Japan is a highly connected market with 49 million affluent households. You'd think that the combination of high-speed Internet access, plenty of disposable income, and a bemused addiction to Western culture would make Nippon a perfect target market for digital movie services from America. Netflix hasn't made the leap to Tokyo yet, and Amazon.com just opened up a digital movie store in Japan.

Game, set, and match -- right? Amazon gets the first-mover advantage, and Netflix might as well not bother attacking the Japanese market now.

Not so fast. I can think of at least three big reasons why Amazon's Japanese adventures don't throw any roadblocks in front of Netflix's Far Eastern ambitions:

• Amazon is only serving up pay-per-view rentals and digital purchase options in Japan. This is a markedly different business model from the all-you-can-eat subscription service that Netflix sticks to and that Amazon's Prime subscription service offers. Apples, meet oranges.

  Like I said, Amazon isn't bringing Prime to Japan at this time, and might in fact never get around to doing so. Amazon prefers the simpler licensing model and higher margins of selling or renting content one item at a time. Netflix goes for a long-term relationship with a larger addressable market instead.

• A bit of competition never scared Netflix out of overseas market opportunities before. In particular, Amazon already had its LoveFilm subscription service in the U.K. before Netflix entered that market. So even if Amazon does bring Prime or LoveFilm to Japan, that's not exactly the end of Netflix's Japanese ambitions.

  If anything, you should be surprised to see Amazon moving in with its plain-Jane rentals and purchases model. Apple already has its iTunes movie store running in Japan, alongside several local services with a similar model. It's not clear how Amazon plans to set itself apart from Apple, GyaO, or Tsutaya, so this service risks becoming just another commodity in a sea of equivalent options.

• And Netflix does have Japanese ambitions. The company is already hiring Japanese translators with marketing experience, so you can expect a Netflix service in the Land of the Rising Sun before too long. I'd be shocked if we don't see Netflix crossing over to Japan and South Korea -- another hyperconnected Asian market with more than 20 million movie-hungry households and an existing relationship with Netflix -- in 2014. It's a logical next step for Netflix's international plans.

Netflix is coming to Japan, with or without competition from Amazon and Apple. This particular announcement shouldn't make any difference at all to Netflix's overseas plans.

For many, the first sign that The Patient Protection and Affordable Care Act, also known as Obamacare, had taken effect came in October, when health-insurance exchanges rolled out for the first time. But two tax provisions linked to Obamacare have been in effect since January, and they could make a big impression on your tax return.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, discusses two of the taxes that were included in provisions of the Affordable Care Act. He explains how one imposes an extra 0.9 percentage-point tax on Medicare withholding for certain high-income taxpayers, and how because of the special mechanics of how the tax is imposed, you might have to report it on your tax return rather than having had it withheld from your paychecks during the year. Second, a new net investment income tax of 3.8% applies to investment income for the same high-income taxpayers, defined as single filers with more than $200,000 in income or joint filers with more than $250,000 in income.

Dan points out that while the wage tax is one that most people can't avoid, there are steps you can take to reduce taxable income. By using ETFs like iSharse National AMT-Free Muni , SPDR Nuveen Muni , and PIMCO Intermediate Muni , investors can shelter at least part of their investment income from the new Obamacare tax.

It's that time of the year again, folks! It's time to dust off the cyber awards and crown five CEOs with the dubious honor of being the worst of the worst in 2013.

Unlike last year, when we held several rounds of public voting after I picked eight of the best and worst CEOs, I wanted to do something different this year. So instead of picking who I thought should be in each category for 2013, I reached out to as many of my Motley Fool colleagues as possible and aggregated their answers into one list. The result is a considerably more balanced list representing a wider swath of views and likely a more accurate portrayal of the worst CEOs of the year than I could have come up with by myself.

Over the past two weeks, we've unveiled the No. 5 worst CEO of the year, the now-former CEO of BlackBerry, Thorsten Heins, as well as the No. 4 worst CEO of the year, Aubrey McClendon, who is the now-former CEO of Chesapeake Energy.

Today, we're dipping our nose back into the tech sector and collectively anointing Apple's Tim Cook as our third-worst CEO of the year.

Source: Apple.

Why Tim Cook?
I can guess what you might be thinking. Blasphemy! And to some extent, I'd agree because arguably no technology company has done more for the advancement of high-tech mobile devices or brought consumers and businesses closer than Apple. It was its iPod and iPhone that revolutionized portable music and brought smartphones into our everyday lives.

But Apple had one key component leading that charge that it, unfortunately, lost in October 2011 far too early to pancreatic cancer, Steve Jobs. Replacing Jobs was Cook, who walked into a monstrous pay package -- in his defense, he has forgone dividend payments totaling $75 million on restricted stock unit that will vest over the next decade -- but hasn't delivered to shareholders' satisfaction since taking the helm.

As my Foolish colleague Jeremy Bowman perfectly put it,

Apple shares may have bounced back, but the company has lost its magic. The problem with Cook is he's not an idea man -- he's a finance and operations guy. He doesn't invent, [he] just moves money around. All of Apple's recent initiatives have been pure harvesting -- the iPad Mini, the bond sale, the [iPhone] 5c. Why isn't that massive cash pile driving R&D? He is killing the brand.

Apple's greatest flaw and the legacy that Cook will be known for (at least thus far in his tenure) is in transitioning Apple from a growth to a value company complacent to sit on its laurels and allow dividends and share buybacks to drive modest growth instead of investing in the next-generation device that's going to change the world. Fool Dan Dzombak also hit on this point by pointing to Cook as one of the most overhyped CEOs of the year, adding to Jeremy's point that Cook is more about operational control than actual idea generation.

The really sad part is that Apple is starting to get beaten at its own game by Samsung  and Google . The partnership between Samsung's smartphones, led by its Galaxy series, and Google's Android operating system is dominating the global market with Strategy Analytics showing that Samsung controlled 28.7% of global mobile phone vendor market share as of the third quarter. This figure was up 230 basis points from the year-ago period and absolutely overshadows the next-closest mobile phone maker, Nokia, which sits at just 15.5% global market share, having lost 570 basis points from the year prior. By comparison, Apple was able to grow its global market share by 120 basis points in the third quarter, but still controls just 8.1% of the total global market.

But it isn't just with smartphones that Apple is seeing sales stymie a bit. The latest JD Power & Associates satisfaction survey, released at the end of last month, showed that Samsung tablets, which are powered by Google's Android OS, edged out Apple for the first time ever. According to TechCrunch, perceived fairness of price paid by consumers was the big reason for Samsung's leap, signaling the possibility that consumers are growing weary of Apple's technology premium with few new innovations on the horizon.

Finally, the proof has been in the pudding with Apple's profits falling in three consecutive quarters on a year-over-year comparison. This isn't to say that Apple isn't raking in large sums of free cash flow, but its glory days of being a growth stock are looking like a distant memory with Tim Cook at the helm.

Stay tuned as we unveil our second-worst CEO and our second-best CEO of the year next week.

Over the past few days, some headlines about Green Mountain Coffee Roasters , Starbucks , Coca-Cola Femsa , Coca-Cola "Hellenic" , and PepsiCo came across the web to shed light on their overall direction. These companies want to satisfy an increasingly health conscious consumer and expand into new territories. Also, their ubiquity helps them maintain a competitive edge over smaller rivals.

A new Green Mountain Coffee partnership

According to Restaurant News, Panera and Green Mountain Coffee Roasters teamed up to sell Panera branded coffee K-Cups in four different flavors; "dark roast, light roast, Colombia, and Hazelnut Crème". Taking note of Starbucks successful relationship with Green Mountain Coffee Roasters and Starbucks' entrenchment into the grocery store chains Panera decided to follow suit with a partnership of its own. Now you don't need to go to Panera to enjoy its coffee.  

In a more interesting partnership, according to an article in USA Today, Starbucks teamed up with Switzerland's national railroad, Swiss Federal Railways, building a store on a train car. The train car sports two levels with the outside decked out with the Starbucks' logo. Starbucks wants to research how well its stores will do on trains.

Coca-Cola bottlers expand

Coca-Cola's largest publicly traded bottler Coca-Cola FEMSA recently invested $28 million in a warehouse facility in the Philippines, according to Drinks Business Review. Coca-Cola FEMSA's executives said this allows the company the logistical flexibility to expand as demand in the country increases.  On the Eastern European front, an analyst sees Coca-Cola HBC AG more, commonly known as Coca-Cola Hellenic, expanding due to low levels of consumption per capita in developing and emerging markets, according to Beverage Daily. The article noted that customers in developing markets are starting to adopt branded beverages. It's also noteworthy that customers even in developing markets gravitate toward healthier drinks such as water and juice. Moreover, Russia's crackdown on beer consumption bodes well for the non-alcoholic industry according to the analyst. It's interesting to think that parts of the world still have yet to enjoy Coca-Cola's taste. 

PepsiCo's moat

An article in Bakery and Snacks highlighted PepsiCo's ubiquity, marketing might, and brand management as a serious competitive edge. PepsiCo demonstrates expertise in cross-marketing and understands the demand patterns of its consumer. PepsiCo's snacks and beverage brands represent some of the most recognized in the world. An analyst cited in the article gave this example, "Consumers rarely buy Doritos without a dip". PepsiCo utilizes its resources to stay on trend so it can adapt. Lay's, Doritos, and Cheetos hold the top three positions in "Global Brand Share" according to Bakery and Snacks. Its global distribution infrastructure allows the company the economies of scale to profitably sell at a lower price. 

Foolish takeaway

The key to future shareholder expansion lies in remaining dynamic, flexible, and innovative. Finding new products, initiating new business relationships, and maintaining financial strength serve as keys to enhancing shareholder wealth over the long-term. 

Recently, I was a member of a panel that judged a multi-school business case competition at McDaniel College in Maryland. The case was about a junior hedge fund analyst who had to choose between making a long or short recommendation on a stock, after examining all of the relevant financial information.

This case was extremely complicated. It centered on a quasi-government entity making a gigantic capital expenditure to help lower the production costs for a very dangerous and highly regulated commodity. At the conclusion of the event, my fellow judges shared our insights with the students. Below are some of my takeaways from the case for aspiring investment analysts.

1. Humility trumps brains
In the real world, this stock would have gone into my "too hard pile" very quickly. I encourage all analysts to avoid difficult problems when they can. As they say, there are no called strikes in investing. It turns out that humility is a rare, yet extremely valuable, commodity in the investment business.

2. Think before you plug and chug
Most students working on this case were unfamiliar with the actual business, yet dove right into creating a valuation model. They invested hours doing Monte Carlo simulations, and calculating the Weighted Average Cost of Capital. Most never really took the time to understand the type of company they were analyzing, and which parts of their model were most important to get right.

Always ask yourself if you're looking at a fixed- or variable-cost business. Does it have a competitive advantage? Where is value created and captured in the particular industry?

3. You must understand where value is created and captured
Always remember that a low-cost provider wins in a commodity business. However, if there's some new technology that will lower your production costs dramatically, remember that all those savings will likely be passed directly along to customers. In other words, don't buy rosy predictions of cost savings flowing to the bottom line if you operate in a commodity business.

4. Culture eats strategy for breakfast
This case was all about strategy, internal rates of return, and breakeven analysis. In the real world, culture and people are really what you're investing in. With the explosion of the Internet, there are so many non-traditional ways to measure the power of culture at an organization, yet so many schools focus solely on strategy instead.

For example, most of the great businesses of our time make as many mistakes as other companies. No one is going to be 10 for 10 in strategic decisions. Remember Netflix's disastrous "Qwikster" decision? Even Berkshire Hathaway has stumbled with the David Sokol debacle. The great businesses have dynamic leaders who build outstanding cultures. Those cultures don't always prevent mistakes, but they do allow the company to adapt more quickly and learn from failure.

The word "mistake" is the one word that you should look for in an annual report to see if you're investing in a learning culture or not. My tip is to spend more time investigating the culture than you do understanding the financial statements.

5. Intangible assets outweigh tangible ones
Most investors check the stock price first, and then go right to the financial statements. I have news for you... all those numbers represent history, and the value of the business lies in the future. No one would recommend you drive a car by looking through the rearview mirror, yet people do that in investing all the time.

Here are a few things to ponder. Where is the value of Jeff Bezos reflected on the balance sheet of Amazon? What about the value of Elon Musk for Tesla? How about the strict underwriting discipline at Berkshire Hathaway? How about the brand value of Coca-Cola? Each of these companies possesses a rare and highly valuable asset that doesn't appear on the balance sheet. Good analysts take the time to analyze and understand these competitive advantages.

6. Being conservative in your assumptions can be very costly
This last piece of advice might actually violate Warren Buffett's "rule number one," which is to never lose money. The flip side of Buffett's maxim is that the best investors in the world are wrong about 40% of the time. The analysts who use conservative assumptions when deploying their discounted cash flow models would have never bought great businesses like Amazon or eBay. If you're looking for extraordinary businesses, you'll need to be careful that you're not too conservative in your assumptions.

Against the wind
Case studies are a good way to learn. At The Motley Fool, we value a multi-disciplinary approach to company analysis. We also appreciate independent thought, and civil and open debate. When it comes to investing, we've learned that both a kite and a portfolio can rise against the wind.

Energy giant Dow component ExxonMobil has had a fairly good 2013, with gains of 11% this year. But compared both to the 23% gain for the Dow Jones Industrials and the 17% jump in shares of rival Chevron , Exxon's returns don't look all that impressive, and the oil giant still has something to prove to investors that it can deliver leading returns even with its massive size.

Exxon faces the same challenge that many big oil companies have had to deal with lately: finding ways to replace falling production from aging wells with new sources of oil and gas around the world. Even with monumental discoveries in unconventional plays like ultra-deepwater drilling and shale oil and gas formations, Exxon and its peers have to maintain the pace of capital investments in order to keep up with the rate of depletion of its legacy assets. Can Exxon keep up with Chevron and its other industry rivals? Let's take a closer look at what moved shares of ExxonMobil in 2013.

Stats on ExxonMobil

Source: S&P Capital IQ.

Exxon Total Return Price data by YCharts.

Why hasn't ExxonMobil stock done better in 2013?
As you can see above, ExxonMobil has struggled for most of the year. Without a sizable rebound in just the past couple of months, Exxon might have threatened to be one of the Dow's few losers for the year, and it has consistently failed to match up to Chevron's performance.

One big headwind against Exxon has come from its not being ideally positioned to take advantage of some of the most favorable opportunities in energy lately. For instance, even as U.S. oil and gas production has skyrocketed, Exxon still gets most of its production from international sources. That has made it challenging for Exxon to find enough good projects to sustain its output, something that Chevron has managed to do more successfully and on a more consistent basis.

Yet Exxon has delivered some positive surprises more recently. In its most recent quarter, the company managed to boost production by 1.5%, topping investors' expectations and reversing year-ago drops in production levels. Even though overall revenue and income fell, Exxon enjoyed sizable earnings gains from its upstream segment, partially offsetting weakness in the downstream refinery business as some of the pricing factors that had previous helped refining operations be extremely profitable began to fade somewhat.

Still, Exxon, Chevron, and many other oil and gas companies haven't been happy to see oil prices stagnate and even head lower recently. In particular, West Texas Intermediate breaking under $100 per barrel has had a painful impact on revenue and earnings throughout the industry. Yet the increasing spreads between WTI and overseas Brent crude prices could help Exxon's refinery operations turn around in the current quarter. That shows some of the benefits of Exxon having decided to remain an integrated energy company, rather than spinning off its refinery operations as many of its peers have done in the past few years.

ExxonMobil's future is still uncertain. Although it has taken strides recently to bolster its production and try to make the most of a tough price environment, Exxon really needs to see oil climb back above $100 per barrel in order to make the most of its current opportunities. Otherwise, it will have to find new discoveries at a much faster pace than it has accomplished in the past if it wants to have any chance of sustaining its revenue over the long run.

Click here to add ExxonMobil to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

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

What: Shares of Renren, plunged 11% Friday after the Chinese social networking specialist reported mixed quarterly results and weak forward guidance.

So what: Quarterly net revenue fell 5.6%, to $47.6 million, which translated to an adjusted net loss of $19.7 million, or $0.07 per ADS. By contrast, while analysts were expecting higher quarterly revenue of $48.26 million, Renren actually beat estimates that called for a larger adjusted net loss of $0.10 per ADS.

However, Renren also issued a dismal outlook for the fourth quarter, calling for revenue to fall to a range of $29 million to $31 million, or a 36% to 41% year-over-year decline. Analysts were modeling fourth-quarter revenue of $48.85 million.

Now what: CEO Joseph Chen explained, "While we continue to face short-term monetization challenges, our strategies are becoming more focused and clear."

To be sure, Renren did just launch a new "communication-oriented" mobile app in an effort to make their services stickier to younger users. What's more, Chen elaborated to say the restructuring of their gaming business should allow them to focus on creating higher-quality games going forward.

Even so, as long as Renren continues bleeding cash, and with no end in sight, I can't blame investors for taking a step back today. Until Renren can show it has what it takes to achieve sustained profitability over the long term, I'd prefer to stay on the sidelines.

The rising stock prices of certain companies, such as Starbucks and Panera Bread have some investors worried while others think there's potential to profit from their suspected return to more realistic valuations. In fact, some highly respected money managers have taken action. Take, for example, Chipotle Mexican Grill . Successful investors such as David Einhorn and Jeff Gundlach have publicly made the case for shorting the company or betting the share price will decline.

Unimpressed by the stock's 50% rise over the last year, they believe that Chipotle will not be able to sustain its premium valuation much longer. Are they correct? Is it a good idea to short this high-flying specialty fast-food retailer? Let's take a look.

Things to consider when betting against Chipotle
Chipotle certainly has an extremely optimistic valuation. Expected revenue of $3.7 billion would generate cash earnings, basically net income plus non-cash charges such as depreciation and amortization adjusted for expected capital expenditures, of roughly $435 million at an 11.7% profit margin based on 2014 analyst estimates. This has Chipotle's stock trading at a hefty 38 times cash earnings compared to industry mainstay McDonald's, with more than $24 billion in sales and a 20.1% margin, trading at around 16 times.

To justify this premium, Chipotle needs to prove that it can maintain above-average growth. Recent quarterly results seem to have fulfilled that task. Company sales were up a hearty 18% from the prior year and diluted earnings per share grew 17.2%.

While much of the company's improvement came from restaurant expansion, the number of Chipotle sites grew by almost 2.5% in the quarter and more than 9% year-to-date, a 6.2% year-over-year increase in comparable-restaurant sales also contributed to the gains.

It looks like the company would have to post much weaker results before its valuation might be significantly threatened and that may not be likely. Continued restaurant growth should help revenue climb. An 11% to 13% increase in locations is planned for 2014. Sales metrics may also assist. Though the company is only expecting low single-digit comparable-restaurant sales advancement, the forecast excludes any menu-price increases in the coming year.

It's probable that Chipotle will raise prices, however. The hike is necessary not only to boost comp-store results but to also shore up the company's bottom line. In the latest quarter, food costs increased significantly and that profit pressure must be addressed.

The fast food retailer's social purpose may give it an edge in raising menu rates. By insisting on the use of fresh ingredients grown in an environmentally friendly way, while dealing with employees and suppliers in an honorable manner, Chipotle has built a kind of "beyond typical business" reputation. This reputation can go a long way in allowing a company to charge premium prices and increase them moderately without much damage.

Where Do Starbucks and Panera Bread Stand?
Starbucks is a prime example of the success a highly valued fast-food retailer can achieve. With a stock market value ballooning from around $15 billion to more than $61 billion over the last 10 years, the enterprise continues to defend its share price effectively.

Starbucks reported robust gains in its latest quarter. Revenue increased 13% and adjusted earnings per share jumped more than 30%. Results were boosted by strong global comparable-store sales growth of 7%, with 8% spikes in key markets like the U.S. and China. Starbucks also expanded its store footprint, opening 558 sites in the quarter and developing 1,701 new locations, a 9.4% increase, so far this year.

The company expects next year to be another winner with revenue growth of at least 10% and comp-store sales increases in the mid-single digits. Expansion plans into Asia including China might offer the greatest possibilities. The region, which currently generates only about 6% of total revenue but has a company-best 35% operating margin, will add another 750 locations.

Starbucks' current growth and future promise seems to support a premium valuation. Based on 2014 analyst expectations of around $18.6 billion in revenue generating $2.4 billion of cash profits at a 13% margin, the company currently trades at a justifiable 25 times earnings.

Panera Bread may not be in a similarly solid position, however. This high-flying stock, rising from around $65 per share in 2010 to a range of between $155 and $195 in the last year, might need to better justify its worth.

The company's recent quarterly results didn't seem to suffice. Though earnings per share rose a respectable 9% versus the prior year, comp sales were disappointing, rising only 1.3%. Further, where company-owned sites increased a slightly better 1.7%, the gain looked to be due to average check growth of 2.7%, which offset a transaction decline of 1%. A less-than-comforting statistic.

Site expansion, though solid, didn't provide a significant boost. Panera's 32 new bakery-cafes in the latest quarter increased total locations less than 2%.

Such performance, if maintained, isn't likely to support an enthusiastic valuation. The shares, currently trading at a market multiple of around 20 times cash earnings based on 2014 analyst expectations of $2.6 billion in sales generating $255 million in earnings at a 9.8% margin, may be revalued if Panera cannot improve its execution.

Bottom line
Is shorting Chipotle a good idea? Probably not, at least not at the moment. While it's usually foolish to bet against such accomplished investors as Einhorn and Gundlach, there does seem to be compelling evidence that their short-thesis may not play out for awhile.

Chipotle's admittedly high valuation may be well defended by an expanding restaurant base and probable menu-price increases. Beyond a general market meltdown, the company might not be vulnerable unless location-expansion gains get harder. Until Chipotle grows to somewhere greater than 2,000 sites, up from around 1,539 currently, and restaurant development does not provide sufficient growth, its optimistic share price may be here to stay. 

Last November, I announced my intention to create a portfolio of 10 companies that investors had effectively thrown away and given up on, in the hope of showing that deep-value investing and contrarian thinking can actually be a successful investing method. I dubbed this the "One Person's Trash Is Another Person's Treasure" portfolio, and over a 10-week span, I highlighted companies that I thought fit this bill and could drastically outperform the benchmark S&P 500 over the coming 12 months. If you're interested in the reasoning behind why I chose these companies, then I encourage you to review my synopsis of each portfolio selection:

• /

Now let's get to the portfolio and see how it fared this week:

Source: Yahoo! Finance, author's calculations, American Eagle Outfitters replaced Dell, which was taken private in October.

This week's winner
Don't call it a comeback, but topping the list of outperformers this week was struggling biopharmaceutical company Dendreon , which added 3.9% despite no company-specific news. The real allure of Dendreon in recent weeks is the possibility that it could put itself up for sale. Although heavy cost-cutting and a recent approval for metastatic prostate cancer drug Provenge could bring the company close to profitability, it's really the company's immunotherapy development platform that holds the appeal for a potential suitor.

This week's loser
On the other hand, coal miner Arch Coal had a rough week, ending lower by 3.6%. Part of that drop can be explained by the company going ex-dividend on Tuesday with the expectation that shareholders on record as of Friday, Nov. 29 will receive a $0.03 quarterly payout on Dec. 13. The other factor at work here is generally weak commodity pricing. As the stock market continues to move higher investors have moved away from all forms of hedged commodity investments, which have spilled over as far as the coal sector.

Also in the news...
The One Person's Trash Is Another Person's Treasure Portfolio has its first triple in the form of trucking company Arkansas Best . While a nice milestone, the real news here is that we also received our quarterly $0.03 dividend from the company on Friday, which has been added to the dividends receivable column above. Although this portfolio wasn't built for dividends, we've collected a yield of 1.5% and counting since inception, which is pretty impressive and more than negates our trading commissions. As for Arkansas Best, with its labor dispute now in the rearview mirror it's time to put the pedal to the medal!

Telecom service provider Orange announced late Tuesday that it had found a buyer for its assets in the Dominican Republic, with private telecom firm Altice agreeing to purchase Orange's assets for a sum of $1.49 billion. For Orange, the deal allows the company to continue to focus on its core markets and emerging growth opportunities such as Sub-Saharan Africa, while giving it extra capital which it can use to pay down debt and buoy its impressive dividend.

Finally, Staples announced that it has expanded its existing ink and toner cartridge recycling program to give rewards members more options and more rewards. Staples has been a leader in ink cartridge recycling for years, but is looking for innovative ways to reduce costs and improve customer loyalty. Expanding its rewards and recycling program may not seem like much, but it's the first step in doing so, especially considering that it has a huge opportunity to pick up domestic market share with Office Depot and OfficeMax now officially merged and looking to consolidate their operations.

We can do better
It was a pretty tame week for this portfolio of underappreciated and contrarian plays, all things considered, with nothing moving up or down more than 3.9%. Given the S&P 500's unstoppable run higher it's been difficult for this group of contrarian plays to keep up, but thank to Arkansas Best and Xerox, we're well within striking distance of eclipsing the iconic index. Although time is finally starting to wane on this experiment, I still believe that even the slightest downtrend could shoot this portfolio of undervalued plays well past the S&P 500.

Check back next week for the latest update on this portfolio and its 10 components.

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

The 30 stocks in the Dow Jones Industrials didn't trade on Thursday, enjoying the Thanksgiving holiday along with the rest of the U.S. stock market. But many investors don't realize that you can get exposure to the Dow in many ways that don't require the regular stock market to be open. Let's take a look at some of the alternatives to sticking around between 9:30 a.m. and 4 p.m. EST to place trades.

Before-hours and after-hours trading
Some stock exchanges offer trading sessions outside the normal hours. For instance, Nasdaq OMX starts pre-market trading at 4 a.m. EST, running until the market opens. It then has after-market hours that start when the market closes and go until 8 p.m. EST. On the other hand, NYSE Euronext's New York Stock Exchange only maintains regular trading hours, although its NYSE Arca exchange is also open as early as 4 a.m. EST and as late as 8 p.m. EST.

Cross-listed stocks
Some U.S. stocks are also listed on foreign exchanges. That allows traders with access to those foreign exchanges to buy and sell shares even when U.S. exchanges are closed.

Historically, cross-listing arrangements involving U.S. stocks didn't get much attention from investors. But with the merger of NYSE and Euronext, cross-listing has become more common, with Dow pharma stocks Merck and Pfizer among companies cross-listed on the exchanges, U.S. and European markets. Still, investors have to be extremely careful about liquidity, as there's no guarantee that extensive trading even in big-name stocks will happen overseas.

Dow futures
The CME Group's Chicago Board of Trade offers futures contracts on the Dow. With futures, you don't actually own the stocks in the Dow, but the value of the futures contract generally moves up and down with the average.

Dow futures contracts begin pre-open trading at 5 p.m. EST every Sunday, with electronic trading running from 6 p.m. EST Sunday through 9:15 a.m. EST Monday morning for the primary Dow futures contracts. Open-outcry floor trading for those futures runs from 9:30 a.m. to 4:15 p.m. EST weekdays, with electronic trading kicking in to cover most of the other times during weekdays.

Except for a half-hour period from 5:15 p.m. to 5:45 p.m. EST, Dow futures are available almost continuously from Sunday afternoon to Friday afternoon, when you include both regular and pre-open electronic trading. E-mini and so-called "Big Dow" futures are purely electronically traded but are available during the same times, including during the trading day.

Most investors are quite content to trade during normal hours. But it's good knowing that if you need to act quickly, there are alternatives you can consider to take advantage of changing conditions as they happen.

There's no question that 2013 has been a great year for stocks with the broad market up over 25%, but it was by no means a given that stocks would boom this year. Going into 2013, investors were dealing with the government standoff known as the "fiscal cliff," an unemployment rate near 8%, recession in the eurozone, and the re-election of Barack Obama, which had disappointed many on Wall Street.

Few prognosticators predicted that these factors would lead to such a crushing win for stocks, but both the S&P 500 and the Dow Jones Industrial Average have set numerous records since, recently eclipsing milestones of 1,800 and 16,000, respectively. The records have come as the unemployment rate has fallen about a percentage point to 7.3% -- approaching the Federal Reserve's goal of 6.5% -- the European economy has shown signs of life, and the market has learned to ignore the budgetary shenanigans in Washington.

Perhaps most importantly, stocks have responded to the Federal Reserve's repeated decision to continue its $85 billion monthly bond-buying program, which has kept interest rates and bond yields artificially low, propping up equities as the better alternative to fixed income.

For buy-and-hold investors, the Fed's actions are essentially meaningless, as they are unlikely to have a significant long-term effect on corporate profits, but buy-and-hold investors do not control the market; traders do. And their response to the Fed's decisions has been the biggest factor in determining the stock market's movements this year.

This was on display in September when the Dow jumped more than 100 points in an instant, and more than 200 in an hour, following the Fed's surprise decision not to begin its stimulus tapering. My colleague Morgan Housel observed that stock market returns would have been essentially flat between 1994 and 2011 excluding the three-day periods around the Fed's Open Market Committee announcements, and there seems to be a simple explanation for that: Short-term traders, who respond to such decisions, are the ones directing the market.

Those of us who consider ourselves "investors" often bemoan the rise of the day trader looking to make a quick buck. Investors tend to believe they are the true stewards of the market, allocating their capital to companies that have the long-term positioning to generate strong returns, and they see traders as interlopers trying to game the system, using questionable tactics like technical analysis to turn a profit. Warren Buffett, the paragon of long-term investors, has said he buys stocks under the assumption that the market could close for the next five years -- with an attitude like that, the market seems almost unnecessary.

But with the proliferation of technological tools for data analysis and high-frequency trading, short-term trading has come to dominate the exchanges. The average holding period for stocks was more than 10 years in the 1930s, but it has fallen to just six months or less, according to some estimates, as investors have grown more impatient and participants have tended to see the stock market as a casino for making bets on securities rather than a vehicle for long-term wealth-accumulation.

But in a year like this, with 26% stock returns on earnings growth of just 3%, perhaps long-term investors should be thanking traders for pumping up the market.

Either way, there are a few lessons that buy-and-hold investors may want to keep in mind in a market fraught with high-frequency trading.

It's all about liquidity, baby
Perhaps the biggest way traders help the market is by making it liquid. After all, for every buyer there needs to be a seller. Plus, if everyone held their stocks for 20 or 30 years, bid/ask spreads would be much wider than they are, and transaction costs would be much more expensive, like you usually see for penny stocks, options, or other low-volume securities. Highly liquid markets are also less volatile, as changes in supply and demand tend to have a small effect on price, and the prices of securities generally move incrementally, rather in large jumps.

Liquidity is one of the best reasons to invest in stocks, as they can be disposed of in a matter of minutes with the click of a mouse, as opposed to other assets such as real estate, which often require months on the market to sell and incur high transaction costs through agents and other fees.

Not all turnover is created equal
Some stocks are especially popular with day traders. These tend to move in large swings and are often beaten-down companies that some see as a value play, or heavily shorted companies that many believe are overvalued. Long-term investors are probably better off avoiding companies such as these. An easy way to check is to look at the percentage of shares outstanding that are traded each day, which you can do by dividing the average volume by shares outstanding.

J.C. Penney , for example, has seen an average of 13% of its shares traded each day over the last three months. That means the average holding period for each share is less than eight trading days. Additionally, 51% of the retailer's shares are sold short, and over the last three months shares have moved an average of 3.3% each day as opposed to just 0.54% for the S&P 500. During that time, the company's price has dropped from $14 to just north of $6, before climbing back above $9. Given those statistics, it's no surprise that the stock has been pillaged by day traders. Someone's making money off those movements, but for long-term investors that volatility should be a red flag.

Not all stocks turn over once every eight days though. Stable blue-chip companies tend to trade at much lower volumes, and are often free from short sellers and day traders. Dividend stocks also generally see less volatility then their non-dividend-paying counterparts. Take a stalwart like Coca-Cola for instance. Coke is one of the best-returning stocks in the history of the market, and until recently it had the world's most valuable brand name. Not surprisingly, Coke shares change hands barely more than once a year on average. This is the type of stock you keep with you for the long haul, a solid dividend payer and a cash flow machine that you can count on for retirement. It's a steady and predictable company: It won't go out of business anytime soon, nor will its sales double next year.

Ignore them doing this
While traders may manipulate the market in plenty of ways, over the long term their day-to-day machinations shouldn't affect your portfolio. After all, stock prices are based on the underlying value of real companies that generate actual profits. As those companies' profits grow, stock prices should rise with them. Fundamentally, corporate earnings are the basis of share prices -- not the Federal Reserve or the short-term bets of traders looking to make some fast cash.

Valuations fluctuate, but one of the most powerful rules in finance -- reversion to the mean -- will eventually prevail. The S&P 500 has historically traded at an average P/E of 15, but after this year's surge its P/E is near 19. We may not be in a bubble, but this year's extraordinary gains are a reminder that buy-and-hold investing is not always a smooth ride. Be prepared for the fallout, and remember it's all part of normal market dynamics. Investing in sound companies with growing profits and holding them for a long period of time has almost always paid off.

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

I'm not sure whether the Christmas spirit, the tryptophan, or the prospect of a long weekend got the better of investors, but the broad-based S&P 500 gobbled its way to another all-time record intraday high before finishing the trade-shortened day down fractionally.

Leading the markets higher throughout most of the session was optimism that retailers will fare well this holiday season. Retailers opened their doors earlier than ever this year in the hope of attracting cost-conscious and cash-strapped consumers to their stores. However, with the payroll tax holiday removed and Obamacare's individual mandate set to kick in a month from now, many consumers are looking at less cash to spend this year than they were a year ago, leading many economists to forecast a tough holiday season -- and potentially sabotaging the S&P 500's attempts at another new closing high.

By day's end, the euphoria wore off slightly, and the S&P 500 ended lower by 1.42 points (-0.08%) to close at 1,805.81.

Leading all companies to the upside today was small-cap Nuverra Environmental Solutions , which provides environmental solutions to the energy and industrial sector. Although no specific company news shot shares higher by 13.2% on the day, the stock has been clobbered this year, losing more than 55% of its value following a string of pretty dismal earnings reports in which the company missed estimates by a mile. Nuverra's future, as Foolish colleague Matt DiLallo has noted, is really dependent on the acceptance of fracking, and the subsequent treatment of the water used in this procedure. While Matt has his bullish and bearish points on the company, I'd prefer to stick to the sidelines until its bottom-line bleeding lessens dramatically.

Also heading higher by double-digits was commercial and retail banking company CorpBanca , which operates in Chile. CorpBanca shares vaulted 11.1% higher on the day after Bloomberg reported yesterday that billionaire Alvaro Saieh, who owns a controlling 76% interest in CorpBanca, has hired Bank of America and Goldman Sachs to help sell his stake in the company, possibly to Itau Unibanco, according to two people familiar with the matter. As you might have already suspected, every party involved declined to comment, although, if true, it would mean the potential for a bidding war for CorpBanca in a best case scenario. This is certainly a situation that bears watching; as Chile and Latin America offer much more robust growth opportunities than most domestic U.S. banks, CorpBanca could still have room to run higher.

Finally, oil tanker operator Frontline made its second appearance on this list in a matter of days, advancing 9.9% on the heels of incredibly strong gains in the Baltic Dry Index (BDI) on Thursday. For the session, the BDI gained 9.3% to close at 1,719 which would represent its highest point in a month. The higher the BDI, the better the short-term charter day rates Frontline can charge for its transports. If you recall, oversupply has been the bane of shipping companies, so any sort of higher daily charter rate or retirement of older ships would be great news for this highly indebted and money-losing sector.

Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. As we do every week, let's take a look at five dumb financial events this week that may make your head spin.

1. Jeff Bezos may be Ebenezer Scrooge
Amazon.com  is being taken to task for its employment practices overseas.

BBC's Panorama profiled an undercover employee who worked as a picker at one of Amazon's distribution centers in the UK. He would have to walk as much as 11 miles in a 10-hour shift, and the pressure to pick 110 items an hour -- with a locator tracking his position and counting down -- proved mentally and physically taxing. 

It also didn't help that roughly a thousand employees at a pair of Amazon facilities in Germany staged a strike on Monday, complaining about their wages and benefits. Amazon may be a rock star at home, but it has some image-boosting to do overseas. 

2. You Nook me all night long 
Barnes & Noble  isn't cutting it in e-readers. Shares of the struggling bookseller stumbled after posting disappointing quarterly results -- but the real shocker was the huge drop in its fading Nook line.

Nook revenue declined 32% during the quarter, and, while the 41% drop in hardware could be attributed to Barnes & Noble scaling back on its product lines, the 21% plunge in digital content is inexcusable. There are clearly more Kindle e-readers and tablets now than there were a year ago. Why is Barnes & Nobles selling more than a fifth less digital content than it was last year?

The market has moved on, and it's unlikely that Barnes & Noble's Nook can regain its relevance. 

3. It wouldn't be the holidays without Scroogled
Microsoft  is back with a new installment in its Google-bashing Scroogled campaign. Microsoft has taken shots at Google's shopping portal, email ads, and ad-serving technology in the past. Now it's slinging arrows at Chromebook.

The attack begins with the stars of Pawn Stars, telling someone how useless her Chromebook is as a pawn trade-in because it's practically useless when there's no Wi-Fi around. Keep in mind that you need to be online to see the ad. But that's just one spot where Mr. Softy's misfiring.

The Scroogled landing page ultimately leads to a landing page that compares Chromebook to Windows-fueled laptops. Most of the points are valid, but then it argues that Chromebook users are missing out on Skype, iTunes, and other PC-based software. 

"There are millions of programs that run on Windows," goes the argument. "A Chromebook can't run any of them."

It's not a fair shot, especially since there are cloud-based workarounds that are often superior to their PC equivalenta. However, isn't the nature of the argument -- that a Chromebook is inferior because it lacks the quantity of apps available on other platforms -- also the same reason not to buy a Windows Phone smartphone as opposed to one using iOS or Android?

4. Qualcomm before the storm
Qualcomm  made waves after Chinese regulators opened a probe into the telco chip giant's practices.

Qualcomm argues that it's been hard to do business in China since the NSA snooping scandal cast American companies in a poor light overseas. Qualcomm also suggests that Chinese companies may be singling out Qualcomm in this antimonopoly probe as a result of how the U.S. treats Chinese companies closer to home.

It's not a great position to be in, but it should be noted that Chinese regulators were starting to sniff around Qualcomm long before the NSA story broke.

5. Another turkey out of Kmart
With all of the grumbling out of holiday traditionalists lamenting the many retailers opening last night for an early jump on the shopping season, Sears Holdings' Kmart has been there. It's been bucking the trend by opening on Thanksgiving for years. 

It hasn't worked. No one's shopping at Kmart, and just when it seems as if the discount department store chain couldn't be faring any worse, it posts yet another period of negative comps. 

Well, it could've turned things around this month. It could've broken free from Thanksgiving, announcing that it wouldn't open until Black Friday this year. It would've won rare style points and perhaps even a few shoppers. Instead, Kmart chose to open even earlier this Thanksgiving. 

Gobble gobble.

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

Until very late in the post-holiday-shortened trading day, the Dow Jones Industrials looked like it would post its sixth consecutive record close. But a last-minute downdraft sent the Dow down 11 points on the day, defying Microsoft's  gains as Boeing  and Verizon  weighed on the average. Even with the small drop today, the Dow posted a solid 3.5% rise for the month of November.

Microsoft gained 1.4% to lead the Dow's winners, with the company's Xbox One gaming console helping to draw consumers into electronics retailers this holiday weekend. Analysts don't all agree on whether the Xbox One is destined to be a profit driver for Microsoft or a loss leader, but what's clear is that many investors are relying on success from the Xbox One to justify their continued faith in the company as a whole. Therefore, it makes sense for Microsoft to push the console even if it ends up being a money loser for the company. 

Verizon fell 0.6% as the company learned this week that it would end up being replaced as the host of the Obamacare Healthcare.gov website. Hewlett-Packard  will take over the hosting responsibilities from the telecom giant and, although the amount of revenue involved is inconsequential, the damage to the company's reputation could prove to be more significant.

Boeing lost about a third of a percent. Missouri Gov. Jay Nixon decided today to call a special legislative session in order to try to put together an incentive package to lure the aerospace giant to move its 777X production program to the state. Boeing already has a presence in Missouri, but the scale of the 777X program makes offering special new incentives a viable option for the state. Missouri won't be the only state bidding for the plant, with states including California, Texas, and several others reportedly interested in trying to lure Boeing within their borders. 

If you're feeling good about the market, you're not alone. Take my hand as we go over some of this week's more uplifting headlines.

1. Take-Two and call me in the morning 
Take-Two Interactive  won't have to worry about Carl Icahn anymore. The video game publisher behind this year's wildly successful Grand Theft Auto V is cashing out the activist billionaire.

Take-Two spent $203.5 million to buy back Icahn's 12.02 million shares. Was it greenmail? Instead of settling for a discount, Icahn got Take-Two to buy back the stock at its then-closing price of $16.93. However, Icahn selling on the open market would've likely sent the shares lower. 

Icahn's three board appointees will also be leaving, giving Take-Two more breathing room to carve out its own future. The market wasn't exactly wowed by the move. Some figured that Icahn's meddling could've ended in a buyout. However, it's still a smart buyback for a company that's riding high after Grand Theft Auto V's record sales.

2. Katie homepage
Yahoo!  has another celebrity in the fold. Katie Couric is joining the dot-com pioneer as its Global Anchor next year. She will be spearheading the coverage on Yahoo News.

She's not leaving TV entirely. She will continue to host her "Katie" syndicated daytime talk show. However, it's still a great catch for Yahoo!, which has struggled to drum up display advertising revenue in recent years. The addition of TV-vetted Couric could lead sponsors to pay more to get noticed on Yahoo!, and that's what is so encouraging about this deal.

3. OLED leads the way
Last week was brutal for Universal Display after it revealed negative news about its patent-protecting initiatives in Europe, but the OLED pioneer bounced back this week after inking a new deal.

Universal Display signed a collaboration and evaluation agreement with Philips, in which Universal Display will supply Philips with its highly efficient phosphorescent OLED materials to be used in solid-state lighting applications.

Universal Display has been susceptible in the past to patent concerns and fluctuations whenever partner Samsung seems to be moving in a new direction, so the new deal with a different company is welcome news all around.

4. Horton hears a Qihoo 
The Internet remains a fast-growing platform in China.

Qihoo 360  posted strong quarterly results on Monday. The company behind China's leading Web browser and Internet-security software saw its revenue catapult 124% higher to $187.9 million. Adjusted earning also more than doubled to $0.47 per ADS. Analysts once again underestimated Qihoo's potential, targeting a profit of $0.37 per ADS on $181.7 million in revenue.

Guidance was also encouraging, though at least one analyst chose to downgrade the stock after a massive run over the past year. It's still hard to ignore that kind of octane. 

5. Apple's mini mouse 
Things may be going better for Apple than naysayers think. Reports earlier this week had the consumer tech giant boosting its orders for iPhones and iPads. 

On the iPad front, a DigiTimes report claims that supplier channel checks show Apple boosting its orders of the iPad mini with Retina Display to 4 million units. The market may have been hesitant when the refreshed iPad mini came with a slightly higher price, but it seems as if millions of consumers aren't being won over by dirt cheap Android tablets.

Shares of international drugmaker AstraZeneca have climbed more than 17% year to date, but a number of challenges lie ahead for the company. Despite bringing in a fresh management team last year and making acquisitions throughout 2013, it can take years to see tangible results in the pharmaceutical industry, and the turnaround at AstraZeneca is still unfolding.

In the following video, analyst Max Macaluso discusses the risks investors need to watch at AstraZeneca today, and focuses on three particular topics: revenue growth, its drug development pipeline, and acquisitions.

Recently, big banks like Bank of America , Wells Fargo , and JPMorgan Chase have gotten criticism for discussing potentially charging customers to keep deposits at their banks. Yet savers should realize that big banks are bluffing with a losing hand, as any suggestion of charging customers for deposits is an empty threat.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, examines why charging depositors to have bank accounts would backfire on the big banks. He notes that deposit rates are subject to supply and demand, and that even though B of A, Wells, and JPMorgan might not want excess deposits, other banks do -- and they're willing to pay for them. Pointing to higher rates from banks run by Sallie Mae and General Electric's GE Capital, Dan figures that as long as other banks are willing to pay for deposits, customers' best move will be to vote with their feet if larger banks try to charge them for the privilege of banking with them.

Social Security pays millions of Americans benefits that they rely on for making ends meet. But while many people understand the financial challenges that the program faces, they don't necessarily know how Social Security taxes work and how the program gets the revenue it needs to pay those benefits.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, takes a closer look at Social Security taxes, running through three essential aspects that everyone should know. Dan notes that payroll taxes provide the major source of income for Social Security, with employees paying 6.2% of their wages and employers matching that amount on their behalf. Self-employed workers have to pay both halves of the 12.4% total tax themselves. He then discusses the wage-base limit of $117,000 for 2014 and how it has nearly doubled in the past 20 years, and concludes with thoughts about how even deductions that reduce income-tax liability generally don't reduce the amount of Social Security taxes you have to pay.

Unlike many of its competitors, which are focused on high-growth, unconventional oil and gas plays such as the Bakken and the Eagle Ford, SandRidge Energy has focused the bulk of its resources on the Mississippi Lime play -- a shallower, lower-growth resource play. Will the company's strategy pay off?

SandRidge in the Mississippian
Though SandRidge still maintains operations in the Gulf of Mexico, the company's main area of focus is the Mississippi Lime, a vast carbonate oil play that spans parts of Kansas and Oklahoma. Tom Ward, SandRidge's founder and former CEO, was a big believer in the play's potential, and led the company to amass a large position relatively early on.

This year, roughly three-quarters of SandRidge's total drilling and completion capital expenditures will be directed toward its drilling program in the Mississippian, where it commands a whopping 1.9 million net acres. Meanwhile, other energy companies have quietly backed out of the play.

Energy companies exiting the Mississippian
Take Royal Dutch Shell , for instance. As part of a strategic review of its North American shale oil and gas assets, the Hague-based oil giant recently put all of its 600,000 acres in the Kansas portion of the Mississippi Lime up for sale. Shell's reasoning behind the decision is twofold -- first, these assets simply aren't generating the kind of returns Shell is looking for, and second, the company has better opportunities elsewhere.

Similarly, Chesapeake Energy , another company that was initially optimistic about the Mississippian, sold a 50% interest in a large chunk of its Mississippian acreage to China's Sinopec earlier this year. While the terms of the deal were quite disappointing, with Chesapeake selling its acreage at less than a third of the price it had previously estimated the land was worth, the company needed the cash desperately and was willing to take whatever it could get.

SandRidge's unique advantages
But these companies' departures from the Mississippian don't necessarily bode ill for SandRidge. That's because SandRidge has numerous advantages in the play that these companies didn't have, including its deep knowledge base of the play, the existence of multiple pay zones across its vast acreage, and its existing infrastructure within the play.

In 2011 and 2012, the company invested heavily in both electrical and salt water disposal infrastructure, which offer both improved economies of scale and a lower cost structure. Results from recent quarters suggest these investments are already paying off handsomely, as the company's new wells required roughly half the spending on salt water disposal as wells brought online a year earlier.

In addition, SandRidge reckons that up to five zones within its Mississippian leasehold may feature what's known as "stacked pay potential," meaning that there are multiple pay zones within a single play that can be accessed by drilling at varying depths. This is important: Not only could it significantly boost recovery rates, but it could also significantly increase the value of the company's reserves and therefore the value of its acreage.

The bottom line
Even though breakeven costs in the Mississippi Lime are generally higher than those in plays such as the Eagle Ford and the Bakken, SandRidge has done a great job of leveraging its knowledge base and existing infrastructure in the play to grow its production at double-digit growth rates while still maintaining a more or less flat level of capex.

The company's low cost structure and unique infrastructure advantages in the play allow it to generate a roughly 45% internal rate of return on its wells at current strip pricing. If SandRidge can continue to lower operating expenses in the play through further well site redesign and pad drilling efficiencies while growing liquids production much faster than total production, it just might be able to unlock the full value of its Mississippi Lime assets.

Microsoft is planning to get rid of one of its operating systems. At the UBS Global Tech conference last week, Microsoft executive Julie Larson-Green said that Microsoft wasn't "going to have three [operating systems]" going forward.

Right now, Microsoft has Windows Phone, Windows 8, and Windows RT. Given that Microsoft's hardware partners have all rejected Windows RT, the ARM-optimized version of Windows seems like the obvious of the three to go.

To replace Windows RT, Microsoft might change one of its core beliefs -- a strategy that has so far differed greatly from the one embraced by Apple and Google .

Two operating-system philosophies
Microsoft has always differed with its competitors, Google and Apple, when it comes to drawing a line between traditional PC form factors and mobile devices. All three companies offer at least two operating systems, but apply their operating systems very differently.

Apple and Google use their mobile operating systems, iOS and Android, on both smartphones and tablets. Their traditional PC operating systems, Google's Chrome OS and Apple's OS X, remain on traditional PC form factors.

Microsoft, on the other hand, offers its pure mobile operating system, Windows Phone, strictly on smartphones, while pushing Windows 8 on everything else -- desktops, laptops, tablets, and convertibles. Windows RT is, in a sense, also a pure mobile operating system, being offered strictly on tablets; but it looks identical to Windows 8, and largely functions the same, relying heavily on keyboard and mouse input.

Microsoft's outgoing CEO, Steve Ballmer, explained how Microsoft thought about the two computing environments back at the D8 conference in 2010:

I think there will exist a general purpose device that does everything you want... Will there also be a device that you keep in your pocket? Because I think there's a fundamental difference between small enough to fit in a pocket, not small enough to be in your pocket. There will be some distinct difference in usage patterns between those two devices.

Microsoft wanted to offer one computing environment for smartphones (Windows Phone), and one for everything else (Windows 8).

Windows Phone 8 gets bigger
But Nokia's new phablet, the Lumia 1520, stretches the limits when it comes to fitting in a pocket. The Windows Phone-powered device sports a 6-inch screen, making it larger than the Galaxy Note 3; Samsung's flagship phablet running Google's Android is a bit smaller, with just a 5.7-inch screen. Sure, the Lumia 1520 might fit in some pockets, but certainly not all.

Could Windows Phone get even bigger? The jump from a 6-inch phablet to a 7- or 8-inch tablet is not much of a stretch. Ovum's analyst for devices and platforms, Tony Cripps, believes that it makes sense for Microsoft to scale up Windows Phone further, offering Windows Phone-powered tablets (via V3).

Windows Phone tablets could help Microsoft close the gap
Windows RT tablets have basically been a failure -- some of Microsoft's hardware partners, like Hewlett-Packard, have avoided offering them entirely. Others, like Dell, experimented with Windows RT tablets, but quickly discontinued them.

The aversion is understandable -- consumers have avoided Windows RT. Microsoft was forced to take a $900 million writedown back in July after its own Windows RT tablet, the Surface, sold more poorly than anticipated.

The lack of mobile apps may have been the key reason for Windows RT's failure. Apple's iPad has hundreds of thousands of apps written for it specifically. Tablets running Google's Android have far fewer, but Google's operating system compensates for its weakness by scaling up existing Android apps written for smartphones.

Windows RT has had to rely on the Windows 8 app store, which continues to be plagued by a key lack of mobile apps, including HBO Go, Pinterest, and LinkedIn, not to mention the absence of popular games including Plants vs. Zombies 2. Windows Phone, in addition to being much more touch optimized than Windows RT, also suffers from a lack of apps, but appears to be gaining some momentum among developers with the recent additions of Instagram and Vine.

Offering Windows Phone-powered tablets would be, in a sense, conceding defeat, by acknowledging that Microsoft had it wrong when it came to drawing the line between mobile and traditional PC form factors. But if Microsoft heads in that direction, it could offer a tablet experience more competitive with Apple's and Google's offerings.