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Want a Rewarding Career? Don't Major in Business

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"The germ of an idea for a breakthrough in technology doesn't come out of a business school curriculum. It comes out of a laboratory or a math lecture or a physics tutorial."
So said British billionaire, venture capitalist and former Google (GOOG) (GOOGL) board member Michael Moritz in an interview with Charlie Rose last year -- and Moritz is probably right. For every example you can find of a young Fred Smith -- who famously came up with the idea for founding FedEx (FDX) in the course of studying economics at Yale in 1965 -- having a eureka moment in a college business course, there are two or three just as famous examples of entrepreneurs who only struck gold after dropping out of college (Bill Gates, Steve Jobs, Mark Zuckerberg) or who never studied business at all (Whole Foods Market (WFM) founder John Mackey, also a college dropout).

As a general rule, business school seems to be a bad place to look for game-changing technologies. Contrary to what you might expect, business school might not be the best place to go if you're looking to embark on a fulfilling career.

Survey Says ... Think Twice About Going to B-School

That last revelation, at least, appears to be the conclusion of a Gallup poll, which earlier this year found that "U.S. college graduates who majored in business are the least likely of those who majored in the four large major categories -- social sciences/education, sciences/engineering, arts and humanities, and business -- to express strong interest in the work they now do, regardless of what career path they may have followed after graduation."

Surveying 29,560 college graduates of all ages across the country, Gallup found that only about 37 percent of business school graduates polled describe themselves as "deeply interested" in their work today. That's 10 percentage points fewer than graduates who majored in the social sciences or in education. It's 6 points below the results tallied for college graduates who majored in the "hard" sciences, or in the arts and humanities.

Job satisfaction also appears to be a sore point among former business majors, with surveys by Gallup, in conjunction with "health and well-being" company Healthways (HWAY), finding that fewer business majors than graduates in other fields "lik[e] what they do each day" and are "motivated to achieve their goals" after graduation. Of business majors, 48 percent of business majors were "thriving" in this area, compared to 56 percent who majored in social sciences/education, 54 percent in sciences/engineering, and 53 percent in arts and humanities.

And yet, as Gallup reports, across the U.S., nearly one American college student in five has chosen to major in business.

But Money Can Still Buy Happiness, Right?

Why do so many college kids study business? Well, in case you haven't noticed, the U.S. economy is still in a bit of a funk.

Troubled economic times tend to focus students' attention on their ability to land a job out of college. And Gallup notes that "the perceived marketability of business fields that should help boost a person's earning potential" may be a big factor behind the continued popularity of business majors.

And yet, at the same time, polling data collected by Gallup and Healthways show that when it comes to getting paid, business school majors fall short once again.

Asked whether they are "thriving" financially, only 43 percent of college business school graduates agreed with the statement. That was somewhat better than the numbers tallied for graduates with social sciences/education degrees (42 percent) or for arts and humanities graduates (39 percent). But once again -- and as Moritz might have told you -- the folks who have the most fulfilling careers and make the most money working in those careers are students who earned science and engineering degrees. Forty-eight percent of such students say they're "thriving" financially today.

Careers That Matter -- and That Pay

Little wonder, then, that among college majors found to have the best salary potential in a recent survey conducted by PayScale.com, the top three were:
  • Petroleum engineering (with a median starting salary of $103,000 and a mid-career median of $160,000).
  • Actuarial mathematics (with salaries of $58,700 and $120,000, respectively)
  • Nuclear engineering ($67,600 and $117,000).
Finance came in in 27th place, at $49,200 to start; international business not much better at 34th place. And plain-vanilla business administration tied for 60th place, with a mid-career salary roughly 31 percent below the median starting salary for a petroleum engineer.

Motley Fool contributor Rich Smith has no position in any stocks mentioned, and he doesn't have an MBA, either. The Motley Fool recommends FedEx, Google (A and C shares) and Whole Foods Market. The Motley Fool owns shares of Google (A and C shares) and Whole Foods Market, and co-CEO of Whole Foods Market John Mackey is a member of The Motley Fool's board of directors -- despite his lack of a business degree. Find out the easy way for investors to ride the new mega-trend in the automotive industry in our free report.

 

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What Your Lower Winter Energy Bill Means to Power Companies

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Energy prices are plunging around the world, and consumers are likely in for a winter of lower energy costs. The U.S. Energy Information Administration predicts natural gas heating bills may fall as much as 7.9 percent for consumers in the Midwest, and heating oil costs nationwide may fall an incredible 15.4 percent from just a year ago.

You may think that's bad news for the companies collecting your energy bill. but most utilities are insulated from the falling cost of energy. They'll rake in profits regardless.

How a Utility Makes Money Whether Energy Prices Rise or Fall

Most utilities around the country providing electricity and natural gas to homes and businesses operate in a highly regulated environment. Cities and towns don't want 15 different power lines or natural gas lines running overhead or under our feet, so they allow a utility a monopoly to build infrastructure and provide energy to customers.

In return for this monopoly, utilities agree to only make a certain rate of return on the assets they install, essentially limiting their profits. But this setup also ensures that utilities make money even if you don't use much energy. Prices they charge to you are set so they generate their expected rate of return, even if energy prices fall.

Yet utilities aren't the only energy companies that will be making money despite falling energy prices. A segment of the industry called midstream transports energy around the country, and they're in for a good year as well.

The Tollbooths of Energy

Between the oil and natural gas wells of the U.S. and the homes and businesses that consume energy is a maze of pipelines that transport energy around the country. In many cases, these pipelines follow the interstate network that already zigzags across the country (as you can see in the map below).

Source: U.S. Energy Information Administration

But instead of being owned by the government like roads are, energy pipelines in the U.S. are owned by midstream energy companies. Kinder Morgan (KMI) is one of the largest pipeline operators, with 80,000 miles of pipelines moving oil, natural gas, carbon dioxide and other materials around the country. In many cases, these companies don't collect fees based on the price of oil or natural gas, but instead essentially collect a toll for moving energy.​

Midstream energy companies are among the most important in the energy industry, but like electric and natural gas utilities, they're not all that susceptible to energy price fluctuations. Don't feel bad for them when prices fall like they have recently. The stability of a company like Kinder Morgan may also be a reason to put the stock on your investment watch list.

Big Oil Will Find a Way

Big oil companies won't be impacted as you might think, either. These companies dominate energy in the U.S., such as ExxonMobil (XOM), Chevron (CVX), Total (TOT) and Royal Dutch Schell (RDS-A).

Big oil may see drilling, or upstream, profits take a beating, but that's not all they make money doing. Big oil companies own refineries, chemical plants, gas stations and more in their downstream businesses, and as long as people are using energy, they'll make profit somewhere along the value stream.

There's also production of natural gas, which has seen prices recover from lows in 2012. Companies like ExxonMobil have invested heavily in the last decade in expanding natural gas production, and it could now pay off if prices continue to climb.

Of course, there is one danger for big oil that should worry executives and investors alike.

The Biggest Danger to Energy Profits

Profits in the energy industry are largely tied to how regulated a company is and how much of its product consumers are using. In large part, electricity consumption continues to grow slowly but surely, ensuring long-term profit for utilities.

Natural gas usage is also growing slowly, driven by its use to heat homes and the low cost that's making it attractive to more electricity generators.

But when oil and gasoline prices fall, the pain is felt closest to the source. And prices are falling: According to GasBuddy.com, the average retail gasoline price in the U.S. has plunged from $3.70 a gallon in late June to around $3 today. This is in part due to greater supply on the market, and a progressive decline in oil and gasoline consumption in both the U.S. and Europe over the past decade.

U.S. oil consumption data by YCharts

The drop in gas prices may not impact a lot of companies, such as refiners or pipeline operators, which will also have lower costs because oil is cheaper or profits are regulated. But it will have a big impact on oil drillers. Continental Resources (CLR), Kodiak Oil & Gas (KOG), and EOG Resources (EOG) are just three of the companies that expanded rapidly to exploit U.S. shale oil reserves, and they'll see revenues drop as a result of lower oil prices. Since drilling costs don't come down just because oil prices are low, their profits will likely plunge as well.

So keep in mind when you're paying your energy bills this winter that lower prices aren't necessarily bad for all energy companies. If they're not the ones taking the fuel out of the ground, they'll likely be just fine whatever you're paying.

Motley Fool contributor Travis Hoium manages an account that owns shares of Kinder Morgan, Royal Dutch Shell CL A and Total (ADR). The Motley Fool recommends Chevron, Kinder Morgan and Total (ADR). The Motley Fool owns shares of Kinder Morgan. Try any of our Foolish 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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Best of DailyFinance: The Week in Review (Nov. 3 - Nov. 9)

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This Popular Financial Tip Will Cost You $1 Million

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If you blindly follow a tip that nearly every financial adviser recommends, it could cost you $1 million. But you can't even call it a financial tip. No, it's more like a law or a financial commandment etched in stone. You hear it all the time from financial experts: You should have an emergency reserve fund with six to 12 months of living expenses in cash. Follow this advice at your peril. Here's why.

We know bad things (and often unexpected things) happen to good people. Sometimes we need to get out of a jam, and money can help. If you lose your job, it's nice to have a cushion to pay the rent and buy food. It's important to have the ability to pay high medical deductibles if you get hurt or sick. If you get a flat tire on the way to work, you need to be able to get it fixed and back on the road. Stuff happens, and money is often the only salve.

An Old-Fashioned Location

The Certified Financial Planner Board would strip me of my certified financial planner designation if I suggested it was not important to have an ability to cover these emergency situations. But the antiquated six to 12 months in a checking account or money market account is a terrible idea.

Consider a 30-year-old couple. They're doing their best to save for retirement and raise a family. They calculate that 12 months of living expenses is $75,000. Like good students, they follow the standard financial advice and set aside $75,000 in a savings account at a bank. After a few high-fives, they go on about their lives feeling good about their "smart" financial decision. It's too bad, though -- they just cost themselves $1 million.

Here's the math:
Traditional Emergency Reserve Alternative Emergency Reserve
$75,000 in savings account $75,000 in diversified investment portfolio
1 percent interest rate 8 percent investment return
35 years (until age 65) 35 years (until age 65)
TOTAL: $106,245 TOTAL: $1,108,900
Difference: $1,002,655

The difference between the emergency reserve savings account and the alternative account is a whopping $1 million!

The "alternative emergency reserve" is simply to invest the cash in a diversified investment portfolio. But hold on, you say. Where's the rainy day fund when you need access to money quickly? You absolutely should have access to assets, cash or some way to cover these emergencies -- but there are many other sources you could access that won't cost you a $1 million at retirement. Here are just a few.
  • Home equity line. If you own a home, apply for a home equity line of credit. If approved, you will get you a checkbook from which you can write checks if you have an emergency.
  • 401(k) loan. Check with your employer to see if your 401(k) allows for loans. You can withdraw 50 percent of your balance up to a maximum of $50,000, or if your 401(k) balance is $10,000 or less, you can borrow the full amount.
  • Credit cards. This is often the quickest way to access cash or pay for an emergency -- often even faster and more convenient than withdrawing cash from a traditional emergency reserve account.
  • Investment account. As long as you don't have illiquid investments, the $75,000 you invest can be accessed within a day or two at most.
The takeaway isn't that having an emergency reserve is a bad idea -- it's imperative that you have access to a source of funds that you can tap into quickly. The takeaway is that if you keep your emergency reserve assets in cash, a savings account or money market, you get so little interest or return on this money. I call this a dead asset.

A Few Thousand in Cash Is OK

Instead, make sure you have access to assets if there is an emergency. Maybe set aside a few thousand in cash, but take the rest you would have set aside and invest it. Over time -- and in this case, 35 years -- there is a good chance you'll do a lot better than if it just sat in your checking account.

If you get laid off or are anticipating needing the funds, sell some or all of your investments so you can sit on cash and not have to worry about investment performance while you are withdrawing money from the account. Once you get a job and things stabilize, re-invest the cash back into a diversified portfolio.

When we are all trying to improve our lives a little bit more in retirement, we need all the help we can get. An extra $1 million would sure be a good start.

Robert Pagliarini is a best-selling author and Mission Viejo financial planner who focuses on sudden wealth recipients. Connect with him on Twitter at @rpagliarini.

 

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5 Reasons Investopedia is Dead Wrong About Index Funds

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Financial Markets Wall Street
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When popular financial sites like Investopedia start bashing index funds, you know the gig is almost up for active management. For years, investors have been bamboozled by fund managers who claim to have the skill to "beat the market." The reality is that most active fund managers underperform the market in any given year, and an even greater percentage will underperform over longer periods.

The shell game that is active management is based on the fact that observers tend to confuse luck with skill. When a fund manager has a few good years, the financial media anoints him as the next market guru. This charade continues until the manager loses his "magic touch" and gives back all or most of the profits generated by his lucky streak. Nobel laureate Eugene F. Fama and finance professor Kenneth R. French wrote a seminal article differentiating luck versus skill in investing.

As information about the failure of active management has become more widely disseminated, investors are voting with their money. Over the 12-month period ended June 30, the total market share of net sales for all index-based and other passive funds was 68 percent, compared with only 32 percent for actively managed funds.

Active fund managers are not taking this reversal of fortune lying down. The article by Investopedia, titled "5 Reasons to Avoid Index Funds," is an excellent example of an attempt to divert investors away from intelligent, evidence-based investing. Let's look at the article's five reasons for avoiding index funds.

1. Lack of Downside Protection

Investopedia warns its readers that investing in an index fund "leaves you completely vulnerable to the downside." This is a common argument used by proponents of active management. Here's the problem. Active managers don't protect you in a down market either.

According to an analysis by Vanguard, the majority of active managers outperformed the market in only three of six U.S. bear markets, and in only two of five European bear markets. The study concluded that active managers have been "inconsistent" in bear markets, thereby debunking the popular myth that bear markets give them an opportunity to demonstrate their expertise.

Protecting yourself from a bear market is simple. Reduce your allocation to stocks so you can wait out the decline in stock prices until the market recovers. But don't wait for a bear market to reassess the risk you are taking in your portfolio. This should be an ongoing process.

2. Lack of Reactive Ability

Investopedia asserts that sometimes "obvious mispricing can occur in the market" and that active management can take advantage of this "misguided behavior."

Whenever you hear claims about the wisdom of any investing approach, ask this question: Where is your data? Investopedia doesn't refer its readers to any data or studies demonstrating the ability of active managers to identify -- much less take advantage of -- stock mispricing. There's a reason for that: The dismal performance of active managers over both the short and long term makes it extremely unlikely that people with that expertise exist.

3. No Control Over Holdings

Investopedia believes another disadvantage of index funds is that you have no control over the holdings in your portfolio. It's true that you can't make decisions about what goes into an index, but why would you want to? The whole purpose of owning a globally diversified portfolio of low-fee index funds is to capture the returns of those global indexes. You can best achieve this goal by mirroring them, which those funds do.

On the other hand, you should be cautious about holding individual stocks. The chances that you'll be able to identify a mispriced stock are no better -- and probably significantly worse -- than those of active fund managers, who have far greater resources. And even with those resources, their track record on stock-picking is nothing to emulate. Still, if there are individual stocks you really want to add to your portfolio, there's nothing stopping you from doing so without disturbing your index fund holdings.

4. Limited Exposure to Different Strategies

Investopedia claims that buying an "index of the market" may not give you access to many "good ideas and strategies." It counsels investors to do their own homework to find "the best value stocks, the best growth stocks and the best stocks for other strategies."

The fallacy that amateur (or even professional) investors can "do their homework" and consistently "beat the markets" is a cruel joke. We don't even need to speculate about the daunting odds you face if you elect to follow this advice. Many studies have found the average mutual fund significantly underperforms its benchmark before taxes -- and especially after taxes. The odds of a portfolio of 10 equally weighted actively managed funds, rebalanced annually, beating their benchmark have been calculated at a puny 0.055 percent over a 10-year period. In gamblers' parlance, that's around 1,800 to 1 odds.

Do you still want to "do your homework" and try to "beat the market"?

5. Dampened Personal Satisfaction

Investopedia stretches reality with the contention that index investors will still find themselves "constantly checking on how the market is performing and being worried sick about the economic landscape." The reality is quite the opposite.

Well-advised, index-based investors pay little attention to short-term market fluctuations. They focus on their asset allocation (the division of their portfolio between stocks and bonds). They aren't concerned about what happens in the market today, tomorrow or even over the next few years. They don't need to be.

Investors who "do their homework" and engage in stock picking, market timing and fund-manager selection, however, are buffeted by market volatility. They bounce in and out of the market, often in response to predictions made by self-proclaimed "gurus." They don't rely on peer-reviewed data. They often don't understand risk, and rarely have a well-thought-out investment policy statement, much less the discipline to stick to it.

So There You Have It

There's a lot of profit for Wall Street's so-called "experts" in dissuading you from following a simple, evidence-based index fund strategy. But it's profit for them, not for you. Don't be fooled.

Daniel Solin is the director of investor advocacy for the BAM Alliance and a wealth adviser with Buckingham. He is a New York Times best-selling author of the Smartest series of books. His latest book is "The Smartest Sales Book You'll Ever Read."

 

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Wall Street This Week: Furnishing and Building Homes

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EARNS HOMEBUILDERS
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From a recent initial public offering checking in with its first quarter as a public company to a homebuilder expected to post healthy double-digit growth as the housing market starts to get frothy, here are some of the things that will help shape the week that lies ahead on Wall Street.

Monday -- Wayfair Steps Up

It's been a rough first few weeks for Wayfair (W) as a public company. The fast-growing furniture retailer went public at $29 in early October, traded as high as $39.43, but it now trades for far less than its original IPO price.

Wayfair reports after the market close on Monday. It will be the online retailer's first report as a public company. Sales are up nearly 50 percent through the first half of the year, but the problem rests on Wayfair's bottom line, where it should post another quarterly loss. Analysts see red ink until at least 2017.

Tuesday -- Hear From Horton

The housing market is showing signs of peaking. New home sales are clocking in at 467,000 -- a record high since the market crashed several years ago -- but momentum has slowed dramatically. The number of new homes sold through the first nine months of the year is only 2 percent ahead of where we were last year. Why does this all seem frothy? Well, there are a lot of unsold new homes on the market. We're up to 207,000, and that's 13 percent ahead of where we were last year and the highest level since 2010, when the housing recovery began. With mortgage rates near historic lows again and median home prices declining in 2014, we may be heading into challenging times for homebuilders.

We'll get a better snapshot of the industry when D.R. Horton (DHI) reports quarterly results on Tuesday. Wall Street doesn't seem to buy the theory that the residential housing market is getting frothy. They see revenue at America's largest homebuilder soaring 32 percent for the quarter and another 20 percent for the new fiscal year that began last month. Keep an eye on new orders and cancellation rates when D.R. Horton reports, as those are leading indicators of future performance.

Wednesday -- The Cisco Kid

There was a brief moment when Cisco (CSCO) was the country's most valuable publicly traded company. It was springtime in 2000, and Cisco's market cap peaked at more than $555 billion. That was just before the dot-com bubble popped, and the leading provider of networking equipment was being hyped as the thinking investor's play on the Internet revolution.

It all came crashing down. The dot-com craze settled down, and Cisco's stronghold of routers and switches was challenged by cutthroat competitors. Cisco also made some moves into the consumer market that in retrospect were ill-advised. Does anyone remember the Flip camcorder?

Cisco reports on Wednesday afternoon. Its market cap is closer to $130 billion these days, and the company that couldn't hire employees fast enough during the sudsy dot-com boom has pushed through layoffs in recent quarters.

Thursday -- Sam Walton's Legacy Lives On

Things haven't gone according to plan at Walmart (WMT). The world's largest retailer has been suffering through sluggish sales, and its reputation has taken a hit over the years. The online shopping revolution has nipped at Walmart's historical pricing advantage over rival brick-and-mortar retailers.

Walmart reports on Thursday morning. Analysts are holding out for a ho-hum showing. They see sales climbing 2 percent and earnings per share declining 2 percent. The challenges remain for the once-thriving discount department store chain.

Friday -- Carrey On My Wayward Fun

Fridays are usually quiet on the financial news front, but investors looking for a laugh may head out to the multiplex to check out "Dumb and Dumber To." (No, that isn't a typo.) It's been 20 years since the original Farrelly brothers' comedy was a box office smash, ringing up more than $127 million in ticket sales. A sequel followed nine years later, but "Dumb and Dumberer: When Harry Met Lloyd" was a cinematic flop. Reviews weren't kind, and it didn't help that it didn't star the original's comedic duo of Jim Carrey and Jeff Daniels.

They're back for "Dumb and Dumber To," and it should fare well as the biggest movie opening during the weekend.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems. Try any of our Foolish 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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Losing His Job Taught This Former Bank Exec One Big Lesson

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Every one of us has had "aha! moments." Epiphanies. Days when we reach a crossroads and realize that we have to make some changes. For the next two months, we're sharing moments like those in our Life Stage Lessons series: Real stories straight from the financial lives of our DailyFinance contributors about times when they realized they were due for a serious course correction. So read on, learn from our mistakes, and get inspired to improve your relationship with your money.

Although personal finance experts may debate the required size of an emergency fund, almost all agree that you should have one. Anywhere from $1,000 to eight months of living expenses seems to be the general guidance. And it doesn't take a rocket scientist to figure out why an emergency fund is needed. Unexpected things can happen. And even though your income may disappear, your expenses do not. In fact, they often get larger during emergencies (for example, with large medical bills).

Borrowing money during an emergency can be incredibly expensive. Short-term borrowing options include:
  • Credit cards, if you have available credit. Interest rates on credit cards average 15 percent or higher. And if you miss a payment, expect to see that rate increase to well over 20 percent.
  • Borrowing against your overdraft limit on your checking account. But typically the limit is low ($500 or less), and the fees are extremely high (an average of $35 per transaction).
  • Payday loans, which are just as bad as overdrafts, or even worse. You would end up paying $20 for every $100 you borrow for 14 days.
  • Title loans, which are just as bad as payday loans -- except they take your car if you don't pay them back.
  • Borrowing against your 401(k), which harms your retirement planning and has punitive tax implications.
  • Using your home equity line of credit. The good news is that the interest rate is low. The bad news: You lose equity and could end up paying the debt back for decades.
You should never put yourself into the situation where your only choice is to use one of the options above, because you can end up paying more than double the original amount you borrowed in fees and interest. It is much better to save in advance, and have access to an emergency fund when disaster strikes.

If Only I'd Taken My Own Advice

In 2008, I made a career change. I left my job as chief risk officer of Citibank's (C) consumer franchise in Russia and moved to take a new job in New York. While in Russia, I had saved enough money for a down payment and decided to buy a house. So, within a few months I quit my job (as did my wife), switched countries and bought a house.

My plan allowed me to put a 20 percent down payment on my home, complete necessary repairs and maintain a six-month emergency fund. Unfortunately, life did not go according to plan.

First, the house started to cost more than I'd planned. Although this surprised me, all of my homeowner friends just laughed at my naiveté. Everywhere we looked, the house needed more work. It culminated with a loud explosion in the basement, when our boiler broke.

Unfortunately, I continued full speed ahead with my home repairs. Although fixing the boiler before winter certainly counts as an emergency, I should have delayed other work. The guest room did not need a new floor and the front lawn did not need a new brick path. But I continued to write checks every week, as my bank account balance raced towards zero.

I Delayed Replenishing My Emergency Savings

Given that I had just started a new job, I couldn't imagine being out of work any time soon. I did the calculations and decided to fix up the house and then just save money over the next 12 months to replenish. I really wanted our house to feel like a home.

Then the 2008 economic crisis hit, and I lost my job. I was facing the prospect of no income, no emergency savings and a large mortgage payment. I felt foolish. Emergencies are never planned, and it is possible for more than one bad thing to happen at once. To add insult to injury, the price of homes in my neighborhood plummeted. If I'd sold my home in a rush, I would have lost my entire down payment, not to mention the money that I had spent refurbishing the house. In a matter of six months, I could see eight years of hard work and planning go up in smoke.

The worst part of having no money in the bank is the stress. You feel trapped, foolish and afraid. I had always prided myself on having a good job, money in the bank and a good financial plan. All of a sudden I dealt with the consequences of my actions. And the consequences were entirely avoidable. I could have easily had six months of living expenses -- had I waited to pay for the home repairs.

What I Did

The good news was that I got a few months of severance. I set two objectives:
  • I did not want to sell my home. I felt that, over time, home prices would come back, and I did not want to lose 100 percent of my down payment.
  • I needed to get a job as quickly as possible
To conserve my cash, I slashed my budget. Gone were any unnecessary expenses. And I built up a cash buffer by charging everything I could to a credit card with a 0 percent purchase rate. I wanted to have cash in the bank, even if it was borrowed. And I wanted to borrow at the lowest possible rate. I treated my job search like a full-time job.

In the end, I was fortunate. I quickly found a new job, and paid off the credit cards before I owed a dollar of interest. And I learned my lesson. I never wanted to feel that stress again. My definition of emergency has been narrowed considerably.

Practical Tips

Here are some of the things that I learned:
  • Create a completely separate emergency fund. I recommend putting it in a different bank, where you get the highest interest rate. And lock it up in a one-year CD. Ally Bank, for example, pays 1 percent on a 12-month CD. The interest rate will be much better than your traditional bank (which pays close to 0 percent). But, psychologically, you are locking it up to remove any possible temptation and use it only in a true emergency.
  • When an emergency strikes, be honest with yourself. Is this a short-term or a long-term emergency? In a short-term emergency, you have a temporary issue and will be able to return to your old life. Create an emergency budget, which includes drastic budget-cutting and a target date to replenish your emergency fund.
  • React quickly. If it is a long-term emergency, with a permanent loss of income, than you will need to cut your fixed costs, and quickly. If that means downsizing your home or selling your car, you need to do it quickly. The longer you wait, the higher the chance that you will just end up borrowing for an unsustainable life.
  • If you do end up with some debt, make sure you don't pay high interest rates. There are plenty of 0 percent offers out there, like the one I used. I keep a list of the best 0 percent offers at MagnifyMoney, my website.
I was very lucky to get a new job so quickly. And I was able to keep my home, watching the price appreciate over the last few years. But I was foolish to put myself in a position where every month without a job would put me further in debt. With some planning and self-discipline, you can protect yourself from emergencies that always surprise you upon their arrival.

Nick Clements is the co-founder of MagnifyMoney.com, a website that makes it easy to compare and save money on banking products. He spent nearly 15 years in consumer banking and most recently he ran the largest credit card business in the United Kingdom.

 

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Starbucks, Dunkin' Eye Dinner Foods to Boost Evening Sales

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starbucks dinner menu
Credit: StarbucksStarbucks' artichoke and goat cheese flat bread
By Brian Sozzi

NEW YORK -- In an attempt to keep the sales and profits flowing nearly around the clock, Dunkin' Donuts (DNKN) and Starbucks (SBUX) are planning to sell more dinner-friendly foods in 2015.

The endless-work clock that many folks are on -- constantly checking emails and text messages -- may be causing the need for certain restaurant chains to evolve in order to compete with go-to fast food dinner destinations Chipotle (CMG) and McDonald's (MCD).

"Though breakfast remains our core, today people are seeking all-day dining, and they want to eat what they want, when they want it and where they want it -- that's why we are so committed to menu innovation and giving our guests even more options that they can enjoy any time of day," John Costello, Dunkin' Donuts president, global marketing and innovation, said in an interview with TheStreet.

Dunkin' Donuts has already begun to introduce a dinner staple -- steak -- this fall, recently making a steak sandwich and a wrap with eggs permanent additions to its menu. Only 40 percent of Dunkin' Donuts' sales come after 11 a.m., leaving a lot of room for growth.

Sales Boost

With hardier menu items typically reserved for dinner, sales could grow at the more than 2,300 Dunkin' Donuts in the U.S. that are open 24 hours. Most Dunkin' Donuts, Costello said, are open until 10 p.m.

Dunkin' Donuts may draw inspiration for dinner from overseas. "We have a variety of products and flavors that are tailored to the regional preferences of our guests around the world such as donuts stuffed, topped and glazed with everything from rice pudding to saffron to crushed pistachios in India," Costello said.

Dunkin' Donuts India also offers burgers and wraps.

Dunkin' Donuts' focus on food for those on the go contrasts with Starbucks' goal of trying to keep customers inside its remodeled coffeehouses.

Moving Forward

Starbucks is pressing ahead with its evening menu, which consists of small plates to be shared and of wines and beer, after testing the menu in 32 U.S. stores in seven markets since 2012.

The home of the fall-favorite pumpkin spiced latte plans to "add several hundred evening stores as we move the program into the full launch phase that thoughtfully leverages the insights we gain during the test period," Starbucks Chief Operating Officer Troy Alstead said on the company's earnings call last week.

Starbucks now offers 10 standard small plate options as part of its evening menu, such as truffle macaroni and cheese and double chocolate brownie bites. There are also five choices of red wine, three white wines, a sparkling rose and proseco.

New Ideas

On Dec. 4, Starbucks will hold its biannual investor meeting where it intends to share more "details around new food and beverage innovations, reimagined store designs and new store formats, mobile order and pay, and the expansion of our evening programs," CEO Howard Schultz said.

Starbucks declined to comment for this story.

Starbucks is trying to capitalize on what has been a successful foray into offering consumers lunch options, including warm sandwiches and packaged platters called "bistro boxes" that contain vegetables and hummus.

"We saw strong growth in the midday between 11 a.m. and 3 p.m., and this is another encouraging sign that our food and beverage innovations are geared towards expanding the afternoon day part are gaining momentum with customers," Alstead said on the call.

Sales of food, notably breakfast, contributed two percentage points to Starbucks' 5 percent increase in Americas same-store sales in the third quarter. Alstead said that sales growth in food, "indicates that Starbucks is increasingly recognized by our customers as an attractive option for lunch."

At the time of publication, the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Starbucks CEO Howard Schultz LIVE

 

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Veterans Day 2014 Freebies

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The Denver Veterans Day Parade, comprised of local Veterans organizations and supporters, takes place in downtown Denver on Satu
Kathryn Scott Osler/The Denver Post via Getty Images
By Cameron Huddleston

Several businesses will be showing their appreciation for those who have served our country by giving them free meals, services and more on or around Veterans Day. Here's a roundup of the special offers available to veterans and military personnel. Note that some of these offers are available on days other than the Veterans Day holiday on Nov. 11. If you don't see your favorite establishment listed, call it directly to see if it will be honoring veterans and service members with any freebies. And check back because we'll be adding more deals as we learn about them.

Free Food


Applebee's is offering veterans and active-duty military members a free entree on Nov. 11 (dine-in only). Proof of service required.

Bar Louie, with locations in 24 states, will honor veterans and active-duty military members with a free meal up to a $12 value on Nov. 10-11 when they show valid military ID or other proof of service.

Bob Evans will let veterans and active-duty military enjoy free all-you-can-eat pancakes on Nov. 11.

California Pizza Kitchen is offering a free entree from a special menu (dine-in only) Nov. 11 to veterans and active military members who come in uniform or bring proof of service.

Cheeseburger in Paradise Bar & Grill, with locations in seven states, will give veterans and military personnel with proof of ID a free burger and fries on Nov. 11.

Denny's is offering active, non-active and retired military personnel a free Build Your Own Grand Slam breakfast meal from 5 a.m. to noon on Nov. 11.

Golden Corral will hold its annual free military appreciation dinner Nov. 17 from 5 p.m. to 9 p.m. to anyone who has ever served in the military (no ID required). The dinner is open to friends and family of military members, but they will have to pay the regular dinner menu pricing.

Handel's Homemade Ice Cream & Yogurt will be giving away free single-scoop ice cream cones to veterans and military personnel with valid ID on Nov. 11 at participating shops. No purchase is required. Handel's has 40 locations in seven states.

Krispy Kreme will give a free doughnut and coffee to veterans and active military (no ID required) on Nov. 11.

LongHorn Steakhouse will offer veterans and active military members a free Texas Tonion appetizer and non-alcohol beverage on Nov. 11 with proof of service.

McCormick & Schmick's Seafood Restaurants, with locations in 22 states and the District of Columbia, will offer veterans (with official ID) a free entree from a special menu Nov. 9. Dine-in only.

Olive Garden will give active-duty military and veterans a free entree from a special menu on Nov. 11.

On the Border is giving veterans and active military who dine in the restaurant Nov. 11 a free meal from its "create your own combo" menu.

Red Lobster will be giving veterans and active-duty military members with valid ID or proof of service a free select appetizer Nov. 10-13.

Shoney's will offer veterans and active-duty military a free All-American Burger on Nov. 11.

Texas Roadhouse will honor veterans and active-duty military with a free lunch from a special menu Nov. 11. Proof of service required.

Wayback Burgers will offer veterans and active-duty military a Wayback Classic Burger with the purchase of any side and drink on Nov. 11. Valid form of military ID required.

Free Services and Product Discounts


JDog Junk Removal & Hauling is offering free junk removal services for disabled veterans who book a service on Nov. 11. The franchise, which is owned and operated by veterans, has locations in six states.

Sleep Number is offering special discounts on select Sleep Number beds to current and past military personnel through Nov. 16.

Free Park Admission

Colonial Williamsburg in Virginia is offering free admission Nov. 7-11 to active-duty military, reservists, veterans and retired military and their dependents.

Knott's Berry Farm in California is offering free admission for veterans and active-duty military (with ID) and one guest Nov. 2 through Jan. 4.

U.S. National Parks will waive entrance fees on Nov. 11 for everyone at the 133 parks that usually charge an entrance fee.

Business Opportunities for Vets


Baskin-Robbins is offering an incentive program to veterans who want to open a Baskin-Robbins franchise. It will waive the franchise fee of $25,000 and offer a zero percent royalty rate for the first two years for five qualified veterans.

Maui Wowi Hawaiian, a beverage chain that serves Hawaiian coffee and smoothies, is providing a 20 percent discount off its franchise fee for qualifying military veterans through Dec. 31.

: Bet You Didn't Know: Veterans Day

 

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Gas Prices Fall to Lowest Level in Nearly 4 Years

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Exxon Mobil Corp. Gas Stations Ahead Of Earnings Figures
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By Ashley Lau

NEW YORK -- The average price of a gallon of gasoline in the United States dropped 13 cents in the past two weeks to its cheapest in nearly four years, according to the latest Lundberg survey released Sunday.

Gasoline prices fell to $2.94 a gallon of regular grade gasoline, its lowest level since December 2010, according to the survey conducted on Nov. 7.

The decline in price is largely driven by lower crude oil prices, which declined further during the period, said Trilby Lundberg, publisher of the survey.

"Crude oil dominates what gasoline prices are and what gasoline prices will do," Lundberg said, noting that the direction of crude oil prices in the coming weeks and months will dictate whether gasoline prices will continue to fall further or begin trending upward. "If they don't decline further, then this will be the end or nearly the end of this very steep price drop," she said.

The gasoline price is down about 28 cents from a year ago, and has dropped 78 cents from a 2014 peak of $3.72 in May.

The highest price within the survey area was recorded in San Francisco at $3.27 a gallon, with the lowest in Memphis at $2.65.

 

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Rising Food Costs Eat into Consumers' Savings at the Pump

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Inside A Whole Foods Market Inc. Store As Profit Tops Estimates
Ty Wright/Bloomberg via Getty Images
By Nathan Layne and Nandita Bose

Martha Franco says she hadn't really noticed the sharp drop in gasoline prices, even though the mother of three is always shuttling the kids around in her SUV. She has been paying closer attention to the soaring cost of meat instead.

"Meat and grains. Actually it seems like the price of everything is going up," Franco, 30, said following a visit to a Kmart discount store on the outskirts of Chicago, with her two youngest children and a bag of groceries in the shopping cart.

Retailers hoping for a lift to the year-end shopping season see promise in gas prices, which last week fell below $3 for the first time since 2010. Those savings, along with the effect of lower heating fuel, could amount to more than $2 billion extra a month for consumers, analysts calculate, enough to buy a lot of holiday gifts.

People talk about gasoline prices but you can't look at them in isolation.

Franco's attitude is a reality check on those hopes, though: higher food costs are eating into or eclipsing savings from gasoline, and a $2 billion jump in spending could be a much smaller bump after food inflation is taken into account.

"People talk about gasoline prices but you can't look at them in isolation," said Craig Johnson, head of consultancy Customer Growth Partners. "We think the psychological effect of record food inflation, because it's a bigger part of the family budget, is a key behavioral driver here."

Food prices, which the U.S. Department of Agriculture predicts will rise 2.5 to 3.5 percent this year, is one of the main reasons CGP forecasts holiday spending to rise only 3.4 percent. Most other forecasts call for growth above 4 percent.

Johnson estimates higher food prices will likely swipe about $10 billion out of consumer wallets in November and December compared with a year earlier, double the $5 billion boost expected from cheaper gasoline.

Big Budget Item

Food accounts for three times more of household budgets than the amount spent at the pump, and he believes food inflation is currently higher than USDA forecasts, running at a clip of 5 percent.

The net impact of lower gas prices versus higher food costs will be felt most by lower income households, which on average own fewer automobiles, said IHS (IHS) economist Chris Christopher.

Assuming the same amount of gas was bought both years, Christopher estimated consumers saved about $1.6 billion from lower gas prices in October versus the same month last year, while laying out $3.3 billion more on food.

"Remember everyone eats, but not everyone drives a car," Christopher said.

Fortunately for retailers, the fall in gas prices gathered steam and outstripped food inflation in the last month, leaving consumers with net savings of $760 million in October, compared with September, Christopher said.

Broad Economic Impact

The caution about food prices isn't universal. Joseph LaVorgna, chief U.S. economist at Deutsche Bank (DB), estimated a penny saved at the pump provides a $1 billion boost to consumers and that lower gas prices would have a broad, positive effect on the economy, even accounting for food prices.

With gas trading at about 27 cents a gallon lower than last year, that translates into annualized savings of $27 billion.

Still, retailers which offer gas, food as well as other items may be the best positioned, according to the companies themselves and analysts.

Same store sales results by apparel and teen apparel retailers, especially Gap (GPS), were among the biggest disappointments in October, according to Thomson Reuters (TRI) data, while Costco Wholesale (COST) did better than expected.

Benefits for Retailers

Walmart (WMT) told investors last month that lower gas prices should help its business. On Thursday, citing fuel prices, Wells Fargo (WFC) raised its earnings targets for convenience store chains Casey General Stores (CASY), Pantry (PTRY) and CST Brands (CST), all three of which deal in groceries and sell gasoline.

"Consumers only have so much money in their budget and when a commodity like fuel goes down in price, it has historically created 'space' for us to compete for a higher spend inside the store," a CST official told Reuters.

Sears Holdings (SHLD) said that it too could benefit, noting shoppers at its Kmart chain were more sensitive to changes in gasoline and other prices.

The fall in gas prices "will hopefully give them added shopping confidence heading into the holiday season," said Imran Jooma, executive vice president of the holding firm.

But standing outside the Chicago area Kmart, shopper Franco didn't display such confidence.

"Everything is so expensive and my husband's salary has not increased," she said.

 

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Pizza Hut Turns Foodie in Bid to Reverse Sliding Sales

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Pizza Hut Makes Massive Move Into 'Craft' Pizza

By CANDICE CHOI

NEW YORK -- Pizza Hut is letting customers play mad scientist, giving them the freedom to make pies with honey Sriracha sauce or add curry flavor to the crusts.

The atypical flavors and new ingredients are part of a menu overhaul set to be announced Monday and hit stores Nov. 19. Executives are hoping the revamp -- which includes an updated logo and more relaxed uniforms for workers -- will be the trick that finally jumpstarts sales.

Pizza Hut, which is owned by Louisville, Kentucky-based Yum Brands (YUM) and based in Plano, Texas, has reported sales declines for eight straight quarters at established locations, even as rivals Domino's (DPZ) and Papa John's (PZZA) have enjoyed gains.

To regain its footing, Pizza Hut is turning to a growing trend in the industry: giving people greater flexibility to tailor orders exactly to their tastes. The popularity of places such as Chipotle Mexican Grill that let people select toppings has prompted a variety of chains to play up their own customization options.

Even McDonald's (MCD), which grew to popularity in part because of its consistency, is testing a format in California that lets people build their own burgers by picking the bun, patty and toppings they want.

Pizza Hut is still keeping its most popular pies on the menu, such as the Meat Lover's and Veggie Lover's, while adding 11 new specialty pies and a section of "Skinny" pies that are lower in calories. But for people who like to design their own pies, it's giving them yet more ways to do so at no extra cost.

For the base sauce, people will be able pick from six options, including marinara, garlic Parmesan and honey Sriracha. They can also add swirl of flavor to their pies, picking from four "drizzles" including balsamic and buffalo.

And they'll be able to brush pie crusts with one of 10 flavors, including salted pretzel and fiery red pepper. Two of the crust flavors will be updated regularly, with "Ginger Boom Boom" and "Curried Away" being the first limited-time offerings.

Carrie Walsh, Pizza Hut's chief marketing officer, said she expects the majority of customers to take advantage of the new options, even if it's just requesting a Parmesan crust on a Meat Lover's pie.

The chain is also adding more toppings, including banana peppers, cherry peppers and spinach. Standard toppings are also being renamed to make them more appealing; black olives, for instance, will be called "Mediterranean black olives" and red onions will be renamed "fresh red onions," although the ingredients are the same.

The chain's famous red roof logo will be also tweaked so that it's white against a swirling red circle. And worker uniforms will switch to jeans and T-shirt, rather than a polo shirt with black pants.

"It's a signal to America there's a big change at Pizza Hut," Walsh said.

 

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GM Ordered Switches Nearly 2 Months Before Recall

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GM Road Ahead
Carlos Osorio/APGeneral Motors CEO Mary Barra addresses the Global Business Conference for investors last month in Milford, Mich.
By TOM KRISHER

DETROIT -- Emails released in a court case show that General Motors (GM) ordered a half-million replacement ignition switches nearly two months before telling the government that its small cars should be recalled because the switches were defective.

The emails, released Monday by Texas personal injury attorney Robert Hilliard, once again raise questions about what GM knew about the defective switches and when, and how forthcoming the company was both in congressional testimony and in a GM-funded investigation into its conduct by former U.S. Attorney Anton Valukas.

The chain of emails between lower-level GM workers and Delphi (DLPH) seem to indicate that GM knew at least by Dec. 18, 2013, that the switches were the cause of air bag non-deployment in certain models such as the Chevrolet Cobalt and needed to be recalled. The Valukas report, which didn't mention the switch order, said GM executives didn't decide internally on a recall until January 2014, and alerted the government about the decision on Feb. 7. Also, the order was not mentioned when CEO Mary Barra subsequently testified before Congress.

The switches can slip out of the run position, causing engines in cars such as the Chevrolet Cobalt to stall. If that happens, the power steering, brakes and air bags are disabled, and people can lose control of their cars. GM eventually recalled 2.6 million small cars for the problem, which has caused at least 32 deaths.

The emails in the chain, which run from December into February, call the matter "urgent" and eventually use the words "safety issue."

GM says it is standard procedure to start ordering parts before a recall decision is made.

But Hilliard said GM should have told the government and warned its customers as soon as it knew about the problem. For his clients alone, a warning could have prevented one death and 85 injuries, Hilliard said.

"This pulls the curtain back completely and proves GM has not been forthright," Hilliard said.

Hilliard contends that Barra, who was head of product development and purchasing before becoming CEO, should have known about the purchase of 500,000 new switches at an unbudgeted cost of about $3 million. "This completely reframes the conversation, the investigation and a re-examination of the truth of Ms. Barra's involvement," he said.

Barra has previously told Congress that she first learned of the switch problem in late December 2013, and the recall on Jan. 31. Spokesman Alan Adler said Monday the company stands behind Barra's original statements.

The parts were ordered a day after a committee of three GM executives met to consider a recall but decided that it didn't have enough information to make a decision. According to Valukas' report, the decision was delayed after then-Vice President of Engineering John Calabrese thought that company investigators didn't know what was causing air bags not to inflate. Calabrese has since retired.

But Hilliard said the company wouldn't order a half-million parts if it didn't know the cause of a problem. Hilliard said he is seeking additional documents to see how high up knowledge of the order went in the company's hierarchy.

"This email chain creates more questions than it answers. It will be interesting to learn from the GM documents how high up it went, how far back it went," he said.

GM wouldn't comment on details of the emails, but said in a statement that the emails are "further confirmation" that its system needed to be reformed, which it has done.

"We have reorganized our entire safety investigation and decision process and have more investigators, move issues more quickly and make decisions with better data," the statement said.

Investigations are opened faster and a group of senior leaders quickly decides whether a recall is needed, the statement said.

 

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Last Week's Biggest Stock Movers: Herbalife Declines

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Operations Inside The Herbalife Distribution Center
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Plenty of stocks go up and down in any given week. The gainers inspire us to keep investing. The decliners keep greed in check while reminding us about the risks of the equity markets.

Let's go over some of last week's best and worst performers.

King Digital Entertainment (KING) -- Up 20 percent last week

We're not playing "Candy Crush Saga" the way we used to, but some of King Digital's other mobile games are starting to show signs of life. Shares of the casual-gaming leader moved higher after it posted quarterly results.

King Digital is no longer a one-trick pony. Gross bookings for non-"Candy Crush" games have soared 167 percent over the past year and now make up nearly half of King Digital's total gross bookings. The diversification is paying off. King Digital referred to App Annie data showing that its market share of worldwide revenue generated from casual games in the top 100 titles is 49 percent on iOS and 44 percent on Android.

Whole Foods Market (WFM) -- Up 19 percent last week

The country's leading organic grocer moved higher after posting better-than-expected quarterly results. Sales climbed 9 percent to $3.3 billion, fueled by expansion and a 3.1 percent uptick in comparable sales. Whole Foods Market's profit of 35 cents a share exceeded analyst estimates for the second quarter in a row.

Things aren't perfect. Margins contracted once again with net income failing to grow as quickly as sales. Whole Foods is facing competition as mainstream grocers and discount department store chains stock up on cheaper organic food. However, with shares trading 19 percent lower so far this year -- even after last week's pop -- it's easy to see Whole Foods come through with a big move up on a refreshing earnings beat.

Kate Spade (KATE) -- Up 12 percent last week

The market for premium handbags has proven challenging for Coach (COH) over the past two years, but the same can't be said about smaller rival Kate Spade. The trendy maker of expensive purses and other accessories rang up $250.4 million in its latest quarter, 30 percent higher than a year earlier and comfortably ahead of the $244.1 million that Wall Street pros were modeling. Kate Spade also went on to raise its guidance.

Herbalife (HLF) -- Down 29 percent last week

The bears are winning the battle at Herbalife. Shares of the distributor of wellness products tumbled after it posted disappointing financials. Herbalife's quarterly profit fell sharply, largely on Venezuelan currency swings.

Herbalife has become a battleground stock. We've been treated in the past to colorful disputes between Carl Icahn on the bullish side and Bill Ackman on the bearish front. Ackman's claim that Herbalife is a pyramid scheme with the company making money on recruiting new distributors rather than its actual products may or may not be valid, but investors aren't sticking around. SunTrust Robinson Humphrey (STI) downgraded the stock after the report, slashing its price target from $75 to $55.

Sprint (S) -- Down 20 percent last week

It isn't easy being a wireless carrier this earnings season. Sprint was the last of the four smartphone service providers to report this season, and just like its larger peers, it too wasn't able to live up to Wall Street expectations.

Sprint posted a wider loss than analysts were projecting. It also revealed that it will lay off 2,000 employees to trim costs.

Michael Kors (KORS) -- Down 11 percent last week

Kate Spade may have soared last week, but rival Michael Kors went the other way. Its results were strong on the surface: Revenue soared 43 percent; net income climbed 42 percent. However, analysts were perched on the high end of its guidance for the seasonally potent holiday quarter, suggesting continuing deceleration of the premium handbag distributor's once heady growth. Goldman Sachs (GS) removed the stock from its conviction list of highest-rated stocks to buy.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Coach, Michael Kors Holdings and Whole Foods Market and has the following options: long January 2016 $57 calls on Herbalife. John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Try any of our Foolish 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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Why Can't Investors Let Go of Their Portfolios' Losers?

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By Matthew Amster-Burton

Do you own stocks that are down significantly since you bought them, but that you can't bring yourself to sell?

Selling "loser" stocks can make sense, especially as we get close to the year's end, and those losses can offer a tax break on capital gains elsewhere in one's portfolio. Yet, investors tend to do just the opposite: They sell their winners and hang onto their losers. That's the consistent finding of nearly 30 years of research on the disposition effect, beginning with a 1985 paper by Hersh Shefrin and Meir Statman.

It also fits in with research that reveals that the pain we feel from losing a certain amount of money is greater than the pleasure we feel of earning the same amount. And investors don't consider a gain or loss "real" until they sell.

Oh, the Pain

Maury McCoy, a financial consultant, has experienced the disposition effect and learned his lesson. "After a number of years of investing, one of the lessons I've learned is it is OK to take a loss and move on," he says. "I've held three stocks to zero, which is a painful experience."

SigFig, an investment management company in San Francisco, has charted the "biggest losers" of its losers. In third place is a once-hot tech startup whose performance fizzled fast and furious after a hyped-up initial public offering. Investors who own Zynga (ZNGA) have, on average, a 30 percent unrealized loss (as of Oct. 13). And the top two are Growlife (PHOT), a "cultivation services provider," and Medical Marijuana Inc (MJNA) -- two marijuana stocks that are far off their one-time highs.



So why are folks holding onto these stocks?

What Some Investors Say

Some cop to the disposition effect, admitting that they don't want to sell at a loss. Nathan Polak, a business analyst and MBA candidate, owns Medical Marijuana. "My logic was that as these and other markets opened to the marijuana industry, the stock would appreciate due to increased revenues," he says. "I believe the term at the time was 'pot fever,' and I foolishly failed to do thorough research on this company." Now, he says he's holding the stock "mainly to just see what happens."

But some investors truly believe in the potential of a stock to recover. McCoy, who had experienced the pain of holding stocks that become worthless, now owns Zynga -- because he thinks the stock is worth more than its current price. "I see this stock as an option on Zynga potentially having a big winner in the mobile gaming or real money gaming space," he says.

Christopher Soria, a retail banker, says he bought Medical Marijuana and Growlife because he believes "marijuana legalization is inevitable in the U.S. and this stock will benefit from it (or at least the hype)." He plans to sell if the federal government blocks the possibility of legalization definitively, but his current plan is to hold the shares until "something hypes them up, then sell on the hyperbolic rise, and buy back sometime later."

Hold On or Cut Loose?

None of this means that these investors are wrong to hold onto their "loser" stocks. As we know from every teen comedy made ever, today's losers can turn into tomorrow's winners.

So how can investors decide when they're being rational ("I want to hold onto this stock because I still believe in the company") or irrational ("I want to hold onto this stock because I can't accept pain of realizing the loss")?

One way is to avoid individual stocks, period, and invest in a total market portfolio of exchange-traded funds or mutual funds. This approach won't protect investors from overall market declines and financial panics, but the goal of passive investing is to protect people from the mistakes of trading too often and trying to time the market, not to mention single-stock concentration risk, which is far more common than you may think. And let's face it: A low-cost total market portfolio does alleviate the worry about whether the company you've chosen is a star ... or a stinker that's about to go to pot.

Matthew Amster-Burton is a contributing writer at SigFig, the easiest way to manage and improve your investments. More than three quarters of a million investors nationwide use SigFig to track and manage more than $300 billion in assets.

 

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Want to Work Past Age 65? Here's What to Watch Out For

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Businesswoman sitting at desk in office portrait
Thomas Barwick/Getty ImagesYour freedom isn't the only thing you may be hindering by continuing to work your 9-5 after age 65.
By Emily Brandon

Continuing to work after age 65 can certainly help your retirement finances. You can continue to save for retirement, your existing savings will have more time to grow before you begin withdrawals and the number of retirement years you need to pay for will be shorter. But there are a few ways employment after age 65 can hurt your retirement finances. Take care to avoid these problems when working after age 65.

Signing up for Medicare. It's important to sign up for Medicare at the correct time, even if you are still working and don't need the coverage yet. You can first claim Medicare benefits during a seven-month period that begins three months before the month you turn 65. If you don't sign up during this initial enrollment period, your monthly Part B premiums may increase by 10 percent for each 12-month period you were eligible for Part B but didn't claim it.

However, if you are covered by a group health plan based on your or your spouse's current employment after age 65, you can avoid Medicare's late enrollment penalty if you sign up anytime you're still covered by the group health plan or within eight months of leaving the job or the coverage ending. "If you are currently working when you become entitled to Medicare, you don't have to sign up for Part B if you have group-sponsored coverage through your employer or if your spouse does," says Juliette Cubanski, a Medicare policy analyst at the Kaiser Family Foundation. "If you don't sign up for Part B when you are either first entitled or when you first don't have other coverage, you will be subject to a late enrollment penalty." COBRA coverage and retiree health plans are not considered coverage based on current employment for the purposes of avoiding the late enrollment penalty.

There's also a late enrollment penalty that is applied to Medicare Part D premiums if you don't sign up when you are first eligible or go 63 or more days in a row without prescription drug coverage. And a Medigap open enrollment period begins the month you're first enrolled in Part B, after which you could be denied the option to buy a Medigap policy or it could cost significantly more.

Impact on Social Security. Continuing to work after age 65 is typically good for your Social Security payments. Most baby boomers aren't eligible for unreduced Social Security payments until age 66, and for people born in 1960 or later, the full retirement age is 67. Payments further increase by 8 percent for each year you delay claiming up until age 70. "It can work in your favor to delay benefits in order to maximize the Social Security benefit that you will receive," says Jim Blankenship, a certified financial planner for Blankenship Financial Planning in New Berlin, Illinois, and author of "A Social Security Owner's Manual." After age 70, there is no additional increase for waiting to claim your Social Security payments.

However, if you decide to sign up for Social Security benefits before your full retirement age while you are still working, part or all of your payments could be temporarily withheld. Social Security beneficiaries who are younger than their full retirement age will have $1 in benefits withheld for every $2 they earn above $15,720 in 2015. Retirees receiving Social Security payments who will turn 66 in 2015 can earn up to $41,880, after which one benefit dollar will be withheld for every $3 earned above the limit. However, once you turn full retirement age, you can earn any amount without having your benefit withheld, and Social Security payments are recalculated to give you credit for any withheld benefits.

Required minimum distributions. Withdrawals from individual retirement accounts typically become required after age 70½, and income tax will be due on withdrawals from traditional retirement accounts. However, if you are still working and don't own 5 percent or more of the company you work for, you can continue to delay withdrawals from the 401(k) associated with your current employment until April 1 of the year after you retire, if the plan allows it. "When you turn 70½, if you are still working for an employer, you have a 401(k) and assuming that you don't own 5 percent or more of the company, you can still delay taking money out of the 401(k)," says Howard Hook, an accountant and certified financial planner for EKS Associates in Princeton, New Jersey. However, withdrawals from IRAs and 401(k)s from previous employers will still be required, and there's a steep 50 percent tax penalty if you fail to withdraw the correct amount. Additionally, retirement savers age 70½ and older are no longer eligible for a tax deduction if they make traditional IRA contributions.

-Emily Brandon is the senior editor for Retirement at U.S. News. You can contact her on Twitter @aiming2retire, circle her on Google Plus or email her at ebrandon@usnews.com.

 

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Fannie Mae Quarterly Earnings: By the Numbers

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The Fannie Mae headquarters complex Building at 3900 Wisconsin avenue in Washington DC
Ken Howard/Alamy
Government-controlled mortgage giant Fannie Mae (FNMA) earned net income of $3.9 billion in the third quarter, which ended Sept. 30. That was a drop of 55 percent from $8.7 billion at the same time last year, although higher than the $3.7 billion in the second quarter. Fannie Mae's quarterly increase in earnings came from higher net interest income and one-time $1.2 billion in penalty settlements from banks.

Fannie Mae does not lend directly to consumers. It buys mortgages from banks and other lenders and bundles them into securities, which it sells to investors with a guarantee against default. Fannie Mae's revenue and earnings can vary widely based on changes in housing prices and interest rates. This quarter, for example, Fannie Mae's U.S. home sale index showed an increase of just 1.2 percent, and its revenue fell to $6.0 billion from $6.3 billion a year ago.

During the financial and housing crisis in 2008, Fannie Mae was taken over by the federal government, and its stock does not now trade on any exchange. The company received $116.1 billion in aid from the Treasury at that time, and must remit all of its profits under the terms of its bailout. After its next payment on Dec. 31, it will have returned a total of $134.5 billion to the Treasury, more than fully repaying the government.

This earnings release follows the earnings announcements from the following peers of Federal National Mortgage Association: Bank of America Corporation (BAC), Federal Home Loan Mortgage Corporation (FMCC), First National Financial Corporation (FN), Nationstar Mortgage Holdings (NSM) and Wells Fargo & Company (WFC).

Highlights
  • Summary numbers: Revenues of $29.3 billion, Net Earnings of $3.9 billion and EPS of $-0.02.
  • Performance focus more on revenue than earnings: Revenue decline of -3.5 percent vs. decline in earnings of -55.3 percent compared to same period last year
  • Net Interest Income Margins now 17.3 percent from 18.4 percent compared to the same period last year.
  • Net Interest Income After Provisions Margins now 21.0 percent from 26.9 percent

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):
Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014
Revenue Growth (YOY) -6.7% 1.3% 8.2% 3.1% -3.5%
Earnings Growth (YOY) 379.8% -14.7% -90.9% -63.6% -55.3%
Net Margin 28.7% 20.3% 15.7% 12.0% 13.3%
EPS $0.02 -$0.13 -$0.06 -$0.01 -$0.02
Return on Equity 3.9% -27.7% -16.6% -2.6% -6.2%
Return on Assets 1.1% 0.8% 0.7% 0.5% 0.5%


Market Share Versus Earnings Growth

Companies sometimes sacrifice profits in order to increase market share. Capital Cube looks at revenue to judge market share activity and earnings to gauge profitability.



Fannie Mae's fall in revenue compared to the same period last year of -3.5 percent is better than its -55.3 percent earnings decline, suggesting perhaps that the company's focus is on market share at the expense of bottom-line earnings. This revenue performance is among the lowest thus far in its sector -- inviting the potential of further market share deterioration. (Also, for comparison purposes, revenues changed by -3.56 percent and earnings by 6.52 percent compared to the third quarter.)




Net Interest Income and Loan Loss Provisions

The company's decline in earnings compared to the same time last year has been influenced by the following factors: (1) Decline in net interest income margins from 18.4 percent to 17.3 percent and (2) Issues with loan loss provisions. As a result, net interest income after provisions margins dropped from 26.9 percent to 21.0 percent in this period. For comparison, net interest income margins were 14.3 percent and net interest income after provisions margins 20.2 percent in the immediate last quarter. In addition, loan loss provisions as a percentage of net interest income were -46.7 percent 12 months ago, and -21.4 percent this period.



Accounting Items

The company's decline in earnings has been influenced by the following factors: (1) Decline in operating (EBIT) margins from 32.6 percent to 19.2 percent and (2) Accounting items that decreased pretax margins from 33.2 percent to 19.4 percent.



Supporting Data

The table below shows the preliminary results along with the recent trend for revenues, net income and other relevant metrics:
Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014
Revenue Growth (YOY) -6.7% 1.3% 8.2% 3.1% -3.5%
Peer Average Revenue Growth (YOY) 3.7% 7.1% 2.0% 1.2% -2.3%
Earnings Growth (YOY) 379.8% -14.7% -90.9% -63.6% -55.3%
Peer Average Earnings Growth (YOY) 56.9% 16.4% -31.7% -44.5% -32.9%
EBITDA Margin 32.6% 26.1% 23.4% 17.6% 19.2%
Peer Average EBITDA Margin 26.5% 31.2% 23.4% 18.6% 12.2%
Net Margin 28.7% 20.3% 15.7% 12.0% 13.3%
Peer Average Net Margin 21.7% 20.9% 14.3% 12.7% 14.4%
EPS $0.02 -$0.13 -$0.06 -$0.01 -$0.02
Peer Average EPS $0.42 $0.16 $0.11 $0.32 $0.28
Return on Equity 3.9% -27.7% -16.6% -2.6% -6.2%
Peer Average Return on Equity 21.0% 3.2% 4.4% 7.8% 5.9%
Return on Assets 1.1% 0.8% 0.7% 0.5% 0.5%
Peer Average Return on Assets 1.0% 0.8% 0.7% 0.7% 0.5%
Net Interest Income Margin 18.4% 15.3% 14.0% 14.8% 17.3%
Peer Average Net Interest Income Margin 37.0% 36.9% 33.0% 32.8% 34.2%
Loan Loss Provision Margin -46.7% 0.0% -16.3% -36.3% -21.4%
Peer Average Loan Loss Provision Margin 0.7% 3.1% 3.1% 2.0% 3.4%


Company Profile

Federal National Mortgage Association is a government-controlled company. It provides liquidity, stability and affordability to the U.S. housing and mortgage markets and its activities include providing market liquidity by securitizing mortgage loans originated by lenders in the primary mortgage market into Fannie Mae mortgage-backed securities and purchasing mortgage loans and mortgage-related securities in the secondary market. The company operates through three segments: Single-Family Credit Guaranty, Multifamily, and Capital Markets. The Single-Family segment generates revenue primarily from the guaranty fees on the mortgage loans underlying guaranteed single-family Fannie Mae mortgage-backed securities. The Multifamily segment generates revenue from a variety of sources, including guaranty fees on the mortgage loans underlying multifamily Fannie Mae MBS and on the multifamily mortgage loans held in its portfolio, transaction fees associated with the multifamily business and bond credit enhancement fees. The Capital Markets segment invests in mortgage loans, mortgage-related securities and other investments, and generates income primarily from the difference, or spread, between the yields on the mortgage assets it owns and the interest paid on the debt the company issued in the global capital markets to fund the purchases of these mortgage assets. The company was founded in 1938 and is headquartered in Washington, DC.

CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of FNMA.

 

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Target Offers Shoppers Early Access to Black Friday Deals

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Target Data Breach
Damian Dovarganes/AP
By ANNE D'INNOCENZIO

NEW YORK --€” Target wants to extend Black Friday well before Thanksgiving.

The Minneapolis-based retailer is kicking off its holiday push with a one-day online sale Monday that will last from noon to midnight Eastern time with nine items that can be ordered online and picked up at stores.

Target (TGT) is also giving early access to some of the deals reserved for the holiday kickoff by holding a pre-sale on a handful of Black Friday deals at its stores and online on Nov. 26, the day before Thanksgiving.

Starting Thanksgiving morning, online customers will have access to all discounts that will be available when stores open at 6 p.m. on the holiday, two hours earlier than last year.

It is the first time Target is offering early access to Black Friday deals, an effort to rebound from a series of problems and compete in an economy that's still difficult and reel in shoppers who want options besides rolling out of bed at 3 a.m. the day after Thanksgiving.

"Not everyone wants to wait until Black Friday to start shopping," Kathee Tesija, Target's chief merchandising and supply chain officer, told The Associated Press. "They like to spread their shopping over the holiday shopping season."

Last year's holiday season started out fine for Target, but then a massive theft of customer information disclosed the week before Christmas caused shoppers to flee for months.

While shoppers have moved beyond the breach, Target's sales have remained sluggish. It is trying to win over customers with aggressive discounts while adding more exclusive trendy merchandise to grab its share of holiday dollars.

Late last month, Target eliminated shipping fees for online orders under $50 until Dec. 20. Tesija told The Associated Press that Target saw a 30 percent increase in online sales in the first 48 hours of free shipping compared with the prior two weeks.

As for the Nov. 10 sale, deals include Apple TV streaming video devices for $89, down from the regular price of $99, and Beats Studio Headphones at $249, down from $299.99. To take advantage of the discount, customers have four days to pick up the item from a store.

Tesija said Target tested a flash online sale in July for back-to-school items where shoppers picked up the items at the store and that sale fared well. Bringing customers into stores is good for retailers because shoppers will then pick up other items.

For the Nov. 26 sale, shoppers will be able to get a preview of the deals in Target's weekly ad on Sunday, Nov. 23.

On the Friday after Thanksgiving, from 6 a.m. to noon, customers can purchase up to $300 in Target gift cards at 10 percent off, the first time it has offered a discount on gift cards.

Target officials declined to say how many deals will be offered for the Thanksgiving weekend but noted in some categories, shoppers will see one across-the-board discount. For example, Target is marking down all clothing by 40 percent.

 

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Disney Quarterly Earnings: By the Numbers

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A view of the Disney castle and visitors at the entrance to Fantasyland in Disneyland
Buddy Mays/Alamy
The Walt Disney Company (DIS), whose fiscal year ends Sept. 30, reported a 7 percent gain in fiscal fourth quarter revenue to $12.4 billion, and an 8 percent rise in yearly revenue to $48.8 billion over fiscal 2013. Profits were up too. The fourth quarter saw profits rise 7.5 percent or 86 cents a share to $1.6 billion, compared to the same period last year.

The Disney film division's outsized performance led the way to overall revenue and profits. The success of animated movie "Frozen" and Marvel movie "Guardians of the Galaxy" lifted movie revenue beyond expectations. Revenue from the Studio division was up 18 percent to $12.4 billion in the fiscal fourth quarter. Frozen, which became the highest grossing animated film ever, also generated merchandising revenue, which lifted up fourth quarter product sales in the consumer division by 7 percent to $1.1 billion.

Other Disney divisions also had higher revenue. The revenue from media and cable networks rose 5 percent to $5.2 billion; and the revenue from parks and resorts rose 7 percent to $1.1 billion.

The results were ahead of analysts' estimates, with the overall revenue number slightly better than expected. Despite that, Disney's stock fell slightly after the earnings report, although it has nearly doubled in price in the last two years.

This earnings release follows the earnings announcements from the following peers of Walt Disney Company: CBS Corporation (CBS), Comcast Corporation (CMCSA), Discovery Communications (DISCA), DreamWorks Animation (DWA), Twenty-First Century Fox (FOXA), Sony Corporation (SNE) and Time Warner (TWX).

Highlights
  • Summary numbers: Revenues of $12.4 billion, Net Earnings of $1.6 billion and EPS of $0.86.
  • Performance focus on earnings: Same period yearly change in earnings of 7.5 percent, better than change in revenues of 7.1 percent
  • Ability to declare a higher earnings number? Increase in operating cash flow of 13.5 percent compared to same time last year better than change in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):
Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014
Revenue Growth (YOY) 7.3% 8.4% 10.1% 7.8% 7.1%
Earnings Growth (YOY) 12.1% 33.1% 26.7% 21.5% 7.5%
Net Margin 12.1% 15.0% 16.5% 18.0% 12.1%
EPS $0.77 $1.03 $1.08 $1.28 $0.86
Return on Equity 11.9% 15.4% 16.2% 18.7% 12.4%
Return on Assets 6.9% 9.0% 9.3% 10.8% 7.1%


Market Share Versus Earnings Growth

Companies sometimes focus on growing market share at the expense of profits.





The Disney Company's 7.1 percent increase in revenue, compared to the same period last year, trailed its increase in earnings, which rose 7.5 percent. The company's performance this period and for its full fiscal year suggests a focus on boosting the bottom-line earnings. While the revenue performance could be even higher, it is important to note that Disney's revenue performance is among the best in its peer group thus far. (Also, for comparison purposes, revenues fell by -0.5 percent and earnings by -33.2 percent compared to the immediate last quarter.)




Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend better terms to customers and vendors. Capital Cube checks for such activity by comparing gross margin changes with any changes in working capital. If the gross margins improved without a worsening of working capital days, it is quite possible that the company's performance is a result of truly delivering in the marketplace and not simply an accounting prop.


Disney's decline in gross margins is offset by some improvements on the balance sheet side. Working capital management shows progress. The company's working capital days have gone down to 5.8 from 18.2 for the same period last year, and suggest that the gross margin decline is not altogether bad.



Operating Cash Flow Growth Versus Earnings Growth-Sustainable?

Companies often post earnings numbers that are influenced by non-cash activities, which may not be sustainable. One way to gauge the quality of the declared earnings number is to judge the deviation in earnings growth from the growth in operating cash flows. In general, an earnings growth rate that is superior to operating cash flow growth implies a higher proportion of non-operating or one-time activities. Such activities are typically not sustainable over long periods.


Disney's year-on-year increase in operating cash flow of 13.5 percent beat its change in earnings, suggesting that the company might have been able to declare a higher earnings number. In addition, this increase in operating cash flow is better than average among the declared results thus far in its peer group.



Margins

The company's earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 18.7 percent to 19.3 percent and (2) one-time accounting items. The company's pretax margins are now 19.9 percent compared to 19.2 percent for the same period last year.


EPS Growth Versus Earnings Growth

Disney's year-on-year change in Earnings per Share (EPS) of 11.7 percent is better than its change in earnings of 7.5 percent. However, Capital Cube concludes that the company is gaining ground in generating profits compared to its peers because the 7.5 percent rise in earnings is better than the peer average.




Supporting Data

The table below shows the preliminary results along with the recent trend for revenues, net income and other relevant metrics:
Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014
Revenue Growth (YOY) 7.3% 8.4% 10.1% 7.8% 7.1%
Peer Average Revenue Growth (YOY) -1.1% 5.3% 9.0% 3.3% 5.5%
Earnings Growth (YOY) 12.1% 33.1% 26.7% 21.5% 7.5%
Peer Average Earnings Growth (YOY) 6.1% 27.3% 0.5% 12.1% 8.7%
Gross Margin 23.5% 26.2% 30.6% 32.6% 19.3%
Peer Average Gross Margin 44.5% 40.8% 40.3% 41.7% 42.7%
Net Margin 12.1% 15.0% 16.5% 18.0% 12.1%
Peer Average Net Margin 11.5% 11.7% 12.6% 12.1% 12.7%
EPS $0.77 $1.03 $1.08 $1.28 $0.86
Peer Average EPS $0.60 $0.74 $0.69 $0.76 $0.67
Return on Equity 11.9% 15.4% 16.2% 18.7% 12.4%
Peer Average Return on Equity 13.8% 15.1% 15.5% 16.5% 11.8%
Return on Assets 6.9% 9.0% 9.3% 10.8% 7.1%
Peer Average Return on Assets 6.1% 6.4% 6.6% 5.7% 6.3%


Company Profile

The Walt Disney Co. together with its subsidiaries and affiliates is a diversified international family entertainment and media enterprise. It operates through five business segments: Media Networks, Parks & Resorts, Studio Entertainment, Consumer Products and Interactive Media. The Media Networks segment is comprised of a domestic broadcast television network, television production and distribution operations, domestic television stations, international and domestic cable networks, domestic broadcast radio networks and stations, and publishing and digital operations. This segment operates through consolidated subsidiaries, the ESPN, Disney Channels Worldwide, ABC Family, SOAPnet and UTV/Bindass networks. This segment also operates ABC Television Network and television stations, as well as the ESPN Radio Network, Radio Disney Network and owns and operates radio stations. Additionally, it operates ABC, ESPN, ABC Family and SOAPnet-branded internet businesses. The Parks & Resorts segment owns and operates the Walt Disney World Resort in Florida and the Disneyland Resort in California. Its Walt Disney World Resort includes four theme parks-the Magic Kingdom, Epcot, Disney's Hollywood Studios and Disney's Animal Kingdom; resort hotels, retail, dining, and entertainment complex, a sports complex, conference centers, campgrounds, water parks, and other recreational facilities. The segment's Disneyland Resort includes two theme parks-Disneyland and Disney California Adventure; resort hotels, and a retail, dining and entertainment complex. This segment's Walt Disney Imagineering unit designs and develops theme park concepts and attractions, as well as resort properties. The Studio Entertainment segment produces and acquires live-action and animated motion pictures for worldwide distribution to the theatrical, home entertainment, and television markets. This segment distributes these products through its own distribution and marketing companies in the United States and through independent companies and joint ventures in foreign markets primarily under the Walt Disney Pictures, Touchstone Pictures, Pixar, Marvel, and Disneynature banners. The Consumer Products segment licenses trade names, characters and visual and literary properties to various manufacturers, retailers, show promoters, and publishers throughout the world. This segment also engages in retail and online distribution of products through The Disney Store and DisneyStore.com. It also publishes entertainment and educational books and magazines and comic books for children and families and operates English language learning centers in China. The Interactive Media segment creates and delivers branded entertainment and lifestyle content across interactive media platforms. Its primary operating businesses are Games which produces and distributes console, online and mobile games; and Online, which develops branded online services in the United States and internationally. The Walt Disney was founded by Walter Elias Disney on October 16, 1923 and is headquartered in Burbank, CA.

CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of DIS.https://online.capitalcube.com/#!/stock/us/nyse/dis

 

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McDonald's Recalls 2.5 Million 'Hello Kitty' Happy Meal Toys

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Hello Kitty McDonalds Whistle recall
Consumer Product Safety Commission
McDonald's is recalling 2.5 million Happy Meal toys given away at its restaurants in the U.S. and Canada over a potential danger to young children, the U.S. Consumer Product Safety Commission said on Monday.

The Hello Kitty whistles were included as part of a giveaway with Happy Meals and Mighty Kids Meals last month and the beginning of this month. Anyone who has the whistles is asked to take them back to McDonald's. In exchange, McDonald's will provide another toy and your choice of a yogurt tube or a bag of sliced apples, the CPSC said.

McDonald's announced the recall after hearing reports of two children who coughed out pieces of the whistle after putting the whistles in their mouths. One required medical attention.

The whistles are red and came with a Hello Kitty figure that is holding a pink heart-shaped lollipop. The following text appears above and below Hello Kitty's face on the whistles: "(C)1976, 2014 SANRIO CO., LTD" and "Made for McDonald's China CCW Chine."

The recall was unusually quick, occurring almost immediately after the product was put into the marketplace. In addition, McDonald's is offering an incentive for its return. While nominal, that does represent a more progressive approach to this sort of recall than is typical.

"By reporting as fast as they did, CPSC and McDonald's were able to work together to get the word out to parents, grandparents and other caregivers to help prevent any other incidents or serious injuries," CPSC Chairman Elliot Kaye said in a statement sent to Daily Finance. "We urge all parents and other caregivers who believe they might have received one of these Hello Kitty whistles from McDonald's to act on this recall immediately."

 

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