Continuing its strategy of developing key partnerships with some of the pharma industry's biggest companies, Denmark-based Dako, Agilent Technologies' cancer diagnostics division, announced today it has entered into a "master framework agreement" with Merck .

Master framework agreements, as defined by the European Commission, are contracts used to establish the terms and conditions (framework), particularly relating to price and quantity, between one or more parties. Financial terms of the deal between Dako and Merck were not disclosed.

The agreement with Merck calls for Dako to develop "companion diagnostic tests" for cancer-fighting drugs. The companion tests developed will be for oncology drugs in Merck's development pipeline, Dako said. Companion diagnostics, according to Dako, are especially useful in determining the appropriate oncology therapy based on an individual patient's needs.

"With Dako's wide experience in companion diagnostics and its expanded playing field as part of Agilent's Life Sciences and Diagnostics Group, I see great potential in this new agreement," Jacob Thaysen, vice president and general manager for Agilent's diagnostics and genomics division, said in a press release.

Agilent acquired Dako for $2.2 billion in an all-cash deal that closed on July 21, 2012. Since the acquisition, Dako has signed agreements similar to today's Merck deal with Eli Lilly and Pfizer . Dako also has partnerships with Bristol-Myers Squibb and a division of Switzerland-based Roche Holding.

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

What: Shares of eHealth , a provider of online private health insurance services for individuals, families, and small businesses, jumped as much as 25% after announcing its preliminary results for the fourth-quarter yesterday following the closing bell.

So what: For the fourth-quarter, eHealth anticipates reporting revenue in a range of $53 million to $55 million - significantly higher than the $49.2 million Wall Street consensus - as individual and family plan product demand increased approximately 50% year-over-year. However, due to much higher marketing costs, eHealth anticipates its fourth-quarter bottom-line will range from a loss of $0.03 to a profit of $0.04. For the full-year, eHealth is forecasting EPS in a range of $0.34-$0.41 which is more or less in-line with Wall Street's expectation of $0.36.

Now what: In spite of higher marketing costs negatively impacting eHealth's profitability, what we're seeing here is the direct result of the problems associated with the Healthcare.gov website. With the individual mandate requiring individuals to purchase health insurance by law in 2014 or face a penalty, and Obamacare's federally run health exchange, Healthcare.gov, running into numerous issues over its first two months, eHealth has turned into a big beneficiary. By offering a similar private insurance platform where individuals can compare plans, eHealth has very stealthily given consumers a way to circumvent Obamacare's exchanges while still gaining access to health insurance. As we approach the ever-important March 31 coverage cutoff date, I would anticipate eHealth's product demand will only increase.

Top-line growth is slowing for Liquidity Services , and investors are wondering how long can the company maintain its advantage, as the company has yet to diversify its revenue stream. Accordingly, shares retreated 45% in 2013 and are now trading at depressed valuations. The ultimate outcome remains unknown, as key contracts are set to expire. The markets are either mispricing growth prospects, or valuations appropriately reflect a diminished competitive advantage.

Surplus and scrap as a business model
One person's trash is another person's gold, and Liquidity Services has transformed that concept beyond just a clever quip into a $506 million business model. Liquidity Services is the largest public company providing manufacturers, corporations, and the U.S. government with asset recovery and disposition services. The firm is a logistics company that recycles surplus and scrap goods for resale on its various online bidding platforms. In FY13, Liquidity Services acquired and disposed of $973 million worth of gross merchandise volume, or GMV, through its online marketplaces.

One down, one to go
56% of FY13 sales came from the Department of Defense through two contracts, one of which was renewed in early December. The renewed contract extends performance into 2015 and covers the acquisition, management, and sale of all scrap DoD materials (26% of Liquidity Services' FY13 revenue). More importantly, though, is the outcome of Liquidity Services' surplus contract, which expires in February and accounts for an even greater 30% of revenue. The DoD already exercised two annual renewal options, and any remaining options have been exhausted under the original contract, leaving them up for competitive bid.

Is one shareholder's trash another shareholder's gold?
That question rings loudly in the minds of investors, with shares trading at a forward P/E of 13. The answer is uncertain and hinges upon the outcome with the DoD. Liquidity Services could lose as much as $151 million in revenue, should the DoD proceed with another suitor. Shares have also decreased due to factors other than concerns over the DoD. While GMV increased a healthy 13% in FY13 to $973 million, this was well below the 58% GMV growth that Liquidity Services notched the previous year.

A similar story becomes apparent upon examination of online market place peers such as eBay  whose market place segment reported a total GMV increase of 10% quarter-over-quarter. However, eBay shares trade at a lofty premium to Liquidity Services at 25 times EPS. Perhaps a differentiating factor that explains the valuation gap is that analysts have forecast 15% top-line growth for eBay in 2014, while revenue for Liquidity Services is expected to increase only 1%.

Final thoughts
If consistently exercising options to renew is any indication, then Liquidity Services is likely in the clear and buyers will benefit from heightened selling pressure over the past year. On the flip side, remember that the DoD is operating on a continuing resolution through January 14th, and government outlays could be best categorized as anything but certain. These are just a few of things to consider that could make or break 2014 for Liquidity Services.  

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

What: Shares of lighting solution company Acuity Brands  jumped as much as 24% today after the company released earnings.

So what: Fiscal-first-quarter revenue was up 19.5% from a year ago to $574.7 million and easily topped Wall Street's estimate of $540.9 million. On the bottom line, earnings per share of $0.96 topped estimates by $0.12 and management thinks 2014 will see more growth as end markets improve.  

Now what: Results may be volatile next year, but CEO Vernon Nagel said forecasts show a mid-single-digit growth rate for renovations and retrofits in North America, which should lead to more growth. Shares are by no means cheap at 27 times forward earnings, but Acuity Brands' growth rate and solid profitability give plenty of upside. I think the stock can move higher as energy efficiency becomes more important, and if shares pull back after this pop it would be a nice entry point.

While the pickup in the housing market has become a widely accepted investment theme, Foolish investors might favor taking a look at investing in the commercial construction market. One area of interest is the heating, ventilation, and air conditioning, or HVAC, market. The pick of the sector is Lennox International , with A.O. Smith also deserving of an honorable mention.

Lennox and A.O. Smith look set to grow earnings
Why is commercial construction considered next year's hot sector? The key argument is that the commercial sector tends to follow the residential sector, so stocks exposed to the former are likely to produce more upside in 2014.

You can think of the commercial construction sector as experiencing a rough five to six years where it grew lower than GDP growth, but is now set to grow faster than GDP, as the economy recovers. Indeed, it certainly seems that way if you look at consensus earnings-per-share growth forecasts for Lennox and A.O. Smith. Both companies are forecast to have high compound annual growth rates, or CAGRs, over the next four years.

Source: Nasdaq.com

In the case of HVAC specialist Lennox, the market has clearly priced in a recovery due to its residential market exposure. However, it also has upside potential from a future recovery in commercial construction.

Lennox's management estimates that its 2013 revenue split will likely include residential HVAC contributing 49%, commercial HVAC 27%, and refrigeration 24%. Given the strengthening housing market, it's no surprise that 75% of the increase in overall segment profits came from the company's residential markets. Furthermore, Lennox generates around 85% of its business in North America, so it's very much a U.S. market play. Where it gets interesting is in the fact that Lennox's commercial operations tend to have a higher profit margin.

Source: company presentations

Essentially, if Lennox's commercial HVAC sales come in better than expected then there is an opportunity for a positive shift in the overall margin mix. Moreover, Lennox's management recently gave its 2014 forecast and outlined the key assumptions behind its 3%-7% revenue growth forecast. Management is estimating that North American residential units will be up "mid-single digits" from 10% in 2013. Meanwhile, its commercial units are forecast to rise in "low-single digits" from a paltry 2% in 2013. Frankly, Lennox's commercial forecast looks a little bit conservative, so you should see some additional upside.

Lennox's cash flow advantage
Lennox stands out for its cash flow generation. For example, A.O. Smith's management recently forecast $100 million in free cash flow, or FCF, for 2013, but this is not particularly impressive when compared to its enterprise value, (market cap plus debt minus cash) of around $4.6 billion.

In contrast, Lennox has converted 110% of net income into FCF over the last four years, and is forecasting 90% conversion in 2014. However, A.O. Smith has converted around 60% of adjusted net income into FCF over the last three years. 

For illustrative purposes, lets assume Lennox converts 100% of income into FCF and A.O Smith converts 60%. Using these rates and analysts' EPS forecasts we get an idea of future FCF per share. For the sake of simplicity, assume that enterprise value is equivalent to current values.

Source: Nasdaq.com, author's estimates.

Lennox looks to be fairly valued, but as discussed above, it offers upside potential if you are bullish on commercial construction. Meanwhile, A.O Smith doesn't look like as a good value, but it's likely to outperform if the sector picks up.

The bottom line
A.O. Smith and Lennox are not cheap stocks, but they both have good earnings leverage should the commercial construction market improve next year. Lennox is probably the choice pick, but don't be surprised if A.O. Smith starts increasing margins and cash-flow generation if its end markets pick up. HVAC is an indispensable part of a commercial construction project, and bulls on the sector should take a closer look at both stocks.

Google's view of where I'm writing this post, at the press room in the Mandalay Bay resort. Source: Google.

Navigation software has been in the news ever since Apple dropped Google's Maps. Revelations of NSA-managed digital spying also have us, as consumers, obsessed with location privacy. We figure there's no place to hide. That digital technology is so frightfully precise as to give birth to Skynet any day.

Poppycock. An afternoon stroll along the Las Vegas Strip proves that, when it comes to walking, mapping and location technology still has a long way to go.

Shortly after arriving at the MGM Grand Hotel for this year's Consumer Electronics Show, I switched on navigation on my new Moto X -- I recently switched from an iPhone -- and set out on foot for the In-N-Out Burger about a mile away. A walk that should have taken 25 minutes took more than an hour.

Mind the gaps
Why? Instead of actually looking up to get my bearings, I trusted Maps to guide me, never figuring that the search king wouldn't account for Las Vegas' clever city planners and their twisting sidewalks and well-placed barriers designed to prevent suckers -- I mean, tourists -- from walking anywhere directly, but instead through the nearest casino.

Google isn't entirely to blame here. GPS satellites aren't designed to track us by the footfall, but rather by the mile or (at best) the block. I'd end up walking a half-mile or more before the Moto X would remind me of the silly, circuitous route I was taking. Larry and Sergey aren't looking over my shoulder; they're watching me from space, and that leaves plenty of hiding places.

And yet Maps is improving. A new interface accessible in Chrome makes it easier to switch back and forth between available Street Views, a straight map, and Google Earth photos. The goal? Give urban explorers more intel when they land in a foreign town.

Google this week also unveiled plans to work with hotel chains to store photos that would allow travelers to take a visual tour, of sorts, before booking. The idea is to create a panoramic experience similar to that in Street View. Best Western and Carlson Rezidor Hotel Group have both signed on to the program, though Rezidor plans to go further and enable guests to view floor plans of some of its hotels directly in Google Maps, the Associated Press reported.

Here's a closer look at the new Maps in action, this time using 221B Baker Street -- home of the Sherlock Holmes Museum in central London --  as our template.

The blue lines denote clickable Street Views, which makes switching back and forth easy. Source: Google.

Still, with so many gaps it's hardly surprising that this year's CES offers a smorgasbord of new wearable technology. Give us sensors to wear, the the thinking goes, and we'll get to know more about how we conduct our day and interact with our surrounding environment. And that's good, especially if your aim is to live a longer, healthier life. But those same sensors -- gap fillers, we might call them -- could also be used to more precisely pinpoint where we are at any given time.

Google needs them. So do Apple, Microsoft, and every other device maker intent on building a "platform" for location-aware, ad-supported apps. My bet? 2014 will be the year these companies begin building (and buying) smarter sensor technology.

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 have bounced back somewhat from earlier losses, but the Dow Jones Industrial Average has failed to escape the red so far today. The blue-chip index is down more than 45 points and most members in the red as of 2:15 p.m. EST, which is still a sharp improvement from earlier when it was down nearly 100 points from the open. Telecoms have taken a big hit, with both Verizon and AT&T dropping sharply, while JPMorgan Chase and other financials have also wandered into the red. Let's catch up on what you need to know.

T-Mobile takes aim at AT&T, Verizon
Verizon and AT&T stock have both fallen by nearly 2% after rival T-Mobile   yesterday launched a shot across the two telecom giants' bows. T-Mobile offered to pay customers up to $350 per line to cover early termination fees for customers who abandon larger competitors for T-Mobile's network. AT&T has already perused this strategy, committing recently to paying up to $450 to customers who switch to its own network -- but T-Mobile has now raised the stakes of this bidding war even higher.

Today's drop isn't so much about T-Mobile's firepower in the battle for U.S. telecom customers: After all, the company's only the No. 4 wireless provider in the U.S., far behind leader Verizon and runner-up AT&T in customers. Verizon in particular has done a great job lately in driving growth higher, adding more than 900,000 new wireless customers in its most recent quarter and pushing wireless revenue up by 8%.

While customer growth continues, however, the bidding war for rivals' subscribers does mean that old standbys of the industry, such as early termination fees, could be moving on out. Networks will need to find new ways to retain customers and keep them away from opportunistic rivals in order to sustain wireless client growth.

In the financial sector, JPMorgan's down around 0.5% today as the bank ponders selling its prepaid card unit. JPMorgan is already declining to bring in interested new prepaid card users, but it's still servicing existing members. However, with the company's prepaid unit the victim of a hack last month -- an incident that led to JPMorgan issuing warnings to 465,000 card holders over potential breach of data -- the division is a prime candidate for a sell-off.

The bank's turned toward simplifying its operations lately in the wake of the 2012 "London Whale" incident that cost more than $6 billion in a failed derivatives bet. The plan's gone over well with investors so far: JPMorgan's stock has risen more than 28% over the past year, and focusing in on core business units should help the bank evolve as a sleeker and more efficient company -- with the added bonus of a better likelihood of avoiding messes like the London Whale event in the future.

Image source: Disney/ABC

If Disney Marvel's Agents of S.H.I.E.L.D. were a bowler, it'd need just one more strike for a perfect game.

After returning with an all new episode Tuesday following its four-week midseason pause, Agents of S.H.I.E.L.D. just marked its 11th consecutive win in the valuable men's 18-34 demographic. In addition, ABC says, the show spiked 16% in adults 18-34 from its last original episode.

As usual, however, CBS'  NCIS once again won the night's top spot in the overall adults 18-49 demo, earning a solid 3.0 rating as 20.84 million viewers tuned in live. Meanwhile, Agents of S.H.I.E.L.D. settled for second place in the hour with a 2.2 rating on 6.63 million live viewers, good for a slight improvement over the midseason finale's series-low 2.1 live + same-day rating. 

Keep in mind, though, that Agents of S.H.I.E.L.D. has made a habit of gaining ground later as millions of additional people watch through their DVRs. In fact, based on the latest live + 7-day figures, Agents of S.H.I.E.L.D. went into this week's episode as Tuesday's highest-rated series overall, with a 4.8 rating in adults 18-49. By comparison, NBC's The Voice currently sits in second place with a 4.6, while CBS' NCIS stands third at 4.2.

To CBS' credit, it's admittedly more difficult to gauge the exact value of comparably novel DVR viewership numbers. But given the fact DVR penetration has risen by 2 percentage points to 49% over the last year alone, it still appears to bode well for newer shows like Agents of S.H.I.E.L.D., which formerly would have had their work cut out for them in convincing droves of dedicated fans to defect after years of watching well-established series like NCIS.

But that's also not to say Agents of S.H.I.E.L.D. absolutely needs those viewers to succeed. To the contrary, Disney should be more than happy given the show's obvious appeal to younger adult males, which already makes it an advertiser's dream and should all but ensure a second season.

And for those of you worried it may not be able to maintain its momentum after Coulson's big reveal, I'm convinced it'll continue outperforming going forward. After all, the show's creators have not only promised it'll delve deeper into the Marvel Cinematic Universe going forward, but those of you who stuck around for the end credits know Marvel's also planning big things for next week's episode.

Can't wait? Here's the sneak peak ABC aired Tuesday:

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At least according to official edict, it's been illegal and impossible for a Chinese consumer to get his or her hands on Microsoft's Xbox One or Sony's PlayStation 4 in the Middle Kingdom.

This is nothing new for the Chinese gaming market. More broadly, it's actually been illegal to import any foreign video game console into the People's Republic of China since 2000.  

However, in a recent ruling the Chinese government reversed course, saying it will allow video game console producers like Microsoft and Sony to make and sell their respective gaming devices in the Shanghai free-trade zone, effectively opening the Chinese market to the likes of Microsoft and Sony.

China is, of course, one of the fastest-growing major emerging economies in the world. So just how significant an impact could this news have on Microsoft and Sony as the two competitors vie for video game dominance?

The show has gone on
Current estimates peg the market size at around $10 billion in annual sales. So in terms of addressable market, the Chinese gaming market certainly presents an attractive money making opportunity for both Sony and Microsoft.

However, cracking into the Chinese gaming market might be easier said than done for Microsoft and Sony. Because despite their undeniably strong gaming brands, the Chinese gaming industry has largely evolved beyond the kind of console gaming that Sony and Microsoft offer.

This is largely a byproduct of the same ban that China recently repealed. By isolating and localizing the market to such a high degree, the Chinese government created a industry climate where home-grown domestic gaming names like Tencent could thrive. It's the business equivalent of the Galapagos Islands, a place that gave rise to its own distinct set of species as a result of its isolation. 

And rather than use consoles like the Xbox and PlayStation 4, Chinese gamers prefer to use either desktop computers or mobile devices like smartphones and tablets. So given that gaming platforms on other devices are already the mainstream norm, getting Chinese consumers to shell out the additional several hundred dollars to buy a console seems a high hurdle indeed.

The nature of the market isn't the only reason that Microsoft and Sony might find breaking into the Chinese gaming space problematic though.

Unofficial presence
Although it's certainly harder to quantify, it seems that, legality aside, Chinese consumers have always been able to get their hands on a Xbox One or PlayStation 4 if they so desired. According to reports, a robust black market had developed around such banned goods offering ample availability of Microsoft's and Sony's leading consoles. By some accounts, these illicit vendors would go as far as even advertising that they sold Xboxes and PlayStations.  

And while it appears Chinese consumers have had access to Microsoft's and Sony's devices, bringing their sales channels out of the shadows and into the mainstream could have two benefits for the tech giants though.

The first is the possibility of lowering prices. It's no secret illegal markets allow prices to be set by those that take the risk of selling such wares. And since illegal vendors at least in theory faced possible legal retribution for selling black market goods, it's certainly possible Xboxes and PlayStations were sold with some kind of markup above what their retail prices would be. The second potential win for Microsoft and Sony comes on the distribution front. Legalizing their sale should allow Microsoft and Sony to tap into much broader distribution and sales channels as well.

Foolish bottom line
Although the two aforementioned advantages are nothing to sneeze at, it's hugely unclear whether or not a Microsoft or Sony have a meaningful market opportunity in China.

After so many years of evolving without their presence, it could easily prove fruitless for either company to break into this space. This is only an emerging storyline at this point. However, it's at least clear that the deck is stacked against Microsoft and Sony in the Chinese gaming market today.

Advanced Micro Devices showcased its next-generation Beema and Mullins APUs at CES 2014. Now, unlike Intel  which failed to show any interesting silicon at the event, it was encouraging to see how Beema/Mullins offered substantial improvements in graphics performance and power efficiency over previous generation APUs. However, unlike Intel, AMD has a rather sizable gap in its IP portfolio that it will need to fill to compete in the tablet segment.

Connectivity and communications
It's clear that the vast majority of tablets that will sell going forward are in the $100-$200 range. To adequately service these markets, chip vendors will need to integrate connectivity (Wi-Fi, Bluetooth, GPS, NFC, etc.) as well as communications (3G/4G LTE technologies) onto their chips to create cost-competitive products.

This is an area in which Intel, the leader in PC chips, has struggled for quite some time. However, with its upcoming SoFIA product, the company claims that it will have the "most highly integrated chip on the market." While Intel, at the very least, bought Infineon (as well as a number of smaller companies) simply to acquire this connectivity IP, AMD does not appear to have much in the way of in-house connectivity.

Today it's a problem for tablets, tomorrow for cheap PCs
The trend in computing has been toward higher levels of integration and lower cost, and given AMD's position as the leading vendor of PC processors in the sub-$399 PC space with over 50% market segment share, this is going to become more important long-term. In Android tablets, leaders such as Qualcomm already ship products with integrated connectivity and communications.

However, in Windows tablets, neither Intel nor AMD has integrated connectivity/communications, so there's much less pressure. However, given that the PC market is in decline, both Intel and AMD must look for ways to capture silicon content share in PCs. An obvious route that Intel will likely be taking with its next-generation "Broxton" part (which will span high-end phones to low-end PCs) is the integration of connectivity.

AMD, unfortunately, doesn't seem to have a robust connectivity portfolio. On a longer-term basis, the company will need to acquire such IP to integrate into future system-on-chip products. It is unclear from whom AMD could buy in order to acquire the IP and, if there existed such a company for sale, if AMD could afford it, given its current financial situation.

Foolish bottom line
The good news, though, is that integrated connectivity is unlikely to be necessary across the gamut of the PC market -- just the very low-end/cost-sensitive markets. However, connectivity and communications are a key part of the smartphone and tablet world, which is part of why Intel has failed to gain traction in phones thus far. The integration of that IP, particularly in lower-cost models, will prove a necessity over time. Can AMD secure some connectivity IP going forward? Only time will tell, but this is something to keep in mind.

Kodiak Oil & Gas , the Denver-based exploration and production company, had a pretty solid year. Adjusted EBITDA for the nine-month period ended September 30, 2013, surged 223% year over year to $469.6 million, while third-quarter oil and gas production also jumped 223% year over year to an average of 35,400 BOE per day.

With the company having recently announced its 2014 capital program, let's take a closer look at its progress so far and how it plans to keep improving its operations.

Kodiak's progress so far
Kodiak's assets are located almost exclusively in North Dakota's Williston Basin, where the company commands roughly 192,000 net acres. As of June 30, 2013, it had proved reserves totaling 144 MBoe, of which 86% was crude oil. Since 2010, Kodiak has grown production at a staggering compound annual growth rate of 182% and expects to deliver 45% year-over-year growth in sales volumes this year.

In addition to delivering eye-popping production growth, the company has also made major progress in reducing costs and making its Bakken operations more efficient. For instance, the number of days it takes the company to drill and complete a well have fallen from the mid-30s in 2008 to under 20 days currently, with some of its quickest third-quarter wells having been drilled in under 15 days.

As a result, Kodiak is now able to drill 13 to 14 wells in a year, compared to 8 to 9 when it first began drilling in the Williston. Similarly, well costs have declined from an average of $12 million in 2012 to under $10 million as of the third quarter. Next year, the company expects well costs to average roughly $8.9 million.

While that's not nearly as cheap as fellow Bakken drillers Continental Resources and Oasis Petroleum , which are both forecasting well costs of $7.5 million next year, Kodiak's relatively higher well costs are partly due to its use of expensive ceramic proppants during fracking, which have resulted in meaningful improvements in initial production rates and estimated ultimate recoveries (EURs).

How Kodiak plans to keep improving
These improvements are largely the result of Kodiak's innovative techniques. For instance, the company's use of zipper fracs -- a hydraulic fracturing technique that allows adjacent wells to be fractured in sequence and maximizes the area of exposed reservoir -- was crucial in helping reduce the time taken to complete a well. Similarly, its use of cemented liners -- a completion technique that entails cementing the liner throughout the horizontal wellbore -- has resulted in improved wellbore stability and well serviceability.

To further improve drilling efficiencies and maximize recovery, Kodiak is currently studying two downspacing pilot programs in order to identify optimal spacing between wells. Results from the 12-well program continue to meet the company's expectations, with 12 Polar area wells posting a 120-day average production rate of 618 BOE/d and 12 Smokey area wells yielding 60-day average production of 627 BOE/d.

The fact that these results are in line with production figures for previously drilled wells in the Polar and Smokey areas is encouraging because it suggests that the increased well density has not resulted in lower production, confirming results from other operators' pilot programs. For instance, Whiting Petroleum's density pilot programs in its Hidden Bench, Pronghorn, and Sanish areas also showed how companies can materially boost recovery efficiency despite drilling in higher densities.

What to expect in 2014
In 2014, Kodiak plans to spend roughly 95% of its $940 million capital budget to drill and complete approximately 100 net wells, with the remaining $50 million to be used for infrastructure spending and for minor acreage acquisitions. Importantly, the company expects to be able to fund the vast majority of its 2014 capital budget through its operating cash flow, which greatly improves its risk profile.

In addition to quarterly performance results, investors may want to keep a close eye on the results of its downspacing pilot program since they will not only be instrumental in guiding the company's future development plans in the Williston Basin, but could result in major cost savings going forward.

The Dow Jones Industrial Average is down 0.13% in late trading, despite positive jobs data. Initial unemployment claims fell 15,000 last week to 330,000, while Challenger, Gray & Christmas said planned layoffs fell 32% during December -- the lowest level in 13 years. Although I, and the Motley Fool, always recommend taking short-term information with a grain of salt, tomorrow's Labor Department payroll rate report will be of keen interest to investors. With that in mind, here are some companies making headlines today.

Inside the Dow, Boeing is doing its part to move the index higher as the company's stock trades 1% higher. There are two key takeaways from machinists' union members vote last week  to approve Boeing's new contract extension, which secured production of the 777X aircraft at its Everett, Wash., plant.

First, pension-style retirement plans took a huge knock and seem to be dying a slow death among corporations in favor of less risky defined-contribution, 401(k)-style plans. It will be interesting to see over the next decade if other massive business sectors, such as the automotive industry, begin to take the same approach. We also saw, much to the pleasure of Boeing customers and investors, that the rollout of the 777X aircraft that rang up roughly $100 billion in orders at November's Dubai Airshow should be much smoother than the 787 Dreamliner. The latter produced headaches alike for everyone involved -- customers, travelers, Boeing, and investors. Fortunately for all of those parties, the 777X will likely be produced closer to budget and delivery times, as the Washington state workforce experienced with the 777 family will be working on the next generation aircraft.

Outside of the Dow, Ford  is trading more than 2% higher today after it increased its dividend for the second time since it was reinstated in 2012. Ford will pay a quarterly dividend $0.125 per share, a 25% increase from the previous rate of a dime per share. 

The Blue Oval decided the company's strong balance sheet, increased liquidity, and better business performance enabled a sustainable increase in the dividend level. More specifically, over the last three quarters Ford increased its liquidity position by $3 billion; and over the last eight quarters the company has increased its liquidity position by more than $5 billion. Ford says it has also posted 14 consecutive quarters of positive automotive operating-related cash flow.

Also in the automotive industry, the Volvo honored Johnson Controls with three awards for outstanding product quality and sustainable manufacturing operations. Johnson Controls AGM batteries support the start-stop functionality in Volvo cars, which reduces fuel consumption by as much as 8%, according to the company.

"For more than 20 years we have been working in close cooperation with Volvo Cars," said Holger Jetses, general manager for power solutions Europe for Johnson Controls, in a press release. "These three awards are a great honor for us and reaffirm our commitment to high standards of quality, reliability, and performance. It also motivates us to continue our sustainability efforts -- both with our products and our production sites." 

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Yum! Brands  sank 2% today after Morgan Stanley downgraded the fast-food giant from overweight to equal weight.

So what: Along with the downgrade, analyst John Glass lowered his price target to $77 (from $82), representing essentially no upside to yesterday's close. While momentum traders might be attracted to the stock's sharp rebound since October, Glass believes that Yum!'s prospects, particularly in China, are already baked well into the valuation. 

Now what: According to Morgan, Yum!'s risk/reward tradeoff is rather unappetizing at this point. "While we still see YUM as a best-in-class play on emerging market consumers, we see risk to the company's ambitious goals for a 40% profit recovery in China in '14," noted Glass. "It's not that this cannot happen, but we think the market is already discounting that it will happen (current consensus is calling for 24% increase in 14 EPS, above guidance of 20%)." With Yum! still trading at a P/E of 30, I'd agree that waiting for a wider margin of safety seems prudent. 

After celebrating the best year in Starbucks'  42-year history in 2013, the company's CEO, Howard Schultz, had a few things to say about the state of retail going forward. In a letter to the company's store managers this week, Schultz shared his thoughts on two key trends that will shape the retail environment in 2014. Let's dig in and see how Schultz's insights can help investors better gauge the strength of the retail sector in the year ahead.

"Click trumps brick" is here to stay
First, Schultz noted that mall traffic suffered greatly during this year's holiday shopping season as more consumers shopped online and on mobile devices. This was hardly news to e-commerce giant Amazon.com, which enjoyed a record-setting holiday season in December. In fact, Amazon said it added more than 1 million new customers to its Amazon Prime service in the third week of December. Moreover, the e-tailer saw a record 36 million purchases on Cyber Monday alone. For perspective, that's about 426 items per second! 

However, as Amazon and other online retailers enjoyed record holiday sales, their success was underscored by a significant downturn in foot traffic at traditional brick-and-mortar retail stores. ShopperTrak estimates that the number of consumers walking into stores between Thanksgiving and Christmas in 2013 fell 14.6%. Meanwhile, online retail spending during that period increased 10% to $46.5 billion, according to comScore.

While this trend will certainly hurt traditional retailers going forward, Starbucks is well prepared to handle this shift in retail spending thanks to what Howard Schultz describes as its "world-class digital and mobile payment expertise." A big part of the equation for the java giant is its digital Starbucks reward card and loyalty program. During the holiday quarter, Starbucks processed more than $1.3 billion in Starbucks Card loads in North America, according to Schultz's recent letter. 

The coffee chain was quick to integrate mobile payments solutions into its business in 2012 when it teamed up with Square. Using Square, Starbucks customers can check out faster with an app on their mobile devices. Ultimately, Starbucks' head start in online and mobile should help it weather changes in the broader retail market.

This brings us to the next big takeaway from Schultz's note: More customers are "embrac[ing] the convenience and choice afforded by physical and digital gift cards." 

From cash to cards
Starbucks broke a single-day record on Dec. 19 when it activated approximately 2.4 million Starbucks cards. This is a monster number for Starbucks, and it could translate into a meaningful amount of new customers for the Seattle-based company in the new year. Schultz elaborates on this by writing, "Overall, we generated over $610 million in new card activations in the holiday quarter, representing a significant increase over both last year and plan." 

Source: Starbucks.

This is a promising trend for Starbucks because the company is very good at turning new customers from gift card recipients into repeat customers. Overall, the takeaway for investors is that between its strong online and mobile presence and gift card programs, Starbucks should be a retail winner in 2014, even as other brick-and-mortars struggle.

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

What: Shares of Sangamo Biosciences , a clinical-stage biopharmaceutical company developing zinc finger DNA binding proteins for gene regulation and modification, soared as much as 40% after announcing a collaborative agreement with Biogen Idec to develop therapeutics for hemoglobinopathies.

So what: Under the terms of the deal, Biogen Idec will license Sangamo's proprietary genome-editing technology platform to develop therapies targeting sickle cell disease and beta-thalassemia. Sangamo's technology will allow Biogen to approach these diseases in two ways: either by knocking out the regulators that cause the disease, or to reinsert a corrective gene to replace the defective one. The deal nets Sangamo $20 million upfront, and Biogen Idec will reimburse Sangamo for any of its internal and external research. Sangamo also has the potential to earn an additional $300 million in milestone, development, and regulatory payments.

Now what: There's certainly nothing bad to say about either company with regard to this deal. Biogen Idec gets access to an exciting gene-altering platform for what I consider to be pennies on the dollar while Sangamo gets more cash added to the bank and has its research expenses paid for (with regard to sickle cell disease and beta-thalassemia) by Biogen Idec. I do believe the excitement of this deal, though, has been more than baked into Sangamo's share price and would caution even health-care-savvy investors to take a step back and let Sangamo's ongoing research do the talking from here on out.

The latest rumors for the ever-vibrant Apple rumor mill is that Apple is planning to bifurcate its high-end iPhone lines into two lines. The first would be the standard continuation of the traditional iPhone line (perhaps dubbed the iPhone followed by a generational moniker), but the second line would sell under the iPhone Air brand. This is very similar to what Samsung does with its Galaxy S/Galaxy Note lineup.

Great news for Apple shareholders
While some may believe that Apple launching an iPhone Air would simply serve to keep the current Apple customer base, rather than meaningfully expand it, others believe that this serves as an incremental opportunity on top of the existing iPhone opportunity. While it is certainly likely that traditional iPhone buyers will move to the iPhone Air, there could be a meaningful opportunity to gain share from rival Samsung in the U.S., as well as in the Asia-Pacific region.

What's more interesting is that if this rumor is true (which, frankly, seems plausible enough), this is exciting from a revenue-per-unit and, therefore, a gross-margin-dollar-per-unit standpoint. It is very likely that an iPhone Air would command a premium ASP to the more traditional iPhone, so at constant gross margin, sales of such a device would drive hefty profit up. It's hard not to be excited.

The secondary effect -- weakening Samsung
It is imperative that Apple weaken its largest rival, Samsung, by taking as much of the high-profit-margin share of the smartphone market as possible. Not only does this shift more of the industry's profit dollars into Apple's coffers, but it weakens Samsung, as the company would likely take down spending to keep it as a constant percentage of revenue.

Now, that's not to say that Samsung would completely die and fade away, far from it, actually, but it is in Apple's best interest to significantly weaken Samsung as a competitive threat at the high end. Samsung can turn its attention to more aggressively taking share in the low end, where Apple doesn't really want to play anyway.

More Apple products per year
Another interesting aspect here is that introducing an iPhone Air lineup that is separate from the traditional iPhone (but equally high-end) is that Apple would be able to drum up excitement multiple times per year if it follows Samsung's model of two major releases per year. It's a brilliant strategy, and given Apple's keen understanding of how to build a brand and capture customer loyalty, it would not be a surprise to see this strategy implemented in 2014.

Foolish bottom line
Apple is a solid company with a strong brand and deep technical prowess. While the risk of smartphone commoditization is real, if there's any company that can rise above that and run a business with very robust profitability, it's Apple. It will be very interesting to see how market segment share in the high end shifts when, or if, Apple implements this strategy, but it's tough to imagine that it'll be pretty for Samsung. 

If late stage trial data is as strong as the data just reported, liver disease may someday face a new foe thanks to Intercept Pharmaceuticals

Intercept's orphan drug obeticholic acid, or OCA, targets a range of liver disease including primary biliary cirrhosis, portal hypertension, and NASH. But it was news regarding its Phase 2b trial for NASH that likely has liver disease drug companies like Gilead and Johnson and Johnson paying attention.

It doesn't happen often, but when it does people take heed

The company's trial studying OCA in NASH, an increasingly common cause of liver failure, was halted early by its independent watchdogs after it was determined the study had already met its endpoint. The study was evaluating a 25 mg oral dose of OCA for both safety and efficacy in NASH patients over 72 weeks. 

The decision came after the study's monitoring board reviewed liver biopsy data in half the 283 patients in the trial. That review showed a highly statistically significant improvement in decreasing an important activity score by at least two points, without scarring worsening compared to placebo. 

"The unexpected early stopping of FLINT due to OCA meeting the primary endpoint with such high significance is a major milestone," said Mark Pruzanski, M.D., Chief Executive Officer of Intercept. "NASH has grown to epidemic proportions worldwide, having become a leading cause of cirrhosis and liver failure."

An unmet need with no approved therapies.

Investors may be viewing OCA's impact on Intercept in the same light they viewed next generation hepatitis C drugs from Gilead and Johnson & Johnson. Gilead received FDA approval for its hepatitis C drug Sovaldi in December and Johnson & Johnson won FDA approval for its Olysio in November.  The growing global need for new hepatitis C treatments has industry watchers thinking those drugs may have billion dollar potential.

Like hepatits C, the global need for new treatment is significant.  Both diseases affect millions and each can cause liver failure.  But unlike hepatitis C, which is caused by virus, NASH is characterized by a buildup of excessive levels of fat in the liver, causing chronic inflammation that increases scarring, which may lead to liver failure in as many as 10% of NASH patients.

Driving the increase in diagnosed patients is an increasingly fat and sugar-rich diet. Estimates suggest as many as 12% of Americans have NASH, and roughly 6 million of them have advanced scarring or liver failure. Based on disease's rising prevalence, Intercept projects the disease may become the leading reason behind liver transplant, accounting for more cases than either hepatitis C or alcoholism. 

That market opportunity has investors cheering since Intercept controls the commercial rights in every country except Japan and China.  Dainippon Sumitomo agreed to pay Intercept up to $315 million plus royalties for those rights in 2011.

The halt also adds support for OCA's use in other indications, including primary biliary cirrhosis, or PBC, and type 2 diabetics with nonalcoholic fatty liver disease.

On the heels of positive phase 2 results as a therapy for PBC, Intercept launched a phase 3 trial for the condition, which primarily affects women over 40 years old. There may be as many as 450,000 cases of PBC may in China and Japan alone and PBC is the fifth largest reason for liver transplant in the United States.

Advancing other drugs into trials

OCA is clearly the most advanced drug in Intercept's pipeline and the PBC indication may be the closest to getting commercialized, but Intercept also has a couple other interesting drugs in early stage studies.

Source: Intercept Pharmaceuticals

Similar to OCA, the company's NT-767 is an agonist derived from the primary human bile acid CDCA that targets receptors used by the body to regulate metabolism. The company thinks NT-767 could be up to five times more potent than OCA in stimulating the same receptors targeted by OCA. According to the company, NT-767 showed greater anti-scarring and anti-inflammatory results than OCA during animal studies.

Intercept is also developing INT-777, another agonist derived from the primary human bile acids. The company has completed its IND filing for INT-777, a drug that targets a receptor shown to directly regulate glucagon release, or GLP-1. GLP-1 has become a big focus for the major diabetes drug makers and Intercept believes INT-777 has an advantage over them thanks to its ability to induce production. If they're right, the market potential could be large.

Diabetes giant Novo Nordisk's GLP-1 drug Victoza had over $520 million in sales during the third quarter. That blockbuster status has Sanofi , the maker of diabetes blockbuster drug Lantus, ushering its GLP-1 contender Lyxumia through trials. Sanofi announced its awaiting additional phase 3 data for the drug, which is already being sold in Europe, prior to filing for FDA approval. And Lilly is hoping its GLP-1 drug, dulaglutide, which is in phase 3 trials, can strengthen its diabetes franchise, which already includes blockbuster Humalog.

Fool-worthy final thoughts

One of the biggest challenges facing many emerging biotechs is the lack of commercialized products to fund development. The cost of conducting trials is higher than ever and investors need to pay close attention to biotechs cash burn rates to make sure they're liquid enough to see their drugs through clinic.

In the case of Intercept, it appears the company is well funded. The agreement with Dainippon provides some opportunity to monetize and a dilutive 2 million share offering allowed the company to exit September with $156 million in cash, up from $110 million in December 2012.

Intercept posted $55 million in losses during the first nine months of the year as R&D expenses associated with OCA jumped to $18.4 million from $11.4 millionlast year. That rate and projections for other trials has Intercept confident its funds can see it through early 2016.

That cash on hand, and the potential market opportunity for OCA in both PBC and NASH makes Intercept an intriguing company with a sky high market cap of $5 billion and no revenue. Whether that valuation is too high remains to be seen and depends on more clinical data and, ultimately, the nod from the FDA.

T-Mobile's been on a tear recently. The company's Un-carrier moves have led to impressive customer gains. The company's success, however, hasn't gone without a response from the competition. AT&T  responded last week to T-Mobile's customer acquisition success with $450 in credits. But this week T-Mobile has jumped in with its own incentives for customers to switch to its network. As the carrier war for customers rages on, companies like Apple , whose costly smartphones are highly dependent on subsidies, financing, and credits, will likely benefit.

T-Mobile's planned assault
T-Mobile has generated more than 1.6 million total customer additions and has reported positive branded postpaid net customer additions for three quarters in a row. Its success in acquiring customers follows T-Mobile's implementation of an aggressive plan to disrupt the industry. It's referring to the plan as Un-carrier -- and it's working.

"Our Un-carrier moves have clearly upended this industry," T-Mobile CEO John Legere said in a press release yesterday that highlighted preliminary fourth-quarter results. "Over the past 12 months, 4.4 million customers have come to T-Mobile in response to greater flexibility and choice. We have clearly struck a chord with customers and will continue to look for ways to expand on that in 2014."

T-Mobile has rolled out its Un-carrier initiative in four phases so far, beginning in March 2013.

1. Introduced "Un-Carrier" plans that said goodbye to subsidies, replacing them with interest-free financing.
2. Introduced a "Jump" program that allows subscribers to upgrade their phones at smaller intervals.
3. Added international texting and 2G data in 100 countries to its Un-Carrier smartphone plans.
4. Offered credits to customers switching from the three major national carriers.

The latest battle
The fourth phase of T-Mobile's Un-carrier moves, announced yesterday, looks like a response to AT&T's just-announced credits. T-Mobile's move offers credits to switching customers from AT&T, Sprint, and Verizon. But as The Wall Street Journal author Ryan Knutson said after AT&T announced its $450 of credits, T-Mobile was already widely expected to announce a similar promotion before AT&T's was announced. So who knows which carrier was planning to offer credits to switching customers first?

T-Mobile's credits are irrefutably more aggressive than AT&T's. They offer up to $350 in early termination fees per line (up to five lines per family) and up to $300 in credits for phone trade-ins. That's potentially $650 in credits per line for customers switching from any of the three major national carriers.

iPhone 5s.

Time for a new iPhone?
Since T-Mobile's announcement detailing the move said the deal would only be available at "participating T-Mobile location[s]," I called around to see just how prevalent the deal was. Every location I called was well aware of the deal.

The intense competition between carriers is great news for Apple investors. As long as they are fiercely competing for customers, the subsidies, interest-free financing, and credits that help drive iPhone sales will remain intact.

J.C. Penney shares stumbled last week when the company released a holiday sales statement that simply said that it was "pleased with its performance" for the period and included a reaffirmation of the previously announced fourth-quarter outlook.

The lack of specifics suggests that the sales data will fall short of expectations, which would serve as the latest in a long line of disappointing news for the struggling retailer. Does J.C. Penney have a chance at a turnaround in 2014?

The past two years proved difficult for J.C. Penney, as the company hired Apple's Ron Johnson to perform a drastic reinvention that included store-within-store modules and the end of the company's promotional pricing. But customers balked, Johnson stepped down to allow former CEO Myron Ullman to return,and the brand now has to undo the reinvention.

J.C. Penney's long-term plans remain murky. But there are some ways that J.C. Penney could show improvement and win investor favor in 2014. And one way involves borrowing pages from Kohl's and Target's  playbooks.     

Pushing sales growth into positive numbers
This chart shows J.C. Penney's year-over-year quarterly revenue growth.

J.C. Penney revenue (quarterly YOY growth) data by YCharts.

The improvement over the past year has come from J.C. Penney narrowing the amount it missed in the prior year's quarter. That's better than nothing, yet not as encouraging as actual sales growth. A slow comeback is expected with the undertaking of undoing the reinvention attempt.

But it's important to watch why sales metrics are improving. An example came in the third quarter when revenue was down more than 5% year over year but same-store sales had improved 1%. The same-store sales improvement was due to heavy promotions aimed at clearing out excess inventory, which is a model that's hard on margins.  

How can J.C. Penney manage legitimate growth in both revenue and same-store sales? The process begins with solving those inventory problems.

Inventory improvements
I previously discussed J.C. Penney's problem with inventory turnover -- a metric that divides cost of sales by average inventory for a given period.The cancellation of Johnson's plans meant that J.C. Penney had to remerchandise to replace unpopular products launched during that period. And that process has tanked the company's inventory turnover. 

But returned CEO Ullman stated in the third-quarter conference call that the inventory issue should resolve by spring of this year. J.C. Penney has had turnover rates in the past that fell better in line with competitors.

J.C. Penney inventory turnover (quarterly) data by YCharts.

So a spring inventory turnaround is possible. And that turnaround would help boost J.C. Penney's overall health -- especially if paired with a sequential sales improvement. But the company also needs to focus on the reason product sales have improved. Promotions have their place, but an overreliance will keep margins pinched and lead to more problems in the future. 

So what nonpromotional moves can J.C. Penney make to entice customers? 

Securing a competitive advantage
J.C. Penney's key weakness is a lack of competitive advantage. And undoing Johnson's plans won't change that; J.C. Penney was suffering pre-Johnson -- that's why he was hired, after all. So returning to the old business model will make metrics look better by comparison for a short time but won't provide a sustainable path for the future. But that could change if the company launches a less-radical reinvention plan built around cultivating interesting, unique partnerships with higher-profile designers. 

J.C. Penney has brand partnerships and store brands that must have a degree of popularity or the company would have even larger sales problems. But walk up to a mall shopper who doesn't regularly frequent J.C. Penney and ask him or her to name an exclusive brand to the store and see if the answer is a blank stare. 

The company needs to establish partnerships that create more buzz. Kohl's has a similar customer base -- and promotional environment -- as J.C. Penney but drives interest with media-friendly lines from reality starlet Lauren Conrad and noted fashion designer Vera Wang. Getting the media excited about product launches can pass that excitement on to consumers. 

J.C. Penney could also try the route of Target's one-off collections from high-end fashion designers that have included Alexander McQueen, Zac Posen, and Missoni. The partnered designers create Target-specific designs that sell at a far lower price point than typically associated with these names. And the limited-edition nature of the products makes for some frenzied launches. 

The question is whether J.C. Penney has the leverage to establish these types of partnerships. But if the company is able to find willing parties, the benefits would prove well worth the costs.

Foolish final thoughts
J.C. Penney is wounded but still shows signs of life. If the company does clear up the inventory issues by spring, and focuses on improving its competitive advantage with new branding agreements, it could have a much better year.