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Why TG Therapeutics Inc. Shares Temporarily Plunged

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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 TG Therapeutics , a clinical-stage biopharmaceutical company focused on developing therapies to treat cancer, temporarily plunged as much as 15% this morning after reporting preliminary clinical results of a phase 2 study in combination with Pharmacyclics' Imbruvica (formerly ibrutinib). Shares have since rebounded and are now higher by 3% on the day as of this writing.

So what: According to TG Therapeutics' press release, TG-1101 in combination with Imbruvica led to an impressive 90% overall response rate (out of 10 evaluable patients) at the first efficacy assessment in patients with previously treated chronic lymphocytic leukemia and mantle cell lymphoma. As noted in its press release, "The addition of TG-1101 appears to abrogate ibrutinib related lymphocytosis in patients with CLL, with patients experiencing a median ~80% reduction in their absolute lymphocyte count (ALC) by month 4 following initiation of combination therapy." In addition, the combo appeared to be generally safe and well-tolerated in the initial 28 patients, though one grade 3/4 adverse event was reported that led to study discontinuation.


Now what: Today's sharp, but temporary move lower merely looks like a combination of emotional trading and profit taking following TG Therapeutics' 92% surge higher over the past month. Although the data, while preliminary, would certainly appear to indicate that Imbruvica could have legs as a combination therapy, and that a combination with TG-1101 might be one of those therapies that eventually reaches the market. Admittedly, with just 10 evaluable patients I'm not reading to declare this a wholly effective combo just yet, but I believe the case has been made that this combo should be followed closely going forward.

One final thing to consider, however, is that as a purely clinical-stage company TG Therapeutics may choose to offer shares for sale in order to raise cash for future research studies - a somewhat common practice in the biotech sector. Investors may want to consider the potential for dilution following TG's large run higher.

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The article Why TG Therapeutics Inc. Shares Temporarily Plunged 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. 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 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Social Security: An Early Benefits Strategy Most Workers Never Consider

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Social Security and retirement are linked in most people's heads. But you can start receiving Social Security before you retire -- as long as you're careful about navigating the rules involved.

In the latest installment of our Social Security Q&A video series, Dan Caplinger, the Motley Fool's director of investment planning, takes a question from Allen, who notes that his wife wants to start taking early Social Security benefits while still working and put the proceeds directly into a retirement account. Dan goes through the pros and cons of the plan, running through the conditions under which workers can have some of their early Social Security benefits forfeited if they make more than $15,480 in annual wages. Dan then evaluates the benefits and problems with the plan, with the trade-off of getting a longer time period to invest versus accepting smaller monthly payments. Dan concludes that the tax benefits of retirement accounts can outweigh the negatives of lower benefits, but the situation depends significantly on individual factors such as life expectancy.

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The article Social Security: An Early Benefits Strategy Most Workers Never Consider originally appeared on Fool.com.

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

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

 

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Will Walter Energy's Sales Dwindle in the Second Quarter?

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The metallurgical coal market hasn't done well in the past year as prices have dwindled. This weakness has led Walter Energy to report high losses in the first quarter. Will the company's performance improve in the second quarter? Or will its revenue and earnings continue to tumble? Let's examine some key factors that will impact the company's performance in the near future.

Will the met coal market improve?
During 2013, total met coal exports dropped by 6% compared to 2012, according to the Energy Information Administration. Most of this fall in exports is due to the 16% drop in exports to Asia (mainly India and Japan). The 15% rise in Australia's met coal exports has softened the demand for met coal from the U.S. Moreover, the EIA's report showed the average price of U.S. metallurgical coal exports plummeted by 24% to $115 per ton. Looking forward, the rise in Australia's exports and the limited growth in the steel market are likely to slowly drag down metallurgical coal prices. Further, in 2014, the EIA expects U.S. met coal exports to fall by nearly 13%, year over year.

For Walter Energy, during the first quarter the average realized price of met coal dropped by 16.8%, year over year. Even if the average price remains stable in the second quarter, the prevailing prices are roughly 15% below the average price recorded in the second quarter last year. Therefore, the current low prices of met coal will keep dragging down Walter Energy's revenue. The other side of the equation is production.


Production
In the first quarter, the company met coal sales (in tons) fell by 6%, year over year. Further, this year the company estimates to sell around 9.5 million tons of met coal and a total of 11 million tons of coal (including thermal). Based on the above, Walter Energy expects to sell around 2.7 million tons during the second quarter -- nearly the same amount it sold in the same quarter last year.

Thus, the company's revenue is likely to dwindle by 15%, mostly due to lower coal prices (assuming the prices won't fall further). Production volume won't negatively impact its sales. Despite the lower revenue, the company's earnings and operating cash flow could pick up. Let's see why. 

Profit margin
Despite the low coal prices, Walter Energy's gross profitability slightly improved in the past quarter, mainly due to a 23% fall in its coal cash cost of production. The company expects to keep cutting its production costs, which will offset the low coal prices. Moreover, the margins the company makes on met coal remain higher than that of Arch Coal  and Alpha Natural Resources . These companies' operations mostly rely on thermal coal rather than met coal. The chart below demonstrates the changes in their gross profitability.

Source: Google Finance

If Walter Energy keeps reducing its cash cost, this could reduce its net losses in future quarters.

Final note
Despite low met coal prices, Walter Energy might improve its gross profitability and record low losses in the second quarter. The production is likely to remain nearly stable during the quarter and the drop in production could offset the drop in coal prices. Nonetheless, the company still faces high debt, and unless the met coal market starts to heat up, Walter Energy will keep recording losses and accumulate debt.

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The article Will Walter Energy's Sales Dwindle in the Second Quarter? originally appeared on Fool.com.

Lior Cohen 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.

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

 

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Lower Rates and More Liquidity Make Europe a Buy

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Source: Eric Chan/Flickr

Europe is facing an unprecedented round of monetary measures that could mean major price changes across the region. The European Central Bank recently lowered its benchmark interest rate 10 basis points to a record low of 0.15%. Now the region's rate is below its U.S. and U.K. equivalents, which are currently at 0.25% and 0.5%, respectively.

In addition, deposit rates with the ECB will be -0.1%. Yes, you read that right: European banks face a negative rate on their excess funds if they keep them overnight with the central bank. This is the first time we've seen a major central bank taking its deposit rate negative. Now banks will have a stronger incentive to give a profitable purpose for this cash, which means they will essentially invest it and lend it, boosting activity levels and pushing European asset prices up.

But wait, there's more. In order to reinforce bank lending, the ECB also announced a new asset-purchase plan and the opening of a $542 billion liquidity channel destined for this purpose. With  money being poured into the economy, and deflation risks mitigated, it might be time to start a position in the region. Let's check out some Europe-related ETFs.

Source: Pixabay.


What Europe-related ETFs could you buy?
If you prefer equities, an interesting ETF to follow is iShares MSCI EMU . This fund tracks the performance of the equity markets of the EU members that have adopted the euro as their currency. This is exactly what you should be looking for, as similar ETFs like Vanguard FTSE Europe have among their biggest holdings companies denominated in pounds and Swiss francs. Of course, these companies have operations in the whole region, but the monetary policy does not have a direct impact on their businesses.

Regarding iShares MSCI EMU, its holdings are pretty well-diversified across sectors, with relatively large weightings in financial services (21.2%), consumer cyclical (12.3%), and industrials (12.1%). This is good news, as greater lending incentives and liquidity measures should increase financial-services activity and spur industrial activity in the region through credit.

In addition, staving off deflation should boost consumer confidence. Decreasing prices make people push purchases forward and wait for prices to drop, and that's exactly what we don't want. Retail activity in the region is gaining traction already: June retail sales for the eurozone rose 0.4% from May and 2.4% year over year, their strongest annual growth in seven years.

However, if you think the measures' major impact will be within financial institutions, the fund you should consider is iShares MSCI Europe Financials . New monetary policy has a direct effect on banks. Sooner or later other sectors will feel the effects, but the extra liquidity and higher lending will take place through banks. This fund tracks financial companies across Europe, with more than half of holdings being eurozone-based.

Why now?
The market's initial reaction to the policies' announcement has been a clear buy. Most European shares closed higher as investors considered that the ECB's intentions should boost the economy in the region. In addition, the announcement led to a drop in the yield, and consequently a rise in their prices, of most European sovereign bonds. This was especially evident in the bonds issued by Spain, Italy, and Ireland.

The purpose of these measures is to stop deflation threats in the region and boost lending. This year's ECB inflation projections were lowered from 1% to 0.7%, a step in the wrong direction.

Final foolish thoughts
The EU is the world's second-largest economy, and these strong measures should be closely monitored. The region has not managed to recover as fast as previously expected, and higher bank lending could make a difference.

From now on, Europe will be facing liquidity expansion with extremely low rates and this should be beneficial for equities in the region. It is hard to imagine a scenario where the additional cash leads to inflation without boosting economic activity. The rise in sales in the eurozone is not a minor thing either and should gain more traction after the new measures take place. Under this scenario, iShares MSCI EMU is a good choice since it holds its biggest positions in the sectors that will profit the most from the policies. If you still want exposure to the region, but do now know how effective the ECB will be in turning things around, maybe Vanguard FTSE Europe is a better choice. This fund is positioned in less volatile assets based outside the eurozone, mostly oil companies and labs, which have a more stable demand.

Be cautious here, though. ECB President Mario Draghi has promised to do whatever it takes to save the euro, but it's hard to think of stronger actions than the ones he's already taken. How much lower can the benchmark interest rate go? Not much more, so if these measures do not work, then the region could face serious trouble. Hence, considering that iShares MSCI Europe Financial is not 100% exposed to the euro, the fund remains interesting even in a pessimistic environment.

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The article Lower Rates and More Liquidity Make Europe a Buy originally appeared on Fool.com.

Louie Grint 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.

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

 

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Is Priceline a Buy Today?

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Today, investors of OpenTable were treated to a rather pleasant surprise when it was announced that Priceline was buying the company out for $2.6 billion in an all cash deal -- a premium of 47% to Thursday's close.

Motley Fool analyst Jamal Carnette likes the deal. First, Priceline acquires a company growing its top line similar to its own. Also, this shows that Priceline is looking to become the "one-stop shop" for travel and leisure, further ingraining itself into travelers' itineraries.

Even more telling, however, is Priceline chose to pay cash instead of issuing shares. This points toward Priceline being comfortable with the price paid and the potential synergies, and also that it feels its own company is still undervalued by the market.


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The article Is Priceline a Buy Today? originally appeared on Fool.com.

Jamal Carnette has no position in any stocks mentioned. Michael Douglass owns shares of Priceline Group. The Motley Fool recommends OpenTable and Priceline Group. The Motley Fool owns shares of Priceline Group. 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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The Afternoon's Top News Headlines

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Here are some of this afternoon's top news headlines from Fool.com. Follow us on Twitter at TMFBreaking and click here for today's full list of news headlines.

Latest GM Recalls Include Camaros With Possible Ignition Switch Problem

Why Finisar Corporation Shares Got Crushed


Why OpenTable Inc Shares Skyrocketed Today

What Does Intel's Guidance Mean for Hewlett-Packard and AMD?

Long Live the PC: Intel's Rally is Pulling Microsoft and Hewlett-Packard Higher

Tepid Inflation Supports the Stock Market, But Will Prices Rise Soon?

E3 Unleashes Next Generation of Gruesomeness

Chevron Sells Oil Assets in Chad for $1.3 Billion

Why Nektar Therapeutics Shares Soared

Why Navidea Biopharmaceuticals Inc. Shares Briefly Spiked Lower

Why OncoMed Pharmaceuticals Inc. Shares Collapsed

Why TG Therapeutics Inc. Shares Temporarily Plunged

Why is Intel Corporation Soaring Today?

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The article The Afternoon's Top News Headlines 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 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Intel, Microsoft Keep the Dow in the Green

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The market has managed to reverse its recent losing streak today, with the Dow Jones Industrial Average gaining a moderate 31 points as of 2:30 p.m. and looking to end the week on a positive note. While most of the 30 blue-chip stocks aren't moving much today, chipmaker Intel has absolutely blown up for shareholders in gaining more than 6.7%. Meanwhile, tech peer Microsoft  was up 1.8%. Let's catch up on what you need to know.

Consumer sentiment on the downswing
Despite today's gains, the economy began the day on a downbeat note. Thomson Reuters and the University of Michigan showed consumer sentiment in the U.S. fell to a three-month low this month, declining below economist expectations. Economists believe that consumption will pick up and help the economy grow throughout 2014, but today's report paints a picture of consumers still worried about slow income growth in the U.S. as the labor picture remains murky. While retail sales did rise in May, it'll take prolonged growth in consumer confidence to keep the foundation of America's GDP growing.

Source: Wikimedia Commons

That hasn't hurt shares of Intel today, however. The chipmaker has been hounded in the recent past by concerns over its reliance on the declining PC market, but the company showed much more optimism in its future late yesterday by raising its outlook. Intel bumped up its second-quarter revenue forecast from $13 billion to $13.7 billion while noting that 2014 should mark the company's first year of revenue growth since 2011. Intel sees its gross margin benefiting in 2014 as well.


Why the optimism? Intel sees demand for business PCs picking up this year as offices upgrade infrastructure, giving a shot in the arm to the company's struggling revenue. Businesses still rely more on PCs than consumers, who have shifted toward mobile devices in tablets and smartphones and away from the PCs that Intel relies on for business. Still, it's best for investors to be cautious before buying into Intel's updated hopes and the stock's surge. Businesses upgrading hardware will last for a short time, and once that trend has finished, it's questionable whether Intel can maintain any momentum in its PC group. Intel must continue to broaden its horizons and plan for the long term; otherwise, today's optimism will be short-lived.

Much of Microsoft's surge today likely also comes from the business upgrade cycle. The software giant's ending of Windows XP support means that companies and organizations will need to pivot toward new operating systems and software to complement the replacement of existing hardware. Still, like Intel, Microsoft must make the most of its efforts to expand beyond its traditional software niche, even as software continues to perform well at the company. The company's foray into mobile with its acquisition of Nokia's device and services branch offers a big, yet murky, opportunity to make a serious statement about its direction. if Microsoft can carve out a slice of the mobile market, it'll be in a great position to thrive.

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The article Intel, Microsoft Keep the Dow in the Green originally appeared on Fool.com.

Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel 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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Why Yelp Inc Shares Are Screaming Higher Today

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

What: Shares of Yelp Inc are trading roughly 13% higher today after news broke that Priceline.com would acquire  OpenTable for $2.6 billion.

So what: This news seems to have little bearing on Yelp itself at first glance. Shares of OpenTable have leapt nearly 50% from yesterday's close, but there has been no such buyout chatter swirling around Yelp recently. Even after the buyout, OpenTable is still valued at less than half Yelp's market cap, which would also indicate a smaller pool of potential buyers.


Now what: Yelp and OpenTable have complementary business models -- Yelp helps users find, assess, and rate local businesses, while OpenTable is focused on booking dining reservations for users -- but they are not so similar that an acquisition of one company should lead to a bidding frenzy for the other. Yelp has also been on a tear over the past year -- even with the buyout's near-50% pop in its favor, OpenTable is still a full 100% behind Yelp's 150% gain for the past 12 months. Yelp has also been growing faster on the top line, although it's never posted positive EPS, unlike OpenTable, which has been profitable for years.

Yelp was no bargain before this deal, and it looks even more overvalued now when you compare its valuation ratios  to OpenTable's:

Valuation Ratio

OpenTable

Yelp

Price to Sales

12.5

19.0

Forward Price to Earnings

75.0

8,945

Price to Free Cash Flow

51.2

843.5

Source: YCharts. All valuations current following acquisition news.

Does this look like a screaming buy? It sure doesn't to me. I'd keep my distance until Yelp comes back to earth.

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The article Why Yelp Inc Shares Are Screaming Higher Today originally appeared on Fool.com.

Alex Planes has no position in any stocks mentioned. The Motley Fool recommends OpenTable, Priceline Group, and Yelp. The Motley Fool owns shares of Priceline Group. 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 You Shouldn't Buy Reynolds American Today

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Reynolds American is the US' second-largest cigarette company in terms of market value. However, at present levels, the company is a poor investment. Here's why.

Valuation
For a start, Reynolds is expensive at current prices. In particular, right now shares of Reynolds are trading at a trailing-twelve-month, or TTM, P/E of 20.8. Over the past five years, Reynolds has traded at an average TTM P/E of 16.4 and the wider tobacco industry currently trades at a TTM P/E of 18.

Now a reason exists for this high valuation. Reynolds is in the process of taking over Lorillard . I say "in the process" as the two companies have openly admitted to being in talks, but the sticking point seems to be the price.


The deal
Estimates indicate that Reynolds will be able to achieve around $400 million in cost-savings from a merger, although many issues remain to iron out.

For example, a combined Reynolds-Lorillard would control around 40% of the US' domestic tobacco market. This means that around 90% of the market would be controlled by two companies, Altria and Reynolds-Lorillard; this transaction would be sure to attract the attention of the FTC.

To get around this, analysts expect that Reynolds will sell some of its smaller brands, effectively leaving the combined Reynolds-Lorillard with three main brands -- Pall Mall, Camel, and Lorillard's Newport.

This is a portfolio of strong brands, although Newport is predominantly a menthol brand of cigarette and the FDA's position regarding menthol products is still unknown.

The sticking point
As I mentioned above, the sticking point of the deal between Lorillard and Reynolds has been the price, and this could be the deal breaker for Reynolds.

Due to the merger rumors, Lorillard itself is trading at an all-time high and a five-year-high valuation. Lorillard currently trades at a P/E of 19.6, compared to a five-year average of 14. This makes Lorillard an expensive acquisition; $22 billion, in fact.

Reynolds already has a net debt-to-equity ratio of around 70% and an additional $22 billion in debt would cripple the company's balance sheet.

Nevertheless, it is assumed that Reynolds' 40% owner British American would step in to help the deal go through, potentially assisting with funding. Still, even if Reynolds paid half of the $22 billion price tag, the company's net debt would jump by 300%.

With this being the case, ratings agency Standard and Poor's has threatened to downgrade Reynolds to junk status if the deal goes ahead.

Falling volumes
Reynolds is facing another problem, as the volume of cigarettes sold by the company is sliding faster than the industry average.

Specifically, during 2013 the total volume of premium cigarettes sold by R.J. Reynolds within the domestic market declined 6.6%, compared to the wider industry decline of 3.9%. What's more, the volume of value cigarettes sold by Reynolds declined by 7.1%, compared to the industry average of 6.3%. All in all, the total volume of cigarettes sold by Reynolds declined 6.8%, while industry volume only slid 4.6 %.

Slumping cigarette sales are the reason that Reynolds is looking to buy growth through Lorillard. Unfortunately, with sales volumes slumping, the company is going to find it harder to sustain its debt and dividends.

Foolish summary
Due to the bid rumors, Reynolds is currently trading at a five-year-high valuation. However, Reynolds looks expensive at this level. What's more, if the deal does go ahead Reynolds will have an uncertain future due to the extra debt it will take on. If the deal does not go ahead, Reynolds' valuation could quickly fall back to earth.

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The article Why You Shouldn't Buy Reynolds American Today originally appeared on Fool.com.

Rupert Hargreaves owns shares of Altria Group. 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 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Is This the Real Reason That Tesla Motors Is Sharing Its Patents With the World?

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Tesla Motors made a big announcement this week saying it would make its patents available to the world in hopes of accelerating mass adoption of electric vehicles. In a blog post on Thursday Tesla's chief executive Elon Musk said, "Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology." The company's decision to share its intellectual property with the world comes just days after Musk told investors at its annual shareholder day that he was planning something "somewhat controversial in respect to Tesla's patents."

For the greater good
Well, this is certainly controversial as it gives much bigger, traditional automakers, such as Ford and General Motors free rein to use Tesla's proprietary technology. GM in particular should be happy about this announcement. If you remember, less than a year ago GM enlisted a special team of employees to study Tesla's disruptive technology.

It now seems that all of Tesla's current patents, as well as several thousand in the future, will be available with no strings attached for GM and other rival automakers. Ultimately, Musk hopes this open source move will help accelerate the adoption of electric-vehicle technology. However, it is less clear what this will mean for Tesla's stock.

Source: The Motley Fool.


There is always the possibility, after all, that this could weaken Tesla's advantage in the long-range-battery war. At this point, Tesla's Model S boasts the longest driving range of any electric vehicle on the road. Moreover, it's no secret that GM plans to introduce an all-electric car that can travel 200 miles on a single charge and cost as little as $30,000. While GM hasn't said when its model would be available, gaining access to Tesla's patented technology could certainly speed up the process.

However, there could be an even more compelling reason for Tesla Motors to share its patents with competitors: It would create greater demand for lithium-ion batteries. And, as we already know, Tesla is set to break ground on its massive battery plant this month. Tesla's Gigafactory would produce about 500,000 lithium-ion batteries per year by 2020, more than were produced worldwide last year.

At the major auto manufacturers, electric vehicles currently make up less than 1% of total vehicle sales. However, if traditional auto companies were to adopt Tesla's innovative technology not only would they be able to create competitive long-range EVs, but they would also need large quantities of lithium-ion batteries -- not unlike those Musk plans to produce at scale with his Gigafactory.

For now, Musk says he is confident that sharing patents will help Tesla attract the world's best technical talent. "We believe that Tesla, other companies making electric cars, and the world would all benefit from a common, rapidly evolving technology platform," Musk said. However, perhaps the bigger payoff for Musk and Tesla's shareholders would be supply contracts for lithium-ion batteries, as Musk plans to corner that market with his Gigafactory.

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The article Is This the Real Reason That Tesla Motors Is Sharing Its Patents With the World? originally appeared on Fool.com.

Tamara Rutter owns shares of Tesla Motors. The Motley Fool recommends Ford, General Motors, and Tesla Motors. The Motley Fool owns shares of Ford and Tesla Motors. 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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Nestle Is Vulnerable to Shareholder Activism

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Source: Nestle annual report

If you're a Nestle shareholder, things haven't been too sweet for you of late. A strong Swiss franc, which is the currency in which the Vevey, Switzerland-based company reports its financial statements, has weighed on performance, while lackluster growth in key markets has been disappointing. And with the Swiss franc expected to remain strong for the foreseeable future, there may not be any relief in sight for Nestle. Could this be an opportune time for activist investors to pile in?


With Nestle's market cap of $250 billion, it would be tough for a single activist investor to obtain a large enough stake to effect change. According to Activist Insight's annual review for 2013, however, it might not be as far fetched as you may think.

Activist investor activity across large-cap stocks is on the rise, with companies like Apple and Procter & Gamble, commanding market caps of $568 billion and $216.9 billion, respectively, no longer out of reach. In 2013, for example, activism in companies with a market cap in excess of $10 billion nearly doubled in comparison to 2012 levels. In fact, the Activist Insight report suggests that with assets under management at investment firms ballooning, a target's size is"no longer a deterrent."

The thing about Nestle is that it has always been a steady performer for investors, delivering on its promises for organic sales growth, paying uninterrupted dividends since 1960, and not ruffling the feathers of activist investors who instead targeted companies like PepsiCo. But the tide for Nestle began turning in the wrong direction about a year ago, when organic sales started to falter and the company suggested it was considering lowering its dividend payout ratio "in the coming years" to 50% from the 67% level where it has resided over the trailing-12 months. 

The road has been rocky ever since despite the fact that in 2013 the company slashed the compensation of chief executive Paul Bulcke by 7% below 2012 levels. Nestle execs also hinted toward a share buyback -- something that the company hasn't performed in years -- with the proceeds from the February sale of a chunk of its stake in L'Oreal.

What's the trouble?
The trouble really began in 2013, which the company in its annual report characterized as having been "challenging." Nestle missed on its trademark long-term organic sales target of between 5% and 6% growth, and its stock price languished in comparison to rivals like Mondelez International. That trouble has persisted into 2014 as well.  

In its first quarter, Nestle suffered from a 5.1% drop in sales. Performance in Europe weighed on results, with a modest 0.3% increase. Meanwhile, a 4.6% sales increase in the Americas and a 7.3% jump in the Asia, Oceania, and Africa regions couldn't offset a negative foreign exchange impact of 8.6%.

Most disappointing was that Nestle produced organic sales growth (excluding the impact from foreign exchange and acquisitions) of 4.2%, below its ideal range. For the full year, however, Nestle expects to deliver on this metric with organic sales growth of 5% as well as margin improvement. 

Nestle isn't stopping there. It is on a streamlining mission to grow by acquisition in the areas where it can generate the most cash and to shed underperforming assets. CEO Bulcke made his intentions clear at a recent investor conference. He was cited in The Wall Street Journal as saying:

We will divest certain businesses or subcategories of certain businesses. We will not allow problems to drag on. 

Nestle already unloaded some of those problems, including PowerBar, which it sold to Post Holdings in February. And if the company can return to delivering on its sales promises in a consistent manner, perhaps it returning shareholder value will become a higher priority, which could rejuvenate the stock price.

On the expansion side, Nestle is also targeting high-end chocolate, where rivals Mondelez and Hershey already have market share.  

I think there will be some sort of premium chocolate initiative on a global basis for the company over coming months and quarters. And to be honest, about time too. -- Jon Cox, Kepler Cheuvreux analyst cited in Reuters. 

Meanwhile, Nestle might affectionately be known as a confectionery company, but it is more than that. It is a foods company by definition but it also plays elsewhere, including in the health and wellness industry, where it seeks to be a leader among its peers. To that end, Nestle in recent days revealed it will acquire select skin-care products from Canada's  Valeant Pharmaceuticals in a $1.4 billion cash transaction. But no share buyback has been announced.

Aesthetic dermatology products are a highly cash generative business and seem to serve a similar purpose to Botox. The addition of the Valeant assets coupled with Nestle's skin care joint venture with L'Oreal gives the company exposure to "more than half of the fast-growing medical aesthetics market around the world," according to Nestle.

Foolish conclusion
The fact that Nestle has had a tough go of it in the last set of quarters is rough but it could trigger the kind of change that shareholders have been missing. It's a mixed bag at the moment. The company is pursuing streamlining efforts but is scaling back its earnings payout ratio and the share buybacks have yet to materialize.

Whether or not activist investors will take an interest in Nestle remains to be seen, but the point really is that Nestle hasn't really been in a position to be in the discussion until recently. If activists enter the picture, it could lead to greater shareholder value for investors whether by share repurchases or a higher percentage of earning dedicated to dividends.  

Not everything is in Nestle's control. For instance, there's not too much it can do to rectify the foreign exchange impact. But investors still have a lot to watch for. They should observe the way that Nestle uses the cash that it will generate from its recent expansion efforts and any future asset sales to see if shareholder value becomes an increasing priority for the company.

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The article Nestle Is Vulnerable to Shareholder Activism originally appeared on Fool.com.

Gerelyn Terzo 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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The Boeing Company Ropes in a Huge Chinese Order

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Dow Jones Industrial Average was trading 29 points higher, or 0.19%, by midafternoon despite a decline in consumer sentiment and escalating tensions in Iraq (but when are tensions not escalating somewhere). Consumer sentiment fell to 81.2 in early June, its lowest level in three months, according to the University of Michigan and Thomson Reuters. With escalating violence in Iraq, oil prices have pushed to their highest level since September -- investors should keep an eye on the potential impact on commodity prices, which could slow economic growth. 

With all that in mind ,here are two companies making big headlines.

Inside the Dow, aviation giant Boeing announced that China Eastern Airlines has committed to purchase 80 737 passenger jets.


Once finalized, the order is expected to become China's largest-ever purchase by an airline for single-aisle airplanes, according to Boeing. The order is valued at roughly $8 billion at current list prices and will join Boeing's already massive backlog of orders worth (as of last quarter) $440 billion.

Boeing investors should keep an eye on Chinese airlines, which are expanding their fleets and networks to keep pace with the country's accelerated air travel growth. In fact, Boeing hasn't ruled out the possibility of building a final assembly line for single-aisle commercial aircraft in China, which could give the company an edge in securing additional 737 orders. Over the last half decade, Boeing has continued to increase its estimate for demand from China; the company now expects the country through 2032 to need 5,580 new airplanes worth roughly $780 billion, according to Bloomberg. 

2014 Chevrolet Camaro. Source: General Motors.

Outside of the Dow, General Motors  today announced another four recalls that cover more than 500,000 cars sold in the U.S. The new set of recalls includes every single Camaro sold since the new model went on sale in 2010 after its eight-year hiatus.

This new recall is scarily similar to the ignition-switch problem that has been linked to at least 13 deaths and prompted a federal investigation. General Motors said a Camaro driver's knee could knock the key and ignition switch out of the "run" position. GM said it has connected the defect to three crashes with four minor injuries.

This puts General Motors' count of individual recalls this year to 38, which cover more than more than 16.4 million globally, including 14.4 million vehicles in the U.S., according to Automotive News

With General Motors dominating the negative recall headlines, Toyota Motor quietly announced its own recall of 844,277 vehicles in the U.S. due to faulty Takata airbags. That brings Toyota's grand total of vehicle recalls in 2014 to 10.1 million vehicles worldwide.

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The article The Boeing Company Ropes in a Huge Chinese Order originally appeared on Fool.com.

Daniel Miller owns shares of General Motors. The Motley Fool recommends General Motors. 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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Should You Buy Big Lots' Turnaround?

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Many big-box retailers would like to put 2013 behind them because of their lackluster performances. Big Lots' fiscal 2013 was no different. The company's comparable-store sales, or comps, a keenly followed metric by investors in the retail industry, which measures sales open at least one year, have been in the red for the last two fiscal years, declining 2.7% year-over-year for two years in a row.

However, the trend reversed when Big Lots announced its first-quarter fiscal 2014 results. It posted comps growth for the first time in the last eight quarters, 0.9% versus the year-ago quarter. Let's take a look at the underlying business and how it stacks up against other discount retailers such as Wal-Mart Stores and Dollar General .

A robust performance
As a result of a better-than-expected quarterly performance, the stock rallied strongly after the results, touching a new 52-week high. Big Lots' earnings per share from continuing operations in the U.S. came in at $0.50, way ahead of the consensus estimates . Its Canadian operations, which it has discontinued, posted a loss of $0.44 per share versus expectations of $0.76 to $0.71. Lower-than-expected losses came on the back of favorable settlements on lease terminations and deferred tax benefits.


The estimate-beating earnings were driven by revenue growth of 1.1% versus the year-ago quarter. The revenue growth, though apparently small, is impressive if we consider the negative impact of the harsh winter weather and general weakness in the retail industry.

On the merchandising front, four of the seven categories were positive during the quarter, with food being the strongest. So the initiatives that Big Lots has undertaken to refine its business model are working well and it is connecting well with its customers.

The strategies going forward
Looking forward, in order to fuel comps growth in the food category, Big Lots is rolling out store coolers and freezers. It is on course for roll-outs this year at approximately 600 stores, which will take its total to 725 . Even though food is low-margin, it's an important category that represents frequent repeat purchases. In theory, this will increase foot traffic driving the purchase of other, higher margin items.

Big Lots took a page out of Conn's book with a rent-to-own initiative for big-ticket items like furniture. It even extends this initiative to customers who have bad credit ratings. The furniture financing program is live in about 800 stores and the company is on course to extend this to approximately 1,300 stores by the end of the second quarter . The results are impressive as Big Lots is seeing incremental furniture sales in the high single to low double-digit range. Looking forward, the program will drive sales and the bottom line when Big Lots extends it to other categories in its stores.

No growth story is complete without expansion and marketing plans. During the quarter, Big Lots opened eight new stores and shuttered five, ending with a tally of 1,496 stores . The company is spending on e-commerce, and expects these operations to go online in 2015. On the marketing front, simplified print advertising and email offerings for rewards members helped drive sales in the quarter.

What about the competition?
While Big Lots is turning around from its streak of dismal performances, Dollar General has been on a roll and its fiscal 2014 started on a strong footing. On the back of comps growth of 1.5% year over year, the discount retailer posted 6.8% sales growth during the first quarter. For the 25th consecutive quarter in a row, it registered growth in consumer traffic and average ticket. Earnings per share came in at the lower end of guidance at $0.72 .

Going forward, Dollar General expects fiscal 2014 sales growth in the range of 8%-9%, fueled by square-footage growth of 6%-7% and comps growth of 3%-4% versus the prior year. It expects earnings per share in the range of $3.45-$3.55. In contrast, Big Lots expects earnings in the range of $2.35-$2.50 per share , on the back of flat to slightly positive net sales growth and 1%-2% comps growth.

On the other hand, Wal-Mart expects fiscal 2015 earnings per share in the range of $1.15-$1.25 . During the first quarter it registered a minuscule 0.8% increase in sales versus the year-ago period and it was quick to blame the inclement weather for its lackluster growth, but it delivered comps within its guided range.

On the bright side, its Neighborhood Markets format delivered 5% comps growth . Buoyed by the strong performance of Neighborhood Markets, it is accelerating its roll-out, aiming for 180 to 200 Neighborhood Market stores in fiscal 2015.

The bottom line
Slowly but steadily, Big Lots is turning around. On the back of store expansions and consumables growth, the company's strong performance should continue. It has given strong guidance as well, and smart strategies such as its rewards program and the roll-out of its rent-to-own initiative should help Big Lots sustain its performance.

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The article Should You Buy Big Lots' Turnaround? originally appeared on Fool.com.

Sharda Sharma 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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Could This Buyout Go Down As One of the Worst Deals Ever?

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You certainly don't have to look far these days to see that merger and acquisition activity is picking up across a number of sectors.

Investors and Wall Street analysts love to see M&A activity because it signals two things. First, it points to companies' willingness to take on risk by paying a premium (in most instances) to acquire a rival or expand into a complementary business. Secondly, and perhaps most importantly, it demonstrates improved corporate visibility and the expectation of long-term growth. In other words, when investors see M&A activity they get excited, and rightly so.

However, history has shown us that not every M&A deal goes according to plan. The merger of AOL with Time Warner is perhaps one of the biggest tech wrecks of all time, while Bank of America's $2.5 billion purchase of Countrywide Financial during the financial meltdown wound up costing it $40 billion in settlement costs. Although I believe the magnitude of failure from these deals may be tough to match, I would also opine that the deal announced earlier this week between Merck and Idenix Pharmaceuticals has the potential to rank highly among the worst deals ever.



Source: EMD Group.

Does this deal make sense?
Under the terms of the buyout Merck agreed to pay $3.85 billion, or $24.50 per share in cash, to acquire all outstanding shares of Idenix. Assuming everything stays on track the deal would close in the third quarter, and it'll represent a 239% premium to last Friday's closing price.

The move was made by Merck to get its hands on Idenix's lead drug samatasvir, an NS5A inhibitor, as well as its two additional clinical-stage nucleotide prodrugs, IDX21437 and IDX21459. Merck's press release notes that Idenix's pipeline will help complement its own developing hepatitis C pipeline, and should help broaden its chances of getting a hepatitis C therapy to pharmacy shelves.

On one hand I have to admit there are scenarios where this deal makes sense. Idenix's proprietary technology could be one way for Merck to cash in on its purchase. Idenix is already squaring off toe-to-toe with Gilead Sciences over Sovaldi claiming that Gilead is infringing on one of its key patents. If Idenix were to win it could be set up with a hefty upfront payment or perhaps even a steady royalty payment.

In addition, the ability to possibly combine samatasvir or Idenix's nucleotide prodrugs with either of its own investigational oral hepatitis C compounds, MK-5172 and MK-8472, could give Merck even more opportunities to develop a blockbuster. Merck is looking for ways to avoid the patent cliff, and testing as many hepatitis C combination therapies as possible could prove to be a smart move.

Source: EMD Group.

Among the worst biotech deals ever
But, in my opinion this has all the makings of being a complete dud for Merck.

Putting aside the potential royalty or upfront revenue from Gilead Sciences, let's look at what Merck is actually purchasing: namely two midstage therapies in samatasvir and IDX21437, and a single phase 1 investigational drug in IDX21459, as well as a number of preclinical nucleotide inhibitors currently being studied.

These generally early stage compounds would already be considered a serious stretch to be purchased for $3.85 billion, but if you take a closer look at the pipeline history behind Idenix the premium Merck paid seems even pricier.

As a refresher, since 2010 Idenix has had four of clinical compounds placed on hold by the Food and Drug Administration (five if you count IDX184 which was actually placed on hold twice!). Subsequent to those holds Idenix wound up discontinuing IDX320, IDX184, and IDX19368, all of which were once considered to be an instrumental component to Idenix's long-term success. At the moment it still has IDX20963 on FDA hold with the regulatory agency requesting additional preclinical safety data from Idenix. With Idenix failing to get any of its pipeline therapies beyond a phase 2 study what exactly is Merck hoping to accomplish with a nearly $3.9 billion purchase?

Worse yet, it's as if Merck's completely ignored the fact that Gilead Sciences and possibly AbbVie haven't completely beaten it to pharmacy shelves by years!

Gilead's Sovaldi has drastically improved patient quality of care for genotype 2 & 3 patients who no longer need to take interferon (which is known to cause flu-like symptoms in patients), and the potential approval of Sovaldi in combination with ledipasvir has the potential to expand that to genotype 1 patients as well. Not to mention that Gilead's multiple studies with Sovaldi have consistently produced sustained virologic response (SVR) rates (i.e., undetectable levels of disease) in 90% or more of patients.

By a similar token AbbVie has filed new drug application paperwork for its direct-acting antiviral combo which could mean an approval before 2014 is over. It, too, can be given to genotype 1 patients without the need for interferon and also produced SVR's consistently at 90% or above in clinical trials.

Source: Cameron Neylon, Flickr.

What this means for Merck and Idenix is that unless samatasvir or some combination of samatasvir and one of Merck's compounds can consistently produce mid-90% SVR's there's probably little chance of it unseating Sovaldi or AbbVie's DAA.

We also have to consider what sort of chance Merck and Idenix have at penetrating the HCV marketplace with the assumption that samatasvir probably has little chance of making it to pharmacy shelves, even under the most ideal study conditions and results, prior to 2017. By then Gilead and AbbVie will have established themselves, potentially leaving but scraps of market share left over for the latecomers.

Finally, investors should keep in mind the precedent set by Bristol-Myers Squibb when it purchased Inhibitex for $2.5 billion in 2012 only to have the company's lead drug (which eventually was known as BMS-986094) scrapped in midstage studies due to safety concerns. The end result was Bristol taking a $1.8 billion writedown tied to its Inhibitex purchase all because it desperately wanted to be a part of the HCV race.

Only time will tell
Could a similar fate await Merck? It's possible. If Idenix is successful in its case against Gilead it could net Merck a moderate revenue stream, though probably not enough to recoup its $3.85 billion investment. The real wildcard is whether or not Idenix can overcome its numerous safety obstacles and get a drug past phase 2 trials. Based on four years of history I'm not certain that's possible. Although time will truly tell the tale, based on the information we have right now as investors I'm calling the potential for this deal to be a dud much higher than 50-50.

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The article Could This Buyout Go Down As One of the Worst Deals Ever? originally appeared on Fool.com.

Sean Williams owns shares of Bank of America, but has no material interest in any other 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 Bank of America and Gilead Sciences. 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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What's Fueling Karyopharm Theraputics Inc's Monster 50% Pop Today?

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

What: Shares of Karyopharm Theraputics Inc are trading over 47% higher this afternoon after topping out at a gain of over 50% at roughly 1 PM today. The development-stage biotech is enjoying a huge influx of positive sentiment following the release of its initial Phase 1 data  for Selinexor.

So what: Selinexor, which is a selective inhibitor of nuclear export designed to treat multiple myeloma, has been part of an eight-patient trial in conjunction with a low dosage of dexamethasone. The company reported a clinical benefit response rate -- a category combining stringent complete responses (one patient), partial responses (three patients), and minor responses (two patients) -- of 75%. All patients had advanced hematological malignancies and had received a median of 5.5 prior rounds of therapy for multiple myeloma, and all but one had received failed stem cell transplants.


Now what: This response rate is promising for such an advanced stage of disease, but it's still very early in the trial process, and the sample size is still very small. This is Karyopharm's single largest daily gain since it went public in late 2013, but the stock has already been quite volatile, as development-stage stocks tend to be. I wouldn't be surprised if the share price falls back to earth between now and the next trial update, and it's the later-stage trials that are more important for Selinexor's success at any rate. Keep your eyes open, but don't dive in just yet.

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The article What's Fueling Karyopharm Theraputics Inc's Monster 50% Pop Today? originally appeared on Fool.com.

Alex Planes 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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Stock Markets Rise and Priceline Looks to Expand Booking Dominance

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U.S. stock markets are up slightly today, in part because President Barack Obama said he won't send troops back to Iraq, where insurgents are pushing toward the capital. Fear that the U.S. would get involved helped push the markets down yesterday, so there was a little relief from his comments.

The Dow Jones Industrial Average was up 0.11% late in the day, driven by Intel's 6.6% bounce on the chipmaker's announcement that higher than expected PC sales would lead to higher revenue in this quarter. That pushed Microsoft and Hewlett-Packard higher and the tech bounce was on.

One tech company that didn't enjoy the gains but made big news was Priceline , which is buying online restaurant reservation service OpenTable for $2.6 billion.


Why Priceline was shopping today
Priceline's $103 per share offer was an incredible 46% premium to OpenTable's closing price yesterday, and the stock shot up 47% as a result. OpenTable's shares were actually trading for more than $104 late in the day, an indication that some traders think the price could be increased before the deal closes. That's speculation and a risky bet for investors, but what's interesting is why the online travel discount specialist would want to pay so much for a company with $190 million in revenue and just $33.4 million in profit last year.  

CEO Darren Huston correctly told investors that travelers are also diners, so the synergies between the two companies are natural. If Priceline can get you to book airfare or a hotel on one of its platforms it could easily line up a reservation at a local restaurant as well.  

But the company will also be able to bring OpenTable's platform to Europe, where Priceline has a large business. Priceline has been successful in integrating and expanding acquisitions such as Kayak.com in the past, so there's reason to think that OpenTable could do just as well.

Sometimes with acquisitions it's more important to look at how a company will integrate an acquisition rather than what it's buying the company for. Priceline can gain more contact points and revenue opportunities with customers through the acquisition, so it's worth paying a premium price. Building out the same infrastructure would have been extremely expensive and OpenTable is the premier name in online reservations. So while Priceline's shares may be down 3% in trading after the deal was announced, I think it's a solid strategic move for the company.

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The article Stock Markets Rise and Priceline Looks to Expand Booking Dominance originally appeared on Fool.com.

Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends OpenTable and Priceline Group. The Motley Fool owns shares of Priceline Group. 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 GrubHub, Inc. Shares Are Gorging on Gains Today

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

What: Shares of GrubHub, Inc. are trading roughly 8% higher this afternoon after peaking at a gain of over 11% near lunchtime. GrubHub seems to be part of a rising tide of mobile-centric dining apps following in the wake of priceline.com's $2.6 billion acquisition  of OpenTable , which was announced this morning.

So what: OpenTable was bought at a near-50% premium its Thursday closing price, and GrubHub is currently valued quite similarly to the OpenTable buyout price -- its $2.8 billion market cap is within spitting distance of Priceline's $2.6 billion bid. Since both OpenTable and GrubHub help smartphone users get the food they want when they want it, investors who missed out on the OpenTable acquisition seem to be flocking to the similarly positioned GrubHub.


Now what: While OpenTable and GrubHub both serve hungry smartphone users and have similar valuations and their business models are somewhat at odds with each other -- OpenTable is targeted at users who want to sit down at a restaurant at a certain time, while GrubHub helps its users get restaurant deliveries from establishments that don't typically deliver their meals. GrubHub is also so new to the public markets (its IPO took place just two months ago) that it's somewhat less likely to be bought out in the near future. GrubHub's forward P/E of 200 is also nearly three times OpenTable's forward P/E of 75 following the acquisition, which may be too rich a price for potential acquirers to swallow. I'd stay on the sidelines for now.

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The article Why GrubHub, Inc. Shares Are Gorging on Gains Today originally appeared on Fool.com.

Alex Planes has no position in any stocks mentioned. The Motley Fool recommends OpenTable. It recommends and owns shares of Priceline Group. 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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Raytheon Company vs. Northrop Grumman Corporation: Which Stock's Dividend Dominates?

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Dividend stocks outperform non-dividend-paying stocks over the long run. It happens in good markets and bad, and the benefit of dividends can be quite striking -- dividend payments have made up about 40% of the market's average annual return from 1936 to the present day.

But few of us can invest in every single dividend-paying stock on the market, and even if we could, we're likely to find better gains by being selective. Today, two of America's largest defense contractors will square off in a head-to-head battle to determine which offers a better dividend for your portfolio.

Tale of the tape
Established in 1922, Raytheon Company is one of the United States' largest defense contractors -- it ranked fifth in government contracts awarded for 2010 -- with a focus on defense systems and defense electronics. Raytheon is also a Global Fortune 500 corporation with more than 63,000 employees around the world, and it is the largest producer of guided missiles in the world. Headquartered in Waltham, Mass., Raytheon also provides commercial electronics products and services along with food-safety processing technologies, but it still generates the majority of its revenue from U.S. defense contracts.


Established in 1939, Northrop Grumman Corporation is one of the world's largest defense contractors -- ranking third in contracts awarded for 2010 -- offering innovative electronics systems, information and unmanned systems, cyber-security, and logistics services to government and commercial customers. Headquartered in Falls Church, Virginia, Northrop Grumman is a Global Fortune 500 corporation, employing more than 68,000 people around the world. The company recently completed its acquisition of Qantas Defence Services, while in recent years it has also divested its shipbuilding subsidiary to focus on high-tech defense and security.

Statistic

Raytheon

Northrop Grumman

Market cap

$30.9 billion

$26.6 billion

P/E ratio

15.6

13.9

Trailing-12-month profit margin

9.0%

8.4%

TTM free cash flow margin*

9.9%

6.9%

Five-year total return

150.6%

231.5%

Source: Morningstar and YCharts.
*Free cash flow margin is free cash flow divided by revenue for the trailing 12 months.

Round 1: endurance (dividend-paying streak)
Raytheon has paid dividends without interruption since 1964 -- a full half-century of dividends. However, Raytheon falls short against Northrop's streak, as the latter has paid quarterly dividends for more than 63 years in a row since its first distributions in 1951.

Winner: Northrop Grumman, 1-0.

Round 2: stability (dividend-raising streak)
According to Dividata, Raytheon has increased its payouts every year since 2005, giving it a nine-year dividend-raising streak. On the other hand, Northrop has increased its quarterly distributions for a full decade since it began the practice in 2004, which gives it a narrow edge -- and the stability crown -- against Raytheon.

Winner: Northrop Grumman, 2-0.

Round 3: power (dividend yield)
Some dividends are enticing, but others are merely tokens that barely affect an investor's decision. Have our two companies sustained strong yields over time? Let's take a look:

RTN Dividend Yield (TTM) Chart

RTN Dividend Yield (TTM) data by YCharts.

Winner: Raytheon, 1-2.

Round four: strength (recent dividend growth)
A stock's yield can stay high without much effort if its share price doesn't budge, so let's take a look at the growth in payouts over the past five years.

RTN Dividend Chart

RTN Dividend data by YCharts.

Winner: Raytheon, 2-2.

Round five: flexibility (free cash flow payout ratio)
A company that pays out too much of its free cash flow in dividends could be at risk of a cutback, particularly if business weakens. We want to see sustainable payouts, so lower is better:

RTN Cash Dividend Payout Ratio (TTM) Chart

RTN Cash Dividend Payout Ratio (TTM) data by YCharts.

Winner: Northrop Grumman, 3-2.

Northrup may trail by the narrowest margin today, but over the past five years, it's clearly kept its payouts at a more sustainable level overall, which earns it the final victory -- and the overall title -- in our dividend contest today.

Bonus round: opportunities and threats
Northrop Grumman may have won the best-of-five on the basis of its history, but investors should never base their decisions on past performance alone. Tomorrow might bring a far different business environment, so it's important to also examine each company's potential, whether it happens to be nearly boundless or constrained too tightly for growth.

Raytheon opportunities:

Northrop Grumman opportunities:

Raytheon threats:

  • Lockheed Martin has nearly $1.8 billion in contracts for its competing Aegis Ballistic Missile Defense system.

Northrop Grumman threats:

One dividend to rule them all
In this writer's humble opinion, it seems Northrop Grumman has a better shot at long-term outperformance, thanks to the anticipated surge in spending on surveillance drones around the world, and because of its role in supplying a huge amount of hardware to Japan over the coming years. Raytheon could also wind up benefiting from increased demand for missiles as a UAV countermeasure, but its manufacturing focus seems less aligned with the interests of tomorrow's militaries. You might disagree, and if so, you're encouraged to share your viewpoint in the comments below. No dividend is completely perfect, but some are bound to produce better results than others. Keep your eyes open -- you never know where you might find the next great dividend stock!

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

The article Raytheon Company vs. Northrop Grumman Corporation: Which Stock's Dividend Dominates? originally appeared on Fool.com.

Alex Planes has no position in any stocks mentioned. The Motley Fool owns shares of Lockheed Martin, Northrop Grumman, Raytheon Company, and Textron. 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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6 Essential Tips to Sell Your House This Summer

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If you're planning to put your house on the market this summer - and you hope to have it sold in time for the September school season - the clock is ticking. Even before you meet with a realtor, you need to get your house, and yourself, ready to capitalize on the sizzling summer selling season, when 60% of all homes are bought and sold!

Here are 6 essential steps to take now in order to be sale-ready after Memorial Day:

1. Tackle The Obvious Repairs
If you're planning to list your home at the start of summer, you now have 30 to 45 days to tackle all the necessary and obvious repairs. Why is it so important to check these off your to-do list ahead of time? First and foremost, it'll prevent potential buyers from being distracted as they tour your home. Instead of making a mental list of what needs to be fixed, they'll be able to focus on your home's positive qualities. You'll also save time (and money) later by avoiding back-and-forth negotiations over minor repair issues. And doing the repairs yourself, ahead of time, saves you from having to foot the bill for the estimated, and often over-inflated, cost of repairs! (Your actual cost will almost always be less than a buyer's post-inspection estimate).


2. Remove Your Clutter And Junk Now
Clutter eats equity and kills deals. Period. It's time to declutter, freeing up more visual space in your home. Look at each item in your house, and decide to save it, store it, sell it, or chuck it.  The concept that 'less is more' is at the heart of making a home sellable. Once you've gotten rid of what you're not using, edit and organize the rest. Living space is an extremely precious commodity, and a little extra breathing room, along with a sense of expansiveness, makes your home feels luxurious, calming, and uplifting. And, as obvious as this seems, a buyer will naturally be drawn to, and pay more for, a home that feels bigger.

3. Depersonalize Your Home
I guarantee there is far too much of "you" in your house. It's time to take down the collectibles, family heirlooms, school photos, and other highly personal mementos. Not that those treasures aren't amazing - I have a house full of family heirlooms, but now's not their time in the spotlight. I recommend this, because when it comes to selling, you want a slate that's blank enough to allow potential buyers to visualize themselves in the home, and to them, your memorabilia is just more stuff, so put it away for now!

4. Remove Anything Polarizing

When clearing out the house, remove any controversial elements - which translates primarily to anything religious or political. Many people have strong emotional reactions to these types of items. Don't give your buyer a chance to prejudge your home because of your political or religious beliefs.

5. Pump Up the Curb Appeal
First impressions are everything, and a pretty face, err façade, will get buyers in the front door. Right now, you can get a jump on your curb appeal by taking advantage of the spring growing season. This is the time to plant grass and flowering plants. And don't forget to trim up the trees and bushes. By sale day, your curb appeal will be in full bloom and ready for the stream of willing buyers. Remember, you never get a second chance to make a first impression. That's why curb appeal - the way your house looks from the street - is so critical.

6. Get A Reality Check
We all have an idea of what our house is worth, but I can promise you that those self-appraisals are not going to be objective.  An educated seller makes smarter decisions. Give yourself a reality check with Trulia's new home estimate tool.  It'll give you an automated value estimate and help you connect with agents who can give you an even more detailed and accurate price. For some homes, it'll also show you what other homes in your area have recently sold for—this is helpful for getting to know the competition. To be extra thorough, explore similar homes in your neighborhood on Trulia. A quick survey of other homes in the area will be immensely helpful for helping you get to that perfect list price.

Getting a head start on the summer sale season by preparing your house (and yourself) gives you a significant leg up come list time. A bonus pay off: Your agent will be thrilled to know that you've done your homework and have a realistic view of what your house is really worth!

This article 6 Essential Tips To Sell Your House This Summer originally appeared on Trulia Tips.

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The article 6 Essential Tips to Sell Your House This Summer originally appeared on Fool.com.

SELLERS: What's the first thing you're doing to get your home ready to be shown and sold?ALL: You can get more information on my books here, follow me on Twitter@1MichaelCorbett and like me on Facebook!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 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Want to Work on Wall Street? Here Are 5 Careers To Pick From

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Have you ever dreamed about a career in the stock market, but don't really know where to start? You're not alone - most people's idea of working in the investment world comes from glamorized and dramatized Hollywood movies like The Wolf of Wall Street, Wall Street: Money Never Sleeps, and Boiler Room. However, in the vast majority of cases, this portrayal isn't even close.

So, what types of career paths are available? What kind of education and skills do you need? And, how much can you expect to make?

These stocks beat the big banks...
Here's your chance to pocket big dividends. Over time, dividends can make you significantly richer. And guess what? The big banks are laggards when it comes to paying dividends. So instead of waiting for a cash windfall that may never come, check out these stocks that are paying big dividends to their investors RIGHT NOW. Click here for the exclusive free report.


The article Want to Work on Wall Street? Here Are 5 Careers To Pick From 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 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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