3 Banks That Are Trumping the Rest

Return on assets is Matt Koppenheffer's favorite metric for evaluating banks. The top three in this regard are US Bancorp at 1.6%, Wells Fargo at 1.5% and M&T at 1.4%. Average for all banks: 1%. The bottom two banks were Citigroup at 0.5% and Bank of America at 0.3%. It's hard to say what's going to happen with Citi and Bank of America since they are still working through their various business problems. On the other hand, the top three banks are great banks with great management teams. They got through the last recession relatively unscathed and are in a position to continue growing.

With big finance firms still trading at deep discounts to their historic norms, investors everywhere are wondering if this is the new normal or whether finance stocks are a screaming buy today. The answer depends on the company, so to help figure out whether JPMorgan is a buy today, I invite you to read our premium research report on the company today. Click here now for instant access.

The Incredible Shrinking Deficit

According to an LA Times article in 2011: "Some 75% of respondents said they were following the [California] budget debate, yet only 16% were aware that state spending has shrunk by billions of dollars over the last three years."

There may be something similar happening now at the federal level. Poll after poll will confirm that Americans are worried about the budget deficit. But how many of them know it's shrinking fast?

The Treasury Department issues reports on monthly spending and tax receipts -- a version of the government's income statement. Tally up the last four years, and you get this:

Source: Treasury Department.

Many have pleaded with the government to cut spending. Far fewer, I think, know that the government spent less over the last 12 months than it did during the same period two years ago. Adjusted for inflation, the government spent the exact same amount over the past 12 months as it did during the same period five years ago, before the current administration came into office.

If you just look at the first three months of the year, which is guided by the most recent deficit-reduction policies, the numbers are even better for deficit hawks. Compared with the first three months last year, federal spending is down 9%, tax receipts are up 14%, and the deficit is down 32%.

Goldman Sachs analyst Alex Phillips recently wrote:

The federal deficit continues to shrink. Through the first six months of the fiscal year, revenues have come in higher than expected, while spending has come in lower than expected. As a result we are lowering our deficit forecast for the current and next two fiscal years.

Earlier this year we lowered our FY2013 deficit forecast from $900bn (5.6% of GDP) to $850bn (5.3%). In light of recent trends, we are lowering it again to $775bn (4.8%) ...

We expect the improvement to continue for the next few years. Although we had already expected additional cyclical improvement and residual fiscal policy tightening to reduce the deficit further in 2014 and 2015, we have reduced our estimates a bit further, to $600bn (3.5% of GDP) and $475bn (2.7%).

The most important figure here is the deficit as a share of GDP, because as long as a government's deficit is lower than annual economic growth, it can run in the red forever while actually lowering its debt burden (people overlook this because it doesn't apply to households). Since 1930, the government has run an average deficit equal to 3.2% of GDP each year.

Goldman now estimates the deficit as a share of GDP will total 4.8% this fiscal year, and 3.5% next year. Over the last year, GDP grew by 4%. If growth stays pat and Goldman's estimates are right, the nation's debt-to-GDP ratio will stop rising as soon as next fiscal year (which begins this October).

Long term, the largest budget issue is the cost of health care its impact on Medicare. It will be a mammoth problem if not addressed. But the short- and medium-term budget outlook is likely far tamer than most imagine. Just like California in 2011, there is a gulf between perception and progress. 

What's Your Investment Strategy?

What kind of investor are you? If you don't know, you might have a problem. It's useful to have a handle on your investment strategy, so that you can better focus on it.

There are many different ways to categorize investing. For example, a Goldilocks-like approach might divide investing strategies into these groups:

Too-aggressive investing: This approach puts your dollars in danger. It can include any of a host of riskier-than-average types of investments, such as options, commodities, currency bets, penny stocks, and even lottery tickets. It's true that some options strategies can be conservative, but many are not, and it's very, very common for options to expire unexercised and worthless.

Too-cautious investing: It might seem smart to be very conservative with your money, but if you do that, it might not grow enough to support you in retirement. That's especially true these days, in our environment of ultra-low interest rates. With inflation historically averaging about 3% annually in the U.S., even earning 2% in your bank account or via a bond or CD will leave you losing purchasing power over time.

Just-right investing: For many people, a long-term portfolio mixed with both stocks and bonds is a sound way to grow your net worth.

The bond world features many kinds of bonds, such as government bonds, municipal bonds, and corporate bonds. Government bonds, such as U.S. Treasury bills, bonds, and notes, are the safest, backed by the U.S. government. They pay interest that's taxable on your federal tax return, but is exempt from state and local taxes. Municipal bonds can be riskier, as some local governments are on somewhat shaky ground, but they can therefore offer higher interest rates and their interest is exempt not only from state and local taxes, but also from federal taxes. Corporate bonds are issued by companies that want to raise money. They, too, offer rates higher than government bonds, and their interest is not tax-exempt. In general, the higher their interest rate, the lower their credit rating and healthiness.

Stock investing approaches
A sound stock investment strategy is hard to beat, for long-term growth. Here's a quick rundown of some key approaches. Note that many investors engage in one or more of them -- they're not all mutually exclusive.

Value investing: This investment strategy involves seeking out stocks that offer a meaningful margin of safety, by being undervalued -- ideally, trying to buy a dollar for 50 cents. Value investors will typically study the fundamentals of a company, such as its growth rates, balance sheet, profit margins, and so on. They may favor a stock such as fertilizer company CF Industries, with its forward P/E ratio below 7 and promising prospects, given our planet's growing population that will need to be fed.

Growth investing: This involves focusing on fast-growing companies. It can be riskier than value investing, as some growth stocks can be seen as overvalued and many offer little or no margin of safety. Starbucks, for example, has averaged annual growth of 22% over the past 20 years and sports a not-bargain-level P/E ratio of 32.

Income investing: This investment strategy involves seeking cash payouts from your investments, generally via dividends from common and preferred stocks. Utilities have long been viewed as good dividend payers, but real estate investment trusts have grown in popularity, and gobs of other companies offer long track records of compelling payouts. Shipping specialist Textainer, for example, recently yielded 4.5% and has been growing that payout at double-digit rates.

Large-cap and blue-chip investing: This involves focusing on the biggest and most established companies around. They're rather proven, if they've grown to a large size, but their growth rates tend to slow as they grow. Many pay dividends, too, as they don't need to plow as much money into growth.

Small-cap investing: This investment strategy appeals to many folks because small companies have the greatest growth potential. They can be riskier than their bigger counterparts, but they can sometimes be easier to read up on and understand, as their operations are still somewhat focused. Telecom specialist 8x8, focused on high-margin voice-over-IP software, is an example of a stock on the small side. It has averaged annual growth of more than 40% over the past decade, and some still see lots of growth ahead and even wonder if it will get bought out.

International investing: It's always smart to include international holdings in your mix, for diversification. If the U.S. economy stumbles, stocks based elsewhere may hold up better. You can add considerable global exposure via big American stocks, though, if you like, as many of them generate a lot of money abroad.

Index investing: Finally, consider index investing, which can include any or all of the above. Index investors don't have to carefully select which small-cap or international or dividend-paying stocks to buy. Instead, they invest in funds that track wide indexes, such as ones that represent the S&P 500 or the total world stock market, or thousands of small companies, or Latin American stocks.

Many roads will lead to Rome. Learn more about your choices in investment strategies and take on the ones that fit your needs and temperaments best. Aim to be balanced, too.

The best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

Is This Liquor Really Quicker?

The spirits industry is certainly dynamic in that it provides clearly defined reasons that it makes for a solid long-term investment, and other demonstrable reasons that it's best to stay away.

In the plus column, the spirits industry provides the most accessible, most affordable, and often, the only legal, high. Alcohol consumed one night is often out of the bloodstream the next day, leaving few visible effects. Spirits producers also have incredible pricing power because the barrier to entry in the industry and the amount of regulations surrounding liquor sales in certain countries are rigorous.

On the flip side, the long-term effects of alcohol consumption are highly debatable, but more often than not point to serious negative effects on the body. In addition, while they have survived most U.S. recessions just fine, spirits makers aren't immune to the effects of a pullback in consumer spending. Not to mention, the need for higher local and state taxes can always mean a higher price for alcohol and a detrimental effect on sales.

Given this tug-and-pull dynamic, let's take a closer look at what's driving multinational spirits and beer maker Diageo (NYSE: DEO  )  -- owner of Johnnie Walker, Crown Royal, Ketel One, Guinness, and multiple other brands -- and see if this liquor producer truly is quicker than its peers.

As the owner of both hard liquor and beer lines, Diageo must split its focus along two fronts. In spirits it must grapple against its two primary foes, Brown-Forman  (NYSE: BF-B  ) , maker of Jack Daniel's and Southern Comfort, and Beam (NYSE: BEAM  ) , which (surprise, surprise!) makes Jim Beam, as well as Maker's Mark and other brands of spirits. In beer, it goes up against domestic and global giants like Anheuser-Busch InBev (NYSE: BUD  ) and Molson Coors (NYSE: TAP  ) .

Hard liquor's sour grapes
Focusing first on hard liquor sales, the entire industry has to be concerned with an NPR report issued last year noting that in the 30-year time frame from 1982 to 2012, liquor sales dropped from 34.6% of store sales to just 12.6% of store sales. Replacing liquor in America's homes -- and even sniping away 1.2% from beer sales -- is wine. Wine now accounts for nearly 40% of all liquor-store sales.

Source: Rachmaninoff, Commons.wikimedia.org. 

The liquor industry did note a 4% increase in sales volume in 2011, but this is a potentially disturbing trend that will require Diageo, Brown-Forman, and Beam to boost pricing to maintain margins. The problem with that is that boosting prices could further chase customers looking to save a few dollars away from that bottle of Jack Daniel's, Jim Beam, or Crown Royal into settling for a $9.99 bottle of local wine.

Beer producers look overseas
Beer, on the other hand, shows a lot of promise despite its near-term headwinds. In both Europe and the U.S., sales of beer have struggled as higher taxes and lower consumer-spending habits have sapped any growth prospects. This has caused some of the world's biggest beer producers to turn to M&A activity to drive growth and synergies that translate into bigger bottom-line profits.

Anheuser-Busch InBev, for instance, is purchasing all of Grupo Modelo's operations, sans its U.S. operations and northern Mexico facilities, in order to boost its international presence. Molson Coors did the same last year with its $3.5 billion purchase of StarBev in order to gain exposure to Eastern Europe's burgeoning emerging markets.

Source: Harald Bischoff, Commons.wikimedia.org. 

Diageo has seen many of these same domestic troubles and is attempting to mix things up by trying to obtain a majority stake in India's largest distiller, United Spirits. The deal, if approved, would give Diageo one of the two controlling positions in a rapidly growing Indian market. However, opposition to the deal is mounting as stakeholders want Diageo to increase its offer and Diageo doesn't seem ready to budge.

By the numbers
Looking at Diageo's most recent quarter, we see a lot of expected trends playing out in reverse. Diageo's emerging markets -- specifically Nigeria and Brazil -- delivered weak results, while U.S. spirits helped balance out some of that weakness. Diageo did manage to boost organic net sales by 4%, although volumes fell globally by 1%. 

So I ask once again: Is Diageo's liquor really quicker?

Certain aspects certainly look intriguing, such as its global diversification, top-notch line of spirits and beer, its growing dividend that's yielding just shy of 2%, and the fact that it can use its pricing power to fuel sales gains. Conversely, though, weak volume growth in hard-liquor sales, high levels of competition, and a forecast organic growth rate of just 4% over the next two years don't sound too thrilling next to a forward P/E of 17.

Ultimately, I'm leaning in favor of Diageo being a company to hold over the long term, but given the weakening trend in liquor sales over the past three decades and its recent weakness in emerging markets, I'd suggest steering clear until Diageo pulls back by about 25% from its current level.

Take a long pull of this one
Boston Beer's Samuel Adams brand helped to redefine beer and kick off the craft beer revolution in the United States. Success breeds competition, though, and while just a few years ago Boston Beer had claim over most of the craft beer shelf, today the field is crowded. Can Boston Beer rise above the rest, or will it be squeezed between small local breweries on one side and global beer giants on the other? To help you decide, we've compiled a premium research report filled with everything you need to know about Boston Beer's risks and opportunities. Just click here now to find out whether Boston Beer is a buy today.

The Other Side of Record Margins: Good News for Job Seekers

Some say corporate profit margins are at record highs (though there's debate on that claim). That's going to ding profits, and then a stock index like the S&P 500 (SNPINDEX: ^GSPC  ) will fall, they say.

But there's another side to the story. Profit margins are high because companies have shed such a large part of their workforces and pay such measly average wages. Margins will fall, therefore, when companies begin to hire more and raise wages. That should be good for the economy, and thus stocks. Great, even.

In an interview last week, I asked Charles Schwab chief investment strategist Liz Ann Sonders about the jobs-margins relationship. Here's what she had to say. (A transcript follows.)

Liz Ann Sonders: "Labor, as a share of GDP and as a share of corporate profits, has gotten down to about as low as it typically gets. You even saw it in the most recent jobs number, which the headline was not terrific, but the hours worked number was pretty good.

So when you see the constraints now in productivity, the fact that the labor share of corporate income is relatively low, you look at hours worked going up, it tells you we should be getting close to that point in the cycle where the next step on the part of businesses is actually adding to workers. But you're right, part of the reason why margins have been so strong is because businesses have been at least trying to squeeze as much as they can out of the workforce that they have. So yes, that would be, in essence, certainly good news for the underemployed or unemployed."

Is United Airlines Shooting Itself in the Foot?

A price war is brewing between United Continental (NYSE: UAL  ) and Virgin America on two lucrative transcontinental routes. Since the merger of United and Continental several years ago, United has been the only carrier flying from Newark Airport (just outside New York City) to San Francisco and Los Angeles. However, earlier this month, low-cost carrier Virgin America began service on both of these routes, breaking United's monopoly.

To stimulate demand and market its flights, Virgin America decided to undercut United's prices when it entered Newark. United responded with a full-blown price war to defend its turf in the Newark-San Francisco and Newark-Los Angeles markets. While United needed to match Virgin America's prices to maintain its competitiveness, the extent of its reaction will have a noticeable negative impact on its profitability. The ability of a relatively small competitor like Virgin America to disrupt a global carrier like United highlights the continuing risks of the airline industry for investors. Moreover, United's response suggests that capacity discipline is not nearly as engrained as airline industry bulls believe.

Background
United's San Francisco, Los Angeles, and Newark hubs are all located in major markets for both business and leisure travelers. The transcontinental routes from Newark to San Francisco and Los Angeles became highly profitable monopoly routes after the United Continental merger. For a long time, United's strong position in all three hubs and the difficulty of securing slots at Newark Airport deterred competitors from entering the market.

However, the American Airlines bankruptcy allowed Virgin America to buy slots and begin service three times a day on both routes. The Newark-San Francisco and Newark-Los Angeles routes appealed to Virgin America for a few reasons. First, the carrier already has a major presence in San Francisco and Los Angeles. Furthermore, Virgin America specializes in long-haul flying and offers more passenger amenities than United. Virgin America has joined JetBlue (NASDAQ: JBLU  ) in offering free in-flight satellite TV and other entertainment options, which are particularly nice to have if you're going to be on an airplane for six hours. Lastly, Virgin America recently achieved the top ranking in the Airline Quality Rating survey, whereas United was last. When competing directly with United, Virgin America can try to win customer loyalty by providing a clearly superior service.

Price war?
When Virgin America began service to Newark, United could have just matched the fares and hoped for the best. Additionally, it could have trimmed its own capacity, in the hope of retaining some pricing power. Instead, United slashed fares even more and added flights! United added five daily round trips on each route for the summer season, moving total industry capacity from 11 daily round trips to 19 on the Newark-San Francisco route, and from nine daily round trips to 17 on the Newark-Los Angeles route. According to Virgin Group founder Richard Branson, United stands to lose as much as $150 million from its actions on these two routes alone. (For comparison, United earned an adjusted profit of $589 million in all of 2012.)

United's management has steadfastly claimed that they are not trying to drive Virgin America out through unfair competitive practices. However, their claims that Virgin America's lower prices "stimulated demand" ring hollow. With capacity rising around 70% to Los Angeles and nearly 90% to San Francisco, it seems highly unlikely that there will be enough demand to fill those seats at rational prices.

Indeed, on the company's recent earnings call, United's management highlighted the new competition and additional capacity on these routes as a factor that will hurt Q2 unit revenue. At first, it may seem surprising that two routes could have a noticeable impact on the results of a global carrier like United. However, by this summer, those two routes will account for 3% of United's total capacity, so a 30% drop in unit revenue on those routes would lead to a nearly 1% drop in system revenue, and a corresponding decrease in margins.

Foolish bottom line
To some extent, it makes sense for legacy carriers to defend their market position on major hub-to-hub routes. That said, United seems to be shooting itself in the foot by cutting prices and adding capacity at the same time. Virgin America's higher-quality service would attract some customers regardless of United's response. Rather than minimizing the damage, United's move to boost capacity will probably lead to even lower average fares and more empty seats, eroding profits during the peak season.

In the next few years, we're likely to see Virgin America, JetBlue, and other low-cost carriers continue their growth, which will occasionally lead them into new competition with legacy carriers. If the legacy carriers follow United's example by cutting fares and raising capacity whenever new competitors arise, the recent trend toward industry consolidation will not lead to higher profitability. This is a significant consideration for investors who are interested in buying airline stocks today.

What macro trend was Warren Buffett referring to when he said "this is the tapeworm that's eating at American competitiveness"? Find out in our free report: "What's Really Eating at America's Competitiveness." You'll also discover an idea to profit as companies work to eradicate this efficiency-sucking tapeworm. Just click here for free, immediate access.

What's Driving Sirius XM Radio's Earnings?

Next Tuesday, Sirius XM Radio (NASDAQ: SIRI  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.

Sirius inspires strong reactions from investors, as its impressive recovery from near-oblivion during the financial crisis has brought its stock back up to pre-financial-crisis levels. But will the company ever produce the truly explosive growth it will need if it wants to see its stock regain levels last seen during the tech boom more than a decade ago? Let's take an early look at what's been happening with Sirius XM Radio over the past quarter and what we're likely to see in its quarterly report.

Stats on Sirius XM Radio

 

 

Analyst EPS Estimate	$0.03
Change From Year-Ago EPS	50%
Revenue Estimate	$906 million
Change From Year-Ago Revenue	12.6%
Earnings Beats in Past 4 Quarters	1

Source: Yahoo! Finance.

Will Sirius XM Radio deliver earnings growth this quarter?
Analysts have stayed confident in their calls for Sirius XM's earnings over the past quarter, keeping their $0.03 per share estimate unchanged in recent months. But they've dropped their consensus for full-year 2013 earnings by $0.01 per share, and that has kept the stock roughly unchanged since mid-January.

Sirius can point to positive trends that should support earnings this quarter. Auto sales have been extremely strong and, given the importance that the auto industry has for pre-installed satellite-radio sales, good performance from automakers often translates to positive results for Sirius.

But some investors have been concerned about slowing growth. Early in the year, Sirius projected just 1.4 million net subscriber additions for 2013 and, although the company has been conservative with past projections, that figure is well below the 2 million additions last year. Although Sirius has dominant market share in providing satellite radio for automobiles, some believe that Pandora, Spotify, and other competitors will eventually eat into that dominance, as wireless Internet access becomes more available in vehicles.

In addition, Sirius investors are trying to figure out the strategy that major shareholder Liberty Media (NASDAQ: LMCA  ) has for its holdings in the company. Last month, Liberty bought a 27% stake in cable TV operator Charter Communications, using capital that some Sirius investors had hoped Liberty would spend making a premium buyout offer for the remainder of the satellite radio company that it doesn't own. So far, Liberty hasn't committed either to a buyout or to a spinoff of its Sirius shares, seemingly content to keep its majority control.

In Sirius XM's report, watch closely to see if the company begins to ramp up its guidance for the full 2013 year. Last year, similarly conservative early estimates led to much higher actual results later on, and if the same trend holds true this year, then the stock could break out of its holding pattern sooner rather than later.

Despite Sirius XM being one of the market's biggest winners since bottoming out three years ago, there is still some healthy upside to be had if things go right for it -- and plenty of room for it to fall if things don't. Read all about Sirius in The Motley Fool's brand new premium report. To get started, just click here now.

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

What Is a Dividend?

Pop quiz! And there's just one question: "What Is a Dividend?" You probably know that it's a bit of money paid out by a company to shareholders, but you may not know why the company does that, or what it might mean, for you and the company.

So let's jump in, and start at the beginning. Imagine a company, such as Mops 'n' Brooms (ticker: SWABZ), with its compelling tag line: "Providing actionable domestic engineering solutions that leverage and optimize client excellence with a relentless focus on driving shareholder value going forward." Now, assume that Mops 'n' Brooms is raking in a lot of cash every year. What will it do with that money? Well, it has lots of options. Here are some of the main ones: It could pay down debt, or build new factories, or hire more workers, or buy more advertising, or buy another company, or buy back some of its own shares, or invest it, or ... pay a dividend. It may well decide to do a combination of some of those things, too.

But why?
Why does a company pay a dividend? Well, if it doesn't see more effective ways to deploy its excess cash, then a dividend will make sense. This is why many companies, especially younger, smaller, or fast-growing ones, don't pay dividends. They need all their excess cash to help them grow. Troubled companies often don't pay dividends, either, as they may need their income to pay down steep debt. They may not even have any net income at the moment.

It's not a bad sign if a company doesn't offer a dividend. It can still reward shareholders by growing rapidly. But a dividend is a promising sign, suggesting that the company is relatively stable, with earnings predictable enough to permit it to commit to regular payouts.

Simple math
The answer to the question "What is a dividend yield?" is a bit different from our "What is a dividend?" question. But they're quite related. The dividend is the actual sum of money paid by the company per share -- usually per quarter, and sometimes once or twice a year. But it's hard to make sense of just that number. Two companies may both pay $1 per quarter, for example, but they're not equally attractive (dividend-wise) if one costs you $20 per share, and the other costs $100.

Thus, the dividend yield. To get it, you divide the annual dividend amount by the current stock price. In our two examples, dividing $1 by $20 yields 0.05, or 5%. Dividing $1 by $100 yields 0.01, or 1%. So you'll get five times as much dividend income if you buy into the $20 stock, because it has a juicier dividend yield.

What to seek and avoid
When you're seeking dividend investments, go ahead and favor hefty dividend yields, but be wary when they're really hefty, because they might be unsustainable. Seek healthy and growing companies, too, and ones that are not paying out more in dividends than they're actually earning. For a sobering lesson, check out an article from October of last year by my colleague Brian Stoffel, who wrote about "3 Extremely Dangerous Dividends," discussing rural telecom specialist Windstream (NASDAQ: WIN  ) , supermarket concern Roundy's (NYSE: RNDY  ) , and electronics retailer RadioShack (NYSE: RSH  ) . It hasn't been much more than five months since the article was published, and while Windstream's payout is intact, RadioShack's has disappeared, and Roundy's has roughly been cut in half. Windstream may have low profit margins and a lot of debt, but it's been investing in new directions and growing its revenue. Roundy's is also saddled with debt and low margins, and operates in a tough industry. Still, it's at least free-cash-flow positive. RadioShack has long been struggling and recently posted shrinking quarterly revenue and widening losses. One ray of hope is its new CEO, turnaround specialist Joseph Magnacca.

A promising place to seek dividend contenders for your portfolio is the index of Dividend Achievers, which are companies that have hiked their dividends for at least 10 consecutive years. One company on the list, for example, is Intel (NASDAQ: INTC  ) , which is yielding about 4% recently, and has been raising its payout by about 12% annually over the past five years, on average. It, too, has struggled a bit lately, but it's healthy, with deep pockets, and has been moving into the rapidly growing mobile arena.

Now you, too, can answer the question, "What is a dividend?" And better still, you might want to consider adding some to your portfolio.

When it comes to dominating markets, it doesn't get much better than Intel's position in the PC microprocessor arena. However, that market is maturing, and Intel finds itself in a precarious situation longer term if it doesn't find new avenues for growth. In this premium research report on Intel, our analyst runs through all of the key topics investors should understand about the chip giant. Click here now to learn more.

5 Surprising Companies Going Green

Google / YouTube When one thinks of environmentally forward-thinking businesses, some companies spring immediately to mind: Whole Foods Market (WFM), Annie's (BNNY), Patagonia, Seventh Generation, and Method, for example, are all known for their commitment to being green.

However, there are other firms putting a lot of resources into planet-helping initiatives -- companies whose green tactics are far less recognized, and may even come as a surprise to you. Let's take a look at a few.

Huge companies making huge strides

Waste Management Google Unilever Sprint-Nextel Walmart One Step at a Time Toward a Cleaner, Greener World More on DailyFinance:

Interface Misses on the Top and Bottom Lines

Interface (Nasdaq: TILE  ) reported earnings on April 24. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended March 31 (Q1), Interface missed estimates on revenues and missed estimates on earnings per share.

Compared to the prior-year quarter, revenue dropped. Non-GAAP earnings per share contracted significantly. GAAP earnings per share grew.

Gross margins increased, operating margins contracted, net margins grew.

Revenue details
Interface logged revenue of $210.4 million. The eight analysts polled by S&P Capital IQ predicted a top line of $224.1 million on the same basis. GAAP reported sales were 9.6% lower than the prior-year quarter's $232.8 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $0.08. The eight earnings estimates compiled by S&P Capital IQ anticipated $0.14 per share. Non-GAAP EPS of $0.08 for Q1 were 20% lower than the prior-year quarter's $0.10 per share. GAAP EPS were $0.11 for Q1 against -$0.09 per share for the prior-year quarter.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 33.9%, 120 basis points better than the prior-year quarter. Operating margin was 6.7%, 50 basis points worse than the prior-year quarter. Net margin was 3.3%, 580 basis points better than the prior-year quarter. (Margins calculated in GAAP terms.)

Looking ahead
Next quarter's average estimate for revenue is $245.2 million. On the bottom line, the average EPS estimate is $0.21.

Next year's average estimate for revenue is $1.01 billion. The average EPS estimate is $0.86.

Investor sentiment
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 144 members out of 162 rating the stock outperform, and 18 members rating it underperform. Among 59 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 56 give Interface a green thumbs-up, and three give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Interface is outperform, with an average price target of $20.25.

Looking for alternatives to Interface? It takes more than great companies to build a fortune for the future. Learn the basic financial habits of millionaires next door and get focused stock ideas in our free report, "3 Stocks That Will Help You Retire Rich." Click here for instant access to this free report.

Add Interface to My Watchlist.

Don't Get Too Worked Up Over West Pharmaceutical Services's Earnings

Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.

Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.

Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on West Pharmaceutical Services (NYSE: WST  ) , whose recent revenue and earnings are plotted below.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.

Over the past 12 months, West Pharmaceutical Services generated $56.1 million cash while it booked net income of $80.7 million. That means it turned 4.4% of its revenue into FCF. That sounds OK. However, FCF is less than net income. Ideally, we'd like to see the opposite.

All cash is not equal
Unfortunately, the cash flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash flows are of high quality. What does that mean? To me, it means they need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).

For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable for the short term) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it's ordinary in recessionary times, and you can only increase collections so much. Finally, adding stock-based compensation expense back to cash flows is questionable when a company hands out a lot of equity to employees and uses cash in later periods to buy back those shares.

So how does the cash flow at West Pharmaceutical Services look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. TTM = trailing 12 months.

When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.

With 17.7% of operating cash flow coming from questionable sources, West Pharmaceutical Services investors should take a closer look at the underlying numbers. Within the questionable cash flow figure plotted in the TTM period above, stock-based compensation and related tax benefits provided the biggest boost, at 8.3% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed 70.1% of cash from operations. West Pharmaceutical Services investors may also want to keep an eye on accounts receivable, because the TTM change is 2.0 times greater than the average swing over the past 5 fiscal years.

A Foolish final thought
Most investors don't keep tabs on their companies' cash flow. I think that's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated home-run stocks that provide the market's best returns.

Looking for alternatives to West Pharmaceutical Services? It takes more than great companies to build a fortune for the future. Learn the basic financial habits of millionaires next door and get focused stock ideas in our free report, "3 Stocks That Will Help You Retire Rich." Click here for instant access to this free report.

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Big Business Is Finally Waking Up to Global Warming

Ethan Miller/Getty ImagesDrought and increased water demand spurred by explosive population growth in the Southwest has caused the water level at Lake Mead, which supplies water to Las Vegas, Arizona and Southern California, to drop. Terrible droughts. Vast wildfires. Superstorm Sandy. Extreme weather is one of the most obvious negative results of climate change, and when it reaches "natural disaster" proportions, it can affect everything from our food supply to our homes and businesses, to our overall economic well-being.

People who are concerned by climate change say all signs point to more extreme weather events like those noted above. Let's not forget that Superstorm Sandy was first dubbed "Frankenstorm" -- it shocked even weather experts with its unprecedented formation.

In fact, last year was the warmest year on record, and the second most extreme weather year in U.S. history, according to sustainability advocacy group Ceres.

After last year's frightening developments, which only foreshadow greater climate-related problems and dangers, Earth Day 2013 seems more important than ever. And lately all eyes are on big business and how companies can do more to stop harming Mother Earth.

Scary Math

This Earth Day, a documentary called "Do the Math" made its debut on a tour across the country. The man behind the documentary is Bill McKibben of the 350.org group, who in a recent interview with the Portland Tribune described the fossil fuel business as "a rogue industry," releasing five times more carbon than even conservative estimates consider safe.

McKibben has launched a fossil fuels divestment campaign urging companies to reduce the amount of CO2 released into the atmosphere. According to 350.org, scientists and climate experts say that the CO2 level needs to be reduced from 392 parts per million -- the amount that is in our atmosphere right now -- to less than 350 parts per million.

He explained the premise of the documentary to the Tribune: "'Do The Math' refers to the simple and terrifying new reality of the climate crisis: The fossil fuel industry currently has 2,795 gigatons of carbon in their reserves, five times more than the maximum 565 gigatons the world can emit and keep warming below 2 degrees Celsius, a goal agreed to by nearly every nation on Earth, including the United States."

Many companies are making bigger stands to acknowledge and address climate change, but there are still many more that are not yet on board.

Companies Slow to Warm Up to Climate Change

When it comes to climate-related catastrophes, few industries have as much at stake as those involved in insurance.
According to a recent report from Ceres, only 23 insurers out of 184 examined have formed any comprehensive strategies to cope with climate change.

And while insurers will share the experience of being among the first to feel the pain, those responses they have made to global warming have been anything but uniform. For example, ACE (ACE) and Swiss Re are both putting money into climate change research, while Allstate (ALL) and Travelers (TRV) express "ambivalence" about the science involved, according to Ceres, and most companies are primarily relying on their Enterprise Risk Management strategies to build in any risk to the model.

There are, however, many other large companies stepping up to the plate in aggressive ways.

Thirty-three companies, including Starbucks (SBUX), eBay (EBAY), Ikea, Seventh Generation, Patagonia, and Annie's (BNNY), have all joined forces with Ceres' advocacy coalition, Business for Innovative Climate & Energy Policy. The coalition is pushing policymakers to pass energy and climate legislation.

The companies that have joined have signed a Climate Declaration, which asks the U.S. government to implement a national policy to combat climate change. Both corporations and individuals can sign the declaration.

The organization claims: "Tackling climate change is one of America's greatest economic opportunities of the 21st century (and it's simply the right thing to do)."

Changing for Good and Profit

It's not only the right thing to do, but also the financially smart thing to do. Plenty of companies are coming to the realization that working to save the planet can also save them money -- and even make them profits.

Consumer giants like Procter & Gamble (PG) acknowledge that changing business practices with an eye on sound environmental policies lowers costs and waste. They've also been reporting on their progress at cutting greenhouse gas emissions and water waste, using renewable energy and recycled materials, and letting no consumer or manufacturing waste end up in landfills.

Some smaller companies are trying to move us into the future with greener alternatives. Take biofuels company Solazyme (SZYM), which uses plant-based sugars and microalgae to make alternative fuels, or SolarCity (SCTY), a solar company that's been making major headway into business and consumer markets.

And consider Tesla (TSLA), whose founder, Elon Musk, has made pointed statements about reducing America's oil addiction. Tesla's gorgeous electric cars are aimed to help consumers do just that. Talk about good for Mother Earth, the wallet, and Tesla's bottom line.

Climate change's ill effects have made themselves known, but the beginnings of progress can be seen on the horizon.

Fortunately, corporate America, investors, and regular people all seem to be coming around to the idea that we can work on greening up the planet -- and maybe even saving the world.

MetroPCS Shareholders OK Merger With T-Mobile

By an overwhelming majority, MetroPCS (NYSE: PCS  ) shareholders have ratified the company's proposed merger with Deutsche Telekom (NASDAQOTH: DTEGY  ) unit T-Mobile USA.

Nearly 300 million shareholders voted in favor of the move, while 21 million voted against it, the company announced today.

MetroPCS shareholders also approved a raft of other proposals connected with the merger, including a recapitalization plan for the company.

T-Mobile USA first proposed the merger last year, meeting with some resistance from MetroPCS shareholders. Earlier this month T-Mobile revised its offer, specifically the debt financing component of the deal.

Under the terms of the merger, MetroPCS stockholders of record as of the closing date of the agreement -- which is expected to be April 30 -- are to receive an aggregate $1.5 billion (roughly $4.06 per share) in cash. They will also hold a collective 26% stake in the reformed company, with the acquirer owning the remainder.

link

Ford Earnings Report Delivers the Goods!

Charting Acacia Research's Latest Earnings Release

Acacia Research (Nasdaq: ACTG  ) reported earnings on April 18. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended March 31 (Q1), Acacia Research crushed expectations on revenues and missed estimates on earnings per share.

Compared to the prior-year quarter, revenue shrank significantly. Non-GAAP earnings per share dropped significantly. GAAP earnings per share contracted significantly.

Margins contracted across the board.

Revenue details
Acacia Research logged revenue of $76.9 million. The six analysts polled by S&P Capital IQ hoped for revenue of $55.2 million on the same basis. GAAP reported sales were 22% lower than the prior-year quarter's $99.0 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $0.47. The five earnings estimates compiled by S&P Capital IQ anticipated $0.50 per share. Non-GAAP EPS of $0.47 for Q1 were 57% lower than the prior-year quarter's $1.09 per share. GAAP EPS of $0.11 for Q1 were 90% lower than the prior-year quarter's $1.09 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 76.0%, much worse than the prior-year quarter. Operating margin was 9.2%, much worse than the prior-year quarter. Net margin was 6.7%, much worse than the prior-year quarter. (Margins calculated in GAAP terms.)

Looking ahead
Next quarter's average estimate for revenue is $56.8 million. On the bottom line, the average EPS estimate is $0.52.

Next year's average estimate for revenue is $269.7 million. The average EPS estimate is $2.37.

Investor sentiment
The stock has a three-star rating (out of five) at Motley Fool CAPS, with 135 members out of 155 rating the stock outperform, and 20 members rating it underperform. Among 31 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 28 give Acacia Research a green thumbs-up, and three give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Acacia Research is buy, with an average price target of $44.25.

Looking for alternatives to Acacia Research? It takes more than great companies to build a fortune for the future. Learn the basic financial habits of millionaires next door and get focused stock ideas in our free report, "3 Stocks That Will Help You Retire Rich." Click here for instant access to this free report.

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Is Chipotle Making McDonald's Mistake?

Chipotle Mexican Grill (NYSE: CMG  ) has a plan to boost its moribund comps.

The fast-growing restaurant chain will be adding premium margaritas -- handmade with Patron silver tequila, triple sec, agave nectar, and fresh lime -- to more than half of its restaurants next week.

These drinks won't be cheap, priced between $6.50 and $8 apiece. 

The allure may be obvious. Average ticket prices could head higher as customers trade up from sodas and beers. However, McDonald's (NYSE: MCD  ) also thought that it could boost sales and woo new customers by adding premium beverages. It hasn't exactly worked out well lately. Comps turned negative in October for the first time in a decade, and customer complaints are growing. 

Is Chipotle biting off more of this tequila worm than it can chew?

In this video, longtime Fool contributor Rick Munarriz wonders if Chipotle's new product may result in confusion and slow-moving lines. There's also the fear that Chipotle's value proposition gets blurred. What do you think? Check out the video, then chime in with your thoughts in the comment box below. 

Chipotle's stock has been on an absolute tear since the company went public in 2006. Unfortunately, 2012 hasn't been kind to Chipotle's stock, as investors question whether its growth has come to an end. Fool analyst Jason Moser's new premium research report analyzes the burrito maker's situation and answers the question investors are asking: Can Chipotle still grow? If you own or are considering owning shares in Chipotle, you'll want to click here now and get started.

Is Delta's Refinery Missing Expectations?

An Investment Opportunity for a Healthy World

Since 1981, 25 million people have died from HIV/AIDS. An estimated 1.7 million died in 2011 due to AIDS-related causes, with another 2.5 million newly infected with HIV. Beyond the human cost, the U.S. government spent $28 billion fighting HIV in 2012, and some African countries lose 1% in GDP growth each year due to the disease. It's difficult to grasp these numbers, but it's a problem crying out for several solutions.

One such solution is offered by Female Health Company  (NASDAQ: FHCO  ) : FC2, the only female condom approved by the Food and Drug Administration and the World Health Organization.

Social opportunity
The Bill and Melinda Gates Foundation recently called for proposals for its Grand Challenges in Global Health grant program. One of the topics addressed this year is "reinventing the condom." As the blog post describes the issue:

It may seem obvious, but the success and impact of any public health tool hinges on that tool being used consistently and correctly by those who need it. Vaccines sitting on shelves don't prevent disease. New tuberculosis drug regimens won't help if patients stop taking them halfway through the necessary days. Likewise, the potential value of condoms is limited by inconsistent use.

The FC2 condom is a superb public health tool that allows women to initiate protection against sexually transmitted diseases. As to making sure it is used consistently and correctly, Female Health has a variety of initiatives. In South Africa, Female Health has distributed 20 million condoms and trained 10,000 health providers. The company also runs a website with product information and training, it will be investing $14 million over the next six years in HIV/AIDS and reproductive education with global agencies, and it has set a goal of reaching 120 million more women in the poorest countries by 2020.

Profitable opportunity
Some may guess that doing business with developing countries wouldn't allow for a very profitable business. However, when South African companies like Sasol  (NYSE: SSL  )  -- which estimated 18% of its workforce carried HIV in 2007 -- must dedicate departmental budgets to HIV/AIDS, there are plenty of opportunities for Female Health to cover costs and earn a return. A healthier workforce for Sasol would simply cost less for the company, and Female Health can help companies like Sasol achieve a healthier workforce.

Closer to home, at least 3% of Washington, D.C., residents carry HIV/AIDS. Working with Johns Hopkins, a study found:

...a public-private partnership to provide and promote FC2 female condoms, prevented enough HIV infections in the first year alone to save over $8 million in avoided future medical care costs (over and above the cost of approximately $445,000 for the program). This means that for every dollar spent on the program, there was a cost savings of nearly $20.

FHCO Revenue TTM data by YCharts.

Risky opportunity
Female Health's major customers are from the public sector -- like the United Nations Population Fund and USAID -- which the company warns can make for lumpy revenue due to politics, changes in leadership, funding issues, and other delays. Additionally, while right now the FC2 is the only FDA and WHO-approved female condom, others are under development.

Still, with a pure play in female condoms, the company achieves a staggering double-digit net profit margin: 44% for 2012. This dwarfs the conglomerate and Trojan condom maker Church & Dwight's (NYSE: CHD  ) 12% net margin, even though Church & Dwight is more expensive on a P/E basis and offers a lower dividend yield than Female Health.

A niche play
Female Health's operations not only enrich the world, but have enriched investors. Its product is proven in both efficacy and economics, and offers a barrier to entry with regulatory approval. While is has the downside of relying heavily on public sector customers, Female Health is making a push for wider consumer adoption through offering the product in stores like Walgreens. Even if you may not deem it a worthy investment, it's a fascinating company.

Profiting from our increasingly global economy can be as easy as investing in your own backyard. The Motley Fool's free report "3 American Companies Set to Dominate the World" shows you how. Click here to get your free copy before it's gone.

Don’t Unveil a TV Without This Feature, Apple

So many have weighed in on Siri's flaws that it must be difficult to take Apple's (NASDAQ: AAPL  ) voice assistant seriously. But she isn't useless. To the contrary: I think Siri should be the default interface of the next version of Apple TV.

Frankly, it's the least Apple can do. Microsoft (NASDAQ: MSFT  ) has spent years transforming the Xbox into a wonderfully functioning media console as well as a gaming platform. The 360 already includes Kinect voice commands for activating common features:

Sources: Microsoft and YouTube.

Now, there's talk that the next Xbox will include more natural language commands. Say you're playing the latest Halo but want to try something new. The next Xbox should allow you to ask "What are my friends playing?" to bring up a list. Text-to-speech is also planned, The Verge reports.

Both features are interesting. But of the two, I think Apple's best option is to transform Siri into a personal TV assistant. Remotes have too many steps. Giving customers the ability to go directly to a show or a menu with one command could be a huge game-changer.

Nuance Communications (NASDAQ: NUAN  ) , long rumored to be a Siri partner, is already working on this sort of advanced interface as a sort of personal assistant that travels from your computer to your phone and car. Why not add TV?

Whatever the plan, Apple needs to upgrade soon. Microsoft is improving Xbox TV while Google (NASDAQ: GOOG  ) adds its own subscribers via an expanded fiber network. The industry is moving fast; Apple needs to move faster.

It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged among the five kings of tech. Click here to keep reading.

What Google's Cloud Warmongering Means for Amazon Stock Investors

Suddenly, the tech world has gone jealous. Everyone wants to be Amazon.com (NASDAQ: AMZN  ) .

Google (NASDAQ: GOOG  ) offered the latest proof when it cut prices 4% on Cloud Engine, a low-cost hosting alternative to Amazon Web Services. EMC and VMware (NYSE: VMW  ) have also joined the effort with a spinoff called Pivotal, which is due to be formally unveiled before month-end, according to trade magazine eWEEK.

Even Microsoft (NASDAQ: MSFT  ) wants in, having recently cut prices for some on-demand services available through its competing Windows Azure platform. All signs point to a race to the bottom, which is good news for the likes of Netflix, which consumes vast amounts of Internet infrastructure for delivering its services. Amazon may not be so lucky, says Tim Beyers of Motley Fool Rule Breakers and Motley Fool Supernova in the following video.

What do you think of Google's power play? Please watch to get Tim's full take, and then leave a comment to let us know whether you'd buy, sell, or short Amazon stock at current prices.

Everyone knows Amazon is the king of the retail world right now, but at its sky-high valuation, most investors are worried it's the company's share price that will get knocked down instead of its competitors'. The Motley Fool's premium report will tell you what's driving the company's growth, and fill you in on reasons to buy and reasons to sell Amazon. The report also has you covered with a full year of free analyst updates to keep you informed as the company's story changes, so click here now to read more.

Aubrey McClendon's New Job

Well, that didn't take long. Less than three weeks after retiring as CEO of Chesapeake Energy (NYSE: CHK  ) , the company's co-founder, Aubrey McClendon, has a new job. According to The Oklahoman, McClendon is launching a new energy company: American Energy Partners LP. The new company is reportedly headquartered just down the street from his old office.

In an email obtained by the paper, McClendon said he is actively seeking new oil and gas drilling opportunities. The email went on to say that McClendon's "goal is to build a substantial E&P company both through the drillbit and through acquisitions of producing properties." Further, the email stated: "In particular, I will be looking for deals with a lot of drilling left on them and will also consider undeveloped acreage deals – plus, I am not scared of natural gas."

Now that he's out of the spotlight of the public markets, McClendon can build this new company without having his every move scrutinized. His only limitations will be the capital to fund his big dream as well as the non-compete agreements he has with Chesapeake. All we can do is speculate about what McClendon will buy first, especially considering that he's not afraid of natural gas.

He's probably the only one who's not afraid of natural gas these days. Despite the recent rise in price, all we've heard about are companies transitioning from natural gas to oil and natural gas liquids, or NGL, with nearly every energy company highlighting that aspect of its business. Environmental services company Heckmann (NYSE: HEK  )  for example is quick to point out that oil- and NGL-focused shale plays make up 70% of its revenue. Meanwhile, Devon Energy (NYSE: DVN  ) is quick to point out that its oil production increased 20% last year and its natural gas production is down to just 61% of total production. Each company has done so to alleviate investors' fears that its business is too reliant on natural gas to grow. 

Even Chesapeake, which McClendon had built into the nation's second-largest natural gas producer, has been trumpeting that it is now the 11th largest oil and liquids producer in the country. The company had basically quit drilling gas wells this year, as 86% of its drilling capital is devoted to liquids-rich projects.

However, now that McClendon is out of the market's spotlight, he can pursue natural gas when no one else is doing so. That's the beauty of the private market place. The question is: Should we join him in that pursuit?

While we can't yet invest in his new company as public investors, we do have two options if we, like McClendon, are not afraid of natural gas. We can either seek out those companies that are reliant on natural gas or invest in those that have a large upside if gas prices increase.

One company that has showed it's not afraid of natural gas is Ultra Petroleum (NYSE: UPL  ) . The company is one of the lowest-cost producer,s meaning it's profitable even in this low-price environment. Further, the company is focused on driving natural-gas-fueled returns by investing within its cash flow instead of pushing growth for the sake of growth. With massive natural gas reserves in the Marcellus Shale and the Green River Basin of Wyoming, Ultra's future is firmly levered to natural gas.

On the other hand, a company to keep an eye on is another one with a CEO who is also a former Chesapeake Energy co-founder. SandRidge Energy (NYSE: SD  )  is actually a step ahead of Chesapeake; the company has already made the transition to liquids as 80% of its Mississippian cash flow is from oil and liquids. However, the natural gas upside is tremendous when you consider that 55% of its Mississippian production is natural gas. While the company talks oil growth, it will really benefit from a rise in natural gas prices. 

While McClendon might be starting over, I think it's interesting that he's going back to the same well, so to speak. Natural gas is something that most investors are afraid of these days, and most companies are trumpeting liquids. However, it might be a good idea to follow McClendon's lead and either invest in a pure-play natural gas driller like Ultra Petroleum or find those companies like Heckmann, SandRidge, and Devon that are trumpeting liquids but have hidden natural gas upside.

Now that Chesapeake remains a compelling story in the natural gas industry, energy investors would be hard-pressed to find another company trading at a deeper discount. Its share price depreciated after negative news surfaced concerning the company's management and spiraling debt picture. While the debt issues still persist, giant steps have been taken to help mitigate the problems. To learn more about Chesapeake and its enormous potential, you're invited to check out The Motley Fool's brand-new premium report on the company. Simply click here now to access your copy.

Believe It: Hyperinflation in America

Ever since the Federal Reserve began its quantitative easing policies four years ago, a group of pessimists has warned of looming hyperinflation.

It hasn't come. Not even moderate inflation.

But this isn't a topic to joke about. When we talk about hyperinflation, most point to examples in Zimbabwe and the Weimar Republic. But America actually has its own history of hyperinflation. Last week, David Cowen, CEO of the Museum of American Finance, told me the story. Have a look (transcript follows):

Morgan Housel: So about two years ago, I was at a conference, and for the lunch tickets, they gave us $100 trillion in Zimbabwean bills that were real and they had a face value of maybe two cents for U.S. Dollars. A lot of people don't know that we actually had a hyper inflation here in American quite a while ago. What can you tell me about that?

David Cowen: You know, you're so right; it's not just Zimbabwe, but the textbooks have those wheelbarrows of money in Weimar, Germany, but hyperinflation actually happened here during the Revolutionary War. There's a phrase from there, "Not worth a Continental." A "Continental" was the paper currency that the Continental Congress was issuing to try and pay for the war, and it depreciated so rapidly that there's a famous letter from George Washington where he writes that "a wagonload of money will not buy a wagonload worth of provisions." So we experienced that hyperinflation here once in our history, and we have examples of the Continentals right here.

Now, part of the problem was we were losing battles, as you're well aware, quite often. But also the British were counterfeiting our currency like mad. And as a result, as you can see on this bill above one thousand dollars, it says, "Death to counterfeit," so very serious consequences. Recently there was a movie, Catch Me If You Can about counterfeiting. We almost glorify it in that movie. Very, very serious business, not just during this time, but throughout American history.

Morgan Housel: Was this just a threat, or did they actually execute people who were counterfeiting?

David Cowen: I don't know if there were actual executions, but I've read newspaper accounts where they branded people back then with the letter "C" on their forehead for counterfeiting.

Morgan Housel: That's almost worse than being executed.

David Cowen: Yeah, almost, right, so very, very serious penalties.

The End of Gold as a Weight on the American Economy

President Franklin D. Roosevelt withdrew the United States from the gold standard on April 19, 1933. It was only the latest in a series of drastic steps taken during Roosevelt's legendary first 100 days in office to stem the tide of the Great Depression, following a nationwide banking holiday and the criminalization of most private gold-ownership. As a result of Roosevelt's action, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) shot 9% higher -- the second-best percentage gain of 1933 following the post-banking-holiday market reopening.

The New York Times wrote a concise summary of the event and its motive forces:

Officially cut adrift from the gold-standard anchor by President Roosevelt's announcement prohibiting exports of gold to support exchange, the dollar fell yesterday to a discount of 11.5% in terms of the gold-standard currencies of the world.

Embracing the belief that inflation was at hand, the stock and commodity markets soared, while United States Government bonds and other high grade fixed-interest securities broke sharply. The imposition of an air-tight embargo upon gold exports, coupled with intimations from Washington of plans for expanding credit, and, if necessary, enlarging the basis of the currency, unleashed in Wall Street a stampede for "equities."

Part of the optimism was driven by legendary banker J. P. Morgan Jr., the 66-year-old heir of legendary banker John Pierpoint Morgan and the chairman of the JPMorgan (NYSE: JPM  ) bank that bore his family name. Morgan said he welcomed the action, and, furthermore:

It has become evident that the effort to maintain the exchange value of the dollar at a premium as against depreciated foreign currencies was having a deflationary effect upon already severely deflated American prices and wages and employment.

It seems to me clear that the way out of the depression is to combat and overcome the deflationary forces. Therefore, I regard the action now taken as being the best possible course under existing circumstances.

Although some confusion remained over the particulars of Roosevelt's gold plans -- that is, whether it was a true inflationary program or merely an effort to gain negotiating leverage against Britain and France -- the market didn't wait for clarification. Commodities and commodity stocks were broadly higher, with steel, copper, rubber, tobacco, and sugar issues all posting large gains. More than 5 million shares traded during the day, and utilities and railroads joined the parade as well, though to a more modest degree than that enjoyed by commodities investors. These industries had their own reasons for optimism, as railroad freight volume, steel output, and electricity production all showed growth in reports issued before the start of trading on April 19, 1933. The recovery from the Great Depression seemed to be underway at last.

Building a better corporate future
Home Depot (NYSE: HD  ) graduated from over-the-counter trading to a spot on the New York Stock Exchange on April 19, 1984. The 6-year-old company had already grown into a market cap of nearly half a billion dollars, its stock already up more than 1,000% from a 1981 IPO. Home Depot operated 19 stores with about $250 million in annual sales in 1984. Graduating to the Big Board gave the company some big publicity, and a year later Home Depot became a 50-store growth rocket with $1 billion in annual sales.

Home Depot's first decade on the New York Stock Exchange wasn't without its growing pains. Its stock suffered a sharper loss than many others during 1987's Black Monday, losing more than half its value during the short but vicious crash. Home Depot also fell precipitously in the fall of 1990 as a result of the savings and loan crisis and its resulting depression of the U.S. housing market. Neither of these slowed Home Depot, which posted another 2,000% gain between 1984 and 1994. By the time Home Depot joined the Dow in 1999, it had posted dot-com-like returns, giving investors who bought in on the day of its ascent to the Big Board a 12,550% gain to the day of its Dow initiation. The small home-improvement upstart had grown into a retail juggernaut by then, with 909 stores in the U.S. and Canada (plus four in Chile) generating more than $38 billion in sales.

Shot heard round the world
By the rude bridge that arched the flood,
Their flag to April's breeze unfurled,
Here once the embattled farmers stood,
And fired the shot heard round the world.
--Ralph Waldo Emerson, "Concord Hymn"

The American Revolution began on April 19, 1775, when British Army redcoats marched on Concord and were turned back by a spirited band of colonial militiamen. The war would rage for six years until Cornwallis' surrender at Yorktown in 1781 (and the Treaty of Paris two years later) gave the rebels the freedom needed to build a nation of their own.

Although the Lexington and Concord conflict has been spun indelibly into the patriotic fabric of the U.S. as the start of the Revolution, it was in truth a minor conflict with relatively few casualties -- but it spurred thousands of colonial men to take up arms against what they perceived as a foreign oppressor. It also made a hero of Paul Revere, whose famous ride preceding the battle became another icon of American patriotism. The U.S. now cautiously approaches the 250th anniversary of this transformative event, its status as the world's largest economy no longer assured or taken for granted. The colonial Americans of 1775 could scarcely have imagined that their actions would lead to the creation of the most powerful nation in world history as they faced the most powerful nation of the late 1700s. What will the future hold for the more distant heirs of that revolution?

I can speak computer. Can you?
IBM (NYSE: IBM  ) released the first FORTRAN compiler to the public on April 19, 1957. The first trial run, at Westinghouse, produced an error message due to a missing comma, and from there on the language would spread rapidly throughout the field of high-performance computing, much of which used IBM mainframes and was thus already well-equipped to use it.

What is FORTRAN? Named after IBM's "Mathematical Formula Translating System," FORTRAN was the first modern high-level programming language, and as such it was designed to replace assembly language -- the closest thing you can get to hand-coding everything as ones and zeroes. FORTRAN made the task of programming far simpler by reducing the number of operational statements by roughly a factor of 20. It was quickly adopted for computationally intensive programming, which happened to be most programming at a time when most machines were huge contraptions that might cost millions of dollars. In fact, it's still so useful for scientific applications that modern supercomputers still use FORTRAN benchmark programs to test their speed and run some of their more complex models.

FORTRAN is one of the few computing dinosaurs still lumbering across the tech landscape today, and although most of the languages that came afterward developed their own ways of doing things, they all owe FORTRAN and inventor John Backus for getting the ball rolling on programming languages.

Is JPMorgan a buy today?
With big finance firms still trading at deep discounts to their historic norms, investors everywhere are wondering if this is the new normal or if finance stocks are a screaming buy today. The answer depends on the company, so to help you figure out whether JPMorgan is a buy today, I invite you to read our premium research report on the company today. Click here now for instant access!

30 Boeing Attack Helicopters Heading to South Korea

By now you've probably heard the news; The Pentagon's Defense Intelligence Agency thinks "with moderate confidence" that North Korea has developed a nuclear weapon capable of being delivered on a ballistic missile. Good news, though: The DIA thinks such a weapon would have "low reliability."  

If you're like me, "low reliability" doesn't exactly elicit feelings of confidence. I mean, how accurate do you need to be to do damage with a nuke? Apparently, South Korea feels the same, as it intends to spend $1.6 billion to purchase attack helicopters from Boeing (NYSE: BA  ) equivalent to 30 helicopters at an estimated $52 million base price. South Korea also wants to purchase 60 fighter jets, all for the express purpose of countering North Korea's threats. Obviously, this is good news for defense contractors, and their investors. 

Photo: Jim Gordon, via Wikimedia Commons.

Bring on overseas spending
You've got to hand it to the guy: Kim Jong-un has a flair for the dramatic. While escalating tensions and his continued bellicose remarks aren't great, so far the only thing they've really done is serve as a means for further overseas defense spending -- in addition to the attack helicopters, Boeing's F-15 Silent Eagle, Lockheed Martin's (NYSE: LMT  ) F-35 Stealth Fighter, and the Eurofighter Typhoon developed by BAE Systems (NASDAQOTH: BAESY  ) , European Aeronautic Defense and Space, and Finmeccanica are all competing to be South Korea's fighter of choice. Plus, Northrop Grumman (NYSE: NOC  ) stands to benefit, as the U.S. has said it's willing to sell South Korea one of its most elite spy weapons, the Global Hawk -- an estimated $1.2 billion deal. 

Is it all just talk?
Many U.S. analysts believe Kim is full of hot air, with no real intention to act. An attack against the U.S. would probably be suicide for North Korea, especially given that North Korea's two allies, Russia and China, have both condemned Kim's belligerent, war-mongering talk. It's even rumored that Chinese officials have started referring to Kim as "the little upstart."  

Still, China is a longtime ally of North Korea and has critiqued America's growing military presence in Asia. So even though China has condemned Kim, there's no real way to determine how China's defense ministry would react to an attack. Moreover, it's rumored that one of the real reasons China has condemned North Korea is that it doesn't want South Korea or the U.S building up a defense system in Asia. In fact, China has said the United States' increased military presence is destabilizing Asia and escalating tensions. 

How will it all end?
Right now, the only thing that's certain is that defense companies are benefiting from escalating tensions with North Korea. Sequestration and domestic defense spending cuts are in full swing, and defense contractors are feeling the pinch. But thanks to Kim Jong-un, some defense companies are getting a welcome financial boost. And if there is an outright war, I imagine that'll only improve defense companies' revenue. Perhaps they should send Kim a fruit basket as thanks.

Boeing operates as a major player in a multitrillion-dollar market in which the opportunities and responsibilities are absolutely massive. However, emerging competitors and the company's execution problems have investors wondering whether Boeing will live up to its shareholder responsibilities. In our premium research report on the company, two of The Motley Fool's best minds on industrials have collaborated to provide investors with the key, must-know issues surrounding Boeing. They'll be updating the report as key news hits, so don't miss out -- simply click here now to claim your copy today.

What to Watch For in Thursday's IBM Earnings

On Thursday, IBM (NYSE: IBM  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever surprises inevitably arise. That way, you'll be less likely to have an uninformed, knee-jerk reaction that turns out to be exactly the wrong move.

As the most influential stock in the Dow Jones Industrials (DJINDICES: ^DJI  ) , IBM gets plenty of attention not only from tech investors, but also by market watchers in general. As competition has increased, however, Big Blue has had to work increasingly hard to defend its turf and break new ground with its technology innovations. Let's take an early look at what's been happening with IBM over the past quarter and what we're likely to see in its quarterly report.

Stats on IBM

Analyst EPS Estimate	$3.05
Change From Year-Ago EPS	9.7%
Revenue Estimate	$24.69 billion
Change From Year-Ago Revenue	0.1%
Earnings Beats in Past 4 Quarters	4

Source: Yahoo! Finance.

Will IBM leave investors feeling blue this quarter?
In recent months, analysts have gotten more excited about IBM's earnings prospects. They've only boosted their calls on first-quarter earnings by $0.02 per share, but they've added a more respectable $0.15 per share to their full-year 2013 calls on IBM's earnings. The stock has advanced in line with the broader market, rising a bit more than 10% since early January.

Even though it invented the PC, IBM has done an excellent job of avoiding the machine's fallout. By moving beyond hardware to incorporate higher-margin services including IT consulting, servers, and cloud computing, IBM avoided the trap that has snared other big tech companies as PC sales have declined.

But IBM has had to deal with increasing competition to its business model. Business software giant Oracle (NASDAQ: ORCL  ) has finally reached an impressive execution milestone in the strategy it began four years ago with its acquisition of Sun Microsystems: Oracle's new chips and server products managed to best Big Blue's offerings in independent benchmark testing. Smaller companies will increasingly find their own niche roles in the big-data space as well. For instance, CyrusOne (NASDAQ: CONE  ) , which got spun off from Cincinnati Bell recently, is seeking to make a name for itself in the data-storage infrastructure space. Despite its hefty debt load, CyrusOne has huge growth potential to capitalize on the growing need for data-storage centers, and it has the benefits of tax-favored real-estate investment trust status to boot.

IBM hasn't been coy about trying out new areas for potential growth. Last week, it announced a $1 billion initiative to invest in technology related to flash memory, the high-speed alternative to older technologies like hard disk drives. With the potential to reduce the time required for critical operations like banking transactions and telecommunications services, the initiative fits well with IBM's overall big-data mission.

In IBM's quarterly report, watch for how Big Blue responds to the news on Oracle's performance. With quality always vital for IBM, the company will need to show how it intends to find its way back to the top spot in short order.

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How VMware's Earnings Will Fare This Quarter

Next Tuesday, VMware (NYSE: VMW  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise.

VMware has been a long-term growth giant in the red-hot virtual-computing industry. But last quarter, the company saw its growth slow down sharply, and that led investors to knock the stock from its nosebleed-level valuations. Let's take an early look at what's been happening with VMware over the past quarter and what we're likely to see in its report.

Stats on VMware

Analyst EPS Estimate	$0.70
Change From Year-Ago EPS	6.1%
Revenue Estimate	$1.18 billion
Change From Year-Ago Revenue	12.2%
Earnings Beats in Past 4 Quarters	4

Source: Yahoo! Finance.

Can VMware regain investors' confidence this quarter?
Analysts have been somewhat negative on VMware's earnings prospects in recent months, reducing their estimates for the just-ended quarter by $0.04 per share but limiting their consensus reduction for full-year 2013 to $0.01. The stock has plunged, though, losing almost a quarter of its value since mid-January.

VMware has done an exceptional job of taking advantage of the move toward cloud computing and virtualization software, as its customers have turned to the company for help in optimizing data-center efficiency to make the most of the cloud and the data that it helps those customers collect. But as the industry has gotten more competitive, it's been increasingly difficult for VMware to produce the growth necessary to justify investors' high expectations of the company.

Moreover, competition has gotten tougher in the industry. Citrix Systems (NASDAQ: CTXS  ) has managed to sustain strong growth in product and license revenue in its most recent quarter and appears to be poised to start taking market share away from VMware. In addition, Red Hat (NYSE: RHT  ) has also achieved better license-revenue growth, suggesting that the problem may be solely with VMware rather than reflective of an industrywide trend.

Shares bounced somewhat last month when VMware said it and parent company EMC (NYSE: EMC  ) would spin off VMware's Cloud Foundry service and EMC's data analytics software business. The spinoff, to be called Pivotal, won't go public anytime soon, but it might help focus VMware on making the most of all of its various opportunities.

In VMware's report, pay close attention to whether the company can see renewed growth in its core sources of revenue. If the slowdown continues, then VMware could see another big shift down for its share price.

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Valuation Hardly Matters for This Massive Growth Company

In the following video, Fool contributor Matt Thalman discusses a few reasons investors should still consider buying Disney, even as the stock hits fresh 52-week highs.

In particular, Matt says, Disney still has a long runway to work with and a number of new and old operations that will help the company continue to print money and allow the stock to regularly set new highs.

More Foolish insight on Disney
It's easy to forget that Walt Disney is more than just the House of Mouse. True, Disney amusement parks around the world hosted more than 121 million guests in 2011. But from its vast catalog of characters to its monster collection of media networks, much of Disney's allure for investors lies in its diversity, and The Motley Fool's premium research report lays out the case for investing in Disney today. This report includes the key items investors must watch as well as the opportunities and threats the company faces going forward. So don't miss out -- simply click here now to claim your copy today.