or from UnitedHealth GroupAetna, or Cigna -- then fine. They could still sign up for one of those, either as a supplement to Medicare-for-all or, if they prefer, as an exclusive plan, and choose not to participate in Medicare at all. For that matter, there should be no need to require anyoneto buy any insurance whatsoever.

All that's really required for Americans to begin reaping the 73 percent savings of a Medicare-for-all plan is to open up Medicare enrollment to everybody. Give everyone the right to sign up for Medicare, rather than requiring us all to sign up for a private insurance plan under the ACA. And then let the marketplace decide if Medicare-for-all is really as good an idea as NerdWallet's survey makes it sound.

The article How Much Could Medicare for All Save You? originally appeared on Fool.com.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth Group and WellPoint. The Motley Fool owns shares of WellPoint. 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 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Bank of America Aims to Prove Its Supporters Right

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In this video, Motley Fool banking analyst David Hanson breaks down the second-quarter earnings from Bank of America and highlights a few things to love, as well as a few things that concern him.

If B of A can continue to slowly make progress cleaning up legacy issues and effectively serving its customers, long-term investors may continue to be rewarded. Despite the bank's resurgence, one of the other big banks may be a better option. Our analysts break down what they believe to be the strongest bank in The Motley Fool's new report. It's free, so click here to access it now.


A full transcript follows.

Hey, Fools. David Hanson here. This morning, we saw Bank of America report second-quarter earnings. They're the last of the Big Four U.S. banks to report earnings this season, and it was a little bit of a mixed bag. We saw the bank report net income of roughly $4 billion, which seemed strong; however, if we look at it at a tangible book value per share basis -- that actually fell from first quarter, despite the bank raking in over $4 billion in net income plus doing $1 billion of share buybacks.

So, what does this mean? Why do we care that tangible book value per share fell? The reason tangible book value per share fell in the second quarter was this rise in interest rates. When interest rates rose, the bank made a little bit more money on the income that they're making off interest, on the securities that they're holding, but the value of the fixed-income securities that they hold on their balance sheet, those fell, so when interest rates rise, fixed-income securities fall in price.

Now, these aren't actually realized losses that affect net income, but the bank has to record and recognize these unrealized losses that totaled over $4 billion. So we had over $4 billion in unrealized losses and then around $4 billion in net income, so it essentially wiped that out completely to the common shareholder on a tangible book value basis.

So, that doesn't sound very good -- so why is the stock up this morning? There were certainly some things like in Bank of America's second quarter from a business perspective, not necessarily these accounting gimmicks -- not necessarily gimmicks, but these accounting entries that offset in different places.

Just when we look at Bank of America's business, there are certainly some things to like. The wealth-management business, the Merrill Lynch unit that they of course acquired in late 2008 at a very high price, is actually starting to look like a pretty good acquisition -- maybe they still overpaid, but it's performing very well. On the call this morning, banking analyst Mike Mayo was asking, "Is this the strongest margins we've seen in the wealth-management business since the heyday, since Merrill Lynch's old heyday?" [CEO Brian] Moynihan and Bruce Thompson, the CFO, didn't give a direct answer to that, but they certainly hinted that the Merrill Lynch wealth-management business is performing very, very well.

The trading business was also strong, and we just continue to see credit improvement in the consumer portfolios, in the commercial portfolios, that Bank of America holds on its books -- so there are certainly some things to like on the business perspective.

I also was encouraged by some of comments that Moynihan and Bruce Thompson said on the call this morning. Instead of skirting around these other unrealized losses on the security portfolio, they acknowledged these losses at the beginning of the call, instead of kind of shooing them off to the side, kind of like [JPMorgan Chase] did earlier in the week -- they didn't fully address these head-on at the beginning; some analysts had to bring it up, and then they addressed it. Bank of America, they addressed these losses upfront. They said "We made $4 billion in net income, but these were offset by unrealized losses," so they were upfront about that. They didn't try to hide it.

They also acknowledged the new leverage ratios, the proposal in capital requirements that some the banks will have to hold in the long run. They addressed those upfront. They told analysts where they stood on that. They weren't trying to be opaque and not address that upfront. So I was encouraged to see that. And then just the overall performance -- yes, the net income was wiped out by unrealized losses to some extent, but, but, the long-term view of Bank of America is why you'd buy it today is because ultimately their returns are going to get back to a normalized level when they get through these legal issues, when they get through credit losses. They can return to a double-digit return on equity, and they were close -- they were almost at a 10% return on tangible equity in the second quarter.

So, that's them trying to prove investors and analysts right. The people who bought their stock over the last year, the last couple years, despite making terrible net income results and terrible returns for shareholders, the view was Bank of America will ultimately return to a normalized earnings stream and slowly try to produce double-digit returns on equity, and that's where the real value is going to be for a Bank of America shareholder. So, they're trying to prove investors right. They're on the path to do that. There's still going to be some bumps in the road -- we still have legal settlements outstanding -- but the road looks like it's clearing a little bit for Bank of America, and it was a pretty positive quarter.

Again, this is David Hanson, and you can always read more on Fool.com.

The article Bank of America Aims to Prove Its Supporters Right originally appeared on Fool.com.

David Hanson owns shares of JPMorgan Chase. The Motley Fool recommends Bank of America and owns shares of Bank of America and JPMorgan Chase. 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 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Is Honda's New Fit a Hit or a Miss?

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Honda revealed the next-generation Fit subcompact in Japan on Friday. Photo credit: Honda

Will Honda's new Fit build on the old car's success?

The car you see above was revealed  this past week in Japan. It's a prototype of the all-new Honda Fit. The new Fit is due to be rolled out in Japan this fall, and will be here in the U.S. by next summer.


Stylistically, it's... well, let's say it's a departure from the outgoing model, which has won many fans with its endearing looks. In a way, the current Fit is a lot like Hondas of old: Light, simple, well-thought-out.

The new Fit might not have the visual appeal of the old one. But at least in its hybrid incarnation, it has something else: Record-breaking fuel economy.

The new Fit Hybrid is amazing, and not coming to the U.S.
Honda says that the hybrid version of the new Fit will get 36.4 kilometers from each liter of gas in the standard fuel-economy test used by the Japanese government. That translates to about 84 miles per gallon - good enough to make it Japan's most fuel-efficient car.

It's also a 30% improvement over the outgoing Fit Hybrid, which is a big seller in Japan - but which was never offered here in the U.S.

 Honda says that the new Fit Hybrid won't come here, either - a strange decision given that the Fit Hybrid's closest competitor is the Japan-market version of Toyota's Prius c, which has been offered in the U.S for a while now. But we will see the Fit's hybrid powertrain in two new variants: A small sedan and a subcompact crossover SUV based on the Fit.

The U.S. is expected to get the Fit with a new 1.5 liter four-cylinder engine as the only powertrain option in the Fit itself. The new U.S.-market Fit and its new variants will all be built in a new factory in Mexico that is set to open early next year.

 So will it succeed?

Can the new Fit live up to the old car?
The outgoing Honda Fit might be the company's most beloved current model. Unlike Honda's bigger cars, which have grown in size and weight (and price) from the lightweight, efficient models that built Honda's reputation here in the U.S., the Fit is still small and light - and very fuel-efficient.

The current Honda Fit has won fans with its fuel economy and simple, endearing look. Photo credit: Honda

Sales of the Fit have remained strong even as strong contenders like Ford's Fiesta have gained ground. Through June, U.S. sales of Honda's subcompact were up 5.2%, a good gain for an outgoing model in a segment that has lagged a bit as consumers have started moving back toward larger cars and SUVs.

The appeal of the old car is obvious, especially if you talk to a Fit owner. But I'm not sure what to make of the new car. The look is definitely a departure from the current car's, and appears to take visual cues from Honda's Insight hybrid, which has been a very slow seller.

When Honda redesigned its Civic a few years back, fans and critics were disappointed - the car didn't seem to have what it needed to compete with hot new contenders like Ford's Focus. Honda had to rush an updated version to market far ahead of schedule. That updated version has fared better, but it was an un-Honda-like misstep. Will this new Fit turn out to be another?

What do you think? Is the new car a winner, or is Honda losing its touch? Scroll down to leave a comment and let me know.

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The article Is Honda's New Fit a Hit or a Miss? originally appeared on Fool.com.

Fool contributor John Rosevear owns shares of Ford. Follow him on Twitter at @jrosevear. The Motley Fool recommends Ford. The Motley Fool owns shares of Ford. 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 Dead Cow Has Caught Big Oil's Attention

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Photo Credit: Flickr/Paul Lowry

After lots of speculation, oil and gas giant Chevron has finally come to terms on a joint development agreement with Argentine national oil company YPF . The $1.24 billion deal will help further the development of oil and gas at Argentina's Vaca Muerta formation. Vaca Muerta, which in Spanish means dead cow, holds a lot of hope for both Chevron and Argentina as it's estimated to hold 27 billion barrels of technically recoverable oil.


That's a lot of oil, in fact, it's enough to place Argentina fourth in the world when it comes to recoverable shale oil. If the estimates prove true, it means Vaca Muerta could hold more than three times the amount of recoverable oil as the Bakken, which according to the U.S. Geological Survey holds about 7.4 billion recoverable barrels of oil. The problem is that this oil is expensive to develop.

That's why Chevron's funds will be crucial in bringing the Vaca Muerta field to life. The initial program will include the drilling of 100 wells as part of the first phase of the play's development. A second phase of development would then follow with an additional 1,500 wells being drilled. The hope is the duo can grow oil production to 50,000 barrels of oil per day while also producing 4 million cubic meters of gas per day. That would be a huge jump from the current production of 10,000 barrels of oil per day.

What's interesting here is the deal announcement comes right after Argentina announced a package of incentives geared toward luring foreign oil and gas investors to the country. The incentives allow companies investing at least a billion dollars to eventually be allowed to sell 20% of the oil production abroad without paying export taxes. This would enable the companies to keep the related profits, which enhances the economics for investors.

That bodes well for Chevron, as well as other U.S. oil and gas producers looking to profit from the massive oil and gas reserves in the country. This includes EOG Resources which has already signed two exploration contracts and one farm-in agreement with YPF. The company is still in the very early stages of drilling in Vaca Muerta, so it remains to be seen how big its investment in the country will one day become. The company currently spends about $7 billion in capital each year, however, it has a 15 year drilling inventory just in its high returning, liquids-rich U.S. onshore business so a billion dollars in Argentina might be a bit of a stretch.

Another company to watch is Apache . The company has been operating in the country since 2001 and has interests in 3.7 million net acres, including 1.3 million net acres in the Vaca Muetra shale. Last quarter the company participated in the drilling of four total wells in the Vaca Muerta and it's currently working on a strategy to develop its acreage in the play. That means the company has a long way to go before its operations in the country really move the needle.

Source: Apache 

What's very clear is that despite the potential, investors have a long way to go until Vaca Muerta will begin to drive returns for U.S. based producers. One reason for this is that Argentina will need a lot of capital to really bring the Vaca Muerta to life. The general consensus is the country will need about $7 billion per year to fully develop its shale oil and gas resources. So, while an important first step, Chevron's $1.24 initial investment in the play is really just the tip of the iceberg. 

The real driving force behind the move is that oil remains well above $100 a barrel making places like Vaca Muerta a potentially lucrative venture. If you're on the lookout for some other currently intriguing energy plays to profit as oil stay high, you should check out The Motley Fool's "3 Stocks for $100 Oil." For FREE access to this special report, simply click here now.

The article This Dead Cow Has Caught Big Oil's Attention originally appeared on Fool.com.

Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Chevron. The Motley Fool owns shares of Apache. 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 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Lexmark International Beats on Both Top and Bottom Lines

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Lexmark International (NYS: LXK) reported earnings on July 23. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended June 30 (Q2), Lexmark International beat expectations on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue contracted. Non-GAAP earnings per share grew. GAAP earnings per share increased significantly.


Gross margins dropped, operating margins shrank, net margins grew.

Revenue details
Lexmark International reported revenue of $886.7 million. The nine analysts polled by S&P Capital IQ hoped for a top line of $857.3 million on the same basis. GAAP reported sales were the same as the prior-year quarter's.

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

EPS details
EPS came in at $0.95. The 12 earnings estimates compiled by S&P Capital IQ predicted $0.87 per share. Non-GAAP EPS of $0.95 for Q2 were 6.7% higher than the prior-year quarter's $0.89 per share. GAAP EPS of $1.39 for Q2 were 153% higher than the prior-year quarter's $0.55 per share.

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

Margin details
For the quarter, gross margin was 39.0%, 60 basis points worse than the prior-year quarter. Operating margin was 6.9%, 170 basis points worse than the prior-year quarter. Net margin was 10.0%, 570 basis points better than the prior-year quarter. (Margins calculated in GAAP terms.)

Looking ahead
Next quarter's average estimate for revenue is $849.7 million. On the bottom line, the average EPS estimate is $0.95.

Next year's average estimate for revenue is $3.49 billion. The average EPS estimate is $3.82.

Investor sentiment
The stock has a two-star rating (out of five) at Motley Fool CAPS, with 142 members out of 227 rating the stock outperform, and 85 members rating it underperform. Among 77 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 54 give Lexmark International a green thumbs-up, and 23 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Lexmark International is underperform, with an average price target of $22.63.

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The article Lexmark International Beats on Both Top and Bottom Lines originally appeared on Fool.com.

Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. 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.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Helix Energy Solutions Group Beats on Both Top and Bottom Lines

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Helix Energy Solutions Group (NYS: HLX) reported earnings on July 23. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended June 30 (Q2), Helix Energy Solutions Group beat expectations on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue dropped significantly. GAAP earnings per share dropped significantly.


Margins shrank across the board.

Revenue details
Helix Energy Solutions Group tallied revenue of $232.2 million. The three analysts polled by S&P Capital IQ hoped for revenue of $212.5 million on the same basis. GAAP reported sales were 33% lower than the prior-year quarter's $347.4 million.

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

EPS details
EPS came in at $0.26. The seven earnings estimates compiled by S&P Capital IQ predicted $0.20 per share. GAAP EPS of $0.26 for Q2 were 38% lower than the prior-year quarter's $0.42 per share.

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

Margin details
For the quarter, gross margin was 29.1%, 540 basis points worse than the prior-year quarter. Operating margin was 20.8%, 610 basis points worse than the prior-year quarter. Net margin was 11.7%, 120 basis points worse than the prior-year quarter. (Margins calculated in GAAP terms.)

Looking ahead
Next quarter's average estimate for revenue is $217.2 million. On the bottom line, the average EPS estimate is $0.30.

Next year's average estimate for revenue is $897.6 million. The average EPS estimate is $1.00.

Investor sentiment
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 906 members out of 944 rating the stock outperform, and 38 members rating it underperform. Among 220 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 214 give Helix Energy Solutions Group a green thumbs-up, and six give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Helix Energy Solutions Group is outperform, with an average price target of $27.50.

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The article Helix Energy Solutions Group Beats on Both Top and Bottom Lines originally appeared on Fool.com.

Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. 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.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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