3 things young investors must know about equity investment

Equities are the proverbial 'double edged sword' in the field of investment. Technically, they are dubbed as 'high risk, high return' assets. And the fact that they are 'high risk' automatically pushes them into the forbidden category for the ones who are planning to start off in the field of investment.

While it is true that one should not invest in anything, least of all equities, without understanding their dynamics, it is equally foolhardy to steer clear of an excellent investment avenue just because it seems too daunting or scary.
Equities are an essential component of any effective investment portfolio and young investors must not make a complete exclusion of this category if they want to create an efficient investment scheme for themselves. While it is not possible for us to delve into the dynamics of equity investment as a whole in a single article, we have culled out the three most important and basic things that a young investor must know and keep in mind when dealing with equities.

The best time to start is 'Now'- Of course the markets are volatile and the returns hardly look like what they did in the pre-recession era. But if you are waiting for the markets to improve and equity assets to prove their worth, it is probably the most disastrous investment error that you can make. Equities fluctuate directly with the markets and hence, a downward curve is never a bad time to invest in equities if you plan to remain invested for a long period of time. This way, you are assured of reaping the benefits of the inevitable upward swing in the market which succeeds the lean phase.

As far as young investors are concerned, time is their biggest asset and irrespective of market conditions, our standard advice for any young investor is to start investing as soon as possible. The longer the investment time-frame, the greater are the benefits that are reaped. And of course, a longer time frame also increases the risk appetite of the young investors who have the security of income generation to cushion any unexpected loss, hence giving their investments time to recover through varying market cycles.

Invest small, invest systematic- Bulk investing is almost never advisable, especially in the current market conditions. A systematic investment in small fractions ensures that your investment is evenly spread out, thus reaping the maximum benefits from the varying market conditions. SIPs or systematic investment plans offered by most funds are the best way to ensure that your money in simultaneously regulated and invested in a disciplined manner. Apart from the fact that this is an excellent way to discipline your savings, SIPs are also recommended to weather the changing market conditions efficiently.

Don't be conservative. Do diversify- Being conservative is a cardinal sin for young investors when it come to investment. The risk appetite of the young investors is their biggest strength and it should be utilized to the hilt.

However, this does not imply that the young investors should be careless with the way their investment is positioned in the market. It is crucial for them to understand the dynamics of various asset classes and then diversify the investment as per their long term financial goals. However, we reiterate, risk is an essential feature of a young portfolio and young investors should take the maximum advantage of high risk asset classes like equities. Even while investing in equities, there must be careful consideration of the nature of the equities (large cap, mid cap, small cap stocks/funds; diversified or sectoral funds etc.) and the investment must be distributed according to individual goals and capacity.

The young investors must understand that investment is not a sleep walking exercise or else, they would be confined to a portfolio that would be 'safe', but definitely not efficient. And once the young investors do get into the investment scene, they must be keen, aware and vigilant. The best way to ease oneself into equity investments is through mutual funds. (Read 3 Reasons Why Every Lay Investor Should Invest In Mutual Funds). They are relatively easier to understand and manage.

Irrespective of the mode of investment, young investors must understand the risks involved, always have an emergency corpus to deal with unexpected situations, in market or otherwise and be extremely aware and well researched on the asset classes they include in their portfolio. Investment in equity is hardly an avoidable proposition if one intends to get the maximum value for money and hence, young investors should delve into it with an aware gusto.

July 8: Earnings in the Limelight - Economic Highlights

Friday's strong jobs report shed a positive light on the labor market and likely increased the odds of Fed 'tapering' in the coming months. The bond market's move towards pricing in such an outcome has thankfully not become a problem for the stock market, at least not yet. We will know more later this week as minutes of the last FOMC meeting get released. But at this stage, the stock market is taking the 100 basis point jump in benchmark yields since early May in the stride.

Thankfully for us, the focus shifts from the Fed this week to the 2013 Q2 earnings season with the earnings reports from Alcoa (AA) later today and Yum Brands (YUM), J.P. Morgan (JPM) and Wells Fargo (WFC) later this week. Expectations remain low enough that companies wouldn't face much difficulty coming ahead of them. About two-thirds of companies beat earnings expectations in a typical quarter any way and there is no reason to think that the Q2 earnings season will be any different. My sense is that earnings growth and earnings surprises in the Q2 reporting cycle would be along the lines of what we saw in Q1.

Current expectations are for +0.4% growth in total earnings in Q2, down from +3.9% in early April, while total S&P 500 earnings increased by +2.8% in Q1. Nine of the 16 Zacks sectors are expected to show negative earnings growth in Q2. The growth picture in is even more underwhelming when Finance is excluded from the data. Outside of Finance, total earnings for the S&P 500 would be down -3.2% in Q2.

But even more significant than growth rates and surprises will be guidance. Guidance is always important, but it will likely be far more important this time around given the elevated expectations for the second half of the year. Total earnings are expected to be up +5.1% in 2013 Q3 and by +11.7% in Q4, giving us a second-half growth pace of +9.2% from the same period the year before, which comes after +2.7% earnings growth in the first half. Importantly, the growth expectations for the! second half are not due to easy comparisons – the level of total earnings expected in 2013 Q3 and Q4 represent new all-time high quarterly records.

My sense is that estimates need to come down in a big way. The market hasn't cared much in the recent past about negative revisions as aggregate earnings estimates have been coming down for over a year now. But if we are entering a post-QE world, as I believe we are, then it will likely be difficult to overlook negative earnings estimate revisions going forward. How the market responds to negative guidance over and the resulting negative revisions will tell us a lot about what to expect going forward.

Top Financial Stocks To Buy For 2014

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Top Financial Stocks To Buy For 2014: General Finance Corporation (GFN)

General Finance Corporation, through its subsidiaries, engages in the lease and sale of portable storage containers, portable container buildings, and freight containers. It offers mobile storage containers, including general purpose units, double pallet-wide high cube units, hazardous goods containers, and refrigerated containers; portable building containers, such as site offices and cabins, workforce accommodation units, luxury accommodation units, restroom blocks, blast-resistant units, and specialized office and infrastructure suites; and freight containers consisting of curtain-side containers, hi-cube containers, pallet-wide containers, side-opening door containers, and bulk containers. The company provides its products for various storage applications, including retail and manufacturing inventory, construction materials and equipment, documents and records, and household goods. It also leases and sells storage trailers and other storage structures, container office s, mobile offices, and modular buildings, as well as ancillary products comprising steps, furniture, portable toilets, security systems, and other items for use in connection with its equipment. In addition, the company offers delivery and installation, return and dismantle, and other site services. As of June 30, 2012, it operated a fleet of 23,855 mobile storage containers, 3,294 portable container buildings, and 9,348 freight containers. The company serves various industries, such as mining, road and rail, construction, moving and storage, manufacturing, transportation, defense, retail, utilities, education, and services sectors, as well as small and medium-size entities in New Zealand, North America, and the Asia-Pacific regions of Australia. General Finance Corporation was incorporated in 2005 and is headquartered in Pasadena, California.

Top Financial Stocks To Buy For 2014: Quintain Estates & Dev(QED.L)

Quintain Estates and Development plc invests in, develops, and manages real estate properties in the Great Britain and the Channel Islands. It undertakes urban regeneration projects for hotel, residential, office, retail, and commercial properties. The company also invests and manages various properties, which include health care properties, such as nursing and residential care homes for the elderly, specialist care homes for those with long term disabilities, private hospitals, and care villages; science parks; student accommodation properties; and commercial properties consisting of office properties, and industrial and retail assets. Further, it rents and leases properties, as well as engages in the property trading activities. The company was founded in 1992 and is based in London, the United Kingdom.

Best Blue Chip Stocks To Own For 2014: Flaherty & Crumrine/Claymore Preferred Securities Income Fd In (FFC)

Flaherty & Crumrine/Claymore Preferred Securities Income Fund Inc. is a closed-ended fixed income mutual fund launched and managed by Flaherty & Crumrine Incorporated. It invests in the fixed income markets of the United States. The fund employs quantitative analysis to create its portfolios. It benchmarks the performance of its portfolio against the Merrill Lynch 8% Capped DRD Preferred Stock Index, Merrill Lynch Hybrid Preferred Securities Index, and Merrill Lynch Adjustable Preferred Stock 7% Constrained Index. Flaherty & Crumrine/Claymore Preferred Securities Income Fund Inc. was formed on May 23, 2002 and is domiciled in the United States.

Top Financial Stocks To Buy For 2014: CorVel Corp.(CRVL)

CorVel Corporation provides medical cost containment and managed care services to manage the medical costs of worker?s compensation and auto claims in the United States. It offers network solutions, including bill review, PPO management, professional review, reimbursement, pharmacy, directed care, and clearinghouse services, as well as medicare solutions. The company also provides patient management services comprising claims management, case management, nurse triage, utilization management, vocational rehabilitation, life care planning, disability management, liability claims management, and auto claims management. It provides its services to insurance companies, third-party administrators, employers, and government agencies. The company was founded in 1987 and is based in Irvine, California.

Top Financial Stocks To Buy For 2014: Jefferson Bancshares Inc.(JFBI)

Jefferson Bancshares, Inc. operates as the holding company for Jefferson Federal Bank, which provides various financial services to consumers and businesses in Tennessee. It offers various deposits products, which include NOW accounts, money market accounts, regular savings accounts, Christmas club savings accounts, certificates of deposit, and retirement savings plans. The company?s loan portfolio includes one-to four-family residential loans, home equity lines of credit, commercial real estate and multi family loans, construction loans, land loans, and commercial business loans, as well as consumer loans, including loans secured by automobiles and savings accounts, loans on recreational vehicles and boats, debt consolidation loans, and personal unsecured debt. It also offers ATM, insurance, and safe deposit box services. The company operates its business through its main office, nine full-service branch offices, and two limited-service drive-through facilities located i n Hamblen, Knox, Sullivan, and Washington Counties, Tennessee. Jefferson Bancshares, Inc. was founded in 1960 and is headquartered in Morristown, Tennessee.

Top Financial Stocks To Buy For 2014: Templeton Dragon Fund Inc.(TDF)

Templeton Dragon Fund, Inc. is a closed ended equity mutual fund launched and managed by Templeton Asset Management Ltd. It invests in the public equity markets of China. The fund invests in stocks of companies operating across diversified sectors. It invests in value stocks of companies. The fund typically employs fundamental analysis focusing on factors like growth prospects, competitive positions in export markets, technologies, research and development, productivity, labor costs, raw material costs and sources, profit margins, returns on investment, capital resources, government regulation and management. Templeton Dragon Fund, Inc was formed on September 20. 1994 and is domiciled in Singapore.

Tenet Maintained at Neutral - Analyst Blog

We have retained our Neutral recommendation on Tenet Healthcare Corp (THC) as declining admissions, rising bad debt and increasing operating expenses are likely to weigh on the positives of the company. This healthcare services company currently carries a Zacks Rank #3 (Hold).

Why the Reiteration?

Tenet has managed to deliver positive earnings surprise in two out last four quarters with an average beat of 17.75%.

The company serves a large number of uninsured and underinsured patients with a high burden of co-payments and deductibles. Tenet thereby encounters a high level of uncollectible accounts and rising bad debts. This has led to an increase in the provision for doubtful debts over the years. The trend is expected to continue in the upcoming quarters owing to the constantly increasing number of uninsured patients.

Additionally higher operating expenses have also been a matter of concern for Tenet. The impact of industry-wide and company-specific challenges, including decreased volumes and demand for inpatient cardiac procedures along with high levels of bad debt, has led to the rise of operating expenses by almost 8% since 2007. Expenses are expected to surge until physician employment streamlines and patient fills out in their office practices, thus weighing on margins.

Nevertheless, Tenet's improved operating revenues have contributed generously to bottom line growth over the years. With an improvement in managed care pricing and a favorable shift in managed care payer mix the trend is expected to persist in the upcoming period. Moreover the pending acquisitions of Vanguard Health Systems (VHS) and Emanuel Medical Center are expected to widen the company's healthcare network and bolster revenues further.

Tenet also works to reduce its share count through share repurchases. Since 2011, the company has deployed $892 million towards share buyback, thus lowering the share count by nearly 30%. Going ahead, the planned share buyback is expected ! to enhance earnings per share and boost shareholder value further.

However, the rising debt levels and the overhang of litigation settlements are other matters that raise concern.

Other Stocks to Consider

Among others from the health care industry, Acadia Healthcare Company Inc. (ACHC) and VCA Antech Inc. (WOOF) carry a favorable Zacks Rank #2 (Buy) and appear impressive.

Very Weak Q2 Earnings Outside Finance - Ahead of Wall Street

Friday, July 19, 2013

With nothing on the economic calendar and the Bernanke testimony now behind us, the market today will likely give an undivided attention to the earnings season. The big negative surprises from Google (GOOG) and Microsoft (MSFT) will put a spotlight on the weak earnings picture of this key sector in today's session. But having seen Q2 results from more than 20% of the S&P 500 members that combined account for more 30% of the index's total market capitalization, we have a good enough sample of Q2 results to start judging this earnings season as well.

Total Q2 earnings are on track to reach a new all-time quarterly record and the aggregate growth rates and beat ratios are broadly in-line with what we saw in the previous quarter. But results from the Finance sector are making the aggregate numbers look better than they actually are. It's not so reassuring outside of Finance and results from the Technology sector tell a better story of what is really unfolding on the earnings front.

No business can afford to sit on its past laurels and hope for a better future, but the issue is particularly pronounced in the Technology space where innovations and new technologies come through and disrupt the existing order of business. We see this issue at play in both the Google and Microsoft earnings misses. Microsoft's problems are partly company specific, a function of management's inability to follow through efficiently on any major initiative. But a big contributor to the company's woes have resulted from the steady erosion of PC due to tablets and other mobile platforms. Microsoft isn't suffering alone – from chip makers like Intel (INTC) and Advanced Micro Devices (AMD) to PC makers like Hewlett-Packard (HPQ) and Dell (DELL) - it has plenty of company on this front.

Google is facing the same issue. After all, the erosion of Google's search-ad prices (the so-called cost per click or CPC) is a direct function of traffic migration from the deskto! p to mobile platforms. Google may be able to offset its CPC issue with increased volume, but Intel, Microsoft and others have to fundamentally realign their businesses to succeed.

Beyond these structural and secular issues is the cyclical problem of low demand for the sector's products and services resulting from weak global capital spending trends. Hard to envision the sector's fortunes improving without a positive shift in enterprise spending. And keep in mind that unlike the banking space which has more of a domestic orientation, the Technology market is far more global in nature. The outlook for the U.S. economy may be improving, but hardly anyone is betting on the global economy getting better in the near to medium term.

So, how is the Technology sector's results shaping up? They are not very good, but the underperformance wasn't entirely unexpected.

As of this morning, total earnings for the 44.8% of the sector's total market capitalization that have reported results are down -8.1% from the same period last year on +3% higher revenues, highlighting the sector's margin challenges. This is materially weaker growth performance than what we saw from the same group of companies in Q1 or over the preceding four quarters.

The Scorecard for the broader S&P 500 as of this morning shows Q2 results from 103 S&P 500 companies or 20.6% of the index's total membership that combined account for 31.8% of its total market capitalization. Total earnings for these 103 companies are up +8.1%, with 61.2% beating earnings expectations. On the revenue side, we have a growth rate of +4.6% and 44.7% are coming ahead of top-line expectations. The earnings and revenue growth rates seen thus far are broadly in-line with what we have seen from the same group of 103 companies in recent quarters.

The Finance sector is helping hide a lot of weakness in the aggregate earnings picture. Strip out the strong growth reported by the Finance sector and total earnings growth! for the ! remaining S&P 500 companies turn negative – down -2.9%. This is weaker than what these same companies reported in Q1. There are few positive surprises outside of Finance as well, with the earnings and revenue beat ratios outside of Finance tracking below Q1's levels. Bottom line, the earnings picture outside of Finance are very weak and perhaps inconsistent with a stock market at all-time record levels.

Sheraz Mian
Director of Research





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Top Portfolio Products: iShares Rolls Out Commodity-Trust ETF

New products introduced over the last week include the iShares Dow Jones-UBS Roll Select Commodity Index Trust.

In addition, Emerging Global Advisors said it has launched the EGShares EM Dividend High Income ETF, and Edward Jones is in the process of introducing its own fixed-income mutual fund to clients using its fee-based platform.

Here are the latest developments of interest to advisors:

1) iShares Launches iShares Dow Jones-UBS Roll Select Commodity Index Trust

BlackRock, Inc. (BLK) announced recently that its iShares ETFs business has launched the iShares Dow Jones-UBS Roll Select Commodity Index Trust (CMDT). It is the first ETF based on the Dow Jones-UBS Roll Select Commodity Index, which currently tracks 22 commodities futures contracts, including agriculture, energy and metals, and is designed to minimize the costs of closing expiring futures contracts and replacing them with new ones.

CMDT accesses commodities exposure through commodity index futures contracts. When the contracts are close to expiring, the fund replaces the contracts with new ones in a process known as “rolling.” If the fund is rolling contracts for costlier later-dated contracts, then the commodity market is in “contango,” which may detract from performance. If the later-dated contracts are less expensive than the contracts held by the fund, then the commodity market is in “backwardation,” which may add to performance.

The index on which the ETF is based, a version of the Dow Jones-UBS Commodity Index, aims to mitigate the effects of contango on performance. For each commodity, the index rolls into the futures contract that shows the most backwardation or least contango, selecting from those contracts with nine months or fewer until expiration.

2) Emerging Global Advisors Launches EGShares EM Dividend High Income ETF

Emerging Global Advisors (EGA) announced Thursday that it has launched the EGShares EM Dividend High Income ETF (EMHD), an ETF designed for income-oriented investors. EMHD tracks the FTSE Equal Weighted Emerging All Cap ex-Taiwan Diversified Dividend Yield 50 Index, which has a dividend yield of 8.8% (as of 7/31/2013) and screens for emerging market companies that have consistently generated high income for their shareholders.

EGA and FTSE collaborated to design an index that seeks to provide a higher dividend payout relative to other widely used EM dividend indices. The equally weighted index measures the stock performance of the 50 highest-yielding, liquid EM equity securities in its universe, excluding the least capitalized dividend-paying companies. As a result, the index is designed to deliver a broad basket of securities across EM countries that are screened for high dividend yield and quality.

3) Edward Jones ‘Not Altering Direction of Ship’ With Proprietary Fund

Edward Jones said Wednesday that it was introducing its own fixed-income mutual fund to clients using its fee-based platform, a move that the St. Louis-based broker-dealer says represents a course correction rather than a radical shift in corporate strategy.

“We are not altering the direction of the ship and are putting the needs of our clients first,” said Steve Seifert, principal with the firm’s investment-advisory operations, in an interview with ThinkAdvisor. “As we continue to grow and look for the best ways to perform for our clients, this is an important step forward for Edward Jones.”

Read the full story at ThinkAdvisor.

***

Be sure to read the Aug. 10 Portfolio Products Roundup.

BlueFire Drilling Technology Poised for Gains (OTCMKTS:BLFR, OTCMKTS:CLNO)

BlueFire Equipment Corporation (BLFR)

Today, BLFR has surged (+5.08%) up +0.030 at $.620 with 208,022 shares in play thus far (ref. google finance Delayed: 11:01AM EDT July 19, 2013).

BlueFire Equipment Corporation previously reported field testing of its proprietary polycrystalline diamond cutter (PDC) drill bits has exceeded company expectations.

BlueFire's exclusive technology provides the potential for higher rates of penetration (ROP) and longer bit runs in hard rock formations and shales.

BlueFire Equipment Corporation Chairman and CEO William A. Blackwell said, "U.S. drilling companies continue to seek out and employ new technologies to improve performance and effectiveness. Culminating years of research and development, BlueFire has taken a ground up approach to redesigning the PDC bit to help meet these needs."

BlueFire Equipment Corporation (BLFR) 5 day chart:

Cleantech Transit, Inc. (CLNO)

Cleantech Transit, Inc. (OTCMKTS:CLNO) (www.cleantechtransit.net ) through its Discovery Carbon subsidiary, develops emissions offset strategies for companies, municipalities, and countries. Today, CLNO has shed (-8.08%) down -0.021 at $.239 with 221,075 shares in play thus far (ref. google finance Delayed: 11:32AM EDT July 19, 2013), but don't let this get you down.

CLNO's daily range is at ($.26 – $.22) thus far and currently at $.239 would be considered a (+21627.27%) gain above the 52 wk low of $.0011. The stock is up +0.23 ( +10354.55%) since the concerning dates of January 22, 2013 – July 19, 2013. +10354.55% is the 6 month high and rightly so.

Cleantech Transit, Inc. (CLNO ) 5 day chart:

The Budgeting Can Kicks Washington Back

In an unusual display of fiscal rectitude for Washington, the can that politicians are always kicking down the road may finally be kicking back with the launch of a campaign to push for honest numbers in government budgeting.

It’s not just the bipartisan legislation that Sens. John Thune, R-N.D., and Tim Kaine, D-Va., introduced two weeks ago in the Senate but the campaign surrounding it, including a veritable torch and pitchfork-wielding mob of prominent economists and former government officials endorsing the bill.

“You never see 11 Nobel economists endorse something—never, never, never, never, never,” Boston University economist Laurence Kotlikoff (left) told ThinkAdvisor in an interview.

The busy academic, who has supplemented his teaching, book and academic journal writing with a maverick presidential campaign last year, drafted the aptly named Intergenerational Financial Obligations Reform (INFORM) Act. U.C. Berkeley economist Alan Auerbach edited the bill’s language.

The legislation would mandate detailed cost analyses of congressional and presidential spending initiatives. Specifically, it would institute what is known in economics as fiscal gap and generational accounting, which include future financial obligations that are currently off the books.

“Have you seen those greenish-yellow Social Security checks your mother gets every month?” Kotlikoff asked. “Well not a penny of it is recorded as official debt.”

The Boston University economist has been writing for 30 years on the problems attendant on government commitments which are mostly off the books. “Official debt is only one-twentieth of our true obligations,” he warns, calculating our true debt today weighs in at $222 trillion.

If the current generation does not accept higher taxes or reduced benefits, they will be in effect shifting the cost of their living standards onto a less affluent younger generation.

Kotlikoff’s Inform Act website has tabs for Nobel Prize-winning economists such as Kenneth Arrow and William Sharpe, former government officials like George Shultz and Michael Boskin, hundreds of economists and finance professors like Jeffrey Sachs and Kent Smetters and other supporters such as columnist Scott Burns and broker-dealer executive and ThinkAdvisor contributor Bob Seawright.

The purple-colored website—Kotlikoff’s intent is to move beyond red (Republican) or blue (Democrat)—seeks citizen endorsers as well, prior to a full-page New York Times ad to run some time next month.

Kotlikoff is optimistic about the measure’s chance of passage, saying a co-sponsor from each party will soon be introducing a House version of the Senate bill.

“The government has spent six decades lying about the deficit,” Kotlikoff says, referring to promises backed by words but not deeds.

“No matter what labeling convention you use, economics is about real things and linguistics is about words,” he says. “This [bill] is the economics profession speaking with almost one voice,” he adds, citing the large number of economics profession endorsers.

Kotlikoff says there a number of technical issues—involving how the U.S. will account for future expenses—that will complicate implementation of the bill. These expenses will be “very difficult to measure but we have to try.”

The Boston University economist credits a nonpartisan grass roots group of young Americans called The Can Kicks Back, which—“with no money” initially— started lobbying for generational equity starting in November of last year.

Some nonpartisan philanthropists kicked in funds, brought Kotlikoff in to draft a bill (“It took months to get the language right”) and the group attracted the interest of “Senators who really care about the country,” Kotlikoff says, adding “this is democracy in action.”

If passed, the Inform Act would substitute the current convention of looking at the budgetary impact of spending over 10 years with a 75-year and “infinite horizon” fiscal gap and generational accounting analysis.

Such analyses were performed in the first Bush and Clinton administrations, but were then nixed, though the Social Security Trustees Report and the IMF still utilize this approach to show how liabilities are transferred intergenerationally.

Do all dividend paying companies make a good investment

There are two ways in which an investor can profit from his investment in stocks . First is through price appreciation, which we all know can remain depressed for a long duration even if the stock fundamentals are strong enough. Second way is to profit through dividends.

Dividends, unlike stock prices, do not depend on the whims and the fancies of the investor community at large. If the business is performing well and generating cash in excess of what is required for growth, dividends are generally paid out irrespective of the stock price movement .

As mentioned in an earlier article, a company can do two things with the profits that it earns. It can either invest it back into the company (into reserves and surplus) and/or pay out an amount as dividend. As such, dividend payout depends a lot on the cash (after meeting its capital expenditure and working capital requirements) or 'free cash' a company generates during a year. 

It quite often happens that many companies will not need to reinvest much into the business (in spite of having high return on investments), purely because their managements don't see the need for it. A classic example would be most of the companies from the FMCG sector. The FMCG sector is a slow yet steady growing industry. Most of the companies garner high return on their investments in this sector. But yet they choose to pay out huge dividends as growth levels are generally steady in nature and also because the capex requirements are on the lower side.

Now if we compare this to say a relatively fast growing industry such as telecom, the situation is quite different. We shall explain this with the help of an example. Telecom major, Idea Cellular has not paid any dividend till date since it is reinvesting the profits back into its business to roll out services across the country.

Do all dividend paying companies make a good investment?

The answer is understandably no. This is where the aspect of 'dividend yield' comes into picture. Dividend yield is calculated by dividing the amount paid out as dividend within a year by the company's share price. An example will help in understanding this better.

A company's stock is trading at a price of Rs 100 and during FY12 it has paid a dividend of Rs 5 per share in total. This stock would be having a dividend yield of 5% at the current price. Assuming that the company is growing steadily and is expected to pay dividends in the coming year, the investor could have surety of earning at least a 5% return on his investment.

However, it may be noted that one should not purely go out and buy a stock which has a high dividend yield as dividends are generally not fixed in nature. Therefore, understanding a company's growth plans, future capital requirement, expected free cash flow generation is important. It could be possible that a company may not be in a position to pay dividends or it might pay lower dividend in the future (as compared to earlier years) due to various reasons- an unprecedented loss, higher capex requirements, diversification into newer areas, amongst others.

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Top Financial Companies To Buy For 2014

LONDON (AP) -- Unemployment across the 17 EU countries that use the euro hit another record high in April -- and appears to be on course to hit 20 million this year in what would be another gloomy landmark for the currency bloc.

Eurostat, the European Union's statistics office, said Friday that the unemployment rate rose to 12.2 percent in April from the previous record of 12.1 percent the month before. In 2008, before the worst of the financial crisis, it was around 7.5 percent.

A net 95,000 people joined the ranks of the unemployed, taking the total to 19.38 million. At that pace, unemployment in the currency bloc -- which has a population of about 330 million -- could breach the 20 million mark by the end of the year.

Eurozone economies have been suffering because their governments are trying to improve public finances through aggressive spending cuts and tax increases. The problem is they've done it at a time when much of the private sector has been unable to plug the gap in activity left by the retreating state, unlike in the U.S., which has opted for a more gradual approach to debt reduction.

Top Financial Companies To Buy For 2014: American Independence Corp.(AMIC)

American Independence Corp., through its subsidiaries, engages in the health insurance and reinsurance businesses in the United States. The company provides specialized health coverage and related services to commercial customers and individuals. It offers various insurance products comprising medical stop-loss, fully insured health and dental, and short-term statutory disability. American Independence Corp. offers its products and services through managing general underwriter and agency subsidiaries, independent brokers, producers, and agents. The company was incorporated in 1956 and is headquartered in New York, New York. American Independence Corp. operates as a subsidiary of Independence Holding Co.

Top Financial Companies To Buy For 2014: Primo Water Corporation(PRMW)

Primo Water Corporation, together with its subsidiaries, provides three- and five-gallon purified bottled water, self-serve filtered drinking water, water dispensers, and carbonating beverage appliances in the United States and Canada. The company?s Primo Water segment sells multi-gallon purified bottled water and self-serve filtered drinking water vending service through retailers in the United States and Canada. It offers its services through point of purchase display racks or self-serve filtered water vending displays, and recycling centers. Its Primo Dispensers segment sells water dispensers that are designed to dispense Primo and other dispenser-compatible bottled water. This segment engages in dispensers sales primarily through retailers. The company also offers home beverage appliances, flavor concentrates, carbon dioxide cylinders, and accessories used with the appliances to make various cold beverages. As of December 31, 2011, its exchange and refill services wer e offered in each of the contiguous United States and in Canada at approximately 23,600 combined retail locations. Primo Water Corporation was founded in 2004 and is headquartered in Winston-Salem, North Carolina.

Advisors' Opinion:

• [By Roberto Pedone]

  Primo Water (PRMW) is a provider of multi-gallon purified bottled water, self-serve filtered drinking water, water dispensers and carbonating beverage appliances sold through major retailers in the U.S. and Canada. This stock closed up 9.6% to $2.16 in Thursday's trading session.

  Thursday's Range: $1.97-$2.20
  
  52-Week Range: $0.69-$2.20
  
  Thursday's Volume: 329,000
  
  Three-Month Average Volume: 145,397

  From a technical perspective, PRMW ripped higher here right above some near-term support at $1.85 with heavy upside volume. This stock broke out above some near-term overhead resistance at $2.14 and into new 52-week-high territory, which is bullish technical price action.

  Traders should now look for long-biased trades in PRMW as long as it's trending Thursday's low of $1.97 and then once it sustains a move or close above its new 52-week high at $2.20 and above some past resistance at $2.28 with volume that hits near or above 145,397 shares. If we get that move soon, then PRMW will set up to enter new 52-week-high territory, which is bullish price action. Some possible upside targets off that move are its next major overhead resistance levels at $3 to $3.11.

Top 5 High Tech Stocks To Own Right Now: World Heart Corporation(WHRT)

World Heart Corporation, together with its subsidiaries, focuses on the development and commercialization of implantable ventricular assist devices (VADs) primarily in the United States. The VADs are mechanical assist devices that supplement the circulatory function of the heart by re-routing blood flow through a mechanical pump allowing for the restoration of normal blood circulation for the treatment of patients with severe heart failure. The company?s products in development include Levacor, a rotary blood pump, for a range of circulatory support indications; Minimally Invasive VAD, a miniature maglev rotary pump, which provides circulatory support in adult patients in an earlier stage of heart failure, as well as late-stage heart failure patients; and Pediatric VAD, an axial rotary VAD, for use in newborns and infants. World Heart Corporation was founded in 1996 and is headquartered in Salt Lake City, Utah.

Guess Inc. Retained at Neutral - Analyst Blog

We reaffirm our Neutral recommendation on Guess Inc. (GES), a specialty retailer of fashionable and contemporary apparel and accessories for men, women and children following an appraisal of its first quarter 2014 results.

Though we are optimistic about the turnaround strategies undertaken by the company, soft top line results in the first quarter of fiscal 2014 and the lowered fiscal 2014 earnings guidance keep us on the sidelines. Further, the tough retail conditions are expected to prevail throughout 2014.

Why the Reiteration?

On May 31, 2013, Guess? reported first-quarter fiscal 2014 earnings of 14 cents per share, which beat the Zacks Consensus Estimate of 8 cents by 75% and exceeded the company's guidance of 5 cents to 10 cents backed by its initiatives to increase sales.

However, earnings slipped year over year due to higher product cost leading to a rise in the operating expenses. Moreover, revenues in the quarter slipped 5.2% to $548.9 million due to lower sales at the North American retail and European segments.

The significant decline in total sales from the year-ago period was due to the slower pace of economic recovery and lower spending by domestic customers. Transactions per store declined, although traffic was on the rise, implying an increase of window shoppers.

The company has, however, taken several initiatives in order to improve sales. It has embarked on a three-pronged approach to improve the performance of its retail business. Firstly, it is enhancing its denim stocks to revamp the denim heritage of the company, which is the essence of the collection of Guess?.

Secondly, the company is shifting its focus from higher margin products and is offering its stocks at entry point prices in an attempt to attract the young generation. Thirdly, Guess? is geared to change its stocks more often so as to reflect the current fashion trends.

Following the release of first-quarter 2014 earnings, the Zacks Consensus Estimate for fisca! l 2014 fell by 8.0% to $1.84 per share. For fiscal 2015, however, the estimate went up by only 1.0% to $2.12 per share.

The company narrowed its guidance for fiscal 2014 following the first quarter earnings results. For 2014, the company expects earnings in the range of $1.70 to $1.90 per share, which is narrower than the band of $1.70 to $1.94 per share as announced previously. The company gives a conservative outlook due to the prevailing tough retail conditions and higher product costs

Other Stocks to Consider

Guess? carries a Zacks Rank #3 (Hold). Other diversified retailers worth considering include Restoration Hardware (RH), Dollar Tree, Inc. (DLTR) and Ross Stores (ROST). While Restoration Hardware carries a Zacks Rank #1 (Strong Buy), Dollar Tree and Ross Stores carry a Zacks Rank #2 (Buy).

Investing Lessons - Petroplus Holdings (PPHN.SW)

To become a better investor, one has to keep learning from the ideas that went wrong. Sometimes, an investor may put off his better judgement and invest in a stock for some quick bucks because he "knows" the way the stock price behaves. He might think that the company is not going bankrupt and will recover from the slump that the general market is in. I will describe one such company which has made me grapple with myself quite a bit. I am happy to report that even though some serious profits could have been made by investing in this particular stock for the short term, I did not invest in it because of some reservations I had about the business and its liquidity. Last December, I even removed this company from my watch list because I would look at the price and think, "Oh! If only I had bought some at $6 I would have doubled my money in a month!"

If my memory serves me right, I first saw Petroplus Holding (yahoo quote PPHN.SW) in February 2010, when it had dropped from CHF23 in Jan 2010 to CHF16 in Feb 2010. A 30% drop and in comparison, the Swiss Leader Index had only dropped 7%. I did a quick check of the company, what it does and how its balance sheet looks.

The Company

Petroplus Holding is Europe's largest independent oil refiner by capacity. It has refineries in UK, Belgium, France, Germany and Switzerland, with sales of nearly $21 billion. In 2006, it had made earnings of $9.71 per share and traded in the CHF 67-80 range. The operating profit in 2010 was $155.4 million. The key numbers from the annual report are given below.

If you look at the numbers, it does not seem like Petroplus will go bankrupt. The current ratio is above 1, and the debt-to-equity ratio is less than 1 and is improving. Furthermore, at CHF24 a share it was greater than $2 billion company and hence a safer bet than small caps. With its improving EPS it seemed like the company is turning around a corner and could be a very good turnaround play. The refining margins were better and the oil d! emand was recovering.

[ Enlarge Image ]

Let us quickly run through the investment thesis here.

Financial risk

The company's debt and the maturity profile is not out of order either. As you see, until 2013 the company does not need to make major payments to its creditors and hence is quite safe till then.

[ Enlarge Image ][ Enlarge Image ]

Insider Holdings

The chairman of the board, Thomas D. O'Malley, owns 3.97% of the shares outstanding as of 2010.

Management Compensation

This is a group of 14 people and they were compensated $18.6 million in the fiscal year 2010. The management was not treating the company like their wallets.

My decision

I decided not to invest in the company. There were three reasons for this. One, I did not understand the refining business. I mean, I know what the business is but I don't have a good idea about how the margins work. I tried to educate myself but it seemed like a bad business with very low gross margins. Two, I did not like the business. There was no defensible moat. No one cares where the oil comes from, the cheaper the better. Three, the total equity was $2 billion and the total liability was $4.7 billion. I had randomly decided that I would not invest in a stock with total liability/equity was greater than 2, however attractive it may look (I have broken this rule a few times in "expert" recommendations and it has turned out well so far).

Let's lo! ok at the! share price graph during February-April 2010.

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And in April I thought that I missed a good opportunity to capitalize on the "value" of this investment. In any case, then came the sovereign debt crisis in Greece and then the Macondo Well oil leak. Down the market went and Petroplus with it. I was again considering pulling the trigger.

[ Enlarge Image ]

At around CHF10 I was asking myself if the stock had gone too far down and at some point the risk of balance sheet will be worth taking from a pure value point of view. I mean, how low can it go ? The price/sales ratio at this point was 0.07 which means that even with a paper thing 0.7% net margin the company will have a P/E of 10! In February 2011 the company quickly doubled from a low of CHF9. And then it went down slowly as the 2010 results were also a loss, but better then the results of 2009.

The company improved the balance sheet (not by much, as you can see from the details in the key figures). And then came the debt ceiling debate with the usual Greek problems and at CHF4.12, I fought with the idea that I should buy some. This decision was also due to the fact that in October 2011 several of the insider buy transactions were reported. You can see in the table below that the insiders bought almost CHF700,000 worth of shares at an average price of more than CHF5.5. This was a good buy signal that the insiders thought that the company had gone too far down and was quite cheap.

[ Enlarge Image ]

Date	Price/Share (CHF)	Shares	Amount
08.08.2011	6.38	12,574	80,222
08.08.2011	5.97	15,000	89,550
10.08.2011	5.994	5,000	29,972
18.08.2011	5.8	66,000	383,103
22.08.2011	5.4	10,000	54,000
22.08.2011	5.7	20,000	114,500

At this point though, I had several less risky investment options because the market was down and several good quality companies were trading at discount. In particular, I bought Swiss Re (up 25%), Zurich Financials (up 25%), Transocean (up 8%) and ABB (up 10%). Also, at this point I had decided not to buy bad companies (bad businesses I mean) and so I stayed away from Petroplus and even removed it from my watch list. This was the end of my actively following the company.

I have a RSS feed for BBC business news and I saw the article on Jan. 24, 2012' about Petroplus' insolvency filing. And I was happy that I stayed away from this company. The stock at the moment trades at CHF0.4 and had traded as low as CHF0.18.

Will Sirius XM Radio See A Strong Bid?

With shares of Sirius XM Radio (NASDAQ:SIRI) trading around $3.46, is SIRI an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Sirius XM Radio broadcasts its music, sports, entertainment, comedy, talk, news, traffic, and weather channels in the United States on a subscription fee basis through its two satellite radio systems. Subscribers can also receive its music and other channels over the Internet, including through applications for mobile devices. Audio entertainment has always pleased consumers and is a medium that is growing in popularity. Sirius XM Radio is looking to expand its audio entertainment channels to every audio medium possible, which will surely translate to rising profits. As consumers continue to adopt this technology, look for Sirius XM Radio to gain market share.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

T = Technicals on the Stock Chart are Strong

Sirius XM Radio stock has been on a strong surge higher since establishing lows during the 2008 Financial Crisis. The stock is now coasting higher and sees no signs of slowing. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Sirius XM Radio is trading slightly above its rising key averages which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Sirius XM Radio options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Sirius XM Radio Options	37.89%	66%	62%

What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
July Options	Flat	Average
August Options	Flat	Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Improving Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Sirius XM Radio’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Sirius XM Radio look like and more importantly, how did the markets like these numbers?

	2013 Q1	2012 Q4	2012 Q3	2012 Q2
Earnings Growth (Y-O-Y)	0%	104.8%	-50%	1500%
Revenue Growth (Y-O-Y)	11.52%	13.87%	13.74%	12.51%
Earnings Reaction	5.86%	1.26%	0.35%	4.54%

Sirius XM Radio has seen improving earnings and revenue figures over the last four quarters. From these numbers, the markets have been upbeat about Sirius XM Radio’s recent earnings announcements.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

P = Poor Relative Performance Versus Peers and Sector

How has Sirius XM Radio stock done relative to its peers, Pandora (NYSE:P), Cumulus Media (NASDAQ:CMLS), CBS (NYSE:CBS), and sector?

	Sirius XM Radio	Pandora	Cumulus Media	CBS	Sector
Year-to-Date Return	14.88%	56.32%	34.83%	26.99%	28.34%

Sirius XM Radio has been a poor relative performer, year-to-date.

Conclusion

Sirius XM Radio provides a wide variety of audio entertainment channels to excited consumers in the United States. The stock has been on strong surge higher over the last several years and seems to be poised to continue this trend. Over the last four quarters, earnings and revenue figures have improved, which has really helped maintain investors upbeat about the company. Relative to its peers and sector, Sirius XM Radio has been a poor performer, year-to-date. WAIT AND SEE what Sirius XM Radio does this coming quarter.

4 Stocks Making Moves

The following video is from Tuesday's Investor Beat, in which host Chris Hill and analysts Jason Moser and Matt Koppenheffer dissect the hardest-hitting investing stories of the day.

Dollar General's (NYSE: DG  ) first-quarter profits rose rose 3%, but the retailer cut guidance for the full year. Business market software maker ExactTarget (NYSE: ET  ) rose more than 50% after Salesforce.com (NYSE: CRM  ) agreed to buy the company for more than $2.3 billion. Zynga (NASDAQ: ZNGA  ) held firm after shares tanked on Monday in the wake of the company announcing it's cutting 18% of its staff. And IBM (NYSE: IBM  ) buys a company to better compete in the cloud computing space. In this installment of Investor Beat, our analysts discuss four stocks making big moves.

Zynga's post-IPO performance has been dreadful, and investors are beginning to wonder if it's "game over" for this newly public company. Being so closely tied to the world's largest social network can be a blessing and a curse. You can learn everything you need to know about Zynga and whether it's a buy or a sell in our new premium research report. Don't even think about picking up shares before you read what our top analysts have to say about Zynga. Click here to access your copy.

The relevant video segment can be found between 2:21 and 5:21.

Why Rigel Pharmaceuticals Shares Were Shellacked

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 Rigel Pharmaceuticals (NASDAQ: RIGL  ) , a clinical-stage small molecule drug company focused on inflammatory and autoimmune disorders, dropped as much as 21% after the company resumed full responsibility for its rheumatoid arthritis pill, Fostamatinib, and reported topline data from two late-stage studies involving the drug.

So what: It probably wouldn't have been such a bad day had licensing partner AstraZeneca (NYSE: AZN  ) decided that, based on the data from the two Oskira studies, and previous clinical findings, it would take a $140 million charge and return all rights of Fostamatinib back to Rigel. Essentially, AstraZeneca feels there's little reason to waste additional research funds since it wasn't planning to seek a new drug application filing anyway based on the data. The actual top-line data demonstrated a statistically significant ACR20 response rate at 24 weeks in the 100mg dosage group in both trials; however, the treatment group receiving the once-daily 150mg dose following four weeks at 100mg in the Oskira-3 trial didn't show a statistical significance.

Now what: Rigel has been put between a rock and a hard place. It has plenty of statistical data to be combed through and a drug with a potential benefit for rheumatoid arthritis sufferers, but probably not enough to get approved by the Food and Drug Administration, nor to compete against AbbVie's blockbuster Humira or Pfizer's newer medication, Xeljanz. With no drugs currently approved, it appears as if Rigel is going to burn more cash as it decides what next to do with Fostamatinib. For Humira, it means continued smooth sailing, at least until its patents run out in late 2016, and for Xeljanz it likely means its portion of the pie will grow unabated as well. As has been the case all along, I'd suggest keeping a good distance away from Rigel.

Craving more input? Start by adding Rigel Pharmaceuticals to your free and personalized watchlist so you can keep up on the latest news with the company.

Is there life after Humira for AbbVie?
In the pharma business, great success comes with a caveat. AbbVie is a perfect example, as investors in the new company are left wondering what the future holds once the company's golden goose, Humira, is cooked. The Fool's brand new premium report on the company answers the high-profile questions that AbbVie investors are asking. Simply click here now to claim your copy today.

NetSuite to Offer $270 Million in Convertible Notes

NetSuite  (NYSE: N  )  plans to offer $270 million worth of its convertible senior notes due 2018 to qualified institutional buyers, with the initial purchasers getting an option to buy up to $40 million more solely to cover overallotments. 

While the initial conversion rate, interest rate, and certain other terms of the notes still need to be worked out between NetSuite and the institutional buyers, when the notes are eventually issued they will be senior unsecured obligations of NetSuite that will pay interest semiannually and will mature on June 1, 2018, unless first repurchased or converted.

If the note holders want to convert the notes before March 1, 2018, certain conditions would first need to be completed. Upon conversion, however, holders will receive cash, NetSuite stock, or a combination of the two at NetSuite's election. Yet holders of the notes will have the right to require NetSuite to repurchase all or some of their notes at 100% of their principal, plus any accrued and unpaid interest, if certain events occur. Those events were not specified in the press release announcing the offering.

NetSuite intends to use the net proceeds from the offering for working capital and other general corporate purposes, including acquisitions of and investments in complementary businesses, products, services, technologies, and capital expenditures. It also anticipates using a portion of the proceeds to buyback as much as $30 million of its shares either through privately negotiated transactions or on the open market.

NetSuite notes that by buying back its stock, it may increase the value of its stock or limit a decrease in it. NetSuite's shares closed at $89.52 on May 28.

James River Coal: Updated Bankruptcy Risk Assessment

We first wrote about James River Coal (JRCC) in mid-April and assessed its chances of bankruptcy based on conditions at that point. The conclusion was that James River Coal's future was mostly dependent on the price of metallurgical coal. A moderate to strong recovery in metallurgical coal prices would likely make the shares worth several times the $1.53 per share price that it traded at then. However, if the price of metallurgical coal remained flat, then James River Coal would face significant bankruptcy risk in 2014.

Developments in metallurgical coal pricing since that article have increased James River Coal's bankruptcy risk, although management appears to be doing an excellent job in minimizing expenditures. If the metallurgical coal market continues to struggle for much longer, cost management will not be enough, and it will be necessary to seek out additional funding, which could be extremely challenging for James River Coal to secure.

In advance of James River Coal's Q2 FY2013 earnings report, we are going to go through an updated look at its bankruptcy risk.

Metallurgical Coal Pricing

The metallurgical coal market has had a tough run of things recently. Signs of recovery in early 2013 have given way to further price declines over the last few months, with spot prices dropping below September 2012 lows and benchmark pricing for Q3 being settled at the lowest level since 2009.

Here's a look at the average price that James River Coal managed to get for its metallurgical coal recently. Given the deterioration in the market during Q2 and the benchmark pricing settlement for Q3. James River Coal is likely to get pricing similar to Q1 FY2013 levels at best during those two quarters.

Period	Q1 FY2012	Q2 FY2012	Q3 FY2012	Q4 FY2012	FY 2012	Q1 FY2013
Met Coal Revenue Per Ton	$141.72	$128.85	$114.30	$107.33	$121.54	$91.35

Thermal Coal Pricing

As mentioned in the previous article, James River Coal has committed and priced its thermal coal production for 2013. As for 2014, it has only priced and/or committed a small volume of thermal coal, as it is waiting for the thermal coal market to recover. The thermal coal market was showing signs of recovering earlier in the year, but has recently declined again as natural gas prices retreated below the $4 per BTU mark. We probably will not see any major movements in the price of thermal coal until the late fall/winter, when cold weather may cause substantial drawdowns of natural gas inventory, increasing the price of natural gas, and creating more demand for thermal coal.

However, the bulk of James River Coal's thermal coal is CAPP coal, which is only said to be competitive with natural gas if natural gas prices reach the $4.50 to $5.00 per BTU mark. Current 2014 contract prices for CAPP coal are well below the $80+ per ton prices that James River Coal is achieving for 2013, and it will likely require an extremely cold winter for natural gas to consistently stay above the $4.50 mark. The last time pricing reached above $4.50 for consecutive months was back in early 2010. It is therefore unlikely that James River Coal will be able to achieve 2014 thermal coal pricing that is above 2013 levels.

Projected Liquidity After Q3

We are going to assume that James River Coal's EBITDA is essentially zero during Q2 and Q3. This is similar to the $581k adjusted EBITD! A in Q1 s! ince James River Coal's thermal coal pricing is essentially set for 2013, and metallurgical coal pricing has gone down since Q1.

As for capital expenditures, James River Coal's earlier guidance was for $70 million in FY2013. It reported $7.7 million in capital expenditures during Q1 FY2013, and suggested on that conference call that capital expenditures during future quarters would be somewhere between Q1 FY2013's figure and the $15.1 million in Q4 FY2012. Averaging those two out gives us $11.4 million per quarter.

Cash interest on its long term debt and fees for letters of credit was estimated by James River Coal to come out to around $38 million in 2013. Its debt exchange in May appears to have increased interest expenses slightly, so we are estimating the interest and revolver costs to reduce cash by around $20.8 million over the next two quarters.

The result is that projected liquidity at the end of Q3 will be around $63.6 million without factoring in potential changes to inventory levels, accounts receivables, and accounts payable.

All Figures in $ Millions
Beginning of Q2 FY13 Liquidity	$107.2
EBITDA	$0.00
Capital Expenditures	$22.8
Interest Expense & Revolver Cost	$20.8
Projected Liquidity At End of Q3 FY13	$63.6

Scenario 1: No Recovery in Metallurgical Coal Prices Until 2014

Under this scenario, there is no recovery in met! allurgica! l coal prices until 2014. Starting in 2014, metallurgical coal prices increase by $5 per ton per quarter, regaining Q4 FY2012 levels by Q3 FY2014. Each $5 per ton increase in metallurgical coal prices will result in a $4 million improvement in EBITDA per quarter based on 1 million tons sold per quarter and an increase in cost of $1 per ton due to increased cost of purchased coal. In this scenario James River Coal will keep burning cash, as it needs to get around $119 per ton for its metallurgical coal in order for its entire operations to be cash neutral. This assumes that thermal coal prices recover to 2013 contract levels.

In this situation, James River Coal is likely to run out of liquidity at the end of Q3 FY14.

All Figures in $ Millions	Q4 FY13	Q1 FY14	Q2 FY14	Q3 FY14
Beginning of Quarter Liquidity	$63.6	$41.8	$24.0	$10.2
EBITDA	$0.0	$4.0	$8.0	$12.0
Capital Expenditures	$11.4	$11.4	$11.4	$11.4
Interest Expense & Revolver Cost	$10.4	$10.4	$10.4	$10.4
Projected End of Quarter Liquidity	$41.8	$24.0	$10.2	$0.4

Scenario 2: Recovery in Metallurgical Coal Prices Starting In Q4

Under this scenario, metallurgical coal prices start recovering in Q4, increasing by $5 per ton per quarter. After 5 quarters at this rate of increase, James River Coal will reach a cash neutral position. However, this cuts its margin of safety to a very low level, as liquidity is projected to bottom out at around $14 million at the end of 2014. Any hitch in the metallurgical coal market recovery or thermal coal market recovery or problems with its operations could result in them running out of money.

$11.4

All Figures in $ Millions	Q4 FY13	Q1 FY14	Q2 FY14	Q3 FY14	Q4 FY14
Beginning of Quarter Liquidity	$63.6	$45.8	$32.0	$22.2	$16.4
EBITDA	$4.0	$8.0	$12.0	$16.0	$20.0
Capital Expenditures	$11.4	$11.4	$11.4	$11.4
Interest Expense & Revolver Cost	$10.4	$10.4	$10.4	$10.4	$10.4
Projected End of Quarter Liquidity	$45.8	$32.0	$22.2	$16.4	$14.6

Scenario 3: Strong Recovery in Metallurgical Coal Prices Starting In Q4

Under this scenario, metallurgical coal prices start recovering in Q4, increasing by $10 per ton per quarter, and reaching a high of $131 per ton after four quarters of recovery. This is a strong and quick recovery that results in liquidity bottoming out at around $44 million. In such a scenario, James River Coal is in good shape through 2014 and can turn its attention to dealing with 2015 debt maturities, which are at manageable levels now.

All Figures in $ Millions	Q4 FY13	Q1 FY14	Q2 FY14	Q3 FY14	Q4 FY14
Beginning of Quarter Liquidity	$63.6	$49.8	$44.0	$46.2	$56.4
! EBITDA	$8.0	$16.0	$24.0	$32.0	$32.0
Capital Expenditures	$11.4	$11.4	$11.4	$11.4	$11.4
Interest Expense & Revolver Cost	$10.4	$10.4	$10.4	$10.4	$10.4
Projected End of Quarter Liquidity	$49.8	$44.0	$46.2	$56.4	$66.6

Conclusion

Due to a prolonged slump in the metallurgical coal market, James River Coal's risk of bankruptcy during 2014 has increased substantially. While the metallurgical coal market has shown signs of stabilizing again recently, there needs to be a sustained and strong recovery starting very soon for James River Coal to make it into 2015 without additional funding.

At a minimum there needs to be a sustained 10+% improvement in metallurgical coal prices within the next 2-3 months for James River Coal to be in better shape. As well as that, 2014 average pricing for metallurgical coal needs to be at least 20% higher than current levels.

If the improvement in the next 2-3 months does not occur, James River Coal will likely be at the mercy of requiring extreme weather events (severe flooding in Australian coal mines or near record cold weather) to make it through 2014 without re! quiring a! dditional funding. Costs have been already cut to near minimums, so the only other measures that could buy the company additional time to wait out a market recovery are to draw down inventory and accounts receivables. This may extend the ability to wait out a market recovery by a couple quarters. On the other hand, a warm start to winter could quickly wipe out that remaining safety buffer.

Source: James River Coal: Updated Bankruptcy Risk Assessment

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in JRCC over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

Additional disclosure: I am waiting until after the Q2 earnings report to decide if I should take a position in JRCC. I may take a speculative long position in JRCC if the price declines after earnings and cost cutting and 2014 thermal coal pricing and volume commitments exceed my expectations. Close to the $1.50 level may be attractive in that circumstance. If there is a pop similar to Q1's 29% increase after earnings it may lead me to take a short position if they haven't entered into contracts for a reasonable amount of 2014 thermal coal deliveries at a price close to 2013's.

Top 5 Low Price Companies To Invest In 2014

Maxims can be the kiss of death in investing. "Always buy low P/E stocks." "Always look for low price-to-book." Holding fast to these supposedly bulletproof investment strategies -- good as they sound -- could cost you, says Fool contributor Tim Beyers in the following video.

The problem is context. A low price-to-earnings multiple is helpful only in those instances where earnings are growing at a faster pace than the low multiple implies. Look at for-profit educator Apollo Group (NASDAQ: APOL  ) , which has suffered a single-digit P/E ratio throughout the past year. Revenue and earnings fell consistently over the same period, and the stock is off 50%.

Low price-to-book stocks suffer from a similar problem. Who cares if the stock sells for a discount to its assets if the company can't earn a good return on said assets? United States Cellular (NYSE: USM  ) has seen its returns on assets and equity decline steadily since 2011. Thus, despite a history of trading near or below book value, the stock is down 22% since the beginning of last year.

Investment strategies are just that: strategies. Recognize that every company is different. Analyze the underlying strengths and weaknesses before you buy. Because the more you understand about what drives a business to grow, the more likely it is you'll pay a fair price to own a piece of it, Tim says.

Do you agree? Please watch the video to get Tim's full take, and then leave a comment to let us know which investment strategies have worked best for you.

Top 5 Low Price Companies To Invest In 2014: Motricity Inc.(MOTR)

Motricity, Inc. enables mobile operators, brands, and advertising agencies to maximize the reach and economic potential of the mobile ecosystem through the delivery of relevance-driven merchandising, marketing, and advertising solutions. It leverages predictive analytics capabilities to deliver the right content, to the right person at the right time. Motricity, Inc. provides their entire suite of mobile data service solutions through a managed service platform. The company was formerly known as Power By Hand, Inc. and changed its name to Motricity, Inc. in October 2004. Motricity, Inc. was incorporated in 2004 and is headquartered in Bellevue, Washington.

Advisors' Opinion:

• [By Hutchinson]

  Motricity, Inc. is a provider of mobile data solutions and services that enable wireless carriers to deliver mobile data services to their subscribers. Its EPS forecast for the current year is 0.64 and next year is 0.99. According to consensus estimates, its topline is expected to grow 29.54% current year and 25.65% next year. It is trading at a forward P/E of 14.44. Out of seven analysts covering the company, four are positive and have buy recommendations, one has a sell rating and two have hold ratings.

Top 5 Low Price Companies To Invest In 2014: Mph Ventures Corp. (MPS.V)

MPH Ventures Corp., an exploration stage company, engages in the acquisition, exploration, and development of resource properties in Canada. The company primarily explores for molybdenum and gold deposits. It has interests in various properties located throughout northern Ontario, including properties near Timmins, Ontario. The company is based in Vancouver, Canada.

Top 5 Penny Stocks To Buy For 2014: E*TRADE Financial Corporation(ETFC)

E*TRADE Financial Corporation, a financial services company, provides online brokerage and related products and services primarily to individual retail investors under the E*TRADE Financial brand in the United States. It offers trading products and services, including automated order placement and execution of the U.S. equities, futures, options, exchange-traded funds, and bond orders; sweep deposit accounts; access to E*TRADE Mobile Pro to trade stocks and transfer funds between accounts, as well as to monitor real-time investment, market, and account information; access to Power E*TRADE Pro, a desktop trading software for active traders; an open applications programming interface for third-party and independent software developers; margin accounts; cross boarder trading; access to international equities; research and trade idea generation tools; and E*TRADE Community that utilizes social media to offer a platform to customers. The company also provides access to the inve stor resource center that provides an aggregated view of its investing tools, market insights, independent research, education, and other investing resources; advisory services through Online Advisor; fixed income tools to identify, evaluate, and implement fixed income investment strategies; access to Retirement QuickPlan calculator that provides action plan on personal retirement savings; one-on-one portfolio recommendations and personalized plans; managed investment portfolio advisory services; unified managed account advisory services; individual retirement accounts; access to non-proprietary exchange-traded funds and mutual funds; investing and trading educational services through online videos, Web seminars, and Web tutorials; and deposit accounts, including checking, savings, and money market accounts. In addition, it provides software and services for managing equity compensation plans for corporate customers. The company was founded in 1982 and is headquartered in Ne w York, New York.

Top 5 Low Price Companies To Invest In 2014: Sparton Resources Inc (SRI.V)

Sparton Resources Inc. engages in the exploration and development of mineral properties. The company holds interest in the Chebucto SDL, a natural gas field located in the Sable Island area of offshore Nova Scotia, Canada; and the ARCN Project, a secondary uranium recovery program located in the in Yunnan Province, China. It also holds interest in the SBD Gold Project located in the Lander County, Nevada; and the Huajun 306 Germanium Coal Mine located in the Yunnan Province, China. The company is headquartered in Toronto, Canada.

Top 5 Low Price Companies To Invest In 2014: National Bank of Greece SA (NBG)

National Bank of Greece S.A. (the Bank), incorporated on March 30, 1841, is a Greece-based financial institution. It offers a range of integrated financial services, including corporate and investment banking, retail banking (including mortgage lending), leasing, stock brokerage, asset management and venture capital, insurance, real estate and consulting services. In addition, the Company is involved in various other businesses, including hotel and property management, real estate and information technology (IT) consulting. On May 19, 2009, the Bank established Ethniki Factors S.A., a wholly owned subsidiary. On June 8, 2009, Finansbank A.S. established Finans Faktoring Hizmetleri A.S. (Finans Factoring), a wholly owned subsidiary. On June 30, 2009, NBG Luxemburg Holding S.A. and NBG Luxfinance Holding S.A. were merged to NBG Asset Management Luxemburg S.A. On January 18, 2010, the Bank acquired 35% of the share capital of AKTOR FM. On October 16, 2009, United Bulgarian Bank A.D. (UBB) established UBB Factoring E.O.O.D., a wholly owned subsidiary of UBB. On September 15, 2009, the Bank disposed of its investment in Phosphoric Fertilizers Industry S.A.

At December 31, 2009, the Bank operated in Greece through 575 branches, one private banking unit, one unit for financial institutions and 10 specialized banking units that deal exclusively with troubled and non-performing loans. At December 31, 2009, the Bank had over 1500 automated teller machines (ATMs).

Retail Banking

The Bank offers retail customers a number of different types of deposit and investment products, as well as a range of services and products. The Bank offers a range of mortgage products, with floating, fixed, or a combination of fixed and floating interest rates. In February 2009, the Bank introduced a new floating rate product, the ESTIA MIKTO with flexible payment terms. In addition to fire and earthquake property insurance, the Bank offers an optional life insurance plan together with mortgage! s.

The Small Business Lending Unit (SBL Unit) a part of the Bank's retail banking division consists of three credit centers situated in Athens, Thessaloniki and Patrastail. The SBL Unit offers term loans geared towards medium and long-term working capital needs for the financing of asset purchases.

Corporate and Investment Banking

The Bank offers corporate accounts with overdraft facilities, foreign currency loans, variable rate loans, and currency swaps and options for corporate customers. The Bank's commercial loan portfolio in Greece comprises approximately 50,000 corporate clients, including small and medium sized enterprises. It offers the corporate clients a range of products and services, including financial and investment advisory services, deposit accounts, loans denominated in euro and other currencies, foreign exchange services, insurance products, custody arrangements and trade finance services. The Bank lends primarily in the form of credit lines, which are generally at variable rates of interest with payment terms of up to 12 months. In addition, the Bank provides letters of credit and guarantees for its clients.

The Bank�� shipping finance and syndicated loan portfolio consists of first-tier shipping groups involved in diversified shipping activities. The Bank provided project finance advisory services to the Hellenic Republic on two infrastructure projects: the new Attica Motorway and Kasteli International Airport.

Global Markets & Asset Management

The treasury activities provided by the Bank and its subsidiaries include

Greek and other sovereign securities trading, foreign exchange trading, interbank lending and borrowing in euro and other currency placements/ deposits, forward rate agreement trading, repurchase agreements, corporate bonds, and derivative products, such as options and interest rate and currency swaps. The Bank also conducts a portion of its treasury activities through its subsidia! ry CPT. A! s at December 31, 2009; CPT's portfolio comprised Greek government bonds and corporate bonds, with a total value of EUR 1.8 billion.

The Bank offers its private banking services both domestically and internationally from its international private banking units in London. The Bank offers custodian services to its foreign and domestic institutional clients who hold equity securities listed on the ATHEX or listed Greek State debt, as well as remote settlement and custody services on the Cyprus Stock Exchange. The Bank offers trade settlements, safekeeping of securities, corporate action processing, income collection, proxy voting, tax reclamation, brokerage services, customized reporting, regular market flashes and information services. The Bank also acts as global custodian to its domestic institutional clients who invest in securities outside of Greece.

The domestic fund management business is operated by NBG Asset Management, which is wholly owned by the Group. NBG Asset Management manages funds that are made available to customers through the Bank's extensive branch network. As at December 31, 2009, NBG Asset Management's total assets under management were EUR 1.9 billion.

National Securities S.A offers a range of investment services to both individual and institutional customers. In September 2009, National Securities S.A. opened a branch in Nicosia, Cyprus, to provide brokerage services to local private investors.

Turkish Operations

The Bank�� Turkish operations include the Finansbank group of companies and NBG Bank (Malta) Ltd. Finansbank's group of companies includes Finans Invest, Finans Leasing, Finans Portfolio Management, Finans Investment Trust, Finans Factoring, IBTech, Finans Pension, and Finans Consumer Finance. As at December 31, 2009, Finansbank operated through a network of 461 branches in 60 cities.

Finansbank Corporate Banking serves corporations through its eight branches in the four cities in Turkey.! Finansba! nk Commercial Banking serves medium-sized companies located in 23 cities in Turkey through its head office, four regional offices (three in Istanbul and one in Ankara) and a distribution network, which includes 61 branches.

Finansbank Investment Banking consists of project finance, corporate finance and technical consulting. Investment Banking acts as a client relations specialist while providing medium to long-term loans and other products. Finansbank Private Banking has been providing investment products and asset management services to individuals through eight private banking centers and 28 private banking corners located in Finansbank's branches in the cities throughout Turkey.

International

The Bank's international operations include the Bank's branches in Albania, Egypt and Cyprus, as well as banking subsidiaries in six countries: NBG Cyprus; Stopanska Banka A.D. in FYROM; United Bulgarian Bank A.D. in Bulgaria; Banca Romaneasca S.A., in Romania; Vojvodjanska in Serbia; and the South African Bank of Athens, as well as other subsidiaries, primarily in the leasing sector. As at December 31, 2009, the Bank had foreign branches in four countries, including one in the United Kingdom, 30 in Albania, one in Cyprus, 15 in Egypt and one in Guernsey (which closed early in 2010).

Insurance

The Bank provides insurance services to individuals and companies through the wholly owned subsidiary Ethniki Insurance Group (EI) and Finans Pension. EI offers a range of products such as life, accident and health insurance for individuals and groups, fire, catastrophe, credit, motor, marine hull and cargo insurance, and general third party liability. EI operates through a network of 2,850 tied agents and 2,620 independent insurance brokers, in addition to selling bancassurance products through the Bank's network. EI provides bancassurance products through our insurance brokerage subsidiary NBG Bancassurance S.A. (NBGB), which assumes no insurance underwr! iting ris! k, and the Bank's extensive network in Greece.

Advisors' Opinion:

• [By Roberto Pedone]

  National Bank of Greece (NBG) is engaged in providing financial services, including retail and commercial banking, global investment management, investment banking, insurance, investment activities and securities trading. This stock closed up 2.5% to $3.61 in Tuesday's trading session.

  Tuesday's Range: $3.49-$3.70
  
  52-Week Range: $2.85-$32.50
  
  Tuesday's Volume: 3.59 million
  
  Three-Month Average Volume: 3.59 million

  From a technical perspective, NBG bounced modestly higher here right above some near-term support at $3.20 with solid upside volume. This stock has been crushed over the last two months, with shares drooping from over $8 to its low of $2.85. Since that drop, the stock has started to stabilize and it's now moving within range of triggering a major breakout trade. That trade will hit if NBG manages to take out some near-term overhead resistance at $3.88 with high volume.

  Traders should now look for long-biased trades in NBG as long as it's trending above $3.20 and then once it sustains a move or close above $3.88 with volume that hits near or above 3.59 million shares. If that breakout triggers soon, then NBG will set up to re-test or possibly take out its next major overhead resistance levels at $4.47 to $5.63

Apple's Share Repurchase Program Could Bring an Upside

Apple's (NASDAQ: AAPL  ) share repurchase program is a great way for the company to return value to shareholders. But to what extent, exactly, does it change the game for Apple investors?

Let's find out.

Apple has authorized a total of $60 billion in share repurchases. Even though the company has until the end of 2015 to follow through with this plan, it has already spent 30% of its allowance, leaving just about $42 billion left to spend.

To highlight the difference this $42 billion could make for investors, I'll value the stock based on two scenarios. In scenario one, Apple doesn't repurchase $42 billion in shares. In scenario two, Apple does -- at an average price of $495 per share.

Valuation without a buyback
Assuming a 10% discount rate and a projection for 3% annual growth in EPS going forward, a discounted cash flow valuation yields a fair value for Apple shares of $618.

Even at $618, Apple trades with a 25% margin of safety -- certainly not bad.

Valuation with a buyback
The story changes quite dramatically when you factor in the $42 billion Apple will inevitably spend before the end of 2015. At an average price of $495 per share, Apple could retire 84.85 billion shares.

How does this affect Apple's valuation? Significantly. Adjusting for the buyback, Apple shares are worth about $684 per share. This means the stock is trading with about a 32% margin of safety, more than enough for my comfort.

Sure, maybe Apple won't be lucky enough to purchase its own stock for an average price of $495. But if you're in the camp that believes this, then that means you probably believe Apple is likely to be undervalued today.

And if you believe Apple shares will remain where they are today, or even sink, then that means Apple will be able to buy back even more shares, returning even more incremental value to shareholders.

Don't underestimate Apple's cash hoard
Now that you've seen how much Apple's current share repurchase program can positively affect valuation, keep in mind that Apple has far more than $42 billion lying around. Today, its cash hoard amounts to a whopping $146 billion. And don't forget about the approximately $2.8 billion the company pays out in dividends each quarter.

When it's all said and done, Apple is fundamentally cheap.

Are you interested in learning more about Apple stock? Read about the company's future in the free report, "Apple Will Destroy Its Greatest Product." Can Apple really disrupt its own iPhones and iPads? Find out by clicking here.