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Is 3D Systems Corporation a Short Sell?

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With shares off more than 50% year to date, and short interest hovering near 52-week highs, it's worth asking if 3D Systems is a compelling short-selling candidate.

Short-selling 101

On a high level, selling a stock short means an investor is wagering that the stock price will decline in the future. Behind the scenes, a broker arranges a short-seller to "borrow" shares from another stockholder's brokerage account that owns shares outright, and the short-seller uses these shares to sell to another buyer. When the short position is opened, the short-seller receives the proceeds from the sale of the stock, and would only make a profit if they closed out the position by buying back said shares at a lower price than what they initially sold the borrowed shares for.

As far as risk is concerned, short-selling is acknowledged to carry unlimited risk because a stock's price can technically rise indefinitely, which may force the short-seller to buy back shares at a price they simply cannot afford to cover. Because of the significant risks associated with short-selling, it should only be employed in special situations by investors who are willing to expose themselves to potentially outsize risks.


Twice a month, a stock's short interest, or the total number of shares that are sold short and remain open positions, is reported to the stock exchanges. When short interest is high, the number of shares sold short represents a significant percentage of a company's total shares outstanding. As of Sept. 15, 3D Systems' short interest stood at 35.8 million shares, representing 32.6% of its shares outstanding. With nearly one-third of 3D Systems' total shares outstanding being actively shorted, it's currently quite popular to bet against 3D Systems' future.

The case for shorting 3D Systems

With a trailing P/E ratio hovering around 130, it's easy for bears to make the case that 3D Systems' stock is too richly valued and is priced beyond its future earnings potential. In recent quarters, 3D Systems has had a difficult time meeting investor expectations, which has helped the bears substantiate their beliefs about 3D Systems' current valuation. Hedge fund manager Whitney Tilson has even gone on record saying that 3D Systems' intrinsic value is $10 per share, which, if true, suggests significant downside from today's mid-$40 level. Combined, these factors have helped investors drive 3D Systems' short interest to near 52-week highs and the stock near its 52-week lows. 

Putting the bears to rest

Anyone who's listened to one of 3D Systems' recent conference calls should know that the company is more concerned with investing in the long-term success of its business than it is with short-term earnings, and this strategy can cause its P/E ratio to remain stubbornly high. After all, 3D Systems is operating in a highly competitive, high-growth industry, and the window of opportunity to solidify what it believes is a competitive advantage as the most vertically integrated 3D printing company could be limited. This dynamic has motivated 3D Systems to make about 50 acquisitions in the last three years, aimed at bolstering its 3D printing portfolio and broadening its market opportunity.

Moreover, 3D Systems has set an ambitious plan to nearly double its full-year revenue between 2013 and 2015, which happens to align nicely with management's promise that its operational leverage will be "fully restored" in 2016, as the heavy pace of investment and concentrated product introductions begin to normalize. In other words, come 2016, investors should be able to get a better sense of 3D Systems' true earnings potential.

What should a Fool do?

With 3D Systems shares off more than 50% year to date and short interest hovering around 52-week highs, it's safe to say that investor expectations and sentiment are currently in the doldrums. Although it may be popular to short 3D Systems shares today, given the fact that the company remains more committed to the long-term success of its business than with its short-term earnings, and has adopted a strategy that it believes will capitalize on the growth of an industry that's expected to grow by over 30% a year through 2020, it seems to me like it's too risky of a proposition to bet against this potentially massive upward trajectory. If you don't believe in 3D Systems' long-term prospects, or think shares are too richly valued, you'll certainly be safer sitting on the sidelines than short-selling shares and exposing yourself to a significant amount of risk.

Apple Watch revealed: The real winner is inside
Apple recently revealed the product of its secret-development "dream team" -- Apple Watch. The secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see where the real money is to be made, just click here!

The article Is 3D Systems Corporation a Short Sell? originally appeared on Fool.com.

Steve Heller owns shares of 3D Systems and Apple. The Motley Fool recommends and owns shares of 3D Systems and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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

 

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What Does Windows 10 Mean for Intel and Smartphones?

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PC users won't be the only ones getting the number skipping upgrade from Windows 8.1 to 10. During Microsoft's recent unveiling of the new OS in San Francisco, the company also confirmed that Windows 10 will replace Windows Phone 8.1.

Windows 10. Source: Microsoft


But unlike the PC version, which will follow a traditional upgrade path, installing Windows 10 on smartphones leads to major questions about the graphical user interface and CPU architecture. Microsoft addressed interface concerns by stating that the mobile version of Windows 10 won't have a desktop mode like the PC version. However, the second question remains unanswered, since Windows 8.1 runs on x86 (Intel or AMD ) devices, while Windows Phone and RT currently run on ARM-based ones.

Since Windows 10 will be an x86-based OS, Microsoft could be betting heavily on Intel to straddle the PC and mobile markets with new processors. Let's see why that could be an excellent long-term strategy for both companies.

What Windows 10 smartphones mean for Microsoft
In the past, the biggest problem for Microsoft's mobile business was that chipset designs from ARM Holdings dominated 95% of the handset market.

ARM pushed Intel out of this market with two simple strategies: it only licensed chip designs to manufacturers, instead of manufacturing them, and it developed cheaper CPUs with lower power consumption -- making them ideal for mobile devices. ARM's dominance of smartphones forced Microsoft to develop an ARM-based smartphone operating systems, like Windows Mobile and Windows Phone, to reach mobile users. The big trade-off was that none of the x86-based software that PC users relied on would be compatible with the mobile operating systems.

Four years ago, that wasn't a major issue since smartphones weren't powerful enough to handle most desktop applications. But today's phones, many of which have quad-core CPUs and over 2GB of RAM, certainly are. Therefore, it makes sense to install Windows 10 on both smartphones and PCs and cut ARM-based systems out of the picture. That also means that the ARM-based Windows RT, which has become irrelevant with the recent launch of cheap Windows 8.1 tablets, could soon be axed as well.

Simpler than it seems
Switching the OS and CPU architecture across all mobile devices seems like a monumental task, but Microsoft has an obvious advantage -- it controls the majority of the Windows Phone hardware as well as the operating system. According to AdDuplex, Microsoft's handset division (formerly Nokia's) still produces 95% of all Windows Phone devices worldwide. Therefore, Microsoft can steadily replace its ARM-based Windows 8.1 devices with x86-based Windows 10 ones without upsetting too many third party handset manufacturers.

These new phones would run both Windows Store apps and scaled down versions of x86 desktop software. Just like desktop and mobile versions of websites, popular Windows software could switch between the two modes depending on the device. Cloud-based synchronization and backup options could then make a Windows 10 phone feel like a true extension of a user's desktop or laptop PC.

The "One Windows" strategy. Source: Microsoft

While this kind of bold change would be a huge risk for a company like Samsung (as we recently saw with Tizen), Microsoft doesn't have anything to lose at this point. According to IDC, Windows Phone only accounted for 2.5% of the global smartphone market in the second quarter, down from 3.4% a year earlier.

Will this be Intel's chance to shine?
Intel's new Atom processors are slowly becoming relevant again in the smartphone market. Asus' ZenFone and FonePad, Lenovo's K900, and Motorola RAZR i are all Intel-powered Android phones.

When Windows 10 launches for smartphones, I believe that Intel's processors will replace ARM-licensed ones in Microsoft's Lumia devices. While that wouldn't be a huge loss for ARM, it would grant Intel a much firmer foothold in the mobile market than its limited selection of x86 Android devices. Other smartphone manufacturers which want to diversify away from the crowded Android market, like Windows Phone makers HTC and Samsung, could also follow suit with Intel-powered Windows 10 devices.

Moreover, if Microsoft continues its free licensing deal for devices under nine inches, Windows 10 will remain the cheapest option for handset manufacturers, which actually pay Microsoft (not Google) patent royalties for every Android device sold.

The Foolish takeaway
In conclusion, Windows 10 not only represents a second chance for Microsoft, but one for Intel as well. If Microsoft successfully straddles the PC, tablets, and smartphone markets with a single OS, Intel's Atom processors could finally gain enough momentum to push back against ARM-licensed ones.

Apple Watch revealed: The real winner is inside
Apple recently revealed the product of its secret-development "dream team" -- Apple Watch. The secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see where the real money is to be made, just click here!

The article What Does Windows 10 Mean for Intel and Smartphones? originally appeared on Fool.com.

Leo Sun 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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What's Behind Baidu Inc. (ADR)'s 20% Growth in 2014?

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Investing in Chinese companies has been a pastime fraught with danger. Not only does the average retail investor not have access to the physical products many of these companies produce, but there have been countless instances of fraud from the Middle Kingdom.

That's tough for American investors to cope with, since most of us wouldn't mind a piece of the world's fastest-growing large economy. Luckily, a select few Chinese companies are large enough, and respected enough, that we can put our hard-earned money behind them. One such company is Baidu , the parent company of China's largest search engine.


Baidu corporate headquarters. Photo: Simone.brunozzi, via Wikimedia Commons. 

So far in 2014, the stock is up about 20%. But to really understand Baidu's most recent movements, we need to start our timeline in early April, when the company reached its 2014 low. Since then, share value has surged almost 50%.

A steady decline, followed by a turnaround
Leading up to April's low, two key factors weighed on Baidu shares. The first was a general decline in Chinese Internet stocks. The big blow came when an SEC judge ruled in January that the Chinese units of the Big Four auditors would be prohibited from publishing accounting figures of U.S.-listed companies for six months.

The second factor was general concern about Baidu's loss of search market share. A few years back, Baidu could lay claim to 80% of China's search engine traffic. But upstart Qihoo 360 came on the scene and within just two years captured 25% of the search pie, according to CNZZ. That meant Baidu's fell all the way to 58%.

But just when it seemed 2014 might be a year to forget, things quickly turned around for Baidu.

The rally kicked off when Baidu reported first quarter earnings in late April. Revenue growth accelerated and stood at 59%, while earnings blew past analyst expectations. Just as important, the company forecast that revenue would continue to grow by about 58% for the next quarter.

The most important part of that growth came from investments in mobile platforms. Those investments, management warned, would hold down earnings in the short term but provide a major boost in the long run. Even more important, the dominance of the company's mobile platform meant that it could capture more of the mobile search market.

That good news snowballed in July when the company reported second-quarter earnings. As expected, revenue grew almost 59%, but Baidu surprised with earnings that far surpassed expectations--bringing in $1.63 per share versus the expectation of $1.32. Continuing on the mobile theme, Baidu reported that 30% of total revenue came from that platform.

But perhaps most crucially, revenue per customer rose an astounding 50% between the second quarters of 2013 and 2014. That type of pricing power impressed investors and highlighted a major difference between Baidu and Qihoo -- as the latter is relying on cheaper ads to help attract revenue to its sites.

The outlook
Of course, the most important question for today's investors is, what does Baidu's future look like?

The answer will likely have two parts. On the one hand, mobile will remain the crucial segment. As increasing numbers of Chinese consumers come online, they are likely doing so via a mobile device. Therefore, even though Qihoo has taken a sizable chunk of the search market, Baidu can regain a large swath by becoming the de-facto engine for mobile users.

The second theme will be the company's investment in infrastructure. Baidu is looking to expand its ecosystem to remain relevant for decades. Anyone familiar with Google knows what this can look like: focusing on video, mobile payments, apps, and a plethora of other endeavors.

These investments will likely keep margins lower than they could be, but will be worth it if they can deliver important revenue boosters for Baidu.

Baidu now trades for about 32 times forward earnings. That's a hefty price tag. But this is also one of the highest-quality companies operating in China, and the growth potential is enormous. If you're interested in the company, it's probably worth initiating a starter position, then adding to it over time at better and better value points.

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The article What's Behind Baidu Inc. (ADR)'s 20% Growth in 2014? originally appeared on Fool.com.

Brian Stoffel owns shares of Baidu, Google (A shares), and Google (C shares). The Motley Fool recommends Baidu, Google (A shares), and Google (C shares). The Motley Fool owns shares of Baidu, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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

 

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The Next Blue-Chip Stocks: lululemon athletica Inc.

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Source: Motley Fool Flickr

When investors talk about "blue-chip" stocks, they're generally referring to the largest, most stable companies the market has to offer. These are businesses that tend to experience modest but significant long-term growth, have well-established products and services, often pay steadily rising dividends, and, as a result, are typically considered safer investments than their smaller, more volatile peers.


For investors who buy and hold these companies before they achieve their coveted blue-chip status, the financial rewards can be staggering. Take Nike , a $78 billion company that is expected to collect $30.75 billion in sales this fiscal year. All told, Nike has achieved a total return (including dividends) for investors of more than 36,000% going public in 1980. 

Could this be the next Nike?
Let's look, then, at another promising athletic-apparel company: lululemon athletica .

Best known for its high-end yoga gear, Lululemon has roughly tripled investors' money since its IPO in 2007, trouncing the broader market's 56% return over the same period:

LULU Total Return Price Chart

LULU Total Return Price data by YCharts.

Lululemon obviously isn't as familiar a name as Nike or even Under Armour -- the latter of which is another one of my investing favorites and a blue-chip hopeful itself. But Lululemon is still a $6 billion business that trades around 20.7 times next year's estimated earnings, and it expects to achieve revenue of $1.78 billion to $1.8 billion this year. By comparison, Under Armour currently trades around 55 times next year's estimated earnings, sees fiscal 2014 sales of $2.98 billion to $3 billion, and boasts a market cap of $14.4 billion.  

So what's the problem with Lululemon? As you can see from the chart above, its gains have been punctuated by massive volatility over the past two years, thanks to a slew of business challenges that slowed its growth significantly. That included a huge recall early last year due to quality control issues, the subsequent resignation of its popular CEO, and conflicts with its founder, now-former chairman, and single largest shareholder, Chip Wilson. As a result, sales in the last fiscal year rose "just" 16% -- capped by 7% growth in the fourth quarter -- which translated to meager 3% growth in net earnings. All things considered, not exactly representative of the stability a blue-chip stock should enjoy.

Progress is being made
This year, however, Lululemon has worked hard to perfect its supply chain as it grows, resolved the issues with Wilson, and enjoys the leadership of a fresh CEO in Laurent Potdevin. 

Potdevin cut his teeth at Louis Vuitton parent LVMH, then capped 15 years at Burton Snowboards with five years as CEO, and most recently worked as president of socially conscious shoemaker Toms for three years before heading over to Lululemon. These companies all know what it takes to sustain loyal fan followings with unique, high-end products, which is perfect considering that Lululemon built its business from the ground up through grass-roots campaigns and relationships with yoga instructors and other individual consumers.

Lululemon's men's segment is growing quickly, Credit: lululemon.

Of course, that certainly doesn't mean Lululemon can become a blue-chip stock by focusing on just yoga apparel (and primarily women's yoga apparel at that). But that's where the retailer's burgeoning men's segment and ivivva kids' subsidiary both come into play.

In fact, even amid the company's struggles, Lululemon's men's segment regularly posted double-digit comps growth. Unsurprisngly, the company last quarter confirmed that among the 47 new stores it plans to open in 2014 is its first men's stand-alone location -- in New York City. Investors should keep a close eye on how that store performs as a gauge for whether Lululemon can consistently appeal to both men and women on a broader scale.

Ivivva, for its part, has exploded onto the scene with younger consumers. Mmanagement said ivivva posted 36% comparable-store sales growth in the last quarter, and it is on track to achieve sales of just over $1,000 per square foot for the year. Naturally, Lululemon has outlined plans to accelerate the build out of ivivva, which currently comprises just 33 of the retailer's total 270 stores.

In the end, ivivva and its men's line have propped up Lululemon through it all, which demonstrates the company's aptitude for maintaining growth (however moderate) and solid profitability even as its core business has struggled. Lululemon's overall business also appears to be on the mend, as the stock popped a few weeks ago after the company beat analysts' estimates on both revenue and earnings, narrowed guidance to be in line with expectations, and reiterated its view that gross margin should steadily improve over the next two years or so -- from its current 51% back to the mid-50's range to which investors had grown accustomed before its fall from grace. By comparison, Nike's gross margin last quarter was considered solid after it improved 170 basis points to 46.6%.

In the end, investors hope Potdevin is succeeding in his stated plans to use 2014 as "an investment year with an emphasis on strengthening our foundation, reigniting our product engine, and accelerating sustainable and controlled global expansion." If Lululemon's most recent quarter is any indication, it is well on its way to reaching that goal. When that happens, I see no reason Lululemon won't eventually be considered a fantastic blue-chip stock that can generate tidy profits for investors for decades to come.

Top dividend stocks for the next decade
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The article The Next Blue-Chip Stocks: lululemon athletica Inc. originally appeared on Fool.com.

Steve Symington owns shares of Lululemon Athletica. The Motley Fool recommends Lululemon Athletica and Nike. The Motley Fool owns shares of Nike. 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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RetailMeNot Stock Down 50%: Bargain of a Lifetime or Time to Run?

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Source; RetailMeNot.

RetailMeNot stock has crashed by more than 50% over the last six months. Google's new search algorithm is having a negative impact on the page rank for the online coupon provider, and this is hurting RetailMeNot's business. However, the company has a solid business model, and it is still delivering sound financial performance under challenging conditions. Should you buy the dip in RetailMeNot stock, or is the worst yet to come for shareholders?

The problem
RetailMeNot investors have been faced with considerable uncertainty lately. The company relies heavily on search for its traffic, and Google is the undisputed market leader in that business. Google regularly updates its search algorithms to improve the quality of results, and the Panda 4.0 update rolled out in May had a negative impact on RetailMeNot's page rank and traffic coming from organic search.

RetailMeNot has successfully adapted to previous changes in search algorithms, and CEO Cotter Cunningham said in the company's latest earnings conference call that performance was partially recovering: "We did see our organic search rankings affected beginning midquarter, and while we've seen a partial recovery over the past two months in overall organic search rankings, we're not back to the growth levels we were seeing in the first quarter."


Organic search represents 64% of total traffic for RetailMeNot, and management estimates the new search algorithm will reduce full-year 2014 sales by 5%, while revenue for the second half of the year is expected to be 8% below the midpoint of the company´s previous guidance.

Making things worse, organic traffic tends to have higher conversion rates and a stronger monetization than other traffic sources for RetailMeNot, so the company is not only seeing slower revenue growth, but this is also affecting margins in a negative way.

In this context, the company delivered lower than expected sales and earnings for the second quarter, and management also reduced its guidance for the rest of the year, which generated considerable negativity among RetailMeNot investors, as suggested by the stock's price performance in recent months.

The opportunity
While it's never nice to see a company reducing guidance, it's important to keep in mind that management still expects solid sales and profit margins, both for the coming quarter and the full-year 2014.

For the quarter ending on Sept. 30, RetailMeNot projected net revenue in the range of $53 million to $57 million, implying an annual growth rate of 16% at the midpoint. Adjusted EBITDA is forecast to be between $14 million and $16 million; this would mean an adjusted EBITDA margin of 27% at the midpoint of the range.

For full-year 2014, the company expects revenue between $262 million and $270 million, a 27% year-over-year increase at the midpoint. This is actually the same guidance range RetailMeNot provided at the beginning of the year, before raising guidance due to strong performance in the first quarter and then dropping it again later. Adjusted EBITDA margin is expected to be roughly 34% of sales during the year.

These numbers don´t look that dismal at all. Besides, management said in the latest earnings conference call that strong growth in other traffic sources such as mail, social media, and direct navigation is mitigating the negative impact from slower growth in organic search.

What doesn't kill you makes you stronger, and RetailMeNot could emerge from its problems stronger than ever by reducing its dependence on organic search and building a more direct relationship with customers.

From a long-term perspective, the company has an interesting business model. While competitor Groupon is more focused on providing huge discounts from small merchants and local companies, RetailMeNot is successfully attracting big retailers and coveted brands, a key differentiating factor for the company.

RetailMeNot also beats Groupon by a wide margin when it comes to cash flow generation. The company produced $36.5 million in operating cash flow during the first half of 2014, while Groupon delivered negative operating cash flow of $43.5 million over that same period. This represents a considerable advantage for RetailMeNot when it comes to financial flexibility to invest in areas such as marketing, technology, and acquisitions.

The takeaway
RetailMeNot's dependence on Google and its organic search traffic is an important risk to keep in mind, so investors might want to watch the financial performance over the coming quarters in order to evaluate the company´s ability to deliver sound results under the new scenario. However, the market usually exaggerates its short-term reaction to negative news, and this seems to be the case with RetailMeNot recently.

The company is still delivering healthy financial performance, and the business model remains quite solid. All in all, there is a good probability that the recent collapse in RetailMeNot stock will turn out to be a buying opportunity for contrarian investors.

Apple Watch revealed: The real winner is inside
Apple recently revealed the product of its secret-development "dream team" -- Apple Watch. The secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see where the real money is to be made, just click here!

The article RetailMeNot Stock Down 50%: Bargain of a Lifetime or Time to Run? originally appeared on Fool.com.

Andrés Cardenal has no position in any stocks mentioned. The Motley Fool recommends RetailMeNot. 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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Gilead Sciences, Inc. Got 2 Drugs Approved, and Didn't Bother to Tell Anyone

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The Food and Drug Administration approved two new HIV drugs last week -- Tybost and Vitekta -- but Gilead Sciences didn't even bother to issue a press release on its website. It might be a sign of the times: Hepatitis C has become more important to the big biotech than HIV. Last week, Gilead Sciences announced that the European CHMP gave its hepatitis C cocktail, Harvoni, a positive opinion, so it wasn't like the press office was on vacation.

But there's more to it than that. Tybost and Vitekta are already on the market as part of Gilead Sciences' quad pill Stribild, which was approved more than two years ago.

Source: Gilead Sciences.


Around the same time, Gilead asked that the individual components be approved so they could be combined with other medications; but in April 2013, the FDA turned down the drugs because there were issues with Gilead's quality control tests. A year and a half later, Gilead Sciences fixed the problems, and the FDA signed off on the marketing of the drugs individually.

More cocktails
Neither of the drugs will be used by themselves. Gilead is making them available so they can be used in combination with other company's HIV drugs.

Tybost is a boosting agent, designed to increase the blood levels of protease inhibitors, such as Bristol-Myers Squibb's Reyataz, and Johnson & Johnson's Prezista. The increased concentration, which is currently achieved by taking AbbVie's booster Norvir, allows the protease inhibitors to be dosed just once a day.

In a clinical trial, Tybost was shown to be non-inferior to Norvir when the drugs were combined with Reyataz and Gilead's Truvada. Without any efficacy advantage, it's hard to see patients switching from Norvir to Tybost if the former is working for them. Gilead might be able to use its marketing muscle to promote sales for new patients, but most of them start on all-in-one combination pills like Stribild and Atripla.

Vitekta is an integrase inhibitor, which prevents the HIV DNA from being integrated into the DNA of the cells it infects. Merck also has an integrase inhibitor, Isentress, which worked as well as Vitekta in a phase 3 trial with other medications. Vitekta only has to be taken once a day, which is more convenient than Isentress' twice-a-day regimen. Unfortunately, AbbVie's Tivicay, which is in the same class, only has to be taken once a day, also, so it's not clear Vitekta has much to offer over the drugs doctors have been prescribing.

Gilead might be able to generate some sales of the individual drugs from patients coming off of Stribild because of side effects. Doctors may be interested in changing just one component at a time to figure out the issue, which they can do now that the individual drugs are available.

Of course, that probably doesn't include a lot of patients. Combine that fact with its limited use in other combinations, and you'll likely find the explanation as to why Gilead didn't bother to announce the approvals.

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The article Gilead Sciences, Inc. Got 2 Drugs Approved, and Didn't Bother to Tell Anyone originally appeared on Fool.com.

Brian Orelli has no position in any stocks mentioned. The Motley Fool recommends Gilead Sciences and Johnson & Johnson. The Motley Fool owns shares of Gilead Sciences and Johnson & Johnson. 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 $83 Billion Threat to the Housing Market

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The link between high levels of student loan debt and a moribund housing recovery has been the subject of discussion for some time, as a dearth of first-time homebuyers push homeownership rates down to the lowest level in almost 20 years.

Now, John Burns Real Estate Consulting has alerted its clientele to a dismal reality: Student debt will cost the housing industry approximately $83 billion in sales in 2014. With college debt increasing by about 6% every year, there is every reason to believe this trend will continue, and probably worsen. 

Mortgages: Debt matters more than ever
The number-crunching involved in the analysis puts some real heft behind the argument that student debt is holding housing back. The report estimates that heavy college debt will reduce real estate sales by 8% for this year, and that households that pay $750 or more for college loan debt each month are priced out of the housing market entirely.


This makes sense, particularly with the new emphasis on debt-to-income ratios baked into the new qualified mortgage rules. A recent analysis from The Wall Street Journal, using information provided by mortgage lender LoanDepot.com, highlighted this issue. When parsing mortgage applications of those with student loan debt, approved borrowers had monthly college loan payments of about $300. Mortgage applicants paying nearly $500 per month, however, were usually denied.

This situation is a recent phenomenon that grew out of mortgage rules instituted in January of this year, meaning there is little chance that the situation will improve in the future.

A domino effect
The most discouraging aspect for the housing market is that those with the highest student debt burden are the millennials, those aged 18 to 34 years -- an age group that encompasses the bulk of the first-time homebuyer market. The John Burns report notes that 35% of households younger than age 40 pay more than $250 per month on student loans, compared with 22% in 2005. Each $250 paid toward student debt reduces the amount these households can borrow for a home by a minimum of $44,000.

The lack of first-time buyers is hurting the housing recovery in other ways, too. With fewer buyers for lower-priced starter homes, midmarket households looking to trade up to a more expensive residence are stymied. While higher prices and constrained inventories likely affected the ability of younger buyers to purchase a home, student debt played a part, as well. Only 22% of 30-year-olds with student debt also held a mortgage in 2013, down from nearly 34% just five years ago.

Is housing doomed? Some analysts say the market will pick up in coming years as the economy improves and wages rise for college graduates. Millennials themselves are expressing more interest in owning a home someday, with 65% recently agreeing that homeownership embodies the American Dream. But with interest rates on the rise and student loan debt escalating, many will continue to find that dream unattainable.

The mortgage-interest deduction isn't the only tax loophole you should know about
Recent tax increases have affected nearly every American taxpayer. But with the right planning, you can take steps to take control of your taxes and potentially even lower your tax bill. In our brand-new special report "The IRS Is Daring You to Make This Investment Now!," you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

The article The $83 Billion Threat to the Housing Market 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.

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Jeep Wrangler: Radical Changes Are Coming. Will Fans Freak Out?

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The four-door Unlimited model was the biggest change to Jeep's iconic Wrangler in years. But the next generation of the Wrangler may need to be very different to survive, Fiat's CEO says. Source: Fiat Chrysler.

Jeep fans, take note: Fiat Chrysler CEO Sergio Marchionne is threatening to mess with your icon. 


Marchionne said this week that the next-generation Jeep Wrangler may need to undergo radical changes in order to survive. It may be based on a carlike unibody platform, have a small turbocharged engine, and have aluminum body panels instead of the current steel.

And it may not be built in Toledo, where Wranglers have been built for decades. 

Would such a vehicle even be worthy of the Wrangler name?

The iconic Wrangler is the Jeep brand
The Jeep Wrangler is, of course, the heart and soul of the Jeep brand, something that Fiat Chrysler executives acknowledged when they laid out their plans for Jeep earlier this year.

But in recent years, the Jeep brand has evolved. Other Jeeps now have "soft-road" versions, versions that aren't quite capable of the off-road feats that have defined the Jeep brand for decades. 

That has helped draw a lot of new customers to the brand. Softer Jeep SUVs can be more comfortable to drive on normal roads than the serious off-roaders that Jeep has long built. Of course, Jeep has made sure to offer a "Trail Rated" version of each new Jeep, one that carries on the brand's tradition of serious off-road prowess.

It's working: Jeep sales are up a whopping 45% this year, thanks in big part to the success of the unibody Cherokee.

New unibody Jeeps like the Cherokee have shown that they can be capable off-roaders. Source: Fiat Chrysler.

Jeep enthusiasts have grudgingly accepted this compromise -- partly because the "Trail Rated" Jeeps have turned out to be pretty good, but also because there's still one Jeep that hasn't gone soft: The Wrangler. 

The Wrangler is still built with traditional body-on-frame construction that provides the right stiffness and clearance for its extremely capable suspension. It's still built with rugged steel body panels and torquey, naturally aspirated engines -- and it's still built in the Toledo, Ohio factory that has turned out Wranglers for many years.

For all of the changes that have come to the Jeep brand, the Wrangler is still the Wrangler -- at least for now. Source: Fiat Chrysler.

All of that is extremely important to Jeep enthusiasts. In many eyes, the purity of the Wrangler is what makes Jeep "Jeep."

But what Marchionne said this week is that all of that might be about to change.

Why even the Wrangler may have to evolve to survive
Here's the problem: The next Wrangler has to get better fuel economy than the current model. 

Current Wranglers are powered by Chrysler's "Pentastar" 3.6 liter V6. It's a good engine with plenty of power: 285 horsepower and 260 lb-ft of torque. But even the smaller of the two Wrangler models, the two-door version, only gets 17 miles per gallon in the city and 21 on the highway. (The bigger four-door Wrangler Unlimited is rated at 16 city/21 highway.) 

Part of the problem is weight: A two-door Wrangler weighs almost 3,800 pounds. The Wrangler Unlimited is about 300 pounds heavier. Wranglers aren't huge vehicles, but all of that sturdy steel adds up. 

Reducing the Wrangler's weight would allow Fiat Chrysler to fit a smaller engine. Done right, that would improve fuel economy without sacrificing performance. A turbocharged engine could add additional improvement: Simply put, modern turbos allow a small engine to give big-engine power when you need it, while using less gas in normal day-to-day cruising.

One way to reduce the Wrangler's weight without reducing its size would be to build much of it out of aluminum. Another would be to shift from its current body-on-frame construction to a lighter "unibody" platform -- to build it like a car rather than like a truck, in other words. 

But building such a Wrangler would require hundreds of millions of dollars' worth of changes to the Wrangler's current factory in Toledo, and those changes may not be in cash-strapped Fiat Chrysler's budget. It's likely that an aluminum unibody Wrangler would be built in one of Fiat Chrysler's other North American factories, Marchionne said.

Now, none of this means that the Wrangler will be ruined. Jeep has shown with its other models that it can still get Jeep-like off-road performance with unibody construction. 

But it will definitely be different, even if it doesn't look much different on the outside. Will Jeep fans buy it?

There's a precedent for these kinds of changes
These are probably the same questions that Ford executives were asking as they began the redesign of the Blue Oval's own iconic product, the F-150 pickup.

As you've probably heard by now, the 2015 F-150 will have body panels made of aluminum instead of steel. It'll be offered with a smaller engine, Ford's 2.7 liter "EcoBoost" turbo V6 -- though more powerful options will be available. And the weight savings are significant: It'll be as much as 700 pounds lighter in some versions than the outgoing truck.

Ford has spent months reassuring its customers that the new aluminum F-150 is a properly tough and brawny Ford truck. That careful groundwork looks set to pay off. Source: Ford Motor Company.

Ford's leaders felt like this was something they had to do. Corporate average fuel economy regulations are going to get a lot tougher over the next few years. Ford CEO Mark Fields has said that the new F-150 will actually help Ford's corporate average fuel economy ratings, rather than holding them back as past versions have.

But there's no getting away from it: These are radical changes for America's top-selling vehicle, and they're very risky ones: This is Ford's most profitable and important product. It won't be on sale for a couple of months yet, so we don't know for sure how buyers will react. But Ford executives are very confident that it'll do well.

How a radical Wrangler could succeed
Of course, Ford has spent months laying the groundwork for its new truck in the market, talking in detail about the harsh field-testing it went through and its many improvements.

Ford's track record suggests that the new truck will probably be very good, and it'll probably sell very well. 

It's certainly possible for Fiat Chrysler to build a lighter, more efficient Wrangler that will also be very good and sell well -- and that will be accepted as a Wrangler, just as the new F-150 is  being accepted as a proper new Ford pickup. 

But the company will have to go to great lengths to sell it to its wary enthusiasts, just as Ford has with its new F-150.

Will they? We'll find out.

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.

The article Jeep Wrangler: Radical Changes Are Coming. Will Fans Freak Out? originally appeared on Fool.com.

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

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

 

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What Warren Buffett's House Can Teach You About Success

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Warren Buffett's house is the object of endless fascination when people learn about him -- and for good reason. Buffett is one of the richest people in the world; therefore, it's always surprising to learn that he's lived in the same house for most of his adult life.

Looking more closely, Warren Buffett's house can teach you a lot about success and what's important in life. Read on for more.


Warren Buffett's House.

Warren Buffett bought his house in Omaha, Nebraska in 1958 for $31,500. The house is stucco, and has five bedrooms and 2.5 baths. Warren Buffett has called his house "the third best investment" he ever made, behind only wedding rings.

In reverse order, here are the biggest lessons we can learn about success from Warren Buffett's house.

5. Wealth is about what you don't see
What does Warren Buffet's house tell you about how much he's worth? Nothing. What does the house below tell you about how much the owner is worth?

Source: Nine Homes.

Still nothing. The above is a depiction of the soon to be completed largest home in America. It's the subject of the documentary, "The Queen of Versailles," which talks about how the owners fell into financial trouble during the financial crisis.

Most people's idea of wealth isn't someone who has a million dollars in the bank; it's of someone spending a million dollars. Too often, people confuse the trappings of wealth with actual wealth.

Warren Buffett is now worth an estimated $68 billion. You can't tell how much someone is worth from his or her house or car. Wealth is about what you don't see.

4. Why you buy a house
Warren Buffett's house is the same house he originally bought; but it was not a financial investment in the sense that Warren's goal wasn't appreciation in value. Warren bought a house he could afford, and has called it one of his best investments because, "My family and I gained 52 years of terrific memories with more to come." Warren didn't lose sight of the idea that a home is for living in rather than for speculation on housing prices. When you mix the two, bad things can happen.

3. Possessions don't bring happiness
One thing you may notice about Warren Buffett's house is that there is only one. As Warren Buffett wrote in his Giving Pledge:

Some material things make my life more enjoyable; many, however, would not. I like having an expensive private plane, but owning a half-dozen homes would be a burden. Too often, a vast collection of possessions ends up possessing its owner. The asset I most value, aside from health, is interesting, diverse, and long-standing friends.

2. Stocks are better investments than real estate in the long run
"All things considered, the third best investment I ever made was the purchase of my home, though I would have made far more money had I instead rented and used the purchase money to buy stocks," says Buffett.

On a purely financial level, data shows that, over the long term, houses do not return much above inflation, while the stock market generally does. Robert Shiller has collected home price data in the U.S. as far back as 1890. On an inflation-adjusted level, home prices have not risen much.

Source: Robert Shiller.

Compare that to the stock market where, during the past 50 years, stocks have crushed inflation.

^SPX Chart

^SPX data by YCharts.

1. Success has nothing to do with the house you live in
There are many definitions of success, but the size of your house has nothing to do with it. While life will have its ups and downs, continuous learning, thinking for yourself, developing good habits, focusing on the long term, and having fun on the journey, is what you need to set yourself up for success in life. It's as simple as that.

Warren Buffett: This new technology is a "real threat"
At the recent Berkshire Hathaway annual meeting, Warren Buffett admitted this emerging technology is threatening his biggest cash cow. Buffett's fear can be your gain. Only a few investors are embracing this new market, which experts say will be worth more than $2 trillion. Find out how you can cash in on this technology before the crowd catches on, by jumping onto one company that could get you the biggest piece of the action. Click here to access a free investor alert on the company we're calling the brains behind the technology.

The article What Warren Buffett's House Can Teach You About Success originally appeared on Fool.com.

Dan Dzombak can be found on Twitter @DanDzombak, on his Facebook page DanDzombak, or on his blog where he writes about investing, happiness, life, and success. 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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3 Cheap Stocks With Big Dividends for October

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If Annaly Capital Management , ARMOUR Residential REIT , and American Capital Agency's  double-digit dividend yields weren't exciting enough, as asset-based businesses, mortgage REITs trade based on their price-to-book value, and all three stocks are currently trading at a significant discount to their historic book values.

NLY Price to Book Value Chart


However, because some stocks are cheap for good reason, today I'll dig into why these companies are trading at such discounts, identify the upside, and determine which high-yielding option is the best buy today.

Why are they so cheap?
As "agency" mortgage REITs, Annaly, American Capital Agency, and ARMOUR make short-term borrowings to invest in longer-term residential mortgage-backed securities -- pools of housing debt -- packaged by Fannie Mae, Freddie Mac, or Ginnie Mae.

While these securities are guaranteed against defaults, they are extremely vulnerable to rising interest rates that lower the market value of currently held securities. Moreover, because they borrow based on short-term rates, an increase in borrowing costs will cut into profitability.

To put it plainly, the threat of rising interest rates is like a punch in the face. If you see it coming and do nothing, it is going to hurt a lot. Cover your face, however, and you can limit some of the damage. And that's really what we've seen from these companies over the past year -- an attempt to cover their faces.

This has involved lowering leverage -- borrowing less compared to equity -- buying shorter duration assets, and using derivatives to exchange their floating interest rate payments for fixed-rates. The downside to these defensive moves, however, has been limited profitability and dividend cuts -- ultimately, leading to a cheaper valuation.

NLY Dividend Chart

What's the upside?
ARMOUR Residential REIT: ARMOUR's extremely low valuation is, in my opinion, it's most interesting quality. I have gone into more depth on ARMOUR recently, but the abridged version is that nothing about the company's past performance, assets, or investment approach, excites me.

Annaly Capital Management: Unlike ARMOUR and American Capital Agency -- who went public following the financial crisis -- Annaly has been around since 1997, and is one of the few mortgage REITs that can boast surviving more than one market cycle. In fact, Annaly's stock has historically performed best immediately following a recession -- a time when most companies are still scrambling to put the pieces back together. 

Also, with the acquisition of CreXus in January 2013, Annaly has diversified into owning commercial real estate. Although the $1.6 billion in commercial assets only accounts for 12% of the company's equity, the high-yielding investments are an intriguing part of their business and will be something to watch. 

American Capital Agency: Lead by President and CIO Gary Kain, American Capital Agency has what I believe is one of the best management teams in the sector. Whether it's investing in competing mREITs stock, switching between 15-year and 30-year mortgages when opportunity presents, or operating with a larger duration gap -- difference between length of assets and liabilities -- to benefit from falling interest rates, American Capital Agency always seems to stay one step ahead, and it's the reason they have been one of the top performing agency mortgage REITs over the last five years. 

The best cheap mortgage REIT 
With reduced books values, smaller dividends, and uncertainty surrounding rising interest rates, none of the stocks mentioned today have been unfairly beaten down. With that said, buying into uncertainty tends to go with the territory when you're looking at cheap stocks. 

So, while I do believe the road ahead will be difficult, I'm betting on American Capital Agency's management to best navigate the storm. I think Annaly's track record earns it second best, and -- despite their incising valuation -- I see ARMOUR as a fairly distant third.

Top dividend stocks for the next decade (Hint: It's not mortgage REITs) 
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.

The article 3 Cheap Stocks With Big Dividends for October originally appeared on Fool.com.

Dave Koppenheffer 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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Cleveland May Be Better Off Without Its United Airlines Hub

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In early February, news leaked that United Continental was about to ax its Cleveland hub. This had been long feared by city leaders and business figures, as Cleveland was United's smallest domestic hub, and was located within 400 miles of three other (larger) United hubs.

Since United announced its hub closure, other airlines have rushed to fill the vacuum. Ultra-low-cost carrier Frontier Airlines has led the way. Last month, Spirit Airlines -- the top ultra-low-cost carrier in the U.S. -- announced plans to start service to Cleveland, too.


Spirit Airlines is entering the Cleveland market for the first time in early 2015. Image source: Spirit Airlines.

As a result, Cleveland may actually find that it is better off without the United hub. It's true that Cleveland has lost nonstop service to several dozen airports. However, most of these were small-to-midsize cities. By contrast, Cleveland is seeing a boom in competition on the routes that most travelers want to fly. This will lead to lower prices, stimulating travel demand.

United gives up on the Cleveland hub
On Feb. 1, United CEO Jeff Smisek sent a letter to employees stating that United planned to cut its capacity in Cleveland by approximately 60% by June. Smisek attributed the end of hub operations in Cleveland to a combination of sustained losses there and pilot shortages at several of United's regional airline partners.

Despite the downsizing, United decided to keep Cleveland as its largest nonhub market. United now operates about 72 peak-day departures from Cleveland to 20 destinations, serving all of United's domestic hubs, as well as several key business and leisure markets. (At the time of the announcement, United had nearly 200 peak-day departures in Cleveland.)

United has significantly cut its flight schedule in Cleveland.

Many in the Cleveland area bemoaned the loss of the United hub as a big blow to the regional economy. Indeed, the hub closure led to several hundred job losses at United, not to mention job losses at other businesses that depended on the hub. Furthermore, losing nonstop service to dozens of cities could make Cleveland a less attractive place to do business.

Other carriers swarm in
However, the flip side of losing the United hub was gaining new competition. In the last eight months, several airlines have added flights in Cleveland or announced plans to do so. The biggest increases have come from ultra-low-cost carriers Frontier Airlines and Spirit Airlines.

Frontier's growth in Cleveland has been the most remarkable development. At the beginning of February, Frontier operated just three routes from Cleveland: serving Denver, Cancun, and Punta Cana. It also had plans to start service to Trenton, New Jersey, later that month.

Within less than two weeks, Frontier was ready to announce new year-round service to Orlando and seasonal service to Seattle. A month later, it added six more cities: Raleigh-Durham, Atlanta, Tampa, Fort Lauderdale, Fort Myers, and Phoenix.

Frontier has continued to announce new routes from Cleveland in the ensuing months. These have targeted five large markets: Chicago, Dallas/Fort Worth, Las Vegas, Washington, D.C., and New York. On the flip side, it has also reduced service on some routes with lower demand.

Frontier now serves almost as many destinations from Cleveland as United.

A little more than a week ago, budget leader Spirit Airlines announced its own plans to conquer the Cleveland market. Between January and April, it will start year-round service to Orlando, Fort Lauderdale, Dallas/Fort Worth, Las Vegas, and Los Angeles, as well as seasonal flights to Fort Myers, Tampa, and Myrtle Beach.

Prices will fall dramatically
For Q1 of 2014, Cleveland Hopkins Airport had the sixth highest fares -- adjusting for route length -- out of 121 airports tracked by the Department of Transportation. For years, United's dominant position has kept potential competitors away, allowing United to keep fares high.

The demise of United's hub in Cleveland is also proving to be the end of its status as a high fare airport. Frontier and Spirit have been offering promotional fares as low as $15 to build buzz about their growth in Cleveland. They won't sell tickets at such low prices for long, but having ultralow-cost carrier competition on 15 to 20 routes will keep a lid on airfares in Cleveland.

This reduction in airfares will help Cleveland-area travelers save a lot of money on air travel, particularly because Frontier and Spirit are attacking routes with high leisure demand. Low fares should also help stimulate more travel to Cleveland, bringing more tourist dollars to the city.

More flights vs. lower fares
It's difficult to weigh the benefits of having nonstop flights to more destinations and high fares against the alternative of having fewer nonstop flights but lower fares. Businesses are the main beneficiaries of having a wide array of nonstop flights. Leisure travelers tend to care a lot more about price.

While losing nonstop flight options can inconvenience business travelers, it only becomes a problem for the broader community if businesses start to leave. (One prominent example is Chiquita's decision to move from Cincinnati to Charlotte, a city with many more flight options.)

So far, this hasn't happened in Cleveland. Furthermore, a fair number of midsize U.S. cities have lost airline hubs in the last two decades, including Pittsburgh, St. Louis, Memphis, Nashville, and Columbus (among others). None of these cities has seen a devastating loss of business activity from the loss of its airline hub.

On balance, most people in Cleveland seem to be better off with the new state of affairs: fewer but cheaper flights.  For now, at least, Clevelanders should breathe a sigh of relief and enjoy the low fares!

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The article Cleveland May Be Better Off Without Its United Airlines Hub originally appeared on Fool.com.

Adam Levine-Weinberg is short shares of United Continental Holdings. 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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4 Banks With Sketchy Dividends

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Dividends are great, as long as the company can continue paying them. When capital or cash flow runs low, dividends become a luxury that the business can no longer afford. 

A strong dividend stock, then, is one that has sound business and financial fundamentals to protect that dividend from unforeseen economic shocks. A weak dividend stock, not surprisingly, is the opposite. 

Today I have identified four stocks that are paying more than industry-average dividend yields, but each has characteristics that could put that dividend in jeopardy. 


An inefficient bank stock is a bank stock asking for trouble
Up first we have Old National Bancorp , a $10.4 billion regional bank headquartered in Evansville, Ind. Currently, Old National yields a dividend yield of 3.4%, per data from S&P Capital IQ.

Source: Company website.

The trouble for Old National is its efficiency, measured by the bank's efficiency ratio. The efficiency ratio is calculated by the bank's non-interest expenses into its net revenue. The lower the results ratio, the better. Old National currently sports a 75.6% efficiency ratio as of June 30. For context, the FDIC reports that at the same quarter end, the average efficiency ratio for banks with greater than $10 billion in total assets is 59.5%.

For Old National, this means that for every dollar of revenue, the bank has at least $0.15 less than the average bank to pay taxes, buy back shares, or pay its dividend. In other words, money is tight.

IberiaBank Corp. is in a similar situation. The bank's dividend currently yields 2.1% and has an even worse efficiency ratio than Old National does.

IberiaBank reported an efficiency ratio of 79% for the second quarter. On average, IberiaBank has $0.20 less per dollar of revenue to potentially use on a dividend.

IberiaBank does have one advantage over Old National: It has just one-third the level of problem assets on its balance sheet as Old National. Problem assets are loans that are severely past due plus foreclosures. WIthout those problem assets bogging down the bank, Iberia has a better shot at improving its operations.

Excess leverage puts everything at more risk, including the dividend
Banks are, by their very nature, highly leveraged. A typical bank balance sheet will have about 10% equity and 90% debt. That means that if a typical bank sees the value of its assets drop by only 10%, then all of the company's equity is wiped out. 

Don't forget, that scenario is for the typical bank. For a bank with even more leverage, the risk is that much greater.

Enter the Toronto-Dominion Bank . At first glance this bank looks fantastic. Its return on equity was 15.5% in the second quarter, its dividend yields 3.4%, and its efficiency ratio is an impressive 52%. However, to accomplish those great returns, the bank employs an assets-to-equity ratio of 16.8. That's a lot of leverage and a lot of risk.

The Bank of Hawaii is a similar case. The bank's return on equity is better than TD Bank's at 16%, and its efficiency ratio is in line with industry averages at 58%. The bank's dividend yield is currently 3.1%. 

But once again, the bank uses a ton of leverage to boost those returns, though not as severely as TD Bank. The Bank of Hawaii's assets-to-equity ratio is still over 14, though.

Both of these banks otherwise have very attractive looking financials, and it seems that up until this point, using that leverage is working out fine. The problem, of course, doesn't happen when business is booming; it's when the economy hits a snag that today's success become tomorrow's losses. 

The key is to know the risks
To be clear, I am not saying that any of these four banks will imminently cut their dividends. My objective here today is to merely point out a few red flags that every investor should consider.

Dividends can be paid only when a company has adequate profitability and capital. These banks have weaknesses that could create problems in those two exact categories -- either by having an inefficient operation that hinders profitability or significant leverage that could put capital at risk.

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.

The article 4 Banks With Sketchy Dividends originally appeared on Fool.com.

Jay Jenkins has no position in any stocks mentioned. The Motley Fool owns shares of Bank of Hawaii. 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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Is VIVUS Inc. a Short Sell?

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Short selling is a high risk, high reward investing strategy that requires a rock-solid investing thesis to pull off successfully. Even then, short sellers often guess wrong and pay dearly in the form of a so-called "short squeeze."

Healthcare and biotech stocks tend to attract short sellers in droves because they often have a premium built into their share prices that reflects the commercial potential of their clinical pipelines. In other words, biotechs tend to trade at rich premiums for reasons that could evaporate in a hurry due to a clinical or regulatory setback. 

VIVUS is presently the fourth most shorted stock in the healthcare sector, and for good reason. Specifically, the company's flagship diet drug, Qsymia, has been an unmitigated disaster in terms of its commercial performance to date. Despite over 30% of Americans meeting the criteria that define the term "obese," this new generation of weight-loss pills, that includes Qsymia, appear to have garnered less than 1% of their potential target market based on my estimates.


Putting these numbers into context, the combined sales of Arena Pharmaceuticals' diet drug Belviq and Qsymia probably won't even break the $100 million mark this year. Qsymia's commercial woes have subsequently crashed VIVUS's share price and attracted short sellers in large numbers: 

VVUS Chart

Given the nearly 60% drop in VIVUS's share price year to date, I think it's a good time to pose the question: Is this stock still a good short candidate or is the bottom finally here? With that in mind, let's take a look at the company's prospects moving forward.

Qsymia's task isn't going to get any easier with new drugs coming to market
Last month, the Food and Drug Administration approved Orexigen Therapeutics' diet pill Contrave and endorsed Novo Nordisk's injectable obesity treatment called liraglutide. Although Qsymia still appears to be king of the hill in terms of efficacy, I think these new treatment options will negatively impact Qsymia sales.

VIVUS has long sought a top flight marketing partner for Qsymia but has failed thus far in inking an agreement. Arena and Orexigen, by contrast, have first rate sales teams financed by major pharma partners. And Novo Nordisk is no slouch when it comes to marketing either. In sum, I think Qsymia will continue to be marginalized due to a lack of a top-notch marketing partner, and newer, well-financed, competitors entering the obesity game. 

Can Stendra save the day?
VIVUS's erectile dysfunction drug, Stendra, was approved by the FDA nearly two years ago. And despite licensing the drug to stronger marketing partners like Auxilium Pharmaceuticals, , the drug hasn't made much of an impact on VIVUS's bottom line so far. In the first half of this year, for instance, VIVUS booked only $23.5 million in milestone and licensing revenue from Stendra. 

On the bright side, VIVUS and Auxilium recently announced that the FDA approved Stendra's label expansion application, allowing the drug to be taken only 15 minutes before sex. This could help Stendra gain market share against entrenched blockbusters like Viagra and Cialis. That being said, the jury is still out on whether Stendra can turn the tide for VIVUS. 

Foolish conclusion
VIVUS's dramatic fall this year has shares valued close to the company's cash position, based on my estimates from last quarter's numbers. That's a pretty bearish valuation for any company, especially a biopharma. Even so, I tend to agree with the bears that Qsymia will never be much of a revenue generator, leaving Stendra as the main value driver going forward.

Like Qsymia, Stendra has oodles of commercial potential based on the sheer size of its target market. So, the real question is whether the drug can realize its potential?

My view is that Stendra's label expansion won't be good enough of a reason for consumers to switch brands en masse, making it unlikely that the drug will ever claw a significant portion of market share away from Cialis or Viagra. As such, I expect VIVUS's shares to continue their slide for the foreseeable future.

This coming blockbuster will make every biotech jealous
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The article Is VIVUS Inc. a Short Sell? originally appeared on Fool.com.

George Budwell 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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Better Dividend Stock: Realty Income Corp. or American Realty Capital Properties Inc.?

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With high yields and growing dividends paid monthly, American Realty Capital Properties  and Realty Income  can turn your portfolio into a cash-generating machine.

Bet on the wrong management team, however, and your cash machine can become a money pit. To determine the better dividend stock, I'll dig into which management consistently follows through on its mission, intelligently allocates capital, and promotes and nurtures competitive advantage.

Mission
ARCP:
 "[T]o generate monthly dividends from a durable and predictable level of monthly rents paid by primarily investment grade and other credit-worthy tenants,and to provide significant growth potential." 


Despite only going public in September 2011, ARCP is the largest net-lease REIT, has the highest percentage of investment grade tenants -- normally meaning of stronger credit quality -- and has the lowest percentage of rent concentrated in its top 10 tenants. Put it all together, and it creates a durable and predictable monthly dividend. 

Source: Company filings.

The company has also shown its growth potential, increasing total properties threefold, from 1,329 at the end of 2013 to 4,429 today. 

"Since our founding in 1969, our mission has been to provide our shareholders with dependable monthly dividends that increase over time." 

For Realty Income, the proof is in the pudding. The company has paid a dividend every month for 44 years and has increased its dividend 77 times since 1994 -- which works out to a dividend increase every quarter for 20 years. 

The company has been successful simply because of its focus on buying great properties, leasing them to good businesses, and holding those properties for the long term.

Smart capital allocation
Because REITs pay out 90% of their earnings in dividends, raising capital and allocating it appropriately is essential to growing over time. By looking at each companies' return on equity, investors can get an idea of how well each company is turning equity into adjusted funds from operations, or AFFO, a more useful profitability metric for REITs.  

The illustrated time period is short, but it does a good job of demonstrating the stability and consistently of Realty Income, as well as ARCP's transition into the largest net-lease REIT. In 2014 alone, ARCP grew total assets by $13.5 billion -- Realty Income did $887 million in the same time -- however, since returns haven't caught up to the massive increase in total equity, the company's ROE has fallen dramatically. 

ARCP is a great example of why growth may not always be beneficial for shareholders. To pay off some of the debt created to fund these acquisitions, ARCP -- after explicitly telling investors that its stock price was undervalued -- issued 138 million new shares of stock this past May. 

Then on June 3, the company received a scathing letter from Marcato Capital Management -- which at the time owned 21.8 million shares -- stating that it was "disturbing" that the company would dilute shareholder value by selling shares at a discount to their true value. The rapid growth was making the company confusing to evaluate, and the stock price was being unfairly beaten down, Marcato charged.

If ARCP's investments pay off, ROE will probably improve over time. However, it remains a question whether such rapid expansion was truly in shareholders' best interest.  

Competitive advantage
If nothing else, acquisition growth has helped ARCP create a competitive advantage.

As the largest players in the space, ARCP and Realty Income are more diverse and therefore less susceptible to late payments, non-payments, regional economic woes, or tenants that don't renew their leases. Also, because these are large, stable companies that receive rent from strong, creditworthy businesses, they can borrow at lower costs than their competitors. 

However, as ARCP's rapid growth has proved, size isn't a durable competitive advantage in the REIT space. For both companies, their true competitive advantage lies in their management's abilities. That's one of the major reasons I like Realty Income's track record over ARCP. 

The better dividend stock
In most cases, it's east to say that Company A is better than Company B. In this case, however, I believe both companies are good investments, given the right investor.

If you're looking for a higher-yielding stock -- 8% for ARCP versus 5.3% for Realty Income -- with big upside, and you're willing to overlook the company's limited track record, ARCP may be the stock for you. With that said, for my money, I like Realty Income's more stable and consistent approach that has proved successful for decades. So while I believe both business have their advantages, I believe Realty Income is the better dividend stock and a strong long-term investment.

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.

 

The article Better Dividend Stock: Realty Income Corp. or American Realty Capital Properties Inc.? originally appeared on Fool.com.

Dave Koppenheffer 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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Get Free College Tuition Abroad -- but Watch for These Pitfalls

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Last year, a British study showed that 56% of American college students indicated a desire to study abroad - mostly so they could experience foreign culture and have some fun.

There is, however, another good reason to pursue your college career in a country other than the United States: Tuition is free in many foreign countries, even for American citizens. Still, only about 1% of all U.S. college students study abroad. 

While the benefits of living and studying in another country are many, there are also disadvantages - which may account for the low percentage of students who actually study abroad. If the idea of living in another country while paying no tuition costs appeals to you, make sure that you understand the drawbacks of doing so.


Just to get you started, here are a couple of downsides to consider.

Language barriers
Although many respondents to the aforementioned study did not consider language differences to be much cause for concern, being monolingual could cause problems - particularly when attending lectures that will be such a large part of your routine.

Many European countries, luckily, have added thousands of English-based courses and majors in the past several years. Germany has developed over 1,000 such course offerings at many of its universities, which generally offer free tuition to non-citizens. 

Other countries that don't charge international students tuition, such as Brazil, Czech Republic, and Panama, however, only offer courses taught in their dominant languages: Portuguese, Czech, and Spanish, in that order. 

Expenses can be high
Even with tuition-free study, expenses in your host country can add up. For example, though Norway offers free tuition to most students as well as English-language coursework, living expenses can be as high as $15,000 annually. 

The costs of living internationally can add up if you're not careful. Those in the know suggest making a budget early on to manage expenses, and purchasing a cheap, local cell phone, rather than a pricey smartphone, to keep in touch with people back home.

As for credit cards, shop around before you leave to make sure you get one especially suited for students studying abroad. Generally, you will do best with big banks with an international presence. NerdWallet suggests Bank of America's BankAmericard - which has secure chip-and-PIN technology, and no foreign transaction fees.

Don't forget travel costs, either. Air fare can be very pricey for international flights, which may limit the trips home you will be able to afford each year. 

Research and planning ahead is crucial
All this is not to say that pursuing your college degree outside of the U.S. isn't a worthwhile endeavor. With the right planning, you may very well save money by studying abroad - not to mention the priceless education you will receive by immersing yourself in another culture for several years. As with any type of investment in your future, however, due diligence is required to make sure that the decision you make is the right one for you.

Bank of America + Apple? This device makes it possible.
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The article Get Free College Tuition Abroad -- but Watch for These Pitfalls originally appeared on Fool.com.

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

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If You're Worried About Going Broke in Retirement, Read This

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According to a recent Wells Fargo survey, nearly half of all U.S. investors are concerned about running out of money in retirement.

Source: 401kcalculator.org via Flickr.


Some people worry that they don't have enough savings, while others are simply afraid to invest in the stock market and are earning little or no returns on their nest eggs.

Should you be worried about going broke during retirement? It depends on your savings and expectations. But with some solid planning, you should be able to put many of your retirement-finance fears at ease. Here's how to make sure you outlive your retirement nest egg.

Have realistic income and lifestyle expectations
If you have $1 million in savings, expecting to draw an annual income of $100,000 from your investments in perpetuity is unrealistic. Many experts advocate following the "4% rule," which essentially says that if you withdraw 4% of your assets during your first year of retirement, and then adjust for cost-of-living increases after that, your savings have a good chance of lasting for your entire retirement.

While I agree that this is generally an effective strategy, the problem is that this rule assumes your expenses will stay relatively constant. Unfortunately, the opposite is generally true in retirement. In a given year, you could have a lot of unforeseen medical expenses, which could require a larger withdrawal. Rather than following a particular rule to the letter, be flexible. If the market performs poorly one year, it may be a good idea to cut down on your expenses and give your portfolio a chance to rebound. And if your investments have a particularly good year, maybe you can treat yourself to a little more.

Don't be afraid of stocks, but avoid overpriced bonds
This holds true even as you approach retirement, but it's especially true for younger investors (those with 20 years or more until retirement). Conventional wisdom says you should start with most of your money in stocks and then shift to lower-risk assets like bonds as you get older. Generally, this is true, with a couple of small modifications.

First, you should never completely exit stocks, which are your primary growth engine. The aforementioned survey found that the average investor has just 38% of their retirement savings invested in stocks. This is far too low.

One traditional guideline is to take your age and subtract it from 100 to find out what percentage of your investments should be in stocks. But with retirees living longer and longer, a better guideline may be 110 minus your age. For example, if you're 30, you should have about 80% of your retirement savings in stocks. If you're 70, then 40% is a sensible allocation to stocks. But bear in mind that your risk tolerance should play a role in your decision. If having nearly half your retirement funds in stocks will give you ulcers, then feel free to reduce your exposure for your own peace of mind.

History has shown that, over any economic cycle, stocks outperform every other asset class. So retirees and investors nearing retirement shouldn't have too much exposure to stocks; but for those with a substantial amount of time to ride out market highs and lows, stocks are the best place for the majority of your retirement investments.

Second, shifting some of your money to bonds and other fixed-income instruments should be a deliberate and timed process; you shouldn't start buying them simply because you've reached a certain age. There are good and bad times for buying fixed-income investments, and they have nothing to do with your age. A better idea is to buy bonds when interest rates are high and avoid them when interest rates are low (like they are now).

As of this writing, the average yield for 30-year Treasuries is 3.28%. While this is definitely higher than the record lows seen in 2012-2013, it's still low on a historical basis, as you can see in the chart below.

30 Year Treasury Rate Chart

As rates rise, the value of bonds drops. It's not a one-to-one formula, but longer-expiration bonds are affected more. For instance, if 30-year rates were to rise to 4%, the market value of existing Treasuries would fall in order to produce the 4% yield that investors now expect.

Once the Fed starts raising rates and bond yields rise substantially, it may be a good idea to shift some money to bonds in order to lock in high rates. However, in the meantime, there's too much potential to see your principal erode.

Boost your savings
Of course, the most surefire way to make sure you have enough money to last through your retirement is to save up as much as possible before you leave the workforce. Even if you're having a tough time finding extra money to set aside, something as simple as increasing your 401(k) contributions at work could make an enormous difference. And it's a good idea to start thinking about your current expenses and where you could possibly cut back to find some more money to set aside. (Here, for example, are 15 things you could stop wasting money on).

The bottom line is that you shouldn't underestimate small increases in your retirement savings. Let's say that, as a cost-cutting measure, you decide to go out for dinner two fewer times per month, saving you $50 per month (or $600 per year). Over the course of 20 years, this small sacrifice alone would result in an extra $30,000 in retirement savings, assuming 8% average annual returns (the S&P has averaged 9.8% during the past 20 years).

So save a little more and set your investment portfolio up for success. This should produce a nice nest egg for your retirement. In addition, some smart budgeting should ensure that your money lasts at least as long as you do, if not longer.

How to get even more income during retirementSmart saving habits and Social Security play a key role in your financial security; but they are not the only ways to boost your retirement income. In our brand-new free report, our retirement experts give their insight on a simple strategy to take advantage of a little-known IRS rule that can help ensure a more comfortable retirement for you and your family. Click here to get your copy today.

The article If You're Worried About Going Broke in Retirement, Read This originally appeared on Fool.com.

Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Wells Fargo. Try any of our newsletter services free for 30 days. We 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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It's Entirely Possible to Fix & Flip 10 Homes at Once: Here's How

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Throughout most of the country, prices are rising, and investors are scrambling to find deals. My market in Colorado is no different, with prices rising 20% to 40% over the last two years.

Investors have come back in a big way since the housing market recovered, and it is definitely harder to find deals. However, I have still been able to buy fix and flips and rental properties in a very competitive market. I have no secret ninja techniques to find deals; I simply used solid fundamentals to buy properties well below market value.

How can I handle 10 flips at once?
If you read my recent articles about contractor problems, you will see it has not been smooth having 10 flips at once. However, I think I have greatly improved my business by having this many flips. I have added three contractors and started using an old contractor again who used to work with me. Having that many contractors will make my job so much easier, especially once I get caught up on all these houses. I have decided not to start my own contracting company yet, but that may be a future move.


The good news is three of my flips are on the market and under contract with closings all happening in October. I promised myself I would not buy any more flips or rentals until I sold some properties, but I just got a new one under contract yesterday! I decided it was OK to buy another since a couple of my current flips will be closed soon.

How have I been able to find fix and flips?
Nine of my current flips were bought off the MLS, and one was through direct marketing. There are still deals on the MLS, no matter what anyone tells you!

You have to act very fast, and in some cases be willing to do a lot of work, but the deals are there.

Here is a list of my last ten purchases and how I bought them.

Related: My First Flip & Fix: Termites, Hauntings & A Foundation of Dirt

My last 10 purchases

House No. 1
This one I found through direct marketing. I have been sending hundreds of letters a month to probates and absentee owners.

House No. 2
This was a traditional sale on MLS. The home was built in 1857 and needed a lot of work. The buyers knew it needed work and liked my cash offer enough to close in 15 days with no inspection.

There were multiple offers, and I got the home $10,000 below list. It is being repaired now and should be on the market in a week or two.

House No. 3
This house was a short sale built in the 1940s on MLS. I had made an offer on it after another highest and best.

The bank approved my offer in May, and we closed in June. The house is almost ready to be listed and was bought $3,000 over list.

House No. 4
This house was a traditional sale owned by an investor on MLS. The owners were going to flip, but ran out of money.

I made a cash offer hours after it was listed, and they counter me and I accepted $15,000 below list.  House is gutted and sitting there waiting for a contractor to free up.

House No. 5
This house was for sale on MLS as an REO. It was priced super low, and I made an even lower offer. They asked for highest and best, and I made my cash offer with no inspection a couple thousand below list.

I could not believe I got it. Work is starting Monday on this one.

Related: How to Analyze a Fix and Flip: A Step by Step Case Study

House No. 6
This home was an REO on MLS that was priced super low. I made my cash offer about $17,000 more than asking price, and I won that one as well.

It is sitting waiting for a contractor to free up.

House No. 7
This house was an estate sale available on MLS. It came on the market active/backup, which means under contract. The contract fell through, and it came back on the market.

I made a cash offer that same day. I was notified of another offer, and I raised my offer to slightly above list and got the deal. This one is on the market and set to close next month.

House No. 8
This house was listed for very cheap on MLS, but I was on vacation when it came on the market. It was a traditional sale that went under contract before I could see it.

When I got back from vacation, the home came back on the market, and I made an offer about an hour later. My offer was countered, and I accepted the counter at $10,000 less than list. This home is closing next week.

House No. 9
This home was owned by a city and was for sale in MLS. It was listed very cheap, but was advertised as having no water, septic and possibly a squatter.

I made a full price offer the same day it was listed, and I got it. The home is being repaired: new well, electric, kitchen, drywall, windows, doors, flooring, paint, and insulation. This house was bought for $75,000 and will sell for close to $200,000.

House No. 10
This house was an estate sale listed on MLS, and I made an offer the first day it was listed. My offer was full price and accepted before any other offers came in. I put this house on the market, and it had two immediate offers, but the inspections showed major problems that my contractor missed.

I took the home off the market, made more repairs with a new contractor, raised the price and listed it Monday. It is now under contract.

What traits do you see in my offers?
If you see a common trend, it should be speed.

I make offers as soon a possible after I see a house. Being a real estate agent helps me do this, and saving commissions is nice as well.

I have lowered my standards on the amount of repairs a home needs, but I have kept the same profit margins I have always used. My average profit on my flips bought from $75,000 to $150,000 remains just over $30,000.

How many fix and flips are you working at the moment? How did you acquire it/them?

This article originally appeared on BiggerPockets.

Your cable company is scared, but you can get rich
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple.

The article It's Entirely Possible to Fix & Flip 10 Homes at Once: Here's How 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.

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The Biggest Threat Facing Johnson & Johnson

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Source: Johnson & Johnson

Johnson & Johnson is one of the globe's biggest healthcare companies. Its businesses include everything from Band-Aids to catheters, to cancer busting compounds. But Johnson's status as a dividend paying Goliath doesn't mean it's immune to pitfalls. So we asked some of our top analysts to weigh in with what they believe to be the biggest threats to Johnson going forward. Read below to learn what they think.


: A major story for Johnson & Johnson has been the revival of its pharmaceuticals division. After facing a first wave of patent losses several years ago, a flurry of new drug approvals helped the division grow 11% in 2013 fueling companywide 6% top line growth. That growth appears to be accelerating, with pharmaceutical sales growing a stunning 21% in the most recent quarter. But for all of that success, the division is facing additional patent losses in the coming years that could stall growth. 

In 2013, top selling immunology drug Remicade contributed $6.7 billion, or nearly a quarter of the company's pharmaceutical revenue. By 2018, when Remicade loses patent protection in the U.S., those sales could dwindle to mere fractions of what they once were, putting significant strain on the company's fastest growing business. It will be up to newer drugs like Simponi and Stelara to carry Remicade's torch, leaving Johnson & Johnson with the task of convincing doctors that its next generation products have a place in a biosimilar-flooded market.

I hear what you're saying Seth, but In my eyes it's the stiffer competition for Johnson's top selling prostate cancer drug, Zytiga, that poses the biggest threat to Johnson & Johnson this year.

Since winning approval in 2011, Zytiga has been a remarkable success, racking up sales of $1.7 billion in 2013 and $1.07 billion through the first six months of 2014.

But sales may slide now that Medivation and Astella's competing drug, Xtandi, has notched the FDA go-ahead for use in pre-chemotherapy prostate cancer patients.

Despite coming onto the scene more than a year after Zytiga, Xtandi has become the market share leader in the much smaller post-chemotherapy setting and that suggests that its approval for use in the much larger pre-chemotherapy indication will allow it to win substantial market share away from Zytiga there, too. Xtandi's opportunity in the pre-chemotherapy indication is further supported by its label, which includes language noting its ability to improve overall survival -- something that Zytiga can't claim.

Since Zytiga is one of Johnson's top selling drugs this year, a drop-off in sales could weigh down its profit, so investors should pay close attention to Johnson's next few earnings reports to see if Zytiga's momentum stalls.

: But it's not just Zytiga that has allowed J&J to be a top performer in the Dow this year, it's the company's hepatitis C drug Olysio, too. In the second quarter, Olysio hit blockbuster status by posting $725 million in sales during the quarter.

The drug's monstrous performance has been somewhat surprising given that it was up against Gilead Sciences'  terminator hep C drug Sovaldi. But as it turns out, doctors have been co-prescribing the two drugs at a fairly nice clip, leading to Olysio's unexpectedly strong sales.

Even so, I think Olysio may have already peaked only about half a year into its U.S. launch. Within the next four to five months, we should see a glut of new hepatitis C drugs, from the likes of AbbVie and Bristol-Myers Squibb, hit the market that will surely cut into Olysio sales. Perhaps more importantly, the likely approval of the fixed-dosed combo pill of ledipasvir and Sovaldi later this year should make Olysio co-prescriptions unnecessary, in most cases. All told, I think most of the drug's $2 billion-plus in projected 2014 sales could be wiped out in 2015.

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.

The article The Biggest Threat Facing Johnson & Johnson originally appeared on Fool.com.

Todd Campbell owns shares of Gilead Sciences and Medivation. George Budwell owns shares of Johnson & Johnson. Seth Robey doesn't own positions in the companies mentioned. The Motley Fool recommends Gilead Sciences and Johnson & Johnson. The Motley Fool owns shares of Gilead Sciences and Johnson & Johnson. 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 a Pink Floyd Song Can Teach Us About Flipping Houses

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"Ticking away the moments that make up a dull day

You fritter and waste the hours in an offhand way.
Kicking around on a piece of ground in your home town
Waiting for someone or something to show you the way."
-- "Time," by Pink Floyd

By now, you probably know that house flipping is all about time...For each passing day that your house remains unsold, a portion of the profits are lost. If you "fritter and waste the hours in an offhand way"...you'll end up frittering away your profits too...

Time is a concept you have to keep in mind when entering the house flipping business. Time is your enemy. The longer you take to finish your flip, the less you make.


Time waits for no-one
Feels like the first time...
Does anybody know what time it is...
Time is on your side... 

Not always on the last one.

All rock n'roll lyrics aside, time should be at the top of your list when you are creating a business plan for your house flipping business. However, inasmuch as you are trying to shorten the amount of time you spend flipping a house, you shouldn't compromise on the quality of your work.

Racing against time does not mean this...
Yes, time is the enemy, but the only thing that comes before time is quality. If you are thinking of cutting corners just to get rid of the house, don't be surprised when it all comes back and nips you in the butt. Those shortcuts you are thinking of taking will save you a penny or two, but they will completely damage your reputation.

Can you sell a house flip in one day? Yes, but selling a house flip within 24 hours happens very rarely.

I just held onto one for WAY too long, and it really hurt us. Believe me when I say the holding costs that come with house flipping can add up real quickly.

On this one, it cost me well over $30,000 in profit. We still came away profitable thanks to the 70% Rule, but man, was it painful...

So to beat father time, try these three house flipping tips that will help you flip a house in the shortest amount of time possible.

Three tips for flipping a house fast

1. Set a definite timeline for completion
The importance of having a timeline for your house flipping projects cannot be emphasized enough. If you want to run a successful house flipping business, you have to hold everyone accountable, and the best way to do this is to set a definite timeline.

The first thing that you should do is set up a meeting with your general contractor and subcontractors. This will ensure that everyone who is working on your project is on the same page as you. During the meeting, you should review the entire schedule for repairs.

Break down the order of repairs and emphasize the importance of sticking to the schedule. Everything that you discuss should be documented.

2. Put a price on the house ahead of the market
Most people make buying decisions based on price. A home buyer will make price comparisons of your house with other homes within the same area in the same market. The price you put on a house will determine how fast you will be able to flip and sell it, so you have to competitively price your home.

Start by looking at the price tags on other homes within the area you plan to flip the home. Become an educated seller and stay updated on local sales trends. An educated seller knows the demand within their area. Demand varies from one area to another. For instance, a house with an ocean view might have a greater demand than one without even though they are located just yards apart.

The key is to find houses within your area that have similar characteristics. How much do they cost, and how long have they been in the market? What are the sales trends? Do the prices increase during winter or during summer? From there you can use your findings to align your price accordingly.

3. Generate some buzz
You have a greater chance of selling your house quickly if you create a buzz about it before putting it on the market. You can use social media platforms to generate interest. Use Facebook and Instagram to share impressive photos, and use Twitter to share the rehab process. Create online conversations by talking about what's interesting about the area the house is located in and what geographical features make the place so attractive.

You can also create buzz around your property by staging it professionally and pricing it competitively.

Bonus tip
Hire a real estate agent who has an online business presence and will go above and beyond to market your property. Experience and longevity are admirable qualities to look for in a real estate agent but it's better to look for one who has a successful track record of selling property.

Yes, you do have to pay the 5% commission, but the headaches it will save you will be well worth it.

What do you think? Do you have any other tips for flipping and selling property in the shortest amount of time possible?

I'd love to hear your thoughts on other time saving tips you use...or even your favorite "time-themed rock songs"... that would be cool too.

This article originally appeared on biggerpockets.com.

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You may also enjoy these financial articles:

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How to Avoid Student Loans

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We all read about the student loan debt crisis, or near-crisis, and still, business is booming. Student loan debt stands at over $1 trillion across 40 million Americans, and debt has climbed 84% since the recession.


But it's not just the paying it off part that hurts. It's the fact that if you're paying student loans, you're probably not saving money for other things, like retirement. Almost 70% of people under 29 have yet to start saving for retirement, which is a really bad thing considering that this generation is facing a total absence of defined-benefit pensions and, if you ask me, a questionable future for Social Security.

It might seem like a long way off and not that important, but considering how many years of your life debt payment can drain away, it's something to think about. The fact is, student loans, which can seem like a panacea that will help you be awesome and successful, can have seriously negative consequences for your financial future -- especially if you really want to do cool, fun things that don't always pay very well, like become a writer, start a charity, or work as a photojournalist in Botswana. 

But what are the alternatives? Here's how to avoid student loans, in five difficult but worthwhile steps. 

Step 1: Steel yourself 
Now, you might be thinking that education is immeasurably valuable, and thus it's worth it to suffer with the burden of loans. I agree with you wholeheartedly that school is worth suffering for, but the stress of an unmanageable financial burden can be too much for even the most resilient person to bear. 

And people are really struggling. Borrowers between 25 and 49 have a 12% default rate on their loans, and that doesn't include the people who are suffering in silence and just barely getting by. 

There has to be a better way. It's not easy, but it's there. Keep in mind that you can do it, and with consistency and the right strategy you will succeed. 

Step 2: What do you really need? 
Now is the time to separate the nice-to-haves from the desperately needed. Do you need to eat? Yes. Do you need to go to your dream school? I don't know, but at least try to think about it objectively before saying yes. Do you need to live on campus and pay exorbitant prices for a meal plan? Perhaps not. 

After you whittle away the luxuries -- and these might encompass all of the above or something completely different depending on your life and needs -- you can realistically determine how much money you'll need and what exactly you'll need it for. This amount should cover everything: living expenses, tuition, commuting costs, books, etc. 

This is really just a sneaky way of telling you to make a budget. How much money will your dreams cost you? 

The more money you can put toward your education, the better. So, focus on the critical stuff and forget about the rest. This should give you a pretty solid goal to work toward. 

Step 3: Find alternatives 
Once you have a number, you can get to work. 

Your first order of business should be to exhaust every conceivable source of financial aid and scholarships you can find. Whether you get a full ride or a $1,000 check for your books, free money is definitely worth your time.   

Call your financial aid office and ask them about aid programs or scholarships you might qualify for. If you've gotten a better offer from another school, go back and see if you can't renegotiate the package. You would be amazed at what asking nicely can achieve. 

An outside scholarship search is also critical. There are countless scholarships covering every possible demographic and area of study. Find them online (Google is a great starting point) and apply with enthusiasm. You might just find yourself awash in funding.

Step 4: Consider a job 
For many adult learners, this is obvious, but depending on your situation it might not be (and if you're a medical or architecture student, the idea itself might cause your blood pressure to spike). 

Need inspiration? Philip Glass, the now-famous composer, worked as a cab driver until he was 42. Anything helps, whether it's a job at the campus bookstore or a side-business as a virtual assistant. Especially if you're just starting out, working can not only help fund your education, but it will help you build some seriously useful skills, like time management, resilience, and the ability to have small talk around the water cooler.

I would advise against working for free, unless it's the equivalent of interning for Karl Lagerfeld. Even then, see if you can't squeeze the guy. After all, company names on your resume are great, but the demonstrated ability to hold down a job and make a meaningful contribution (and take home a paycheck!) are even better.  

Step 5: Struggle
None of this will be easy. You might have to revise your plans, and you might feel like you're in a constant uphill battle for several years. Finding alternative ways to finance your education will take time and effort, and will probably involve far fewer spring break parties in Mexico than you might have liked. But it will get you what you want in the end, and it will get it for you without the agony of debt hanging over your head.

That way, when you're done with school -- no matter what your degree -- you will finish with the greatest, most potent luxury of all. You will have options

And let me tell you, that is what's truly priceless. 

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The article How to Avoid Student Loans originally appeared on Fool.com.

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