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Why Intel Has Soared 32% in 2014

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For years, Intel was a big disappointment to shareholders. In fact, for a rull five years shares of the semiconductor giant traded in a range between $22 per share and $26 per share. The stock was unable to break out during this time because of ongoing fears about a possible erosion of its core business. Intel is very reliant on the personal computer, which makes up the bulk of its business, and throughout its rough patch, Intel couldn't demonstrate an ability to get its chips into tablets, mobile devices, or other higher-growth areas.

It seems like just within the past few months, all that has changed. Shares of Intel broke out in a major way in 2014, and soared from $25 per share at the start of the year to their current level of $34 per share. Fortunately, Intel is seeing stabilization in PCs, and is reaping the benefits of investment in emerging product areas.

Here's why Intel shares are surging so far this year, and whether the stock still has further room to run.


PC turnaround gaining traction
Intel is seeing stabilization in the PC market, which is very important for the company since its PC business still represents about 62% of Intel's revenue. Fortunately, Intel managed its third consecutive quarter of year-over-year PC unit growth last quarter. This was driven by what management describes as the "end-of-life" of Windows XP.

Going forward, Intel is counting on the ongoing PC refresh cycle to continue to fuel results in its most important business. During the last quarterly conference call, Intel stated that 600 million PCs are at least four years old, and that the company is seeing a refresh cycle strengthen particularly well in the enterprise market. Management believes its line of Bay Trail chips will pay off handsomely, because of their smaller size which results in lower costs. Bay Trail now accounts for more than 60% of its Pentium and Celeron mix, and nearly 20% of its notebooks.

This is also fueling growth in new areas like data centers, where Intel can secure market share without sacrificing margins. Intel's data centers business grew revenue by 19% year over year and produced record revenue of $3.5 billion, thanks in large part to the recent launch of the Xeon E7 processor.

Growth expectations rising
While Intel has undoubtedly enjoyed strong growth in some exciting new areas, such as the Internet of Things and Data Centers, along with a stabilizing PC market, there may be reason for caution. One of the things Intel stock had going for it heading into 2014 was that it was a cheap stock. As previously mentioned, Intel shares did almost nothing for several years. The company remained highly profitable, which resulted in a very attractive valuation. Now that Intel shares have soared on the expectation of future growth, there are much higher expectations embedded into its valuation.

It's worth noting that Intel's earnings estimates for this year don't exactly seem to fit the profile of a 32% rally. After all, Intel projects 5% revenue growth this year. Intel previously expected relatively flat revenue. This announcement was one of the major catalysts that caused Intel's valuation to expand so significantly this year. While it's great to see Intel returning to top-line growth, it's debatable whether 5% revenue growth justifies such a tremendous rally.

It seems that Intel itself is trying to temper expectations. On the company's investor relations website, Intel states in its business outlook section that the company is in a "quiet period" in terms of providing forward-looking results. Intel goes on to state that, "None of the forward-looking statements in the earnings press release, including in the Business Outlook section, should be considered as the current expectations of Intel." This could perhaps be an indication that the company is trying to calm analysts, who may be over-zealous with their rising earnings estimates.

Analysts currently forecast Intel to earn $2.19 per share this year, which would represent approximately 16% growth versus the previous year. If Intel doesn't meet this ambitious projection, the stock could see its rally halted.

$19 trillion industry could destroy the Internet
One bleeding-edge technology is about to put the World-Wide-Web to bed. And if you act right away, it could make you wildly rich. Experts are calling it the single largest business opportunity in the history of capitalism... The Economist is calling it "transformative"... But you'll probably just call it "how I made my millions." Don't be too late to the party— click here for 1 stock to own when the web goes dark.

The article Why Intel Has Soared 32% in 2014 originally appeared on Fool.com.

Bob Ciura has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel. 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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How PayPal Can Become a $100 Billion Company

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PayPal's co-founder Elon Musk and former Chief Operating Officer David Sacks have both shared similar beliefs -- that it makes no sense for PayPal to be a part of eBay . Both believe that PayPal could ultimately become a dominant force in the payments industry, with Sacks saying in a Forbes story that PayPal could top a market capitalization of $100 billion.

With most analysts expecting PayPal's market capitalization to be around $40 billion, at most, following its split from eBay, how can PayPal eventually become that $100 billion company?

Is $100 billion absurd?
Based on PayPal's current fundamentals and business model, it would be near impossible to justify a $100 billion market capitalization. PayPal has grown revenue by 19% during the last 12 months, to $7.2 billion. PayPal's operating margin last year was 24%, so on $7.2 billion of revenue, PayPal would trade at nearly 60 times 12-months operating income.


While not absurd by today's technology standards, 60 times 12-month operating income is quite pricey when you consider the rise of Apple Pay, Amazon Payments, and others. Visa , another company in the payments business, trades at just 17 times 12-month operating income, creating a wide disconnect between it and PayPal, and making $100 billion rather absurd.

A new business approach
That said, Musk and Sacks are both leading technology thinkers who understand the market well, so there must be a reason behind such bullish sentiment. The logic might lie in Sacks' comment about PayPal having the opportunity to "become the largest financial company in the world."

In order to do so, PayPal would have to make drastic changes to its business model; but with more than $200 billion in 12-month payments volume, and a presence in more than 200 markets, the potential is definitely present. Therefore, the key to understanding these changes lie in PayPal's current business model.

Apple will reportedly earn $0.15 per $100 spent via Apple Pay from transaction processors like Visa and Mastercard, but PayPal earns its revenue by collecting fees from consumers or merchants using its service. While the fee varies depending on the service, PayPal's traditional core service of sending and receiving cash online is around 3% of the monies transferred.

The problem for PayPal is that it only collects the 3% fee when users either have money stored on PayPal, or bank information tied to the PayPal account. When using a credit card, Visa, Mastercard, and others alike receive the 3% fee, which PayPal, as the vendor, is responsible to pay.

In other words, PayPal is losing a lot of money by having to pay the likes of Mastercard and Visa when credit or debit cards are used for payments. This brings about the possibility of PayPal becoming an actual transaction processor, rather than an aggregator, or a platform for transferring currency. Essentially, this move would mean that PayPal would operate like Visa and Mastercard, but through an online model.

As a result, PayPal might then find itself processing transactions for competing services like Apple Pay or Amazon Payments, who are both aggregators. In all likelihood, this reality of doing business with the enemy might have persuaded eBay against the move; but with eBay and PayPal split in two, and the latter seeking new business opportunities, the possibility of becoming a transaction processor makes sense.

$100 billion is possible
All things considered, PayPal's network of 152 million active users is large; but competing networks from the likes of Apple, Amazon.com, and perhaps Facebook in the future, are enormous. For the first time. eBay's existing business model is faced with real competitive threats. This fact further adds to the notion of expanding PayPal's reach into new financial markets, such as processing transactions.

The margins for companies like Visa and Mastercard are incredible. During the last 12 months, Visa and Mastercard have operating margins of 62% and 55%, respectively. The reason lies in the fact that both companies collect fees on all services offered, unlike PayPal. Even if PayPal's annual revenue stays at $10 billion due to competitive pressure in its core business, yet the company becomes a transaction processor with an operating margin of 60% (meaning it collects all fees), the company would trade at less than 17 times operating income at a market capitalization of $100 billion.

Foolish thoughts
Obviously, $100 billion is not a short-term market capitalization goal for PayPal; but because of its reach, the company has options in order to drive margins higher and enter new markets. In fact, becoming a transaction processor is just one option. Perhaps PayPal wishes to become a full-blown bank, offering checking accounts, direct deposits, saving accounts, mortgages, and maybe even investment options -- all online.

While all of these things may seem foolish today, eBay has decided to separate PayPal to explore strategic options and new partnerships with independent management. If PayPal decides to partake in any of these big changes, it's quite possible that Musk and Sacks are correct in seeing a grand future, one that might include a $100 billion market capitalization.

This $19 trillion industry could destroy the Internet
One bleeding-edge technology is about to put the World Wide Web to bed. And if you act right away, it could make you wildly rich. Experts are calling it the single largest business opportunity in the history of capitalism... The Economist is calling it "transformative"... but you'll probably just call it, "How I made my millions." Don't be too late to the party -- click here for one stock to own when the web goes dark.

The article How PayPal Can Become a $100 Billion Company originally appeared on Fool.com.

Brian Nichols owns shares of Apple. The Motley Fool recommends Amazon.com, Apple, eBay, MasterCard, and Visa. The Motley Fool owns shares of Amazon.com, Apple, eBay, MasterCard, and Visa. 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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How Safe is The Home Depot Inc. Stock and Its Dividend?

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When the housing market crashed in 2007 and 2008, home-improvement stores were some of the hardest hit companies around. Case in point: Home Depot's stock plummeted 56% between early 2007 and March 2009.

Fast-forward five years, however, and the company has come roaring back -- returning a whopping 500% for investors since the market bottomed. But while that is good news for investors who owned the stock over that time frame, it doesn't help those looking to buy it today.

Which of course begs the question: What does the future look like for Home Depot's stock and its dividend?


 

The most important metric for dividend investors
When it comes to dividends, no metric is more important to watch than a company's free cash flow. This represents the total amount of cash that a company brings in during a year, minus whatever it spends on capital expenditures (like building new Home Depot locations).

Dividends are paid from free cash flow, which is why the metric is so important. Here's what Home Depot's free cash flow situation has looked like since 2010.

Let me put the above chart in perspective for you: it's just about as awesome as any shareholder could hope for.

For starters, free cash flow has grown every year. When a company needs to balance the inventory it has on hand, and figure out how much to spend on capital expenditures each year, it can be tough to consistently grow free cash flow. But Home Depot has pulled the feat off, which shows an impressive ability to predict trends in its business.

More important, the company's dividend is rock solid. Currently, only 35% of the company's free cash flow is used to pay out its dividend. Home Depot could double its payout tomorrow and it would still be relatively safe.

But for the time being, investors should be satisfied knowing that the dividend will be around even if times get tough, and that it will continue to grow in even a sideways economy.

So is the stock a buy?
With companies like Home Depot, two metrics really illustrate the strength of the overall business: comparable-store sales, or comps, and profit margin. Any company can grow revenue by building new stores, but comps let investors know if the business is really taking off. Anything that outpaces inflation is good news.

Profit margin also tells a big part of the story. When you are bringing in billions in revenue every year -- like Home Depot does -- seeing your profit margin go from, say, 4% to 5%, is a huge deal to the order of hundreds of millions of dollars.

Knowing that, here's how the company has performed on those two metrics over the same time frame.

Again, this looks pretty amazing. Not only had comps been accelerating until recently, but the profit margin was expanding at a very healthy pace. I wouldn't worry too much about the slowdown in comps over the last six months, as they still outpace inflation. Also, after four years of comps growing at such a pace, it becomes increasingly difficult to post such high numbers.

All that leaves to investigate is the stock's price. Trading at 22 times earnings and 19 times free cash flow, Home Depot shares are not cheap by any means. But neither are most of today's blue-chip stocks.

Offering a 2% dividend yield today that has a high probability of growing, Home Depot is a stock worth taking a closer look at. If you want to own a piece, I suggest buying a small starter position, and adding to it over time at better and better value points. 

Is Home Depot a top dividend stock for the next decade?
Obviously, Home Depot is a great dividend stock. But it's not the only one out there. Our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio...including yours. Is Home Depot one of those stocks? To see our free report on these stocks, just click here.

The article How Safe is The Home Depot Inc. Stock and Its Dividend? originally appeared on Fool.com.

Brian Stoffel has no position in any stocks mentioned. The Motley Fool recommends Home Depot. 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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Hewlett-Packard Inc.'s Historic Breakup: A Watershed Moment for One of Tech's Most Iconic Companies

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As the song goes, breaking up is hard to do. But in the case of American tech icon Hewlett-Packard , its recently announced corporate separation has been years in the making.

After pledging to keep Hewlett-Packard together when she joined HP in 2011, CEO Meg Whitman reversed course earlier this week by announcing the historic separation. This storyline has so many angles, it will take months to digest let alone actually playout.

But between the billions of shareholder dollars, not to mention the hundred of thousands of jobs, hanging in the balance as part of the storyline, this deal is automatically in the running with the Apple iPhone 6 for the most important tech story of 2014. Let's dive in.


Hewlett-Packard's new halves
HP's monumental split will divide its various divisions into two new companies: HP and Hewlett-Packard Enterprise. From high-level perspective, HP's self-division is split along their respective long-term prospects. As the company with more questions as to its future growth trajectory, HP's personal computer and printer divisions will be spun out into a company that will go by the moniker HP. Here's a quick snapshot as to what would have been HP financial performance in FY 2013.

HP

2013

Revenue (in Mil $US)

$55,925

Revenue Growth (Y-o-Y)

-7.1%

Earnings from Operations (in Mil $US)

$4,839

Operating Margin

8.7%

Operating Earnings Growth (Y-o-Y)

-0.1%

Source: Hewlett-Packard 2013 10-K 

If there had to be a "bad business" created from this split, as is so often the case in such moves, HP would probably be it. After several brutal years, PC growth is relatively stagnant and is becoming increasingly commoditized. Likewise, few expect view the overall growth outlook for the global printer industry to remain robust as the digital age advances, although many argue 3D printing offers a glimmer of hope as a new growth market. In terms of leadership, Dion Weisler, the current head of HP's PC and printer businesses, will step into the CEO role at HP, and Meg Whitman will serve as its nonexecutive chairman. 

The second company, Hewlett-Packard Enterprise, will incorporate HP's current server, storage, networking, software, services, and financing operating segments. Here's how Hewlett-Packard Enterprise would have fared in 2013.

Hewlett-Packard Enterprise

2013

Revenue (in Mil $US)

$58,245

Revenue Growth (Y-o-Y)

-6.4%

Earnings from Operations (in Mil $US)

$6,245

Operating Margin

10.7%

Operating Earnings Growth (Y-o-Y)

10.6%

Source: Hewlett-Packard 2013 10-K 

Although not without its share of problems, Hewlett-Packard Enterprise has by far the more attractive set of core businesses and represents the key division Meg Whitman has sought to expand in her tenure at Hewlett-Packard. She isn't alone. IBM made the shift away from low-end hardware like PCs years ago, favoring the more favorable economics and margin profile the kinds of businesses Hewlett-Packard Enterprise will hold. However, although the financial structure of these businesses is clearly more favorable, Hewlett-Packard Enterprise will face plenty of competition from a host of large and established competitors. Meg Whitman will remain in the CEO spot at Hewlett-Packard Enterprise and current board member and former Alcatel-Lucent CEO Patricia Russo will serves as the board's nonexecutive chairman. 

The end of an era 
Splitting Hewlett-Packard into two new organizations is hugely symbolic in terms of HP's long-term place in the annals of U.S. technology history and its more recent troubles.

Looking to the its more immediate history, the Hewlett-Packard break-up should hopefully, and finally, put an end to its years of mismanagement and poor results, little of which falls at the hands of Whitman. After pursuing a litany of misguided or pricey acquisitions, HP appeared to many a company that had attempted to solve its innovation or growth issues by patching on other companies' operations. To give some color, HP spent a combined $53.8 billion alone to acquire the likes of Palm, 3Com, Compaq, Autonomy, and Electronic Data Systems. This doesn't even reflect the bulk of HP's sprawling appetite for acquisitions. The combined weight of these moves has left Hewlett-Packard's balance sheet bloated. Consider this: Roughly one-third of HP's total assets consisted of Goodwill alone during its most recent quarterly report. It's a company that has simply become too large, too complex, and too reliant on unsustainable growth strategies to go without the kind of drastic overhaul we saw this week.

And although the right move in my mind, HP's breakup story marks a defeat of sorts for one of Silicon Valley's most original and innovative companies. HP had lost the kind of innovative and entrepreneurial spirit that founders Bill Hewlett and Dave Packard sought to imbue in their organization long ago, the kind of corporate culture that would serve to inspire countless technology executives such as Steve Jobs or Bill Gates, among many others. That Hewlett-Packard died years ago.

At the end of the day, seeing an iconoclast of any genre suffer and fade into decay is never easy or comfortable. However, as we technology enthusiasts know all too well, time stands still for no company. So as this move officially signals the end of Hewlett-Packard's long rise and subsequent fall, the decision to breakup HP's IT empire is one that should serve the combined company well as it attempts to carve out its place in tech's new world order.

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 Hewlett-Packard Inc.'s Historic Breakup: A Watershed Moment for One of Tech's Most Iconic Companies originally appeared on Fool.com.

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

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

 

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Why Google Tried to Buy Cyanogen for $1 Billion

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Cyanogen -- the maker of CyanogenMod, a modified version of Android -- recently revealed that it rejected a buyout offer from Google for around $1 billion.

CyanogenMod, a popular alternative OS for Android devices with unlocked bootloaders, is currently installed on as many as 12 million devices worldwide. Cyanogen has already collected $30 million over two rounds of funding, and is currently trying to secure a third round which could bump its valuation up to $1 billion. The company also secured deals with Micromax and OnePlus to manufacture Cyanogen-powered phones, and has lofty ambitions to become the world's third largest mobile OS.


CyanogenMod. Source: Cyanogen

Let's take a closer look at why Google wants to buy Cyanogen, and whether or not it was wise for Cyanogen to turn down that big offer.

Why Google is getting worried
Android is installed on 85% of the world's smartphones, according to IDC, but the OS is severely fragmented. Research firm Open Signal recently found that only 21% of all Android devices were updated to Android 4.4, the most recent version of the OS. This means that many of Google's new features, like Android Wear, won't be compatible with a large number of Android devices.

That's why Google launched its Android One initiative, which ensures that low-end Android devices, which meet certain hardware requirements, are always updated with the latest version of Android.

However, an increasing number of companies are "forking" Android and carving Google's services out of Android altogether. Amazon's Fire OS, Xiaomi's MIUI, Alibaba's Yun OS, and other operating systems replace Google Play with their own marketplaces, which prevents Google from taking its 30% cut of app purchases. ABI Research estimates that 20% of all Android devices shipped worldwide between May and July were forked with an alternative OS. In 2011, Samsung also launched its own app store on Android devices, pocketing the 30% cut of app sales for itself.

Amazon's Fire OS. Source: Amazon

Understanding AOSP vs. OHA
CyanogenMod isn't technically a forked version of Android, since most of its users still install Google Play and Google Services, but it's part of the same AOSP (Android Open Source Project) that encourages the modification of Android with less focus on Google Services. By contrast, Google's OHA (Open Handset Alliance) partners -- like HTC, LG, Asus, and Acer -- agree to include Google Services by default and follow guidelines in customizing Android.

Google is quick to pounce on partners who violate those terms. Google forced Acer to shut down its plans to launch Yun OS devices in China, and is reportedly interfering with the development Android-x86, the version of Android that runs on Intel-powered smartphones like the Asus Zenfone. Last November, Google kicked Cyanogen's CyanogenMod installer out of the Google Play Store, on grounds that it "encourages users to void their warranty."

These actions led to criticisms that Google is transforming Android, which it touted as an open source OS, into a closed source walled garden, similar to iOS and Windows Phone.

Declaring independence from Google isn't easy
Considering how quickly Cyanogen has grown, the next logical step would be to launch its own app store to generate a steady stream of revenue of its own, as Amazon, Xiaomi, and Samsung have done.

The possibility of Cyanogen evolving into a rival OS means makes it a lucrative takeover target for Google's rivals. That's why Microsoft , Samsung, Amazon, and even Yahoo were also reportedly interested in buying the company. That pressure likely convinced Google that it needed to buy Cyanogen and shut it down. Cyanogen was certainly bold to refuse Google, but it will face some major hurdles in its quest to become the third largest mobile OS in the world.

For example, Samsung -- which controls 25% of the world's smartphone market -- clearly wants to declare independence from Google. In addition to launching its own app store, it developed its own open source OS, Tizen, which currently powers most of its Gear smart watches. Samsung also developed a Tizen smartphone, the Samsung Z, but delayed the device's launch indefinitely in July due to a lack of developer support.

A Foolish final thought
However, Cyanogen isn't a hardware manufacturer like Samsung. Cyanogen simply needs to spread its modified version of Android from one hardware manufacturer to another.

XDA-Developers recently announced that CyanogenMod 11 can be installed on the three Android One devices that Google recently launched with its hardware partners in India. CyanogenMod is also installed on OnePlus' One, a Chinese phablet that nearly matches the specs of Samsung's Galaxy Note 4 at less than half the price.

If Cyanogen launches its own app store, it could become a serious threat to Google in India and China, two key markets which research firm Mediacells expects to purchase 500 million smartphones by the end of 2014. In my opinion, that could force Google to come back with a bigger offer in the near future.

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 Why Google Tried to Buy Cyanogen for $1 Billion originally appeared on Fool.com.

Leo Sun has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Google (A shares), and Google (C shares). The Motley Fool owns shares of Amazon.com, Google (A shares), Google (C shares), 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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3 Top Dividend Growth Stocks to Buy Today

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Dividend growth stocks are arguably the best type of stocks to own because they continuously reward shareholders with dividends and share buybacks. The goal when investing in dividend growth stocks is to find stocks that will continue to raise their dividends for many years to come. Procter & Gamble , McDonald's , and PepsiCo are three industry-leading companies with sustainable dividend payouts. Not only are they dividend aristocrats (more on that in a minute), but they are also top dividend growth stocks to buy today. Here's why.

1. Procter & Gamble
Procter & Gamble has had its fair share of up and downs in recent years. However, one thing that has remained consistent is management's commitment to creating shareholder value in the form of dividends and share buybacks. The consumer products giant has increased its dividend for the past 58 years running at a compounded rate of more than 9% a year. Not to mention, Procter & Gamble has been paying a dividend for the past 124 years without fail. Now that is reliability!

The stock currently boasts a dividend yield of 3%, which is significantly better than the S&P 500's yield of 1.9%. The conglomerate increased its dividend 7% to $2.45 per share in fiscal 2014, and returned a whopping $6.9 billion to shareholders in the form of cash dividend payments. In addition to this exceptional dividend growth, investors can rest easy knowing P&G will be able to continue paying a dividend in the future thanks to its strong balance sheet. During fiscal 2014, the company generated a whopping $10.1 billion in free cash flow.


Part of this strength comes from Procter & Gamble's portfolio of leading consumer brands including Gillette razors, Tide laundry detergent, and Crest toothpaste. In fact, the company has 23 brands under its umbrella today that each generate between $1 billion and $10 billion in sales annually. Together, these things make a compelling argument for Procter & Gamble as a top dividend growth stock. Throw in the stock's price-to-earnings growth value of 2.47, which is below the household products industry average of 2.99, and the stock looks attractively priced at where it trades today at around $84 a share.

2. McDonald's
The fast-food giant's stock may be down nearly 6% this month, but its dividend has never looked so good. Last month, McDonald's beefed up its quarterly cash dividend by as much as 5% to $0.85 per share. For those keeping track at home, that means the burger chain now pays an annual dividend of $3.40 per share. The stock currently boasts a dividend yield of 3.62%, which similar to P&G is above the S&P 500's yield. Moreover, the company has returned $3.2 billion to shareholders year to date, and is now on track to return $18 to $20 billion to investors by 2016.

McDonald's stock offers investors high dividend growth with little risk. To be sure, Mickey D's has increased its dividend every year since it first started paying one in 1976. Sure, McDonald's earnings growth has suffered in recent quarters because of a challenging global environment, but with a net profit margin of 19.5% it is one of the more profitable companies within the industry.

This combined with the sheer size of McDonald's operations, over 35,000 locations serving 70 million customers in 100 countries today, mean the restaurant chain should have no problem continuing to reward shareholders for many years to come. Shares also look tasty today trading near the stock's 52-week low at around $93 a pop.

3. PepsiCo
Not only is the king of pop a household name, but it has also been rewarding income investors every year since 1952. Better still, Pepsi has increased its payout for the past 42 straight years. The soda and snacks giant recently boosted its dividend 15% to $2.62 annually, up from $2.27 per share. The company's payout ratio has increased to 53% as a result. The payout ratio is important because it tells investors how much of the company's net income is being given back to shareholders. Importantly, at 53% of Pepsi's net income, management still has ample cash to invest in growing the business.

On top of this, Pepsi plans to buy back $5 billion of its shares this year, thus further increasing shareholder value. It's worth noting that the company has already returned $6 billion to shareholders in the form of dividends and share repurchases so far this year.

Thanks to its strong portfolio of brands, Pepsi should have no problem continuing to grow its dividend well into the future. Consider this, Pepsi is the world's largest snack food company by market share, with 22 brands in its snack business that each pull in annual sales north of $1 billion. In addition, Pepsi's latest performance is nothing to balk at -- the company grew its earnings 7% to $1.32 per share while organic revenue climbed more than 3% in the third quarter, despite a challenging retail environment.

This is also a great time for investors to own Pepsi because of its strategic partnership with the NFL. With football season in full swing, shareholders can capitalize on management's plan to promote the Pepsi brand through NFL-related sweepstakes, Super Bowl events and other season-long campaigns. Shares of PepsiCo are currently trading around $94 apiece.

Unlock even more wealth with this under-the-radar dividend stocks
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 Top Dividend Growth Stocks to Buy Today originally appeared on Fool.com.

Tamara Rutter has no position in any stocks mentioned. The Motley Fool recommends McDonald's, PepsiCo, and Procter & Gamble. The Motley Fool owns shares of PepsiCo. 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 Other Bull Market

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The S&P 500 has doubled in the last five years. That's huge. Historically, it takes an average of 10 years to earn those kind of returns.

Such a big run has many people calling this market a bubble.


But there's another bull market that hasn't gotten enough attention. Check it out:

Growth since January, 2010

S&P 500

71.8%

S&P 500 Dividends

83.6%

 Source: Standard & Poor's, S&P Capital IQ, FactSet

One of the only things that grew faster than the S&P 500 over the last five years are S&P 500 dividends.

My friend Eddy Elfenbein pointed this out last week:

Dividends have grown by more than 10% for 14 of the last 15 quarters. The only exception was the fourth quarter of last year, and that's because the fourth quarter of 2012 had been unusually strong (+22.77%) so investors could take advantage of the new tax laws. Dividends for Q3 are up more than 77% from the third quarter of 2010 while the index is up by 73%. Yes, the dividend yield is slightly higher than what it was four years ago. Some bubble.

Even though the S&P has nearly doubled since late 2009, the dividend yield is actually higher today than it was back then.

As Warren Buffett says: "Price is what you pay, value is what you get." The S&P's price has doubled over the last five years. But its value -- in terms of dividends -- is pretty much the same.

That wasn't the case in the 1990s, when stocks were rising much faster than dividends. Eddy made this great chart, which I think is one of the most important charts of the recent bull market:

Microsoft stock is up 82% since 2010, which is pretty cool. Microsoft dividends per share have increased 115% since 2010, which is even cooler. Procter & Gamble shares are up 48% over the last four years, but its dividends per share grew nearly the same amount -- 46%.

Before we start calling this market a bubble, we have to acknowledge that real, tangible things that create value have improved at the same rate that the market has increased.

The best thing about the bull market in dividends is that it's sustainable. Going back to 1900, S&P companies historically have paid out more than 60% of their earnings as dividends. That started to decline in the 1970s, and fell all the way to 29% in 2011 -- an all-time low. S&P 500 companies paid out 36% of their earnings as dividends over the last year.

That's really important, because it means companies can raise dividends faster than earnings are growing without breaking any historical precedents. If earnings grow 5% a year for the next 10 years, companies could grow dividends by 10% a year and still have below-average payout ratios.

Share buybacks have also boomed over the last few years.

S&P companies bought back more than half a trillion dollars worth of their shares in the year ended July 31, versus $201 billion during the same period in 2010, according to FactSet.

That's awful timing -- the last thing you want to see are companies doubling down on buybacks after shares surged. And a portion of share buybacks don't actually benefit investors; they're just mopping up new-share issuance tied to management compensation. 

But poorly timed or not, buybacks do create value. One-in-five S&P 500 companies reduced their shares outstanding by 4% or more during the first six months of the year, according to Standard & Poor's.

Take IBM . It's reduced shares outstanding by about 18% since 2010. Home Depot's shares outstanding have dropped 21% since 2010. ExxonMobil has cut shares outstanding by more than 14% in the last four years, the equivalent of adding 3.5 percentage points to its dividend yield.

That's a real return to shareholders. It can't be ignored.

This doesn't tell us anything about where the market might go next. Dividends and buybacks were high in 2007, and stocks fell 50% without flinching. That could happen again. Anything could happen again, and I'm skeptical that any metrics tell us what stocks might do next.

But a bubble is something that rises so high that you can't possibly justify its value. I don't think that's the case with most stocks these days. Dividends are the most tangible shareholder returns that exist. They're also one of the only things keeping pace with this market.

For more on this topic: 

Check back every Tuesday and Friday for Morgan Housel's columns. 

The article The Other Bull Market originally appeared on Fool.com.

Morgan Housel owns shares of ExxonMobil and Procter & Gamble. The Motley Fool recommends Procter & Gamble. The Motley Fool owns shares of International Business Machines and Microsoft. The Motley Fool has a disclosure policy.

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

 

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Will Apple Inc. Open Apple TV to Facebook and Twitter Next Week?

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Source: Apple

TV remains an area of great interest for Tim Cook and Apple . The company, whose Apple TV set-top box is in 20 million homes, may be looking to open up its television platform to developers a bit more in the near future.

Global Equities Research released a note on Wednesday indicating Apple is working on an App Store for Apple TV. Trip Chowdhry interviewed several developers and all of them indicated Apple is opening up the platform, and may be updating the hardware this fall. Apple is holding an event on October 16 next week, when it's expected to unveil new iPads and new Macs.


Chowdhry may be reading too much into his interviews with developers. His note indicated that Apple is working specifically with Facebook , Twitter , Disney , and CNBC. These developers open the door for something he calls "Social TV."

Twitter on the TV?
It's up to the broadcasters themselves to integrate Twitter and Facebook into their shows. ESPN's broadcast of the NL Wild Card game did this very well with comments from Curt Schilling's Twitter account. Some shows will replay recent episodes while displaying tweets from audience members that used specific hashtags promoted during the original broadcast.

Apple may be working with Disney, CNBC, Facebook, and Twitter to bring this functionality to more shows. Disney and CNBC already have apps for Apple TV. Disney's WatchESPN app provides access to ESPN's suite of networks, while CNBC's app allows users to stream the financial news network live. Additionally, Disney and CNBC's parent company are both involved in Hulu Plus. Facebook and Twitter are currently absent from the platform.

How I imagine Twitter and Facebook integration is Apple TV could enable an app like Hulu Plus to access the Facebook and Twitter application programming interfaces, or APIs, which would allow it to display tweets or Facebook posts related to the programming their watching. Considering every tweet and Facebook post come with a timestamp, the posts could easily be programmed to pop up at exactly the right time.

The interface could work the other way around as well. Video clips or gifs from Apple TV apps could easily be posted to Facebook and Twitter through Apple TV apps pre-filled with the broadcaster's hashtags.

What this means for those involved
For Apple, integrating Facebook and Twitter into Apple TV would give a differentiating factor that it's largely missing in the set-top box market. Apple TV has outsold its closest competitor, Roku, two-to-one. The competition is getting stronger though, as more big names enter the market with their own offering.

For Disney and CNBC it gives users another reason to watch content via their apps, which ought to increase their average audience. As a result, they can increase ad prices. There's also the ability to encourage viewers to post to Twitter and Facebook via their Apple TVs, which could help increase audience size, but the jury's still out on whether more tweets cause higher ratings.

For Facebook and Twitter it encourages people to use them as a second screen (or part of their first screen). It may increase the amount of content posted to their site either through apps on Apple TV or because people want to be part of the experience -- the same reason people tweet during live TV. The content is also relatively easy to monetize because the broadcasters and Nielsen have already done most of the hard work of figuring out what demographics watch a television show.

But an App Store?
People have been clamoring for an Apple TV App Store for years now, but Apple has been content to slowly let select developers into its device. I don't see that changing without a significant product refresh, which may or may not happen next week.

Compared to more current devices like Amazon's Fire TV, the Roku 3, and Sony's upcoming PlayStation TV, Apple TV could use an upgrade in its processor and memory in order to handle game applications, which Chowdhry believes will be one of the most popular categories should Apple open the device to developers.

In the short-term it makes more sense for Apple to work with big developers on improving the user experience of Apple TV while maintaining stronger margins than its competitors.

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 Will Apple Inc. Open Apple TV to Facebook and Twitter Next Week? originally appeared on Fool.com.

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

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

 

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Why GT Advanced Technologies Inc Shouldn't Keep Its Investors in the Dark

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Reuters reports that GT Advanced Technologies   is asking the court to "keep crucial documents sealed," a move described as a "highly unusual situation."

GT reportedly alleges that it isn't able to reveal why it filed for bankruptcy because it wanted to "avoid the risk of paying damages of $50 million per violation." In this case, a violation seems to mean a violation of confidentiality agreements.

While it is true that paying such fines for violations would further weaken GT's financial position, I think that, at this point, investors have the right to know exactly why they so abruptly lost the money that they did.


What is bankruptcy?
According to Wikipedia, "When a business is unable to service its debt or pay its creditors, the business or its creditors can file with a federal bankruptcy court for protection under Chapter 7 or Chapter 11."

Chapter 7 bankruptcy essentially means that the business is finished and is liquidated, which means that the company's assets are given back to the entities to whom the business owes money. Chapter 11 bankruptcy, on the other hand, is designed to, according to NOLO, allow a bankrupt company to "restructure its financial affairs."

GT Advanced filed for Chapter 11 bankruptcy protection, which means that the bankruptcy court will have to determine how GT plans to run its business and how it's going to pay back all of the money that it owes.

This lack of transparency is uncomfortable
Before it declared bankruptcy, GT Advanced Technologies traded for a market capitalization of approximately $1.5 billion; the company is worth a mere $139 million as of writing.

That's about $1.3 billion in shareholder value gone.

While knowing why the company went bankrupt isn't going to get shareholders their money back, I do think that stockholders would benefit from the peace of mind that comes with closure.

Do shareholders have a right to know?
I am not a legal expert, but it doesn't seem to me that GT has any legal obligation to tell stockholders what happened. However, the reason that investors, at least from the vantage point of somebody who did lose a fairly large chunk of change from this whole ordeal, is that there did not appear to be any overt signs that bankruptcy was pending.

Note that the company's management issued full-year revenue guidance of between $600-$700 million on its Aug. 5 earnings call. Further, as Fellow Fool Evan Niu points out in his must-read piece, management was not only confident that GT would "end the year with approximately $400 million of cash on the balance sheet," but that even if it didn't receive the final pre-payment from Apple, that it would not be a "world-ending event."

Now, while GT's Safe Harbor statement pretty explicitly stated that there was no guarantee that its deal with Apple would lead to actual revenue, it seems strange that there was such a short time between "we're on track for this revenue" to "we're bankrupt."

Foolish bottom line
At the end of the day, what's done is done, and the common stockholders in GT Advanced Technologies are likely to be wiped out (I'm frankly shocked that the stock is trading, as of writing, at $1.15). That said, I think it's only fair that shareholders know exactly why they lost the money that they did.

Indeed, while GT might owe Apple an additional $50 million for each violation of its confidentiality agreements, I really do have to wonder: What's the worst that could happen if an additional $50 million or so were tacked on to what the company owes? Bankruptcy?

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 Why GT Advanced Technologies Inc Shouldn't Keep Its Investors in the Dark originally appeared on Fool.com.

Ashraf Eassa 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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Urban Outfitter's Wants Anthropologie to Be Like Ikea

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Urban Outfitters apparently no longer believes "big is the enemy of cool." Photo: Flickr user South Granville


Maybe other than having to assemble your own clothes, retailer Urban Outfitters wants its bohemian chic concept Anthropologie to be just like Ikea.

Where the Swedish leader in minimalism entices you to shop by dropping your kids off in a ball-filled playroom and eating your fill of Swedish meatballs and lingonberry sauce, Urban Outfitters is seeking to rebrand Anthropologie as a "lifestyle" choice where you'll want to dine in or get your hair done. 

To do so, the retailer plans to expand the size of its stores, to become three times larger than their current 7,100 square foot format. Whether that means they'll have to paint arrows on the floor or hang maps from the ceiling to navigate your way through the store remains to be seen, but it's an audacious plan with the ultimate goal of doubling sales by 2020.

Data: Urban Outfitters quarterly SEC filings

Sales at Urban Outfitters' namesake stores have fallen for four straight quarters, the last two of which were at double-digit rates, which has allowed its Anthropologie stores to take over as the largest concept. Free People, the retailer's third concept, is a little more than a third the size of the other two. The falling sales, though have also seemingly caused the retailer to resort to some dramatic -- yet ultimately offensive -- marketing techniques that reek of desperation.

Which may be why it's experimenting with Anthropologie, and to a lesser extent Free People. These are its growing concepts and with Anthropologie in particular reporting record sales and near-record profits, it intends to invest more in them.

Feeling bloated
The retailer recently unveiled a plan to expand its merchandise selection to fill up the bigger floor plan, setting up store-in-store boutiques that will house different brands, such as its BHLDN wedding brand and the Terrain yard and gardening brand.

The urban shopper can now have a more regal flair. Photo: Urban Outfitters URBN Vision 20|20 Investor Day presentation Sept. 23, 2014.

Additionally it will expand the home goods offerings Anthropolgie offers so that more than just accenting their apartments with "boho chic" bric-a-brac, customers can fully furnish them. It looks like you'll need more than just a Phillips head screwdriver to assemble it all.

Urban Outfitters' says research shows its shoppers really do want to get lost in its stores. By tripling the size of their stores, they're able to double or even triple the amount of time customers spend going through the racks, according to focus groups conducted by the company. Presumably the extra time spent in the stores will translate into higher sales.

Ultimately the retailer wants clothing to fall from nearly three quarters of what its customers buy to just over half, while home goods rises to 22% from 17% of its penetration. Additionally, it generally wants there to be more of everything in its stores. Instead of just selling accessories and beauty supplies (currently of its sales), it wants Anthropolgie to also be a destination for intimates, shoes, handbags, and bridal, all of which would end up accounting for a quarter of sales by 2020.

Whether it works remains to be seen. Other retailers are reducing their footprint in response to declining foot traffic and customer preferences indicating what they really desire is a more intimate setting.

The industry watchers at ShopperTrak recorded a near-15% decline in mall traffic in November and December last year (their busiest months) compared to the same period the year before. Compared to three years ago, the dropoff is even more staggering at almost 50%.

As online shopping becomes more prevalent, the need to actually set foot in a store grows less.

Data: U.S. Census Bureau

The U.S. Census Bureau says second quarter e-commerce retail sales surged 15.7% from the year ago period and now accounts for more than 6% of all retail sales, or $75 billion on a seasonally adjusted basis. Admittedly that's still a small overall percentage, but it suggests that the best days of online shopping are still in front of it.

According to comScore, 198 million consumers bought something online in the first three months of 2014, or more than three quarters of the population of the U.S.

Even Urban's own results bear this out. In an investor presentation discussing the previous holiday season, the retailer acknowledged that its direct-to-consumer sales grew almost eight times faster than comp sales at its retail stores while shoppers using mobile devices grew 77% for the period.

The Free People mobile app. Photo: Urban Outfitters URBN Vision 20|20 Investor Day presentation Sept. 23, 2014.

While consumers may love clothes shopping, with everyone's busy lives do they really have time to spend three hours just hanging out in an Anthropologie store? Urban might be right that they spend about an hour or so in its stores now, but going big doesn't ensure they'll spend more.

According to the Lifestyle Monitor survey from the apparel trade group Cotton, consumers shop twice per month for clothes in stores, and only once per month online, but they spend 105 minutes doing so online compared to 99 minutes in-store.

So I'm not convinced that what works for Ikea can work for Urban Outfitters. There is a certain sense to having a large showroom when you're selling big, bulky furniture as it now wants to do, but that big box feel may ruin the intimacy it's customers feel.

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 Urban Outfitter's Wants Anthropologie to Be Like Ikea originally appeared on Fool.com.

Rich Duprey has no position in any stocks mentioned. Follow him on Facebook where he covers all the most important developments in retail and consumer brand name goods.  The Motley Fool recommends Urban Outfitters. 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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Dividend Aristocrats: Time to Buy Kimberly-Clark?

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Source: Kimberly Clark.

The best dividend stocks have business models that are deceptively simple, generating regular income that shareholders can depend on year in and year out. The consumer-goods area is particularly fertile ground for dividends, and Kimberly Clark is among the best in the business, qualifying for recognition as a Dividend Aristocrat. With a track record of more than a quarter-century of annual dividend increases, Dividend Aristocrats are the cream of the crop in the dividend-investing world.

Kimberly Clark has a long and storied history of putting useful household products in the hands of homemakers across the globe. With brands like Kleenex, Huggies, and Scott towels, the company has built up a strong presence despite strong competition from larger players like Procter & Gamble and Colgate-Palmolive . Below, we'll take a closer look at Kimberly Clark.


Dividend Stats on Kimberly Clark

Current Quarterly Dividend Per Share

$0.84

Current Yield

3.1%

Number of Consecutive Years With Dividend Increases

42 years

Payout Ratio

59%

Last Increase

March 2014

Source: Yahoo! Finance. Last increase refers to ex-dividend date.

Kimberly Clark just keeps growing
The biggest tailwind that Kimberly Clark, Procter & Gamble, Colgate, and several other major consumer-goods producers all enjoy is that the world has gradually become more prosperous, with wealth spreading out of high-income countries throughout the emerging-market world. The rise of the consumer class in formerly poor countries has given Kimberly Clark and its rivals brand new potential customers to buy their products, and Kimberly Clark, in particular, has done well in getting the most from its target markets. In its most recent quarter, Kimberly Clark's international operations saw organic sales climb 10%, with the companies specifically mentioning China, Brazil, Russia, and South Africa as areas where sales volumes have been on the rise.

But another appealing characteristic of Kimberly Clark during market turbulence is the fact that its ability to generate free cash flow is stable and consistent. With millions of customers remaining loyal to Kimberly Clark products irrespective of changing economic conditions, the company doesn't have to worry about the ups and downs of macroeconomic factors nearly as much as some of its counterparts in more cyclically sensitive areas.

As a result of its consistent profitability, Kimberly Clark has been able to grow its dividend steadily. During the past five years, Kimberly Clark's payout has climbed at a roughly 7% annual rate, and after more than four decades of annual increases, investors have come to take each year's boost in Kimberly Clark's payout as a given.

KMB Dividend Chart

KMB Dividend data by YCharts.

Some investors were concerned, though, when Kimberly Clark reduced its dividend growth rate earlier this year. With just a 3.7% increase, Kimberly Clark's dividend hike was the smallest since 2009, reflecting some of the difficulties the company has faced. In particular, the strong U.S. dollar has had a substantial impact on Kimberly Clark's earnings, with currency impacts holding back growth to a virtual standstill even as currency-adjusted growth figures remained healthily robust.

What's next for Kimberly Clark?
One interesting move Kimberly Clark is pursuing is the spinoff of its healthcare unit. The new entity, to be known as Halyard Health, will concentrate on surgical products and medical devices, freeing Kimberly Clark to focus even more heavily on its core consumer-brands business. With the unit having the lowest return on assets of Kimberly Clark's four major divisions, healthcare is an obvious choice for the company to break off in order to make the remaining whole look even more attractive going forward.

Source: Kimberly Clark.

Yet, of more immediate importance is whether Kimberly Clark will keep producing the growth that investors expect. Last quarter, Kimberly Clark narrowed the top end of its previous guidance range by $0.05 per share, arguing that higher costs for input materials, and a sluggish Mexican economy, held back its overall results. With the dollar also remaining strong, this quarter's results at Kimberly Clark could also look less than stellar.

Don't worry about Kimberly Clark's dividend -- yet
Fortunately, Kimberly Clark has some wiggle room to withstand the short-term impact of adverse currency moves without threatening its ability to boost its dividend in the future. Nevertheless, after the relatively small dividend increase earlier this year, dividend investors will want to see more exciting growth from Kimberly Clark before they can reasonably expect future dividend growth to accelerate.

At this point, Kimberly Clark seems likely to produce that growth, and therefore will likely remain a Dividend Aristocrat into its fifth decade of dividend increases. Still, investors need to keep an eye on Kimberly Clark to make sure that dividend growth comes back when currencies move in a more favorable direction for the consumer goods giant.

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 Dividend Aristocrats: Time to Buy Kimberly-Clark? originally appeared on Fool.com.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Kimberly Clark and Procter & Gamble. 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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Cheap Stocks Wall Street Hates: Transocean LTD

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Even though shares of Transocean  at today's prices offer a dividend yield of greater than 9.5%, just about every analyst out there is saying "don't touch." In the past three months alone, Transocean's stock has dropped over 29%, and many say that still doesn't make the company an attractive buy. To a long-term value investor, though, the time to buy might be when the company is out of favor. With that in mind, let's see why so many people are negative about the outlook for this offshore drilling contractor and whether cheap prices today could translate into high returns down the road.

RIG Chart

RIG data by YCharts.


How cheap is cheap?
We can use a number of different financial ratios to evaluate stocks, but many are either unhelpful because they are limited in scope or irrelevant because they don't apply well to a certain industry. In the case of rig companies like Transocean, two key ratios are total enterprise value-to-EBITDA and price-to-tangible book value. 

We need to keep these numbers in perspective because a company or an entire industry can trade at a valuation very different from the broader market. So we'll look at the valuation of Transocean and its peers today compared to their 10-year historical average. 

Company TEV/EBITDA (today) TEV/EBITDA (10 yr. avg) Price/tangible book (today) Price/tangible book (10 yr. avg)
Transocean 5.04x 11.69x 0.82x 3.48x
Seadrill* 8.94x 21.16x 1.28x 3.91x
Ensco 5.66x 9.52x 1.1x 2.02x

Note: Seadrill has only been public since 2005, so historical averages for it are only 9 years. Source: S&P Cap IQ.

You don't have to look too hard to see that Transocean and its peers are trading very significant discounts to their averages. To be fair, though, these averages consider the peak oil media frenzy of 2005-2007 when oil prices were touching north of $150 a barrel. So those historical averages can be a little high. Still, these numbers indicate Transocean is extremely cheap.

Why all the hate?
Part of the reason the stock is so cheap today is because many analysts have been quite negative about the company's outlook for the rest of this year and into 2015. Every analyst rating in the past 18 months has been a downgrade, and a majority of analysts have either hold or sell ratings on the stock. 

Now, most analyst calls are based on earnings for a couple quarters, potentially a year at best, so long-term investors must take these numbers with a grain of salt. However, the age of its fleet could leave Transocean struggling over the next year or two, if not longer. Transocean has many older drill rigs that aren't capable of handling deeper waters and more complex drilling tasks, and newer rigs being brought on by the company and its competitors could push these older rigs out of the running for contracts. If this were to happen, which is likely unless demand for drilling spikes dramatically, then many of Transocean's assets would need to be retired, so perhaps its book value isn't what the balance sheet indicates today.

What a Fool believes
At today's prices, though, long-term investors could do pretty well for themselves in the rig market. Personally, Transocean is probably cheap enough for a long-term investor to sit on for several years and eke out a return through its dividend. However, if I'm going to pick a company to dance with in the rig market today, I would lean toward Seadrill or Ensco. Both companies have a much more attractive fleet that will last longer, and will more likely earn the few contracts out there in the downtime while Transocean's rigs could sit in the dockyards.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their nondividend-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 Cheap Stocks Wall Street Hates: Transocean LTD originally appeared on Fool.com.

Tyler Crowe owns shares of Seadrill. You can follow him at Fool.com under the handle TMFDirtyBird, on Google+, or on Twitter @TylerCroweFool. The Motley Fool recommends Seadrill. The Motley Fool owns shares of Seadrill and Transocean. 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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After Tanking 12%, Here's Why Gap Inc. is a Good Buy

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Earlier this week, Gap's CEO, Glenn Murphy, announced that he was going to step down, naming Art Peck as his replacement. Peck is currently the head of Gap's digital division and has been with the company since 2005. The news brought Gap' stock crashing down, losing 12% by midday. That's great news for investors, as Gap is still in a very strong position.


Gap is the go to brand for the middle class the world over.

Apart from having a household flagship brand, Gap also controls a handful of other well-known or up-and-coming brands. Sales have been steady, -- though not stellar -- cash is coming into the business, and the company has been pushing its dividend payments up for years. With a price to earnings ratio well below the retail average, Gap looks like a solid buy.


The sales Gap
Let's get the weakest points out of the way first. Gap has been up and down on sales over the last year. While the company had a storming return in 2012, 2013 was lackluster, and 2014 has been just dribbling along. In it's the first half of this year, Gap's same store sales have fallen 1%, with the Gap brand pulling back gains from Old Navy. For comparison's sake, this time last year, total comparable sales were up 4%.

The difficulty in sales has caused Gap to treat 2014 like a sort of rebuilding year. The company's sales trouble has made it rethink how it approached customers and make changes in the first half that are supposed to take effect in the back half of the year. Murphy recently called out the progress that Old Navy had in margins in the first half, as an example, getting it set up for a stronger end to the year.

Plans are always to do better, though, and Gap is no different than any other optimistic brand. The real question for the company on the sales front will be, "Are Americans ready to spend again?" We're cutting back on the amount that we're willing to part with for non-essentials. That's hitting everyone in the retail space with teen apparel makers getting a heavy dose of trouble.

Looking at competitors like J. Crew, Abercrombie & Fitch, and Urban Outfitters, it's clear that no one is really winning right now. J Crew is the leader of this pack, with comparable store sales up 4% in its last quarter. Abercrombie recorded an 11% drop in comparable sales, while Urban Outfitters managed to hold flat, thanks to the success of its secondary brands.

Gap is running in the bottom half of this ugly pack, and sales is clearly the biggest concern for Peck, as he steps into the CEO role.

Cash rolls in
Even as sales have slogged along, Gap has managed to make cash. In the first half, the company generated free cash flow of $668 million, a 23% increase from the same period last year. Gap has used that flow to pay out solid dividends, increasing its annual payment consistently over the last decade. In the first half, it paid out $194 million in dividends.

Gap is also putting more into share repurchases, buying back 14.6 million shares in the first half at an average cost of $40.09 per share. Until the CEO announcement, that had been a very solid investment. Rounding out the balance sheet rundown, Gap has $1.5 billion in cash and $1.4 billion in long-term debts. To summarize, the company is financially sound.

Why a 'buy'
With the huge pullback after the Murphy announcement, Gap's stock has fallen to a P/E of 13.5. That puts it well below the retail industry average, but its prospects are much stronger than most of the companies in that same industry.

Gap is a solid business with a solid brand. Murphy's departure may mean a return to more advertising -- he was notorious for his dislike of marketing -- which could help Gap bring in new customers and increase its sales. With such a strong financial bedrock on which to build, Gap looks like a long-term winner, to me.

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 After Tanking 12%, Here's Why Gap Inc. is a Good Buy originally appeared on Fool.com.

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

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

 

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Is It Time to Buy Hartford Financial Services Group Inc.'s Stock?

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Insurance companies are still cheap. Property and casualty insurance leaders like American International Group  or The Hartford Financial Services Group trade at persistently low price-to-book multiples. Artificially low interest rates, thanks to the expansive monetary policy of the Federal Reserve, haven't helped much to awaken investor interest in financial institutions. Yet, with interest rates expected to move up, that might very well change in the near future.

The relevance of interest rates
The level of the prevailing interest rate in an economy is of extraordinary importance for insurance companies, because they invest insurance premiums into (mostly) fixed-income investments. Low interest rates tend to result in low returns from bond investments, which in turn makes investors avoid exposure to financial firms, including insurance companies, during periods of low interest.

Interest rate sensitive investments, like Hartford Financial Services, therefore make a lot of sense when the interest rate outlook is lightening up. Just look at the development of the U.S. real interest rate to see that rates have only one way to go -- up.


The Federal Reserve has already guided for higher interest in its latest Federal Open Market Committee meeting in September by preparing the market for a reduction in its bond buying program. Fewer purchases of mortgage-backed securities and long-term Treasury securities will put upward pressure on interest rates in the near term -- and likely lead to tailwinds for insurance companies, which in turn can expect higher investment returns as a result.

Earnings momentum and improving cost trends
Hartford Financial Services has seen some exciting earnings momentum over the last couple of years, which raises hopes that the insurance company will be able to sustain earnings growth in an environment of stronger economic growth as well.

Hartford Financial Services operates a strong property and casualty business, which brought in a whopping $9.9 billion in premiums last financial year. The majority of premiums originate from Hartford's commercial property and casualty business (63%), which has been an earnings driver over the last couple of quarters, whereas 37% of premiums, or $3.7 billion of premiums, came from its consumer markets business, which includes automobile and homeowner service lines.

Price increases for renewal policies as well as improvements in its combined ratio led to an explosion in Hartford's core earnings in its dominant commercial property and casualty business.

Hartford's commercial property and casualty combined ratio has steadily improved over the last three years and declined from 97.3% in fiscal year 2011 to 93% in fiscal year 2013.

Over the same time period, commercial P&C segment core earnings skyrocketed from just $389 million in fiscal year 2011 to $827 million in fiscal year 2013. 

Earnings momentum also extended to Hartford's two other business units: group benefits and mutual funds. Total core earnings grew by a stunning 26% to $1.4 billion from 2012 to 2013 with further momentum in the first six months of 2014. So far, core earnings increased another 4% compared to the first six months of 2013, which makes it likely that Hartford Financial Services will be able to report another instance of year-over-year earnings growth.

The insurance company could further benefit from premium momentum and stronger performance in its commercial business as a result of improving fundamentals in the U.S. economy.

Valuation
As mentioned in the introduction, insurance companies like Hartford Financial Services are for the most part not exactly investors' favorites just yet, which, on the other hand, makes them interesting investments.

Hartford Financial Services, for instance, still trades at a relatively low valuation compared to its accounting book value. With a 16% discount from book value, Hartford's shares also appear to be cheap in a historical context. Before the financial crisis, for instance, it was not unusual for Hartford to trade at twice the current book value multiple.

The Foolish bottom line
With strong earnings momentum, particularly in its dominant property and casualty business, and a sequentially improving combined ratio, it is difficult to see why Hartford Financial Services continues to trade at such a high discount from its book value. This is especially true if the assumption about a positive effect of rising interest rates on insurer profitability turns out to be correct.

In fact, if its own historical valuation is the benchmark, Hartford Financial Services has a lot of potential to increase its valuation if the U.S. economy continues to expand over the next couple of years.

How to get even more income during retirementSocial Security plays a key role in your financial security, but it's not the only way 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 Is It Time to Buy Hartford Financial Services Group Inc.'s Stock? originally appeared on Fool.com.

Kingkarn Amjaroen owns shares of American International Group. The Motley Fool recommends American International Group. The Motley Fool owns shares of American International Group and has the following options: long January 2016 $30 calls on American International Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Your Olive Garden Breadstick Basket Is About to Get Lighter

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A Times Square branch of the Olive Garden restaurant chain on Friday, November 1, 2013. (© Richard B. Levine)
Richard Levine/Alamy
The "When you're here, you're family" casual-dining chain had a rude awakening at its annual family reunion Friday. Activist investors won the proxy battle at Olive Garden parent Darden Restaurants (DRI), and now, we'll all get to see if the boardroom purge delivers results or makes matters worse.

Friday morning's tally at Darden's annual shareholder meeting wasn't a huge surprise. Investors elected all 12 of the directors that hedge fund firm Starboard Value nominated, leaving the eight nominees that Darden brought to table out of the boardroom. Starboard had just an 8.8 percent effective stake in the restaurant operator, but it had been raising a stink in recent months about Darden's sloppy performance.

Its displeasure culminated in a 294-slide presentation that took Darden to task for everything from not generating a high enough price for the sale of Red Lobster earlier this year to the lack of alcohol sales at Darden's LongHorn Steakhouse.

Most of the presentation's critiques were directed at Olive Garden, where some of the widely circulated gems included calling the chain out for being too liberal with its breadsticks and salad dressing, failing to add salt to the water before boiling pasta, and having too many choices on the menu.

Bored of Directors

Darden's woes center around the weakness at Olive Garden, where comparable-restaurant sales have fallen for five consecutive quarters. Darden also runs LongHorn Steakhouse, Bahama Breeze, Seasons 52, The Capital Grille, Eddie V's and Yard House, but all of those better-performing chains still combine to make up a minority of the revenue mix. With Red Lobster out of the picture, Olive Garden now accounts for 57 percent of Darden's top-line results.

Darden executives had lost Wall Street's confidence due to the pronounced weakness at Red Lobster and Olive Garden. The resignation of its CEO wasn't enough of a sacrificial lamb for activists seeing marinara-red over the fall from grace at two of casual dining's iconic chains.

Friday morning's preliminary report wasn't all bad. Shareholders approved the company's auditor and its executive compensation on an advisory basis. They also voted against a pair of shareholder proposals. However, with activists now taking over the boardroom, there's a fair chance that there will be friction between Darden's directors and its executives. Can the two sides that have been at war over the past few months come together for the greater good -- and the greater food?

It's All About Dough in the Bread Basket

There's no denying that Olive Garden is in a funk. The disagreement all along has been about whether or not Darden is really turning things around. Darden claims it's on the right track, and just a few days ago it issued a news release detailing that same-restaurant sales at domestic Olive Garden locations had inched 0.6 percent higher for the month of September. Darden had never put out monthly updates before.

In another sign that the proxy battle was going to be hotly contested, Darden spent the past couple of weeks putting out news releases from advisory firms siding with its director nominees, endorsing its turnaround strategy.

It clearly wasn't enough. The new directors are coming, and new directives are likely to follow.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our newsletter services free for 30 days. To read about our favorite high-yielding dividend stocks for any investor, check out our free report.

 

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Is Clean Energy's Niche Under Attack?

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Natural gas specialist Clean Energy made a strategic decision early on to enter the industrial market, focusing on such things as getting natural gas powered buses and garbage trucks on the road. Tesla Motors , which is working on expanding the reach of electric vehicles, took a different approach, hitting the consumer market first. Now, however, Tesla co-founder Ian Wright is looking to get into a Clean Energy niche.

From the ground up
The gasoline infrastructure in the United States is both mature and solidly entrenched. Then there's the massive fleet of gasoline-powered vehicles in the country and the sales and repair network built around it. It's a rough market to disrupt with new technology that lacks similar supporting infrastructure.

(Source: SMcGarnigle, via Wikimedia Commons)

This is one of the reasons why Clean Energy decided to bypass the consumer market and focus instead on industrial customers. In this market, Clean Energy could show compelling economic and environmental reasons for making the switch to natural gas. Bus operators, airports, and garbage companies took the leap of faith.


Since such vehicles generally have local, and in some cases highly predictable, routes integrating natural gas into the picture was relatively easy. Of course, switching to natural gas also comes with green benefits, too, since it burns more cleanly than gasoline.

The uptake was nothing short of incredible. For example, within the garbage truck sector, natural gas powered vehicles represented just 3% of new truck sales in 2008. In 2013 that number had grown to 60%. But this hasn't gone unnoticed.

Too expensive for the average Joe
Tesla co-founder Wright left the company shortly after its founding because he believed that electric cars were too costly for the average car buyer. Tesla CEO Elon Musk pretty much admitted that when he opened the company's patent portfolio to the world earlier this year: "electric car programs at the major manufacturers are small to non-existent, constituting an average of far less than 1% of their total vehicle sales." He explained that gasoline powered cars were the competitive target—not other electric cars.

Ian Wright highlighted the dilemma that led him to found Wrightspeed to Fast Company: "The thing about electric drive technology is it's very efficient ... but it's not cheap. So you've got to think about who's going to pay the extra cost of these things." Essentially, you can save money by going electric, but only if you use a lot of gasoline. The typical car owner, he contends, does not. A garbage truck, on the other hand, can burn through $60,000 worth of fuel a year.

(Source: CSIRO, via Wikimedia Commons)

Look out Clean Energy? Maybe not
With electric vehicles starting to reach into Clean Energy's core markets, is the natural gas pioneer at risk? Maybe not. For starters, Clean Energy is expanding into new, bigger markets. That includes the long-haul truck sector, which is roughly five times the size of the garbage truck, airport vehicle, and bus markets combined. And it's looking at supplying mining trucks, trains, and ships. So there's still plenty of expansion potential at Clean Energy.

Then there's the fact that Wright's product actually makes use of micro turbines to generate power when the batteries run low. According to the Wrightspeed, those turbines can be powered by diesel, compressed natural gas (CNG), liquefied natural gas (LNG), or even landfill gas.

Moreover, the benefit of Wright's technology is that it makes use of braking to generate electricity. That's great for local vehicles that start and stop all the time, like a garbage truck, but not for long-haul trucks that drive for hours at a time before stopping.

At the end of the day, Wright's industrial push could hamper Clean Energy in some smaller markets by reducing demand for CNG and LNG. However, Wrightspeed is essentially looking to partner with these fuels, not displace them completely. And Wrightspeed tech isn't workable in Clean Energy's newest expansion markets, most notably the giant long-haul truck space. So, electric vehicles are an issue, but not one that should materially change Clean Energy's long-term expansion opportunities.

"As significant as the discovery of oil itself!"
Recent research by the U.S. Energy Information Administration has already tabbed this "Oil Boom 2.0" with a downright staggering current value of $5.8 trillion. The Motley Fool just completed a brand-new investigative report on this significant investment topic and a single, under-the-radar company that has its hands tightly wrapped around the driving force that has allowed this boom to take off in the first placeSimply click here for access.

The article Is Clean Energy's Niche Under Attack? originally appeared on Fool.com.

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

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Why Shares of NXP Semiconductors NV Shorted Out

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This article originally appeared as part of ongoing coverage in our premium  Motley Fool Rule Breakers  service ... we hope you enjoy this complimentary peek!

What's happening
Shares of NXP Semiconductors were among the hardest-hit in a broad semiconductor stock sell-off today after Microchip Technology executives warned of a looming correction for the sector.

Why it's happening
NXP is one of more than a dozen major chipmakers to be hit hard by Microchip's announcement, although its stock has been one of the hardest-hit in a field that includes several other Motley Fool favorites:


MCHP Price Chart

MCHP Price data by YCharts.

Microchip has developed a reputation as something of a canary in the silicon mine, and its executives certainly played to that reputation in a preliminary earnings report released after Thursday's closing bell. Microchip CEO Steve Sanghi warned that the company "often sees the turn of the industry ahead of others ... [because] we report sales from distribution on a sell-through basis worldwide. ... We believe that another industry correction has begun and that this correction will be seen more broadly across the industry in the near future."

In response to the warning, analysts at FBR Capital took a more defensive stance in the semiconductor space, but nonetheless reiterated their buy rating on NXP's shares. Hedgeye was the only notable analyst firm to warn on NXP specifically following Microchip's report, cautioning that it is among those "downside risk stocks" that could suffer from the high beta that previously made it a strong outperformer. NXP itself has yet to release a statement on this development.

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 Why Shares of NXP Semiconductors NV Shorted Out originally appeared on Fool.com.

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

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Why EXACT Sciences Corporation Is Today's Best Healthcare Stock

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

What: Shares of EXACT Sciences , a molecular diagnostics company best known for early detection, non-invasive colon cancer diagnostic test Cologaurd, vaulted higher by as much as 48% after the Centers for Medicare and Medicaid Services released its national coverage determination, or NCD, on Cologuard.


Amplification Lab per 2014 shareholder meeting presentation slide. Source: EXACT Sciences.


So what: According to the CMS' NCD, EXACT's Cologuard will be covered by Medicare effective immediately, although final pricing on the test is still under review by the CMS. The announcement that Cologuard would be covered was unique, as EXACT's press release notes, because it was done on a parallel basis, with the Food and Drug Administration and CMS reviewing the diagnostic test concurrently. Keep in mind the FDA only approved Cologuard two months ago. As EXACT Sciences' CEO, Kevin Conroy noted, "We are pleased with CMS' final coverage determination for Cologuard and would like to thank both CMS and FDA for giving Exact Sciences the opportunity to participate in the parallel review pilot program."

Now what: You might have thought Cologuard's FDA approval was the big news, but in reality it's the reimbursement potential that had investors waiting on pins and needles. Medicare approval is crucial to EXACT because one of colon cancer's greatest risk factors is age. Therefore, having Medicare reimbursement approval should encourage the elderly to get this diagnostic test -- which exams the cellular breakdown of colon wall cells that are shed on a patient's stool sample to determine if any abnormal cells exist (i.e., cancer or precancerous cells) -- done on an annual basis. With its Medicare approval locked up, I'd suggest EXACT Sciences remains on track to turn profitable on an annual basis within the next two to three years, dependent on the success of the product launch, of course.

Cologuard looks to be a big step forward in cancer detection, but this revolutionary product's growth potential could leave it in the dust! 
The best health care investors consistently reap gigantic profits by recognizing true potential earlier and more accurately than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not just how we treat a common chronic illness, but potentially the entire health industry. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns you will need The Motley Fool's new free report on the dream-team responsible for this game-changing blockbuster. CLICK HERE NOW.

The article Why EXACT Sciences Corporation Is Today's Best Healthcare Stock originally appeared on Fool.com.

Sean Williams  has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name  TMFUltraLong , track every pick he makes under the screen name  TrackUltraLong , and check him out on Twitter, where he goes by the handle  @TMFUltraLong . The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services  free for 30 days . We Fools don't all hold the same opinions, but we all believe that  considering a diverse range of insights  makes us better investors. The Motley Fool has a  disclosure policy .

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8 Fascinating Reads

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Here are 8 great things I read this week. 

Good news


We're living longer than ever

— U.S. life expectancy for a child born in 2012 was 78 years and 9½ months, up about six weeks from life expectancy in 2010 and 2011. That's a record.

— For someone 65, the CDC estimates that men have about 18 years of life left and women about 20½ years. The gaps between men and women grew slightly, compared to 2011.

— There were 2.5 million deaths in 2012, or about 28,000 more than the year before. The increase was expected, reflecting the nation's growing and aging population, Anderson said.

Budgets

Here's how teens spend their money: 

Big budgets

The federal budget deficit is now below its 40-year average: 

The Congressional Budget Office now estimates that the deficit for 2014 was 2.8 percent of G.D.P., down from 4.1 percent last year. The deficit is now smaller than its average over the past 40 years of 3.1 percent.

Technology

Marc Andreesen has fascinating thoughts about finance

We have a chance to rebuild the system. Financial transactions are just numbers; it's just information. You shouldn't need 100,000 people and prime Manhattan real estate and giant data centers full of mainframe computers from the 1970s to give you the ability to do an online payment.

Allocation

Companies will spend almost as much on share buybacks this year as they'll earn in profit: 

They're poised to spend $914 billion on share buybacks and dividends this year, or about 95 percent of earnings, data compiled by Bloomberg and S&P Dow Jones Indices show. Money returned to stock owners exceeded profits in the first quarter and may again in the third. The proportion of cash flow used for repurchases has almost doubled over the last decade while it's slipped for capital investments, according to Jonathan Glionna, head of U.S. equity strategy research at Barclays Plc.

Learning

This is a great read about how we learn:

"When you are cramming for a test, you are holding that information in your head for a limited amount of time," Mr. Carey says. "But you haven't signaled to the brain in a strong way that's it's really valuable."

One way to signal to the brain that information is important is to talk about it. Ask a young student to play "teacher" based on the information they have studied. Self-testing and writing down information on flashcards also reinforces learning.

Facts

I loved this piece on the science of truth:

Truthiness is "truth that comes from the gut, not books," Colbert said in 2005. The word became a lexical prize jewel for Frank Rich, who alluded to it in multiple columns, including one in which he accused John McCain's 2008 campaign of trying to "envelop the entire presidential race in a thick fog of truthiness." Scientists who study the phenomenon now also use the term. It humorously captures how, as cognitive psychologist Eryn Newman put it, "smart, sophisticated people" can go awry on questions of fact.

Wisdom

Here's a great video with value investor Mohnish Pabrai:

Have a great weekend. 

How to get even more income during retirementSocial Security plays a key role in your financial security, but it's not the only way 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 8 Fascinating Reads originally appeared on Fool.com.

Contact Morgan Housel at mhousel@fool.com. The Motley Fool has a disclosure policy.

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Why Tesla Motors, Inc. Stock Is Down Today

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After some big news Thursday night about a new version of the Model S and some new autopilot features, Tesla stock is down more than 6% at the time of this writing. What's behind the sell-off? Tesla's announcements Thursday night only met expectations, and nothing more. For a growth stock like Tesla, with a very rosy outlook already priced in, sometimes it takes more than meeting expectations to live up to the market's expectations. But as anyone following Tesla stock closely should know, such drastic swings in Tesla's stock price are basically inevitable.

Tesla's D event
Earlier this month, Tesla CEO Elon Musk helped move the stock higher when he teased an Oct. 9 Tesla launch event, saying on Twitter that Tesla would "unveil the D and something else." The image that went along with the tweet showed a model S peaking from beneath a partly opened garage door.

Speculation quickly pointed to a likely launch of a dual-motor version of the Model S and new driver-aid and safety features. For the most part, speculation about the event turned out to be exactly right.


The Model S can now be bought with dual-motor all-wheel drive. Image source: Tesla Motors.

Thursday night Tesla introduced dual-motor all-wheel-drive upgrade options to its current 60 kWh, 85 kWh, and 85 kWh Performance models. Tesla's new flagship 85 kWh Performance dual-motor all-wheel-drive model, or the P85D, sets some new speed records for the Model S. The car gets to 60 mph in just 3.2 seconds and now tops out at 155 mph instead of 130 mph. Also, increased efficiency of the dual-motor system actually added 10 miles to the P85's range, with a new range of 275 at 65 mph.

The new suite of driver-aid and safety features the company announced were mostly a game of catch-up. Consider new Model S features like lane-departure warnings, stopping without driver help to avoid hitting the cars ahead, and resistance to wandering over lanes -- all common features on new high-end vehicle models by other manufacturers.

But a few driver-aid features Tesla announced broke new ground in the industry.

  • Lane changes without the driver's help after a turn signal has been turned on.
  • A system that reads speed-limit signs and adjusts the car's speed to the posted speed.
  • An ability to summon the car to you on private property. The car will even automatically show up and get interior temperatures and music preferences prepared when drivers have appointments on their calendar.

"Model S comes standard with a forward-looking camera, radar, and 360-degree ultrasonic sensors that actively monitor the surrounding roadway," according to Tesla's website. A series of autopilot features will be rolled out in a series of software updates to owners of vehicles with the new suite of sensors built in. Image source: Tesla Motors.

The features will be introduced slowly after the first deliveries to customers who order a Model S today with the tech package. The car will use a combination of software, radar, cameras, and 12 sensors that will come standard in Model S vehicles ordered today. While some of the new driver-aid features will come standard, Tesla's website says autopilot "convenience features" will be added with the addition of the tech package. The reference to convenience features likely refers to the driver-aid features not related to safety.

Model S and prototype of Tesla's upcoming Model X. Image source: Tesla Motors.

The Street wanted more
Some speculation leading up to Thursday night's event suggested Tesla could show off the final production version of its upcoming Model X SUV or even give the world a first look at Tesla's Model 3, a lower-cost car that Tesla is aiming to bring to market in 2017. With neither appearing, the stock's recent run-up (which was driven by the hype of the event in the first place) caved to the levels Tesla stock traded at in late September, before Musk's tweet about the D event.

For long-term buy-and-hold Tesla shareholders, the sell-off today has no implications whatsoever; the company's underlying business looks as solid as ever. For investors interested in buying Tesla stock, the euphoric expectations priced into the stock price today, and the recent reminder that shares are likely to trade with lots of volatility, might make waiting for a larger sell-off a wise decision.

Warren Buffett's worst auto nightmare (Hint: It's not Tesla)
A major technological shift is happening in the automotive industry. Most people are skeptical about its impact. Warren Buffett isn't one of them. He recently called it a "real threat" to one of his favorite businesses. An executive at Ford called the technology "fantastic." The beauty for investors is that there is an easy way to ride this megatrend. Click here to access our exclusive report on this stock.

The article Why Tesla Motors, Inc. Stock Is Down Today originally appeared on Fool.com.

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

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

 

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