When a company's management makes a statement in an earnings report, investors sometimes accept it on blind faith. However, what the company wants to accomplish, and the reality of its competitive position, may be on opposite ends of the spectrum. When Windstream's management claims that it's confident in its strategies, investors should take this statement with a grain of salt. Just because management has a vision for what the future could hold doesn't mean these dreams will be achieved.

When competition is growing and your company isn't, investors should worry
In the last several years, as customers have gravitated toward cell phones and away from landlines, local telecommunication companies have had to adjust. These companies have turned to high-speed Internet, digital video, and business customers to make up for landline losses.

Some of Windstream's competitors, like Frontier Communications and AT&T , have been relatively successful in growing one side of the business, while voice line use continues to decline. Unfortunately for Windstream investors, the company is losing ground in both areas.

Compared to both Frontier and AT&T, Windstream underperformed in high-speed Internet and video growth.

Source: SEC filings

As you can see, two of Windstream's major peers are growing these two categories, while Windstream reported losses. While these results are troubling, this isn't one of the main reasons to sell Windstream.

Maybe "generous" has two different definitions?
With a yield of more than 12%, Windstream investors are very interested in the company's ability to maintain the dividend. It seems every earnings report mentions how the dividend is supported. The company certainly wants to reassure investors and said in their quarterly report, "Windstream generates substantial free cash flow which supports our dividend."

The bad news is Windstream's cash flow situation doesn't appear as strong as management suggests. Weak free cash flow is the first reason to sell the stock. It's not unusual in the telecom industry to see a payout ratio of 60% or more. However, investors should be cautious, as both CenturyLink and Frontier have been forced to cut dividends in the past. Beyond standard free cash flow, investors might consider using something I call "core free cash flow."

On the cash flow statement, there are non-cash items. Using net income, plus depreciation, then subtracting capital expenditures generates an apples-to-apples comparison across companies in this industry. Using this metric, Frontier carries a payout ratio of 67%, while AT&T clocks in at 75%.

Windstream's "substantial free cash flow" generates a core free cash flow payout ratio of 97%, based on the current quarter's numbers. While this is better than the 143% payout ratio last year, a near-100% payout ratio leaves very little room for error. With declining sales, it's hard to imagine how the payout ratio will improve in the future.

Confidence is key, but this borders on delusion
In Windstream's earnings release, management stated, "We are confident that our strategy to transform Windstream into an enterprise-focused company enhances our growth opportunities and positions us for continued success." This statement sounds great, until you dig into the revenue composition of the company. If Windstream's management believes that the enterprise business will save the company, investors are being given a second reason to sell the stock.

The problem Windstream faces is even though enterprise customers grew by 6% year-over-year, the company's small business customers shrank by 9% during the same timeframe. Enterprise customers make up just 31% of all business customers. In total, enterprise represents less than 5% of total customer connections.

Final thoughts
The bottom line is Windstream will have to undergo a massive transformation to become "enterprise-focused." If management is betting the future of the company on 5% of its customers, investors should be very concerned.

With losses occurring on the high-speed Internet and video side of the business, the company looks weaker than some of its competition. When combined with weaker core free cash flow, the stock's future looks even worse. Turning 5% of customers into the future of the company is a transformation that will take years to achieve, if ever. Though the company's 12% yield looks tempting, unless the company can generate real growth, investors should probably avoid the stock.

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.

Following an eight-week winning streak, stocks kicked off December with a down day as the S&P 500 and the narrower, price-weighted Dow Jones Industrial Average fell 0.3% and 0.5%, respectively.

This month, my colleague Morgan Housel explained "How the Media Blows Bubbles." It's an important question, as stocks have continued to move higher with impressive regularity, the B-word has been popping up with increasing frequency in the financial media.

While most would-be seers in the media and finance aren't worth spending a minute of your time on, Robert Shiller of Yale is worth listening to. Shiller is one of the recipients of this year's Nobel Prize in Economics for his work on the predictability of long-term stock returns; better yet, he's tested his work "by fire," making some prescient calls, including the dot-com bubble and the real estate bubble.

Over the weekend, the German weekly Der Spiegel published excerpts of an interview with Professor Shiller, including the following quote [my emphasis]:

I am not yet sounding the alarm. But in many countries stock exchanges are at a high level and prices have risen sharply in some property markets. That could end badly. I am most worried about the boom in the U.S. stock market. Also because our economy is still weak and vulnerable.

All well and good, but how does Shiller himself invest in that environment? He's invested in stocks -- "those he still believes are undervalued." Within that group, he counts stocks from the energy and health-care sectors. As far as the finance and technology sectors are concerned, he's out of those entirely.

Here's a way to think about the market's performance and its valuation: By my reckoning, 50 stocks in the S&P 500 -- one in 10 -- account for roughly half of the year-to-date rise in the index (remember, the S&P 500 is market capitalization-weighted). The median forward price-to-earnings multiple for those 50 stocks is 16.8. The average forward P/E, weighted by market value, is 18.5; once you remove Amazon.com (P/E 176!) from the group, that average falls to 15.7.

(Even for Amazon, I think there is an argument to be made that, given the size of the opportunities the company is pursuing and management's long-term focus, the shares aren't overvalued. Still, I wouldn't expect huge returns from current levels.)

Those are hardly the sort of numbers that would suggest a market in the throes of generalized euphoria. Facebook offering $3 billion in cash to acquire photo-messaging application Snapchat? That is irrational exuberance, yes -- the sort that can quickly torch shareholder value. (Facebook investors ought to be very grateful that Snapchat's management was even more deluded and turned the offer down!) Twitter gaining 73% on its first day of trading? Same thing. However, those are examples of a "local phenomenon," that concerns social-networking equities, not a broad speculative bubble.

Let me state things categorically: We're not in a stock market bubble. However, it's quite possible that stocks are 10% to 20% overvalued. That needn't exclude long-term investors from investing in shares, but stock pickers ought to make the most of their privilege to focus on issues that still offer value and avoid those that are manifestly overpriced.

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.

Stocks kicked off December with a whimper as investors reacted to disappointing retail sales over the Black Friday weekend. The Dow Jones Industrial Average finished the day down 78 points, or 0.5%, while the S&P 500 fell 0.3%. In the biggest shopping weekend of the year, consumers actually spent less than a year ago, the first time Black Friday weekend spending had fallen since at least 2006, confirming fears retailers had communicated in recent earnings reports. Retail stocks were down nearly across the board, as Target and Macy's both fell nearly 2%.

It wasn't all bad news, though. The Institute of Supply Management's manufacturing index hit its highest level in more than two years, reaching 57.3, up from 56.4, and ahead of expectations at 55.5. The gains were led by an increase an export orders, reflecting an improving economy in Europe and elsewhere overseas.

Krispy Kreme Doughnuts shares were looking burned today, falling 3.3% during the day and another 13.8% after hours after it issued poor guidance in its Q3 report. The doughnut chain actually had a strong quarter, delivering earnings per share of $0.16, a penny better than estimates, while sales grew 6.6% to $114.2 million, in line with expectations. Same-store sales grew 3.7%, the 20th consecutive quarterly increase. CEO James Morgan was happy with the quarter, saying, "We are pleased to have increased our top line at a healthy pace despite the tepid consumer spending environment." However, 2015 EPS guidance was below expectations at $0.71-$0.76, in part because of continuing negative comparable sales in international markets. Analysts had expected $0.77. With a P/E above 40 before the report, the drop shouldn't come as a surprise.

Elsewhere, Amazon.com made headlines with reports that it was testing delivery drones. The pilotless helicopters could cut delivery times to as short as 30 minutes, CEO Jeff Bezos said in an interview on 60 Minutes last night. While Bezos admitted that the new technology was still years away, the drones are representative of innovative thinking that has been Amazon such a powerful force in the market despite minimal profits. Amazon shares were up more than 1% this morning, nearly cracking $400, before closing down 0.3%. The breakthrough technology would also need to clear several regulatory hurdles before coming into practice.

Social network stocks have done terrific this year. Marketers are showing more ads on social networks and spending less money on printed media, as one of every four minutes online is spent using social networks. It's no wonder why investors long in Facebook , LinkedIn, or Twitter have seen amazing returns.

However, although these companies have also seen meaningful improvements in sales and earnings, their market valuations are far from cheap. Given such high multiples, and considering the high level of uncertainty surrounding monetization of social networks, many prefer to stay on the sidelines when it comes to Facebook -- trading at 98 times earnings -- or LinkedIn. In this bullish context, distressed and unloved Internet company Renren , also known as the "Facebook of China," could be an interesting play, as the company just saw a massive sell-off after a disappointing earnings call.

Not all social networks are created equally
Renren, which operates one of the most popular social networks in the second-largest economy, has lost more than 80% of its market capitalization since it went public. To put this in perspective, in the same period, competitor Tencent Holdings  experienced massive share appreciation, as its messaging apps Tencent QQ and WeChat gained international users, and therefore more advertisers. The company has become the third-largest Internet company in the world, only behind Google and Facebook.

The good, the bad, and the ugly
Things are said to be cheap for a reason, and in the case of Renren, the company has never been consistently profitable. The latest earnings call came in with revenue down 5.6% from the same quarter in 2012. This caused the company to report a loss of more than $35 million. Right after the company announced these poor figures, Jefferies downgraded the stock to "underperform."

It's important to highlight that, despite a weak third-quarter performance, Renren is still a long-term growth story. This is because Renren is a holding tech company, with presence in virtually every important market segment from online games to social media. The latest results were caused by a strong decline in game revenue -- down almost 17% year-over-year -- as some of the company's top-grossing titles reached "maturity" and lost many users. 

The good news is that the social network business unit keeps adding new users. Last year, Renren added almost 28 million new users. Monetization remains weak, but at the current stage the focus should instead be on user growth figures. Furthermore, Renren may not excel at monetizing its social network directly, but it uses its enormous user base to bring high traffic to its new apps. For example, it developed Groupon-like buying site Nuomi.com in 2010, and managed to sell a 59% stake in this business to search engine giant Baidu for about $160 million.This shows how fast Renren can create meaningful value.

Renren is also making steady progress in its social network and messaging business units. Even on the gaming side, Renren plans to launch several new in-house game titles next quarter. This increases Renren's chances to release a hit.

The catalyst everybody is waiting for
Clearly, Renren's main asset is its 200-million-member-strong social network service, which isn't fully monetized at the moment. Establishing a solid, sustainable monetization plan for the social network remains a top priority. With China's mobile penetration still well below average, and considering the country already has close to 600 million Internet users, Renren -- whose demographics are pretty young -- is likely to do fine in the future, both in terms of user growth and monetization. Investors bullish on China's tech sector may do well adding this stock to their watch lists.

My Foolish take
Bottom line, Renren is a cheap social network with an interesting growth story. For less than $3 dollars per share, investors can add exposure to a company that's actively using its user base to start new ventures and build a well-diversified portfolio of apps, covering every available segment from e-commerce to gaming. Ultimately, it may be useful to rethink the value of a user profile. At $1.1 billion, the market thinks a Renren user profile is worth less than $6, which may be too cheap considering Renren's ability to start new businesses, drive traffic, show ads, and promote games.

Aeropostale will release its quarterly report on Wednesday, and investors have suffered greatly since mid-summer as the teen retailer's dismal results pushed the stock down sharply. Yet even as rivals American Eagle Outfitters and Abercrombie & Fitch have seen much the same challenges, Aeropostale is working hard to try to bounce back and avoid getting mired in losses for years to come.

Aeropostale has had to deal with fickle customers in the teen-retail space for years, and overall, it has done a good job historically of reading changing trends and responding accordingly. Lately, though, Aeropostale hasn't come up with an answer to its sagging share price. What's in store for the teen retailer, and can it regain the upper hand against Abercrombie and American Eagle? Let's take an early look at what's been happening with Aeropostale over the past quarter and what we're likely to see in its report.

Stats on Aeropostale

Source: Yahoo! Finance.

Will Aeropostale avoid a big loss this quarter?
Analysts haven't been too excited about Aeropostale's earnings prospects in recent months, as they've widened their October-quarter loss estimates by $0.07 per share and made even larger negative adjustments to full-year fiscal 2014 and 2015 projections. The stock has suffered as a consequence, falling 22% since mid-August.

All of those losses came after the company reported its fiscal second-quarter results in late August, with a terrible report sending shares down 20% in a single day. Like Abercrombie and American Eagle, Aeropostale experienced major problems in the quarter, with comparable-store sales down 15%, pulling total revenue down 6% and posting a worse-than-expected loss. Guidance for a loss when analysts had expected a profit of roughly equal magnitude also weighed on investor confidence, especially as competition from newer chains became fiercer.

But Aeropostale stock fell so far that the company got attention from private equity investors. In mid-September, Sycamore Partners bought an 8% stake in the teen retailer, and with a reputation for trying to take companies private, shareholders lauded the move by sending the stock higher. The stock got another boost last month, when Hirzel Capital Management joined the private-equity party by increasing its holdings in Aeropostale to 6%. Yet without an improvement in fundamental business results, it's hard to get too excited about Aeropostale's future, especially with costs on the rise even as net sales decline.

The real challenge Aeropostale faces isn't from Abercrombie or American Eagle, both of which have also struggled. Rather, companies like Urban Outfitters and H&M have hammered on the retail segment, with Urban Outfitters in particularly having finally come back into style after a long period of relative stagnation. One secret to Urban Outfitters' success has been coming up with different store concepts that target several different lucrative demographic groups, helping it diversify and avoid the challenges that focusing on a single group can bring.

In the Aeropostale earnings report, watch for management to explain its recent decision to create a poison-pill defense against further takeover activity. The retailer needs to boost its results in the holiday season if it wants to avoid a big fight among activist investors to push Aeropostale in the right direction.

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

In the world of stocks, today's losers are often tomorrow's winners and vice versa.  The three top-performing stocks in the Dow Jones Industrial Average for 2013 are Boeing, Nike, and American Express. It would be difficult to argue that any of those companies are cheap, as each costs more than 20-times earnings. However, a superior investment opportunity exists with one of the worst-performing stocks in the DJIA -- IBM .

Shareholder friendly management
When it comes to returning value to shareholders through buybacks and dividends, no company does it better than IBM. No member of the S&P Information Technology Index, a list that includes rivals Oracle  and Hewlett-Packard , has consistently paid a dividend longer than IBM. A 45-year streak of dividend payments is something to admire. IBM only pays out 25% of its earnings as a dividend, so that streak won't be broken anytime soon. Dividends from IBM have grown more than sevenfold since the turn of the century. A big factor behind that dividend growth has been the company's huge share repurchases. Big Blue has reduced the number of outstanding shares by over 35% during past decade. The company also has more than $20 billion in planned buybacks, representing a further 10% reduction in outstanding shares at current prices..

Management receives a reasonable salary
In 2012, IBM CEO Gini Rommety's pay package totaled $16 million. That's in line with what Hewlett-Packard CEO, Meg Whitman, was paid, but tiny compared to the $96 million in options Larry Ellison received as his 2012 compensation. Companywide stock-based compensation during 2012 totaled $498 million for IBM, while Hewlett-Packard's 2012 total was $635 million. Not surprisingly, Oracle outdid them both, awarding employees more than $1.4 billion in stock-based compensation. Excessive compensation in the form of stock awards shows that Oracle prioritizes enhancing insider wealth over that of shareholders. Fortunately, such excessive compensation is not present at IBM.

Strong growth in the cloud
IBM is ahead of Hewlett-Packard when it comes to the cloud. Its July acquisition of SoftLayer Technologies contributed to strong growth in IBM's cloud computing operations. Its latest 10-Q revealed that the company grew cloud revenue by 70% year-over-year, and for the first time generated more than $1 billion in quarterly revenue from the cloud. That's more revenue than Hewlett-Packard generates from its entire software segment, which includes the company's cloud-based applications. Additionally, HP announced declining revenue from its IT and cloud management products in its latest quarterly report. Gauging Oracle's cloud performance is difficult because the company lumps cloud software sales with sales of traditional software products. While it would be unwise to draw conclusions from this as to Oracle's success in cloud computing, it makes one curious. Why does Oracle conceal what percentage of its software revenue and profits come from cloud-based applications?

Promising results from growth initiatives
Two of IBM's growth initiatives, besides the cloud, are Smarter Planet and business analytics. Revenue from business analytics grew 8% year-over-year for IBM. The company's Smarter Planet initiative is one of the coolest things any company on Earth is doing to improve how efficiently resources are used. IBM's Smarter Planet solution utilizes the company's analytical capabilities to expose inefficiencies in electrical grids, hospitals, highways, and more. The social utility provided by these solutions is simply stupendous. Providing that utility translates into financial rewards for IBM, revenue from Smarter Planet solutions has grown 20% year-over-year.

Foolish bottom line
Shares of IBM have sat out during the market's recent rally. Luckily for investors, this means they can still be obtained for a very reasonable price. Management at IBM is incredibly friendly toward shareholders, showering them with dividends and buybacks. The company's initiatives for growth in a rapidly evolving technological environment are producing promising results. Don't let short-term revenue figures cloud your judgement. In the coming decades, few companies will provide societal benefits of a magnitude equaling IBM's. Mr. Market is offering all of that for less than 13 times earnings, and in my opinion you would be wise to accept. 

Aerojet Rocketdyne is heading back to space ... with a bullet.

On Monday, the GenCorp subsidiary announced that it has won a contract from the U.S. Air Force Nuclear Weapons Center Propulsion Applications Program to demonstrate a new Medium Class Stage III motor that could be used to refurbish America's aging arsenal of Minuteman III Intercontinental Ballistic Missiles.

Financial terms of the contract were not disclosed, but Rocketdyne noted that its role will be to develop, build and demo of a full-scale motor that, if successful, could replace the SR-73 third stage motors currently used on the Minuteman. Rocketdyne Vice President of Missile Defense and Strategic Systems Michael Bright called the contract "an important win" for this company, and a chance to help "maintain critical industrial base capability in solid rocket motor design and development" for the country.

The U.S. arsenal currently contains some 450 operational Minuteman III missiles.

In addition to the Minuteman program, Rocketdyne says its new engine could eventually become the basis for "a family of affordable, sustainable motors that can support a wide range of potential AF solutions," among them, powering drone missiles used for target practice by missile defense system interceptors.

Brown-Forman will release its quarterly report on Wednesday, and investors have generally been quite pleased with the performance of the spirits company, sending its stock to all-time record highs. But as competition from rivals Diageo and Constellation Brands becomes ever tougher, the bigger question is whether Brown-Forman can keep earnings growing even if its revenue doesn't climb as fast as its peers' sales.

Brown-Forman isn't a household name, but its Jack Daniel's and Southern Comfort brands are well-known among liquor aficionados, and it also has the Sonoma-Cutrer vineyards and the Korbel champagne brand under its umbrella. Like Diageo and Constellation Brands, Brown-Forman has done a good job of making the most of its potential over the long run even despite the interruption of the 2008 recession. But can Brown-Forman keep climbing in concert with its rivals, or will competitive pressures eventually create both winners and losers in the industry? Let's take an early look at what's been happening with Brown-Forman over the past quarter and what we're likely to see in its report.

Stats on Brown-Forman

Source: Yahoo! Finance.

Which way will Brown-Forman earnings move this quarter?
In recent months, analysts haven't budged on their views of Brown-Forman's earnings, keeping both short-term and long-range projections on earnings per share unchanged. The stock has done well, though, rising almost 10% since late August.

Brown-Forman's fiscal first-quarter report in August was mildly disappointing, with mild drops in operating income and earnings per share coming from muted net sales growth of just 2%. The company saw extraordinary growth in its Korbel segment as well as from super- and ultra-premium whiskey brands, with Woodford Reserve leading the way with 25% growth. Worldwide, revenue growth was relatively consistent except for Australia, which saw about a 5% drop in underlying sales.

Brown-Forman has taken steps to try to keep up with rising demand for its products. In August, the company said it would expand its Lynchburg Jack Daniel Distillery, spending more than $100 million to boost capacity for what has become the company's most important segment. As international growth becomes an essential component of Brown-Forman's long-term strategy, having more Jack Daniel's products to send to thirsty customers in key areas like Eastern Europe and Russia could set the stage for accelerating gains in the future. A realignment of Brown-Forman's Asia-Pacific business structure in October also recognizes the importance of the region to the company's overall growth potential globally.

One concern that Brown-Forman might not need to worry about at least for now is the prospect of further consolidation in the space. For a while, it appeared that Diageo might move forward to try to buy out Brown-Forman whiskey rival Beam . But Diageo CEO Ivan Menezes dismissed talk of a merger, saying it was unnecessary in light of Diageo's already-strong Johnnie Walker brand and other offerings. As for Constellation Brands, its recent move to pick up the Grupo Modelo U.S. beer business has likely left it needing some time before considering any further major corporate moves in the near future.

In the Brown-Forman earnings report, watch to see if the company makes further plans to bolster growth. With the threat of getting left behind by Diageo and Constellation, Brown-Forman needs to demonstrate that it will continue to play in the same league as its competitors both now and well into the future.

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

According to Wal-Mart's Thanksgiving sales figures, the iPad mini was one of its top sellers. The company reports it sold more than 1.4 million mobile computing devices, a large portion of which were Apple's minature devices. Furthermore, online auction site eBay tweeted that it was selling an iPad every second. In light of such gaudy stats, should Apple investors be rejoicing?

Not quite yet.

2013 iPad demand
The International Data Corporation estimates that 47.6 million tablets were sold in the third quarter of 2013. Of these, only 14.1 million were Apple iPads. This was a 3% decrease from the 14.6 million sold in the second quarter second and was less than a 1% increase over last year's figures. As a consequence, Apple's global tablet market share has fallen to 29.6%, the lowest it has been in company history. 

This decrease in demand is attributable to two causes. First, Apple chose not to launch its new products until recently. Therefore, volume was stale throughout the earlier part of this year while consumers waited for a refresh. Second, many other competitors entered the market, offering lower priced goods.

Samsung grabbed 20.4% of the global market share by bundling its Galaxy Tablet with other successful products including its smartphones and televisions. Asus took a 7.4% market share selling the Nexus 7 tablet for Google .

While Apple's sales are on the decline, companies like Samsung and Google are seeing accelerating increases in sales. In a tablet industry that is growing 36% year over year , these two should continue to enjoy rising sales.

Why Apple has a problem
Given this sub-par iPad performance, Apple investors should be holding their collective breath hoping current sales continue throughout the end of the fourth quarter. If they do not, the company could post final sales figures barely higher than last year.

If this turns out to be the case, Apple will find itself in a precarious position. It will have to face the fact that its premium pricing strategy is losing traction and may have to consider lowering prices.

In the 7 to 8-inch tablet market, Apple's second generation iPad Mini starts at $399. Comparatively, Samsung's Galaxy Tab 3 starts at $279.99 and Google's Nexus 7 starts at $229. Furthermore, in the 9 to 11-inch tablet market, Apple's iPad Air starts at $499, whereas Samsung's Galaxy Tab 3 costs $359.99 and Google's Nexus 10 costs $399.

Source: arstechnica.

On the other hand, Apple's appeal lies within its branding. Although many of its products are not far superior to those released by competitors, Apple has positioned itself as a premier manufacturer. If it does lower its prices, it may decrease the value of its brand, which could result in a long-term erosion of company value.

Why investors should care
Ultimately, investors need to keep a close eye on Apple's iPad sales throughout the fourth quarter. If the results are unimpressive, investors must accept that Apple will find itself in a lose-lose situation. Though the company is not facing immediate peril, this holiday season's shopping figures should prove quite telling.

Google  and Apple have brought smartphones and tablets to the front of consumer spending over the last couple of years, leaving Microsoft scrambling to release products years after Google and Apple developed a loyal consumer base for their respective products. Microsoft has struggled to develop a product line on par with the competition. Now, Microsoft is slowly catching up with the following products.

Slow climb for Windows Phone
Windows Phone 7 launched in 2010 and critics praised the unique user interface. However, the lack of popular apps and the inability of Windows Phone 7 to utilize multi-core processors pushed Microsoft to, essentially, kill off Windows Phone 7 in 2012 with the launch of Windows Phone 8.

The release of Windows Phone 8, accompanied by the partnership with Nokia , helped Microsoft restart and catch the attention of consumers and application developers.

Source: IDC Worldwide Mobile Phone Tracker

In Q3 of 2013, Windows Phone 8 increased the number of units shipped from 3.7 million to 9.5 million, a 156% growth rate. Granted, 9.5 million units shipped is peanuts compared to the 33.8 million units that Apple shipped, or the 211.6 million that Google shipped, but positive growth is still positive growth.

Partnering with Nokia has proven to be lucrative for Microsoft. The Nokia Lumia product line accounted for 93% of Windows Phone 8 sales in Q3 2013. This led Microsoft to offer Nokia $7.2 billion to purchase the company's ailing cell phone division -- handing Microsoft more control of the Windows Phone 8 image and hardware. On Nov. 19, 2013, Nokia shareholders voted and approved the sale to Microsoft, which is expected to be complete in early 2014.

Continued fight for the living room
Sony launched the PlayStation 4 on Nov. 15, 2013 in North America, and Microsoft quickly followed suit with the Xbox One launch on Nov. 22, 2013. The PlayStation 4 and Xbox One have both sold more than 1 million units within the first 24 hours of their respective launches.

Despite both consoles selling around 1 million units, video game retailer GameStop announced that it has 2.3 million customers on a waiting list for these next-generation consoles. Electronic Arts COO, Peter Moore, expects that between Sony and Microsoft, both consoles could have a combined total of 10 million units sold by the end of March 2014.

Extrapolating further, Wedbush Securities analyst, Michael Pachter, forecasts lifetime sales of the Xbox One to be around 90 million-100 million units and slightly higher for the PlayStation 4 at 100 million-110 million units. Both forecast are higher than what the current generation consoles have sold since 2005, which VGChartz estimates at 79 million and 80 million units, respectively.

Evolution of Office
Microsoft Office is a software staple used by everyone from elementary students to corporate executives. Microsoft's Office suite was the standard for many years, but Google has slowly been eating away at Microsoft's grip on word documents and spreadsheets. Office accounts for around 90% of the revenue for Microsoft's business division, or approximately 29% of Microsoft's overall revenue in fiscal 2013. Keeping Office relevant in enterprise environments will be key for maintaining revenue growth in the future.

In a webinar from research firm Gartner, titled "Choosing a Cloud-Based Office System: Google vs. Microsoft," the report had some interesting insights. Channel Partner writer Kurt Mackie summarized the future of the productivity suite market going forward:

• By 2013, there will be 630 million Office suite business users, with 50 million of them using a cloud-based product. By 2022, there will be 1.2 billion Office suite business users, with 696 million of them tapping the cloud.
• Microsoft Office controls the market with about 80%-96% user share.

Google Docs, renamed Google Drive in 2010, has provided major competition for Microsoft. According to a CNNMoney article, more than 120 million users have downloaded Google Drive, and around 5 million users, namely enterprises, pay a monthly fee to utilize Google apps.

While the document and spreadsheet software on Google Drive is not as comprehensive as Office, there is one allure Google has -- Google Drive is free. Another product that Google offers for free is Android, which launched in 2008. Within three years, Android had over 50% of the smartphone market share, and currently controls more than 80% of the market.

Addressing the growth of Google Drive, Microsoft tweaked its Business Productivity Suite to a new product called Office 365. Aimed primarily at small businesses and enterprise environments, Office 365 added abilities such as hosted email, social networking and collaboration, and seamless integration with cloud storage. The additional features received praise from critics, and the annual subscription model will help increase revenue for the business division.

Google is nipping at the heels of Microsoft Office. The question is, will Microsoft keep Office relevant for future consumers? The seamless integration of the cloud into Office 365 is certainly a step in the right direction.

Financial review
While having solid products is only part of the equation, having a solid financial base is also important. The chart below contains data on the revenue, earnings per share, and dividend payout from 2009 through 2013.

Source: Microsoft's 10-K

Microsoft's EPS piqued in 2011, fell in 2012, but recovered in 2013. Over the last five years, revenue has consistently climbed and the 77% increase in dividends is a solid bonus for investors looking for cash flow growth.

Worth your investment?
Even though Microsoft is in a constant game of product catch-up, the company remains stable, and a new CEO at the helm could help Microsoft reinvent its public appearance (similar to what Marissa Mayer has done for Yahoo!). Through consistent revenue growth and improving product lines, Microsoft probably won't turn any heads, but it is a solid Blue Chip worthy of a spot on your watch list or in your portfolio. 

• Motor vehicle sales rev up with monthly vehicle sales.
• The "Red Book" releases its weekly retail sales report.

News broke last week that Wendy's will phase out the popular pretzel buns that played a role in one of the most talked about sandwiches in the last decade for the fast-food restaurant. The change isn't due to slumping sales. Wendy's simply says the bun;s were always meant to have a short life to make way for other "limited time only" menu items.

Wendy's suffered during the recession due to higher prices than competitors such as Yum! Brands  -- owner of brands including Taco Bell and KFC -- and Burger King Worldwide . But Wendy's has showed new signs of life in recent years as the menu has changed into a higher-end version of fast food.

Wendy's shares have risen nearly 90% in the past year due to investor optimism --much of which was inspired by the potential sales for the heavily promoted Pretzel Bacon Cheeseburger. 

Could the revolving menu strategy come back to bite the long struggling company?

Future sandwich popularity not guaranteed
Wendy's recently reported third quarter included nearly 6% growth in comparable sales for stores open at least two years -- the largest growth the company had managed since 2005. Comps were a respectable 3.2%. Burger King had global comps of around 1% in that period, and Yum! Brands had flat US comps.

Wendy's president and CEO Emil Brolick acknowledged that comps growth was driven by the success of the Pretzel Bacon Cheeseburger. And now that sandwich is going off the menu along with its pretzel bun, which also appeared in a popular chicken sandwich, to make way for new sandwiches that have no guarantee of success. 

Why did Wendy's risk losing one of its most successful products in a decade?

Bloomberg quoted emailed comments from Wendy's spokesman Denny Lynch which explain that the pretzel bun was always meant as a "limited time only" offer. Lynch continued that keeping the bun in restaurants with the other offered buns would increase the inventory kept on hand.

And that's a general point that Wendy's could make. The restaurant already has a wider-than-average variety of salads, side dishes, and sandwiches. Having to keep additional ingredients such as the pretzel buns or the Pretzel Bacon Cheeseburger's specialty cheddar on hand would further complicate inventory and the food-preparation process.

But taking away the pretzel bun isn't going to solve that problem.  

The change won't help streamline kitchens
Wendy's isn't going back to only using traditional hamburger buns. The company has rolled out new brioche buns paired with a second release of the Bacon Portabella Melt, which was on a regular bun the first time around. Brioche buns will become Wendy's new push, kicking the pretzel buns to the curb. 

Switching one bun for another doesn't streamline the kitchen -- it's an even swap. And Wendy's clearly plans to keep launching limited time menu items in the hopes of wooing customers. That's well and good if the company doesn't drive away the new customers it gained with the Pretzel Bacon Cheeseburger. But that strategy certainly doesn't make the food prep or inventory any easier for employees to handle.  

And the revolving menu could also exacerbate the food-costs problem that keep Wendy's menu items more expensive than McDonald's and Burger King.  

This won't fix the food costs problem
Wendy's fresh ingredients and broader menu equal higher food costs. The company's second-quarter food and paper costs were nearly 33% of total sales. Compare that to Burger King's 6%, and 27% for the multiple restaurants behind Yum! Brands. 

Revolving menu items don't seem the best way to cut food costs unless Wendy's manages to utilize existing inventory to create the new products. And even if that were to work, sense would dictate keeping the popular sandwich around until it either experiences a sales plunge or is eclipsed by the sales of an outperforming new product. 

Pretzel buns likely cost more than brioche buns. But that's a hit Wendy's should gladly take to keep a good product on hand. The company is not in a strong enough position to make this bold of a bet. Wendy's missed third-quarter estimates -- reporting $641 million in revenue compared to analyst-estimated $643 million -- and shares dropped 9% the day of the report. 

Foolish final thoughts 
The Pretzel Bacon Cheeseburger does come with more potential problems than the average burger in its inventory needs. But Wendy's would do better to integrate those ingredients into further items to justify their inclusion than to ship off a comps-driving product. And the company had better hope people really love a brioche bun.

Cracker Barrel Old Country Store accounts for around three-quarters of Biglari Holdings' market cap, at about $570 million of the total $692 million. For investors in the latter, the question is what Biglari is going to do with the Cracker Barrel position. Liquidation, which looks somewhat unlikely, would immediately uncover value in Biglari Holdings and show investors and analysts the dirt-cheap multiple they're paying for the company's other cash-flow faucets. A continued activist presence in Cracker Barrel holds the potential for even juicier returns, but it could also experience a reversal in the stock's multi-year capital appreciation. One thing is for sure: Today, Biglari Holdings is a great company selling for cheap.

What to do
Upon reading the results of Sardar Biglari's third attempt at gaining a board seat at Cracker Barrel, my initial reaction was that the investor may now consider taking his profits (well over the $100 million mark) and delighting investors in his own holding company. After salivating at this immediate-gratification event, though, I realized this is still an unlikely event.

Though he claims to be a disciple of Buffett and mimics the Oracle's "buy good for cheap" investment style, Biglari is not quite the congenial, hands-off owner that Warren Buffett is so often idolized as. In yet another open letter to Cracker Barrel management in early November, Biglari again demanded change in the boardroom. The investor's claims have shifted slightly from his original argument, but the essential point remains the same: Cracker Barrel's leaders are not the best capital allocators and are preventing the otherwise "A"+ business from realizing its full potential -- both operationally and in value.

The language in the letter did little to suggest that Biglari had even the slightest interest in exiting his position. Referencing another note earlier this year, the investor said he will outlast any opposition, even if it takes eight years.

Meanwhile ...
While Biglari pushes up against the clearly uninterested Cracker Barrel shareholders and board, his own company's stock has yet to enjoy anywhere near the degree of success as the restaurant. At the same time, another Biglari asset, Steak n Shake, continues to generate heaps of cash that should yield a much chunkier stock price.

The market appears to lack confidence in the viability of Biglari's quest for Cracker Barrel acquiescence. While a little frustrating, it does allow for an opportunity in Biglari Holdings stock. The more Biglari's stake in grows in value, the cheaper the rest of the company becomes (as long as the continues to perform asymmetrically from Cracker Barrel's).

As any Buffett evangelist will tell you, companies will realize their intrinsic value at some point, but you may have to wait a while. Biglari Holdings doesn't have market approval yet, and part of that is due to the mercurial personality who runs it. Underneath the popularity contest, though, this business is very well run and offers investors a risk-averse way of investing in Cracker Barrel, and the bonus of undervalued cash flows from its other lines of business.

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.

Stocks fell for the third straight day today, and the Dow Jones Industrial Average had its worst session in nearly a month as concerns mounted about the Federal Reserve stimulus taper and a disappointing holiday season. The blue chips fell 94 points, or 0.6%, ending the day at 15,915.

With the Fed set to hold its next Open Market Committee meeting in two weeks to determine the future of its $85 billion bond-buying program, investors once again became nervous about the coming taper. Recent jobs numbers have been strong, and Friday's November jobs report should go a long way to determining monetary policy. Another month of strong employment growth could mean the Fed begins cutting the stimulus sooner than expected. Stocks have gained more than 25% this year in large part because of the Fed's bond-buying program, which have made bond yields artificially low, making stocks look better by comparison. Tomorrow's jobs report from ADP will be the first hint at how many new jobs were created in November.

Sales for yesterday's "Cyber Monday," the day online retailers promote for holiday shopping, jumped 16% to $2.29 billion, though shares of Amazon.com , the world's biggest online retailer, fell 2% on news that delivery companies such as UPS are also testing delivery drones, an idea that Amazon.com CEO Jeff Bezos mentioned in an interview on 60 Minutes Sunday night.

Meanwhile, Tesla Motors shares shot up 16% after a German regulatory agency said it didn't find any manufacturer defects in the electric-car maker's Model S Sedan, which had come under scrutiny after three fires were reported in the vehicles in a span of just six weeks. The car is still under investigation by the U.S. National Highway Transportation Safety Board, but the German board's ruling goes a long way to reassuring the public about the vehicle's safety and the market about any serious recall concerns.

Elsewhere in the auto industry, November sales jumped to an annual rate of 16.4 million, up from 15.3 million a year ago, the best figure since February 2007, a strong sign for the overall economy and for carmakers.

Sears Holdings shares continued to fall, dropping 7.7%, continuing a two-day slide of 13% on poor Black Friday results. Sears had been one of the most aggressive Black Friday marketers, as its Kmart stores were open for 41 hours straight.