2014 Top Stocks Market, Best Stocks Investment In 2014, Top Stocks For 2014: 2014

Sardar Biglari's 2013 Letter To The Shareholders Of Biglari Holdings

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Do RF Micro Devices, Inc. Shareholders Want to Own Qorvo Shares?

RF Micro Devices (NASDAQ: RFMD ) and TriQuint Semiconductor (NASDAQ: TQNT ) are merging into a new company, called Qorvo, with the deal set to close on Dec. 31. This year has been a great one for RF Micro, with the stock price soaring on the back of rising revenue and profits, and the merger promises both synergies and advantages from increased scale.

RF Micro Devices shareholders will receive one share of Qorvo for each RFMD share they own while TriQuint shareholders will receive 1.675 shares of Qorvo for each TriQuint share they own. At the closing of the transaction, the Company will execute a one-for-four reverse stock split. Trading in the new combined company is expected to start on the NASDAQ Global Select Market on Jan. 2, under the ticker QRVO.

Will owning shares of Qorvo be a good deal for RF Micro Devices shareholders?

RFMD Chart

RFMD data by YCharts

The story sounds great
RF Micro and TriQuint recently gave a presentation about the benefits of the merger and the opportunity going forward for the combined company, and the story sounds pretty enticing. The $10 billion RF market is growing by 10%-15% annually, mobile Internet traffic is exploding, and the complexity of RF components is rising rapidly. The transition to 4G is in the early innings, and the total value of the RF components in a global LTE device is dramatically higher compared to devices with older technologies.

Source: RF Micro Devices

Qorvo will also have a sizable infrastructure and defense business, providing diversification from consumer devices. Mobile products are expected to bring in about $2 billion per year, while another $500 million comes from infrastructure and defense.

It seems like the growth opportunities for Qorvo will be plentiful. Not only is the number of mobile devices rising worldwide, but the RF market is shifting toward more advanced, higher-value components.

But there's a problem
Here's a chart showing the number of mobile subscriptions broken down by the generation of RF technology:

Source: RF Micro Devices

The number of 4G devices is set to explode during the next few years, and Qorvo should presumably benefit. But the transition to 3G, which started in 2005 or so, didn't really benefit RF Micro at all. Profitability has been erratic, with some years showing losses. This is despite the constant growth in the number of devices being shipped each year, and the constant shift toward more advanced technology.

Why is the shift to 4G any different? If 3G didn't lead to sustainable profitability, why will 4G? Historically, the shift to more advanced technologies has done exactly nothing to improve RF Micro's profitability. The company's operating margin in the past 12 months is roughly the same as it was in fiscal 2007, and revenue is only about 20% higher. This is despite the fact that the smartphone market was barely a market at all in 2007, and has now grown to over 1 billion units annually. If the shift from dumb phones to smartphones hasn't helped profitability, it's hard to imagine 4G making any real difference.

Is it time to buy RF Micro?
RF Micro, or Qorvo once the merger is complete, needs to show that its newfound profitability over the past few quarters is sustainable. Over the past decade, despite the explosion of smartphones and the shift to 3G, RF Micro hasn't been able to remain profitable for more than three years at a time.

The diversification and scale gained by the merger will certainly be good for the combined company, but there's a lot of uncertainty around the sustainability of RF Micro's strong performance in 2014. The stock trades at 45 times TTM earnings, although analysts are expecting rapid earnings growth going forward. The stock has more than tripled in 2014, and the current stock price bakes in a lot of optimism. But the record of the company doesn't seem to justify it.

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7 Ways Americans Are Getting Out of Debt

Getty Images You may be determined to get out of credit card debt, but how do you actually do it? If you're like most people, cutting out that cup of joe you grab at your local coffee shop in the morning isn't going to cut it. You're going to have to use a combination of several strategies to help you reach your goal. Motivation doesn't seem to be the issue. According to a recent Credit.com survey, Americans and Credit Card Debt, 72 percent of people with credit card debt say it is "extremely important" or "somewhat important" to have a plan to pay off their credit card debt in 2014. And in fact, 85 percent of those surveyed who say they have credit card debt also report they have been successful paying down this kind of debt in the past. What techniques have people used to pay down debt in the past? We asked survey respondents to select all the strategies they employed to help pay down their balances and here's what they told us they did: Took in a roommate -- 3 percent Cut back on buying coffee from a cafe -- 13 percent Got a second job -- 14 percent Consolidated credit card debt -- 20 percent Cut regular expenses (cable, phone, insurance) -- 31 percent Stopped eating out as much -- 37 percent The No. 1 strategy listed by most respondents who said they paid down credit card debt in the past? "Started budgeting" was chosen by 60 percent of respondents. As dreaded as the task of creating a budget may be, consumers seem to be aware that if they want to pay off debt, they had better start paying attention to where their money is going. There can be a big payoff to creating a budget: Just tracking spending has been shown to have positive benefits, extending even beyond the money saved. Some research suggests that people who write down everything they spend may see improvement in other areas of their lives, such as eating less junk food and becoming more productive. Unfortunately, though, most consumers don't budget. Only 32 percent of households prepare a detailed household budget, according to a Gallup poll conducted in April 2013. Consolidation, Counseling and Bankruptcy As for other solutions those in debt are considering, the survey also asked respondents which of the following they have seriously considered, and received the following responses (from those with credit card debt): Credit card debt consolidation (15 percent) Credit counseling (8 percent) Bankruptcy (8 percent) While debt consolidation was the most popular option, getting a consolidation loan can be tricky, especially for those whose credit scores have been hurt by the debt they carry. In those cases, credit counseling may be a more realistic option. It usually has the effect of a consolidation loan -- lower interest rates and a lower monthly payment -- but it doesn't require good credit to qualify. Whatever method consumers use to get out of debt, it's going to take some willpower, creativity and hard work. And time. While 41 percent of those surveyed said it was extremely likely they would pay off all their credit card debt in 2014, it often takes people much longer than that, especially if their balances are large. But other consumers have succeeded in paying off massive amounts of debt, demonstrating that with the right strategies and in the right situation, anything is possible. As you pay down your debt, it's a good idea to track your progress on how it's affecting your credit. For one, it can be encouraging to see the positive effect that paying down your debts can have on your credit scores; but it's also good to just ensure that your payments are being reported accurately.

What Qualities Matter Most When You're Hiring a Lawyer?

Smiling lawyer sitting at desk in office Getty Images Few people enjoy hiring lawyers. That's just a fact. If it takes a serious automobile accident, a divorce, or a death in the family to get you into a lawyer's office, then pretty much by definition, you're visiting under duress. But when trouble strikes and you actually need a lawyer, how do you pick one? According to Lawyers.com, the cost of legal services varies widely, from as little as $50 an hour to as much as $1,000 "or more." With such a wide range of prices to choose from, you'd think that the first factor people would look for in a lawyer is price -- specifically, a low price. Something closer to that $50 mark than to the $1,000, and as far away as possible from that ominous "or more." That turns out to not be the case. Earlier this month, online "legal Q&A forum, directory and marketplace" Avvo.com asked its users what they look for in a lawyer. While cost certainly was a factor (65 percent of respondents called it "very important"), it wasn't as important as "respect in the legal community," which 67 percent of those surveyed think is more important, or "track record" (80 percent). So it would appear that hiring a lawyer is actually a bit like buying a car. Price plays a role, of course, but more important is buying the right product, and getting good value for your money. Further bolstering the point, it appears that people who have more experience with lawyers are even more inclined to choose perceived quality over price. As Avvo's results reveal, the people most likely (72 percent) to pick a cheap lawyer over a good lawyer are those who've never used a lawyer before. Let's Get Personal All other things being equal, though, what specific qualities should you look for when choosing between two lawyers charging equivalent prices for their services? According to consumers polled by Avvo, the top three personal qualities that most customers look for when choosing a lawyer are confidence, realism, and aggressiveness. These beat out qualities such as friendliness, ability to reassure a client, or compassion. As Avvo explains, the feedback it got from its respondents is that when seeking a lawyer, they're looking for someone who's "a realistic go-getter" rather than "a hand-holder." And again, this makes sense. After all, the law is a complex thing. Most of us would much rather leave it alone, and not have to deal with it if at all possible -- which is one reason we avoid lawyers in the first place. It makes sense then that if you do run into some bad luck and find yourself with a legal dilemma that absolutely, positively, must be dealt with by a lawyer, you'd prefer to hand it over lock, stock, and barrel to a confident, realistic, and aggressive professional and let them deal with it. And really, for $1,000 an hour "or more," that's the least they could do.

Explaining Amortization In The Balance Sheet

In rather significant fashion, the U.S. Bureau of Economic Analysis recently announced a change to the way it estimates gross domestic product (GDP). The change reflects the inclusion of research and development (R&D) as an investment or asset in the economy. The term amortization is an important concept to intangible assets (such as R&D or a trademark) and reflects the fact that intangible assets have value that must be monitored and adjusted for over time. Amortization helps take care of this, and we explain it in more detail below.

Amortization Defined
Amortization occurs when the value of an asset (usually an intangible asset) is reduced over a specific time period, which is usually over the asset's estimated useful life. A good way to think of this is to consider amortization to be the cost as the asset is consumed or used up while generating sales or profits for a company. Intangible assets can include a patent, trademark or trade name, or a copyright. Major inputs into the amortization process include useful life, residual value and the allocation method, the last of which can be on a straight-line basis that is mostly straightforward.

A more specialized case of the term amortization takes place when a bond that is purchased at a premium is amortized down to its par value as the bond reaches maturity. When a bond is purchased at a discount, the term is called accretion. The concept is again referring to adjusting value over time on a company's balance sheet, with the amortization amount reflected in the income statement. In this context, the asset is amortized or capitalized over time. Otherwise, an item would simply be expensed and wouldn't exist as an asset on a company's balance sheet. A rule of thumb on this is to amortize an asset over time if the benefits from it will be realized over a time period of several years (or longer). With a short expected duration (such as days or months), it is probably best and most efficient to expense the cost through the income statement. Also, amortization refers to capitalizing the value of an intangible asset over time. Depreciation is meant to refer more to capitalizing the value of a tangible asset over time; for example, a piece of equipment or office furniture that a company might purchase.

Intangible Asset Example
Other examples of intangible assets include customer lists and relationships, licensing agreements, service contracts, computer software and trade secrets (such as the recipe for Coca-Cola). Goodwill is another major intangible asset that warrants discussion as it applies to amortization. It used to be amortized over time but now must be reviewed annually for any potential adjustments. The best example of how this can impact a company's financials in a big way is the purchase of Time Warner in 2000 by America Online (AOL) during the dot-com bubble. AOL paid $162 billion for Time Warner, but AOL's value plummeted in subsequent years and required a goodwill impairment charge of between $40 billion and $60 billion (the amount was heavily debated among the company and accountants). In previous years this amount would have been amortized over time, but it must now be evaluated annually and written down if, as in the case of AOL, the value is no longer there.

GAAP versus IFRS
Firms must account for amortization as stipulated in major accounting standards. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) both have similar definitions on what qualifies as an intangible asset, but there are differences in how their values must be adjusted over time. For instance, development costs to create new products are expensed under GAAP (in most cases) but capitalized (amortized) under IFRS. GAAP does not also allow for revaluing the value of an intangible, but IFRS does. This means that GAAP changes in value can be accounted for through changing amortization schedules, or potentially writing down the value of an intangible, which would be considered permanent. Finally, GAAP stipulates that advertising expenditures be expenses as incurred, but IFRS does allow recognizing a prepayment of these expenses as an asset, which would be capitalized or amortized as they are used at a later date.

Financial Statement Examples
In its August 2013 10-K filing with the SEC, technology giant Intel (Nasdaq:INTC) provided the following exhibit related to operating expenses:

Dollars (In Millions)	2012	2011	2010
Research and development	$10,148	$8,350	$6,576
Marketing, general and administrative	$8,057	$7,670	$6,309
R&D and MG&A as percentage of net revenue	34%	30%	30%
Amortization of acquisition-related intangibles	$308	$260	$18

It detailed that the amortization of intangibles was due in good part to its purchase of software security firm McAfee. You can also see that R&D is expensed annually, even though it results in value in terms of Intel's new product sales and future profits. Intel provided the following discussion on how it accounts for its identified intangible assets:

"Licensed technology and patents are generally amortized on a straight-line basis over the periods of benefit. We amortize all acquisition-related intangible assets that are subject to amortization over their estimated useful life based on economic benefit. Acquisition-related in-process research and development assets represent the fair value of incomplete research and development projects that had not reached technological feasibility as of the date of acquisition; initially, these are classified as "other intangible assets" that are not subject to amortization. Assets related to projects that have been completed are transferred from "other intangible assets" to "acquisition-related developed technology"; these are subject to amortization, while assets related to projects that have been abandoned are impaired and expensed to research and development. In the quarter following the period in which identified intangible assets become fully amortized, we remove the fully amortized balances from the gross asset and accumulated amortization amounts."

As you can see, the amortization concept is subject to classifications and estimates that need to be studied closely by a firm's accountants, and by auditors that must sign off on the financial statements.

The Bottom Line
The change to GDP mentioned above boosted economic growth several basis points over the last 50 years and made the economy nearly $560 billion larger than previously estimated. Now that it is considered a long-lived asset, accountants will have to measure whether to adjust or amortize the amount over time. The same goes for a firm's intangible assets on its balance sheet.

July 2013 Asset Class Returns

Asset Class Performance - 2013-07

Last quarter (Second quarter 2013: March 31, 2013 through June 30, 2013) U.S. stocks was the only category which did well. July was much kinder to all the other categories.

We use six different asset classes for asset allocation: three for stability (bonds) and three for appreciation (stocks). We divide the asset classes for stability into short money, U.S. bonds and foreign bonds. We divide appreciation into U.S. stocks, foreign stocks and hard asset stocks.

The exchange traded funds listed in the chart above are a representative of one of the major holdings in each asset category. Many other holdings tune the asset allocation within each asset class. And there is a wisdom of how to diversify each.

Asset allocation means always having something to complain about. Investors are continually looking for the safe investments with good returns. But inflation, sovereign debt, globalization and diminishing U.S. economic freedom make a clear choice difficult. We advise a diversified portfolio that overweights certain subcategories in each asset class.

If you have set such an asset allocation, what did poorly this past quarter may be poised to do better in the coming year. If your asset allocation is wrong, change it. But if it is right, don't abandon a brilliant allocation simply because of short-term returns. Just rebalance back to your original targets. It takes a confident contrarian to ignore the daily market noise and the 24/7 financial news.

July 2013 Returns

During 2013 second quarter bond values dropped as interest rates rose sharply. In July U.S. Bonds were back to their meager returns.

Foreign bonds, which had dropped precipitously last quarter as the dollar strengthened, gained in July as the dollar weakened again. Here is a chart of the U.S. Dollar Index for July 2013 (click for detail):

U.S. Dollar Index for July 2013

Representing U.S. Stocks, iShares Core S&P 500 ETF (IVV) was up 2.90% during the second quarter and gained another 5.08% in July. IVV, representing U.S. Stocks, is up 19.57% year to date. Rebalancing at this point often means selling some U.S. stock holdings and purchasing in other categories.

Foreign stocks, as represented by EFA, were up slightly more than U.S. stocks in July. This after not having done very well last quarter or year to date.

Resource stocks include companies that own and produce an underlying natural resource. These include oil, natural gas, precious and base metals, and resources like real estate, diamonds, coal, and lumber. Resource stocks, also called hard asset stocks, provide an inflation hedge. They do well when the dollar is dropping in value and poorly when the dollar is strengthening.

iShares North American Natural Resources ETF (IGE) was down 5.07% during the second quarter as the dollar strengthened, but back up 5.79% this month.

Subscribe to Marotta On Money and receive free access to a video seminar on: Boosting Returns through Static and Dynamic Asset Allocation.

Here's Why Stepan's Latest Report Might Worry You

Here at The Motley Fool, I've long cautioned investors to keep a close eye on inventory levels. It's a part of my standard diligence when searching for the market's best stocks. I think a quarterly checkup can help you spot potential problems. For many companies, products that sit on the shelves too long can become big trouble. Stale inventory may be sold for lower prices, hurting profitability. In extreme cases, it may be written off completely and sent to the shredder.

Basic guidelines
In this series, I examine inventory using a simple rule of thumb: Inventory increases ought to roughly parallel revenue increases. If inventory bloats more quickly than sales grow, this might be a sign that expected sales haven't materialized. Is the current inventory situation at Stepan (NYSE: SCL ) out of line? To figure that out, start by comparing the company's inventory growth to sales growth. How is Stepan doing by this quick checkup? At first glance, not so great. Trailing-12-month revenue decreased 4.8%, and inventory increased 30.6%. Comparing the latest quarter to the prior-year quarter, the story looks potentially problematic. Revenue dropped 1.9%, and inventory grew 30.6%. Over the sequential quarterly period, the trend looks OK but not great. Revenue grew 6.9%, and inventory grew 9.5%.

Advanced inventory
I don't stop my checkup there, because the type of inventory can matter even more than the overall quantity. There's even one type of inventory bulge we sometimes like to see. You can check for it by examining the quarterly filings to evaluate the different kinds of inventory: raw materials, work-in-progress inventory, and finished goods. (Some companies report the first two types as a single category.)

A company ramping up for increased demand may increase raw materials and work-in-progress inventory at a faster rate when it expects robust future growth. As such, we might consider oversized growth in those categories to offer a clue to a brighter future, and a clue that most other investors will miss. We call it "positive inventory divergence."

On the other hand, if we see a big increase in finished goods, that often means product isn't moving as well as expected, and it's time to hunker down with the filings and conference calls to find out why.

What's going on with the inventory at Stepan? I chart the details below for both quarterly and 12-month periods. (Stepan reports raw materials and work-in-progress inventory combined.)

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

Source: S&P Capital IQ. Data is current as of latest fully reported quarter. Dollar amounts in millions. FQ = fiscal quarter.

Let's dig into the inventory specifics. On a trailing-12-month basis, finished goods inventory was the fastest-growing segment, up 36.8%. That can be a warning sign, so investors should check in with Stepan's filings to make sure there's a good reason for packing the storeroom for this period. On a sequential-quarter basis, raw materials inventory was the fastest-growing segment, up 22.3%.

Foolish bottom line
When you're doing your research, remember that aggregate numbers such as inventory balances often mask situations that are more complex than they appear. Even the detailed numbers don't give us the final word. When in doubt, listen to the conference call, or contact investor relations. What at first looks like a problem may actually signal a stock that will provide great returns. And what might look hunky-dory at first glance could actually be warning you to cut your losses before the rest of the Street wises up.

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Add Stepan to My Watchlist.

Feeling Disappointed by BlackBerryâ€™s 33% Revenue Drop? Hereâ€™s Why Not to Lose Faith

Canadian software and security giant BlackBerry (BBRY) reported its fiscal 2015 third quarter numbers recently. Despite a positive bottom-line, the stock took a beating as revenues were in red and shares dropped by more than 5%. For the three months period the company reported net revenues of $793 million, down by a flabbergasting 33% from prior year period's $1.19 billion. Even the bottom line came at a negative $148 million or $0.28 a share. However, after adjusting for non-recurring onetime costs, it improved to $16 million or $0.01 a share.

The Wall Street and the investors weren't much happy about the numbers. But, should the investors really be disappointed? I think we are missing the bigger picture – that of a recovering BlackBerry. Here are some signs that should help the investors keep faith in the tech behemoth.

#1: Improving fundamentals
Revenue is always a key factor while analyzing the numbers of a quarter and the company understands that the performance has been below expectations. But BlackBerry is not bogged down or depressed by this fact. Instead, CEO John Chen during the earnings call said, "It is my belief that we can grow and stabilize the revenue or stabilize and grow the revenue of the company in FY '16 and while we will make every attempt to stay profitable going forward, sustainable profitability only comes from revenue growth and that is certainly our strategy here…To see this revenue growth we probably need a couple of quarters."

John Chen is devising a turnaround strategy and according to the plan right now it was time to focus on lowering losses and building cash. If we take a closer look at the quarter's numbers, we will find both of these occuring. For the quarter losses came to $148 million. Now, compare that with prior year period's $4.4 billion. Isn't that a significant improvement? Even if we compare the figure with sequentially prior quarter's $207 million, the latest figure hints at a recovering bottom line. That's encouraging! Next, turning to the cash position, year to quarter BlackBerry has generated $603 million of cash from operations. Compared to prior year period's $405 million, that's a 49% improvement. Even free cash flow increased to $532 million, up from previous year's $145 million.

#2: Back to the basics
As the smartphone space evolved, BlackBerry, in order to stay competitive, changed a lot of things. Among all that changes the company lost certain things that were responsible for making Blackberry the success story it was. However, the company has realized this and has renewed its focus on bringing back the age-old BlackBerry signature features, such as the very popular trackpad. In September the company successfully launched BlackBerry Passport and recently it launched BlackBerry Classic. Both the devices offer the superior security features that the Canadian phone maker is famous for. The company has brought back the trackpad to life through the Classic model. Both the devices offer a full blown QWERTY keyboard experience that all BlackBerry users yearn for. The company has finally started listening to the king called customer.

Next, John Chen understands the core competency of BlackBerry lies in software security, and that's why he's working on turning BlackBerry from a hardware focused company to a software focused one. During the quarter, equal share of revenues came from the hardware and the services businesses (46% each), and the remaining 8% came from software sales.

#3: A strong new partnership
Yes, you guessed it right. I am speaking of the BlackBerry-Boeing (BA) partnership. It's not a totally new development and those who have been following the stock knew about this for some time now. However, the mention of this made sense in the context of the discussion. Boeing is working with BlackBerry to manufacture a self-destructing smartphone meant for secret government agencies, known as Boeing Black. Though the device will be powered by Google's (GOOG) Android platform, BlackBerry will help the aero major to make it secured using its BES 12 platform.Several high-profile government agencies are already customer of the Canadian tech giant and this partnership should further strengthen Blackberry's position in the software security market, helping it create a virtual monopoly in this space.

About the author:Quick PenA seasonal writer with a Management Degree in Finance and interests in automotive, technology, telecommunication and aerospace sectors.

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CoreLogic: Home Prices Get a Boost in October

Lenny Ignelzi/AP WASHINGTON -- U.S. home prices rose at a faster year-over-year pace in October than in September, snapping a seven-month slowdown. Real estate data provider CoreLogic (CLGX) said Tuesday that prices increased 6.1 percent in October compared with 12 months earlier. That was up from September's year-over-year increase of 5.6 percent. Still, home values are rising more slowly than they were earlier this year, when 12-month gains were averaging nearly double their current pace. The price momentum began to tail off in the middle of the year as home values in more cities and states neared the record highs last seen shortly before the Great Recession began in late 2007. Higher prices have reduced affordability, especially because the incomes of many would-be buyers have yet to match their pre-recession levels. Lending standards also remain comparably tight. Previous price increases led investors to pull back from the home market, and first-time buyers have yet to fill the void created by their departure. Price growth will likely remain mild as a result, CoreLogic said. The firm projects that home values will rise 5.1 percent over the next 12 months. Roughly half the country's homes will match or surpass their pre-recession prices by mid-2015, it predicts. Every state reported a price gain in October. CoreLogic said prices reached new highs in Colorado, Louisiana, Nebraska, New York, North Dakota, South Dakota, Tennessee, Texas and Wyoming. In 27 states, home values are within 10 percent of their previous peaks. There are still pockets of the country -- including parts of Texas, Seattle and Denver -- where prices are rising faster than in the rest of the country because of their relatively strong job markets, incomes and home prices, said Sam Khater, deputy chief economist at CoreLogic. Other real estate companies have forecast a sharper slowdown in price gains next year. Zillow (Z), the online home marketplace, released estimated Tuesday that home values will rise a mere 2.5 percent nationwide in 2015. That slowdown should ultimately help bring more buyers into the market and increase sales, said Stan Humphries, Zillow's chief economist. Humphries said he thinks more homes will be listed for sale as prices edge closer to their previous peaks, giving buyers more options. At the same time, rental prices are expected to rise 3.5 percent. That should give people an additional incentive to buy. "As renters' costs keep going up, I expect the allure of fixed mortgage payments and a more stable housing market will entice many more otherwise content renters into the housing market," Humphries said.

Gilead Sciences: Another Big Jump in Hep-C Prescriptions

Another Friday, another set of prescription data on Gilead Sciences’ (GILD) Hepatitis C drugs Sovaldi and Harvoni.

Paul Sakuma

ISI Evercore’s Mark Schoenebaum notes that prescriptions for Harvoni rose 79% to 1,983, while Sovaldi rose 5% to 4,302. Together, the two drugs rose 20% to 6,286 prescriptions.

Schoenebaum says that prescriptions need to average 7,900 during the fourth quarter to meet consensus estimates–and he thinks Gilead will get there. “If you assume growth slows every week into quarter's end from 20%, you get to consensus estimates,” he says.

Bernstein’s Geoffrey Porges and Wen Shi take the long view on Gilead:

We believe that Gilead Sciences will be one of the more remarkable growth stories in industry history from 2013 until 2017, with one of the fastest launches in industry history emerging from its Hepatitis C franchise. This launch adds to a steadily growing HIV franchise which offers relatively predictable 8-10% growth through 2017. In addition the company has an emerging oncology franchise which will be led by idelalisib which was just approved for B cell malignancies. We now forecast that earnings will grow explosively, from $1.95 in 2012 to more than $13 in 2016 and 2017, which should capture the attention and imagination of most active growth investors. We remain concerned that 2018 will see a significant decline in revenue, cash flow and earnings; TAF is turning into one of the company’s most valuable tools to mitigate that decline, but we still believe that the company will need to identify additional blockbuster opportunities to even maintain stable revenue, earnings and cash flow after 2017. Nevertheless even our most conservative valuation methodologies suggest that the stock is worth $120-130/share and with more aggressive methods even more upside can be justified.

Shares of Gilead Sciences have gained 1% to $107.92 at 9:37 a.m.

The Dow Drops 264 Points; Biggest Rout Since July

The big comeback the Dow enjoyed on Wednesday got flushed away today, and strategists have few simple answers to explain the blood bath.

U.S. stocks tumbled sharply amid worries about global growth and political tensions, ending with the Dow Jones Industrial Average suffering its biggest one-day loss since July.

The Dow sank 264 points, or 1.54%, to end the day at 16,945, while the S&P 500 fell 32 points, or 1.62%, to close at 1965.99.

The Nasdaq Composite, meanwhile, fell 88.47 points, or 1.9% to close at 4,466.75.

What's to blame? Take you pick of issues from the conflict in Syria and worries about Russia seizing foreign assets to concerns about the global economy, U.S. interest rates and weak durable goods orders.

Regardless, investors fled from stocks, opting to play it safe with Treasuries. The yield on the 10-year note fell to TK as prices rose.

TheCBOE Volatility Index (^VIX), a measure of investor uncertainty, jumped 21% to 16.05. The price of gold, meanwhile, turned higher.

The selloff wasn't limited to Blue Chips. Small cap stocks also suffered, sending the Russell 2000 index falling 18 point, or 1.6% to end at 1,110.24.

In afterhours market action: shares of Nike (NKE) rose 5.5% to $84.12 after hours after the athletic apparel giant posted quarterly results that beat expectations.

Diamond Foods (DMND) rose 6% to $28.25 after posting fiscal fourth quarter financial results.

General Motors (GM) rose 0.5% to $33.04 after hours Thursday after Standard & Poor’s raised the auto maker’s credit rating back above the investment-grade threshold.

Get a Read on How Much You Can Save Using Your Library

in the library Mike Kemp/Rubberball Libraries are passe. Or so prevailing wisdom goes. After all, in the Internet era, where practically every American has a computer (or tablet or a Web-enabled smartphone), there's no need to trek to the library to do research. And books? Who checks out, or even reads, physical books in the age of the Kindle, Nook and iPad? That all sounds logical, except for one thing: The facts contradict the theory. Readers Welcome Half of America has visited a library in the past 12 months, Pew Research found in a poll of 6,224 Americans ages 16 and older. And a mere 4 percent say they've moved exclusively to e-books. What's more, while the millennial generation is widely understood to be more wired than their elders, it turns out that the younger you are, the more likely you are to frequent the library: 59 percent of 16- and 17-year-olds say they've visited a library at least once in the past year. (And to be clear, we're talking about full-service, separately housed public libraries -- not just the school media center.) The same holds true for 48 percent of millennials ages 18 to 29, and 52 percent of folks ages 30 to 49 (moving into Gen X territory here). In contrast, those ages 65 and up, whom you'd expect to be most hidebound in their devotion to clothbound books, are the least frequent users of public libraries. Only 39 percent of this group says they've visited a library in the past year. Get a Library Card -- It's a Bargain Why do libraries retain their popularity in the digital age? In part, it's probably economics. According to a Huffington Post poll last year, about 68 percent of Americans read at least one book last year. Breaking that number down further, "25 percent read between one and five books, 15 percent read between six and 10 books, 20 percent read between 11 and 50, and 8 percent read more than 50" books. That works out to an average of about 12 books read per reader. The "official" estimate of the American Library Association is that library patrons check out about 8.1 books per person per year -- suggesting that the majority of books that Americans read are checked out of libraries. In fact, the numbers suggest that Americans borrow twice as many books from libraries as they buy from bookstores. And why not? The School Library Journal in 2013 figured the average cost of a book (excluding reference books) is $15.32. Multiply that by the 8.1 books checked out of a library, and you have $124 that library patrons -- including you? -- save in book-buying costs annually. Most of us spend a ton of time researching our options when we first sign up for a plan or policy, then forget all about it and make monthly payments like a robot. But this can cost you.

Labor Market Data Upbeat, but Housing Starts Fall Sharply

Nati Harnik/AP WASHINGTON -- The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, suggesting the labor market recovery was gaining traction. The economy's brightening outlook was dimmed somewhat by another report Thursday showing a tumble in housing starts and building permits last month. "This part of economy is going in the wrong direction while the rest of the economy is picking up," said Anthony Karydakis, chief economic strategist at Miller Tabak in New York. Initial claims for state unemployment benefits dropped 3,000 to a seasonally adjusted 302,000 for the week ended July 12, the Labor Department said. Economists had forecast first-time applications for jobless aid rising to 310,000. The four-weak average of claims, considered a better gauge of labor market trends as it irons out week-to-week volatility, hit its lowest level in seven years. Prices for U.S. Treasury debt extended gains after the data, while U.S. stock index futures held losses. The claims data covered the survey week for July nonfarm payrolls. Claims fell 12,000 between the June and July survey period, suggesting another month of solid job gains after June's hefty 288,000 increase. Employment has grown by more than 200,000 jobs in each of the last five months, a stretch not seen since the late 1990s.

Rolls-Royce Says Sorry With $1.7 Billion Buyback

Rolls-Royce’s boss John Rishton had a clear message for investors Thursday: Sorry.

For years, the aero-engine maker was a stock-market darling. Rolls-Royce’s yearly sales and earnings growth was reliable to the point of being dull.

Of late, Rolls-Royce has been anything but boring. Just not for the reasons investors like.

The U.K. Serious Fraud Office and U.S. regulators have been looking into alleged illegal business dealings Rolls-Royce conducted in Asia. The probe remains open.

The British company tried to strengthen its maritime engine business through a $10 billion takeover of Finland's Wärtsilä Oyj (WRT1V.HE) which rebuffed Rolls-Royce’s preliminary approach. The attempted acquisition of a company of that size surprised investors who hadn't realized expansion was on management's agenda so soon after its full takeover of Tognum, a German engineering company originally acquired in partnership with Daimler.

Mr. Rishton caught investors off-guard again in February when he said there would be no growth in profit and sales this year.

Investors voted with their feet. The stock slumped more than 19% this year.

True, Mr. Rishton hasn’t been twiddling his thumbs. Now three years in the job, he is cleaning house, sweeping out inefficiencies that had crept in during a decade of expansion in which Rolls-Royce grew its equipment-services business rapidly amid a boom in demand for passenger aircraft. Selling the company’s subscale industrial gas turbine business to Siemens (SIE.XE) showed how Mr. Rishton wants to focus Rolls-Royce on areas with the best growth potential.

The goal: to bring profitability on a par with rivals such as General Electric Co.(GE)

At Thursday’s presentation to analysts, Mr. Rishton was keen to calm investor nerves and show he is serious about that task.

The £1 billion share repurchase, a first for the company, rewards shareholders for their loyalty. Mr. Rishton ruled out fancy deal-making, reassuring investors that Rolls-Royce won’t squander money on empire building. The proceeds from the Siemens transaction, due to close by year end, will finance the share repurchase.

Rolls-Royce will also curtail capital expenditure, without crimping too much on R&D, as these costs should fall to around 4% of underlying sales before the end of the decade from 4.9% last year.

Mr. Rishton had one more message for shareholders long used to Rolls-Royce’s minimalist approach to investor relations. Greater transparency is in the offing. Thursday’s investor day would be followed by more, Mr. Rishton promised.

Investors liked what they heard. Rolls-Royce shares jumped 6%.

Uncle Sam Expects Gas Prices to Average $2.60 in 2015

Thanksgiving Travel Vignettes Orlin Wagner/AP The Energy Department again slashed its prediction for next year's average price of gasoline across the U.S., this time to $2.60 a gallon. That would be 23 percent below this year's projected average and the lowest full-year average since 2009. If that comes to pass, the price drop will save U.S. drivers $100 billion over the course of the year based on current consumption levels. That will boost the overall economy by reducing shipping and transportation costs, and leaving consumers more money to spend on other things. In its most recent short-term energy outlook, released Tuesday, the Energy Department's Energy Information Administration cut its gasoline price forecast for 2015 by 35 cents a gallon. It was the second time in two months that the EIA cut the forecast by more than 30 cents a gallon. Daily Drops Since Sept. 26 The average national price of gasoline to $2.66 a gallon on Tuesday according to AAA, 61 cents less than last year at this time. The national average has fallen every day since Sept. 26. The steep drop in gasoline prices is a result of a drop in crude oil supplies. Global crude prices have fallen to around $66 per barrel from a June high of $115 per barrel. Global supplies are high thanks in part to rising production in the U.S., while global demand is relatively weak because of slowing economic growth in Europe and Asia. The lower crude prices are forcing oil companies to scale back drilling plans for next year. As a result, the EIA trimmed its forecast for U.S. production growth. U.S. crude oil output is expected to rise by 300,000 barrels per day to 9.3 million barrels a day. The EIA had previously expected production to rise by 400,000 barrels per day. Despite a colder than normal November, the EIA expects home heating costs to fall this winter compared to last year. Weather forecasters do not expect a repeat of last year's consistently low temperatures, and prices for propane and heating oil are much lower than last year. Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. More from The Associated Press
•Congress Unveils Massive $1.1 Trillion Spending Bill •Nissan Offers Brake Settlement for 350,000 Vehicles •Citigroup to Take $3.5 Billion Charge This Quarter

Mario Gabelli Comments on Hillshire Deal

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US proposes fiscal Ebola relief

A health worker returns to her ambulance outside Freetown in Sierra Leone. NEW YORK (CNNMoney) Ebola-stricken Liberia, Guinea and Sierra Leone might get $100 million in debt relief if the US gets its way.

Treasury Secretary Jack Lew suggested in a statement Tuesday that the International Monetary Fund ought to forgive that much for the three countries, whose economies will likely suffer in the virus's wake.

Google wants to match your Ebola donation

"IMF debt relief will promote economic sustainability in the worst hit countries by freeing up resources for both immediate needs and longer-term recovery efforts," Lew said in a statement. Reuters first reported the proposal Tuesday.

The three countries owe the IMF a collective $336 million. The organization has estimated that Liberia will see its economic growth fall more than 70% this year and Sierra Leone will see its growth fall by 60%. Guinea's growth is expected to increase.

Check out CNN's Ebola facts page for coverage updates

A Treasury spokeswoman said that the IMF could finance such an effort with money from a $268 million-emergency relief fund set up for Haiti after its earthquake. The fund still has $150 million in it, she wrote in an email.

She added that Lew would speak more about the plan at the G-20 Finance Ministers Meeting in Brisbane, Australia next week.

An IMF spokesman said that the organization is preparing a response and declined to comment until then.

EU pledges 1 billion euros to fight Ebola

Anadarko Petroleum Earnings: Portfolio Optimization Fuels Strong Results

As you've probably noticed, oil prices have taken a dive this year. In fact, crude oil in the United States recently fell to $79 per barrel. That's a multi-year low for West Texas Intermediate and a 27% decline from the price per barrel reached just a few months ago. While that's great news for consumers who will spend less at the pump and keep more of their discretionary income, it's terrible news for oil and gas companies.

Because of what's happening in the oil market, this earnings season was supposed to be a disaster for oil and gas companies, and particularly for companies in the exploration and production industry, as those companies are even more highly sensitive to fluctuations in oil prices than their larger integrated peers are. However, Anadarko Petroleum (NYSE: APC ) proved its doubters wrong by posting strong third-quarter results that beat the overarching fears of a major slowdown in the oil and gas industry.

Here is a breakdown of Anadarko's results, as well as the strategic decisions made that helped fuel its successful quarter.

Strategic moves are producing results
Anadarko has worked aggressively to divest non-core assets and reinvest the proceeds in the oil and gas fields it deems most attractive for future development. Last quarter alone, Anadarko closed on the $1.075 billion sale of its China unit, and it also closed on $1.2 billion worth of additional divestments. Those moves left the company in a strong financial position, with $8.3 billion of cash on hand. Going forward, it will use its financial resources to expand in its key portfolio assets.

One of the company's areas of focus is the Wattenberg field, a large natural gas field located in Colorado's Denver Basin, where Anadarko recently embarked on a horizontal drilling program that has produced excellent results. That, in conjunction with midstream expansions, helped Anadarko to grow sales volumes at Wattenberg by 87% last quarter, year over year. Anadarko also has strong acreage positions in the Eagle Ford and Wolfcamp fields.

Separately, Anadarko is heavily involved in the deepwater Gulf of Mexico. The company has invested huge resources there in a massive new project that's nearing completion. The Lucius project is on schedule, and first oil is expected within the next few weeks.

Because of the company's strategic initiatives undertaken over the past year, Anadarko's underlying fundamentals are improving. Last quarter, earnings soared to $2.12 per diluted share, up from just $0.36 earned in the same period last year. Of course, it needs to be stated that most of this performance was due to one-time events that aren't part of the company's core operating activities. For example, Anadarko realized approximately $1 billion on gains from derivatives and divestitures.

Still, even when excluding these items, Anadarko still had a good quarter. Production stayed strong, despite the drop in oil prices over the past several months. Anadarko's sales volumes of oil, natural gas, and natural gas liquids rose 14% last quarter, year over year, to an average of 849,000 barrels of oil equivalents per day, a figure that includes adjusting for its divestments. Because of the strong progress seen over the first several months of 2014, Anadarko management increased its sales volume forecast for the remainder of the year.

Production growth should provide shelter from the storms
The oil and gas industry looks like a scary business right now, what with the carnage rippling through the energy markets. The price of oil has collapsed in just the past few months, which is showing up in the earnings reports out of Big Oil. However, not all oil and gas companies are struggling. Anadarko Petroleum is thriving, despite the decline in oil prices. That's because Anadarko is benefiting from an aggressive divestment strategy, which has allowed the company to simultaneously shed underperforming projects as well as raise funds necessary to fuel expansion in higher-performing areas.

It also allowed Anadarko to post strong results last quarter, as well as increase its forecast for the remainder of the year.

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Top Reasons to Invest in National Oilwell

In this article, let's take a look at National Oilwell Varco, Inc. (NOV), a $30.43 billion market cap company that designs and manufactures drill rig equipment, provides downhole tools and services, and also provides supply chain integration services to the upstream oil and gas industry.

Market leader

On 2005, after the merger with Varco International, the company changed its name to National Oilwell Varco. The firm practically made every component that goes into a drilling rig, and also leads each product line in which it operates. We think this will remain in the future.

Strategies for expansion

In order to expand operations and gain more market share, the company focuses on drilling machinery and equipment, as well as making acquisitions. So far, there were more than 200, with some of them with a transformative characteristic; others were little ones concentrating in adding a product line or technology.

Those acquisitions were effective to create intangible assets like intellectual property and also high switching costs

Cash flow yield

At today's trading price, it has a free cash flow yield of about 9%, higher than most of the companies in the Oil & Gas Equipment & Services industry, and we believe this trend will continue in the future.

Commodity prices

Lower oil prices affect capital spending budgets, and this immediately affects drilled and rig orders. Apart from this, another risk that the firm faces is execution risk in several forms like paying more for acquisitions or the risk of mispricing orders.

Revenues, margins and profitability

Looking at profitability, revenues grew by 17.34% led earnings per share increased in the most recent quarter compared to the same quarter a year ago ($1.62 vs $1.40). During the past fiscal year, the company reported lower earnings of $5.16 versus $5.83 in the previous year. This year, Wall Street expects an improvement in earnings ($5.99 versus $5.16).

Finally, let´s compare the best measure of performance for a firm's management: the return on equity. The ROE is useful for comparing the profitability of a company to that of other firms in the same industry.

Ticker	Company	ROE (%)
NOV	National Oilwell Varco, Inc.	11.72
HAL	Halliburton Co	24.18
TS	Tenaris SA	12.39
	Industry Median	7.94

The company has a current ROE of 11.72% which is higher than the industry median. In general, analysts consider ROE ratios in the 15-20% range as representing attractive levels for investment. So for investors looking those levels or more, Halliburton (HAL) and Tenaris (TS) could be the option. It is very important to understand this metric before investing, and it is important to look at the trend in ROE over time.

Relative Valuation

In terms of valuation, the stock sells at a trailing P/E of 12.1x, trading at a discount compared to an average of 18.5x for the industry. To use another metric, its price-to-book ratio of 1.42x indicates a premium versus the industry average of 1.34x while the price-to-sales ratio of 1.32x is above the industry average of 1.08x.

As we can see in the next chart, the stock price has an upward trend in the five-year period.

Final comment

This industry could be hurt if prices are lower for a long time, but oil prices remain high and drilling activity continues to rise, which is a favorable scenario for National Oilwell.

The PE relative valuation and the return on equity that significantly exceeds the industry average make me feel bullish on this stock.

Hedge fund gurus like Mario Gabelli (Trades, Portfolio), Larry Robbins (Trades, Portfolio) and George Soros (Trades, Portfolio) bought this stock in the second quarter of 2014.

Disclosure: Omar Venerio holds no position in any stocks mentioned

Also check out: Mario Gabelli Undervalued Stocks Mario Gabelli Top Growth Companies Mario Gabelli High Yield stocks, and Stocks that Mario Gabelli keeps buying Larry Robbins Undervalued Stocks Larry Robbins Top Growth Companies Larry Robbins High Yield stocks, and Stocks that Larry Robbins keeps buying George Soros Undervalued Stocks George Soros Top Growth Companies George Soros High Yield stocks, and Stocks that George Soros keeps buyingAbout the author:ovenerioWe provide independent fundamental research and hedge fund and insider trading focused investigation.

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RF Micro Devices Earnings: Rapid Revenue Growth

RF Micro Devices (NASDAQ: RFMD ) , a leading provider of cellular frequency solutions, blew past its own guidance when it reported its fiscal second-quarter earnings. The first quarter marked a vast improvement in the company's financial performance, with both gross and operating margins improving dramatically, and that trend has continued during the second quarter. The rapid rise in demand for mobile data is fueling RF Micro's business, and the second quarter was the best on record in terms of both revenue and profitability. Here's a deeper look at RF Micro's second-quarter results.

The details
RF Micro handily beat both its own guidance and analyst estimates for revenue and EPS during the second quarter:

Metric

Average Analyst Estimate

Prior Guidance

Actual Results

Revenue	$346.2 million	$345 million	$362.7 million
Non-GAAP EPS	$0.27	$0.27	$0.30

Sources: RF Micro and Yahoo! Finance.

Revenue jumped 17% year over year, far faster than the 10.9% growth the company previously guided for. Gross margin, which rose dramatically to 45% during the first quarter, increased further to 46.2% during the second quarter. The operating margin also improved, rising to 20.8% during the second quarter, up from 3% during the same quarter last year and 14.6% during the previous quarter.

Guidance for the third quarter was strong. Revenue is expected to rise to $385 million, a 6.1% sequential improvement and a 33% year-over-year improvement. The company expects gross margin to remain in the mid-40s, and for operating expenses to remain flat, leading to an expected non-GAAP EPS of $0.33.

Key points
RF Micro is set to merge with TriQuint Semiconductor (NASDAQ: TQNT ) by the end of this year, and during the second quarter shareholders of both companies officially approved the combination. The merger will give the combined company greater scale, with the hopes of improving both profitability and competitiveness.

TriQuint released its own earnings report one day before RF Micro, also handily beating its previous guidance. Like RF Micro, TriQuint's gross margin has improved dramatically over the past year, and its guidance for next quarter came in well above the consensus. Strong demand for the iPhone is probably helping both companies, with a teardown of the iPhone 6 Plus done last month by iFixit uncovering a TriQuint 3G amplifier module and an RF Micro antenna switch module.

In RF Micro's earnings release, it unveiled that the company had entered into three-way non-disclosure agreements with TriQuint and leading smartphone manufacturers in order to, as management put it, "accelerate highly integrated products to market, as early as next year." What these products are is anyone's guess, but this could be a sign that the impending merger between RF Micro and TriQuint is already starting to pay off, with manufacturers choosing the combination over the competition.

Whether RF Micro can maintain the high margins of the past two quarters is something investors should keep an eye on going forward. RF Micro has had good years in the past with double-digit operating margins, but the company has never been able to sustain profitability for very long. The story is the same for TriQuint, and while the combination should introduce cost savings, combining two companies with erratic earnings results over the past decade may simply lead to a larger company with equally erratic profitability.

RFMD Operating Margin (Annual) Chart

RFMD Operating Margin (Annual) data by YCharts

Final thoughts
RF Micro had a fantastic quarter, handily beating its own guidance and calling for continued growth going forward. The merger with TriQuint is on track, and both companies are benefiting from strong demand for the iPhone 6. How long RF Micro can maintain the record margins that it produced this quarter is a question that will only time will answer, but in the short term, management seems extremely optimistic about the company's prospects.

Apple Watch revealed: The real winner is inside
Apple recently revealed the product of its secret-development "dream team" -- the Apple Watch. The secret is out, and some early viewers are claiming that its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts that 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see where the real money is to be made, just click here!

Most Investors Will Miss This Powerful Buy Signal on Amazon's Chart

Amazon.com (NASDAQ: AMZN) may have disappointed shareholders Friday with another earnings miss, but all I see is opportunity.

At this very moment, there is a screaming post-earnings buy signal on the charts that has worked out 100% of the time over the past two years. This signal is not something most investors would spot, but I use it frequently -- and with great success.

It doesn't hurt that I'm intimate with Amazon's chart patterns, statistics and earnings trends. Our last technical trade in AMZN (although not an earnings-related trade) netted us 51% in less than two months. This time, I see an opportunity for 65% gains before year end.

[Related -Google: Still Opportunities Ahead]

AMZN sold off to the tune off 8% Friday following its third-quarter earnings release after the close on Thursday. If investors were truly running for the hills, though, we would have seen a much more violent move and the rally from the pre-market prices would have been absent. ?CEO Jeff Bezos has been very clear with investors and the media that he is focused on the bigger picture rather than quarterly results. Back in 1997, he informed them that he would be spending money to expand Amazon's empire, and from time to time, the company would incur losses as it grew.

While Amazon may be missing on the bottom line, its customer base and revenues are growing. Like Bezos, I see the bigger bullish picture for AMZN. But what's more important today is the chart action.

[Related -The Sixty Percent Alibaba Play No One Is Talking About]

Trading Amazon's Earnings Reversal

Trading earnings is one of my specialties. As an options trader, I focused heavily on the action leading up to an earnings announcement. I gauged bullish or bearish sentiment and estimated how big of a move a stock would make once the report was out.

Most of the time, I would enter a trade ahead of the report and exit almost immediately after earnings were released.

As the years of successful pre-earnings trades went by, I began to notice a large number of stocks that performed what I call an "earnings reversal."

When a stock is trending (either bullish or bearish), its earnings report can accelerate it in the direction of the trend. An earnings reversal occurs when shares move outside of their Bollinger Bands, creating an overbought or oversold condition from which the stock then reverses.

Essentially, the reaction to earnings pushes the stock too far in one direction, and if the conditions are right, a short-term reversal occurs and thrusts the stock in the opposite direction, often in a big way.

In the case of Amazon, this powerful signal was triggered after seven of the past eight earnings reports. In each instance, if a trader went long or short (depending on the nature of the signal) at the close the day following the announcement, they would have made an average of 11.4% before the next report was issued.

The most dramatic earnings reversal came in April 2013. AMZN was in a bearish trend when it gapped lower following its report. Traders who entered a bullish position at the close on April 26, 2013, made 21% in just three months.

The signal I'm seeing right now looks just as strong as the one I spotted then.

AMZN closed Friday at $287.06. Simply moving back to its pre-earnings close of $313.18 would only require a 9% gain, less than the 11% average move the stock has made after every signal in the past two years.

With a call option strategy, we can leverage that 9% gain into 65% profits in two months.

AMZN Call Option Trade

Today, I am interested in buying AMZN Dec 270 Calls for a limit price of $26.

Risk graph courtesy of tradeMONSTER

This call option has a delta of 72, which means it will move roughly $0.72 for every dollar that AMZN moves, but it costs a fraction of the price of the stock.

The trade breaks even at $296 ($270 strike price plus $26 options premium), which is 3% above current prices.

If AMZN hits my upside target of $313, then the call options will be worth at least $43. Once you enter the trade, place a good 'til cancelled (GTC) order to sell your calls at that price.

Recommended Trade Setup:

-- Buy AMZN Dec 270 Calls at $26 or less (use limit orders)

-- Set stop-loss at $13

-- Set price target at $43 for a potential 65% gain in two months

1 Dividend Stock for Retirees to Buy

Retirement investing is typically all about safety and security. After all, retirees can't afford to take overly risky bets on speculative investments that might blow an irreversible hole in their nest eggs. With that in mind, it might seem inappropriate to suggest a stock in a technology company for retirees. That's because technology is commonly viewed as a volatile industry in which high-flying companies soar and then can easily crash and burn if their innovation doesn't keep up with competitors.

But not all technology companies are created equal. For example, there are a few technology companies that share many of the same qualities as other sectors that retirees flock to. One such tech company is Microsoft (NASDAQ: MSFT ) . Here's why Microsoft is a high-quality dividend stock that retirees should consider.

Stability and dividends
Retirees often look to buy stock in large companies with rock-solid balance sheets. The stocks they favor often pay dividends as well, which are an important margin of safety for income investors. On these qualities, Microsoft definitely fits the bill. It's a megacap company, with a market capitalization in excess of $360 billion. Companies this large tend to have smoother, more predictable cash flows and stable profits. That helps insulate investors against sudden, dramatic crashes, which is a quality that retirees would surely appreciate.

Microsoft recently concluded its fiscal 2015 first quarter, and the company's results once again beat expectations. Microsoft posted excellent 25% revenue growth. That's because sales on both sides of its business, its software and hardware, are soaring. On the software side, the company continues to make huge progress in the cloud. Office 365 racked up 25% more subscribers just since the previous quarter. The Azure and Dynamics CRM offerings are also gaining traction and helped commercial cloud revenue soar 128% year over year.

On the hardware side, Microsoft's Xbox One, the newest iteration of its gaming console, continues to be a hit. Total Xbox sales doubled last quarter, and the Xbox One is now available in 28 geographic markets.

Microsoft generated $7 billion of free cash flow last quarter, according to S&P Capital IQ data. In addition, Microsoft holds a rock-solid balance sheet. At the end of the last quarter, Microsoft held $89 billion worth of cash and investments on its balance sheet. In such an advantageous position, Microsoft can afford to do a lot of different things with its prodigious cash flows.

Microsoft uses a significant portion of its free cash flow to pay dividends to shareholders. It offers a nifty 2.8% dividend yield, which beats the broader market's overall yield, as measured by the S&P 500 Index. In addition, because Microsoft generates solid growth and has so much cash on the books, the company can afford to raise its dividend on a regular basis. Microsoft increased its dividend by 11% in September. Over the past five years, the company has raised its dividend by 19% compounded annually. This level of dividend increase not only beats inflation, but it also results in significant income generation over time.

Microsoft is ideal for retirees
On the surface, many retirees might be reluctant to invest in a technology company, because of the volatility associated with the industry. But while memories of the 1999 technology bubble might still haunt investors, it's a new day for technology companies like Microsoft. That's because Microsoft is now a megacap company with stable operations. The company is reliably profitable and generates billions of free cash flow every quarter.

That means Microsoft can do what retirees in search of income value want most from their investments, which is to pay strong dividends. Microsoft pays a market-beating dividend and also increases its dividend regularly. Doing so allows its investors to receive solid income, and their purchasing power is protected as well, since Microsoft's dividend increases are well above the rate of inflation.

For all these reasons, retirees looking for a strong dividend stock to buy should consider Microsoft.

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Read This Before Buying IBM Stock

On Oct. 20, IBM (NYSE: IBM ) handed in a dud of an earnings report. The company badly missed analyst estimates on both the top and bottom lines, and the stock crashed 8% immediately after the quarterly numbers were released.

If there's a silver lining, it's that IBM is continuing the painful yet necessary step of divesting its hardware business. Although that is weighing on IBM today, these moves will pave the way for a brighter future. Here's what investors searching for value in IBM shares need to know now.

IBM's horrible quarter
IBM posted an operating profit of $3.68 per share on revenue of $22.4 billion in the most recent quarter. This came in well short of expectations for $23.37 billion in revenue and $4.31 per share of operating earnings. Management attributed the weak results to poor client orders in September.

At the same time, IBM continued to see progress in its core strategic initiatives. In short, the scourge of underperforming hardware businesses continued. IBM announced it would shed its semiconductor business to chipmaker GlobalFoundries. What's amazing about this deal is that IBM is actually paying GlobalFoundries $1.5 billion to take the money-losing semiconductor business off its hands.This says a lot about where IBM is in hardware. That being said, this is what IBM must do as it moves forward with its years-old turnaround efforts.

IBM has conducted a number of deals in recent years to divest itself of technology hardware. Investors might recall that earlier this year the company sold its x86 server business to Lenovo (NASDAQOTH: LNVGY ) for $2.1 billion.

These deals will help the company focus on other areas outside hardware, such as data analytics and services, which have actually been working in IBM's favor. This is especially true for IBM's cloud-based offerings, where revenue was up more than 50% through the first three fiscal quarters. For cloud delivered as a service, revenue soared 80% to reach a $3.1 billion annual run rate. Other pockets of strength included business analytics, in which revenue increased 8% through the first three quarters, year over year.

However, IBM made a significant change in its financial outlook that severely damages the company's visibility regarding future earnings, and makes investing in IBM based on valuation a very uncertain proposition.

IBM ditches its $20 EPS plan
Along with its earnings report, IBM revealed it could no longer keep its long-given promise to earn $20 per share in operating profit in 2015. This had been a linchpin of IBM's value proposition for investors during its poor performance over the past year.

That pledge had given value investors reason to buy the stock, based on IBM's conservative valuation. At $170 per share, IBM is valued at just 8.5 times forward earnings. This is about half the forward-looking valuation of the broader stock market, which makes IBM look very cheap.

Unfortunately, abandoning that forecast calls IBM's valuation prospects into question. This helps explain why the stock continued to sell off the day after earnings, even while the Dow Jones Industrial Average soared 200 points. Investors buying in at these levels don't have nearly the same confidence in IBM's turnaround prospects.

IBM will release a fresh 2015 outlook in January. The company said it expects full-year 2014 operating EPS to be down 2% to 4% off the previous year's comparable base of $16.64. While IBM stock still looks cheap, part of the valuation case depends on what earnings are going to look like next year. Investors need to pay close attention in the event IBM's new forecast comes in drastically below $20 in earnings per share.

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