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NQ Mobile Short Sellers Have a Point

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Whether you're an NQ Mobile bull or bear, and whether you think that the company is legitimate or not, at the end of the day it's important to approach the stock from a calm, rational point of view. While it's always fun to hope for a "short squeeze" in a stock where half of the float is shorted, it's tough to ignore that the short sellers may have some really credible arguments here.

Management is too promotional
One of the first red flags that investors should notice is just how promotional the management team is. Now, there's nothing wrong with wanting to get investors excited about your stock, but there's a difference between getting the story out and extreme exaggeration. For instance, NQ's Omar Khan has been quoted as saying, "We are building the company for the next 100 years".

Okay, that's wonderful, but just how many companies have a 100 year history, particularly in technology? Sure, one could point to IBM , which has been around since 1911, but throughout those 100 years the technology landscape has seen paradigm shift after paradigm shift, and IBM has had to dramatically change its business model over that time. Did any of IBM's original employees know what the company would look like or be doing today? No!


So, what right does NQ have to claim that it's building the business for the next 100 years when they have absolutely no idea what the tech landscape will look like in 100 years? This type of overly-promotional management certainly serves as a red flag for investors in a long-term story. Yes, management should be confident in their work and their vision, but without a dose of humility and realism; it's hard to trust management to be the best stewards of investors' hard-earned capital.

The growth expectations are extreme
There are plenty of high-growth names in the world of small cap tech - and those are the kinds of stories that make people serious money if identified early enough. Unfortunately, the expectations surrounding NQ Mobile are actually quite extreme. For instance, the company is expected to deliver 108% growth on a year-over-year basis in 2013. Fair enough - doubling revenues from a $92 million base isn't the hardest thing to do.

What should give investors a case of serious heartburn is that the four analysts covering the stock are expecting NQ to really knock it out of the park next year. In particular, the sell-side expects revenues growing a whopping 53.4% from $191 million to $293 million. Now, these expectations are in place largely because management has been hyping its "1-2-5" plan in which they expect $200 million in revenue by the end of 2013 and $500 million in revenue by the end of 2015.

Management also had the audacity to launch its "2-5-10" plan in which it hopes to have $1 billion by 2017. While the company may actually hit these goals, it's pretty silly to be promoting these types of "slogans." After all, NQ can "aim" for whatever they want in terms of revenue/profits, but will they deliver? Only time will tell, but if NQ doesn't, the shareholders are going to suffer for it.

Foolish bottom line
NQ Mobile just doesn't look like a company that investors should trust their hard earned money in. There's a reason that 50% of the float is sold short and, frankly, even if there is no fraud here (as Carson Block from Muddy Waters Research claims), management seems to be setting up extremely unrealistic expectations that, frankly, the market is no longer buying. Stay out of this stock - there are many better places to put your investment dollars. 

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The article NQ Mobile Short Sellers Have a Point originally appeared on Fool.com.

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

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Was Our Top Stock of 2013 Better than Yours?

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This segment is from Tuesday's edition of 'Digging for Value', in which sector analysts Joel South and Taylor Muckerman discuss energy & materials news with host Alison Southwick. The twice-weekly show can be viewed on Tuesdays & Thursdays. It can also be found on Twitter, along with our extended coverage of the energy & materials sectors @TMFEnergy.

What a year it has been for investors in the stock market! Simply investing in an S&P 500 index fund like the SPDR S&P 500 ETF would have treated you quite kindly, to the tune of a 25% return. That doesn't even hold a flame to our "Top Stock of 2013", Core Laboratories which returned more than 70% excluding dividend payments. Analysts, Taylor Muckerman and Joel South, got the chance to visit with company management earlier this year. Tune in below for reasons they believe made Core Laboratories so successful.


If you missed out on Core Laboratories, don't let it happen again in 2014

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The article Was Our Top Stock of 2013 Better than Yours? originally appeared on Fool.com.

Joel South has no position in any stocks mentioned. Taylor Muckerman owns shares of Core Laboratories N.V.. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Should You Bolt From This Electric Fuel Company?

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In my Dec. 9 article entitled "What to Look for With This Fuel Cell Company's Results" I thought I was a pitching slow softball, figuring FuelCell Energy would easily hit most if not all of the items on the list. What a shock and disappointment to find out that the company missed almost across the board. While there's still plenty of hope for the long-term future, the stock deservedly got crushed following the earnings report.

Results
FuelCell Energy reported fiscal fourth-quarter results on Dec. 16. Revenue zoomed 55.9% to $55.2 million. Gross profit leaped 189% to $2.6 million. Backlog hopped 11% to $355.4 million. The company maintained an annual run-rate of 70 megawatts at its North American facility, an increase of 25%. Overall, it sounds pretty good, doesn't it? The problem is those are year-over-year numbers. The market was expecting much better results compared to the third quarter just prior.

Then (third quarter 2013) and now (fourth quarter 2013)
Then, FuelCell Energy had reported a 26.5% sequential jump in revenue to $54 million. This report's sequential jump is only a gain of 2%.


Then, gross profit had hit an all-time record of $4.5 million or 8.4% of sales. Now, gross profit plunged 42% to $2.6 million or 4.8% of sales.

In the third quarter conference call, which was halfway through the fourth quarter, CEO Chip Bottone stated, "We anticipate continuing to produce at 70 megawatts and will increase production further as backlog and lead times support." Backlog is at over seven quarters' worth now. Production stayed flat in the fourth quarter.

In the same call, Bottone stated, "Our margins are expanding from higher production levels as fixed costs are absorbed by the greater sales volume and cost reductions flow through the financial statement." Notice the present-tense word expanding as opposed to expanded, implying that it is ongoing and investors should expect further margin expansion. It didn't happen, and instead margins actually collapsed.

Now rewind back to the first quarter conference call from March of this year. CFO Michael Bishop stated then, "When we think about the business model going out a couple of quarters, we're targeting margins in the double digit range." It came in nowhere close. This is starting to sound like Plug Power .

Plug Power
Plug Power sometimes feels like it wrote the book on over-promise and under-deliver. Plug Power has been forecasting improving profit margins, and CEO Andy Marsh pegged material costs of fewer than 70% of sales as the ticket to profitability. Over four years ago, he stated, "We will continue to grow our business and forge a path to profitability in 2009." In August 2012, with shareholders still waiting for profits, he targeted material costs of fewer than 60% for 2013 and the prize of profitability. First half of 2013, he assured the market that worst case would be 67% material costs. By Q3, the worst-case 67% became the new hopeful target. 2013 is almost over and all those targets have failed. 2014 is now the magic year. FuelCell Energy is starting to sound more like these Plug Power misses and less like Tesla Motors and its history of over-delivering on margins.

Lessons from Tesla
For Tesla, it's the opposite story. Excluding tax credits, Tesla has been beating its own guidance for margins every quarter. For the first quarter, gross profit margin excluding federal tax credits was at 5%, and Tesla guided it to rise to 9%-12% by the second quarter. In the second quarter it instead came in at 13% and Tesla guided it to rise to 19% for the third quarter. In the third quarter it instead came in at 21% and Tesla guided it to rise to 25% for the fourth quarter. Do I hear 27%? FuelCell Energy and Plug Power should pay attention to what Tesla's doing.

Foolish final thoughts
The market punishes those who over-promise and under-deliver. FuelCell Energy is starting to go down Plug Power's path. While those promises can make for short-term bumps, Fools may want to avoid buying into those bumps only to see lower stock prices later, as has been the case with Plug Power for years. Consider waiting on the sidelines for FuelCell Energy to bring less top-brass promise and more bottom-line results.

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The article Should You Bolt From This Electric Fuel Company? originally appeared on Fool.com.

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

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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A Pain Specialist Buys a Technology Call Option

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Endo Health Solutions has not been shy about using M&A to rebuild its growth prospects in the wake of losing patent coverage on Lidoderm and Opana ER. While prior management didn't do well with its M&A, new management has already made some smart (albeit not necessarily cheap) deals for Paladin Labs and Boca Pharmaceutical. Now management is going for for a different sort of deal -- the acquisition of NuPathe is hardly a slam dunk value-adding deal, but the upfront consideration of $105 million excluding deal costs is not a terribly high price to pay for taking a chance.

The deal
Endo Health announced that it had reached an agreement to acquire NuPathe for $2.85 per share in cash upfront (totaling about $105 million) and up to $3.15 more per share in contingent cash payments. NuPathe shareholders will get $2.15 per share if Zecuity sales meet or exceed $100 million in revenue over any four-quarter period in the nine years after launch, and another $1.00 per share if the sales exceed $300 million.

What Endo Health is buying
The key asset at NuPathe is Zecuity, a battery-powered drug patch that was approved in January 2013 for migraine. Zecuity's active ingredient is sumatriptan, the generic form of GlaxoSmithKline's one-time migraine blockbuster Imitrex.


While Imitrex is quite effective in relieving the symptoms of most migraine sufferers, it is not without a significant side effect -- a large percentage of those who take sumatriptan orally experience nausea, and it is severe enough for some to make oral sumatriptan impractical. By avoiding the GI tract, though, Zecuity avoids those elevated levels of nausea in most migraine patients.

That all sounds fine, but it is more complicated than that. Non-oral forms of sumatriptan (Imitrex Nasal Spray and Imitrex Injection) generated only $100 million in revenue in 2008 before going generic. What's more, NuPathe was quite open about wanting a commercial partner for Zecuity but even with the dearth of branded drug growth prospects and the attractiveness of pain management, there we no takers. That inability to find a partner, and the subsequent delay of the commercial launch of Zecuity, goes a long way toward explaining why the $2.85 upfront price for NuPathe is 25% below the price after Zecuity was approved.

What can Endo do?
Endo Health already has a sizable presence in the pain management space, making it arguably an ideal owner for Zecuity. If Endo Health can't make a winner out of Zecuity, I'm reasonably certain that nobody else could.

I do believe that Endo Health will be able to strip out almost all of the operating costs of NuPathe. After Zecuity, all NuPathe has are two preclinical assets (NP 201, NP 202) for Parkinson's and schizophrenia/bipolar disorder. I have my doubts that Endo Health will choose to develop these, and may look instead to sell, license, or abandon them outright (and may develop them to phase 1 just to improve licensing/sale prospects).

I have confidence that Endo Health will succeed in stripping out costs, but I'm still skeptical that the company will have to pay out those sales milestones. Allergan will likely get approval for Levadex in the first half of 2014 and the late-stage data from this drug have been encouraging with respect to Allergan's likelihood of distinguishing this drug in the market. At a minimum, Allergan's Levadex can benefit from patients and doctors looking to try a new drug for patients who haven't responded to triptans.

The bottom line
Endo Health's management has done a very good job of selling the Street on the idea that this is a new company. This deal for NuPathe may bring back some memories of the more speculative deals that the company used to do (and generally frittered away shareholder capital), but I believe the risk-reward balance makes it worth a shot. While I expect Zecuity to be a $50 million to $100 million a year drug at best, I believe Endo Health could earn a double-digit return on this deal with that and if the company ends up having to pay those milestones, that will be a "win win" for everybody.

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The article A Pain Specialist Buys a Technology Call Option originally appeared on Fool.com.

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

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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How the New Zelda Game 'Hyrule Warriors' Could Change Nintendo's Other Franchises

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Nintendo recently announced that Hyrule Warriors , a crossover title between Nintendo's Legend of Zelda franchise and Tecmo Koei 's Dynasty Warriors series, will be released for the Wii U in 2014.

Hyrule Warriors, the game's tentative title, is being developed by Tecmo Koei and will merge the world of Zelda with the fast-paced hack-and-slash mechanics of the Dynasty Warriors series.

The reveal trailer shows Link using his trademark sword, shield, and bombs while fighting off hordes of classic Zelda enemies in the manic Dynasty Warriors style.


Hyrule Warriors. Source: Allgamesbeta.com

Dynasty Warriors debuted in 1997 as a fighting game for the original Sony Playstation, but has since been defined by the third-person 3D hack-and-slash mechanics introduced in Dynasty Warriors 2 (2000, PS2). Like older 2D brawlers like Double Dragon, Teenage Mutant Ninja Turtles, and Final Fight, Dynasty Warriors pits a single hero against hordes of minions that can be dispatched by the dozen.

Dynasty Warriors 8. Source: Vg247.com

Dynasty Warriors traditionally features heroes from Romance of the Three Kingdoms, a series of classic Chinese tales set in the turbulent Three Kingdoms era (169-280 AD) in China, albeit in a ridiculously exaggerated, anime superhero style. Instead of the slower block, parry, and swing mechanics that Link generally employs in the mainstream Zelda games, the swordplay in Hyrule Warriors will be upgraded to the more manic levels on par with other Dynasty Warriors titles.

This is the second time that Link has appeared in a Dynasty Warriors game. In Dynasty Warriors VS (2012, Nintendo DS), Link appeared as an unlockable costume, although he still fought in the Dynasty Warriors world.

This is also the second time that Tecmo Koei has produced a crossover title. In 2007, it teamed up with Namco Bandai to develop Dynasty Warriors: Gundam, which adapted the Dynasty Warriors hack-and-slash engine to the massive mechs of the classic Gundam anime series.

What Hyrule Warriors means for Nintendo

Hyrule Warriors will be an interesting game for Nintendo for two main reasons.

First, most gamers still feel a sense of loving nostalgia for Nintendo's classic characters, even if they favor Sony or Microsoft consoles. Second, one of the biggest complaints about Nintendo is its lack of third-party software support.

Today, nine out of Wii U's top 10 selling games were published by Nintendo, with the notable exception being Ubisoft's ZombiU, which comes in eighth with 570,000 copies sold worldwide.

The top three spots are predictably occupied by a trio of Mario and classic Nintendo-themed games -- New Super Mario Bros. U (2.68 million units), Nintendo Land (2.62 million units), and Super Mario 3D World (730,000 units).

New Super Mario Bros. U. Source: Wiiudaily.com

Nintendo, which is highly protective of its flagship characters, knows that people usually buy a Nintendo console to play Nintendo games. Therefore, it has adamantly refused to develop games for other consoles featuring its classic characters.

Developers, on the other hand, have been burned by Nintendo in the past. Some of Nintendo's staunchest allies in the 1980s and 1990s, such as Square Enix, Capcom, and Konami, abandoned the gaming giant after the N64 cartridge debacle in 1996 and cast their lots with Sony instead.

Developers also look at the top selling games for the Wii U and wonder why they should bother developing games for the platform, when Wii U gamers are apparently just obsessed with all things Mario and Zelda.

That's where Hyrule Warriors comes in -- it's a game developed by Tecmo Koei, a third-party developer, but the game takes place in one of Nintendo's trademark universes. It's an interesting approach -- rather than develop games for other consoles, Nintendo is inviting Tecmo Koei to put its iconic, nostalgia-inducing characters into new environments.

It's a win-win situation -- the third party developer creates a "Nintendo" game on the Wii U, which could generate more sales than a regular title, and Nintendo gets additional third party support.

The 'Link Effect'

Namco already did this a decade ago with the fighting game Soulcalibur 2, which featured Link as a playable character in the Gamecube version.

Link in Soulcalibur 2. Source: Soulcalibur.wikia.com

The Xbox version featured the comic book antihero Spawn and the Playstation 2 version featured Heihachi, a character from the fighting game Tekken. How much of an impact did Link have on Soulcalibur 2 sales back in 2003? Take a look:

Platform

Total U.S. consoles installed as of 8/2003

U.S. sales of Soulcalibur 2 from 8/2003-12/2003

Nintendo Gamecube

7.0 million

500,685

Sony Playstation 2

22.0 million

447,138

Microsoft Xbox

7.7 million

320,991

Source: Ign.com

Considering that Nintendo had the least installed consoles at the time and still sold the most units of Soulcalibur 2, it's safe to say that featuring Link in a third-party title significantly boosted sales.

Electronic Arts also recognized the potential of putting Nintendo characters in its games, and featured Mario, Luigi, and Princess Peach as playable characters in NBA Street V3 for the Gamecube in 2005.

What if...?

Since then, there haven't been any third party titles featuring the main Nintendo characters in playable roles -- until Hyrule Warriors. Although this could simply be a rare experimental project for Nintendo, it could have some fascinating implications for other third party developers, if it proves to be a hit:

  • What if Nintendo allowed EA's DICE studio to develop a dizzying, first-person version of Mario, based on the Mirror's Edge Parkour engine?

  • What if Square Enix, which developed Super Mario RPG in 1996, developed a new Super Mario RPG with the engine of its modern Final Fantasy titles?

  • What if Nintendo crossed over with Capcom to produce a Nintendo vs. Street Fighter fighting game, similar to Street Fighter X Tekken?

  • What if Nintendo allowed Ubisoft to develop a Zelda title, where Link can free run across rooftops and sail pirate ships like in Assassin's Creed?

Those possibilities, while seemingly absurd, would allow Nintendo to keep its own characters exclusive to its console, decrease the amount of heavy lifting it does for both software and hardware development, attract third-party developers back to the Wii U, and breathe new life into its core franchises, which are being worn out by endless refreshes of Super Mario Kart, Super Smash Bros., and other party and sports games.

A final thought

It's obvious that the Wii U is struggling -- the ailing eighth-generation console has only sold 4.49 million units worldwide since its launch in November 2012. By comparison, the PS4 and Xbox One, which both launched last month, have already respectively sold 2.37 million and 1.84 million units.

Nintendo has already flatly refused to develop games for rival platforms, although CEO Satoru Iwata acknowledge that the company "might be able to gain some short-term profit" as a result. However, Iwata believes that deciding to go third party, as its former rival Sega did in 2001, would ultimately be disastrous for the brand.

Therefore, with the release of Hyrule Warriors, Nintendo may have found a comfortable middle ground, which could be a win-win situation for both the company and third party developers.

What do you think, dear readers? Will Hyrule Warriors usher in a new era of innovative crossover titles for Nintendo? Let me know your thoughts in the comments section below!

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The article How the New Zelda Game 'Hyrule Warriors' Could Change Nintendo's Other Franchises originally appeared on Fool.com.

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

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Profitable Web TV Is Still a Long Way Off

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Intel's decision to stop working on its OnCue Web TV initiative underscores the challenges that any company faces when looking to provide Web TV to Internet users.

Intel created OnCue to provide the same basic bundled channels offered by cable or satellite companies. This would allow anyone to watch the shows on a device of their choice.


The problem is that to be successful, Web TV must address the issues consumers are concerned about: higher content costs and a la carte options. A la carte refers to paying for only those shows the customer wants to watch.

Intel knew this, and worked hard to secure content deals for OnCue. But even offering a 75% premium over its competitors wasn't enough to land contracts from content providers.  The real problem was that Intel wanted to offer a variety of channel options, an idea that was rejected by the industry. 

So no matter how long it took or if it ever was successful, Intel reportedly would have to pay out hundreds of millions of dollars for content upfront, essentially killing the project.

Must be competitive 
For Web TV to succeed, it must find ways to cut costs so that it will be attractive to users who are increasingly looking for lower-priced services.

The biggest hurdle with this is the studios producing the content, which now appear to be protecting existing distributors. Until that changes, it looks like any company attempting to offer Web TV will have to charge less for the service to attract customers while paying more for bundled content.

One possibility would be to go a la carte, but that isn't going to happen until content companies are forced by either the market or lawmakers to provide that option. Canada is undergoing that transformation, and it is likely that this will pressure media companies in the U.S. to do the same over time.

As it is now, there is nothing in regard to content that points to Web TV being a legitimate business model. Intel understood that technology doesn't have the answer to market demand in regard to prices and bundling. It is totally on the shoulders of studios, and until they're willing or forced to change, Web TV will remain in limbo.

Enter Verizon
Numerous reports say Verizon is close to making a deal to acquire OnCue from Intel, with some saying it could pay under $200 million for it. 

At the end of the third quarter, Verizon had approximately 5.9 million subscribers of its FiOS Internet service. For them, adding OnCue could result in a nice increase in subscribers, although its profitability will depend upon whether or not the company will have to secure new contracts for a streaming service, in addition to what it pays out now.

The benefit for Verizon is it will allow it to compete in territories it hadn't been able to before, which could have an impact on other content distributors like Comcast.

For those new subscribers the company does land, it should be able to upsell them to other services, which would increase its average revenue per user, which was up to almost $113 on a monthly basis in the latest quarter. 

Of all of its FiOS customers, almost two-thirds are triple-play customers, underscoring the potential upside for each new customer landed by Verizon for its new streaming service.

Other than short-term profitability questions, the other variable is how many consumers will acquire a streaming service that only offers the same content offered on network and cable TV channels.

The set-top box 
Interestingly, there is more coverage on the set-box side of the Web TV story than there is on the content side. That's puzzling to me as an investor, because all the set-top box does is act as a conduit for content. Many people I know already stream YouTube, Netflix, and Hulu on their TV sets, so I'm not sure what the release of a new Web-enabled set-top box (as in the case of Google ) would do to further the cause.

Google and other competitors in the field need to understand that it's not the type of set-top box offered that will determine the success of Web TV. Instead, it will be the type of content deals made -- if any -- that will determine its success.

As with a number of areas with Google, I see this as more of a marketing play rather than a serious attempt to generate revenue. This isn't the first time a tech company has entered a sector to remind investors and shareholders it's tuned into the market, rather than for the purpose of generating serious revenue. I would rather see Google enter the premium content distribution side of Web TV, instead of the hardware side. That's where the money is in this sector, and Google is already working on that with branded YouTube channels.  

Watch the content deals
The success or failure of Web TV will be determined solely by content. Once the content deals are worked out, the brands, features, and benefits of individual TV consoles will come into play. Until then, the introduction of new models should only be considered a form of marketing to keep the companies that are making them in the minds of consumers.

Streaming existing content bundles on a set-top is not a compelling proposition. This is why Web TV is a long way from becoming a reality, and is a major reason why Intel got out of the business.

Until (or if) content deals are made, it won't be known whether this will be a good business model or not. As things stand now, it's not, which is why I'm bearish on the industry for now.

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The article Profitable Web TV Is Still a Long Way Off originally appeared on Fool.com.

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

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Believe it or not, China's Terrible Pollution isn't a Reason to Hate Coal

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Pollution is an issue showing up throughout fast-growing China. Shanghai has repeatedly warned the young and elderly to stay indoors because of air pollution, earning the city and China notable negative press. While the answer of trimming the use of coal makes for good reading and seems intuitively logical, Chinese coal use is set to increase—not decrease.

A growing pie
There's no doubt that China has a big pollution issue on its hands, but it also has to find a way to satisfy the nation's nearly insatiable thirst for energy. In fact, reliable electricity is a prerequisite for growth. It would be virtually impossible for the massive country to satisfy all of its electricity needs with just one power option.

That's the big reason why coal use will continue to grow despite the negatives associated with it. And that will be good news for coal miners like Peabody Energy , BHP Billiton , and Rio Tinto , all of which mine for coal in Australia. The trio covers the spectrum from thermal to metallurgical coal, so it isn't just electricity that will be a benefit, but also construction.


Met coal is used in the steel making process and, like reliable electricity, steel is a necessity for growth. BHP Billiton and Rio Tinto are also major iron ore and copper players, two other natural resources that are needed to support a growing nation. That gives the pair even more exposure to China's growth. Of the trio, only Peabody has a unique focus on coal.

The U.S. example
In addition to a rising energy tide lifting all boats, there's a second reason to expect coal to survive: the United States. Peabody notes that since 1970 coal use in the United States has gone up three-fold. U.S. emissions, however, have fallen by nearly 90%. A focus on pollution and new technology was the driver of what would, on the surface, seem like contradictory facts.

China, for its part, is doing the right things to follow the U.S. example. It is shutting older, dirtier power plants, closing inefficient mines that produce low-quality coal, installing "scrubbers," and making use of technology like coal gasification to make coal cleaner. All of these things lead Peabody to believe that coal use is set to rise in China while, at the same time, pollution will start to head lower.

A Chinese coal option
Rio Tinto and BHP Billiton are large and diversified miners, which may not be of interest if you are looking for coal exposure. And while Peabody is a great company, it's globally diversified, with about half of its business tied to the U.S. thermal market. For Chinese-focused coal exposure, a company like Yanzhou Coal Mining is a better option, but only for risk-tolerant types.

Yanzhou Mining operates out of the Shandong Province, strategically located near regional coal importers like Korea and Japan. And, perhaps more important, it has access to ports, railway lines, and a river, all of which make getting its coal to market that much easier.

Even though coal has been under pressure in China, Yanzhou Mining was able to increase coal production and sales by around 7% each through June (the latest reported data). Low coal prices hit the bottom line, but clearly the company is growing its business despite the negatives. And with an yield around 4.7%, you are getting paid to wait for better days.

Don't give up on coal
It's trendy to say that coal is a bad fuel option, but that doesn't mean it won't be a profitable investment option. Growing demand for energy in China virtually assures coal's growth in the nation. And the growth of coal in the U.S. market coupled with impressive pollution control efforts prove out that case. Peabody, Rio Tinto, and BHP Billiton all provide some exposure to the Chinese coal market, but, if you are an aggressive type, Yanzhou Mining will put you right in the thick of it.  

When swinging for the fences pays off
Opportunities to get wealthy from a single investment don't come around often, but they do exist, and our chief technology officer believes he's found one. In this free report, Jeremy Phillips shares the single company that he believes could transform not only your portfolio, but your entire life. To learn the identity of this stock for free and see why Jeremy is putting more than $100,000 of his own money into it, all you have to do is click here now.

 

The article Believe it or not, China's Terrible Pollution isn't a Reason to Hate Coal originally appeared on Fool.com.

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

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Is It Time to Buy Sodastream?

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SodaStream , the home-soda-machine maker, hasn't done well in the stock market in the past several months: Shares of the company have lost more than 30% of their value since mid-June. Due to the sharp drop in the stock price, is the company undervalued? Is it time to get back into SodaStream? 

Revenue continues to rise
During the third quarter, SodaStream was able to expand its net revenue by more than 28%, and in the past three quarters by more than 30%. Based on the company's guidelines and performance in the past three quarters, SodaStream estimates its fourth-quarter revenue will reach $172 million -- an increase of nearly 30% year over year.

The company's management seeks to surpass $1 billion in revenue by 2016 -- nearly 80% higher than the current estimates for 2013. This means the company's revenue will have to grow by an average of at least 20% each year to reach this goal. One way to reach this goal is via collaborations with other companies. 


SodaStream continues to find new ways to expand its revenue by collaborating with other companies: The company has entered a joint project with Samsung to integrate its system with Samsung's refrigerators. SodaStream's launch at Wal-Mart fueled the sharp rise in sales during the second quarter. 

Its recent product release of SodaCaps could improve its soda-making experience, which may translate to higher revenue. 

These kinds of collaborations are likely to keep the company augmenting its revenue in the coming quarters. The company is also likely to maintain its high revenue growth as long as the big beverage companies don't directly engage with SodaStream. 

Flying under the radar
One of the advantages of being small is flying under the radar of big beverage companies including Coca-Cola and PepsiCo . Up to now, these companies haven't done much to compete head-on with SodaStream in the home-soda-making business. For now SodaStream isn't putting much of a dent in Coca-Cola and PepsiCo's revenues.

In the third quarter, Coca-Cola's revenue slipped by 2.5%; PepsiCo's net revenue rose slightly by 1.5%. These companies aren't likely to increase their sales by a high rate due to their large size and market share. Their moderate changes in revenue are mostly driven by seasonal changes, local competition, and economic developments. In North America, SodaStream's net revenue was only $50 million during the third quarter. In comparison, Coca-Cola's revenue was $5.7 billion in North America -- this means SodaStream's revenue was less than 1% of Coca-Cola's revenue in North America.

Despite the low growth in revenues, these companies still have several advantages over SodaStream including diversity in their product lines, which, in the case of PepsiCo, extends to snacks and other food products. These companies also maintain much higher profit margins than SodaStream's.  

Profitability
During the third quarter, SodaStream's profitability reached 12.5% -- a slight decline from last year; in the 2012 third quarter, the profit margin was 14.6%. In comparison, Coca-Cola's profitability reached more than 20% in the third quarter; PepsiCo's, 16.4%. These higher profit margins enable these companies to provide a reasonable dividend; both Coca-Cola's and PepsiCo's annual dividend yield is around 2.8%.

On the other hand, SodaStream doesn't pay a dividend. Therefore, investors are likely to benefit from holding on to its stock as long as it continues to sharply improve its revenue by such a high rate. In terms of valuation, is the company worth buying?  

Valuation
Following the drop in SodaStream's stock in recent months, the company's valuation remains higher than that of its leading competitors, as indicated in the table below. 

Source of data: Yahoo! Finance and Damodaran's site

The table compares the enterprise value-to-earnings before interest and taxes ratios of SodaStream, Coca-Cola, and PepsiCo to the beverage industry. As you can see, Coca-Cola and PepsiCo are, as expected, in line with the industry average, while SodaStream's valuation remains higher by more than 30% of the industry's average. A higher ratio is expected for SodaStream considering its high growth in sales. But this also means the company's current price isn't much of a bargain. 

The Foolish bottom line
SodaStream is a great company that continues to find ways to maintain its high growth rate. As long as the company doesn't have to directly compete with other beverage companies, it could maintain its growth. On the other hand, if the company continues to grow at its current pace, this could result in Coca-Cola or PepsiCo or both engaging in direct competition -- releasing their own soda maker.

Moreover, SodaStream's relatively low profit margin, high valuation, and lack of diversity (beyond beverages) doesn't work in its favor as an investment. Therefore, at this point, I think the company doesn't offer enough to make it an stock worth purchasing. 

Learn from the wisdom of Buffett
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The article Is It Time to Buy Sodastream? originally appeared on Fool.com.

Fool contributor Lior Cohen has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola, PepsiCo, and SodaStream. The Motley Fool owns shares of Coca-Cola, PepsiCo, and SodaStream. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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The 2 Reasons Facebook Share Are Down Today

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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 are giving back some of yesterday's unexpected taper lift this morning, with the S&P 500 and the narrower Dow Jones Industrial Average down 0.41% and 0.22%, respectively, at 10:20 a.m. EST.

There are always some people who want to spoil a party. In the case of Facebook , today's culprits are a federal judge and the company's CEO, Mark Zuckerberg. Shares of the social networking company are set to be added to the S&P 500 after the close of trading on Friday, crowning their return from ignominy after a May 2012 initial public offering that was a public relations fiasco. As of yesterday's close, the stock has more than doubled year to date, with an 18% gain this month alone. Today, however, the ghosts of that IPO have come back to haunt the shares, which were down 1.51% at 10:20 a.m. EST.


In a decision that was released publicly yesterday, U.S. District Judge Robert Sweet ruled that investors can pursue claims against Facebook for not having disclosed prior to its IPO internal projections regarding the revenue impact of the rise of mobile usage. This was one of the issues that mired the flotation in controversy, particularly as it emerged that the company had shared the data with its underwriters' stock analysts.

The fear that the transition to mobile would harm Facebook's advertising franchise continued to dog the stock this year until results for the second and third quarters reassured investors that this was not occurring -- note that all of the stock's gains in 2013 have come in the second half of the year:

FB Chart

FB data by YCharts.

The second news item that is hurting shares today is the disclosure that Facebook is planning a stock sale in which Zuckerberg will sell 41.4 million shares worth $2.3 billion. That represents just less than 9.7% of his current ownership stake, according to data from S&P Capital IQ. With 17.3% of the company's shares outstanding, Zuckerberg is Facebook's largest shareholder by a wide margin.

Facebook said it expects Zuckerberg to use most of the proceeds from the sale to satisfy taxes related to the exercise of an option to buy 60 million Class B shares (Class B shares are convertible into Class A shares at any time, but they have 10 times the voting rights). Nevertheless, shareholders ought to ponder the timing of the sale, which suggests that company insiders believe the stock is at least fully valued. With a market value of $136 billion and trading at 53 times next 12 months' earnings-per-share estimate -- the sort of numbers reminiscent of large-cap blue chips at the beginning of 2000 -- that's not hard to imagine.

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The article The 2 Reasons Facebook Share Are Down Today originally appeared on Fool.com.

Fool contributor Alex Dumortier, CFA has no position in any stocks mentioned; you can follow him on Twitter @longrunreturns. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Did Amarin's CEO Leave With His Tail Between His Legs?

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It's rarely a good sign when a CEO quits with a stock near 52-week lows. When Amarin announced its CEO Joe Zakrzewski's "retirement" at age 50, let's just say it raises an eyebrow. Here's a guy that once stated, "If you offer me $15 a share, I am waiting. If you offer $30, $40, $100 it's a different story." Now with Amarin well under $2, he's packing his bags.

Packed his money bags and left
Zakrzewski has taken a salary and sold enough shares at a fraction of $30 to make him a multimillionaire while Amarin's results continue a cash-burning death spiral. The company has racked up more than $150 million in net losses the first three quarters of the year. Analysts expect another $40 million in losses for the fourth quarter and $110 million next year.

Amarin has been hoping for an FDA approval to expand marketing for its fish oil drug Vascepa. The odds look dim at best following a negative majority vote from an FDA advisory panel. While on the one hand Zakrzewski probably doesn't need the salary, on the other hand it doesn't seem like he is too confident in Amarin's future to be "retiring" at such a young age along with other clues.


Maybe he was forced out?
In a press release on Dec. 16, Amarin announced a "change" in leadership. It began with the appointment of John Thero, the company's current president, moving up to the CEO role. Current director Lars Ekman will move up to the chairman of the board position as the company "embarks on the next stages of its commercial growth," according to Ekman.

While Ekman did thank Zakrzewski for his service, what was missing in the press release was any word from Zakrzewski himself. There were no positive statements from him about Amarin, no publicly disclosed departure letter, no customary wink and nod to the shareholders that normally comes with a friendly departure of a still bullish CEO. In fact, in the accompanying filing with the SEC, absent was the customary statement stating there were no disagreements between the departing executive and the company on any matter regarding operations, financials controls, policies, or procedures. 

The wink and nod from Best Buy's CEO
For an example, take a look at Best Buy . When then-CEO Brian Dunn resigned, he soon made it well known that he was still quite bullish on the company. Not only did he make it clear that there were no disagreements regarding the usual list, but he also made it clear that he is very confident in Best Buy going forward. Dunn stated, "I have enjoyed every one of my 28 years with this company, and I leave it today in position for a strong future. I am proud of my fellow employees and I wish them the best." And he apparently was right. Best Buy continues to be quite profitable and is expected to earn $2.43 per share this year. When factoring in dividends, Best Buy stock is trading at record highs and is expected to grow its earnings 16.5% next year to $2.83 per share.

Take note if Zakrzewski pulls a Ruby Tuesday
It could be worse. So far at least, Zakrzewski hasn't done what ex-chairman of the board Matthew A. Drapkin of Ruby Tuesday did. Not only did Drapkin abruptly resign with little notice, but he then proceeded to dump almost all of the shares he owned into the open market despite Ruby Tuesday sitting near 52-week lows. Ruby Tuesday, like Amarin, has a dim-looking future. Ruby Tuesday is racking up net losses, which analysts expect to continue all next year. If we learn that Zakrzewski starts aggressively selling shares like Ruby Tuesday's ex-chairman, it would be a terrible sign.

Foolish final thoughts
It's never a good sign when the ship's captain jumps off the side of the boat with little warning or explanation. Cautious Fools may want to stay on the sidelines and watch Amarin until more solid evidence surfaces that the ship is on the right course with its new captain.

This high-growth company is on the right course
Opportunities to get wealthy from a single investment don't come around often, but they do exist, and our chief technology officer believes he's found one. In this free report, Jeremy Phillips shares the single company that he believes could transform not only your portfolio, but your entire life. To learn the identity of this stock for free and see why Jeremy is putting more than $100,000 of his own money into it, all you have to do is click here now.

The article Did Amarin's CEO Leave With His Tail Between His Legs? originally appeared on Fool.com.

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

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Geographic Location is Just as Important in the Energy Sector as it is in the Real Estate Market

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Exploration and production MLP, BreitBurn Energy , has a winning strategy. Investors should be excited about management's focus on high-quality assets in the most promising geographic regions in the United States. In particular, BreitBurn has been very active recently in acquiring assets in the Permian Basin, which is one of the premier oil and gas fields in the country. These initiatives are sure to provide years of growth, and the benefits of the company's wise acquisitions are already being felt.

This is why income-oriented investors interested in the energy space would do themselves a huge favor by taking note of BreitBurn Energy's geographic strategies.

High-quality assets
A major advantage for BreitBurn Energy is its focus on the most promising oil and gas properties in the United States. Management advises investors that a key part of its strategy is to pursue only high-quality plays characterized by long-lived assets and low depletion rates. BreitBurn Energy has a geographic presence in nine states, including Texas, Oklahoma, and Wyoming, where oil and gas production is booming.


For example, earlier this year BreitBurn Energy acquired $860 million in assets in the Oklahoma Panhandle that added 7,400 barrels of oil equivalent per day to its net production. The acquisition fulfilled one of BreitBurn's strategic initiatives, which is to enhance its liquids exposure, but it also allowed the company to complement its Permian Basin operations.

BreitBurn's Permian Basin footprint became even more pronounced when it very recently acquired additional properties there for $282 million. These assets, which are 60% oil, will increase production by 2,900 barrels of oil equivalent per day, and have an estimated reserve life of over 15 years.

All told, BreitBurn's operations in Texas include nearly 12,000 gross acres and 90 producing wells. Its acreage in Texas holds 21 million barrels of oil equivalent in proved reserves, as well as 315,000 barrels of oil equivalent in per-day production.

Why focusing on the Permian Basin is a winning strategy
Investors should be greatly encouraged by BreitBurn Energy targeting the Permian Basin. There's good reason for management devoting such huge resources to the area. The Permian Basin is playing a major role in the booming oil and gas production in the United States. The U.S. Energy Information Administration reports that total production at the Permian Basin hit one million barrels per day in 2011, making the region one of a select few in the United States to reach that level of daily production.

Oil and gas producers are flocking to the region, meaning competition is heating up to acquire the best properties for development. In fact, the EIA states that the active rig count at the Permian Basin has grown from 100 rigs in mid-2009 to over 500 rigs in May 2012.

Other companies, including Apache Corp. and Devon Energy have devoted significant resources into the Permian Basin, and their efforts are paying off. Apache controls more than 3.5 million gross acres in the Permian Basin. Apache operates more than 12,000 wells in 152 fields there. Apache's year-end estimated proved reserves were 800 million barrels of oil equivalent, which represented 28% of Apache's total proved reserves. Last year, Apache's liquids production in the region rose 25%.

Devon booked a $151 million profit over the first three quarters of this year, reversing the $227 million loss from the same period last year. Devon delivered 38% production growth in its U.S. oil operations, thanks to the hugely successful Permian Basin.

Get to know BreitBurn Energy
For oil and gas exploration and production companies in the United States, the Permian Basin represents a huge opportunity. The region's growth is in full throttle, and many companies are staking their claims there. Thankfully for its investors, BreitBurn Energy has made the Permian Basin a key priority for property acquisitions.

BreitBurn's efforts are sure to pay off in 2014 and beyond, and actually already have. The company reported record results the last two quarters, and assuming management can execute going forward as well as it has in the recent past, investors have many profitable years ahead.

It's not too late to invest in America's energy resurgence
Record oil and natural gas production is revolutionizing the United States' energy position. Unfortunately, identifying winning investments can be difficult. Thankfully, the Motley Fool is offering you a free, comprehensive look at three energy companies set to soar during this transformation in the energy industry in our special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

 

The article Geographic Location is Just as Important in the Energy Sector as it is in the Real Estate Market originally appeared on Fool.com.

Bob Ciura has no position in any stocks mentioned. The Motley Fool recommends BreitBurn Energy Partners L.P.. The Motley Fool owns shares of Devon Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Why LINN Energy Is a Solid Buy After Closing the Berry Petroleum Acquisition

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Monday, December 16 represented the day many LINN Energy investors were waiting for. The much-anticipated vote to acquire Berry Petroleum passed, and the acquisition officially closed immediately after. Interestingly, LINN units did not bounce as some might expect, given that the market usually loves certainty. And, shares of LINN's financial holding entity, LinnCo , which were used to finance the deal, have actually sold off since Monday's vote.

Despite the market's tepid reaction, investors should have full confidence in the company's future. By acquiring Berry, LINN has fulfilled its biggest strategic initiatives: primarily, to find extremely high-quality assets for production of oil and gas. As a result, LINN has many profitable years ahead for investors.

Why Berry's assets are a perfect fit
LINN's management team maintains a fairly simple strategic view of its business: to acquire and develop high-quality properties for production of oil and gas. Fulfilling those objectives is how an exploration and production company grows and funds its massive distribution, and it's something the company takes very seriously. LINN's management team has a sterling track record of making deals that are directly beneficial to LINN's unit holders, and the Berry deal is no exception.


Berry's assets fulfill LINN's priority of finding high-quality properties. Berry's assets hold a depletion rate of just 15%, and a reserve life greater than 18 years. In addition, Berry's portfolio will solve a separate desire for LINN, which is to increase its liquids exposure. That's because Berry's reserves are 75% liquids.

Put simply, upon integrating Berry, LINN will be a force to be reckoned with among exploration and production MLPs. LINN's overall production will increase by 30%, and the company will now be the fifth-largest producer in California.

Further benefits of the Berry Petroleum acquisition
Not only does Berry offer high-quality assets that LINN craves, but the deal also has the potential for significant synergies. Investors who fear LINN overpaid for Berry should be at least somewhat comforted by the fact that management will realize considerable cost cuts, since Berry will perfectly complement LINN's existing operations.

LINN's significantly increased size and scale will lower financing costs and provide greater access to capital. In addition, LINN's debt metrics are expected to improve, as the transaction provides for additional liquidity.

It's reasonable to wonder why units of LINN and shares of LinnCo reacted poorly to the news. After all, the pending Berry acquisition was the biggest concern for investors heading into the new year. One possible solution may be that the market thinks LINN overpaid for Berry. It's true that LINN had to increase its original offer, from 1.25 shares of LinnCo to 1.68 shares.

In all, LINN paid a 45% premium to Berry's closing price the day after the deal was first announced. Despite a hefty premium paid, it's abundantly clear that LINN will reap huge rewards from acquiring Berry. The expected benefits far outweigh the negatives.

Don't forget the distribution
Not only does the Berry acquisition make great sense from an operational standpoint, but LINN and LinnCo investors are likely to see immediate benefits. LINN's hefty 10% distribution will be well-covered by distributable cash flow. And, management has long maintained its intention to increase its payout to $3.08 per unit of LINN and share of LinnCo. This has not happened yet, but it's an exciting possibility that could materialize once the integration of Berry is under way.

As a result, investors shouldn't be at all concerned with the market's lackluster response to the closing of the Berry acquisition. LINN's production will increase substantially, its liquids exposure is enhanced, and Berry's portfolio of long-lived assets with low depletion rates fits perfectly with LINN's upstream exploration and production business model.

Income investing -- it actually works
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

 

The article Why LINN Energy Is a Solid Buy After Closing the Berry Petroleum Acquisition originally appeared on Fool.com.

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

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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10:32 am Is Dominion Resources' Dividend Increase a Smart Move?

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Source: Dominion Resources. 

Dominion Resources announced Tuesday that it is boosting its 2014 dividend by nearly 7%. While this might mean more cash in hand for immediate investors, let's dive deeper to see whether Dominion Resources is making the most of its money.

Dynamite dividend?
The Dominion Resources board of directors has spoken. For fiscal 2014, the utility will up its dividend to $2.40 per share, compared to $2.25 this year. In absolute terms, that represents a 6.7% increase over current numbers, a significant bump for investors.

But the move should hardly come as a surprise for long-term Dominion shareholders. Through thick and thin, the company has prided itself on following the "staircase model" of consistently upping its dividend over time.


D Dividend Chart

D Dividend data by YCharts.

Southern Company and Duke Energy have also managed to step up their dividends again and again. Over the past five years, Southern Company has upped its dividend five times for a total 20.8% payout increase, while Duke Energy has increased its own distribution five times for a 13% improvement. Although Dominion Resources has bumped up its dividend only four times, the overall 28.6% increase beats out both Southern Company and Duke Energy, and that's not including this latest announcement.

All dividends are not created equal
But a big dividend doesn't mean a thing if the company can't compete. Dividends are one of many ways a company can create value for shareholders, and freed-up finances can sometimes mean more for capital expenditures or acquisitions than distributions. Rejecting the staircase model, both Exelon Corporation and Atlantic Power dropped their dividends drastically this year. Exelon Corporation cut its distribution by 40%, while Atlantic Power knocked off a whopping 66%.

The market moves for these five stocks is evidence enough that dividends aren't the only things that matter. While Dominion stock has soared 63% over the past five years, Duke Energy isn't far behind with 43%. And for those companies cutting dividends, Exelon stock's dip is minimal compared to Atlantic Power stock's price plummet.

D Chart

D data by YCharts.

That same stock price drop has allowed Atlantic Power's dividend to soar to 11.4%. The other companies' yields look a lot more stable, and reflect the fact that each utility has grown or compressed its yield in conjunction with its stock price. Dominion Resources currently has the lowest yield at 3.5%, but that has a lot to do with Dominion shares soaring in recent times.

D Dividend Yield (TTM) Chart

D Dividend Yield (TTM) data by YCharts.

Is Dominion's dividend dynamite?
For current shareholders, Dominion Resources' dividend increase is a good thing. The company has reaffirmed its dividend payout ratio of 65% to 70% of operating earnings, and its current operations support smart spending elsewhere.

"As Dominion continues building energy infrastructure to meet market and customer demand, we expect 80 percent to 90 percent of our future earnings to come from our regulated businesses," said Chairman, President, and CEO Thomas Farrell II in a statement. "This earnings mix should allow for continued strong growth in our dividend commensurate with our future operating earnings growth rate."

For prospective Dominion Resources investors, its stock price isn't cheap. The "staircase model" is quite the allure for income investors, but the market may have already priced in much of Dominion Resources' upside as it adds on natural gas and transmission projects.

Company

P/E Ratio, TTM

Price-to-Book

Exelon Corporation

15.0

1.10

Southern Company

21.9

1.89

Dominion Resources

60.4

3.27

Duke Energy

20.1

1.17

Atlantic Power

n/a (no earnings)

0.65

Source: Yahoo! Finance.

Big dividends with big returns
Dominion Resources' dividend increase is a smart move for current shareholders, but shopping investors might be better off elsewhere. The Motley Fool has searched long and hard for companies that offer both sustainable dividends and significant profit potential, and has identified the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.

The article 10:32 am Is Dominion Resources' Dividend Increase a Smart Move? originally appeared on Fool.com.

Fool contributor Justin Loiseau has no position in any stocks mentioned, but he does use electricity. You can follow him on Twitter @TMFJLo and on Motley Fool CAPS @TMFJLo. The Motley Fool recommends Dominion Resources, Exelon, and Southern Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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A New Deal Sends This Aircraft Lessor Flying Past Its Rivals

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Over the past 20 years, airlines have steadily increased the number of aircraft in their fleets through leases instead of purchases. With more than 40% of the nation's planes leased, this practice is a great investment opportunity for those in the know. With AerCap Holdings'  recent announcement that it will be purchasing American International Group's International Lease Finance Corp., AerCap will become the world's second-largest aircraft lessor. Though there are some initial concerns about the transaction's effects, the deal offers investors plenty of upside.

A look at leasing
The percentage of owned planes within the nation's airlines' fleets has fallen from 73% in 1990 to 57% in 2012. Some of the nation's largest airlines have continued to replace aging aircraft with leased models, instead of shelling out the big bucks to own the planes outright. Below, you can see the percentage of aircraft leased by each of the top public U.S. airlines as of December 2012.

Airline Leased Owned Total Fleet Percentage Leased
American Airlines*  515  693 1,208  43%
Delta Air Lines  277  440 717  39%
JetBlue Airways
 64  116 180  36%
Southwest Airlines  189  505  694  27%
United Continental Holdings  566  693  1,259  45%

Source: Company 10-Ks; * includes combined fleet of American Airlines and US Airways, which merged in 2013


Leasing planes allows carriers to reduce their expenses and capital expenditures, while giving them access to the newer, more fuel-efficient models being released by various manufacturers. Since fuel expenses now make up close to a third of the airlines' operating expenses, the newer model aircraft can help boost bottom lines that have been in the red so frequently over the past decade.

Delta was burned in the early 2000s after overhauling its entire fleet. The travel slump that followed 9/11 really created a difficult situation for the airline, which had just extended itself financially to improve its aging fleet. American Airlines is currently in need of a similar revamp, and like the old Delta, the company is looking to replace its fleet over a short span of 10 years. Leasing will help to reduce American Airline's capital expenditures as it makes its preparations for such a huge overhaul.

Small fish, big fish
AerCap has been considered a small fry in the aircraft leasing market. But with the closing of its deal with AIG for ILFC -- slated to occur in the second quarter of 2014 -- the little guy will be competing with the best of them.

The combined fleet of AerCap and ILFC will reach the 1,300 mark, with options to buy another 400 aircraft. For some perspective, the world's largest aircraft-leasing operation -- General Electric's Capital Aviation Services, or Gecas, division -- operates close to 1,700 planes.

Heavy burden
After the announcement of the AerCap's deal with AIG, Standard & Poor's announced that it would downgrade AerCap's corporate credit rating from BB+ to BBB- if the deal closes. The rating agency stated that AerCap would be designated as "Credit Watch with negative implications" due to the transaction.

The S&P downgrade would be a direct result of AerCap's assumption of ILFC's large debt obligations, as well as the additional debt used to finance the deal. The lessor's debt-to-capital ratio would be pushed among the highest of eight aircraft leasing firms.

But investors haven't shed their enthusiasm for the deal, with AerCap's shares rising 40.5% since the deal was announced Monday. Though the company would certainly be acquiring a big debt burden, almost $21 billion, there are a few considerations that may make the heavy leverage worthwhile.

The small company will now have access to ILFC's little black book of customers, while assuming its current leases in place. With those leases, AerCap can expect to see profits close to the $410 million ILFC pulled in last year, depending on renewals and some other variables. Investors should know that ILFC has reported losses so far in 2013, but those are attributable to impairments for the operation's older planes.

Also included in the terms of the ILFC deal is a $1 billion unsecured revolving credit facility from AIG. The insurance giant will also be making the necessary accounting adjustments in order to impair the older models within ILFC's fleet -- preventing any such impairments on AerCap's part, which would hurt the company's shares.

Flying high
With such big benefits, the ILFC deal has to be a major win for AerCap. As a former little guy, the company has the opportunity to take over the lead within the aircraft leasing market. And though the stock has already shot upward following the deal's announcement, the closing and completed merger (profits included) could provide investors with further upside.

Top dog
Though investors will have to wait until the second quarter to see how the AerCap/ILFC deal concludes, there's no need to wait to see what other stocks will take off in 2014. As we get closer to the beginning of a new year, be sure that you aren't like the investors who got burned by staying on the sidelines during 2013. The Motley Fool's chief investment officer has just hand-picked one such opportunity in our new report: "The Motley Fool's Top Stock for 2014." To find out which stock it is and read our in-depth report, simply click here. It's free!

The article A New Deal Sends This Aircraft Lessor Flying Past Its Rivals originally appeared on Fool.com.

Fool contributor Jessica Alling has no position in any stocks mentioned. The Motley Fool recommends American International Group. The Motley Fool owns shares of American International Group and General Electric Company and has the following options: long January 2016 $30 calls on American International Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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How Valuable Are Big Hits for the Entertainment Industry?

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Big hits continue to be important to the TV industry, although that comes with a caveat. The higher cost of producing hit shows requires a higher number of viewers to make them profitable, and that comes at a time when TV viewership is steadily falling.

This is one of the reasons that studios have gone with so much reality TV lately: the costs are much lower for these shows and they attract decent audiences. That means that the risks are much lower too. To lower risk on the scripted side, companies tap into proven franchises for spin-offs.

Here we'll look at three popular shows that buck the trend and see how they impact the companies that own the rights to them. They are the newest hits -- The Blacklist, along with Duck Dynasty and The Walking Dead. The Blacklist is on Comcast's NBC, The Walking Dead is on AMC Network's AMC TV, and Duck Dynasty is on Disney's A&E channel (the business is A+E, while the channel is A&E).  Hearst Corp. of New York owns 50% of A+E, with Disney owning the other 50%.


The Blacklist
The Blacklist is a fascinating depiction of the relationship between a former serial killer who comes out of hiding to interact in a unique way with a young female FBI agent. It is the most popular new series on television, and is no. 1 in the 18-49 demographic so far this season. It is also the top-rated show for all viewers.    

In the last show of the season, it drew a 3.5 rating in the 18-49 demographic, and 12.3 million overall viewers. NBC has renewed the series for a second season, scheduling 22 episodes. It was the first of the new TV series' to be renewed in 2013.

The 18-49 demo attracts the highest ad dollars. Since The Blacklist is the highest-rated scripted TV series for this group, it will bring in the most money of any series on TV. This of course assumes that it continues to lead the pack for the rest of the season in 2014.

I've watched every episode, and I believe it has some long legs if the stories are written as well as they were in the first half of the season. If the writing quality holds up, NBC could benefit from this series for many years.

Duck Dynasty
Duck Dynasty has become one of the most popular non-scripted TV show of all time, and it continues to draw a huge number of viewers.

The popular reality TV show opened its 4th season with 11.8 million viewers, with 6.3 million of them in the 18-49 demo. It closed out the season with 8.4 million viewers, with 3.5 million of them 18-49 adult demographic. That's strong when you consider it was competing directly against the World Series and a new fall lineup. 

To confirm that it continues to be wildly popular, Duck Dynasty's recent Christmas special attracted just under 9 million viewers--that's almost 40% higher than the Christmas special aired in 2012.   . Most importantly, 4.5 million of those viewers were in the all-important 18-49 demo. Any show that attract cross-generational viewers has inherent longevity, and that means a lot of ad revenue over the long haul.

The Walking Dead
Finally we have the immensely popular The Walking Dead series on AMC. Interestingly, not only is The Walking Dead one of the most popular scripted shows on all of television, it also spun off the popular live talk show Talking Dead which analyzes and summarizes the most-recent show immediately after it airs. While separate, they are connected to one another and will rise or fall together based upon the continued popularity of The Walking Dead.

There are concerns over how long the show will hold up, but there is also talk of a spinoff that would focus on another location in the United States. That show is reportedly scheduled for a 2015 release. If successful, it would mirror other popular spin-off franchises like NCIS. Walking Dead launched its fourth season with record-breaking numbers, as more than 16 million viewers tuned in. Of those, 10.4 million were in the coveted 18-49 demo, a 40% increase over the opener in 2012.   AMC Networks advertising revenue was up 36.3% in the latest quarter to $146 million, with most of that attributed to AMC TV.   

Bottom line
The final take on popular TV shows is they are an important part of any company that has the ability and luck to create one. There is no guarantee that those in the industry can continue to produce such shows, however. If they could, it will be evident over time.

I keep an eye out for companies that are able to generate more than one TV series that ranks high in critical acclaim and viewership. Disney, AMC Networks, and Comcast's NBC have been very successful at this lately, and that bodes well for investors.Big hits are valuable, not only as revenue-generators, but also as bragging rights and the free marketing as they get a lot of media coverage.

If you're investing in entertainment companies, continue to do your own research and keep up-to-date on the performance of the companies that are producing more than one big hit. Hits add a lot of value to a company, but they can also tank quickly once they run out of steam.

Which company is taking over your tv?
The future of television begins now... with an all-out $2.2 trillion media war that pits cable companies like Cox, Comcast, and Time Warner against technology giants like Apple, Google, and Netflix. The Motley Fool's shocking video presentation reveals the secret Steve Jobs took to his grave, and explains why the only real winners are these three lesser-known power players that film your favorite shows. Click here to watch today!

The article How Valuable Are Big Hits for the Entertainment Industry? originally appeared on Fool.com.

Gary Bourgeault has no position in any stocks mentioned. The Motley Fool recommends AMC Networks and Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Molycorp's Last Hurrah

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An old boss of mine once remarked that the standard workplace attitude was one of, "It's not so much that I succeed, but that you fail." Though sadly true, it also seems to apply to the rare earth elements market, where calls for the closure of one producer's refinery sent other stocks soaring.

Over the weekend Lynas suffered a tragic fatal accident at its Malaysian refinery that led to calls by opponents for the plant to be shut down during an investigation into what happened. While the facility has long been a lightning rod for controversy, the latest development sent shares of Lynas' rivals higher, with U.S.-based Molycorp jumping 5%, Rare Element Resources up 5.6%, and Avalon Rare Metals running 10% higher.


Lynas Advanced Materials Plant, Malaysia. Source: Lynas. 

Lynas and Molycorp supply the bulk of rare earth minerals outside of China, which, with reserves of 55 million tonnes, supplies some 86% of the world's rare earths needs. If Lynas stumbles just as Molycorp is set to expand production, it would seemingly be to the latter's benefit.

Molycorp is already on record as saying, in the light rare earths niche it plans on specializing in, there's really no room in the market for more than three primary players outside of China. And when it comes to heavy rare earths, there are but just one or two projects needed. 

Yet that outlook highlights the precarious position Molycorp and all rare earth companies find themselves in. Because of China's dominance and its willingness to impose export quotas on the minerals that are used in essential products and technologies globally, their price skyrocketed exponentially two years back, sending the valuations of companies with even the most tangential relationship to the industry soaring as well. When it became clear there was no imminent danger of the world running out of the rare earth elements anytime soon, pricing collapsed once more.

Yet it served to spur the industry forward in developing the resource so that China no longer dominated the market. New projects have sprung up and new life was seemingly breathed into Molycorp. Unfortunately, cerium and lanthanum, the two elements most abundant at its Mountain Pass mine, also happen to be among the least valuable of the 17 different rare earth elements. 

And just two weeks ago privately held SRE Minerals announced it will develop the world's largest deposit of rare-earth elements that's ever been discovered. The resource would more than double the current known deposits of rare-earth-element oxides. In another blow for Molycorp, the new deposit is said to be replete with excess amounts of cerium, lanthanum, and praseodymium.

Which is why it's not enough for Molycorp to succeed in its own mine development, expansion, and production -- Lynas must also fail. The stage isn't big enough for all the players to stand on, so a weakened rival bolsters its own chance for success.

Lynas has locked horns with the Malaysian government before over permits, and its advanced materials refinery is still only operating with a temporary license secured in 2012. As local peoples and environmentalists challenge its release of toxic chemicals, the facility has been marked for protests and confrontations.

While it may seem that every setback at a rival is a win for Molycorp, the miner has its own host of concerns to deal with, suggesting an investment here is still too risky.

Dig into this
It's no secret that investors tend to be impatient with the market, but the best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report, "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.

The article Molycorp's Last Hurrah originally appeared on Fool.com.

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

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Workers' Rights Groups: It's Time to Outlaw Job Applicant Credit Checks

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Man s hand filling out an employment application with a ballpoint pen
Alamy
Have you ever applied for a job, only to be told that before the company will consider hiring you, you'll need to consent to a credit check?

So far, only a minority of workers have to submit to this indignity. But according to worker advocacy group The Leadership Conference on Civil and Human Rights, it's a growing trend: 47 percent of employers in the U.S. now require that new hires submit to credit checks when applying for certain positions.

The Leadership Conference is not especially pleased about that. And they intend to do something about it.

On Tuesday, a coalition of 50 advocacy organizations, including the American Association of People with Disabilities, Demos, NAACP, Lawyers' Committee for Civil Rights Under Law, and Service Employees International Union sent a letter to members of the Senate, urging them to co-sponsor a bill that Sen. Elizabeth Warren (D-Mass.) has put forward.

Titled the Equal Employment for All Act, this proposed law would forbid requiring credit checks as a condition of hiring or promoting applicants for "most" positions.

As the letter's signers argue: "In addition to the weak economy, job-seekers today confront another less discussed challenge -- employers that require credit checks as a condition of employment. Not only does this practice discriminate against the long-term unemployed, it has a disparate impact on communities of color and people with disabilities and constitutes an unwarranted invasion into job seekers' personal lives."

A Bigger Problem Than You Realize

How big of an impact does it have? Advocacy group Demos says that "1 in 4 unemployed people from low- and middle-income households with credit card debt" have been asked to submit to a credit check when applying for work.

With 13 million Americans having been thrown out of work by the Great Recession, more and more Americans belong to this category today. And because these applicants are now not in the greatest of situations, financially speaking, Demos reports that "1 in 7 jobseekers with poor credit say they had been told they would not be hired for a position because of their credit history."

American Dreams and Rude Awakenings

The activists point out that this seems like an especially unfair Catch 22, inasmuch as by keeping these applicants out of jobs for which they're otherwise qualified, the practice of credit checking denies them the ability to earn the income to keep up with their bills -- the very thing that would help them pass a credit check in the first place.

Indeed, the practice may be more than unfair. It may already be illegal.

The activists cite a 2007 report by the Federal Reserve Board that found that, for example, "African Americans and Hispanics had considerably lower credit scores than non-Hispanic whites." That smacks of discrimination on its face, and if employers are making hiring and promotion decisions in part based of these lower credit scores, they risk compounding the discrimination.

An Inappropriate Tool

Of course, employers argue that it is never their intention to discriminate. The rationale most often cited to justify checking the credit of new hires, and new promotions, is preventing on-the-job fraud. The worry, say the practice's defenders, is that "employees who are behind on their bills will be more likely to embezzle funds or engage in other criminal activity."

Yet according to the activists, time and again, studies that have attempted to verify this hypothesis have instead refuted it, "fail[ing] to find a link between low credit scores and propensity to commit financial crime at work." In particular, activists cite a 2010 statement by Eric Rosenberg, Director of State Government Relations for credit ratings organization TransUnion, who testified before the Oregon state legislature: "At this point, we don't have any research to show any statistical correlation between what's in somebody's credit report and their job performance or their likelihood to commit fraud."

So as it turns out, running credit checks on employees isn't even helping the employers. One thing's for certain: It's definitely not making job-seekers happy.

Motley Fool contributor Rich Smith has pretty good credit. Yet he's never yet heard an interviewer exclaim: "Hey! What a great credit report! You're hired!"

 

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Nucor and Encana are Done with Natural Gas for Now, but Why?

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As recently as its third quarter earnings release, Nucor was talking up the benefits of a natural gas drilling contract with Canada's Encana . However when it warned that fourth quarter earnings would fall short of Wall Street expectations, it also announced that drilling was coming to a halt. Why?

Controlling costs
The steel industry makes use of a number of inputs that are commodities. That exposes participants to often volatile cost swings, including such base necessities as iron ore and coal. For example, ArcelorMittal is a steel company, but it also has material operations in the coal and iron ore spaces.

In fact, the company intends to expand its iron ore production by around 50% by 2015. It believes that iron ore will be a cornerstone for its growth, placing it on an equal footing with its steel operations. The end goal is to take out the middle man so ArcelorMittal can get the best prices possible on the iron ore it uses. And, on the coal side, the company's eight million tonnes of production is about as much metallurgical coal as U.S. based Arch Coal's  output.


Different inputs
ArcelorMittal uses a different steel making technology than Nucor, however. So Nucor has different inputs, one of which is natural gas. Although the price of natural gas is relatively low right now, it has a volatile history filled with extreme price spikes. Nucor partnered up with natural gas expert Encana to protect itself from such cost jolts.

Entering into a partnership was a good move since it kept Nucor from having to learn new skills. The pair's original deal, dating back to the turn of the decade, was hugely successful. According to a company press release, the results of this agreement exceeded expectations by over 60%. No wonder it partnered up with Encana again late in 2012.

For Encana, the Nucor deal is just one of many. It has partnerships with companies as far reaching as PetroChina  and Korea Gas. So this one deal isn't as big a deal for Encana as it is for Nucor. In fact, during the third quarter conference call, Nucor CEO John J. Ferriola went so far as to call it a "game changer."

Halt the drilling!
So why did Nucor and Encana just stop drilling? There's likely several reasons. The first big one is that natural gas prices are low, which means that it's hard to make money drilling. The company won't discuss drilling costs, with Keith B. Grass, an Executive Vice President at Nucor, describing the information as "confidential." But it's safe to assume that it's presently cheaper for Nucor to buy gas than drill for it. So, this is a cost saving move from that perspective.

That's a good thing because the steel industry is still in a funk, suffering from generally weak pricing. The second big reason is, essentially, the same, but from a different angle. Not drilling will shave $400 million of off Nucor's capital spending budget in 2014. That number and time frame, provided by Nucor in the press release, also gives an idea of how long the company plans to keep the drill bit idled.

Is this a problem?
So Nucor and Encana agreeing to halt drilling probably shouldn't be seen as a long-term problem. Low natural gas prices will still be a benefit to Nucor, only it won't be drilling its own gas. For Encana, it's just one of many deals. And the flexibility to start and stop drilling is really a notable plus for both companies. When natural gas prices move higher the duo will be able to restart exploration and Nucor will be able to keep a cap on its natural gas costs. In the meantime, costs remain in check and capital spending is reduced during a difficult period for steel companies.

These companies certainly aren't shying away from drilling
Record oil and natural gas production is revolutionizing the United States' energy position. Unfortunately, sifting through the crowd to identify winners can be difficult. Thankfully, the Motley Fool is offering you a free, comprehensive look at three energy companies set to soar during this transformation in the energy industry in our special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

The article Nucor and Encana are Done with Natural Gas for Now, but Why? originally appeared on Fool.com.

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

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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How to Invest in the Next Texas Oil Boom

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Photo credit: Apache Corp. 

The Permian Basin has been fueling America since the 1920s. The legacy Texas oil basin has produced a stunning total of 29 billion barrels of oil in its lifetime -- an amount equal to the current total proved U.S. oil reserves. That said, the Permian Basin still has a lot of oil to left to give. Here are five great focused ways to play the Permian's next oil boom.


Everything is bigger in Texas
Pioneer Natural Resources
is one of the leading advocates for the Permian Basin's future potential. It sees the Spraberry/Wolfcamp formations of the Permian Basin representing the world's second-largest oil field. Pioneer Natural Resources believes producers can recover 50 billion barrels of oil equivalent from this part of the Permian, which is a real game changer for America as that's nearly twice the amount of oil and gas than can be recovered from the Eagle Ford Shale. Pioneer Natural Resources has one of the best positions in the play at 900,000 acres, from which it believes it can draw 7 billion barrels of oil equivalent. 

Accelerating growth
Concho Resources
has a leading pure-play position in the Permian Basin, with 630,000 net acres. That position provides the company with tremendous growth opportunities. In fact, Concho recently announced that it is accelerating its growth plan and now expects to double production by 2016. The company sees that oil-rich production growth yielding great margins and significant cash flow.

Top-tier Permian position
While Apache isn't as focused on the Permian Basin as others on this list, it is the No. 1 driller in the play and certainly worthy of attention. Apache has been refocusing its portfolio in order to pursue its rich North American liquids position, which is led by its massive 1.6 million net acres in the Permian Basin. Apache has more than 30,000 known locations that it can drill in the region and believes it has nearly 3.8 billion barrels of oil equivalent potential in the play. Bottom line, Apache is very well positioned to profit from this next Texas oil boom.

Concentrating on the Permian
While smaller in size and scale, Laredo Petroleum offers investors very concentrated access to the Permian Basin. Laredo Petroleum has 141,230 net acres focused in the Midland Basin portion of the play, providing it access to multiple producing zones including the Wolfcamp and Cline formations. The company believes it's sitting on resource potential that is 10 times its current proved reserves. Looking ahead, Laredo Petroleum believes it can grow its Permian Basin production by 30%-35% yearly through 2016, which is an even faster annual rate than Concho Resources.

A Permian player to watch
Another focused Permian Basin operator worth a closer look is Clayton Williams Energy . Giving credit where it's due, I have to thank a Twitter follower for alerting me to the potential of Clayton Williams. The company has a solid 170,000 net acres in the Permian Basin. It also sports a larger 186,000 net acre position in the Giddings area of Texas that has legacy Austin Chalk production, as well as resource potential in the Eagle Ford Shale. Clayton Williams is loaded with potential, but unfortunately the company is also loaded down with a bit of debt. While it has a plan in place to balance its drilling commitment with its financial resources, there is a bit more risk involved with the company. That said, the potential is there, which is why investors might want to put Clayton Williams Energy on their watchlist.

Investor takeaway
There are literally hundreds of public oil producers with at least a small stake in the Permian Basin. However, these five names have the most at stake as all have a bulk of production coming out of that legacy oil basin. That means each has more to gain as the next oil boom hits the play.

How to invest in the American energy boom
The Permian Basin has been delivering oil for decades, yet its best days could still be ahead. The same can be said for American energy overall, which is why you need more of it in your portfolio. That's why you need to check our special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 


The article How to Invest in the Next Texas Oil Boom originally appeared on Fool.com.

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

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Stores Open for 100 Hours in Final Push to Attract Shoppers

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Holiday Shopping
Andrew A. Nelles/AP
By ANNE D'INNOCENZIO

NEW YORK -- Some stores are ending the holiday shopping season the same way they began it -- with round-the-clock, marathon shopping hours.

Kohl's for the first time is staying open for essentially five days straight, from 6 a.m. on Friday through 6 p.m. on Christmas Eve.

Macy's (M) and Kmart (SHLD) are opening some of their stores for more than 100 hours in a row from Friday through Christmas Eve. And Toys R Us is staying open for 87 hours straight starting Saturday, which is typically the second biggest shopping day of the year.

The expanded hours in the final days before Christmas are reminiscent of how some retailers typically begin the season on the day after Thanksgiving known as Black Friday.
The strategy comes as stores try to recoup lost sales during a season that's been hobbled by a number of factors.

Despite a recovery economy, many Americans have been struggling with stagnant wages and other issues. On top of that, the time period between the official holiday shopping kickoff on Black Friday and the end of the season is six days shorter than a year ago. That has given Americans less time to shop.

Sales at U.S. stores rose 2 percent to $176.7 billion from Nov. 1 through last Sunday, according to ShopperTrak. That's a slower pace than the 2.4 percent increase the Chicago store data tracker expects for the entire two-month season.

The disappointing growth pace has put more pressure on retailers to get people into stores in the final days before Christmas. A lot is at stake because they can make up to 40 percent of their revenue in November and December.

"It's make or break for the retailers," said C. Britt Beemer, chairman of America's Research Group, a consumer research company. "They have to make up for lost ground."

Retailers hope the expanded hours will make it easier for Americans like Peter Sallese, who either stayed out of stores so far because of money problems, inclement weather and other issues. The financial executive from New York City said he's usually finished with shopping by mid-December, but with the shortened season, he fell behind.

"Basically, when I came back from Thanksgiving, there was no time," Sallese said. "Add in the snow and the freezing weather, and you didn't feel like shopping."

This isn't the first year retailers have used marathon hours to lure shoppers. Toys R Us will open for from 6 a.m. on Saturday to 9 p.m. on Christmas Eve -- the fourth year it's had marathon hours at the end of the season. And this is the third year Kmart has offered round-the-clock hours: The discounter will open a little more than one tenth of its 1,100 stores from 6 a.m. on Friday until 10 p.m. on Christmas Eve.

Macy's began testing the 24-hour strategy for back in 2006, but it's made some tweaks this year. Most locations were open for 48 hours straight during the final two days before Christmas last year. But this year, 37 of Macy's 800 stores will be open for 107 hours from 7 a.m. on Friday to 6 p.m. on Christmas Eve.

The rest of Macy's locations will be open between 7 a.m. and 2 a.m. from Friday through Monday. And on Christmas Eve, most Macy's stores will open from 7 a.m. to 6 p.m.

"Our customers love the option to shop late night, overnight and/or first thing in the morning," said Elina Kazan, a Macy's spokeswoman.

 

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