After yesterday's late-session tumble, the major U.S. stock indices are back in the green today. The Dow Jones Industrial Average  had gained 45 points as of 2:30 p.m. EDT, with the majority of the index's blue-chip member stocks rising on the day. Merck  has gained 1.7% to stand as the Dow's top gainer so far. Meanwhile, off the Dow, Monsanto  jumped nearly 5% in the wake of its earnings report. Let's catch up on what you need to know.

Investment on the rise?
The broader U.S. economy started off the day with mixed news in the latest durable goods orders report. A government release showed seasonally adjusted goods orders pulling back by 1% in May, reversing a 0.8% gain in April -- but the loss wasn't as bad as it looks at first glance. The Pentagon's ongoing spending cuts hit defense outlays hard in May, particularly with orders for large military hardware plunging by 31%.

However, spending outside the defense sphere put on a much healthier showing. Core capital goods shipments jumped by 0.4% for the month, and while overall orders outside of the transportation sector fell by 0.1%, auto orders jumped by 2.1%. It's a sign that business spending is advancing slowly but steadily as the economy looks to bounce back from a big stumble in the first quarter.

Big Pharma Merck jumped to the top of the Dow following a big commitment to Australian biotech Bionomics. Merck offered a $20 million injection, along with promising up to more than $500 million in potential milestone payments, for development of Bionomics' pre-clinical Alzheimer's disease therapy BNC375.

Source: Wikimedia Commons

It's not Merck's first foray into the Alzheimer's space, which has proven difficult to master for Big Pharma and biotech alike yet offers a sizable market of 5 million Americans (and more than 38 million individuals worldwide) in need of therapies. Last December, Merck announced that it would push experimental Alzheimer's drug MK-8931 into a pair of late-stage trials. MK-8931 is part of a class of drugs known as BACE inhibitors, which several companies are moving forward to attempt a new treatment for the disease. The drug class took a big hit after Eli Lilly last year stopped its own phase 2 trial of experimental BACE inhibitor LY28866271 after discovering liver toxicity in select test patients. While expectations remain cautious around developing Alzheimer's treatments, given a poor track record of research and development over the past two decades, Merck is still fighting to make a name here. Investors should stay cautious as well, but it's worth keeping an eye on given Merck's need of pipeline success to refuel its portfolio.

Around the market today, Monsanto thumped earnings estimates and raised its full-year guidance. While Monsanto's quarterly earnings fell by nearly 6%, the company announced that it looks to double earnings over the next five years and plans a $10 billon share buyback. Seeds continue to drive profit at Monsanto, and even though profit from the company's primary growth driver among that category, corn seeds, fell 13% in the quarter, Monsanto projects that corn will continue to jump going forward. With the agricultural industry looking to bounce back from the harsh winter, the earnings drop doesn't look like a bad sign headed into the long term.

Back at the beginning of June, I wrote an article on Allied Nevada Gold where I suggested that the company could become a takeover target in the longer term. As it turned out, the company could be making a first step toward this scenario. The Wall Street Journal reported that Allied Nevada Gold is negotiating a sale of a big stake in the company or in its Hycroft mine in Nevada.

The mystery of the January bid was solved
Allied Nevada Gold was in takeover talks in January, when a mysterious company called China Gold Stone Mining Development offered a $7.50 bid for the company. Now, this is no mystery anymore. The SEC revealed that a person called Luis Chang bought shares of Allied Nevada Gold and then constructed a fake bid for the company, profiting from the spike in its shares that followed the fake offer.

Yet, the story highlighted the fact that Allied Nevada Gold could be viewed as a takeover target. During the first-quarter earnings call, the company's CFO Stephen Jones said Allied Nevada Gold was not looking to sell itself. However, as is turned out, the company is ready to sell a big chunk of its shares.

This is not a major surprise, as Allied Nevada Gold does not have money to fund Hycroft mine expansion, for which the budget is estimated at $1.3 billion. For a company with $85.5 million of revenue in the first quarter, this is an impossible task. Thus, the sale of the company or a stake in it was a question of when, not if.

Is it good for shareholders?
The bid war for Osisko Mining, in which Agnico Eagle Mines and Yamana Gold jointly defeated Goldcorp showed how a price for an attractive asset could surge in a round of bids. However, there is a very big difference between Osisko's Malartic mine, for which Agnico Eagle, Yamana Gold, and Goldcorp were competing, and Allied Nevada's Hycroft mine.

The Malartic mine is operationally strong and delivers free cash flow. The Hycroft mine is an asset waiting for significant capital spending. This leads to the conclusion that the price for Hycroft mine will not be stellar. A buyer must take the obligation to fund the expansion of the mine. Otherwise, the purchase does not make sense.

In better days, Allied Nevada Gold shares traded above $40. In current conditions, long-term shareholders shouldn't expect the company to be valued at even half its previous size. The good part for long-term shareholders is that the company will not be entirely sold, as this leaves room for future upside should the Hycroft expansion succeed.

Bottom line
In the last few years, Allied Nevada Gold stock was not for the faint-hearted. Technical problems and the lack of financing resources plagued the company and wiped out its capitalization. All in all, the news about the possible sale of a part of a company is good news. Allied Nevada Gold needs to fund the Hycroft mine expansion, and couldn't do it on its own. The scenario of a partner owning a big stake in the company is better than the acquisition scenario, as it makes upside possible for Allied Nevada Gold shares.

Source: Target.

With all the exclusions that applied to Target's online free shipping policy, it's no wonder customers felt frustrated by the experience, and, according to company data, have often simply abandoned their online shopping cart rather than proceed to the checkout just for that reason. Finally, the retailer has realized the error of its ways, and has largely eliminated all such caveats and fine-print exclusions, meaning nearly all online orders of $50 or more on Target.com, with the exception of oversize or heavy items, will qualify for free shipping.

New shipping policies for retailers took off in earnest two years ago as free shipping became the new mantra to get customers to shop. A lackluster economy, tight purses, and sharper competition were keeping customers from spending, and retailers on- and offline began adopting shipping policies that made it easier and cheaper -- even free -- for customers to make have their purchase delivered.

Wal-Mart was one of the early adopters of the free-shipping policy that allowed consumers to pick up items in-store at no cost when they purchased from its website, while Sears Holding , while not among the first to offer it, highlighted its free-shipping policy at Kmart with its humorous, award-winning "Ship My Pants" commercial. However, it felt like Target had to be drawn kicking and screaming to the table. It only offered a standard free shipping option if you used your Target credit card for a purchase, and even then there were so many items that didn't count toward the $50 minimum purchase that its customers threw their hands up in disgust.

The retailer's own internal data showed that more than half of Target.com shoppers who abandoned their shopping carts did so because of shipping costs. In a blog post this past Monday, Target's website and mobile senior VP wrote that, with Target.com increasingly becoming the company's "front door," making the experience easier and more relevant to its customers had become paramount.

Considering the phenomenal growth Amazon.com has enjoyed and how its $99 Prime membership service has taken off by offering free shipping on tens of thousands of products, it shouldn't have required a breakdown in the express checkout lane for Target to figure this out. With an estimated 2 million customers willing to essentially prepay for shipping (as well as get free movies and TV shows, books, and, soon, music), a retailer offering true free shipping to customers should be a winner.

No doubt it was a case of trying to have its profits cake and eat it too. Shipping costs money, and both gross and operating margins have been slipping. Particularly after its massive data breach late last year, the decline has had a worrisome impact on performance.

Source: Target SEC filings.

Revenues for the retailer were relatively unchanged at $16.6 billion, even though it added more stores to its portfolio. That's because it suffered a decline in same-store sales of 0.3% from the year-ago period. Comparable sales are an important retail metric, because they highlight the growth a company has achieved organically rather than through expansion.

Source: Target SEC filings.

We can see that revenues and comps have also been on a slow -- but steady -- slide for some time, for which millions of customer accounts being compromised did no favors. So at a time when the company is fighting for every sale that it can make, losing a customer just as they're about to turn over their money because you have infuriating, exclusionary policies in place makes no sense.

Target is working hard to restore consumer confidence. It's putting new policies in place, along with new executives. New, easier-to-follow shipping policies are only a small piece of the puzzle, so while they won't cause Target to leapfrog ahead of the competition, they also won't let it fall further behind. And that means the retailer may just deliver on its promises to its customer.

The Dow Jones Industrial Average  shrugged off negative economic data from the Commerce Department and was trading 30 points higher, or 0.18%, by midafternoon. The department today issued its final estimate for first-quarter gross domestic product, which showed a 2.9% annualized contraction, compared to the previous 1% pullback reported last month.

Behind the downward revision was weaker spending on health care and figures that show trade was a bigger drag on the economy than initially thought. One reason the market is seemingly ignoring this ugly picture is that investors don't have a much better option. Buying equities still represents a better investment than cash or bonds, as long as the economy is expected to continue growing -- and all indications are that the economy will indeed grow in the second quarter.

With that in mind, here are some companies making major headlines in the markets today.

Inside the Dow, heavy-machinery manufacturer Caterpillar faces another potential financial blow with the potential demise of the Export-Import Bank. The story has been stirring up dust since House Majority Leader Eric Cantor's surprising defeat in his Republican primary. Without his support, the death of the Export-Import Bank inches nearer. 

The Ex-Im Bank provides credit insurance, direct loans, and guarantees to assist foreign companies in purchasing American-made goods. Without that assistance and subsidies, Caterpillar stands to lose some export business to foreign manufacturers. Boeing and General Electric are also among the handful of industrial juggernauts that could feel the most impact if the Ex-Im Bank isn't reauthorized.

The Ex-Im Bank says it provided $27 billion to support an estimated $37.4 billion in U.S. export business last year alone. It also claims supporting that amount of export business helped sustain more than 200,000 U.S. jobs. While opponents are all but claiming victory for the Ex-Im Bank's future demise, investors in Caterpillar, Boeing, and General Electric would be wise to watch the Sept. 30 deadline for the bank's reauthorization.

Outside the Dow, Ford  today unveiled its all-new Edge. The Edge will be sold in more than 100 markets across the globe and will again be built on the company's global midsize vehicle platform, hence its "crossover" designation.

Incoming Ford CEO Mark Fields presenting the all-new 2015 Edge. Source: Ford.

That's more important than most Ford investors realize as the company continues to execute its "One Ford" plan to streamline operations and consolidate vehicle platforms. Keeping the Edge on the midsize vehicle platform, the same platform the Fusion is built on, should enable the crossover to be produced in additional factories around the globe -- despite Ford officials saying there are no current plans to build the Edge anywhere but Oakville, Ontario. However, as the automaker expects China to become the biggest crossover and SUV market in the world by 2018, and Ford already sells every single Edge it exports into China, producing the Edge abroad seems like an intriguing option down the road.

"For three years in a row, Ford has been the best-selling utility vehicle brand in North America and has been experiencing exponential growth in global markets," said Jim Farley, Ford group vice president, global marketing, sales and service and Lincoln, in a pres release. "The all-new Edge is the next chapter in this story. And it's a story driven by the emotional appeal of the vehicle - not its feature content." 

Another key aspect for the all-new Edge is the addition of Ford's premium "Titanium" trim that commands a higher transaction price, and thus incremental additional top-line revenue, for the Dearborn automaker. Ford's second-generation design is expected to boost Edge sales, which were down 20% in May and 7% through the first five months of the year.

ViaSat's surprisingly fast Internet speeds, combined with recent actions on behalf of Google , might imply significant upside potential in the future of satellite Internet providers. Moreover, this might hold important clues as to what AT&T sees in DirecTV .

Measuring broadband America
In a surprising report from the Federal Communications Commission, or FCC, the top Internet/broadband provider by speeds was a small company called ViaSat, with just 640,000 subscribers. ViaSat produces, on average, about 18 megabits per second, or Mbps.

Source: NewScientist

While ViaSat does not have billions to spend on infrastructure, it has managed to earn the No. 1 ranking by using an unconventional business model that many other broadband providers have abandoned. The company actually uses satellites, which were previously considered a last resort for customers in rural areas who could not get services via fiber or 4G buildouts.

Over a 14-year period, the company has been very acquisitive in creating new technologies like satellite terminals and better antenna systems to increase broadband speeds.

How is DirecTV relevant?
In retrospect, a $2.6 billion company with $1.35 billion in annual revenue has outperformed the juggernauts of broadband with a seemingly dead technology. Albeit, DirecTV is a satellite company, and while its technology doesn't exactly mirror that of ViaSat, the infrastructure is already present for AT&T to create a broadband satellite service, something it lacked prior to the acquisition.

To many, this might sound foolish, but the acquisition of DirecTV was initially puzzling to many AT&T investors, as the synergies weren't evident, nor did AT&T acquire any spectrum in the deal. Since broadband, or U-Verse, is AT&T's fastest growing business, and now accounts for 10% of total revenue, it is possible that AT&T is hoping to utilize DirecTV's technology to create satellite broadband like ViaSat's in rural and underdeveloped areas.

Google serves as proof of AT&T's interest
Before dismissing the notion of AT&T using DirecTV's satellite network for broadband, consider the company's intense competition with Google to build the fastest Internet service the world has ever seen. Google Fiber is a multi-billion initiative that is already in three cities, with plans to launch in 34 additional cities. The service has speeds of one gigabit per second, or 100 times faster than average broadband.

Source: Google

Source: AT&T

AT&T U-Verse GigaPower is an initiative to increase the company's top broadband speeds from 300 Mbps to equal that of Google Fiber. The company will build this network in 100 cities in 21 metropolitan areas. So, why would AT&T backpedal to equal the speeds of ViaSat at barely 18 Mbps?

According to the Wall Street Journal, AT&T's biggest competitor, Google, will soon spend more than $3 billion on satellites to provide Internet access. Google already purchased the drone maker Titan Aerospace earlier this year, which streams Internet service from the sky. Therefore, Google's satellite initiatives might have something to do with Titan, and the Wall Street Journal adds that Google will roll out this service with 180 small satellites.

With all things considered, satellites might boost AT&T and Google's broadband market share while their fast broadband services are being built. Currently, much of the country's rural areas lack Internet access, but by building low-cost/high-speed satellite and drone services, Google and AT&T could capture consumers who might one day upgrade to faster speeds.

Acquiring DirecTV makes a lot of sense for AT&T, given the competitive nature of this space and DirecTV's enormous satellite presence; the acquisition could make AT&T a clear leader -- if it can utilize the technology to create a ViaSat-like service.

Foolish thoughts
Due to AT&T and Google's recent initiatives, there is reason to believe that ViaSat's heyday could be short-lived. Furthermore, it appears that both Google and AT&T will launch a competing service in the near future, with DirecTV being crucial to the latter's plan. Albeit, a satellite service alone doesn't justify a near-$50 billion acquisition, but it does help to explain why AT&T was willing to buy the company, and shows that its plan for DirecTV might be broader than we realized.

T-Mobile is the nation's fastest-growing carrier. Last quarter, it added 1.3 million monthly subscribers -- more than both of the largest U.S. carriers combined. Yet, despite its growth, T-Mobile remains as aggressive as ever.

Its latest attempt to attract subscribers involves giving away Apple's  best iPhone, the 5S. Prospective T-Mobile customers can, for period of seven days, try Apple's latest smartphone for free.

Ultimately, the program -- known as Test Drive -- could benefit both companies as it allows would-be smartphone buyers to try out the products of both companies.

Test driving the T-Mobile network
In T-Mobile's case, it centers around the quality of its network. Historically, T-Mobile's network hasn't been as fast or as reliable as those of its larger competitors. Although T-Mobile generally charges less than its competition, subscribers that are mostly happy with their current service may be afraid to switch.

T-Mobile's network may still be lacking in rural areas, but its 4G LTE coverage has improved markedly in recent months. Last September, T-Mobile boasted that its 4G LTE network now covers over 180 million Americans, and today, it claims to cover more than 210 million people. T-Mobile continues to upgrade its network, and it promises it will have the majority of its 2G coverage upgraded to 4G LTE by the middle of next year.

In terms of speed, T-Mobile's 4G LTE stacks up favorably with its larger competitors -- in fact, it may even be better. Research firm OpenSignal found T-Mobile's 4G LTE download speed to be faster than its larger rivals, and its its network latency to be competitive.

Apple's T-Mobile problem
T-Mobile is partnering with Apple for the promotion, and it isn't surprising that Apple would be on board. As a percentage of T-Mobile's smartphone sales, Apple's iPhone hasn't done as well on T-Mobile as it has on the other major U.S. carriers.

For whatever reason, T-Mobile's subscribers seem to favor handsets made by Apple's competitors -- T-Mobile's Test Drive program could be a way to change that.

If a would-be subscriber receives Apple's iPhone 5S during their test drive phase, it seems intuitive that they would likely to keep it -- assuming they choose to switch to T-Mobile's network. But even if they don't, getting exposed to Apple's device and its content ecosystem could serve as a powerful pull, converting customers to Apple's smartphone.

And once they've purchased their first iPhone, they'll likely be back for more -- buyers of Apple's handsets are known to be fiercely loyal. According to research firm WDS, 76% of current iPhone owners plan to buy another handset from Apple when it comes time to upgrade.

It could backfire
Of course, it should be noted that this policy has the potential to backfire. A prospective buyer that test drives T-Mobile's network may find that it doesn't suit his needs; an Android user, after testing Apple's iPhone 5S, may conclude that she simply doesn't care for Apple's operating system or its hardware choices.

Nevertheless, it appears to be a relatively low-risk way for both companies to create new customers. Whether it results in additional T-Mobile subscribers, or more iPhone buyers, however, still remains to be seen.

If you're invested in 3D Systems , Stratasys , one of their smaller peers, or just following the disruptive 3-D printing space, you know that this technology is growing like gangbusters. According to the Wohlers Report 2014, the global 3-D printing industry grew 34.9% in 2013, to $3.1 billion.

Even more exciting is what lies in the front-view mirror, as we're still in the early innings of the 3-D printing story. With this in mind, let's explore this question from several angles: How big is the potential 3-D printing market?

Wohlers' growth and market-size estimates
Wohlers Associates -- widely considered the authority on the industry -- believes that the worldwide sale of 3-D printing products and services will jump from last year's $3.1 billion to nearly $6 billion in 2017, and reach $10.8 billion by 2021. This translates to a compounded annual growth rate of about 20% through 2021.

I think, however, that we could see considerably faster growth. Wohlers' recent projections have proven to be extremely conservative, which leads me to believe that the current ones will also prove to be considerably too low. This isn't a knock on Wohlers; when a revolutionary technology takes hold, it's not possible for any expert to accurately foresee all of its potential future uses.

Chart by author. Data source: Wohlers.

Canalys' growth and market-size estimates 
Research firm Canalys pegged the global market for 3-D printing at $2.5 billion in 2013, which is smaller than Wohlers' $3.1 billion estimate. However, the firm's growth projections are much stronger than those of Wohlers, as it predicts the industry will reach $16.2 billion by 2018, which translates to growth of more than 500%, and a CAGR of 45.7%.

Source: Canalys.

Market-size estimates as a percentage of manufacturing sector
Estimates by the various consulting firms only go five to eight years out. But what's the longer-term potential market size for 3-D printing? We can look to the size of the global manufacturing sector to help us answer this question.

3-D printing is in the very early stages of disrupting manufacturing, just as it has disrupted prototyping. It has already made solid inroads into short-run production, and is on the cusp of starting to be used for larger-run manufacturing. The high-speed, continuous, fabrication-grade 3-D printing platform that 3D Systems is developing for Google's Project Ara to mass produce customizable, modular cell phones has the potential to greatly expand the use of 3-D printing in manufacturing settings. (Here's the latest news about, and a view of, the platform.) This platform, assuming it will function well, appears to be a great fit for producing smaller-sized, customizable products.

I'm not suggesting 3-D printing will ever be used for the bulk of manufacturing applications, as traditional "subtractive" manufacturing is extremely well suited for many, even most, applications. However, as we see more significant advances in 3-D printing -- namely, in speed, build-box size, and materials capable of being printed -- we should see a gradual increase in 3-D printing chipping away at conventional manufacturing's domain. The beauty of the 3-D printing story is that the technology only needs to displace a small percentage of conventional manufacturing to be massively successful.

The global manufacturing sector contributed $10.1 trillion to the world's GDP in 2010, according to consulting behemoth McKinsey. Here's how huge the 3-D printing market would be based upon what percentage of global manufacturing it displaces:

•   1% -- about $100 billion (plus revenue from prototyping)
•   5% -- about $500 billion-plus
• 10% -- about $1 trillion-plus
• 20% -- about $2 trillion-plus
• 30% -- about $3 trillion-plus

Wohlers' estimated that the global 3-D printing market was worth $3.1 billion in 2013. So, even if this technology snatches away only 1% of the world's total manufacturing dollars, it will be a $100 billion-plus market - or about 33 times as large as it is today! (This calculation doesn't account for growth in the manufacturing sector, so we're talking in today's dollars.) It seems to me that 3-D printing could eventually realistically account for at least 5% or 10% of total manufacturing -- this type of growth would be in the astounding range of about 16,000% to 33,000%!

I went as high as 30% because Wilfried Vancraen, CEO of Belgium-based Materialise -- which went public today -- has been quoted as saying that 3-D printing could eventually represent up to 30% of the manufacturing sector.

The "double plus" factor
We also need to consider what I'll call the "double plus factor" that I've not seen explored. First, 3-D printing allows for certain products to be made that can't be produced using traditional manufacturing techniques, so the technology should help to expand the size of the manufacturing sector. Additionally, 3-D printing is capturing some dollars outside of the "manufacturing" classification. These two phenomenon will surely accelerate as further advances are made, resulting in the technology becoming more widespread.

One example is the use of 3-D printing for "bioprinting" applications. Development-stage company Organovo, for instance, has recently announced it bioprinted 3-D liver assays that were able to retain key liver functions for more than 40 days. These same liver assays reportedly would not have been able to be produced using other techniques, so 3-D printing technology has created a new product category here.

As another example, 3-D printing is now being explored as a method of constructing buildings. This nascent application mostly involves printing concrete using large-scale 3-D printers. If this use pans out, 3-D printing would be "stealing" some market share from the "construction" classification.

Foolish final thoughts
It appears very likely that the market size for 3-D printing is going to eventually be considerably larger than even optimistic forecasters believe. One can't help but cover this space and marvel at the innovative and unique uses that are continuously popping up.

While this doesn't necessarily mean that every publicly traded 3-D printing company will be a winner, the rising growth tide should surely help lift some of the stocks. 3D Systems and Stratasys should have an advantage, given they were the early movers in this industry.

The dream of the Oregon Trail never dies. Companies fire up in the East, build a head of steam, and then push out across the Midwest to find their fortune on the West Coast. Dunkin' Brands is one of the most recent brands to hitch up the wagon and make the trek. Its Dunkin' Donuts brand has finally reached the sunny shores, and it looks like this could be a massive new revenue stream.

One major advantage Dunkin' Brands has is that it already runs businesses in California, so the territory isn't brand new. Its Baskin-Robbins brand was actually founded in California, and it now operates 455 locations in the state. That connection made it easier for Dunkin' Donuts to get off the ground there, and the company will beat its forecast by opening stores in 2014 -- it had anticipated opening locations in 2015. 

California's love of coffee
California is no stranger to coffee. Starbucks operates around 2,000 stores in California, making it the company's most popular state. It's a place that has plenty of demand for Dunkin' Donuts to meet. The sales trend at Dunkin' Donuts suggests it should be met with open arms.

Comparable-store sales were up 3.5% last year in Dunkin' Donuts' U.S. locations. The brand has made a huge push over the last few years, growing quickly from its stronghold in New England. The announced push into California will start with construction this month on five locations, four around Los Angeles and one in Modesto. 

Those locations will be followed by another 200 in the next few years, cementing a foothold in the California market. In total, Dunkin's early California expansion will represent a drop in the company's total distribution bucket. There are currently over 7,500 locations in the U.S., and Dunkin' Brands has said it plans to get that figure to 15,000 largely through expansion in the West. That means the end store count in California should hit closer to 1,000, the company says, but that's many years away.

The value of a new store
Earnings in new Dunkin' Donuts stores are slightly lower in the West right now. Whereas the brand can drive close to a 15% EBITDA margin in the Northeast and other established regions, stores out west bring in closer to 12%. That doesn't mean it's a bad setup for Dunkin', it just means that the growth is going to take a little extra time.

Starbucks does a better job of opening new locations. According to Starbucks management, it averages $1.2 million in average first-year sales and achieves a 50% return on investment. There's something in those figures that Dunkin' could learn from, as its first-year stores have lower sales and lower returns at $936,000 and 25%, respectively. 

Overall, the expansion into California is good long-term news for Dunkin' Donuts, but in the short term, it's likely to have very little impact. What it does highlight is just how much room Dunkin' has to grow. Of its thousands of locations, only about 250 are west of the Mississippi right now. That represents a huge potential and a great future for this business.

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 Zulily Inc  were back in style today, climbing as much as 11% after scoring an upgrade from Goldman Sachs.

So what: The volatile flash-sales retailer got bumped up to buy from neutral, as Goldman said Zulily's "hyper growth warrants attention." Indeed, revenue at the website, which targets new moms, grew by 87% in its most-recent quarter as the flash-sales model, which offers deep discounts for a limited time, has proven to be immensely popular. Goldman also noted that the company is on its way to becoming only the third retailer in U.S history to hit $1 billion in its five years of operations, the other two being Amazon.com and Old Navy.  

Now what: Goldman Sachs is one of the country's most-respected financial institutions, and when its analysts upgrade a stock, the move gets attention. Investors, however, shouldn't heed its advice blindly. Zulily shares have been extraordinarily volatile since its $22 IPO in November, peaking at $73 in February before tumbling 30% on a weak earnings report in May. Shares are now near $40 after today's jump. Clearly, Zulily is one of the more exciting companies to come on the market recently, but the company is barely profitable despite the sharp revenue increases. If its sales growth keeps up, the stock should jump in tandem, but investors should expect a wild ride.

Iron ore futures prices from CME Group Globex
Cliffs' stock prices from Google Finance

Cliffs Natural Resources' stock price has dropped an astounding 85% since its peak of $100 per share in 2011. With no end in sight for iron ore's free fall, the future looks hazy for this iron producer. As a potential investor, should you strike while the iron's hot, wait for a rebound in iron ore prices, or run for the hills?

Background on recent performance and debt covenants
Cliffs posted its first-quarter earnings report on April 25, 2014. The sales margin for its U.S. iron ore segment was $95 million, Eastern Canadian iron ore sales margin was a nasty -$49.7 million, while Asia Pacific iron ore sales margin was $66.3 million. Because of weak coal prices, North American coal's sales margin was $-48.4 million. The sales margin for the company as a whole was $63.2 million.

Despite operating losses in two of its four operating segments, things don't seem too dire yet. Cliffs still has ample liquidity for its operations. The company had $364 million in cash and cash equivalents and access to a 1.7 billion revolving credit line at the start of the second quarter.

The cause for concern in the near future is iron ore prices. If they continue falling, Cliffs could start experiencing dangerously low EBITDA. If its EBITDA continues dropping, this could cause the company to violate its debt covenants, meaning severe liquidity problems, and possibly even bankruptcy. 

Let's take a look at the two debt covenants associated with Cliffs' line of credit:

• Debt to earnings ratio as of the last day of each fiscal quarter cannot exceed 3.5 to 1.0. (Note that "debt" means total funded debt, or long-term debt. It does not include short-term financing. Also, "earnings" refers to the sum of the preceding four quarter's adjusted EBITDA.)
• Minimum interest coverage ratio for the preceding four quarters must not be less than 2.5 to 1.0 on the last day of any fiscal quarter.

Cliffs was compliant with both covenants in the first quarter. Its EBITDA for the four quarters preceding March 31, 2014 was $1.3 billion, and its total long-term debt was $3.13 billion as of March 31. That makes a debt to earnings ratio of 2.40 to 1.

Now, let's look at Cliffs' interest coverage ratio. As discussed in the previous paragraph, Cliffs' adjusted EBITDA for the trailing four quarters was $1.3 billion. Its total interest expense for the 12 months preceding March 31 was $172.7 million. That makes a healthy interest coverage ratio of 7.55 to 1.0.

How close is Cliffs to violating its debt covenants?
Let's look for the magic number that would cause Cliffs' credit line to be revoked. 

Remember that the debt covenants are based on the 12 months preceding the final day of a given quarter. Cliffs' total adjusted EBITDA for the last three quarters was $819.27 million. Let's say its total debt stays at $3.13 billion throughout Q2. At $3.13 billion in funded debt, Cliffs must maintain a minimum trailing 12 month adjusted EBITDA of $894 million. That means Cliffs must generate at least $74.73 million adjusted EBITDA in the second quarter. The question is, will Cliffs make the cut?

What will Q2 look like?
To get a decent idea of where adjusted EBITDA will be come July 21 (projected quarterly earnings release), let's compare market and operating conditions of the first quarter to those of the second quarter thus far.

First of all, the weather has been a lot nicer. Weather conditions affect Cliffs' ability to generate revenue. Historically, Cliffs' first-quarter earnings and revenue lag behind the other three. So, we should see much better sales volume in Q2. Secondly, iron ore prices have plummeted. This will negatively affect the amount of revenue/ton Cliffs will receive. 

We could spend all day going through each financial statement and attempting to accurately forecast every number, but let's just stick to ballparking Q2 EBITDA. Since we are only focusing on EBITDA and debt, we don't need to worry about non-cash expenses such as depreciation, taxes, amortization, and LCM adjustments (thankfully). 

Using the Realized Revenue Sensitivity Guide (below) supplied by Cliffs' management in a recent presentation, we can get a feel for what sales and operating costs might end up being for Q2. 

Chart from Cliffs' 10-Q from 3-31-2014

We also need a few other things: a sales volume forecast, a freight and venture partners cost reimbursements forecast, a cash-cost forecast, the average price of iron ore since March 31, a forecast for selling general and administrative expenses, and an exploration costs forecast. Luckily, the company has offered guidance on all of the above except freight and venture partners cost reimbursements. But that's an easy one, too. Usually freight and venture partners cost reimbursements are about 9% of total revenue, so we'll call it 9% of total revenue for Q2. 

*Q2 EBITDA forecast completed by Michael Nielsen.

Our rough adjusted EBITDA estimate for Q2 was $247.02 million. Remember the minimum EBITDA to stay within the boundaries of the debt covenant is $74.73 million. So, it looks like the company has a decent amount of wiggle room. There are certain things that could happen, or have already happened, in Q2 that could lower this number. However, odds are, Cliffs will come in with an adjusted EBITDA for the quarter that is well above $74.73 million.

So should investors buy now, wait, or run for the hills?
If you're an investor in Cliffs Natural Resources, you should feel a little better knowing Cliffs isn't in immediate danger of bankruptcy. However, you should definitely keep an eye on iron ore prices. If prices don't bounce back within the next year or so, Cliffs' credit line could eventually be depleted or revoked. Both cases could result in bankruptcy. 

If you're comfortable with risk, it might make sense to buy a few shares of Cliffs. If iron ore does bounce back, you could easily be looking at a two-bagger. 

But if you're risk-averse, you should probably run for the hills. There is no real way to know where iron ore prices will be a year from now, but there is a real risk that Cliffs will go bust. 

It may be wise to wait and see how iron ore prices move in the next few months. The only risk is that the stock price jumps before you have a chance to buy at a discount.

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 CVR Refining LP fell as much as 10% today after pricing an offering of shares.

So what: After the market closed yesterday, CVR Refining announced it was selling 6 million common units in its limited partnership and today it upped that figure to 6.5 million units plus potentially 975,000 more if the underwriters' option is exercised. The units have been priced at $26.07 and shares have obviously fallen well below that figure today.  

Now what: The offering will be used to buy shares back from CVR Refining Holdings, LLC, who owned 71% of the company before this offering. In essence, CVR Refining Holdings, LLC is really just selling shares to the public, which isn't seen as a good sign by investors because it's the largest shareholder. I don't really see a reason to change your investment thesis but keep an eye on the company's performance because large shareholders selling can be a warning sign for investors.

Source: Risky Business: The Economic Risks of Climate Change in the U.S.

A major threat is staring the U.S. economy in the face and the situation is so dire that an all-star lineup of political and business leaders have teamed up to release a blockbuster report that outlines the severe costs that businesses and investors face if no action is taken.

What calamitous threat to the U.S. economy would bring together the likes of former New York City Mayor Michael Bloomberg, former Secretary of the Treasury Henry Paulson, former Secretary of the Treasury Robert Rubin, and other A-listers? The issue is climate change, which Rubin calls "the defining issue of our era." The group they have formed in hope of tapping the business community's resources in the fight against climate change is called the Risky Business project.

In an attempt to "quantify the risks of climate change to American businesses" with a goal of spurring positive action within the business world, the Risk Committee released on Tuesday the report "Risky Business: The Economic Risks of Climate Change in the United States." The report frames climate change as an economic issue and, as Bloomberg explains, "details the costs of inaction in ways that are easy to understand in dollars and cents."

Formed in 2013, the Risky Business project, according to an open letter on its website, is "a non-partisan, independent effort that is attempting, for the first time, to analyze the economic risks of climate change for American businesses." The project also features on its "Risk Committee" former hedge fund manager Thomas Steyer, former Cargill CEO Gregory Page, former Secretary of Treasury and Secretary of State George P. Schultz, former Health and Human Services Secretary Donna Shalala, and former Republican Senator of Maine Olympia Snowe, among others. 

Climate change by the numbers

Source: Risky Business: The Economic Risks of Climate Change in the U.S.

There are a number of startling statistics presented within the report's findings, all of which, if accurate, will have a significant impact on the U.S. economy. To start, an increase in temperature will reduce crop yields in the Midwest 19% by mid-century and by as much as 63% by 2100. By 2050, even more droughts and wildfires can be expected to hit the Southwest due to temperatures staying above 95 degrees for an additional month each year. Rising sea levels will cause between $66 billion and $106 billion worth of damage to existing coastal property. And extreme hot and cold weather could reduce the productivity of outdoor labor, like construction, up to 3%, especially in areas like the Southeast and the Southwest.

Taken together, along with the report's other projections, no sector of the economy seems safe from climate change. And by applying what the report calls a "classic risk assessment approach to climate change," it's evident that action needs to be taken on many fronts because "business as usual" means every region of the country and every sector of the economy will become more exposed to the risks of climate change with each passing year.  

Source: Risky Business: The Economic Risks of Climate Change in the U.S.

Risky Business recommendations

The Risky Business project report highlights three general areas of action that can help reduce the impact of climate change on the U.S. economy.

The first is Business Adaptation, whereby U.S. businesses should think about the ways in which they can adapt their everyday practices to be more sustainable and resilient to climate change. The way in which farmers have always adapted and innovated within the climate in order to thrive was pointed to as a model for all businesses to emulate.

The second area of action is Investor Adaptation, which calls on corporations to begin factoring in the risk assessment of climate change into their capital expenditures and their balance sheets. Currently, over 40% of companies on the S&P 500 do not disclose their material risks to climate change, despite the Security and Exchange Commission providing guidelines on how to do so with their Interpretive Guidance on climate disclosure being issued back in 2010.

Likewise, investors need to start incorporating the risk assessment of climate change into their individual investments, whether it's with stocks in Fortune 500 companies or with bonds issued to finance projects in coastal areas.  

The final area of action involves Public Sector Response and calls on governments at the local, state, and federal level to implement long-range plans that will help secure the future of U.S. business through updating infrastructure and directing public money to projects that will make the economy more resilient.  

Whether the Risky Business project's strategy of appealing to the business community in the language of finance will lead to a widespread shift in views on climate change is an open question. Will corporations risk their short-term earnings for long-term investments? Will investors tolerate the impact on stock prices?

Recent history -- and an understanding of the mindset that still dominates Wall Street and board rooms across the country -- leads me to think that the business community won't change their ways on their own, at least not until it benefits their bottom line. However, the sheer star power behind the Risky Business project guarantees that this call to action will at the very least make it impossible for the business community to write climate change off as a non-issue as it has for so long. 

Small-caps tend to fly under the radar, but when a promising investment emerges it's best to look for any unnoticed value we as investors can pounce on. Comstock Resources  has a market cap of $1.35 billion and has seen a remarkable turnaround in its overall operations this year. In the first quarter of 2013, Comstock reported negative earnings per share of $0.52, with cash flow per share coming in at $1.17. In the first quarter of 2014, the independent energy company reported much better numbers: EPS came in at $0.02 and cash flow per share grew by 79% to $2.09. 

To achieve those impressive results, Comstock had a radical change of heart. In the first quarter of 2014, Comstock saw natural gas production fall 30% as oil output surged 116%. To get a picture of what that looked like, oil production for the quarter soared from 4,800 barrels per day, or BPD, to 10,400 BPD, entirely on the back of its Eagle Ford position. As oil output rose, natural gas production plummeted from 174 MMcf/d to 122 MMcf/d.

This trend is projected to hold up for the rest of the year, with crude output (offering more consistent and profitable returns) climbing to ~13,000 BPD as natural gas production falls to ~107 MMcf/d. About 34% of Comstock's current output is weighted toward crude; management hopes to push that up to 40% by the end of 2014 to help maintain profitability.

This is just the beginning of a much broader change at Comstock, a development that could make investors rich. To keep up this oil fueled momentum, Comstock is seeking additional oil reserves by pushing into a new play located right next to the Gulf.

Exploration upside
In the "black oil" window of the Tuscaloosa Marine shale, Comstock Resources is betting on uncovering riches in Louisiana and Mississippi. Investors should look at Goodrich Petroleum's  roughly 300,000 net-acre foothold in the Tuscaloosa to get an idea of what Comstock is hoping for. Goodrich Petroleum sees the hydrocarbon mix being weighted 92%-98% toward crude, with natural gas in the region supposedly having a high BTU content as well. 

What makes the Tuscaloosa even more promising is that Goodrich Petroleum has seen some stellar production curves from a few of its wells. The Crosby 12H-1 has produced roughly 25% more barrels of oil equivalent than a typical Middle Bakken well after 15 months of production. Another well, the Smith 29H-1, is producing at a slightly lower rate relative to the Middle Bakken type curve, but the results are still very promising. Keep in mind that the average Middle Bakken well produces ~40% more hydrocarbons than the average Eagle Ford well (which Comstock is heavily invested in), making wells like Crosby 12H-1 all the more impressive. 

Going forward there are two wells investors can pay attention to that further prove the potential in the Tuscaloosa Marine shale. The CMR 8-5 and the Blades 33H-1 just recently started producing, and over the next several months Goodrich Petroleum will most likely update investors on what the production curves of those two wells look like.

Due to Goodrich Petroleum's promising results from the Tuscaloosa, investors could expect similar things from Comstock Resources. With 52,200 net acres in the "black oil" window, being able to eventually de-risk that asset would substantially grow Comstock's crude reserve base.

Foolish conclusion
Goodrich Petroleum and Comstock Resources have both done well in 2014, with their stocks up 60% and 50%, respectively. This has been fueled in part by strong data coming out of the Tuscaloosa Marine shale, which has propped up the valuation investors are willing to give to oil and gas companies with exposure to this emerging play. As Comstock Resources investors wait for more wells to come online in the Tuscaloosa, they can take in a nice 1.8% dividend to boot. For those who are really bullish on the Tuscaloosa, they should also take a closer look at Goodrich Petroleum.

The U.S. economy is already looking well past the reported 2.9% contraction experienced in the first quarter, a figure that was revised up today from a previous 1% estimate from the Department of Commerce. The Dow Jones Industrial Average showed no ill effects of this uglier GDP number, climbing 0.16% in late trading.

Investors are brushing off the first-quarter figure because bad weather was largely blamed for the slowdown and companies that may be affected have already reported earnings. When you include a bullish sentiment from the Federal Reserve, which still thinks the economy will grow 2.1% to 2.3% this year, there's reason to be optimistic about the final three quarters of 2014.  

One company also brushing off the bad first quarter is Intel , which is up 1.5% today and has now returned 21.2% to investors this year, tops of all Dow Jones stocks. Following years of uninspiring returns it looks as if Intel may have gotten some of its mojo back.

^DJITR data by YCharts

Intel's demise was greatly exaggerated
The run for Intel this year has largely been driven by margin expansion, not earnings growth, but that's in anticipation that the company's investments over the past five years are about to pay off. Intel has invested heavily in improving chip performance and energy usage and will leap past competitors with 14-nanometer chips launched this year.

As it brings this new technology to the market, the chip giant will start competing in smartphones and tablets, which it has largely missed out on until now. It also hopes to take a leading position in wearable devices that are hitting the market, as well as connected devices for the Internet of Things.

Intel is betting its future on wearable and connected devices. Source: Intel.

One example of that was today's announcement that Intel and Ford are working together to enhance personalization and mobile technology for vehicles. Their research will bring facial recognition to vehicles, enable entry through mobile apps, and allow consumers to look into their cars remotely using integrated cameras and a smartphone app.  

As devices become more connected and more mobile, Intel should capture some of the new market with small, efficient systems on a chip, which incorporate connectivity and processing power.

While all of these growth markets are great, Intel has also gotten a boost from the slower than expected demise of the personal computer. Higher than anticipated demand for PCs gave Intel confidence enough to boost revenue expectations to $13.7 billion plus or minus $300 million for the current quarter, up from a previous $13 billion midpoint.  

Given the slowed-down decline of the legacy PC business and the emerging opportunities in mobile, wearables, and the Internet of Things, Intel is in prime position to grow for years to come. This isn't a stock I would bail on because it's having a good year; instead, buckle up and hold on for the ride.

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 Media General  were moving higher today, gaining as much as 11% as broadcaster shares jumped across the board on the Supreme Court's ruling on Aereo earlier this morning

So what: The highest court in the land decided by a 6-3 vote that Aereo, a service that captures broadcaster signals and sells the programming to subscribers for $8 per month, was operating illegally. With 31 network-affiliated channels, Media General is among the beneficiaries from the ruling in the lawsuit led by CBS, a blow to the cord-cutting phenomenon, which has put additional pressure on traditional media companies by offering programming that doesn't require a TV. 

Now what: Aereo had claimed that it was simply connecting users with a free service, as broadcast TV has always been free with an antenna, but it was not paying licensing fees as cable and satellite companies normally do to retransmit the broadcaster signals. Though companies like Netflix are stealing share from the traditional media players, broadcaster stocks have shot up amid consolidation in the industry. Media General just earlier this week purchased the Harrisburg, Pennsylvania, ABC affiliate for $83.4 million, and is expected to merge with LIN Media early next year. The Supreme Court's decision should benefit Media General even more as it continues to expand.