Will Boeing’s Stock Soar Thanks to a New Battery?

Good news, investors! On Friday, the Federal Aviation Administration approved Boeing's (NYSE: BA  ) detailed design changes for the battery on the 787 Dreamliner. Considering the grounding of the Dreamliner has cost Boeing an estimated $600 million and counting, the FAA's decision is great news for the company. It's also great news for Boeing's Dreamliner partners. 

Photo: Jose A. Montes, via Wikimedia Commons. 

Will it fly?
With the FAA's decision, Boeing is expected to issue a service bulletin, which will facilitate quick repairs to the 50 planes owned by airlines around the world. Once repaired, the FAA is expected to issue a final directive, ending the Dreamliner's grounding. Even better news? Boeing will be allowed to resume deliveries of the 787 and expects to deliver all of the planes ordered for this year.  

Now let's just hope the fixes work, as investigators in the U.S. and Japan haven't yet determined what caused the lithium-ion battery to overheat in the first place. Still, Mark Sinnett, Boeing's chief engineer for the 787, said that based on recent tests, the redesigns -- including better insulation, a stainless steel enclosure that'll vent possible smoke and contain fire as well as vent hazardous gases out of the plane, make the battery less likely to overheat.

Boeing's not the only one to benefit
In addition to the good news for Boeing, partners on the Dreamliner are also probably breathing a sigh of relief. Rockwell Collins (NYSE: COL  ) and General Electric (NYSE: GE  ) , both have a stake in the Dreamliner's success -- Rockwell supplies avionics equipment for the 787 and is expecting to increase production from four planes to 10 by the start of its fourth quarter, and GE supplies engines for the 787.  

Will the stock soar?
Following the FAA's announcement, Boeing's stock rose approximately 2% and closed on Friday at $87.96 a share. That's great news for investors and hopefully signals a turnaround for the Dreamliner.

Boeing operates as a major player in a multi-trillion-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.

Direct From Omaha: A Key Message From Warren Buffett

We're still only a couple hours into the Berkshire Hathaway  (NYSE: BRK-A  ) (NYSE: BRK-B  ) annual meeting, but there's a significant theme already surfacing in Warren Buffett's comments. In a word: size.

And yes, to quell your curiosity, Buffett did, in fact, say that size does matter.

Jokes aside, Doug Kass, the big, bad Berkshire bear, challenged Buffett and Charlie Munger on whether Berkshire's size would impede future returns. The easy answer is, of course -- and it's been answered many times over the years -- yes. There are certain opportunities that start to disappear as Berkshire gets ever larger.

However, through the first couple hours of the meeting, both Buffett and Munger returned to the theme that Berkshire's size and financial give the company huge competitive advantage. How many companies out there have billions in liquid cash available to jump on opportunities at a moment's notice? How many have managers of the right mettle to put that capital to work when the market is in disarray? 

This theme should bring to mind Berkshire's crisis-era investments in General Electric  (NYSE: GE  ) and Goldman Sachs  (NYSE: GS  ) , as well as its investment a few years later in Bank of America  (NYSE: BAC  ) . We could probably throw the recent H.J. Heinz deal into the mix as well. In all cases, Berkshire's reputation, ability to move quickly, and its huge bank account put it in a position to snag investment opportunities not available to anyone else. 

In other words, Berkshire is rapidly turning a growing challenge into a growing advantage. And that's an advantage that Buffett doesn't expect to go away even if the Oracle himself is no longer around.

Of course, let's not exaggerate this point. Buffett quipped that "Berkshire is the 800 number when there's really sort of panic in the markets and for one reason or another people need extra capital." But he also said "that hasn't been our main business, but it's been fine."

Feel like you're missing out on hearing Buffett and Munger's wisdom at the Berkshire annual meeting? Fret not, you can join in on the action right now with our live chat.

More on Berkshire
Thanks to the savvy of investing legend Warren Buffett, Berkshire Hathaway's book value per share has grown a mind-blowing 586,817% over the past 48 years. But with Buffett aging and Berkshire rapidly evolving, is this insurance conglomerate still a buy today? In The Motley Fool's premium report on the company, Berkshire expert Joe Magyer provides investors with key reasons to buy as well as important risks to watch out for. Click here now for instant access to Joe's take on Berkshire!

Jamba Has Plenty to Prove Tomorrow

We may be eyeing a seasonally insignificant quarter when Jamba (NASDAQ: JMBA  ) reports tomorrow, but that doesn't mean that the Jamba Juice chain doesn't have something to prove.

After stringing together nearly two years of positive comps, Jamba's company-owned stores posted a dip of 1.2% in its previous quarter. A strong showing at its franchised locations helped keep comps positive at 0.6% -- keeping that streak alive for at least another period -- but will Jamba prove mortal on Tuesday?

When you think about it, two years of positive comps at a time when competition was intensifying from unlikely blender wielders is pretty impressive.

Starbucks (NASDAQ: SBUX  ) turned heads a few years ago when it began offering smoothies, and McDonald's (NYSE: MCD  ) followed suit in 2010 by adding the frosty fruit beverages to its McCafe line. Burger King Worldwide (NYSE: BKW  ) became the latest player to throw marketing muscle behind its smoothie offerings.

It's easy to chart the evolution of Jamba's competition. Burger King has been aggressively pushing its smoothies because larger rival McDonald's jumped in three summers ago. Why did McDonald's go this route? Well, McCafe was a clear attack on your friendly neighborhood Starbucks barista. So if the premium coffeehouse chain introduced smoothies to appeal to non-java drinkers, then Mickey D's had to follow suit.

For now, all of these moves have actually only helped Jamba's brand awareness. The chain has grown to 809 locations through the end of last year. However, if Jamba comes through with another quarter of negative comps at company-owned locations, it would be just to question the theory that new entrants have only helped educate future Jamba customers.

The market's holding out for a narrowing deficit on a slight uptick in revenue. This isn't smoothie-sipping season. Jamba's profitable quarters will come now as the weather starts to warm up. However, it will be Jamba's viability as a concept that will be under the heat lamp when it reports tomorrow.

Jamba survived the arrival of Starbucks and McDonald's on its turf. It would be embarrassing if BK's entry was what tripped the chain up.

Retail makes the world go round
The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of the last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today -- just click here to read more.

Dun & Bradstreet CEO to Retire

Dun & Bradstreet (NYSE: DNB  ) needs a new Chief Executive Officer.

On Friday, the self-proclaimed "world's leading source of commercial information and insight on businesses," announced that Chairman and CEO Sara Mathew plans to retire by May 2014. Planning ahead, D&B's board of directors has retained the services of executive recruiting firm Spencer Stuart to help find a replacement.

Wishing Mathew well on her departure, D&B Lead Director thanked the departing CEO "for her strategic vision, leadership and dedication over her 12-year career with the company."

Other shareholders may feel less charitable. Since Mathew took over D&B at the beginning of January 2010, the company's shares have gained less than 5% in value, underperforming the S&P 500 by nearly 40 percentage points.

Upon news of her retirement being released, Dun & Bradstreet shares gained 1.1%, to close at $90.00.

More Expert Advice from The Motley Fool

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

Why American Axle's Shares Jumped Today

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 American Axle & Manufacturing (NYSE: AXL  ) jumped as much as 13% after the company reported earnings.

So what: First quarter revenue rose slightly, to $755.6 million, and net income was $7.3 million, or $0.23 per share after adjusting for debt refinancing costs. Consensus estimate was for $750 million in revenue, and earnings of $0.16 per share. 

Now what: Financial results aren't breaking any records, but they are stable for the time being. That provides a nice opportunity for investors, because shares are only trading at six times forward earnings estimates. I think the stock can move higher just based on value, particularly after this earnings beat.

Interested in more info on American Axle & Manufacturing? Add it to your watchlist by clicking here.

More Expert Advice from The Motley Fool

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

Don't Worry for a Second About Gilead's Earnings Miss

Gilead Sciences (NASDAQ: GILD  ) shares have steadily risen more than 90% over the past year. The biotech announced first-quarter results after the market closed on Thursday, though, that weren't all that impressive. Will this be a problem for Gilead? I doubt it.

By the numbers
First quarter non-GAAP earnings came in at $801.9 million, or $0.48 per diluted share. That's up from $704.4 million, or $0.45 per diluted share, during the first quarter of last year. However, the average analysts' estimate called for earnings of $0.50 per share.

Gilead reported GAAP earnings for the first quarter of $722.2 million, or $0.43 per diluted share. This represents a large gain from the $442.0 million, or $0.28 per diluted share, reported in the same period for 2012.

Revenue for the quarter totaled $2.53 billion, an 11% increase year over year. However, that figure missed the $2.58 billion in revenue expected by analysts. $2.39 billion of that revenue stemmed from product sales. This amounts to an 8% bump from the first quarter of 2012.

The company listed $2.63 billion of cash, cash equivalents, and marketable securities on hand at the end of the first quarter. This reflects an increase from $2.58 billion recorded as of the end of 2012.

Behind the numbers
Newer HIV drugs Complera/Eviplera and Stribild were the stars of the first quarter. Complera/Eviplera sales increased by 184% year over year to $148.2 million. Meanwhile, Stribild racked up over $92 million in sales. That's more than double the $40 million in sales from fourth quarter for the drug, which was launched in the U.S. last August.

Viread also looked good. Sales for the drug totaled $210 million in the first quarter, up 10% from the same period in 2012.

Other HIV drugs lagged behind, though. Sales for Truvada fell by 8% year over year to $700 million. Atripla garnered sales of $877 million in the quarter, down 1% from first quarter of last year. These drugs were the culprits behind the earnings and revenue misses.

Gilead's cardiovascular drugs, while accounting for a relative small portion of total sales, also performed well. Sales for pulmonary hypertension drug Letairis jumped 35% year-over-year to $118 million. Angina drug Ranexa brought in $96 million during the quarter, up 16% from the same period last year.

Looking ahead
The biotech received bad news a few days ago. The U.S. Food and Drug Administration didn't approve HIV drugs elvitegravir and cobicistat, which were already approved as part of the Stribild quad pill.

I don't see this being a serious issue moving forward. The FDA's concerns related to quality testing procedures and should be relatively easily resolved.

Any worries that Teva Pharmaceuticals (NYSE: TEVA  ) might be able to challenge Gilead in the near future were allayed in February, so that's not a pressing concern for now. The two companies settled litigation that allows Teva to begin marketing a generic rival to Gilead's HIV drug on Dec. 15, 2017.

While Gilead seems poised to continue dominating the HIV market, the buzz these days focuses more on the hepatitis C arena. Gilead announced great results today from a mid-stage study of its all-oral combo of sofosbuvir plus ledipasvir both with and without ribavirin. 

This latest news confirms the view that Gilead has the pole position in the hep C race. AbbVie (NYSE: ABBV  ) claimed a victory last fall with a study showing that its four-drug regimen achieved a 99% cure rate after 12 weeks. Gilead's results included one arm of the study where patients were free of hep C after taking its drug combo after only eight weeks (and it did so with only three drugs at most, compared to AbbVie's four).

The strong performance from the sofosbuvir/ledipasvir combo also puts pressure on Vertex and Bristol-Myers Squibb. Vertex expects to announce results from its all-oral regimen featuring VX-135 later this year. Bristol plans to move into late-stage studies of its three-drug combo that doesn't rely on ribavirin this year as well.

For now, Gilead looks to be ahead of AbbVie, Bristol-Myers, and Vertex. Don't worry about that first-quarter earnings miss. I think Gilead's year-long run isn't over. This stock should keep on climbing.

While you can certainly make huge gains in biotech and pharmaceuticals, 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.

Why Man Group, Kentz, and Range Resources Should Beat the FTSE 100 Today

LONDON -- The FTSE 100 (FTSEINDICES: ^FTSE  ) picked up a bit yesterday afternoon after the European Central Bank cuts its benchmark interest rate from 0.75% to 0.5%, but there's little movement today, with the index of top U.K. shares up just 0.24% to 6,477 points as of 7:45 a.m. EDT. Despite the cut, there are still few signs of economic cheer across the eurozone, with manufacturing output having fallen in April.

But things are happier for some of our individual companies. Here are three that are perking up today.

Man
Man Group saw its shares rise 9.4% to 116 pence this morning after the investment manager released a quarterly update telling us that its AHL Diversified program is up 4.2% for the quarter and up 10.4% for the year to date. But on the downside, the firm saw a net outflow of capital of $3.7 billion over the period, taking total funds under management down to $54.8 billion.

But perhaps the biggest news is that Man will use up $470 million of its surplus capital to redeem all its debt securities, saving $78 million in interest payments from 2014.

Kentz
An interim update from Kentz Corporation sent the firm's shares up 2.7% to 409 pence, bringing a welcome uptick to a share price that has been erratic all year; it's now down a couple of percent over 12 months.

The engineering and construction group tells us trading so far is in line with expectations and that all three of its business units have been awarded new contracts since the end of the last full year. Order intake for the first four months of the year stands at about $700 million, and the firm's prospect pipeline is now up to $13.7 billion.

Range Resources (LSE: RRL  )
The Range Resources share price has fallen about 70% over the past 12 months, but the price blipped up 2.3% to 3.6 pence this morning after the firm released news of its proposed merger with International Petroleum. The raising of the funding needed for the merger is apparently close to completion, with 67 million of Range's 339 million new shares having been placed and the rest to be allocated within the next day or two.

The merger will provide Range with access to resources in Kazakhstan, Russia, and Niger, adding to its main interests in Somalia, Georgia, the U.S., Trinidad, and Colombia.

If you're looking for investments that should take you all the way to a comfortable retirement, I recommend the Fool's special new report detailing five blue-chip shares. They'll be familiar names to many, and they've already provided investors with decades of profits. But the report will only be available for a limited period, so click here to get your hands on these great ideas -- they could set you on the road to long-term riches.

Three Charts that Say Stocks Must Get Cheaper from Here

 OK... This will likely be my last cautionary essay for a while.

 

I've been warning of the potential "sell in May" scenario for so long, I'm getting sick of it myself. But there are three cautionary charts that really stand out to me right now...

 

 Let's start with the summation indexes...

 

Summation indexes are momentum indicators that measure overbought and oversold conditions. As long as the summation indexes are moving in the same direction as the market, the trend is strong and likely to continue. When the indexes diverge from the market – especially when that divergence begins from an extreme overbought or oversold condition – it's a major warning sign that the trend is about to change.

 

In the charts below, you can see how the summation indexes for the New York Stock Exchange (the NYSI) and the Nasdaq (the NASI) reached deep into overbought territory in 2010 and 2012... and then turned lower a few weeks prior to the stock market peaking in those years. The indexes were modestly overbought in early 2011 before declining. The stock market followed suit a couple weeks later...

 

 

 

Both the NYSI and the NASI reached extreme overbought levels several weeks ago. They have been trending lower recently as the broad stock market has rallied to new highs. This negative divergence ended badly for the market in each of the past three years. It's liable to end badly for stocks this time as well.

 

 We also have the same warning sign in the bullish percent index for the S&P 500 (BPSPX)...

 

This is another indicator of overbought or oversold conditions. A bullish percent index measures the percentage of stocks in a sector that are trading with bullish point-and-figure chart patterns. Any reading above 80 is generally considered "overbought." And when the index turns down from overbought conditions, it generates a "sell" signal.

 

This indicator turned lower two weeks ago – just as it turned lower prior to all the major declines since 2010. It's another reason to be cautious...

 

 

Based on these indicators – and on the other caution signs I've written about over the past several weeks (here and here) – stocks are likely to be cheaper a month or two from now. If we get the sort of selloff we saw in each of the past three years, the market will wipe out most of the early gains from this year. Then we'll finally have a low-risk buying opportunity.

 

And I'll have a reason to write something bullish for a change.

 

Best regards and good trading,

 

Jeff Clark

Why Best Buy Stock Might Sink Your Portfolio

Saying that Best Buy (NYSE: BBY  ) stock has had an impressive run so far this year is a gross understatement. The stock has gained more than 119% year to date, compared to a return of just 10% for the broader market. However, don't let the stock's rally deceive you into thinking Best Buy's turnaround plans have gotten off without a hitch. Current shareholders of Best Buy stock should be careful, lest the stock come crashing back to reality.

A tight fix
Earlier this week, Best Buy stock hit another 52-week high after the company agreed to sell its 50% stake in Best Buy Europe to its joint venture partner Carphone Warehouse Group. The cash and stock deal is valued at about $775 million. The deal should help fund Best Buy's turnaround effort, though it's still a loss on investment for the company given its original buy-in five years ago for $2.15 billion. Meanwhile, Best Buy faces no shortage of complications back home.

Amazon's low prices, convenient platform, and speedy shipping have made Best Buy's big box retail strategy all but obsolete. In a late bid to counter comparison-shopping, Best Buy started matching online prices. However, showrooming is the least of Best Buy's worries at this point. In addition to online competition, the consumer electronics chain also faces shrinking margins, declining sales, and deteriorating profitability.

Walk the talk
Let's be clear: Best Buy stock is still a hot mess. Only now, the symptoms are masked by the current recovery in its share price. Amazon and other online retailers meanwhile have lower cost structures, which give them an undying competitive edge over Best Buy -- even as the electronics retailer downsizes stores and reduces its workforce.

Fluctuations in Best Buy's stock price have helped mask the underlying dysfunction in this name. To be sure, Best Buy still faces many live-or-die challenges on the road to recovery. Moreover, the increasingly competitive retail landscape is no friend to a company such as Best Buy, which lacks even the slightest moat. Exceeding the market's low expectations may have helped Best Buy stock climb out of the gutter, but the company's future remains far from certain.

Make no mistake, the brick-and-mortar versus e-commerce battle wages on, with Best Buy stock caught in the middle. After what might have been its most tumultuous year in history, there are now even more unanswered questions about the future for the big-box electronics retailer. How will new leadership perform? Will old leadership take the company private? Will a smaller store format work out for both the company and its brave investors? Should you be one such brave investor? To help answer all these questions, The Motley Fool has released a new premium research report detailing the opportunities -- and the risks -- in store for Best Buy. Simply click here now to claim your comprehensive report today.

Warren Buffett: The Original Tweeter

Warren Buffett has joined Twitter.

Welcome, Warren!

If you've been living under a rock for the last few years, Twitter is a micro-blogging site where people can share a sentence or two of text at a time for the world to see. It's usually a link, or quote, or a statistic, or just a a quick thought.

Here's Buffett's first Tweet:

Warren is in the house.

-- Warren Buffett (@WarrenBuffett) May 2, 2013

Brilliant. 

No one knows how much Buffett will be Tweeting, or what he might Tweet about.

But here's what we know: If the essence of Tweeting is to share smart, pithy -- and often witty -- one-liners, Warren is basically the original Tweeter. He's been making smart points while making people laugh for years. 

Consider some of our favorite Buffett quotes: 

On being active: "It's nice to have a lot of money, but you know, you don't want to keep it around forever. I prefer buying things. Otherwise, it's a little like saving sex for your old age."

On loving your job: "You want to have a passion for what you are doing. You don't want to wait until 80 to have sex."

On focus: "You know, if I'm playing bridge and a naked woman walks by, I don't ever see her."

On due diligence: "Other guys read Playboy, I read annual reports."

On over-diversification: "If you have a harem of 40 women, you never get to know any of them very well."

On internal yardsticks: "Would you prefer to be the greatest lover in the world and known as the worst, or would you prefer to be the worst lover and known as the greatest?"

On investing in 1973: "I feel like an oversexed guy on a desert island. I can't find anything to buy."

On investing in 1974: "I feel like an oversexed man in a harem. This is the time to start investing."

On the first stimulus package: "[It was like] half a tablet of Viagra and then having also a bunch of candy mixed in -- it doesn't have really quite the wallop."

On the speed of economic recovery: "You can't produce a baby in one month by getting nine women pregnant. It just doesn't work that way."

On financially transmitted diseases: "Derivatives are like sex. It's not who we're sleeping with, it's who they're sleeping with that's the problem."

You'll have no problem fitting in, Warren. 

More from the Motley Fool
Thanks to the savvy of investing legend Warren Buffett, Berkshire Hathaway's book value per share has grown a mind-blowing 586,817% over the past 48 years. But with Buffett aging and Berkshire rapidly evolving, is this insurance conglomerate still a buy today? In The Motley Fool's premium report on the company, Berkshire expert Joe Magyer provides investors with key reasons to buy as well as important risks to watch out for. Click here now for instant access to Joe's take on Berkshire!

How 2 of the Dow's Longest-Tenured Stocks Got Started

On this day in economic and business history...

May 2 is an important day in the history of two of the Dow Jones Industrial Average's (DJINDICES: ^DJI  ) longest-tenured former components. Without the breakthroughs that took place on this day, neither company would likely exist in present form at all, and the landscape of 20th-century American industry would have looked quite different.

Like a rock
General Motors (NYSE: GM  ) was already well on its way toward establishing itself as a credible top-tier automaker in the first few years following its formation in 1908. It began by acquiring Buick, added Cadillac and Pontiac the following year, and very nearly managed to buy Ford (NYSE: F  ) in 1910 before overextending itself. After that debacle, GM founder William Durant left the company to found Chevrolet in 1911. He built that automaker into a credible GM challenger over the next several years, all the while cleverly amassing enough of a stake in GM to eventually reclaim control. Then, on May 2, 1918, Durant engineered a deal that had GM buy Chevrolet, bringing GM its marquee nameplate and putting Durant back in the corner office.

The deal was valued at $28.3 million at the time, and the company reported sales of $270 million ($326 million when acquired subsidiaries were included) for the 1918 fiscal year, resulting in a $13 million net profit. GM had already grown into one of the country's largest industrial concerns, with a payroll of more than 49,000 people. Nearly a century later (in 2011), GM reported a record 4.76 million sales in Chevrolet-nameplate vehicles around the world -- more than half of the company's total vehicle sales. That year, the revived automaker's revenue reached $150 billion, with more than $9 billion in net income.

Durant deserves relatively little credit for this growth, unfortunately. Two years after he returned to GM, the crafty deal-maker was pushed out by another major stockholder: chemical giant DuPont (NYSE: DD  ) , which had been amassing a stake in GM since 1914. By 1920, DuPont scion Pierre S. du Pont was chairman of the GM board, and he became president of the company after Durant's ouster. That year, DuPont's stake in GM contributed half of its total net earnings. DuPont held onto GM until 1961, when it sold the last part of its stake. Durant died a broken man, his assets gone in bankruptcy and his legendary business acumen wasted on managing a chain of Flint, Mich., bowling alleys -- ironically located in the shadow of the Buick plant he'd helped build decades earlier.

GM was a part of the Dow from 1925 to 2009, its 84-year tenure interrupted by one of the largest and ugliest bankruptcy proceedings in American history. Prior to that, the automaker was actually the first such company to join the Dow in 1915, but this early trial run lasted only one year.

Cutting through a chemical fog
Thomas L. Wilson accidentally discovered the process for creating commercially viable quantities of calcium carbide and acetylene on May 2, 1892. Anyone who has ever done some welding or torch-based metal-cutting knows the value of acetylene, which has been known since 1836, but this hot-burning gas has also become an important building block in the synthesis of hundreds of different organic chemicals. Calcium carbide, while used primarily to produce acetylene, is also important in the steelmaking process, in which it can serve as fuel, a deoxidizer, or a means to remove sulfur from iron. Wilson did not do much with this discovery on a commercial scale, but he did sell the rights to the process to Union Carbide shortly after its founding in 1898.

Union Carbide was actually known more for the production of calcium carbide -- which it manufactured for use in carbon arc lights and as electrodes in electric arc furnaces -- than for acetylene. The modern Union Carbide was formed in 1917 from the merger of two similar chemical companies, and it quickly expanded its range of products throughout the prewar years. In 1928, Union Carbide joined the Dow when the index first expanded to 30 components, and it stayed on the index for 71 years until its removal in 1999 -- shortly before joining another Dow, Dow Chemical (NYSE: DOW  ) , which acquired Union Carbide in 2001.

In our time, Union Carbide is best-known as the company behind a series of major industrial disasters, including several asbestos incidents stretching back to the 1920s, a major contamination in Australia, and the infamous Bhopal disaster in India, one of the most devastating incidents of industrial chemical poisoning in history.

Worried about GM?
Few companies inspire such strong feelings as General Motors, and ignoring emotions to make good investing decisions is hard. The Fool's premium GM research service can help by telling you the truth about GM's growth potential in coming years. (Hint: It's even bigger than you think. But it's not a sure thing, and we'll help you understand why.) It might help give you the courage to be greedy while others are still fearful, as well as a better understanding of the real risks facing General Motors. Just click here to get started now.

Big Lots Picks a New CEO

Columbus, Ohio-based Big Lots (NYSE: BIG  ) has a new big boss.

On Tuesday, the bricks-and-mortar closeouts retailer announced that Chief Executive Officer Steve Fishman, who announced plans to retire back in December, will officially depart the corner office on May 6, to be replaced by former Respect Your Universe CEO David Campisi.

For Campisi, it's a big move up, leaving a micro-cap retailer with less than $1 million in annual sales, to join a big (literally) name in retailing -- one with $2.1 billion in market cap, and annual sales of $5.4 billion. But the new job won't be entirely out of scale with his experience. Before heading RYU, Campisi served as CEO of privately held The Sports Authority, which last year did $2.5 billion in business .

Big Lots has not yet filed details of Campisi's compensation package with the SEC.

More Expert Advice from The Motley Fool

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

Strong Results for Phillips 66

In the video below, Fool energy analysts Joel South and Taylor Muckerman discuss Phillips 66 (NYSE: PSX  ) . The company, like many U.S. refiners, has had strong performance recently due to high margins from an abundance of cheap feedstock. The company beat on its earnings report and was able to maintain the strong margins investors were hoping for. Joel tells investors what Phillips 66's plans are for the near future, and what the company's distributions to shareholders will look like over the coming year.

There are many different ways to play the energy sector, and The Motley Fool's analysts have uncovered an under-the-radar company that's dominating its industry. This company is a leading provider of equipment and components used in drilling and production operations, and poised to profit in a big way from it. To get the name and detailed analysis of this company that will prosper for years to come, check out the special free report. "The Only Energy Stock You'll Ever Need." Don't miss out on this limited-time offer and your opportunity to discover this under-the-radar company before the market does. Click here to access your report -- it's totally free.

The Latest Feather in Bank of America's Cap

In the video below, Fool financial analysts Matt Koppenheffer and David Hanson discuss Bank of America's (NYSE: BAC  ) Merrill Lynch unit being named the Advisory Solutions Firm of the Year at the 2013 Money Management Institute Industry Leadership Awards. While some may just see this as just another award, Matt gives investors some perspective on this, and tells us why he likes this particular award a bit more than some of the other industry awards, which can end up being just background noise from an investing thesis perspective.

Bank of America's stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it's critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool's premium research report on B of A, analysts Anand Chokkavelu, CFA, and Matt Koppenheffer, Financials bureau chief, lift the veil on the bank's operations, including detailing three reasons to buy, and three reasons to sell. Click here now to claim your copy.

Will Vodafone Group Bid For Liberty Global?

LONDON -- In the latest edition of this long-running story, it has been suggested that Vodafone  (LSE: VOD  ) (NASDAQ: VOD  ) could use a substantial amount of the money it would receive from selling its stake in Verizon Wireless to fund a takeover of Liberty Global  (NASDAQ: LBTYA  ) .

Analysts at Citigroup have declared that an acquisition would be both within Vodafone's reach, and also align with CEO Vittorio Colao's long-term strategy of the company becoming a one-stop shop by offering Internet and television services to customers on its existing mobile network.

Citigroup commented:

For Vodafone, Liberty Global could have strategic advantages giving it a strong portfolio of northern European cable assets, rebalancing the group away from Southern Europe and providing it with a high speed broadband offering, cost synergy, an upgrade path for its own broadband customers and network backhaul options.

Liberty is currently negotiating a purchase of Virgin Media, which would instantly offer Vodafone a television service in the U.K. should it acquire the U.S. cable and telecoms company. 

With increasingly louder noises emanating from Verizon Communications about an interest in bringing its joint-venture with Vodafone under its sole wing, a bandied-about figure of between 65 billion pounds and 85 billion pounds would more than cover a takeover of Liberty, which is valued at around 50 billion pounds -- and, importantly for investors, still return a large proportion of that excess takeover cash to shareholders.

Another player has been (perhaps unwittingly) drawn into this arena, then. There was little movement in Vodafone's shares upon the announcement, as they still hover near 197 pence and close to breaking the 200 pence mark, not seen since November 2011. Investors remain waiting for some concrete news, though, hoping for a sizable return on top of the consensus yield of around 5% that Vodafone currently offers.

If you are looking for opportunities in the FTSE 100 outside of Vodafone, though, this exclusive wealth report reviews five particularly attractive alternatives.

All five of these blue-chip companies offer a mix of robust prospects, illustrious histories and dependable dividends. The report is completely free, but will only remain available for a limited time -- simply click here to get it sent to your inbox immediately.

Why Home Retail, The Weir Group, and Balfour Beatty Should Lag the FTSE 100 Today

LONDON -- The FTSE 100 (FTSEINDICES: ^FTSE  ) is finally picking up a bit today after a flat start to the week, gaining 0.56% to reach 6,466 by 8:40 a.m. EDT. The banks have led the way as hopes rise of further economic easing by central banks ahead of the U.S. Federal Reserve's next policy decision later today. The European Central bank will also meet tomorrow amid expectations of a further interest rate cut.

Sadly, not all our companies are enjoying similar rises. Here are three that look set to lag the index today.

Home Retail
Home Retail Group has seen its share price drop 3.7% to 150 pence this morning after the owner of the U.K.'s Argos and Homebase chains reported a fall in full-year profit. For the year to March 2, sales were pretty much flat at 5.5 billion pounds, but underlying pre-tax profit fell 10% to 91 million pounds, with earnings per share down 11% to 7.7 pence.

Although the transformation of Argos is going well, with a rise in like-for-like sales for the first time in five years boosting underlying operating profit by 6.5% to 100 million pounds, underlying operating profit at Homebase slumped 50% to just 11 million pounds.

Weir
A first-quarter update from Weir Group led to a modest share-price fall. Performance during the quarter suffered from "a lower opening orderbook, particularly in the Oil & Gas division," but the firm still says trading is in line with expectations and has not changed its full-year guidance.

Orders were down 14% from the same period last year, as expected, but were up 14% on the fourth quarter of 2012. And recent acquisitions -- especially Mathena, whose integration is apparently going well -- provided a welcome boost.

Balfour Beatty
Balfour Beatty shares have dropped a further 0.8% to 214 pence this morning after the construction and support group announced the disposal of its Private Finance Initiative assets, as the firm is "reducing the business's reliance on PFI in the U.K. and military housing in the US."

The sale of Balfour Beatty's interests in several PFI schools projects, as well as its interest in the Tameside Hospital PFI, raised 58.5 million pounds, which exceeded the firm's valuation of the investments and made a profit of 21.9 million pounds.

Finally, reliable dividends can more than compensate for the day-to-day ups and downs of share prices. So how about a company that's offering a 5.7% yield and could be set for some nice share-price appreciation, too? It's the subject of our brand-new report "The Motley Fool's Top Income Share For 2013," which you can get completely free of charge -- but it will only be available for a limited period, so click here to get your copy today.

Pfizer 1Q Profit Rises, but Trims Full-Year Outlook

Elise Amendola/AP Pfizer reported lower-than-expected quarterly earnings and revenue, and the largest U.S. drugmaker trimmed its full-year profit outlook, sending its shares down 3 percent.

The company said on Tuesday that it earned $2.75 billion, or 38 cents a share, in the first quarter. That compared with $1.79 billion, or 24 cents a share, a year earlier, when it took charges to boost productivity and address legal matters.

Excluding special items, Pfizer Inc. (PFE) earned 54 cents a share. Analysts on average expected 55 cents.

Revenue fell 9 percent to $13.5 billion, below Wall Street expectations of $13.99 billion. Demand for Pfizer's Prevnar 13 vaccine against pneumococcal bacteria fell because of wholesalers' purchasing patterns, the company said.

Pfizer said it expected full-year earnings of $2.14 to $2.24 a share, down from its previous forecast of $2.20 to $2.30. It noted that the falling Japanese yen was hurting sales in that important market.

Sales of Prevnar 13, the company's third-biggest product, fell 10 percent to $846 million. By contrast, sales of the vaccine used to prevent pneumonia and other infections had soared 19 percent in the prior quarter.

Moreover, Pfizer said sales grew only 5 percent in emerging markets due in part to reduced government purchases of Prevnar 13 and of the company's Enbrel treatment for rheumatoid arthritis and psoriasis. Emerging market sales had jumped 17 percent in the prior quarter.

Sales of generic medicines, which Pfizer calls established products and sells mainly overseas, fell 16 percent to $2.35 billion. That was also a reversal from the prior quarter, when they rose 3 percent.

Sales of cholesterol fighter Lipitor, which has been competing with cheaper generics since November, plunged 55 percent to $626 million, while sales of impotence drug Viagra fell 7 percent to $461 million.

The disappointing earnings report hit shares of Pfizer, which had risen 22 percent so far this year on high hopes for its pipeline of experimental drugs and the recent approvals of its treatments for cancer, rheumatoid arthritis and blood clots.

Pfizer has also attracted investors through its efforts to spin off nonpharmaceutical operations and return much of the proceeds to shareholders through bigger dividends and repurchases of common stock.

In November, Pfizer approved an additional $10 billion in share repurchases, after buying back almost $6 billion in stock in 2012 through an earlier $10 billion authorization.

The company in February spun off its animal health business into a new company called Zoetis. At the time, Pfizer said it would control roughly 80 percent of Zoetis, but divest its stake within 18 months and return much of the proceeds to shareholders in the form of stock repurchases.

Pfizer shares were down 3 percent at $29.52 in trading before the market opened.

Would You Give a Ride to Apple's Biggest Mistakes?

Can Alliant Energy Meet These Numbers?

Alliant Energy (NYSE: LNT  ) is expected to report Q1 earnings on May 3. Here's what Wall Street wants to see:

The 10-second takeaway
Comparing the upcoming quarter to the prior-year quarter, average analyst estimates predict Alliant Energy's revenues will contract 0.0% and EPS will grow 24.0%.

The average estimate for revenue is $765.4 million. On the bottom line, the average EPS estimate is $0.62.

Revenue details
Last quarter, Alliant Energy booked revenue of $750.9 million. GAAP reported sales were 1.3% lower than the prior-year quarter's $760.8 million.

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

EPS details
Last quarter, EPS came in at $0.61. GAAP EPS of $0.61 for Q4 were 17% higher than the prior-year quarter's $0.52 per share.

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

Recent performance
For the preceding quarter, gross margin was 28.1%, 40 basis points better than the prior-year quarter. Operating margin was 13.5%, 40 basis points worse than the prior-year quarter. Net margin was 9.1%, 160 basis points better than the prior-year quarter.

Looking ahead

The full year's average estimate for revenue is $3.23 billion. The average EPS estimate is $3.13.

Investor sentiment
The stock has a three-star rating (out of five) at Motley Fool CAPS, with 85 members out of 99 rating the stock outperform, and 14 members rating it underperform. Among 32 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 27 give Alliant Energy a green thumbs-up, and five give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Alliant Energy is outperform, with an average price target of $48.29.

Looking for alternatives to Alliant Energy? 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 Alliant Energy to My Watchlist.

Lloyds Banking Q1 Profits Rise to 2 Billion Pounds

LONDON -- Shares in Lloyds Banking Group  (LSE: LLOY  ) (NYSE: LYG  )  shot up 4.5% in early trade, to 55.90 pence, following its announcement of a huge increase in year-on-year first-quarter profits.

Statutory pre-tax profit increased to 2.04 billion pounds from 280 million pounds in Q1 2012, the gulf created between the two figures largely down to there being no money set aside to cover mis-sold financial products this year, while impairment charges were significantly reduced, by 40% to 1 billion pounds, which exceeded expectations. Management was also able to cut costs by 6% against the comparative quarter, to 2.41 billion pounds, while "simplification run-rate savings" rose to over 1 billion pounds.

Profits were aided by group net interest margin increasing to 1.96%, which is on track to meet guidance for 2013. Elsewhere, total underlying income rose 3% to reach 4.89 billion pounds, which took into account the 394 million-pound gain relating to the sale of shares in St. James's Place.

Chief executive Antonio Horta-Osório commented:

We made substantial progress again in the first quarter. Underlying and statutory profits improved significantly, and our core loan book returned to growth earlier than expected. Margin increased, and costs and impairments continued to fall rapidly, with this progress underpinned by a further strengthening of our balance sheet. 

We are delivering real benefits for customers, colleagues and shareholders by investing behind our simple, UK customer-focused retail and commercial banking model, and are now further ahead in our plan to transform the Group, as reflected in the enhanced guidance for costs and capital we are giving today.

The 39% taxpayer-owned bank declared last week that it still intends to rebrand 632 branches as TSB Bank and float the division on the stock market, after the European Commission had instructed Lloyds to sell the branches as part of the state bail-out the bank received during 2009. Additionally, the sale of its Spanish retail operations will lead to a further reduction of 1.5 billion pounds in non-core assets.

Positive news like today's is beginning to see investors take an interest in the sector once more. Banking's fortunes remain tied to the activities across the eurozone for now, but if it can recover then there could be significant gains to be made.

Indeed, you may wish to consult this free Motley Fool report, which explains how betting on battered shares can provide wonderful gains... if the underlying company recovers. To put a possible turnaround into perspective, Lloyds is now up almost 75% over the last year -- but is still some way off its five-year high of 89 pence...

Anyway, if Lloyds is tempting you today, please click here to read the Fool's exclusive "millionaire" report before you hit the "buy" button.

Pocket 10.7% Yields By Investing In Companies BEFORE They Go Public

Almost a year ago, it was all over the headlines. You couldn't turn on CNBC or open an issue of The Wall Street Journal without hearing about it. 

Then, May 18, 2012 came around -- the day Facebook (Nasdaq: FB) went public. 

It was the biggest Internet IPO in history -- even bigger than Google (Nasdaq: GOOG), with a peak market capitalization of more than $104 billion.

But as soon as the stock went public, it became clear that the party was over. 

Thanks to a malfunction in the way Nasdaq's computers handled millions of dollars in trades, as well as allegations that the company and its underwriters were involved in everything from inflating share prices, issuing too many shares and even overstating earnings, the stock eventually went into a tailspin. 

All told, Facebook shares lost more than a quarter of their IPO value in less than a month and lost half their value within three months.

While "the herd" was waiting to cash in on the runaway success of Facebook by buying shares as soon as they went public, the "smart money" was busy cashing out -- selling their shares to a frothy public that had waited years for a Facebook IPO.

Peter Thiel -- one of Facebook's first investors -- made nearly $1.4 billion selling Facebook shares when they went public. Thiel originally gave the company $500,000 in 2004, back when it was still known as "The Facebook."

 

And then there's the story of David Choe... an artist who painted murals on the walls of Facebook's office. Rather than take his fees in cash, Choe took it in Facebook stock. Choe's stake was recently valued at close to $200 million.

For these early investors, Facebook has been a goldmine. These guys are literally millionaires because of the stock.

So, what's the difference between these guys and the Facebook shareholders that weren't so lucky? They acquired shares of Facebook BEFORE the company went public...

Choe, for example, got his shares in 2005, long before the world was obsessed with newsfeeds or relationship statuses.

Back then, shares of Facebook weren't listed on any exchange. As you can imagine, for people like you and me, to buy a stake would have been almost impossible. Normally, these kinds of investment opportunities are reserved for "elite" investors and company insiders.

You see, as Andy Obermueller, Chief Strategist of our Game-Changing Stocks newsletter puts it, "the rich are different" from you and me. Once you understand that, you'll be on your way to incredible gains and outsized yields. 

Case in point: While these "elites" and company insiders were cashing in shares of Facebook and making millions of dollars from what's being called "the worst IPO of the last 10 years," the rest of the public was foaming at the mouth to buy shares.

The question is, how can you as an income investor be a part of the "smart money?"

Andy has found the answer. It's a way for investors like you and me to get in on the action. Simply put, he's found a unique set of securities that let investors like us buy into some of the world's fastest-growing companies (including Facebook before it went public) while they're still in their most lucrative growth stages.

The answer?

It's a little-known asset class called business development companies, or BDCs.

Business development companies loan money to small private businesses in order to fund their growth. In exchange for the loans, BDCs normally receive interest payments or an equity stake in the company they're loaning to.

In other words, when you buy shares of a BDC, you're investing in a portfolio of the world's fastest-growing businesses... while they're still private.

For example, Hercules Technology Growth Capital (NYSE: HTGC), a publicly-traded BDC, bought more than 300,000 shares of Facebook when it was still private -- giving investors a stake in the company long before its IPO.

In a world where private investments -- only available to some of the richest and well-connected investors -- are at a big advantage, business development companies help level the playing field.

And while you won't become a millionaire overnight, the best part is BDCs are required by law to distribute 90% of their earnings to shareholders. That means if a company in its portfolio is acquired or goes public, the BDC has no choice but to distribute the profits to its shareholders.

That means BDCs usually carry rich dividend yields. For example, right now, Hercules is yielding 8.5%. And MCG Capital (Nasdaq: MCGC) yields more than 10%.

Here are a few more examples:

Of course with investing, nothing is 100% risk-free. And the same goes for investing in business development companies. But what might surprise you is that investing in a basket of small, private companies isn't nearly as risky as it may seem.

For one, due to government requirements, BDCs look to build a diversified portfolio where no single investment accounts for more than 25% of its total holdings. Typically, a company will hold more than 50 different loans spread out over 20 or more different industries.

They are also required to maintain a low amount of leverage. The government prohibits BDCs from acquiring more debt than equity. By law, the highest debt-to-equity ratio allowed is 1:1. For comparison, investment banks are often levered as high as 30:1.

Action to Take --> I want to make something clear. I'm not saying you should run out and invest every dime you have into business development companies. There is plenty more to learn about them before investing than I can include in this essay.

But there is no denying that with BDCs, you can share the same advantages as insiders that own shares of the world's fastest-growing private companies... long before the rest of the crowd even gets a chance.

P.S. - Andy has put together a special research report "Everything You Need to Know about BDCs," which is probably the single best way to educate yourself about these special companies. To learn how to get this report, follow this link.

Yum! Powers Through China Struggle

Fast-food behemoth Yum! Brands (NYSE: YUM  ) wowed investors a few months back when it reported great sales figures driven by an unlikely suspect: Taco Bell. The news sparked a wave of discussion on topics ranging from whether the company has a genius marketing campaign to whether it's fueling the U.S. diabetes epidemic. Whatever your opinion, Taco Bell's recent efforts have led the company in an otherwise difficult market. For the recently completed quarter, Yum! saw a tremendous drop-off in profit from its China division. Though it beat the Street on earnings, internal comps are down compared to the year-ago quarter. Here's what you need to know about Yum! going forward.

Earnings recap
Starting at the bottom, EPS came in at $0.70 for the parent company behind Taco Bell, KFC, and Pizza Hut. This arrives ahead of Wall Street's estimates, but also represents an 8% slip from the prior year's numbers. Top-line revenues came in at $2.54 billion -- short of the Street, and again, an 8% drop from the 2012. The culprit was quickly and easily identifiable: China.

Plagued by a media-driven scandal involving the quality of KFC's chicken in China, along with the outbreak of the H7N9 flu in the region, Yum!'s China-based stores saw comparable sales plummet 20% from a year ago. KFC China led the downhill race with 24% lower comps, while Pizza Hut fell 2%. The Far East was a disaster for the company, but it didn't impede continued progress for Yum!'s domestic operations. Comparables in the U.S. rose 2%. The leader in the segment? Yep, Taco Bell, with same-store sales up 6% from the prior year.

Globally, profit fell 14%, led by a 41% drop in China. The U.S. showed 5% growth, while Yum! Restaurants International led the company with 19% growth. For those unfamiliar with it, Yum! Restaurants International is the segment that includes everything except the U.S., China, and India. It represents more than 14,000 restaurants in 122 countries.

What now?
Management expects the China problem to remain through the current quarter, so investors should not be looking for a quick turnaround here. There may be another round of year-over-year declines over the next couple of months, but that shouldn't deter long-term investors. With U.S. growth and Yum! Restaurants International up double-digits in a still-challenging macroeconomic environment, I am confident that Yum! remains on track for attractive growth, rewarding investors along the way.

The market, unfortunately, agrees. Despite the major drop in Chinese business, the stock didn't pull back at all. At 18 times forward earnings, Yum! isn't cheap. McDonald's, which is facing much stronger headwinds currently, is at 16 times earnings. Burger King, which just crushed earnings estimates and is growing like a weed, trades at 19 times earnings. Investors may want to wait for a possible pullback in the coming quarter to hit a more attractive entry price into Yum!.

More from The Motley Fool 
McDonald's turned in a dismal year in 2012, underperforming the broader market by 25%. Looking ahead, can the Golden Arches reclaim its throne atop the restaurant industry, or will this unsettling trend continue? Our top analyst weighs in on McDonald's future in a recent premium report on the company. Click here now to find out whether a buying opportunity has emerged for this global juggernaut.

How to Avoid Another Catastrophic Financial Crisis

It's been almost five years since the depths of the financial crisis, and we're still feeling its aftereffects today. Unemployment in the U.S. remains far too high, and economic growth is still unsatisfactory. Overall, the financial crisis of 2007-2009 could result in a decline of economic output of more than $13 trillion, according to the Government Accountability Office.

One might think that our political and financial leaders would be committed to doing everything in their power to prevent a similar crisis in the future. Unfortunately, that hasn't appeared to be the case so far. In The Bankers' New Clothes, Anat Admati and Martin Hellwig argue that today's banking system "is as dangerous and fragile as the system that brought us the recent crisis." They also believe that there hasn't been enough serious analysis of how the financial system could be made safer.

This sorry state of affairs should be unacceptable to all Americans. Fortunately, Admati and Hellwig provide a very clear proposal for real reform of our banking system. The Bankers' New Clothes should be required reading for our policymakers in Washington, D.C.

It's not rocket science
Admati and Hellwig's central argument is very simple. They believe that our banks rely too much on borrowing to fund their investments and that they should be required to have much higher equity levels than they currently maintain. Nowadays, debt often accounts for more than 90% of total assets for some of our larger banks. The authors, on the other hand, declare that they "have never received a coherent answer to the question of why banks should not have equity levels between 20 and 30 percent of their total assets."

Admati and Hellwig are very effective in showing precisely how borrowing magnifies risk and what excessive levels of debt means for banks. Clearly, our bankers are not unaware of what can go wrong by not having enough equity on their balance sheets. To illustrate the point, the authors quote Nobel laureate Merton Miller, who said, "I can't help smiling at complaints from bankers about their capital requirements, knowing that they have always imposed even stronger requirements on people in debt to them."

Too big to fail is an even bigger problem now
The key problem with excessive borrowing by the large Wall Street banks, of course, is that the costs are often borne by others. The authors point out that during the financial crisis, bank losses were picked up by taxpayers, creditors, and shareholders, while executives were able to keep their huge pay packages from previous years. Nowadays, the very legitimate fear of contagion ensures that our government would be reluctant to let one of our big banks fail, despite the tough talk on Sunday morning television shows. And this reluctance leads to even cheaper credit for the big banks, which in turn encourages even more borrowing. The authors believe that too-big-to-fail policies have "strong and perverse effects on banks' behavior."

The case of JPMorgan (NYSE: JPM  ) is particularly instructive. Admati and Hellwig show us that its "fortress balance sheet" is actually much more vulnerable than one might think. The company has almost $1 trillion in commitments to some business units that it doesn't include on its balance sheet, and its accounting treatment of derivatives also makes its balance sheet appear stronger than it actually is. If JP Morgan ever got into serious trouble, of course, it could have extremely serious consequences for the U.S. economy, according to the authors.

Throughout the book, Admati and Hellwig emphasize that insisting on more equity and less debt is the best and easiest solution of all. Alas, they believe that Basel III, the most recent global standard on capital adequacy, is insufficient to the task at hand. Even though Basel III is supposed to be stricter, it still permits banks to have equity that is just 3% of total assets in some instances.

Ultimately, the authors argue that equity relative to total assets needs to be increased considerably, and that this will not impose meaningful costs on society. And Admati and Hellwig firmly reject the notion that increased capital requirements will result in decreased lending – in fact, they feel strongly that that particular argument is a red herring put out there by the bankers themselves.

Too complex to understand?
If the solution is as simple as Admati and Hellwig suggest, then why haven't we adopted it by now? Here, the authors are very persuasive. They argue that Wall Street bankers have succeeded in making this topic appear to be too complicated for ordinary citizens to consider. Individuals who don't know the difference between reserve requirements and capital requirements, for example, are understandably reluctant to weigh in on the broader topic.

Reform along the lines proposed may actually be a possibility in the near future, however. The new banking bill put forward by Senators Sherrod Brown and David Vitter seems to be informed by some of the thinking expressed by Admati and Hellwig.

One of the greatest strengths of this book is that it clearly explains the issues for the ordinary reader. Financial reform shouldn't be left solely to Wall Street bankers and their captured policymakers in Washington, D.C., to decide. Regular citizens must make their voices heard, and this book will help them understand the basic terminology and concepts. I encourage everyone with an interest in effective financial reform to pick up a copy today. This just might be the most important book of 2013.

JPMorgan is one of the most talked about banks out there at the moment. To learn whether JPMorgan is a buy today, check out The Motley Fool's premium research report on the company. Click here now for instant access!

Will the New York Times Soon Make Big News?

The New York Times (NYSE: NYT  ) could wind up making more news than its flagship newspaper breaks by the end of the year.

For openers, the Times may (finally) sell the stumbling Boston Globe, which has struggled amid the severe slowdown in advertising revenue across the media industry. By unloading the Globe, the parent company would enhance the value of its core asset, the Times newspaper itself. The Times, sensibly putting a priority on the famous daily, has parted with its online property, About.com. The Globe appears next on its hit list. Considering the shaky state of the newspaper industry, this act would come not a moment too soon.

Then there is the future of the Times company itself. Will it have a new owner anytime soon?

The Times' recent earnings statement prompted some concerns about its prospects. Media analyst Ken Doctor noted in a report to his readers: "The big number in the New York Times Company's quarterly report today is a double-digit one: 13.3%. That's the Times' loss in print ad revenue, and it's a number -- if it continues into the year -- that could be devastating to new CEO Mark Thompson's turnaround efforts."

The Times installed a paywall system a few years ago in the hope that it could leverage the rabid loyalty of its online reader base to boost revenue at a time when advertising was slipping. It has accomplished its goal, but can it continue to do so?

"In a nutshell, its reader revenue strategy, built atop the smart paywall system it erected two years ago, is working well, but is in danger of plateauing," Doctor added.

Despite the periodic uncertainty surrounding the Times' financial picture, its journalistic reputation remains high. Its brand arguably has more clout than any other news property. The Times could be coveted by an ambitious billionaire as either an opportunity to wield political and social influence or simply as a vanity play.

Which leads us, yes, to a discussion about none other than New York Mayor Michael Bloomberg, who clearly has many strong political and social views of his own and is not shy about expressing them publicly. 

Now that Bloomberg has (apparently) given up his fleeting hopes of running for U.S. president, he is girding to leave public office. Lately, a parlor game of sorts has begun to take shape in New York. It centers on what Bloomberg will do next. 

Sure, he could return to manage his Bloomberg corporate and philanthropic empire. But I suspect he will want the ego gratification of tackling a fresh challenge, one which tests his ample intellect. Bloomberg might think he has "been there and done that" when it comes to the prospect, once again, of running Bloomberg L.P. 

Speculation is rampant in his city and throughout the gossipy media industry as a whole that Bloomberg, whose third term concludes at the end of this calendar year, will attempt to acquire The New York Times because he'd welcome the obvious power and sweeping influence of the flagship newspaper in local, national, and global matters.

True, Bloomberg, by continuing to dominate Bloomberg L.P., the company he created in the early 1980s, is already a media titan to be reckoned with. His privately held Bloomberg operation encompasses a global news-gathering entity, a radio station and a cable-television business-news network, and Bloomberg BusinessWeek magazine. 

But anybody who knows Bloomberg or worked for him (full disclosure: I worked for Bloomberg News from 1993 to 1999 before resigning to go elsewhere in journalism) recognizes his usual restless state and love of huge challenges.

Bloomberg took on the worldwide media establishment nearly a quarter-century ago with his eponymous news operation, and today Bloomberg News stands as one of the most respected media companies on the planet. Few thought that a brash billionaire could be elected mayor of New York, but Bloomberg went on to win three elections.

From his years at what has been dubbed "America's Second-Toughest Job," Bloomberg has come to relish the limelight and has been known to make headlines for his stands on such social issues as gun control, public smoking, and childhood obesity, as he tries to make it harder for school kids in New York City to take those "big gulps" of sugary sodas. 

Bloomberg has been beefing up Bloomberg View, the operation's haven for journalistic commentaries and opinion pieces, perhaps indicating that Mike Bloomberg wants to have an institution at the ready in which he can see that his views are disseminated. The man likes to have influence. Perhaps the most profound way that Bloomberg could show his management expertise would be to make the Times a vibrant machine. 

As the traditional media forces continue to move to the Internet, the Times will require new ideas. It would be a shame if its financial challenges affected the operations of such a great, time-honored media institution. 

link

Guard Your Portfolio's Gains With This Defensive Measure

In recent years, the phrase "seeking alpha" has come into vogue. This refers to the ability of a portfolio to outperform the broader market or a related set of benchmarks. Yet in light of the market's choppy start to the second quarter, it may be better to seek "beta."

What's beta? It's the measurement of how a stock tends to react to the broader market. A stock with a high beta -- say, of 2.0 -- means it will typically move up or down at twice the rate of the broader market. (You can find this figure on the StreetAuthority's Yaho o Finance page. Just enter in a stock symbol and click its "key statistics" page.)

 

Right now, it's time to focus on investments with low or even negative beta. That way, you'll sleep well at night -- or even profit -- if the market heads south.

Low Beta = Defense
Low-beta stocks are often referred to as "defensive stocks." These aren't stocks that operate in the defense industry -- they're stocks (and sectors) that tend to hold their own in any market environment.

Take electric utilities, for example. Both Consolidated Edison (NYSE: ED) and Southern Co. (NYSE: SO), which are among the largest power providers in the eastern United States, each have a beta of less than 0.25. For that matter, other utilities such as Northwest Natural Gas Co. (NYSE: NWN), PG&E (NYSE: PCG) and WGL Holdings (NYSE: WGL) have very low betas.

Of course, such a low beta means that these kinds of stocks may not move very quickly when high-growth tech stocks are zooming ahead. Instead, investors often like them for their steady and growing dividends. And with such low betas, a 20% drop in the stock market would typically entail less than a 5% drop for these stocks.

Companies in the food business are also often seen as low-beta plays. Regardless of the broader economic climate, people still need to eat. As a result, sales and profits for these companies tend to be quite stable.

General Mills (NYSE: GIS), which owns dozens of brands such as Betty Crocker, Haagen-Dazs and Yoplait, is a model of consistency. Every year, management hikes the dividend (at a 10% annual pace over the past five years), and the company's base of investors tends to simply buy and hold this stock. As a result, its beta is quite low. Yet even a seemingly defensive stock is capable of solid share price appreciation.

If you are looking for fresh stocks in this extended bull market but are leery of getting in as the party is ending, then be sure to check out the beta. It's a good practice to know the beta of all of your portfolio holdings, as the highest-beta stocks may make the best sell candidates when it comes time to raise cash.

Going Negative
For some investors, it's crucial to hedge against a falling market by owning stocks or funds that tend to move in the opposite direction of the stock market. These are known as "negative beta" investments. You won't find any stocks that have a negative beta, as they would eventually fall to zero as the stock market tends to rise over the course of many years.But there are a number of exchange-traded funds (ETFs) that do the job. These are known as inverse funds, as they move in the opposite direction of the market. The most popular negative-beta inverse funds include:

ProShares UltraShort S&P500 ETF (NYSE: SDS): This ETF moves at twice the rate of the S&P 500 in the opposite direction. Direxion Daily Small Cap Bear 3X Shares (NYSE: TZA): This ETF moves at three times the rate of the small-cap focused Russell 2000 in the opposite direction. ProShares Short QQQ (NYSE: PSQ): This fund moves in the opposite direction -- on a 1-to-1 basis -- as the Nasdaq 100.

Risks To Consider: A focus on low-beta stocks could lead to an underperforming portfolio if the market moves yet higher. A focus on negative-beta investments could cause you to lose money when the markets rise.

Action To Take --> The S&P 500 has already managed to fall more than 1% on two separate occasions since the beginning of April. Those drops may be a sign that the long-standing bull market is getting tired. A sideways market is often a harbinger of an eventual shift in market direction, which is why it's important to take a defensive posture when you're aiming for further upside. As this chart shows, the S&P 500 is just above its 50-day moving average, and any move below 1,540 may signal trouble ahead.

P.S. -- StreetAuthority's Amy Calistri has one objective for readers of Stock of the Month: to provide one quality stock pick each month, with in-depth analysis in plain English that investors can understand. In fact, she just released a special presentation, "How to Beat the Stock Market... In Just 12 Minutes per Month," that tells you more about her strategy. Click here to learn more.

Here's How Capital Senior Living Is Making You So Much Cash

First Niagara Declares a Pair of Dividends

First Niagara Financial (NASDAQ: FNFG  ) will return money to two separate classes of its stockholders. The company has declared quarterly dividends for its common shares and its class B preferreds, both of which will be paid on May 15 to shareholders of record as of May 3.

The common stock payout is to be $0.08 per share, while that for the class B preferred is $0.539063 apiece.

The amount of the former matches the banking group's previous five quarterly distributions, the most recent of which was handed out in February.

The common stock dividend annualizes to $0.32 per share. That yields 3.4% at First Niagara Financial's current market price of $9.37.

More Expert Advice from The Motley Fool

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

Best Stocks To Buy For 2013

Is there anything worse than buying into a stock that was "sure" to go up a few percent and then holding on and watching the price erode for years? It's gut-wrenching. I've done it, too. I used to trade in and out of risky companies and refused to take a loss, hoping the stock would "come back" someday. Someday didn't usually arrive. But I've reformed: Now I buy for the long term and let the businesses work for me. Allow me to explain and then offer you seven stocks that make an airtight core that can create wealth forever.

A simple question

Are you really in the market for the long term? Here's a quick test: "I buy on the assumption that they could close the market the next day and not reopen it for five years." Would you agree or disagree? That's the buying strategy of superinvestor Warren Buffett. If you're prepared to buy and hold for five years, only the most well-positioned companies will do.

A long-term perspective changes everything: Think years into the future, if not decades. You'll need to rely on companies that have dominant franchises, absolutely indispensable products, and capable managers to drive returns. That positioning (and the confidence that comes with it) means you don't have to worry about next week because the future is going to rock for years to come. You can even take a stock's decline in stride and realize that it makes a great buying opportunity because the price really will come back and then soar even higher over the years.

These are stocks you can hold forever. And if the markets did close for years, well, these securities below (except one) pay solid and growing dividends, too. So let these guys do the work for you.

Best Stocks To Buy For 2013: Invensys(ISYS.L)

Invensys plc develops and applies technologies that enable the operation of manufacturing and energy-generating facilities, mainline and mass transit rail networks, and appliances worldwide. The company?s Invensys Operations Management division provides technology, software, and consulting services. Its services create and apply technologies to facilitate operation of industrial and commercial operations, such as oil refineries, fossil fuel and nuclear power plants, petrochemical works, and other manufacturing sites. This division offers Foxboro and Eurotherm recorders, and other equipment that measure and record plant information; distributed control systems, and Triconex, an automated safety system; SimSci-Esscor simulation software, which allows plant operators to simulate various scenarios for training purposes; and Avantis asset management software that schedules predictive maintenance. The company?s Invensys Rail division provides software-based signaling, communic ation, and control systems that facilitate operation of trains in mainline and mass transit networks. This division offers rail trackside and train-based monitoring products for the measurement of traffic in a rail network, identifying where trains are, and how fast they are going. Its European rail traffic management system, communication based train control, and train safety solutions control traffic on rail networks. The company?s Invensys Controls division designs, engineers, and manufactures products, components, systems, and services used in appliances, heating, air conditioning/cooling, and refrigeration products in a range of industries in residential and commercial markets. This division?s products within appliances or climate control systems various conditions comprising heat, humidity, and pressure. The company is based in London, the United Kingdom.

Best Stocks To Buy For 2013: British/Swiss Franc(UN)

UNILEVER N.V. operates as a fast-moving consumer goods company in Asia, Africa, Europe, and the Americas. It offers personal care products, including skin care and hair care products, deodorants, and oral care products under the brand names of Axe, Brylcreem, Dove, Fissan, Lifebuoy, Lux, Pond's, Radox, Rexona, Signal & Close Up, Simple, St Ives, Sunsilk, TRESemmé, Vaseline, and VO5. The company also provides home care products comprising laundry tablets, powders and liquids, soap bars, and various cleaning products under the Cif, Comfort, Domestos, Omo, Radiant, Sunlight, and Surf brand names. In addition, it offers food products consisting of soups, bouillons, sauces, snacks, mayonnaise, salad dressings, margarines and spreads, as well as cooking products, such as liquid margarines. The company markets its food products under the brand names of Becel/Flora, Bertolli, Blue Band, Rama, Hellmann?s, Amora, and Knorr. Further, it provides refreshment products, which include ice cream, tea-based beverages, weight-management products, and nutritionally enhanced staples under the brand names of Heartbrand, Lipton, and Slim?Fast. UNILEVER N.V. sells its products through its own sales force, as well as through independent brokers, agents, and distributors to chain, wholesale, co-operative and independent grocery accounts, food service distributors, and institutions. The company, formerly known as Naamlooze Vennootschap Margarine Unie, was founded in 1927 and is based in Rotterdam, the Netherlands. Unilever N.V. is a subsidiary of The Unilever Group.

Advisors' Opinion:

• [By Lowell]

  Unilever N.V. is a supplier of fast moving consumer goods. Cramer holds 700 shares of UN stocks. UN has a dividend yield of 4.89% and returned 1.72% since the beginning of this year. It has a market cap of $86.05B and a P/E ratio of 14.56. Ken Fisher had over $500 million invested in UN shares.

Best Stocks To Buy For 2013: Latchways(LTC.L)

Latchways plc engages in the production, distribution, and installation of industrial safety products and related services primarily in Europe and North America. It operates in two segments, Safety Products and Safety Services. The Safety Products segment designs and manufactures fall protection equipment for people working at height. It offers systems for those working at height, including on rooftops, crane rails; and systems for those climbing to or from height, such as ladders, telecom masts, and electricity transmission towers, as well as provides personal protective equipment, guardrails, and walkways. This segment sells its products directly, as well as through independent installers. The Safety Services segment installs and services safety products under the ManSafe name. The company?s products are used in bridges, commercial, electricity pylons, heritage, industrial, towers, office blocks, manufacturing plants, entertainment arenas, public buildings, offshore pla tforms, aerospace, power transmission, utilities, and telecommunications applications. Latchways plc was founded in 1974 and is headquartered in Devizes, the United Kingdom.

Best Stocks To Buy For 2013: Cir-comp(CIRX.MI)

CIR S.p.A., through its subsidiaries, engages in the utilities, media, automotive components, healthcare, and financial services businesses. In the utilities sector, the company engages in the sourcing, marketing, and supply of electricity and natural gas. It operates wind, photovoltaic, hydro, thermo, and biomass power generation plants with an installed capacity of approximately 4,000 megawatts. In the media sector, the company is involved in publishing la Repuibblica national daily newspaper, 17 local dailies, 1 three-weekly paper, L'Espresso weekly magazine, 2 monthlies, 2 quarterlies, and various guide books; providing Internet and applications for mobile and new generation devices; broadcasting 3 national radio stations comprising Radio Deejay, Radio Capital, and Radio M2O; and operating the national TV channel Deejay TV, as well as the satellite channels MyDeejay and Onda Latina. In the automotive components sector, the company offers filtration systems, such as oil , engine air, petrol fuel, diesel fuel, and cabin air filters; and flexible suspension components, including coil springs for shock absorbers, stabilizer and torsion bars, stabilinks, leaf springs, precision springs, and track adjusters. In the healthcare sector, it operates nursing homes under the Anni Azzurri brand; psychiatric rehabilitation units under the Santo Stefano and Redancia brands; and hospital facilities under the Medipass brand. The company manages 60 facilities with a total of approximately 5,600 beds in central and northern Italy. In the financial sector, it engages in the acquisition and management of non-performing loans; venture capital, private equity, and hedge funds business; operation of restaurants; and provision of hospitality management training. The company has operations in Italy, other European countries, North America, South America, and Asia. CIR S.p.A. was founded in 1976 and is headquartered in Milan, Italy.

Will a Much Smaller SUPERVALU Boost Profits?

On Wednesday, SUPERVALU  (NYSE: SVU  ) 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, knee-jerk reaction to news that turns out to be exactly the wrong move.

SUPERVALU has gone through some tough times in recent years, struggling to survive in the low-margin grocery business. But recent moves have given it a path forward, and the stock has reflected increased enthusiasm about the company's future. Let's take an early look at what's been happening with SUPERVALU over the past quarter and what we're likely to see in its quarterly report.

Stats on SUPERVALU

 

 

Analyst EPS Estimate	$0.18
Change From Year-Ago EPS	(53%)
Revenue Estimate	$7.86 billion
Change From Year-Ago Revenue	(4.5%)
Earnings Beats in Past 4 Quarters	1

Source: Yahoo! Finance.

Will SUPERVALU hold its own this quarter?
In recent months, analysts have held stable on SUPERVALU's short-term earnings prospects, although they've cut their full-year fiscal 2014 estimates by $0.03 per share. Investors appear much more optimistic, however, with the stock having risen almost 50% since mid-January.

The big news for SUPERVALU came at the beginning of the year, when private equity firm Cerberus Capital agreed to buy the company's Albertsons, Jewel-Osco, Acme, Shaw's, and Star Market chains for $3.3 billion. Given SUPERVALU's immense debt levels, it didn't have the capital to renovate its stores to keep up with competing chains, and the deal provides SUPERVALU with cash to help bolster the prospects for its continuing operations, which include Cub, Farm Fresh, and other chains, as well as its Save-A-Lot discount stores and wholesale grocery distribution unit. The deal was finalized a month ago, sending shares rising again as the sale went without a hitch.

Obviously, the move will lead to much smaller sales figures for SUPERVALU going forward. But the company will still face threats from both ends of the grocery spectrum. On one hand, Whole Foods has captured substantial business from SUPERVALU and its traditional grocery peers, with its reputation for high-quality healthy fare. On the other, deep-discount chain Dollar Tree and its peers have increasingly turned to grocery offerings to lure customers. Save-A-Lot is designed to help counter that trend, but thus far, its year-to-date sales have been flat, compared to double-digit growth for Dollar Tree.

In response, SUPERVALU has started paring workers, announcing 1,100 job cuts in late March. The move should help cut costs and slim the company down in light of its reduced business scope.

In SUPERVALU's quarterly report, watch closely to see how the company plots its strategy going forward. Beyond simply letting the Cerberus deal speak for itself, SUPERVALU should proactively explain where it sees its best prospects and how it plans to make the most of them. Without strong leadership, the gains that SUPERVALU's stock has seen could prove short-lived.

SUPERVALU isn't the only company to fall prey to Whole Foods' domination in recent years. Find out about what makes Whole Foods such a powerful force in the grocery industry by reading our premium research report on the stock, which includes the main opportunities and threats facing the company. So make sure to claim your copy today by clicking here.

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

Will Sequestration Sink General Dynamics' Aegis Destroyer?

Sequestration's in full swing, and it's putting a kink in the Navy's ship-buying plans. Before sequestration took effect, the Navy signed a multi-year procurement contract, which saved money by buying ships in bulk. Now, however, the defense budget has been cut, and that contract's in jeopardy. This is bad news for defense contractors on the DDG 51 Aegis Destroyer contract and could also be bad news for investors. Here's what you need to know.

U.S. Navy photo by Paul Farley. Public domain, via Wikimedia Commons. 

Who builds what
Both General Dynamics' (NYSE: GD  ) Bath Iron Works shipbuilding company and Huntington Ingalls Industries' (NYSE: HII  ) Ingalls Shipbuilding build the DDG 51 Aegis Destroyer, with the Navy typically buying ships from each builder.

In a move to save money, the Navy signed a 30-year shipbuilding plan that saw the purchase of 10 Aegis Destroyers for the price of nine. It also increased the Navy's shipbuilding budget from $15 billion to almost $19 billion annually. Now, Rep. Randy Forbes (R-Va.), chairman of the House Armed Services Committee, has expressed grave concerns about funding the 30-year plan and has asked the Navy for "a scintilla of evidence" that it can be done.  

One of the reasons the Navy's costs are so astronomical is that the service also has to replace the Ohio, a nuclear-capable submarine dating to the 1980s. Adm. Jonathan Greenert, chief of Naval operations, has stated, "People ask me what is my No. 1 program of concern, and I will tell you it's the Ohio replacement program." Not only is the Ohio outdated, but the replacement program will also provide 70% of the United States' nuclear deterrent capabilities.  

With the price of the new subs and the need for new ships, the Navy is seeing its costs escalating, which of course conflicts with the 10-year, $500 billion cut to defense spending under sequestration . 

Will the Navy remain mission-capable?
Ships aren't the only area where the Navy is seeing cuts; the service was also planning on purchasing one P-8A maritime surveillance plane from Boeing (NYSE: BA  ) , one E-2D Hawkeye battle management aircraft and two unmanned Fire Scout helicopters from Northrop Grumman (NYSE: NOC  ) , and one F-35C carrier fighter from Lockheed Martin (NYSE: LMT  ) -- all of which face being cut.  

Clearly, this is all bad news for defense contractors. It's also bad news for the Navy, as it relies on these systems to remain mission-ready.

What now?
What'll happen to the Aegis Destroyer contract remains to be seen, but it's not looking great. If it does get cut, General Dynamics and Huntington Ingalls could see their stocks suffer. On the other hand, that might end up being a great time to load up on defense stocks at a discounted rate. Yes, sequestration is hurting defense, and contracts are being cut, but as I've said before, defense contractors are essential to the military. Consequently, while defense contractors may be hampered in the short term, in the long term I'm not too worried.

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.