Source: OmniVision Technologies.

The release of Apple's iPhone 6 has had investors excited throughout 2014, both about the tech giant's shares and the stocks of its primary suppliers. Among those companies is OmniVision Technologies , which has seen impressive gains so far this year as shareholders hoped that the maker of image sensors would get another boost from the latest Apple product cycle. Yet OmniVision doesn't have the penetration with the iPhone that it used to, and the lesson of GT Advanced Technologies looms large over every Apple supplier, showing the need for as much diversification as possible in your customer base. Let's take a closer look at OmniVision Technologies to see if the stock can sustain its impressive climb.

Stats on OmniVision Technologies

Source: Yahoo! Finance.

Why has OmniVision Technologies jumped this year?
OmniVision has had a strong year, even before Apple's new products hit the shelves. OmniVision's sensors appear in a wide variety of different manufacturers' smartphones, and the rise of mobile technology worldwide has contributed greatly to the company's overall success. Low-cost 3G smartphones have seen global sales volumes jump dramatically, and in China, the transition to 4G LTE wireless service has spurred greater adoption of more advanced devices that take greater advantage of OmniVision's higher-end technology.

Moreover, OmniVision continues to push forward with new innovations in order to keep its competitive edge. Among the company's initiatives are efforts to generate 3-D image data that can aid in enhancing picture quality, as well as its PureCel high-performance sensors that make better use of available light with relatively low power and reasonable cost. In addition, OmniVision is looking at ways to use its sensors to interact with users through eye-tracking software and gesture recognition.

Source: OmniVision Technologies.

In addition, OmniVision has gone well beyond the traditional mobile-device space to find outlets for its products. The rising adoption of imaging sensors in vehicles has made the automotive market a key driver of growth for the company, and as the importance of safety rises, ways to use cameras -- not only for rearview vision but also less obvious safety-enhancing features -- could drive demand even higher.

Can the Internet of Things boost OmniVision's prospects?

Another big possibility for OmniVision's growth could come from the Internet of Things. Like sensor-producing peer InvenSense , OmniVision stands to gain from the need for previously disconnected electronic devices to provide data for analysis elsewhere in the cloud. To gather that data, devices will need to include an array of sensors that they've previously had no need of, and providing those sensors could give both OmniVision and InvenSense huge growth opportunities.

Clearly, OmniVision Technologies has learned its lesson from its experience three years ago, when Apple chose to go with a competing provider for the main camera chips in its then-latest iPhone series. Just as GT Advanced Technologies saw more recently, relying too much on Apple can leave a company without good options if something happens to jeopardize that relationship. By contrast, OmniVision can now bargain from a position of strength -- not only with Apple, but also with other providers of leading-edge technology -- and that should give shareholders confidence that the company will avoid the fate of other Apple suppliers.

For the immediate future, investors should nevertheless keep a close eye on how well OmniVision's products fare among new Apple products. Even though OmniVision's diversification efforts have been smart, the company still relies on Apple for much of its sales, and it needs to do what it can to stay in the i-Device giant's good graces as long as possible.

We've all done the math before. A stock trading for a few pennies could make us a boat load of money by just rising to a dollar a share. The allure is that we could make a lot of money by starting with a little. However, all too often these penny stocks go to zero. That's because investors are more focused on the stock price instead of the underlying business, which more often than not doesn't actually exist with penny stocks.

That being said there are some lower priced stocks that actually have strong underlying businesses and real assets. These companies are technically penny stocks according to the SEC, because a penny stock is simply a stock that trades below $5 per share. That definition offers a much broader array of companies than those stocks that the "pump-and-dump" crowd would like to see you get caught up in. Here are three really solid energy companies that sell for less than $5 a share; though, I will warn you, they are not without risk.

High flying oil production
While a lot of penny stocks are shallow shell companies, Halcon Resources Corp (NYSE: HK) is full of oil-rich growth. In fact, its oil production jumped 140% from the first quarter of 2013 to the third quarter of 2014 thanks to its strong position in the Bakken and Eagle Ford Shale plays. Meanwhile, unlike a lot of highly touted penny stocks, Halcon Resources has real assets and as of the end of last year the company had 119.6 million barrels of oil equivalent, or BOE in proved reserves that were worth $2.3 billion. Meanwhile, the underlying business continues to improve. As the following slide shows, the company has dramatically improved its Bakken Shale operations.

Source: Halcon Resources Corp Investor Presentation 

Here we see that Halcon Resources is drilling its wells a lot quicker, and those wells are producing more oil initially as well as over the life of the well. This combination is improving the rates of return the company is earning on the money it's investing in new wells. So, while Halcon Resources might have a penny stock price, its operations are solid and growing stronger.

Don't miss this penny stock
Another company with a low stock price, but strong operations, is SandRidge Energy (NYSE: SD). This Midcontinent focused oil and gas company has real assets including 377 million BOE of proved reseves that were worth $4.1 billion at the end of last year. These assets, when combined with the company's solid growth plan has SandRidge Energy expecting to grow its production by about 20% per year, while growing its EBITDA by more than 30% each year without breaking the bank as it expects to keep its capital spending flat. 

On top of that solid growth, SandRidge Energy is really focused on improving its operations and returns. As this next slide shows the company currently earns an internal rate of return of 65% on the wells it drills.

Source: SandRidge Energy Investor Presentation. 

However, as that slide also notes, the company is working toward improving its returns to 80% with an aspirational goal to hit returns north of 100%. So, while most penny stocks are focused on getting investors to pile on to boost their stock price, SandRidge Energy's focus is on improving its operations and returns. It's a plan that will actually create value instead of just inflating its stock price.

Monster results
The final top-tier penny stock is Magnum Hunter Resources Corp (NYSE: MHR). While its stock price might miss the penny stock $5 per share cutoff depending on how volatile the market is on any given day, it's still a low priced stock that has solid operations and a lot of upside. Not only that but the company is loaded with assets as it has 79.8 million BOE in proved reserves and another 891.1 million BOE in contingent resources. 

Speaking of this upside, Magnum Hunter Resources recently drilled the best shale gas well ever in the U.S. The well, located in the Utica Shale of West Virginia, delivered a stunning peak initial production test rate of 46.5 MMcfe/d. More importantly that discovery was in the most southwestern part of the play suggesting that Magnum Hunter Resources' acreage in that part of the play is just loaded with natural gas. Needless to say, this penny stock isn't full of hot air.

Investor takeaway
Investors seek out penny stocks in hopes of finding a quick profit. Those profits almost never materialize as the stocks behind them are almost always just full of hot air. Not so with these three top-tier penny stocks that combine a low stock price with strong operations and real assets making them solid candidates to earn real returns over the long-term. 

When you think of non-profits, names like The Red Cross or Habitat for Humanity come to mind. You certainly don't think of the National Football League, but the NFL (along with the National Hockey League and the Professional Golfers Association) is a tax exempt 501(c)(6) organization -- as are some other business that might surprise you.

While the word "non-profit" brings up mental images of charities helping others, and doing good deeds, in reality, non-profits don't need to be charitable. That is legally true, but it can be argued that the NFL and some big businesses claiming non-profit, tax exempt status are taking advantage of laws not written for them. 

"Cancer research. Tsunami relief. Golden retriever puppy rescue. Professional football. One of these things is not like the other," wrote Patrick Hruby in a recent opinion piece in The New York Times. "Thanks to a long-standing quirk in the federal tax code, however, the National Football League's main office enjoys nonprofit status similar to that of the Alzheimer's Association — even though the former may cause dementia, while the latter seeks to cure it."

Many likely share that sentiment, but before storming Congress to demand an end to this practice, it's worth examining how the NFL and two other surprise non-profits, qualify for the status.

The National Football League
To overly simplify it, the NFL is a tax free entity because it "is organized as a trade or industry association that is exempt from taxation under Section 501(c)(6) of the Internal Revenue Code, not Section 501(c)(3), which exempts charitable organizations," according to a league spokesperson's comments in 2013. Basically, the league is using a loophole created for actual trade organizations -- groups like the National Chimney Sweeps Guild -- and using it as a way to avoid taxes.

The rules apply to the league office, not profits made by individual teams. The distinction can be a bit murky though as the league is structured so that teams fund the league office, which collects revenues from things like TV deals and distributes those funds to the franchises. Once the money is paid to a team, it's taxable. 

Still, the setup does allow the NFL (and the other sports leagues) to hold onto some money that would have otherwise gone to the taxman.

Senator Tom Coburn, an Oklahoma Republican, has supported ending the exemption for sports league and in 2012 produced a report that claimed "the NFL and NHL alone 'may' generate an additional $91 million annually for the federal government if his amendment passes and the leagues are no longer tax-exempt," according to ESPN. Congress's Joint Committee on Taxation had the number quite a bit lower and pegged it at $109 million over the next 10 years, according to the sports website.

What's the relation of IKEA stores to the IKEA Foundation?

The Stichting IKEA Foundation is a Dutch charitable foundation, funded by the Stichting INGKA Foundation. The Stichting INGKA Foundation in the Netherlands owns INGKA Holding B.V., the parent company of IKEA.

It's explained a little further in the company's annual report, though the chain of ownership does seem unnecessarily complicated.The Stichting INGKA Foundation was actually created by IKEA founder Ingvar Kamprad and not everyone buys that his intent was to "create a better everyday life for the many people."

Mark Wilson, who created Philanthroper.com, wrote a piece for Fast Company headlined IKEA Is A Nonprofit, And, Yes, That Is Every Bit As Fishy As It Sounds. In it he, to put it lightly, questions whether the nonprofit designation is valid or merely an attempt by an owner who "is a publicly frugal man who despises taxes" to avoid paying them. The Economist wrote a very thorough piece in 2006 that raised similar questions, though the only thing that has changed is the size of IKEA's business. 

Ikea stores are self-help. Source: Ikea 

The Green Bay Packers
Not all big businesses claiming non-profit status are doing it for questionable reasons. While the rest of the NFL's franchises -- and every other major U.S. pro sports team -- operate on a for-profit basis, the Green Bay Packers are a non-profit company owned by roughly 350,000 shareholders who receive "voting rights but no rights to profit from distribution," according to The New York Times. "Instead, any profits must be reinvested in the team."  

And, while the NFL is an example of using rules not intended for you to your advantage and IKEA appears to be a lesson in tax avoidance, the Packers are a clever, but reasonable use of the law. The Packers are a non-profit owned by its fans. While the team may not be a charity in the traditional sense, it's hard to argue that the franchise isn't doing a lot of good for the people it serves. The organization's storied track record of community outreach includes a community foundation, which funds countless projects which benefit the community and extensive outreach involving players. The team also runs the Community Quarterback Awards, which recognize outstanding volunteers within the state of Wisconsin. 

Though becoming a non-profit was a move to maker sure the team could not be sold and moved to a more profitable locale, it has become a mission the team's management and players have embraced.  

Olive Garden's new boss is definitely not the same as the old one, but other than not serving so many breadsticks with dinner, can the change in leadership really make a difference at the Italian restaurant?

Last week's annual meeting for Olive Garden owner Darden Restaurants was the site of a rare event in investing: Shareholders completely cleaned house, tossing out the old guard board of directors in favor of the entire slate of nominees put up by activist investor Starboard Value. 

Investors completely cleared Olive Garden of weeds, namely its old board of directors, who were voted out of office en masse. Photo: Flickr user Jeffery Bennett.

What happened to "When you're here, you're family?"
Dissatisfied with the direction management and the board had taken, as well as the high-handed manner the restaurant chain treated its critics, investors sent a strong message that dismissing shareholder concerns out of hand when a middle ground could be forged would result in your being voted out.   

The hedge fund's CEO Jeffrey Smith and 11 other candidates have now been installed on the board, and while they will immediately begin the search for a new chief executive to take over for Clarence Otis, who previously announced he was resigning from the position, the larger task remains turning around what is otherwise ailing brand. It might be a well-known and valuable name in dining concepts, but Olive Garden is still suffering from declining customer traffic and the new team needs to reverse that direction pronto.

During the near year-long run-up to the annual shareholder meeting, Starboard and fellow hedge fund Barington Capital battled with Darden over the future direction of the chain, believing that a holistic solution was needed for the problems it and similarly failing Red Lobster faced.

The old board, of course, made that moot by rushing through the sale of the seafood chain that left a lot of value on the table, and like so many leaders who've run on the promise of making sweeping change, now that they've been given the reins of power they must confront the reality of what can they actually do now that they're installed. 

Customers are getting their fill lately
Fortunately for Starboard, Olive Garden is off to a running start, thanks to the prior management team's rebuilding efforts, including its Never-Ending Pasta Bowl promotion that helped the Italian eatery record a second consecutive month of positive same store sales, the first time since May 2013 that's happened.

Considering the cutthroat competition in Italian food that's made it hard for anyone to grow sales, Darden's achievement actually is notable.

Only Brinker International's Maggiano's Little Italy has consistently reported higher comps -- 18 straight quarters of positive comps -- while other chains such as Romano's Macaroni Grill and Carrabba's Italian Grill have seen their own comparable sales fall. 

Wednesday's no longer Prince spaghetti day. Nor is Sunday, Monday, Tuesday, or any day of the week for that matter it seems. Data: Company quarterly SEC filings.

Olive Garden, though, had been the worst of the bunch, having recorded eight straight months of negative comps and 14 out of the last 15 months before the most recent rise. It was one of the primary reasons Starboard Value believed it and Red Lobster needed a different management team to tackle it, one solely dedicated to their turnaround without the distraction of also having to manage Darden's other restaurants, including the Long Horn Steakhouse or its portfolio of specialty restaurants like The Capital Grille and Bahama Breeze.

But with the seafood restaurant gone, what can the new Starboard board build on?

A new table setting
Last month it updated its plan for transforming Darden, building on the one it originally offered in March, and which included a 14-point plan for changing Olive Garden's direction, including:

Man, and restaurants, can't subsist on bread alone. Too many breadsticks caused Olive Garden to lose sales elsewhere. Photo: Olive Garden.

Source: Las Vegas Sands

Las Vegas Sands is actively rewarding shareholders with growing dividends and big share buybacks, and management plans to continue increasing cash distributions in the middle term. While this can be a big plus for investors in Las Vegas Sands stock, there are also some reasons for concern, since the company will most likely need to increase debt to pay for these distributions. Is Las Vegas Sands making a smart bet with its capital distributions or is management taking excessive risks?

Big buybacks and more to come
Las Vegas Sands is embarked in an ambitious capital return program. The company raised dividends by 40% in 2013 and 42.9% in 2013, management has committed to increasing dividends by at least 10% annually over the long term; and recent dividend increases show that the company is not being shy at all when it comes to dividend payments.

In addition, Las Vegas Sands has already taken action on $1.7 billion of its $2 billion repurchase program announced in June 2013. While the $300 million in remaining buyback authorization doesn't sound like much, management is quite confident on its ability to obtain further authorizations to increase buybacks in the future.

CEO Sheldon Adelson was asked during the latest earnings conference call if the company is planning to increase capital distributions, and his answer was quite straightforward:

We are -- we had a board meeting yesterday and I discussed with the board that -- I wanted them to think about the dividend policy and about stock repurchase, and then we would bring it up. We have enough money for the stock repurchase to go through on our regular program to go to this current quarter. And I expect that we will have some dividend news and stock repurchase news on the next earnings call for the third quarter.

Las Vegas Sands is reporting earnings for the third quarter on Oct. 15, among other things; investors may want to pay attention to dividends and buybacks announcements, since it seems like there may be some interesting news in that area.

The risks
Macau casinos are going through a very challenging period lately. Gaming revenues in the region have declined over the last four consecutive months, and data for September was particularly worrisome, with a decline of 11.7% versus the same month in 2013.

Chinese authorities are implementing a series credit and visa of restrictions on Macau VIP gamblers to fight corruption and money laundry. In addition, political protests in Hong Kong are hurting Macau tourism, since many tour groups from Mainland China typically visit Macau and Hong Kong in the same trip. As these trips are being canceled due to political agitation in Hong Kong, Macau is feeling the pain, too.

Importantly, Las Vegas Sands is planning to make big investments in its Parisian Macau complex in 2014 and 2015. Total capital expenditures are expected to more than double from $898 million in 2013 to $1.9 billion in 2014, while capital expenditures in 2015 are expected to be in the area of $2.21 billion.

During the first half of 2014 Las Vegas Sands produced $2.39 billion in cash flows from operations, while capital expenditures required $527 million, leaving $1.86 billion in free cash flows. Dividends and buybacks absorbed a total of $2.73 billion during the quarter. Especially if cash flows from operations are under pressure and the company is increasing both capital investments and distributions to shareholders, Las Vegas Sands will most likely need to increase debt over the coming quarters.

The opportunity
On the other hand, short-term uncertainty usually creates opportunities for smart investors to buy high quality companies at discounted valuations, and his seems to be the case for Las Vegas Sands stock. While it's hard to tell how long it may take for revenues Macau to get back on track, exposure to the region is a huge opportunity for growth due to economic expansion in China and increased consumer spending in the Asian region over decades to come.

Las Vegas Sands stock has fallen by 23.7% year to date, and valuation looks quite attractive for a company in such a profitable business and offering substantial potential for growth over the long term. Trading at a forward P/E ratio of 13.9, Las Vegas Sands is conveniently valued in comparison to a forward P/E ratio of 17.1 for companies in the S&P 500 index based on data from Morningstar. 

By seizing the opportunity to repurchase stock at convenient prices, management is making a smart use of the company's money, even if this means having to issue debt in the short term. In any case, Las Vegas Sands has a debt to equity ratio in the neighborhood of 1.4, which is not excessively high for a financially strong business.

Source: Las Vegas Sands

Besides, according to current plans, capital expenditures will be materially reduced in 2016 and 2017, falling to $1.05 billion and $600 million respectively. This means Las Vegas Sands will be in a much more comfortable position to finance capital expenditures and cash distributions to investors via internally produced cash flows after 2015.

The bottom line
Issuing debt to finance stock buybacks and dividend increases can always raise some concerns among investors, especially when a company is facing a challenging scenario. However, Las Vegas Sands is doing the smart thing by capitalizing the opportunity to repurchase stock at convenient valuation levels, and the company has the financial strength to continue making big cash distributions while investing for growth over the coming years. Investors in Las Vegas Sands stock should be benefited from management's capital allocation decisions over the long term.

T Total Return Price data by YCharts

AT&T is having a hard time delighting investors lately. The stock has gained just 6.5% over the last two years while the S&P 500 index soared 36% higher -- and that's after adjusting for AT&T's generous dividends.

Does that make AT&T a terrible investment for new money today, or is the stock simply spring-loaded with two years of unrealized value creation? Let's have a look.

The bull case
This stock is cheap. You can buy AT&T shares today for just 10.6 times trailing earnings. It's a low watermark compared to AT&T's own P/E history, and a bargain-basement valuation marker all around.

When fellow Fool Bret Kenwell recently highlighted two down-on-their-luck stocks due for a rebound from their disastrously low P/E ratios, both of these stocks still looked expensive next to AT&T.

In other words, Ma Bell's shares are priced for absolute disaster. Simply bouncing back to 15 times trailing earnings, where this stock used to trade in 2011, would unleash a 40% value boost.

And it's not like AT&T is sitting still.

Original images from AT&T and DirecTV.

Besides fighting to keep up with innovative billing strategies and a budding price war in the smartphone market, AT&T is looking to extend its business into brand new arenas. The pending buyout of satellite TV broadcaster DIRECTV would be a game-changer.

The DirecTV deal would not bolster AT&T's fledgling North American TV business, where the U-Verse IPTV service accounts for just 11% of AT&T's annual sales today. Moreover, DirecTV is big in Latin America, where AT&T doesn't have a serious business at all.

So if the powers that be decide to approve the DirecTV buyout, AT&T will be exploring huge new markets at home and abroad. If that doesn't unlock some of the bottled-up P/E compression, I don't know what will.

The bear case
Those innovative pricing strategies I mentioned earlier? They're real, and they pose an actual threat to AT&T's core business.

In particular, T-Mobile US is stealing subscribers from AT&T and other telecom rivals, thanks to a barrage of Uncarrier policy changes.

AT&T has a tendency to follow T-Mobile's lead, introducing features like family plan data sharing and subsidy-free installment plans several months after the smaller rival introduces them. In the meantime, T-Mobile chips away at the bigger carrier's massive user base.

The DirecTV deal would do nothing to stem this tide. Rather, it's time for AT&T to lead by example, clawing back price-sensitive subscribers from smaller and hungrier rivals. Unfortunately, that type of innovation doesn't exactly run in AT&T's veins.

As for the satellite deal's revolutionary impact, it's hardly a sure thing. Regulators may still block the deal, like they stopped AT&T from acquiring T-Mobile three years ago. If the FCC and the Department of Justice take anti-merger action again, the market-stretching benefits listed under the bull case will be off the table.

Bull vs. bear: who wins?
So there are arguments to be made on both sides of AT&T's value equation. But in this battle of bull versus bear, I'm afraid that the big paws will take down the longhorn.

It's true that AT&T shares look mighty tempting from a pure value perspective, and even more so with a 5.5% dividend yield sprinkled on top. If everything works out the way AT&T's management and shareholders hope, new money today should deliver fantastic long-term returns.

But, there are too many shadows over this sunny outlook.

I'm not at all convinced that regulators will allow the DirecTV deal to close, removing AT&T's best shot at significant sales growth for the foreseeable future. And like I said earlier, AT&T doesn't have a great track record when it comes to developing consumer-friendly sales strategies of its own.

In other words, I see a large risk of AT&T shares becoming dead money -- even at today's heavily discounted valuation. The FCC might prove me wrong by green-lighting the DirecTV acquisition, and that's why you won't find me actively betting against AT&T with short sales.

But the risk-reward ratio here doesn't speak in AT&T's favor.

So is it time to buy AT&T, just weeks before all the telecoms report their latest round of quarterly results and subscriber additions? Only if you truly expect the DirecTV merger to get the final go-ahead, and even then, the value is undermined by the brewing wireless price wars.

Or, in other words, there are plenty of better places to put your money today.

Current iMac lineup. Source: Apple.

As far as Apple rumors go, you can always count on DIGITIMES to add a little spice to the mix. The Taiwanese publication frequently reports on rumblings from the Mac maker's supply chain, but its track record is the definition of hit-or-miss.

Well, DIGITIMES is at it again with a fresh report chock-full of questionable claims. Is there anything in here worth believing?

Starting with the strangest
The oddest claim is that Apple is working on new technologies for the familiar logo that is found on all of its products. The Mac maker is supposedly using new laser-cutting and embedding technologies that will make the logo appear 3D and "shine at the edges." This purported new logo will start appearing on Apple products in 2015, starting with the next-generation iMac, according to the report.

While a new Apple logo shouldn't concern investors all that much as it's not a meaningful product upgrade, there is an interesting tidbit here. The report implies that the Retina iMac won't ship until 2015, but Apple is widely expected to unveil the device at an event tomorrow. If so, that would be another rare instance of Apple pre-announcing a product before it is ready for prime time.

Apple has only pre-announced products a handful of times. The original iPhone is probably the most prominent example, announced in January 2007 and shipping in June of that year. Of course, the Apple Watch was announced last month and won't ship until "early 2015."

But Apple also pre-announced the 2012 iMac, which did not ship for another few months as the company worked out kinks related to the friction-stir welding process used to achieve the thinner design. That delay resulted in the only quarter in years in which Apple failed to outgrow the broader PC market, and CEO Tim Cook said iMac unit shipments were down by 700,000 as a result. Could investors see a similar storyline with the Retina iMac?

A tale of two discrepancies
There's another aspect of the DIGITIMES report that directly conflicts with expectations. DIGITIMES claimed Apple will unveil the rumored 12-inch MacBook Air with Retina display tomorrow. Mass production of the high-resolution laptop is supposedly to begin ramping up in November.

Both of these details could be wrong. Re/code has already reported that the Retina MacBook Air won't be rolled out tomorrow, which is very likely a controlled leak on Apple's part. The Wall Street Journal recently said volume production was being pushed back to December so Apple could focus on making iPhones. The WSJ is generally more accurate than DIGITIMES (by a long shot) and it makes sense that iPhones are the priority.

Reading between the lines
The only part of the report that investors should pay any consideration to is the possibility that the Retina iMac will be pre-announced but not ship until 2015. The last time this happened, Apple stopped selling the outgoing models while it waited for the new models to be ready, which hurt unit sales. If it is to pre-announce the Retina iMac, hopefully it will keep selling the current models to mitigate any lost sales.

Source: GoPro's S1

After an incredible run, shares of GoPro now find themselves in bear territory from its all-time highs of nearly $100 per share. After briefly dropping due to a horribly communicated transfer of stock to founder Nick Woodman's charity, the investment briefly rebounded before falling victim to a recently sagging stock market. However, recent revelations are providing GoPro with its first true test and investors should watch intently.

Shares of the company are continuing to tumble after a French journalist speculated that Grand Prix-er Michael Schumacher's brain injury may have been caused and/or exacerbated by the GoPro camera mounted on his helmet during a skiing accident. And while it is important to note this is merely speculation, investors in this richly valuated stock have been ringing the register in a "shoot first, aim later" trade. The question for long-term investors is should you follow and sell GoPro stock?

Will this lead to legal costs?
The first issue is will this lead to increased legal costs for the company. Although the company is profitable by netting over $60 million on nearly $1 billion in sales last fiscal year, the company can't afford long, protracted legal battles. In GoPro's S1 it appears the company has been rather lucky in that regard. Its only mention of a legal matter costing the company is for $200,000 with one of the CEO's family members in the second quarter of fiscal 2013.

So outside of family members, the company has been rather lawsuit free. In the S1, the standard, boilerplate legalese applies:

From time to time, the Company is involved in legal proceedings in the ordinary course of business. The Company believes that the outcome of any existing litigation, either individually or in the aggregate, will not have a material impact on the results of operations, financial condition or cash flows of the Company.

But more importantly, will this harm the GoPro brand?
But lawsuits are not the biggest risk to GoPro right now. The company has grown its top line in part because it's a cool and hip brand that has users that appear to throw caution to the wind. But let's not kid ourselves enough to assume that user safety isn't an important issue. If the allegations are true that the camera weakened the helmet structure or directly led to Schumacher's injury, the company will have to directly address those concerns -- and this is not the right time for GoPro to face this problem.

After coming to the market with a $3 billion valuation, shares of the company are now valued in the $9 billion range due to a combination of GoPro's media ambitions and (mostly) sales growth expectations for its new Hero4 camera line. GoPro has a lot riding on its seasonally heavy, holiday-laden fourth quarter. If users (or just as important, parents of users) decide to postpone or forgo the purchase, shares could shed those lofty valuation multiples that are insane for a single-product consumer electronics company.

Final thoughts
Here at The Motley Fool, we eschew short-term trading and look at buying stock as investing in a business, because it is. With that in mind, investors should pay attention to this development for GoPro for the aforementioned reasons: potential legal costs and loss of its brand cachet due to safety concerns. If any of these become a risk to the investment thesis you established when buying the company, perhaps you want to revisit your reason for owning this richly valued company.

Emerson Electric is a Dividend Aristocrat, one of a select band of companies that have increased their payouts annually for at least 25 years. Income-seeking investors love such stocks, but they also love shares that appreciate over time. With that said, what are the prospects for Emerson Electric to remain a Dividend Aristocrat, and is it time for dividend-seeking investors to buy this company?

A mature dividend play
Emerson Electric is a mature company, providing manufacturing and technology for a number of markets, with a relatively high dividend of roughly 2.8%.

Naturally, the stock will attract income seekers, given a yield almost 0.5% above that of the U.S. 10-year Treasury note. However, its relatively high payout ratio -- about 37% of last year's earnings were paid out to shareholders in dividends -- means that its ability to grow its dividend aggressively in future years is somewhat constrained.

To explain this idea quantitatively, it's a good idea to use the Dividend Discount Model, also known as the Gordon Growth Model. In a nutshell, the model attempts to quantify the rate at which a company can grow its dividend, g, whereby:

g = ROE x (1 - D/E)

ROE: Return on equity, or the net income a company generates from shareholders' equity

D: Dividend per share

E: Earnings per share

Clearly, generating strong ROE is a key factor in increasing dividends, and the good news is that Emerson Electric has a strong record of doing just that:

Data source: Morningstar. Chart: author's analysis.

A ROE figure of 21.96% is very good, but because Emerson Electric pays out a large part of its earnings in dividends already, it can only grow its future payouts at a significantly lower rate. The following table works out the figure for you. (The trailing-12-month dividend and earnings numbers have been used.)

Source: Google Finance, author's analysis.

According to the model, the company can grow its dividend at a rate of 11.35%. Although this is at a lower rate than its ROE, it's still pretty impressive. Furthermore, if it does grow its dividend at this annual rate for the next 10 years, then in a decade it will be paying a dividend of about $5 a share -- equating to roughly 8% of the current share price. Again, investors need to consider whether they might prefer this scenario or a 10-year Treasury yielding just 2.35% at present.

Free cash flow and dividend history
Unfortunately, investing is rarely as simple as following the model above. Dividend seekers need to appreciate that the economy has historically been cyclical and that Emerson Electric's revenue depends a lot on global infrastructure spending, such as for oil and gas processing plants. If a company can't generate free cash flow (the money left over after capital expenditures are taken out of operating cash flow), then it can't pay a dividend without borrowing money.

But Emerson has a strong record of converting earnings into free cash flow, and its dividend per share is usually well covered by both. Indeed, even in the recession-hit year of 2009, Emerson Electric still generated good free cash flow.

Source: Morningstar.

In the last decade, the company has grown its dividend by 8.3% per year -- not bad for a relatively mature company.

Quality of earnings?
All of this quantitative analysis is a moot point if Emerson Electric can't grow its earnings in the future. For that, it will need growth in the global economy, and in particular a willingness among countries and large utilities to engage in sizable infrastructure spending projects. (I've done into more detailed analysis on the prospects for Emerson Electric's stock in a four-article series on the company.) One potential cause of concern could be its reliance on emerging-market infrastructure spending. For example, the company only generates 57% of its revenue from North America and Europe in its key process management segment -- a segment that generated 42.5% of sales in 2013.

Is Emerson Electric a worthy dividend candidate?
All told, the company's history and financial record suggest it can grow its future dividend at a healthy clip, and with its current yield notably above the benchmark 10-year Treasury yield, the stock is a strong candidate for long-term dividend investors.

One potential issue could be if emerging-market performance falls off a cliff. In such a scenario, these countries would slow infrastructure spending, and energy prices (oil and gas is a key end market for Emerson Electric) could also fall. However, if you think such an outcome is unlikely, the company is an excellent stock for income-seeking investors.

It's a battle of the titans, Wells Fargo versus Bank of America , in a dividend grudge match to the death. Well, not to the death, but you get the idea.

Banks can be great dividend stocks, and investors need to know which of these two megabanks presents the best long-term opportunity for a dividend investor.

Step one: The tale of the tape
These are two of the largest banks in the U.S., with Bank of America topping out at $2.1 trillion in total assets versus Wells Fargo's $1.6 trillion.

Bank of America reported net income of $168 million in the third quarter, and that includes a gigantic charge resulting from the bank's $5.3 billion settlement with the Justice Department. 

Now that Bank of America has hopefully put its litigation woes in the rearview mirror, it is looking forward to truly unlocking the massive profit engine that has been hidden under those massive legal costs. A quick calculation to add back that settlement charge shows just how powerful that profit engine could be: $5.4+ billion in the third quarter alone.

Wells Fargo earned $5.7 billion in the third quarter and remains the most profitable bank in the U.S.

Wells Fargo pays a dividend yield of 2.8% according to data from Yahoo! Finance. On a trailing 12-month basis, the bank has paid out about 33% of its profit as dividends. Bank of America's current dividend is much weaker, driven by an accounting error that forced the Federal Reserve to reject the bank's capital plan earlier this year. As it stands today, Bank of America pays a 1.2% yield, with a trailing 12-month payout ratio of 18% of profit.

Step two: Which bank has a better capital position?
Before a bank can pay a dividend, it must be well capitalized. If the bank isn't sufficiently capitalized, then the money will instead be reinvested into the company to boost capital.

Wells Fargo is currently very well capitalized. The bank reported a Tier 1 capital ratio of 11.16% as of Sept. 30, 2014. Bank of America reported 9.6% for the same period.

The biggest risk to capital is loan losses. The Federal Reserve requires banks with more than $50 billion in total assets to run stress tests to estimate exactly what would happen to capital if the economy were to hit the skids and loan losses were to accumulate.

In 2014, Wells Fargo passed the stress tests, and, as previously mentioned, Bank of America's results are under review after the bank discovered an accounting error that misrepresented its capital levels. In my view, that miscalculation will have a relatively minor impact on the final conclusion.

Even before that miscalculation, though, Wells Fargo handily outperformed Bank of America in the tests.

Bottom line: Wells is a better capitalized bank today and is better prepared to weather an economic storm.

Step three: Consistency
Who wants a company that pays out a handsome quarterly dividend check today, but then cancels the dividend next year for some unforeseen reason? 

The short answer is no one.

We want a dividend that's going to pay, and pay, and pay, and pay. Set it and forget it. 

For bank stocks, the key to that consistency is making good loans consistently. It's about having a credit culture that puts risk management first. It's about demonstrating a management approach that makes money throughout the business cycle, which means avoiding bad loans when the economy is on fire and making good loans when the economy is on the ropes.

The only way to assess this is to look at historical performance, and in that context, Wells Fargo is the clear winner. For a complete breakdown of these banks' risk management cultures, read here. 

WFC data by YCharts.

Foolish takeaway
So, at the end of the day, here's the breakdown:

Both Wells Fargo and Bank of America are ridiculous profit engines generating billions of dollars in net income every quarter. Particularly now that Bank of America has settled the majority of its legal problems with the Department of Justice. 

Both banks are well capitalized, although Wells Fargo has a better capital position today and is projected to maintain a higher level of capital in another recession, according to the Federal Reserve's stress test results. 

Finally, Wells Fargo has a far stronger record of navigating through tough economies without accumulating massive losses that could threaten the consistency of your dividend.

Bank of America CEO Brian Moynihan has done a remarkable job of turning the bank around from the lows of 2008 and 2009, but it's just too early to say if he can also successfully change the bank's credit and risk culture.

Therefore, Wells Fargo is the winner by unanimous decision and still bank stock dividend champion of the U.S.

Source: Wikipedia

Every month, it seems like a new story is unfolding at General Electric . First, a major energy acquisition; then a spinoff or two; and every now and again a development around its much-hyped "industrial Internet."

But all of these fit neatly into the same playbook for GE: The wheels are in motion to transform a bloated bank into a streamlined manufacturing powerhouse. A new-and-improved GE will, in turn, light a fire under the stock. Or at least that's how the theory goes, with one well-respected analyst seeing a 20% upside from here.

On Friday, we'll learn a lot more about how GE's transformation is unfolding when the company announces third-quarter earnings. Here are three key things to look for in the release:

1. Industrial-powered earnings growth

When GE reports, analysts and investors alike will fixate on earnings and revenue growth for the quarter. From a high-level perspective, here's what the expectations look like in those two key categories:

Source: Yahoo! Finance.

Odds are, GE will hover around those estimates: In the past four quarters, only twice has GE topped earnings-per-share expectations, and both instances were by $0.01. Foolish investors should dig a little deeper, and evaluate exactly what is powering GE's business. Ideally, owners of GE's stock want to confirm that the company's growth is powered by manufacturing. To this end, management established a couple of important 2014 growth targets back in December:

• 10% overall revenue growth in industrial segments
• 4%-7% "organic" revenue growth in industrial segments

These targets hold GE's CEO Jeff Immelt accountable for steering the company in a new direction. Why does this matter to investors? Because, as I've noted before, the market will look more fondly on manufacturing versus banking earnings, thereby pushing up the stock's valuation over time.

Through the first half of 2014, GE has delivered on these goals. Industrial revenue growth reached a 10% clip through six months. Meanwhile, "organic" growth, which excludes growth through acquisitions, is up 6% year to date -- right in the sweet spot of GE's 4%-7% range. So far, so good, and I expect GE to remain on track in this department through the third quarter.

2. Sales, spinoffs, and synergies

GE's never been a company to shy away from a potentially lucrative deal, and it doesn't seem to have lost its appetite in 2014. Expect management to provide additional insight on the following recent transactions:

• A $1.78 billion purchase of a helicopter-leasing business by GE Capital.
• Alstom's power and grid business -- particularly how the integration is proceeding.
• The full Synchrony banking "split-off," which is expected to take place in 2015.
• Electrolux's purchase of GE Appliance -- specifically where proceeds will wind up.

With all of these moving parts, Foolish investors will want to keep an eye on GE's cash management plans. In recent years, Immelt has made shareholders a top priority, raising the dividend consistently, and announcing a 16% hike in 2014. Undoubtedly, GE will comment on dividends and buybacks, and perhaps it plans to up the ante in this department.

3. A slimmer and trimmer GE

As I mentioned after GE's second-quarter earnings, cost-cutting was a recurring theme throughout management's conference call. The company wants to decentralize decision-making to the business-unit level, while also saving a buck on general and administrative expenses at headquarters.

In a recent presentation, GE put some specific numbers around this effort: GE aims to reduce the sales, general, and administrative expenses that relate to industrial segments from 15.9% of sales in 2013 to 14% by year-end 2014.

Source: General Electric Services and Industrial Internet Meeting.

For a company of this size, that's some serious trimming. We can look forward to insight on how it's shaking out thus far.

The takeaway for investors

The third quarter is particularly full of insight for GE shareholders, because management usually provides some indication of what we can expect to close out 2014. If industrial earnings seem to be outpacing growth on the financial side of the business, this should bode well for the stock.

Furthermore, as GE continues to simplify its operations, it will be easier to hold higher-ups accountable based on their specific business-unit performance. At the same time, GE will emerge as a simpler company for the market to evaluate. Overall, this is a promising effort that will pay off for shareholders over time.

With the S&P 500 now more than 8% off its all-time high set less than a month ago, many investors now find themselves ducking for cover. But make no mistake: Now is exactly the time for patient investors to search for bargains that have either been punished or held back given the market's weakness.

But where should you look? Given their recent drop over the past month -- and despite what some valuation metrics seem to indicate -- I think NVIDIA Corporation , Amazon.com , and LinkedIn all present compelling values right now for long-term shareholders:

AMZN data by YCharts.

Graphics are only the beginning
First, NVIDIA originally made its name selling high-end graphics processing units, which still comprised nearly 80% of last quarter's $1.1 billion in sales. Within that, GeForce GPU sales for gaming machines jumped a solid 10%, which explains why NVIDIA still holds its loyal hardcore gaming customers in high regard.

But keep in mind NVIDIA's business today is about much more than just gaming. NVIDIA's Tesla chips, for example, currently power the world's 15 most efficient supercomputers. Meanwhile NVIDIA's Tegra Processor sales grew 200% year over year last quarter, thanks to its inclusion in more mobile devices and automobile systems. In the latter category, the unique computing power of NVIDIA's veritable Tegra K1 superchip is not only making headway in improving automobile infotainment systems, but it also enjoys a massive opportunity to pave the way for a new era of driverless vehicles down the road.

On top of that, last month, NVIDIA announced a lawsuit against Samsung and Qualcomm, alleging many of Samsung's most popular devices infringe upon seven of its thousands of GPU-centric patents. If NVIDIA finds success in the courts, the resulting royalties could be huge for investors.

As it stands, shares of NVIDIA have fallen 16% from their 52-week-high set in early September, which means the stock trades for a reasonable 15.5 times next year's expected earnings. That's not to mention NVIDIA boasted an incredible $4.39 billion cash hoard at the end of last quarter, and pays a solid dividend with an annual yield of 2%. In the end, for investors willing to wait for this solidly profitable company's long-term prospects to bear fruit, NVIDIA looks like a solid investment.  

An e-commerce king
But why Amazon.com? Shares of the online retail juggernaut have come down, but Amazon's lack of profitability based on generally accepted accounting principles makes it look terribly expensive: The $140 billion company currently trades for around 772 times trailing-12-month earnings, and 158 times next year's estimates.

Put another way, however, note Amazon is also trading at an uncharacteristically low price-to-sales ratio of 1.7:

AMZN PS Ratio (TTM) data by YCharts.

Remember, Amazon consistently, deliberately chooses to forego bottom-line profits, and instead invests its cash in grabbing additional e-commerce market share to build its top line -- a brilliant move to create shareholder value considering discount retail isn't exactly a high-margin business to begin with. At no time was the success of its approach more evident than last quarter, when net sales jumped 23% year over year to $19.34 billion, translating to a net loss of $126 million. Should Amazon ever decide the time is right to stop investing for top-line growth, its cash flow and profits could prove immense.

The business of business networking
Finally, I wholeheartedly agreed with fellow Fool Evan Niu when he wrote in August that LinkedIn was worth every penny. But thanks largely to the broader market pullback, shares of the business networking site have fallen around 11% since then.

Similar to Amazon, that makes sense on the surface considering LinkedIn looks expensive trading around 13 times trailing-12-month sales, and nearly 71 times next year's estimated earnings. At the same time, however, LinkedIn investors can take solace in knowing the company has a stranglehold on its niche, with over 313 million members, making it the world's largest professional network on the Internet. 

LinkedIn's efforts to monetize that base are also in their early stages. Second-quarter revenue climbed 47% year over year, to $534 million, which was comprised of 44%+ growth in each of its three segments, including Talent Solutions, a young ad business within Marketing Solutions, and Premium Subscriptions. All told, that's a drop in the bucket considering LinkedIn estimates its immediate addressable market to be around $27 billion.

Combine that with high insider ownership -- chairman and co-founder Reid Hoffman holds a nearly 12% stake, ensuring management's motives are aligned with shareholders -- along with a rock-solid balance sheet with no debt and $2.4 billion in cash, and LinkedIn stock today looks as enticing as ever.

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: Much-maligned natural gas fuel provider Clean Energy Fuels  gained a strong 12% today, after having spent the past year getting walloped. The big jump was likely a product of a company press release, announcing two things that Mister Market apparently liked.The first was probably the biggest news:

Clean Energy delivered more than 50 million gasoline-gallon equivalents (GGEs) of compressed natural gas (CNG) last quarter, the most it has ever delivered in a single quarter before. This amount represented a 16% sequential increase, and a whopping 36% jump from the year-ago period. The second part of the announcement was that it had acquired a controlling interest in NG Advantage, a current partner based in New England. 

So what: Apparently the market was expecting much less growth -- or maybe no growth -- based on how the stock has been getting killed this year. However it is relatively apparent that falling gas prices haven't affected its primary vehicle refueling business in the manner that people were expecting, and the price differential that is the biggest driver for its business remains compelling. 

The second part of the announcement is interesting. NG Advantage primarily provides CNG to industrial and commercial customers, versus Clean Energy's primary business providing fuel for vehicle fleets. NG Advantage's customers are natural gas users that are not connected to a gas pipeline, but can benefit from NG as an alternative source of energy, or as a feedstock for an industrial process.

Now what: Both parts of this announcement are great news. The first bit is both a reminder that the majority of Clean Energy's business is from fleets that are already in place, and those vehicles aren't just going to get parked and replaced. Furthermore, it's also an indication that plenty of new CNG-powered vehicles have been added to fleets in the past year.

NG Advantage's station in Milton VT will become Clean Energy's largest station overnight, delivering more than 16 million gallons of CNG annually. Furthermore, seeing the company take steps to diversify itself away from total exposure to the vehicle market is a positive. We have already seen it sell LNG to a utility company in Hawaii, so more of these moves should be expected. The company's expertise in natural gas logistics apparently has value for multiple user groups, not just refueling vehicles. 

Does this make Clean Energy Fuels a buy? Maybe. It's likely that the recent sell-off is way overdone, but the company has a lot of work ahead of it, and is still spending more cash than it brings in as it aggressively expands. At some point all those investments will need to turn into profits.

With that said, taking a small position is not a bad idea, if you're willing to ride through a bumpy market until the company shows us what kind of profits it can produce -- and that could be some time from happening. Clean Energy is scheduled to report full earnings next week. Stay tuned for more analysis. 

Shares of GoPro have plunged over 20% since October 7, following reports that mounting the action camera on a helmet possibly caused skier Michael Schumacher's brain injuries after his skiing accident last year. Unfortunately, the PR fallout from that report isn't GoPro's only problem.

Source: GoPro.

In addition to rising competition from cheaper action cameras with similar specs, GoPro faces a new group of 360-degree cameras that could disrupt the company's business of wide-angle ones. Kodak , VSN Mobil, and VOXX International all recently unveiled 360-degree cameras that are waterproof and compatible with GoPro's mounts.

Kodak's Pixpro SP360 will be the first of these products to arrive in late October. The camera can shoot in four modes -- front, 360-degree panorama, "round" (two simultaneous 180-degree videos), and "dome" (a fisheye 360-degree view). It is equipped with a 16-megapixel camera, which can record 160 minutes of 1080p video at 30 fps or 350 still shots -- on a single charge. The stand-alone SP360 will cost $349, while the Extreme version (including mounts) will cost $399.

VSN Mobil's V.360 -- which will arrive in mid-November -- has similar specs, although the price hasn't been announced yet. In early 2015, VOXX International will launch the 360Fly, another comparable device that hasn't been priced yet.

Kodak's Pixpro SP360. Source: Kodak.

The idea of capturing the action from all 360-degrees is interesting, but will these new devices disrupt GoPro's dominant market share in action cameras, or will they fade away without carving out a niche?

Should GoPro worry about 360-degree cameras?
GoPro controlled nearly half of the action camera market last year, according to IDC, and about 30% of the overall video camera market.

The rest of the market is fragmented among wide-angle imitators like Polaroid's Cube and XS100i, Monoprice's MHD Action Camera, SpyTec's SJ-1000, and HTC's new RE Camera. These competitors all use the same strategy -- to introduce new action cameras with comparable specs to GoPro's devices (which cost between $200 and $500) for only $100 to $200. In response to these threats, GoPro recently launched the $129 HERO, an entry-level device that mostly matches those competitors' specs.

360-degree cameras, on the other hand, were primarily used for surveillance purposes in the past. Based on that market, IHS forecasts that sales of 180/360-degree panoramic cameras would rise 60% year over year in 2014. However, actual consumer demand for these products is unknown.

The different modes on 360-degree cameras could be harder to set up than GoPro's "set it and forget it" cameras. Sharing 360-degree shots across Facebook and YouTube could also be more complicated than GoPro's wide-angle videos, which are automatically framed in TV and computer-friendly 4:3 and 16:9 formats. Citing those technical hurdles, Saturna Capital analyst Paul Meeks recently told CNBC that 360-degree cameras were too "niche" to disrupt GoPro's core market.

Why GoPro shouldn't worry about 360-degree cameras
For now, 360-degree cameras simply aren't required for most situations, especially when the video is highly distorted in "round" and "dome" views. Kodak's SP360 website demonstrates the camera being used in an impressive manner while skydiving and flying, but it's hard to see the  camera being used in a practical manner while riding a bike.

Beyond their lenses, 360-degree cameras are technically underwhelming compared to GoPro's devices. The GoPro HERO4 Silver, for example, captures 1080p video at 60 fps -- twice the framerate of Kodak's SP360 -- for just $50 more. Hardcore action camera users, which 360-degree cameras are likely targeting, would also likely prefer the $500 GoPro HERO4 Black Edition, which can capture 4K video at 30 fps, 2.7K video at 50 fps, and 1080p video at a whopping 120 fps.

Even if 360-degree cameras start to gain ground, it would be easy for GoPro to simply launch a competing device, since the devices are based on fairly dated technologies.

The Foolish takeaway
In conclusion, GoPro's greatest strength is that it is defining market trends, rather than following them.

GoPro is working hard on making its brand synonymous with wide-angle cameras with devices at all price tiers and brand-building video channels. In my opinion, the company doesn't need to respond to 360-degree cameras yet -- it should just wait and see what happens, then simply launch a GoPro 360 in response if Kodak, VSN Mobil, and VOXX International's devices actually find an audience.

It's been a miserable month for the markets.

Since the start of September, all three of America's major market indices are down by more than 5%, and most of that drop has kicked in since the beginning of October. The Nasdaq Composite is in full-on correction territory, as it's edged down by 10% since the start of September. That's not even the worst of it -- the small-cap-focused Russell 2000 (INDEX: ^RUT) is now down a full 10%, and many growth-focused investors are hurting far worse as former highfliers fall off cliff after cliff.

This shouldn't be too surprising. September has historically been the worst month for stocks -- since  1950, the S&P 500 has dropped an average of 0.64% in September:

Source: Moneychimp. 

While October's been a middle-of-the-pack month for index returns, it's witnessed some of the worst days (and months) in market history, including the Great Crash of 1929 and the Black Monday crash of 1987. A 22% drop in October of 1987 and a 17% decline in October of 2008 are the S&P 500's two worst monthly performances since 1950.

To market bears, the past two months are incontrovertible evidence of a coming catastrophe. Perma-bear John Hussman began warning this month that the market is likely to fall by half  from its summertime peaks, an apocalyptic scenario that even notorious dotcom-bubble analyst and current Business Insider editor-in-chief Henry Blodget has started to echo this week in an article highlighting the dangers of a market swinging from extreme bullishness toward frantic selling.

Blodget's evidence for a potential stock-pocalypse is compelling, at least on the surface. The market's cyclically adjusted P/E ratio (CAPE) is higher than it's been at any time in history, with the exception of megatops in 1999 and 1929:

Corporate profit margins are also at all-time highs as a percentage of GDP:

So, is it time to panic? Sure seems like it, right?

Well, calm down. We're not doomed yet.

Debunking the super-bears
Anyone who's been in the market for more than five years is still stinging from the memory of 2008, which still ranks as the second-worst crash in American market history behind the Great Depression. These recent memories make us worried that another megacrash is on the way. But here's the thing -- 50% declines in blue-chip indices are extraordinarily rare in modern times.

Since the Dow Jones Industrial Average was created in 1896, it's only suffered from two bear markets that have destroyed more than 50% of its value: those that began in 1929 and 2007. Add in 40% drops and the number of megabear markets grows to eight, but only one of those 40% declines (the OPEC oil-driven recession of 1973 and 1974) has happened since the end of World War II.

Smaller drops are far more common. Data compiled by market commentator Josh Brown shows us that 27 corrections have shaved 10% or more off the S&P 500's value since the end of World War II. Roughly half of these drops happened in the 1970s or the 2000s, two particularly lousy decades for stocks. Since the market bottomed out in 2009, we've had three 10% corrections, with one in 2010, one in 2011 (this one nearly fell into bear market territory), and one in 2012. Despite these drops, the Dow is still up 145%, and the S&P 500 is up 174%, since the bear market ended in 2009. The Nasdaq and the Russell 2000 have each more than tripled since the 2009 market bottom, even after pricing in the "crash" of the past two months:

The two large-cap indices haven't even lost 10% yet, and these 5%-plus drops are so common that they've hit the Dow on average every month and a half since the start of the 20th century. If the Dow and S&P continue to fall beyond losses of 10%, they'll have merely endured their fourth corrections of the past five and a half years.

Corrections are common. Could we still be heading into a catastrophe? Let's dig into the details on Blodget's and Hussman's claims that the market is historically overvalued, to see just how relevant this long-term historical view is to the present day.

The market's CAPE is overvalued by historical norms. That much is indisputable. But when we stretch our viewpoint out across nearly 150 years of market history, we wind up assessing our current situation based on scenarios that will never happen again. The market hasn't had single-digit CAPE ratios since the early 1980s in part because there are so many more investors than there ever have been before. For example, the market is extremely overvalued compared to, say, the 1960s, but only 15% of Americans owned any stocks in the 1960s, compared to more than half of the populace today.

I've written on the modernization of American markets before, and I peg the dawn of the "modern" market at 1974, when individual retirement accounts were first created by law. Before its modernizations, the market's average CAPE was 15.2. Since 1974 the market's CAPE has averaged 19.8, thanks to millions of ordinary Americans pouring trillions of dollars into their retirement funds -- and since the start of the great bull market of the 1980s and 1990s, the market's CAPE has averaged 22.3, a mere 14% lower than its current CAPE ratio of 25.8.

As far as corporate profits go, they are at all-time highs compared to GDP only when you discount the impact of overseas profits. After World War II, the American industrial machine produced corporate profits equal to roughly 8% of GDP. Nearly all of these profits were from domestic sources. Today, roughly a quarter of all profit earned by American corporations comes from overseas sales, and when we start accounting for the fact that American businesses are increasingly global in nature, we find that their domestically sourced profits are actually... about 8% of GDP, the same as it was in the late 1940s. Granted, this figure has more than doubled since the 1980s, but it's still not "historically" high when we discount foreign earnings.

There are risks, of course. China's economy could stagnate. Europe has never really recovered from 2008, and recent data doesn't paint a particularly rosy picture. America's economy could run out of steam after more than five years of growth that's been driven in large part by efficiency gains at its largest companies. Even if stocks don't fall by half, we could be looking at years of subpar returns from here on out, a risk Fool analyst Robert Brokamp highlighted last month. Investors shouldn't shrug off recent market volatility and ignore the warning signs now flashing, but you should be more prepared for the possibility of a 20% decline and a year of weakness than a 50% drop and a catastrophic lost decade. The former is relatively common on long-term investing horizons. The latter tends to hit investors only once in a generation.

Two all-beef patties, special sauce, lettuce, cheese, pickles, onions, on a sesame seed bun don't seem to have the customer appeal they once did.

McDonald's has been struggling, and its burgers are holding back the once-dominant chain. Though the eatery has well-loved French fries, a recent YouGov survey showed that only 7% of the American people think Mickey D's has the best burger. That places the fast-food juggernaut behind obvious choice Five Guys, which promotes the quality of its burgers, but also rivals Wendy's  and Burger King .

That's troubling news, because no matter how many fried chicken variants, coffee drinks, salads, wraps, and other items McDonald's offers it is still at heart a burger chain. If customers see a McBurger on par with the offerings at Arby's, a chain that primarily markets its roast beef sandwiches, then Ronald McDonald, Grimace, and the rest of the gang (I'm looking at you Mayor McCheese) have a big problem.

How bad is it for McDonald's?
In the United States, McDonald's has been on a losing streak. 

In August, U.S. comparable sales decreased 2.8% amid continuing broad-based challenges, including sluggish industry growth in a highly competitive marketplace, the company reported. Sales have fallen on a month-over-month basis in the U.S. since November 2013. 

Why are burgers so important?
Though McDonald's sells many food items, its signature offering has been the Big Mac almost since its invention in 1967. The chain originally just sold burgers and fries, and its identity remains tied to those original offerings.

If the public sees the McDonald's burger as inferior, then it's likely to consider visiting another chain. Five Guys, and to a lesser extent Burger King and Wendy's, have marketed their burger as superior -- just looking at the Five Guys guys product make clear this is true. Add the many regional or smaller chains that offer a burger that looks more like what you make on your home grill and it's not hard to see why people are rejecting the thin, grayish patties McDonald's peddles.

Just in case you question the survey results above, Consumer Reports also tested burger quality and had even worse news for the Golden Arches:

The chain, which serves flash-frozen patties made with 100 percent USDA-inspected beef, touts them as free from  "preservatives, fillers, extenders, and so-called pink slime." Such a pledge might be comforting, but it's hardly a rousing endorsement. McDonald's own customers ranked its burgers significantly worse than those of 20 competitors, including Hardee's, White Castle, and Carl's Jr. No other house specialty scored as low.

When you score lower than White Castle, with its paper-thin patties, then you have a real problem.

Can McDonald's turn it around?
Rejiggering the menu, adding fancyish coffee beverages, and other tweaks have done little to reinvigorate McDonald's sales. Customers expect a higher-end product for a reasonable price (blame Chipotle  for that), and that's simply not what McDonald's does.

It's no longer good enough to be fast and cheap. It's also important to represent quality, and McDonald's is so ingrained as being the opposite of quality that the company must make some major changes. Throwing around the word "Angus" and adding barbecue sauce won't work anymore.

The company needs to borrow a page from Domino's Pizza  which admitted its signature product needed work with its "Pizza Turnaround" campaign. The chain embraced the criticism, made fun of itself, and showed it was willing to listen to customers. It then made a big deal of the improvements it enacted. Never mind that the changes took its bad pizza to barely serviceable. People bought the hype because the changes were real.

McDonald's can do the same, but it must admit that its burgers are broken and that no amount of special sauce can fix them.

Germany's Siemens  is on a shopping spree. Earlier this year it acquired the energy business of Rolls-Royce, and now it is buying Dresser-Rand Group in an epic deal worth $7.6 billion ($83 a share) in cash. Dresser-Rand is counted among the largest suppliers of equipment solutions to the energy sector.

According to Bloomberg, the deal is expensive, as it values Dresser-Rand at 14.1 times its 2015 consensus EBITDA before cost savings, compared with a median 9.2 times EBITDA paid for similar transactions. But Siemens might be shelling out the premium to cash in on the up-cycle in the U.S. oil and gas exploration market. It could also be looking to take on its bigger rival in the energy business, General Electric . Let's find out more about the deal and what it means for the involved parties.

The "Himbeerpalast," Siemens' office building in Erlangen, Source: Wikimedia Commons.

Possible reasons behind the move
Bloomberg reports that Siemens expects oil and gas spending to grow by 6% to 8% from 2016 onward. Siemens CEO Josef Kaeser said on a conference call that there has been a downturn in the U.S. oil and gas segment in 2014, but he expects that to bottom out in 2015 and an up-cycle to begin in 2016. Adding weight to this rationale is the International Energy Agency forecast that the U.S. will beat Saudi Arabia in oil production by 2020 on the back of the shale boom.

Siemens is a latecomer to the oil and gas scene, which GE has invested $14 billion in over the last seven years. But it wants to make up lost ground, and with that intent it acquired Rolls-Royce's power business for $1.3 billion in May. Bloomberg noted that Siemens has been mulling over a bid for Dresser-Rand for at least three years.

The company's other objective behind the bid is to increase its competitive edge against GE. Reuters reports: "The acquisition, which ranks among the biggest in the history of the industrial group, will strengthen Siemens' position in the United States, its weakest region, and bring it nearer catching up with rival General Electric Co."

How will Siemens benefit from the deal?
According to a recent JPMorgan Chase report, Siemens' offerings are mostly concentrated in midstream and downstream applications, while it has a product gap in the more lucrative upstream and LNG applications. The Dresser-Rand deal should help the company fill these gaps and compete better in upstream markets. The two companies complement each other in terms of offerings: Siemens is a key manufacturer of gas turbines and a major supplier of equipment used in natural gas extraction, while Dresser-Rand makes rotating equipment such as turbines and compressors. With an expanded product portfolio, Siemens would benefit more from hydraulic fracturing in the U.S.

Siemens' oil and gas operations will expand to about $11 billion, large enough to bring "consistent and growing stream of profitable service revenue from day 1" and long-term backlogs. Even the spare parts business of Dresser-Rand could become a steady source of recurring revenue, as pointed out by analyst Robert Norfleet.

Siemens expects to obtain annual synergies worth euro 150 million ($190 million) by 2019. Additionally, more than half of Dresser-Rand's service offerings fetch high margins that will help Siemens expand its own profit margins from the beginning.

How does this affect General Electric?
The U.S. conglomerate has been active in the consolidation of the oil and gas industry over the last 10 years and has made a good number of deals to strengthen its portfolio, which stands at $17 billion. It acquired Wellstream in 2010, Wood Group's well support division in 2011, Lufkin in 2013, and Cameron's reciprocation compression business earlier this year, to name a few. It was also interested in Dresser-Rand. However, now that the Siemens deal has received the nod from the majority of Dresser's board of directors, GE is unlikely to make a counterbid. When GE and Siemens last faced off in a bidding battle, the U.S. company bagged Alstom.

Apart from the lost opportunity, one additional possible negative is that Dresser-Rand won't be buying machines, such as aero-derivative gas turbines, from GE anymore. Siemens will prefer to meet the requirement either through its own offerings or Rolls-Royce's. 

Had things worked out between GE and Dresser-Rand, it could have led to grave antitrust concerns, since the deal would have made GE too powerful in the space. 

Siemens is trying to become a more potent force by addressing its weaknesses. The gaps Dresser-Rand will help fill should put Siemens in a better position to compete with GE. As for GE, it has a rock-solid hold on the U.S. market, and though the deal will give Siemens a chance to come closer, the German behemoth will still have a lot of catching up to do.

Netflix  announced on Wednesday that it will stream the entire Friends sitcom series come 2015. That's a good thing, since it's going to need Friends after disappointing investors with its third-quarter report.

Shares of the leading premium video service fell sharply in after-hours trading on Wednesday, and it's easy to see the root of Wall Street's disappointment: subscribers.

Netlfix closed out the quarter with 53.06 million streaming subscribers worldwide. That's a big number. The company also added a little more than 3 million net new accounts over the past three months. It probably padded its lead once again in a market that it truly dominates. However, three months ago, Netflix was forecasting 53.74 million total streaming subscribers for the quarter. For a company that historically dishes out conservative guidance, coming up short of its own prediction is a pretty big deal. The miss was global, as streaming additions fell short of Netflix's domestic and international projections alike.

Netflix thinks May's pricing increase played a part in the shortfall. The decision to increase its monthly rate for new streaming accounts from $7.99 to $8.99 was a factor. It just wasn't obvious right away because of the favorable tailwind the company initially had with one of its biggest original shows. 

"In hindsight," the company stated, "we believe that late Q2 and early Q3, the impact of higher prices appeared to be offset for about two months by the large positive reception to Season Two of Orange Is the New Black."

Netflix is still satisfied with the springtime increase. The company has factored it into a forecast that calls for 4 million net additions during the current quarter. 

Into the numbers
Revenue climbed 27% to $1.409 billion, fueled by a 33% spike in paid streaming members over the past year that was offset by the perpetual slide in the legacy DVD-rentals business. Wall Street was holding out for slightly more than that figure.

The year-over-year margin improvement was substantial, resulting in a 93% surge in operating profit and an 86% pop in net income. Netflix posted a profit of $0.96 a share, surpassing the $0.93 analyst target and Netflix's own $0.89 forecast, but fans cheering on the bottom-line beat appear to be no match for the boo birds concerned about the disappointing subscriber tally.

There were plenty of positives in the report beyond the better-than-expected bottom-line showing. Netflix claims that per-member viewing and retention in the U.S. are at record levels. Its international deficit increased sequentially, but that's the handiwork of its recent push into Europe. In fact, Netflix points out that its overall international operations were profitable if you back out the new territories it entered over the past year.

Netflix is also targeting 4 million net streaming subscriber additions during the final quarter, to close out the year with more than 57 million Web-based video buffs. That's a lot of friends for a company that has just secured the rights to all 10 seasons of Friends. Unfortunately for shareholders, it was holding out for a million friends more.