Growth Ideas: Top 4 Most Undervalued, High-Growth Stocks

Morgan Stanley made additional cuts to 2012 global growth forecasts based on Europe's debt troubles. Fears have increased that the EU now faces recession and that the economy has already begun to contract in the third and fourth quarters.

Morgan Stanley also cut its 2012 growth estimate for Asia ex-Japan to 6.9% percent from 7.3%. Furthermore, the U.S. economy is forecast to grow below its trend, reports CNBC.

"Since we downgraded our regional growth outlook in August 2011, we have been constantly worried about the increasing downside risks to growth. In addition to further evidence of weakening domestic demand, the external environment in Europe has made us more concerned about the region's growth outlook," economists at Morgan Stanley said in a research note on Monday.

The "continued uncertainty" over debt troubles across the Atlantic didn't escape the notice of other forecasters. Goldman Sachs "warned on Friday that Europe's public sector funding problems were starting to spill over into household and corporate credit, turning the moderate recession the bank was forecasting into a more full blown recession akin to the 2008/09 global recession."

Domino effect
"The European economy is already essentially in recession, I think the U.K. is following close behind," Russell Jones, Global Head of Fixed Income Strategy at Westpac Institutional Bank told CNBC on Monday. He adds that given the fragility of Japan's economy, it won't take much to knock it into recession.

Morgan Stanley notes of Asia, "The prospects of further fiscal tightening and weaker domestic demand in Europe will translate into weaker external demand growth for the region. The slowdown in final demand in the developed world will likely be amplified on the region's cross-border production network, leading to a significant slowdown in export growth across the region in 2012."

Indeed, Asian exports have already dropped "on a sequential basis in the last two months," along with other indicators like China's Purchasing Managers' Index for manufacturing, which slowed to a 32-month low in November due to heightened concerns about a global economic shutdown.

Investing ideas
Morgan Stanley seems to think global growth is slowing down. With that in mind, we wanted to explore growth stock ideas that could be used as a hedge against the economic slowdown.

To create the list below, we started with a universe of about 140 high growth stocks. All of the stocks mentioned below have seen their earnings grow by more than 20% over the last five years.

In addition, Wall Street analysts project rapid earnings growth over the next five years for all these stocks.

Of course, the investor's goal should always be to buy into earnings growth at a reasonable price. So we collected data on levered free cash flows, and identified the names that are trading at a significant discount to enterprise value.

All of these high-growth companies appear to be undervalued -- should any of them be on your watchlist?

List sorted alphabetically. (Click here to access free, interactive tools to analyze these ideas.)

List compiled by Eben Esterhuizen, CFA:

1. Bridgepoint Education (NYSE: BPI  ) : Provides postsecondary education services. The company's earnings per share have grown by 67.17% over the last five years, and Wall Street analysts project the company's earnings to grow by 21.67% over the next five years. Levered free cash flow at $181.98M vs. enterprise value at $807.49M (implies a LFCF/EV ratio at 22.54%).

2. Standard Motor Products (NYSE: SMP  ) : Distributes replacement parts for motor vehicles in the automotive aftermarket industry primarily in the United States, Canada, and Latin America. The company's earnings per share have grown by 28.03% over the last five years, and Wall Street analysts project the company's earnings to grow by 21.30% over the next five years. Levered free cash flow at $67.89M vs. enterprise value at $389.36M (implies a LFCF/EV ratio at 17.44%).

3. STEC (Nasdaq: STEC  ) : Designs, manufactures, and markets enterprise-class flash solid-state drives (SSDs) for use in high-performance storage and server systems. The company's earnings per share have grown by 44.41% over the last five years, and Wall Street analysts project the company's earnings to grow by 23.05% over the next five years. Levered free cash flow at $27.31M vs. enterprise value at $237.28M (implies a LFCF/EV ratio at 11.51%).

4. Vistaprint (Nasdaq: VPRT  ) : Operates as an online provider of marketing products and services to micro businesses worldwide. The company's earnings per share have grown by 32.26% over the last five years, and Wall Street analysts project the company's earnings to grow by 20.25% over the next five years. Levered free cash flow at $110.24M vs. enterprise value at $1.03B (implies a LFCF/EV ratio at 10.7%).

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.

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Kapitall's Eben Esterhuizen and Rebecca Lipman not own any of the shares mentioned above. LFCF data from Yahoo! Finance, all other data sourced from Finviz.

Your Guide to Binary Options

The root of the word binary is the prefix ‘bi-’, which means two. Here’s a layman’s explanation of binary options, a term associated with investment:

An investor buys binary options for the shares of a company for a specified strike price and a binary payoff. Based on how the stock is trading per share when it reaches its expiry date, there could be two results (hence the name).

If it trades above the strike price on the said date, then the investor gets the payoff amount. However, if it falls below the strike price, he/she does not receive anything. They are colloquially referred to as ‘all-or-nothing options’, and are also called fixed return options (FROs).

There are mainly four types of binary options. They are explained in detail below:

One touch binary options: If the currency or asset can be traded upon at a specific rate (called the trigger), a trader would earn a profit, which is also pre-determined. The trader isn’t in the dark about his earnings; he will get the payout amount only if the currency/asset reaches the trigger value. If it fails to do so, he will incur a loss.

No touch binary options: When a trader signs the contract, he undertakes that he would only claim a profit when the rate of the currency or asset he has traded upon reaches the trigger and within the time limit stipulated in the contract. He must keep in mind that if the trigger is higher, the currency/asset may not reach it, resulting in a loss.

Double one touch binary options: A trader can fix a couple of triggers for the currency or asset he wishes to trade upon. In the event of its rate reaching either of them, he makes a profit. One should make use of double one touch binary options only if he is optimistic about an upward trend in the market, but is not sure about the direction in which it will move.

Double no touch binary trading options: This is exactly the opposite of the double one touch binary trading options. The trader is not sure whether the rate of the currency or asset he has traded upon will reach either of the two triggers he’d fixed. Traders usually avail double no touch binary trading options when the market is unfavorable. This option becomes profitable when the market moves in the direction of consolidation.

IntelliTraders is a free Binary options trading community to help traders to learn and start trading with best brokers.

Domestic Sales Growth Makes CarMax More Attractive

The economy has created a new generation of do-it-yourself mechanics. Learning the ins and outs of oil changes, starters and alternators has been great for auto supply stores, including AutoZone (AZO), which I wrote about recently. But it's also been good for used car dealers, such as used car superstore operator CarMax (KMX).

Used cars have been in vogue since the recession. The overall age of cars is driving demand for late model and certified used vehicles, which provide a solid alternative to depreciation-prone new cars.

The Manheim Used Vehicle Value Index hit a record peak this summer before backing off through fall. In November, the measure turned higher again, recording its second highest reading since its creation in 1995 - despite more retired rental units being sold at auction.

This suggests consumers, wary of European headline risks, are again turning back to used cars. With industry unit sales up 3.4% in November, CarMax, which is the largest used car dealer in the U.S. with 106 car superstores in 51 markets, stands to benefit.

Currently, the company's stores reach just shy of 50% of the U.S. population, which means there is plenty of room to grow. Back in 2008, the company shelved its expansion plans in order to conserve capital through the recession. Now, with consumers back on dealer lots, CarMax has resurrected its growth plans. It opened three new stores in FY2011 and has plans to add another five in FY2012. In FY2013, the company aims for an additional 8-10 stores. If targets play out as expected, the company's sales and earnings will benefit handsomely from this 15% increase in storefronts.

Last quarter, sales were up 11% to $2.59 billion. Vehicle revenue, which accounts for 77.9% of sales, rose 7% to $2.01 billion as selling prices climbed 7%. The company's wholesale revenue, generated from trade-ins and appraisal buys of vehicles too old to resell on its own lots, jumped 39% to $457.9 million as unit sales rose 23%.

The bump in the wholesale market, likely a function of a continuing stagnant job market, boosted the segments share of revenue to 17.7% of total revenue, up from 14.1% last year. But, even with more wholesale cars hitting the market, demand has been brisk enough to support prices. The company saw its average wholesale price increase 13% in the quarter from the prior year.

CarMax doesn't just make money selling cars. It also finances them through its finance arm, CAF. CAF financed 39% of vehicles the company sold in FYQ2, which helped segment income climb 21% to $63.8 million.

Short-sellers are starting to rein in their pessimism too. The number of shares held short fell to 18.58 million from 19.43 million in the past month. But, even with that covering, short interest stands at 7.1 days of average volume, which suggests a solid floor underneath the stock, particularly if numbers come in strong for the quarter.

As investors digest ongoing risk overseas, they're increasingly hunting for stocks tied to the U.S. economy, which despite sluggishness is still showing evidence of improving default and delinquency rates. A solid plan for future store growth and ongoing consumer interest in used cars makes CarMax and intriguing play for U.S.-focused portfolios.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in KMX over the next 72 hours.

Has BHP Billiton Become the Perfect Stock?

Every investor would love to stumble upon the perfect stock. But will you ever really find a stock that provides everything you could possibly want?

One thing's for sure: You'll never discover truly great investments unless you actively look for them. Let's discuss the ideal qualities of a perfect stock, then decide if BHP Billiton (NYSE: BHP  ) fits the bill.

The quest for perfection
Stocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:

• Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it's certainly a better sign than a stagnant top line.
• Margins. Higher sales mean nothing if a company can't produce profits from them. Strong margins ensure that company can turn revenue into profit.
• Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt.
• Money-making opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors.
• Valuation. You can't afford to pay too much for even the best companies. By using normalized figures, you can see how a stock's simple earnings multiple fits into a longer-term context.
• Dividends. For tangible proof of profits, a check to shareholders every three months can't be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.

With those factors in mind, let's take a closer look at BHP Billiton.

Factor	What We Want to See	Actual	Pass or Fail?
Growth	5-Year Annual Revenue Growth > 15%	13.7%	Fail
�	1-Year Revenue Growth > 12%	20.5%	Pass
Margins	Gross Margin > 35%	78.5%	Pass
�	Net Margin > 15%	30.6%	Pass
Balance Sheet	Debt to Equity < 50%	38.8%	Pass
�	Current Ratio > 1.3	0.85	Fail
Opportunities	Return on Equity > 15%	38.3%	Pass
Valuation	Normalized P/E < 20	9.85	Pass
Dividends	Current Yield > 2%	3.0%	Pass
�	5-Year Dividend Growth > 10%	23.4%	Pass
�	�	�	�
�	Total Score	�	8 out of 10

Source: S&P Capital IQ. Total score = number of passes.

Since we looked at BHP Billiton last year, the stock has lost a point. But the mining company has continued to see fast growth, and a recent dividend boost combined with a significant share price drop has made the stock a lot more attractive.

BHP Billiton has long been known for its iron ore reserves, which made it a prime supplier for countries like China that needed the raw material to make steel. Along with peers Rio Tinto (NYSE: RIO  ) and Vale (NYSE: VALE  ) , BHP still has a stranglehold on the world's iron ore supply, but China's slowdown has reduced steel demand. That partially explains why Rio Tinto's growth has slowed in the past year, although Vale and BHP are both still seeing solid revenue gains.

Unlike Rio and Vale, though, BHP Billiton has become a huge player in energy as well. With a timely purchase of a stake in the Fayetteville Shale from Chesapeake Energy (NYSE: CHK  ) , BHP is gaining shale-gas expertise that it can potentially use around the world, especially in areas where gas prices present a more lucrative opportunity. Meanwhile, Chesapeake got much-needed cash from the sale to help it weather the drop in natural gas prices.

One issue BHP faces is its debt. Although a 39% debt-to-equity ratio isn't too bad, BHP's net debt amounts to more than $20 billion. That puts BHP at a competitive disadvantage to fellow copper producer Freeport-McMoRan Copper & Gold (NYSE: FCX  ) , which actually has a net cash position. On the other hand, Freeport is more concentrated on copper production and doesn't give you as much diversification as BHP's broader portfolio of assets.

Still, BHP Billiton is close to perfection because overall demand for natural resources remains strong. If the economic recovery begins to accelerate, then it could help get BHP over the hump to claim those last two points on our 10-point scale.

Keep searching
No stock is a sure thing, but some stocks are a lot closer to perfect than others. By looking for the perfect stock, you'll go a long way toward improving your investing prowess and learning how to separate out the best investments from the rest.

BHP Billiton may be close to perfection, but we've got some ideas you may like better. Let me invite you to learn about three smart long-term stock plays in the Fool's latest special report. It's yours for the taking and is absolutely free, but don't miss out -- click here and read it today.

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

Is Health Management Associates the Perfect Stock?

Every investor would love to stumble upon the perfect stock. But will you ever really find a stock that provides everything you could possibly want?

One thing's for sure: You'll never discover truly great investments unless you actively look for them. Let's discuss the ideal qualities of a perfect stock, then decide if Health Management Associates (NYSE: HMA  ) fits the bill.

The quest for perfection
Stocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:

• Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it's certainly a better sign than a stagnant top line.
• Margins. Higher sales mean nothing if a company can't produce profits from them. Strong margins ensure that company can turn revenue into profit.
• Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt.
• Money-making opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors.
• Valuation. You can't afford to pay too much for even the best companies. By using normalized figures, you can see how a stock's simple earnings multiple fits into a longer-term context.
• Dividends. For tangible proof of profits, a check to shareholders every three months can't be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.

With those factors in mind, let's take a closer look at Health Management Associates.

Factor	What We Want to See	Actual	Pass or Fail?
Growth	5-Year Annual Revenue Growth > 15%	7%	Fail
�	1-Year Revenue Growth > 12%	14.5%	Pass
Margins	Gross Margin > 35%	47.2%	Pass
�	Net Margin > 15%	3.1%	Fail
Balance Sheet	Debt to Equity < 50%	497.7%	Fail
�	Current Ratio > 1.3	1.84	Pass
Opportunities	Return on Equity > 15%	35.9%	Pass
Valuation	Normalized P/E < 20	9.63	Pass
Dividends	Current Yield > 2%	0%	Fail
�	5-Year Dividend Growth > 10%	0%	Fail
�	�	�	�
�	Total Score	�	5 out of 10

Source: S&P Capital IQ. Total score = number of passes.

With five points, Health Management Associates looks pretty good, but definitely not perfect. The company is dealing with a lot of uncertainty in the health-care industry right now, and unfortunately, it could be a while before investors get clarity about HMA's prospects.

Health Management Associates is based in Florida and operates hospitals and other health-care facilities outside urban areas, focusing on the Southeast. Like peers Tenet Healthcare (NYSE: THC  ) , HCA (NYSE: HCA  ) , and Community Health Systems (NYSE: CYH  ) , HMA relies on government programs like Medicare and Medicaid for a significant part of its revenue.

Throughout the industry, though, the recession has hit hospitals hard. Not only do hospitals end up largely footing the bill for uninsured patients, but people have also cut back on elective procedures that produce higher profit margins for hospitals. That hit shares of HMA hard back in July, along with fellow hospital operators LifePoint (Nasdaq: LPNT  ) and Universal Health Services (NYSE: UHS  ) . But so far, HMA hasn't really seen a huge rebound in its stock.

Most recently, Health Management Associates got whipsawed on conflicting reports about whether repayment reviews in some states could hit reimbursement rates on certain medical procedures. But the much bigger long-term question is whether health-care reform will end up cutting revenue throughout the hospital systems -- and whether the big burden of cost reduction falls on hospitals or on insurers like UnitedHealth (NYSE: UNH  ) . Until courts, legislators, and bureaucrats make final decisions about that, HMA won't get a whole lot closer to perfection.

Keep searching
No stock is a sure thing, but some stocks are a lot closer to perfect than others. By looking for the perfect stock, you'll go a long way toward improving your investing prowess and learning how to separate out the best investments from the rest.

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

Finding the perfect stock is only one piece of a successful investment strategy. Get the big picture by taking a look at our "13 Steps to Investing Foolishly."

Earnings Outlook: Zynga expected to show big revenue gain

SAN FRANCISCO (MarketWatch) � Zynga Inc. will make its first quarterly report as a public company Tuesday afternoon, with analysts looking for a strong jump in revenue and a small profit from the social game maker.

Reuters Zynga CEO Mark Pincus announcing new games for the coming year at the company�s San Francisco headquarters last fall.

The results will be watched especially closely given the strong run-up that Zynga�s shares ZNGA �have experienced over the past two weeks � part of the Facebook �halo effect� that followed the first IPO filing from the social-networking giant. The stock has jumped by 28% since Feb. 1, when Facebook filed its first S-1 papers with the Securities and Exchange Commission. Read full story on Facebook's IPO filing.

Zynga was last trading up 2% at $13.60, about 36% above its IPO price of $10. The stock had fallen about 17% in the weeks following its Dec. 16 debut before bouncing back.

�There�s certainly some downside risk to the stock, given the updraft since the Facebook filing,� said Colin Sebastian of Robert W. Baird in an interview, who maintains a buy rating on the shares. �The risk/reward scenario is a little different at these levels.�

/quotes/zigman/7720406/quotes/nls/znga ZNGA 4.83, -0.07, -1.43% Zynga shares

Zynga is best known for popular Facebook games such as �CityVille,� �FarmVille,� �Texas HoldEm Poker� and �Words with Friends.� Its newly launched �Hidden Chronicles� has also been a popular draw, last ranking as the fourth most popular game on Facebook by AppData since its launch last month.

Zynga generates revenue mainly from the sale of �virtual goods� within those games, about 30% of which goes to Facebook. According to Facebook�s IPO filing, Zynga accounts for about 14% of the company�s total revenue � making the company Facebook�s largest single revenue source outside of its core advertising business.

Analysts expect Zynga to report earnings for the quarter ended Dec. 31 of 3 cents a share on revenue of $302 million, according to consensus estimates from FactSet Research. The company had revenue of $195.8 million in the same quarter a year before; per-share earnings data for that period are not available.

Zynga is also expected to report its total bookings for the quarter, which reflects the total amount of virtual goods and advertising sales booked in the period, a portion of which gets deferred to future periods in terms of revenue recognition. For the nine-month period ended Sept. 30, Zynga reported bookings of about $849 million with reported revenue totaling $828.9 million.

Click to Play Apple shares break $500 mark

Apple shares cross a much-discussed threshold.

Other metrics watched for by analysts will include daily average users, or DAUs, and monthly average users, or MAUs, for the company�s games.

On these metrics, Zynga remains the most popular game developer on Facebook by a wide margin. The company last had about 246.3 million monthly average users on the social network, according to AppData, a third-party service that compiles data on app usage over Facebook. Its nearest competitor, game publisher Electronic Arts EA , had about 47.6 million MAUs, AppData reported.

Still, the recent run on the company�s stock price has made some analysts concerned. The stock is currently trading about 65 times estimated earnings for 2012.

�Driven by the recent Facebook-IPO-related hype, we believe Zynga shares remain overvalued,� wrote Arvind Bhatia of Sterne Agee in a note to clients on Monday. He added that � �whisper� bookings expectations have increased considerably� following the Facebook filing, and �seem too high.�

Bhatia maintains an underperform, or sell, rating on the stock, though most analysts covering Zynga are bullish, with 10 rating the shares as buy and six carrying neutral calls.

Michael Pachter of Wedbush Securities wrote Monday that he expects Zynga to beat Wall Street�s consensus estimates for the quarter, citing �robust user growth� on Facebook. He rates the stock as outperform.

�Zynga is expected to grow revenues in 2012 due to many late 2011 launches (such as �Adventure World� and �CastleVille�), successful January launches (including �Hidden Chronicles� with 26 million [monthly average users and 7.4 million daily average users), and mobile growth,� Pachter wrote.

It is unclear whether Zynga will provide any sort of forecast. Analysts are currently expecting earnings of 4 cents a share on revenue of $319 million for the March quarter, as well as earnings of 23 cents a share on revenue of $1.39 billion for the 2012 fiscal year.

Zuckerberg’s Controlling Facebook Stake Worth $17.6 Billion

Yesterday, Facebook said it plannedto go public with an IPO price between $28 and $35 a share, which values the company as high as $95 billion.

Still, with founder Mark Zuckerberg maintaining firm control over the social network site (he’ll keep about a 57% voting stake), his approximate holdings of 534 million shares alone would be worth $17.6 billion.

As StreetInsider notes, that number puts him ahead of Microsoft‘s (MSFT) Steve Ballmer and Paul Allen, Dell‘s (DELL) Michael Dell, Nike‘s (NKE) Phil Knight, Russian steel tycoon Vladimir Lisin,�activist investor Carl Icahn and all of the Mars candy children.

Check out other soon to be green with envy billionaires on the Forbes list.

Coordinated FX Intervention: Has the Time Come to Consider It?

Coordinated currency intervention may not be far off. I am not making a prognostication that this will happen. That is far to complex an issue to make a ‘call’ on. I want to make a case that the conditions are either presently with us or soon will be upon us for currency intervention to become an option that is exercised.

In my opinion there were at least a half dozen times in the past 18 months where currency intervention could have been an option to provide stability to a global financial system that was cracking up. But there was no coordinated intervention in the FX market. There were an unprecedented amount of fiscal and monetary actions taken by nearly every country in the globe, but it never came down to FX intervention as a policy option.

I bring up this history to re-enforce my point that intervention is impossible to call and is, based on recent history, a remote possibility. That said, should it come in the next few days and weeks it would be a measure of just how much pressure is building up and how unstable the system is.

Central bankers know they can’t control the value of their currencies. The markets are far bigger than the central banks. The best they can do is slow a process. A checklist for decision-making on coordinated intervention would include some of the following:

• How quickly is the market moving? Is the rate of change orderly?

The movement in the $/Euro has not been disorderly. We have a 10% recent peak to trough move. That is big in currency land but it would not by itself be a justification to intervene and provide temporary stability.

A different way to measure how much stress there is out there is to look at the Euro/CHF rate. The Swissy has strengthened by 3+% of late. That may look like peanuts compared to the moves in the dollar. But it is actually a big deal. The SNB has been intervening to hold the 1.51 parity to the Euro. They gave that up after a long fight. Now they just look silly for having drawn a line in the sand then backing off. The Swiss just hate what is going on.

If you want to look at stress look at the move in the $/Yen and the Yen/Crosses yesterday. The two big figure moves might be considered disorderly. I am sure that there are some Yen traders that are puking in the garbage pail. The Japanese CB hates this. They don’t want a strong Yen and they hate when it gets moving too fast

• What is the cause of the capital movements?

It’s the sovereign story that is driving this. This is a bizarre factor that is driving the Euro/$ rate. The GDP of France and Germany are many multiples of that of Greece. Think of this as if the state of Utah was having a budget crisis. You wouldn’t dump the dollar just because of that. Yes, we have Portugal and Spain to consider (Italy, in my opinion should be taken out of the PIIGS). So go back to the US comparison and you have Utah, Georgia and Connecticut to worry about. But step back a bit, we are trashing the Euro based on this. The real comparison to the US and the EU is not Georgia or Utah; it is California and New York. The deficits and problems in these two states balance the problems in Athens and Madrid on the currency scale.

There is nothing rational about our markets. But moving massive amounts of money around the globe because of problems in Greece is not rational. I say, “Never fight the tape”. Central bankers can’t say that. There is a good excuse for them to fight this tape.

• Is the rapid change in FX rates creating collateral damage?

Boy is it. Just look at the tape. This Greece story has gone global. It is raining deflation on us. VIX on everything just shot up. A few more weeks of this and you start taking points off of global GDP.

• What is the implication to the US?

The big Boss made a speech a week ago and said that we had to export our way out of trouble and export to create jobs. Well you can kiss that plan goodbye if the dollar keeps rising. You think this is good for John Deere (DE), Caterpillar (CAT), IBM, Microsoft (MSFT), Apple (AAPL), Boeing (BA), Cisco (CSCO) or Intel (INTC)? This is not good at all. It is one of the reasons the DOW is getting smacked so hard. A strong dollar is a decidedly brown shoot. Go ask Disney (DIS) or Mike Bloomberg. How much do they make on foreign tourism? The White House knows this. I doubt Geithner does, but there are plenty of others (Volker/Summers) who understand the implications of this. Bernanke knows this. He has bet his career on something. It could get derailed if the dollar gets too strong too fast. Everyone in D.C. hates what is going on. They are looking for solutions. Intervention is the one thing that is on the shelf.

• If left unchecked where could the instability lead?

This is a slippery slope we are on. The markets seem to have Greece in their cross hairs. But this will pass and those with loaded rifles will point them elsewhere. This sovereign story could spread very quickly. It could jump out of Europe and go to Mexico overnight. It could go to Asia and make a mess of Indonesia, the Philippines and Korea. Once it gets started it will be very difficult to stop. It is already moving fast. It could go global in a week. The worst possible outcome is that it goes uphill to the “stronger” countries. Like France, Germany, UK and of course the USA. If this disease is left unchecked and it spreads to some of the “Big Boys” it is an absolute lights out event. It would take years to recover from that. This is the most compelling reason for coordinated intervention.

• Could currency intervention achieve anything in the larger picture?

No. And for that reason it probably will not happen. The best intervention could accomplish is buying some time for things to settle down. But if things remain unstable for much longer, the utility of a short-term fix becomes larger.

• Are their any other considerations that might come into the decision?

I think so. Four come to mind:

a) The CDS market has been LEADING this market move. The Central Banks HATE the CDS market and the role that it plays in our economies and in the policy choices. The Central Banks can’t stop that. They have no power. But they could intervene in the currency markets. Because of the way things are connected, a jump in the Euro would also mean a narrowing of the PIIG CDS spreads.

b) Central Bankers have studied the impact of coordinated intervention for years. The biggest conclusion is that intervention can re-establish “two-way risk.” This condition is vital to restoring stability. There has been “no risk” to being short Euros and long PIIG CDS spreads. As long as the perception is out there that there is little or no risk in these directional bets they will continue to move in one direction. Intervention can reestablish the notion of two-way risk. They do that by punishing market players that are constantly pushing the bet farther. CBs hate speculators. They would like nothing better than to catch them off guard and disable them.

c) China is a spectator to this in most respects. But their currency is tied to the dollar. Therefore their currency has just gone up in value by 10%. They hate that. Don’t assume that they have no say in the outcome of this. They would love to see currency intervention solve their problems.

d) If Paul Volker were running the show I think he would say, “Nip this one in the bud”. But Big Paulie is not in charge. Is he?

Will we see this headline?

EU, UK, Swiss, Japanese and US Central Banks Join in Coordinated Global Currency Intervention

1 Dividend to Buy, 1 Dividend to Sell

The following video is part of our "Motley Fool Conversations" series, in which, Andrew Tonner, technology editor and analyst,, and Austin Smith, consumer-goods editor and analyst, discuss topics around the investing world.

In today's edition, they continue their series of looking at one dividend to buy and one to sell in 2012. Austin sells Telefonica because of its waning growth in Latin America and continued weakness in Europe. Andrew buys AT&T because it recently raised its dividend and is a model of dividend stability.

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U.S. Bank Lending Below Depression-Era Levels: S&P

U.S. bank loans are at such record lows that they have done little to contribute to the nation’s economic recovery, the head of financial institutions ratings at Standard & Poor's said Wednesday in New York at an S&P Capital IQ cross-asset conference.

Federal Deposit Insurance Corp. data shows that U.S. loan growth to nominal GDP has stood at an historically low multiple of 0.31 since the banking crash of 2008, compared with its high of 1.75 from 2001 to 2008, said Rodrigo Quintanilla, head of research for North American Financial Institutions Ratings. This compares with a multiple of 0.64 in the 1930s during the worst of the Great Depression, Quintanilla said.

“We believe the U.S. banking industry is undergoing the most radical structural change since the Great Depression,” he said.

As of March 13, S&P’s rating outlook on 56 U.S. banks showed recent downgrades at 30%, upgrades at 11% and 59% unchanged. Of the banking universe, 24% have a negative outlook, 4% are positive, and 72% are stable. No bank has a triple-A rating from S&P; the highest rating is A+, which is four grades below triple-A.

“If the Occupy Wall Street people saw this number, they’d have a field day with it,” said one commenter in the audience during the conference’s question-and-answer session.

U.S. Banking in ‘Radical’ Transition, but Stock Buyers Are Happy

Quintanilla concluded that U.S. banks are an industry in transition, struggling in the face of:

• Increased regulation, supervision and enforcement
• Business models that may change radically
• Consolidation of weaker and smaller entities
• Leveling of the playing field between regulated and non-regulated U.S. financial institutions

The gloomy picture for banks stands in sharp contrast to the overall outlook for U.S. corporate debt and equities, according to S&P Capital IQ analysts.

With the economy in recovery, investors are taking on more risk in 2012, said Robert Keiser, vice president of Global Markets Intelligence, who views the markets globally as “risk on.” U.S. corporate debt with a triple-B or A rating is outperforming the market, while S&P 500 corporations overall have a low risk of default, he said.

The consensus view for the S&P 500 stock index predicts a fourth-quarter 2012 growth rate of 15.5% for all sectors, three times higher than the third-quarter prediction of 5.8%. And clearly, stock investors are positive on banks — consensus on the financials sector predicts fourth-quarter growth of 25.9% and third-quarter growth of 9.1%.

European Headwinds

To be sure, all markets along with U.S. banks continue to face headwinds from Europe as the euro zone sovereign debt crisis continues to drive global macro uncertainty.

Looking at euro zone sovereign ratings as of March 12, Quintanilla said they were far from upbeat. “What jumps out is the very high number of negative outlooks,” Quintanilla said, noting that the only positive outlooks go to Germany and the Slovak Republic.

Marie Cavanaugh, an S&P sovereign credit analyst with more than 20 years at the agency and a member of the company's criteria committee, spoke in measured tones about how the euro zone’s existing policy is insufficient to address the region’s sovereign debt issues.

Yet Cavanaugh’s message was clear: Europe’s fiscal future is dire. Standard & Poor’s on Jan. 13 completed a review of 16 euro zone sovereigns and ended up downgrading nine of them.

“We received a lot of criticism at the time from people who said we didn’t understand the euro zone’s problems,” she said, adding that S&P is not backing down from its negative view of European sovereign debt. “It’s a negative trend, to put it mildly.”

Cavanaugh wasn’t much more encouraging about the United States’ sovereign debt problems. The burden of U.S. government debt and interest as a percentage of GDP totaled about 65% but is on track to exceed 80% by 2014, she said. In contrast, China’s debt to GDP is now at about 15%, and S&P sees it less than zero in 2014.

Read Goldman’s O’Neill: Economy Getting Back to ‘Normal’ at AdvisorOne.

IPOs: Bazaarvoice Loses Money; Proto Lab Faces Competition

Bazaarvoice (BV)bills itself as turning social media into measurable social commerce; unfortunately it hasn't turned itself into a profitable company.

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The company is looking to raise $85.4 million in its IPO expected to price this week. It plans to sell 9.5 million shares with pricing seen ranging from $8 to $10 each.

See if (PRLB) is traded within the Action Alerts PLUS portfolio by Cramer and Link

The problem is that while the Austin, Texas-based provider of online customer review technology has been able to grow revenue, losses have increased as well. 10 Companies in the 'Ultimate Stock Pickers' PortfolioBazaarvoice says that it serves more than 30% of the world's leading global brands. Users of its software share ratings and reviews as well as stories about products and brands. Bazaarvoice spends lots to get customers, but does manage to hold onto them with a 76% retention rate. Revenue rose to $64.5 million in 2011 from $38.6 million in 2010, but losses widened as well, more than doubling to $20.1 million last year from $8 million in 2010. "At this point in their trajectory and with their customer base, BV should be on a much clearer path to profitability, which they are not based on looking at the last six quarters," said IPO Desktop President Francis Gaskins. He thinks new investors should stay on the sidelines and wait for the company to have more clarity about how it's going to get in the black.Meantime, Proto Lab(PRLB) looks to be in good shape leading up to its offering. Protolab creates three-dimensional models of parts or products in a quick time-frame, and is looking to raise $60.2 million through an offering of 4.3 million shares at $13 to $15 each. The company uses resin, aluminum and plastic injection molding to help designers see their products come to life. Designers of medical devices, electronics, automobiles and consumer products all use these services. In 2011, the Maple Plain, Minn.-based company posted net income of $18 million on revenue of $98.9 million vs. net income of $11 million on revenue of $65 million in 2010. Gaskins' main concern with Proto Labs is the competition. Autodesk(ADSK) is a leader in 3-D design for architects and engineers and the stock is down 11% for the past year. 3D Systems(DDD), though is up 6% for the year and has seen its revenue grow 39% over the past quarter. Stratasys(SSYS) is another maker of 3-D printers and its revenue was up 28% in the fourth quarter. Unfortunately the stock is down 18% for the past year. That's just a small selection of publicly traded 3-D technology companies. Gaskins points out that as 3-D printers drop in price, more customers are able to purchase these machines and can make 3-D prototypes themselves, rather than sending the drawings to Proto Labs and wait for the results. He also notes that sales and profits in the December quarter declined sequentially for Proto Labs. Not a great sign ahead of its pricing. -- >To contact the writer of this article, click here: Debra Borchardt.

>To order reprints of this article, click here: Reprints

Acuity Brands Beats Analyst Estimates on EPS

Acuity Brands (NYSE: AYI  ) reported earnings on Jan. 9. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Nov. 30 (Q1), Acuity Brands beat slightly on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue improved, and earnings per share increased significantly.

Gross margins shrank, operating margins increased, and net margins expanded.

Revenue details
Acuity Brands reported revenue of $474 million. The 12 analysts polled by S&P Capital IQ hoped for a top line of $467 million. Sales were 12% higher than the prior-year quarter's $425 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions.

EPS details
Non-GAAP EPS came in at $0.74. The 12 earnings estimates compiled by S&P Capital IQ predicted $0.67 per share on the same basis. GAAP EPS of $0.70 for Q1 were 25% higher than the prior-year quarter's $0.56 per share.

Source: S&P Capital IQ. Quarterly periods. Figures may be non-GAAP to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 40.8%, 60 basis points worse than the prior-year quarter. Operating margin was 11.2%, 50 basis points better than the prior-year quarter. Net margin was 6.3%, 60 basis points better than the prior-year quarter.

Source: S&P Capital IQ. Quarterly periods.

Looking ahead
What does the future hold?

Next quarter's average estimate for revenue is $450 million. On the bottom line, the average EPS estimate is $0.59.

Next year's average estimate for revenue is $1.9 billion. The average EPS estimate is $2.95.

Investor sentiment
The stock has a three-star rating (out of five) at Motley Fool CAPS, with 200 members out of 217 rating the stock outperform, and 17 members rating it underperform. Among 77 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 73 give Acuity Brands a green thumbs-up, and four give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Acuity Brands is outperform, with an average price target of $45.50.

• Add Acuity Brands to My Watchlist.

Immersion Q1: Strong Top Line Results and Unexpected Profit

Immersion Corporation (IMMR) reported Q1 2011 results last night.

Total revenues for Q1 2011 were $9.8 million, with net income of $1.4 million. Both numbers exceeded analysts consensus, and were also much stronger than we expected. The company was capable of delivering a small revenue increase compared with Q1 2010, as a 30% increase in royalties more than compensated the lack of about $2.1 million in product sales of the medical lines sold to CAE Healthcare (CAE) during 2010.

A quick look at some of the highlights:

• Total revenues were $9.8 million, compared to $9.7 million for Q1 2010, exceeding the average analyst estimate by 33%.
• Royalty and license revenues totaled a record $8.4 million for the first quarter of 2011, an increase of 30% over $6.4 million in the same period last year.
• Net income for Q1 2011 was $1.4 million, or $0.05 per share, compared to net loss of $(2.7) million or $(0.09) per share, for the corresponding quarter of 2010.
• Adjusted EBITDA for Q1 2011 was $3.3 million, an increase of $2.9 million over $374,000 in Q1 2010, or 33% of revenues.
• Immersion reiterated expectations for fiscal 2011 of revenues to be in the range of $31 to $33 million, and to generate net income for the full year.
• Cash, cash equivalents and short-term investments were $65.2 million, compared to $61.2 million as of December 31, 2010. The result was also impacted from cash inflows of around $3 million in the Q1 2011, which were originally expected in Q4 2010.

Immersion's turn around, as we said a few times, is on track, and the company is now starting to deliver on its potential. Here is a breakdown of the royalty stream in the last few quarters:

Click to enlarge

There is little doubt that the company reached an inflection point in 2010, and is now positioned to nicely (and profitably) grow its revenues.

Immersion did not issue guidance for Q2, but reiterated the full year forecast of revenues in the range of $31 to $33 million, with a profit for the full year. Using the mid point for our calculations, the company should deliver revenues of $7.4 million in the next three quarters to achieve its target. While it is true that Q1 is seasonally the strongest quarter for the company, and revenues from products came at $1 million in Q1, probably a strong result given the fact that the only remaining medical line delivered slightly more than $2 million in sales last year, we believe that the company might be forced to increase yearly guidance in the second half of 2011.

Operating expenses came at about $ 6 million, excluding non cash and non recurring charges, and are expected to range between $6 million and $6.5 million over the near term, an important factor to model the potential of the business model (as margins are in the 95% range).

After the conference call, Dougherty & Co. analysts raised their price target to $11.00.

We've recently covered the major developments achieved by the company, but the conference call was a good opportunity to hear from management about the status of some initiatives.

Here is the update given by Immersion's CEO, Vic Viegas, (Seeking Alpha transcript, emphasis added):

I’d like to update you on some of the engagements the team has had with both OEMs and application developers in implementing the MOTIV platform. During the quarter we successfully ported the MOTIV solution to demonstration devices for multiple, new and existing OEM customers.

The ease of implementation, combined with the added benefit of a haptic enabled view eye, has further validated our approach of delivering automated haptic integration tools for device manufacturers. While these demonstrations represent the first step in the design process, we’re encouraged by how well the value proposition for haptics is resonating and the number of OEMs who are moving forward to the next stage of identifying target programs.

On the developer front we’ve seen hundreds of downloads of our MOTIV SDK and the response from the development community has been enthusiastic. We have already made subsequent updates to our development tools based on developer feedback and judging by the level of response, I expect by our next conference call to be able to share a number of new gaming and other applications that are designed with the MOTIV SDK.

Immersion's management also underlined the importance of a recent announcement made by the company's chip partner Atmel (ATML), which we also covered in a Seeking Alpha article:

Turning to an update regarding our ecosystem partners, I am pleased to announce that our licensing agreement with Atmel has resulted in the incorporation of Immersion touch sense technology and to Atmel’s cute touch capacitive touch controllers.

These controllers provide haptic support for 14 unique haptic effects and buttons, sliders and wheels which can be used to greatly enhance the user experience and application such as mobile devices, game console, navigation devices, cameras, netbooks, appliances, PCs and other devices.

We are excited that Atmel now has its first offering in the market embedded with Immersion’s technology, as we strive to drive the greater proliferation of haptics with the rapid adoption of touch interfaces across multiple markets.

The company also gave some insight into its revenue stream, which has now been broken down by verticals:

"While revenue mix per segment is expected to fluctuate on a quarterly basis due to seasonality patterns, in the first quarter of 2011, a break down by segment as a percentage of total revenues is as follows: mobility 44%, gaming 27%, medical 15%, auto 5%, chip and other, 9%." - Shum Mukherjee, CFO.

A couple of comments. We believe it is a great result to see that the chip vertical remains in the 9% range of quarterly revenues. The segment delivered about $2.2 million in the whole 2010, so almost $ 900.000 in Q1 represents a good result – and the implementation of haptics into semiconductor partners products was more of a strategic move for the sales benefit that it could create than intended to deliver strong revenues.

These numbers were given on total revenues. Excluding the impact of $1 million in medical product sales, numbers for royalties should roughly come as follows, in percentage:

Click to enlarge

Medical and Automotive remain segments that might potentially deliver much stronger results in the longer term, as, for example, company partner Visteon (VC) starts implementing haptics into several new cars expected to reach consumers in 2012.

After hours, the stock reached a peak of about $ 8.50, as buyers stepped in due to the unexpected strong results delivered in Q1. It's going to be interesting to follow today's action, but, more important, we still believe this could become a two digit stock in the long term, as the company starts taking full advance of the growth potential of touchscreens and becomes a “must have” technology.

Disclosure: I am long IMMR.

China Economy: Short-Term Volatility, Long-Term Stability

Volatility continues to be the watchword for stocks trading on the Chinese mainland. Just last Friday, Chinese share prices enjoyed their biggest gain in six weeks on heavy buying volume. By Monday, the trend was in reverse as shares suffered their biggest loss in nine weeks.

With Shanghai markets being predominantly driven by retail investors, fear and greed hold sway. Fear took center stage again over the weekend as domestic and foreign concerns piled on.

Overseas, the biggest buyer of Chinese exports, Europe, looked increasingly weak as new concerns arose about the financial stability of the region. At the same time, a weekend statement by Premier Wen Jiabao created confusion and more uncertainty about the domestic economy. Premier Wen warned that the country faces tough choices in moderating economic growth and Beijing must avoid piling on adjustment policies and risking "negative consequences."

Wen is talking about the difficult balancing act that his government faces in tempering inflation and soaring property prices without squeezing the growth momentum out of the Chinese economy. The Premier’s open warning about “negative consequences” suggests that he is aware that real estate may be in a bubble and excess pressure could cause an implosion with widespread negative consequences. Although Beijing has taken many measures to soak up excess liquidity in the economy, more will inevitably be done but Wen is cautioning his officials against clamping down too hard.

Stock markets took the Premier’s call for regulatory restraint as a warning about the fragility of the economic recovery. Property developers lost heavily in Shanghai trading. North American indexes trading in Chinese ADRs were also volatile, driven partly by Shanghai and partly by the festering European debt problem.

The question for investors is plain enough. Is the Chinese economy weakening or are shares inexpensive in view of long-term economic prospects?

The World Bank has now weighed in with a clear answer. According to a senior World Bank economist, highly effective investment in infrastructure by the Chinese government (as part of its economic stimulus program), plus the ongoing urbanization process in China, will ensure a continuous rapid growth of the Chinese economy over the next 20 years. We can only wish that the World Bank would make the same prediction about the economic recovery of the United States.

The Chinese government apparently learned a valuable lesson during the Southeast Asian financial crisis in 1997-98. Beijing overcame the economic development bottleneck in Asia during the regional currency crisis by stimulating infrastructure investment, just as it is doing now. Justin Yifu Lin, chief economist and senior vice president of the World Bank, said China’s actions in the nineties laid a solid foundation for the development of an export-oriented Chinese economy. Beijing is laying a strong foundation for future growth again amid worldwide weakness, he believes.

Lin spoke at the “China and the Future of the Global Economy” conference at the University of Chicago, saying:

Since the financial crisis in the second half of 2008, the Chinese government implemented a dynamic financial policy and heavily invested in infrastructure. It propelled China's economic growth and contributed to the global economic growth as well.

Lin’s prediction was not entirely positive, although he did endorse Beijing’s ongoing efforts to clamp down on property speculation. In the longer term he worries about the gap between rich and poor and the undercapitalization of small independent Chinese enterprises.

Nevertheless, a 20-year prediction of growth on the mainland from a non-Chinese government authority is a notable indication that Chinese stocks may be undervalued in the short-run, considering the economy’s long-term prospects.

Disclosure: No positions

Meet the Cash Kings of Telecom

As an investor, it pays to follow the cash. If you figure out how a company moves its money, you might eventually find some of that cash flowing into your pockets.

In this series, we'll highlight four big dogs in an industry, and compare their "cash king margins" over time, trying to determine which has the greatest likelihood of putting cash back in your pocket. After all, a company can pay dividends and buy back stock only after it's actually received cash -- not just when it books those accounting figments known as "profits."

The cash king margin
Looking at a company's cash flow statement can help you determine whether its free cash flow actually backs up its reported profit. Companies that can create 10% or more free cash flow from their revenue can be powerful compounding machines for your portfolio.

To find the cash king margin, divide the free cash flow from the cash flow statement by sales:

cash king margin = free cash flow / sales

Let's take McDonald's as an example. In the four quarters ending in June, the restaurateur generated $6.87 billion in operating cash flow. It invested about $2.44 billion in property, plant, and equipment. To calculate free cash flow, subtract McDonald's investment ($2.44 billion) from its operating cash flow ($6.87 billion). That leaves us with $4.43 billion in free cash flow, which the company can save for future expenditures or distribute to shareholders.

Taking McDonald's sales of $25.5 billion over the same period, we can figure that the company has a cash king margin of about 17% -- a nice high number. In other words, for every dollar of sales, McDonald's produces $0.17 in free cash.

Ideally, we'd like to see the cash king margin top 10%. The best blue chips can notch numbers greater than 20%, making them true cash dynamos. But some businesses, including many types of retailing, just can't sustain such margins.

We're also looking for companies that can consistently increase their margins over time, which indicates that their competitive position is improving. Erratic swings in margins could signal a deteriorating business, or perhaps some financial skullduggery; you'll have to dig deeper to discover the reason.

Three companies
Today, let's look at AT&T (NYSE: T  ) and three of its peers:

Company	Cash King Margin (TTM)	1 Year Ago	3 Years Ago	5 Years Ago
AT&T	12.3%	12.0%	9.9%	12.0%
Sprint Nextel (NYSE: S  )	4.0%	8.3%	6.1%	12.6%
Verizon Communications (NYSE: VZ  )	11.5%	16.1%	11.3%	11.3%
Vodafone (Nasdaq: VOD  )	14.7%	17.5%	18.9%	22.0%

Source: S&P Capital IQ.

AT&T, Verizon, and Vodafone all meet our 10% threshold for attractiveness. AT&T and Verizon have both seen slight growth in their margins from five years ago, while Vodafone's margins have declined significantly over the same time period. Sprint Nextel's current margins are at 4%, and they have declined by more than 8 percentage points from five years ago. Compare these returns to the blue chips of software and biotech, to get some context. �

The cash king margin can help you find highly profitable businesses, but it should only be the start of your search. The ratio does have its limits, especially for fast-growing small businesses. Many such companies reinvest all of their cash flow into growing the business, leaving them little or no free cash -- but that doesn't necessarily make them poor investments. You'll need to look closer to determine exactly how a company is using its cash.

Still, if you can cut through the earnings headlines to follow the cash instead, you might be on the path toward seriously great investments.

Want to read more about AT&T? Add it to My Watchlist, which will find all of our Foolish analysis on this stock.

• Add Verizon�Communications to My Watchlist.
• Add Vodafone�Group to My Watchlist.
• Add AT&T to My Watchlist.
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Jones Lang LaSalle Beats on Both Top and Bottom Lines

Jones Lang LaSalle (NYSE: JLL  ) reported earnings on Wednesday. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended March 31 (Q1), Jones Lang LaSalle beat expectations on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue improved significantly and GAAP earnings per share increased significantly.

Margins expanded across the board.

Revenue details
Jones Lang LaSalle logged revenue of $813.3 million. The five analysts polled by S&P Capital IQ anticipated revenue of $781.2 million on the same basis. GAAP reported sales were 18% higher than the prior-year quarter's $687.9 million.

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

EPS details
EPS came in at $0.46. The five earnings estimates compiled by S&P Capital IQ anticipated $0.20 per share. GAAP EPS of $0.31 for Q1 were much higher than the prior-year quarter's $0.03 per share.

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

Margin details
For the quarter, gross margin was 33.9%, 100 basis points better than the prior-year quarter. Operating margin was 2.9%, 110 basis points better than the prior-year quarter. Net margin was 1.7%, 150 basis points better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $924.8 million. On the bottom line, the average EPS estimate is $1.30.

Next year's average estimate for revenue is $3.89 billion. The average EPS estimate is $5.64.

Investor sentiment
The stock has a five-star rating (out of five) at Motley Fool CAPS, with 701 members rating the stock outperform and 34 members rating it underperform. Among 277 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 273 give Jones Lang LaSalle a green thumbs-up, and four give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Jones Lang LaSalle is outperform, with an average price target of $93.33.

• Add Jones Lang LaSalle to My Watchlist.

Reining in Government Spending - Is It Possible?

Despite the fact that we have added 1.3 trillion dollars to the total government debt in just the past year, there are signs that the increase in the Federal Debt Limit is NOT needed.

For the past 11 months, the government has piled on the debt like a starving sumo wrestler at an all you can eat buffet. Only three of the 11 months saw increases that were under 100 billion dollars per month. February saw the greatest chunk added to the deficit, 274 billion dollars in just 28 days. (Yes, that is nearly 10 billion dollars a day in money that was printed up, backed by the Full Faith and Credit of the American Taxpayer of the Future.)

Yet in December, the season of giving, holiday joy and Christmas plus New Year's vacations, the Federal Government has found its fiscal restraint. For the three weeks of December, the Federal government has only spent 10 billion dollars that it didn't have. That is down from the 50 billion it overspent in November, the 127 billion overspent in October and the 144 billion overspent in September. The Government must be right that the economy is turning around, for at this rate of change, we should actually be seeing a surplus in January.

Of course, while the government has found its restraint, it appears that the public portion of the debt has no such constraints. For you see, there are two sections of the debt owed by our government, the Public Debt and the Intragovernmental Debt, or what is owned between entities in the government. Out of that 1.3 trillion that we added in 2009, more than 95% was tacked onto the Public Portion. The public portion went from 6.369 on December 31, 2008 to 7.733 as of December 21st of 2009. The Intragovernmental portion rose from 4.330 to 4.365 during that same period or only about 35 billion dollars. Yes Virginia (and all the other states), the public is being stuck for all these bailouts, buyouts, bonuses and back door bargins that our government has been engaged in to "save the economy".

Even the month of December is a sobering reminder of the binge we have been on. That pesky public portion of the debt rose by 26 billion dollars so far this month, while the Intragovernmental portion actually fell by 16 billion. Yes, it fell to give us a net increase of only 10 billion for the month so far.

Yes, the Government is jockeying the numbers and the money like a streetwise shell game to avoid hitting the 12.1 trillion dollar limit (we are at 12.099 minus some few billion that doesn't count, except we do owe it eventually). Already the politicians are pulling out the "medicare and social security recepients" to justify adding another 1.9 trillion to the limit so that they can continue to spend money that doesn't exist except by printing press.

So grab another eggnog and drown your sorrows as we allow our government to further dig a hole from which we cannot escape. Our average interest on the debt is only 400 billion or so right now, wait until the interest rises to 7 or 9 percent and the figure jumps to nearly a trillion dollars in interest alone. For those of you wanting to know, we currently pay nearly 18 percent of our taxes just to cover the interest costs on the federal deficit and instead of keeping the debt level or reducing it, we just added another 1.3 trillion to it. Merry Christmas and to All, a good night.

Disclosure: No positions except I get paid in FRNs

Facebook and the age of accidental oversharing

NEW YORK (CNNMoney) -- Hey Silicon Valley, take a giant step back. Yep, one more step back. Now look around. That door over there? Envision a big sign on it saying: "Do Not Trespass."

Behind that door, you'll find a plethora of embarrassing articles I read on Yahoo (YHOO, Fortune 500). You'll also spot the heap of Les Miserables tracks from Spotify that I listened to during a bad month, and the one-too-many episodes of Glee I watched during a particularly unproductive weekend.

Those are all items I accidentally shared on Facebook (FB) before changing my privacy settings.

In the tech world, we hear the same buzzwords constantly: disruptive, revolutionary, magical, social/local/mobile. And then there's "frictionless sharing."

It's the phrase Facebook CEO Mark Zuckerberg recited like a mantra during the company's F8 event in September, where developers let loose Facebook's first wave of "social apps." Imagine a world where we share everything, Zuckerberg told the audience -- what we eat, what we read, how far we run, and the music we listen to.

When Facebook gave me the News Feed in 2006, I was adamantly against it, joining online protest groups and complaining loudly ... until, like most people, I got used to the change. I even, dare I say, grew to enjoy it.

This time, nine months and dozens of accidental overshares later, I'm still unconvinced.

Silicon Valley's startup scene can turn into an echo chamber. As the money pours in, there's more noise and less focus on what actual users want. So the question keeps coming up: how much do we really want to share? Where do we draw the line?

Entrepreneur Billy Chasen explored the issue in a recent blog post titled "Facebook's Cognitive Dissonance with Sharing." He's uneasy about how many of his friends' everyday actions are showing up in his Facebook feed.

"It's littered with things people have listened to, watched, read, and bought on other websites," Chasen wrote.

Take video sharing app Socialcam, a company created by former Justin.tv founder Michael Seibel. The startup has attracted millions of users, propelling its app to the top of the Android and iTunes popularity charts.

It got there largely because Socialcam's default Facebook setting broadcasts everything you watch. A recent post on my Facebook page informed me that a friend had just watched a series of semi-nude dance party videos -- a tidbit I'm pretty sure he didn't mean to transmit.

Related story: Video apps battle to be the next Instagram

Chasen had the same experience.

"Many of my friends don't realize these are showing up," Chasen wrote. "When I tell them they may not want, 'Young girls dancing on the beach (via socialcam),' showing up, they are thankful and ask me how to delete it and stop it from happening again."

Oliver Cameron, founder of a private social network called Everyme, says most of the responsibility lies with developers.

"The apps that are implementing this could do a better job," he says. "The average Facebook user has no clue what they're sharing."

During the launch last week of Napster co-founders Sean Parker and Shawn Fanning's latest venture, Airtime, I sat in the audience and heard over and over how "frictionless" the experience was. Sign in through Facebook and boom, you're online and sharing -- no need to download anything.

"It is simply the best and fastest way for you to chat with your existing network of friends," Parker told the audience. "If you're a Facebook user, you're an Airtime user."

It's an interesting concept, one I was skeptical about, so I jumped on Airtime the night it launched. (So did my CNN.com colleague John Sutter, who suspects Airtime is doomed. "No one seems to know why people would use it," he wrote.)

Immediately, I was video chatting with the only people who seemed to be testing out the service: bloggers, venture capitalists, and startup folks.

Overall, the experience was decent -- I'd suggest Airtime to any startup looking to randomly meet others in the tech industry. My only complaint came a day later, when a friend asked me about a post on my Facebook wall that said I had become friends with someone on Airtime.

I had no idea it was posted. Most of my friends didn't know what Airtime was, and to my non-tech friends, the message was odd.

That's the problem with frictionless sharing. In the Web's increasingly loud world, all of us want to control our online identity. Oversharing erodes those efforts.

A friend of mine said it best as we rehashed Airtime's launch and debated whether we'd use the service. I said I'd keep testing it out, but would rather it not blast updates to my wall.

He said he couldn't see himself using a Facebook video-chatting app very often.

"A lot of the people highly involved in social really misjudge how much people don't want to share everything," he said.  

ADBE: "We were definitely off the most in Europe"

Executives

Mike Saviage - Former Vice President of Investor Relations

Mark Garrett - Chief Financial Officer and Executive Vice President

Shantanu Narayen - Chief Executive Officer, President and Director

Analysts

Brent Thill - UBS Investment Bank, Research Division

Adam H. Holt - Morgan Stanley, Research Division

Mark L. Moerdler - Sanford C. Bernstein & Co., Inc., Research Division

Daniel T. Cummins - ThinkEquity LLC, Research Division

Michael J. Olson - Piper Jaffray Companies, Research Division

Steven M. Ashley - Robert W. Baird & Co. Incorporated, Research Division

Brad A. Zelnick - Macquarie Research

Chad Bartley - Pacific Crest Securities, Inc., Research Division

Kenneth Wong

David M. Hilal - FBR Capital Markets & Co., Research Division

Ross MacMillan - Jefferies & Company, Inc., Research Division

Jay Vleeschhouwer - Griffin Securities, Inc., Research Division

The Best Extended Stay Options in New York City

If you need to stay in New York City for a few weeks on business, we think that you should consider the Sutton Court Hotel Residences. This is an hotel provides extended stay services that gives you all of the luxury, amenities and great service of a 5 star hotel with the conveniences of an apartment.

For example you will enjoy a large desk and work space, a full kitchen and a large living area. You also will the atmosphere of this business hotel called Sutton Place, which is more like a family neighborhood than a hotel district. This makes you feel more at home for your long business stay. It actually is close to midtown Manhattan but is not nearly as busy.

Some of the free amenities in your suite will include broadband Internet, 75 channel HD tv, complimentary phone calls locally, and long distance calls that are no charge within North America.

This great hotel is near the lovely and inviting East River and is near the UN building. A typical room has a large bedroom, bathroom with a dressing area, a living room, separate dining space and a full kitchen. The kitchen was simply immaculate and nothing looked worn or used. The room had big windows with a great view of the East River. The room had nice shades that blocked light and lots of AC, which made it easy to sleep. The rooms also have a large safe for your valuables, an iron for your clothes and a large ironing board.

Here at the Sutton Court Residences you will find they are a great option for a business traveler that desires something more like home than your standard New York hotel room. It is also a good option for tourists who want more space and quiet, and appreciate a nice, big kitchen. Having a kitchen where you can make your own meals is a great way to save money in this expensive city.

The hotel is near the strees in New York of 1st and East 57th, and you can get to it by the Queensboro Bridge in the burro of Manhattan. It is very easy to get to many Midtown restaurants from here. There also are many museums, famous landmarks and many other things of interest. You also will be able to get easily to the subway lines of N, W, R, 4, 5 and 6. If you need to take a bus, there is a cross town that will pick you up right at the hotel entrance

You should know that the lovely Sutton Court Hotel requires you to book for at least 7 nights. Also be aware that some of the people staying here may be locals who are having their homes renovated, or other locals needing a temporary place to stay for other reasons. This means that you may not always have a lot of business travelers staying here. Depending on what you prefer, this could be a good thing or a bad thing. Personally, we enjoy staying near locals who know the area much better than business travelers.

We think that if you are on a business trip in Manhattan that lasts for a week or two, you will really appreciate the qualities of the Sutton Court Residences.

Click here for more information on Dabney Properties. Check out our comfortable furnished apartments.

With high-grade municipal bonds offering meager yields, investors seeking an income jolt are embracing a slightly more exotic product known as "kicker" bonds.

Also See

• Finding Bargains in a Rallying Market
• Give Greece a Chance
• Main Street's $100 Billion Stock-Market Blunder

Unlike traditional municipal bonds, which have set term dates of 10 years or more, kicker bonds can be called much sooner and unexpectedly -- an unattractive feature for a retiree wanting a set-it-and-forget approach to receiving regular checks. They also sell at a premium to the price investors receive when the bonds mature. But investors get rewarded for that uncertainty -- and that premium -- with income payouts that can be double those of regular munis, plus the potential for an extra "kick" down the road.

Interest in these bonds waxes and wanes with the state of interest rates, but in today's low-rate climate, they have turned the $3 trillion muni market on its head. Barclays Capital says they now account for 64% of its Municipal Bond index, nearly twice the share from a year ago.

Fans of such premium callable bonds, sometimes called "cushion" bonds, are betting that the Federal Reserve is likely to raise interest rates slowly in coming years. If that happens, kicker bonds could prove a good portfolio protector, says Peter Hayes, head of BlackRock's municipal bond team.

Indeed, the kick comes if for some reason the issuer elects not to call these bonds early -- usually because interest rates have risen and refinancing becomes unattractive. In that circumstance, the bond owners get bonus years collecting the higher yield.

Even if the issuer pays back early, the investor will have collected higher payments than with standard bonds. "It's kind of a win-win," says John Bonnell, portfolio manager of four municipal bond funds at USAA. "In either scenario you're getting better yield."

However, there is another potential downside for investors: If the bonds are paid back early because of a lower-rate environment, owners could be left holding cash with no good places to put it.

In part for that reason, regular investors have typically shied away from kickers, favoring run-of-the-mill munis for their stability. Demand has helped push the average yield on a Triple-A 10-year muni to a current 1.9% from 3.5% in January 2011, according to Thomson Reuters Municipal Market Data.

But now a growing number of firms, including Deutsche Bank (DBK.XE), Wells Fargo (WFC) and LPL Financial are urging clients to buy kickers instead. Patrick Early, chief municipal analyst with Wells Fargo Advisors, points out that a triple-A rated kicker bond with a 5% coupon would yield about 1.75% if it was called at its first possible chance in six years -- almost double that of a current market muni that matures over that period.

Phil Condon, head of municipal bond portfolio management for DWS Investments, says he is selling regular munis to snap up more kicker bonds. He recommends investors look at long-term bonds with 10 years or more between the bond's call date and maturity date. If they aren't called at the first date, Mr. Condon says, the investor will keep collecting the higher interest.

These Five Inflation Plays Will Provide Protection and Profits

Inflation hawks have been warning since 2008 that the spurt of U.S. money creation that began at the end of that year would spark a surge in consumer-price inflation.

And yet the consumer price index (CPI) statistics remain quiet - not giving ammunition to the deflationary camp, but making "inflationists" look silly, as well. Now, however, it is becoming obvious that inflation will soon arrive. But this time it is sneaking in through the back door - courtesy of our emerging-market trading partners.

Fortunately, there are some very clear steps that investors can take to protect themselves from this expected inflationary surge.

China: A 'Case Study' For Inflation? If you want to see inflation in action, you can see it most clearly in China. Officially, inflation in China in the year to April was only 2.8%. However, China's inflation statistics understate the truth even more seriously than most emerging-market nations.

For one thing, gathering data in such a huge country is very difficult. You can see that the Chinese people think inflation is much higher than that from the wage rises being demanded.

Foxconn International Holdings (PINK ADR: FXCNY) - the Taiwan-based licensed maker of practically all the electronic gadgetry made by Apple Inc. (Nasdaq: AAPL), Sony Inc. (NYSE ADR: SNE), Microsoft Corp. (Nasdaq: MSFT), and others - raised the wages of all its Mainland China workers a full 30% after 10 workers killed themselves and another three attempted suicide at its 300,000-employee Shenzhen factory this year. Wages will increase an additional 66% in October for workers meeting performance standards.

On the other hand, a Honda Motor Co. Ltd. (NYSE ADR: HMC) operation in Southern China was shuttered Monday after workers walked off the job - having rejected a 24% wage increase ( they want a 75% increase, and other benefits, too). In a research note written yesterday (Tuesday), Macquarie Group Ltd. (PINK ADR: MQBKY) analyst Chia-Lin Lu said that such labor-cost increases are "an unstoppable trend."

And it's not just wages. Urban real estate prices are up 13% in the past year. But real-estate costs are not properly included in China's inflation calculations.

Although China's productivity is rising, it's not doing so quickly enough to absorb wage increases in the 20% to 30% range (let alone in the ultra-high-rent 66% to 75% neighborhood). Therefore, prices of Chinese goods - everything from video games to sweatshirts - are likely to rise in dollar terms. That will happen whether or not China revalues the renminbi (the official term for its currency, also known as the yuan).

Another indication that China's competitiveness has declined: After years of huge surpluses, the Asian giant ran a payments deficit in April.

Inflation Surges, BRIC by BRIC China isn't the only one facing this challenge. The other three "BRIC" economies - Brazil, Russia and India - all have significant inflation.

Russia, with 6% inflation, is the least important of these to the U.S. economy, since its exports are primarily commodities whose prices are determined by world markets, rather than by the domestic economy.

Brazil's inflation rate is 5.4%, and that country's central bank is worried enough about its acceleration that it has raised the Selic short-term rate to 9.75% - a punishing level.

Finally, India's inflation situation looks to be pretty well out of control, at 14.5% on a consumer price basis. Given that country's huge budget deficit and difficult balance-of-payments situation, it appears to be nearing crisis. Several other major emerging-market economies also have double-digit inflation, such as Turkey, Egypt, Pakistan and Argentina (where the figures are fudged). In Venezuela, even official figures say inflation is already 30%.

The troubling level of emerging-market inflation is not surprising. Around the world, countries have been frantically engaging in fiscal and monetary "stimulus" with huge budget deficits and negative real interest rates. That has caused commodities prices to soar and emerging-market economies, the ones enjoying real growth, to see that growth accompanied by substantial-and-rising inflation.

Even in Britain - where some of the recessionary sting has been offset by a weakening in the exchange rate - inflation is now up to 3.7%. That's well above the official Bank of England (BOE) target of 2%. Only in the stagnant economies of the United States, the Eurozone and Japan - three markets where recession has been deep and recovery very sluggish - has inflation not yet taken off.

In the downturn, the rich-but-sluggish economies have seen yet more production outsourced to the rapidly growing economies with lower labor costs. That's caused unemployment rates to soar. The good news for those economies is that the inflation in emerging markets will soon help them out of this dilemma. Emerging-market production will become more expensive, both bringing inflation to the rich sluggards and pricing some of their work forces back into jobs. Real wages will decline - but through the comfortable effect of price rises and wage stagnation rather than through outright cuts. Prolonged "stagflation" will be pretty unpleasant for the rich countries' citizens - but it beats a prolonged slump.


As emerging-market economies experience higher rates of inflation - while also continuing to grow rapidly - the commodities and manufactured goods they are exporting to those rich countries will rise in price. That will enable rich-country manufacturers to better compete, since their own wares will become cheaper on a relative basis.

But the imports on which the rich nations too intently depend will rise in price. Thus, inflation will return to the "rich" countries - via the poor ones.

For investors, the continued erosion of purchasing power will be difficult to deal with. Companies such as Caterpillar Inc. (NYSE: CAT), The Boeing Co. (NYSE: BA) and Deere & Co. (NYSE: DE) that have been able to export throughout the recession will find their margins fattening and their export volumes buoyant. All three are worth a closer look.

However, the best investments will likely be those traditional inflation hedges: Treasury Inflation-Protected Securities (TIPS) and gold - especially gold. As inflation returns and currencies face difficulties through their budget deficits, gold will come to be seen as the only reliable store of value, by central banks and retail investors alike. And that means higher gold prices lay ahead.

[Editor's Note: Money Morning readers are often amazed by Martin Hutchinson's profit-focused instincts - as evidenced by his unerring ability to paint a picture of what's to come. He's able to show us the big profit opportunities that are still over the horizon - while also warning us about the potentially ruinous pitfalls hidden just around the corner.

So it's no surprise that Hutchinson has pulled off a string of forecasting successes in the face of the worst financial crisis since the Great Depression - a financial crisis that, not surprisingly, Hutchinson is widely credited for having predicted and warned about well ahead of time.

With his "Alpha Bulldog" investing strategy - the crux of his Permanent Wealth Investor advisory service - Hutchinson has managed to combine dividends, gold and growth into a winning, but low-risk formula that has generated some eye-popping returns for subscribers.

To take a moment to find out more about the opportunities related to dividends, gold, "Alpha-Bulldog" stocks and The Permanent Wealth Investor, please click here.

You'll find the time well spent.]

Universal Display: The Year in Review

Longtime Fools know all about Universal Display (Nasdaq: PANL  ) . The OLED technologist has been a Rule Breaker since 2005. True to the Breaker mission of finding tomorrow's greatest stocks way before everyone else catches on, Universal Display muddled through many years of heavy losses and unimpressive sales. The stock traded mainly sideways, year in and year out, even as Fools pounded the table and told you to jump aboard. The bandwagon was being primed for liftoff.

And then this happened:

Universal Display Corporation Stock Chart by YCharts

2010 wasn't half bad -- shares gained 129% as revenues nearly doubled. This was the year that OLED screens hit the mainstream in a big way, mainly on Samsung smartphones running Google's Android operating system. Samsung's need for high OLED volumes was bad news for others hoping to capitalize on the technology -- phones like the HTC Droid Incredible saw interminable shipping delays and then had to downshift to a top-of-the-line LCD screen instead.

But if 2010 was the year of OLEDs in the mainstream, 2011 is where Universal Display started making real money. The revenue line in the chart above does a fair impersonation of your average hockey stick. That's a direct result of the new licensing and materials deal that Samsung signed in August.

The only way share prices could continue to lag behind that growth curve would be if the fantastically higher sales came with depressed margins -- but that's exactly the opposite of what's happening. Rolling gross margins are exploding as economies of scale start to unfold, the company has this nice new habit of turning a profit, and operating cash flows are positive, too.

Smartphones and tablets are fueling some of the most exciting growth stories in this market. Universal Display is one surefire way to play that trend, with a side of big-screen and general lighting opportunity to boot. Read up on three other smartphone plays in a free report.

Skittish investors hold stocks lower

NEW YORK (CNNMoney) -- Stocks pared losses on Monday, but all three indexes still closed lower as worries that Spain may need a full-blown bailout sparked a global sell-off.

"There seems to be a pattern whereby markets sell hard into the close of European markets and then see some relief," said Mark Luschini, chief investment strategist at Janney Montgomery Scott. "Despite the comeback, Europe will continue to waffle the markets. It's all predicated on whether anything will be done to triage Spain's duress."

U.S. stocks remained under pressure as markets closed. The Dow Jones industrial average (INDU) sank 101 points, or 0.8%, after earlier shedding more than 220 points earlier. The S&P 500 (SPX) dropped 12 points, or 0.9%, and the Nasdaq (COMP) lost 35 points, or 1.2%.

The selling was widespread, with oil prices tumbling 4% and copper prices skidding 3.3%. The euro weakened further, falling as low as $1.207.

Investors flocked to traditional safe havens, such as U.S. Treasuries, where the 10-year yield hit a fresh record low of 1.395%. The German 10-year yield also fell to a record low of 1.127%.

Fears over the debt crisis plaguing Europe pushed the yield on the 10-year Spanish bond up to a euro-area record high of 7.565% -- a level that flashes the first bailout signals and one that Spain's leaders have said is unsustainable.

Securities regulators in Spain and Italy both instituted temporary short-selling bans Monday to try to stop the heavy selling in European markets.

Eurozone finance ministers finalized initial bailout terms for Spanish banks last week, but observers fear that may not be enough. Spain's regional economies are also showing signs of struggle, with Valencia said to have requested emergency funding last Friday.

The Bank of Spain also reported that the nation's economy contracted by 0.4% in the second quarter -- that's the third quarterly contraction and shows the eurozone's fourth-largest economy could be mired in recession for some time.

While Europe continued to dominate trading Monday, investors also had some corporate earnings to contend with. But analysts say Europe's debt problems will show up there, as well.

Fear & Greed Index

"Eurozone news is beginning to manifest itself in the earnings seasons, since we're seeing the erosion of profits, with the dollar gaining strength," said Quincy Krosby, market strategist for Prudential Financial.

While nearly all companies that have reported so far have topped earnings expectations, analysts' forecasts were very low to begin with. In addition, just 45% of companies that have reported have topped revenue expectations, the lowest percentage since the first quarter of 2009, according to FactSet.

Related: Spain and Italy ban short selling

World markets: European stocks closed deep in the red. Britain's FTSE 100 (UKX) lost 2.1%, the DAX (DAX) in Germany fell 3.2% and France's CAC 40 (CAC40) dropped 2.7%.

Spain's IBEX 35 slid 1.1% Monday. Italy's benchmark FTSE MIB index fell 3%, while borrowing costs spiked. The 10-year Italian yield rose to 6.3% from 6.166% late Friday.

Asian markets ended sharply lower. The Shanghai Composite (SHCOMP) fell 1.3%, the Hang Seng (HSI) in Hong Kong tumbled 3% and Japan's Nikkei (N225) dropped 1.9%.

Companies: McDonald's (MCD, Fortune 500) shares slipped after the fast-food restaurateur missed earnings and revenue expectations, citing a slowing global economy.

Hasbro's (HAS) stock rose after the toymaker reported second-quarter earnings beat analyst expectations. But the gains were limited as the company's revenue dropped 11% and missed Wall Street's forecast.

Shares of Halliburton (HAL, Fortune 500) edged higher after the oil and natural gas services company posted better-than-expected earnings as strong drilling activity in international markets offset a slowdown in North America.

Later this week, UPS (UPS, Fortune 500), AT&T (T, Fortune 500), Ford (F, Fortune 500), Apple (AAPL, Fortune 500) and Amazon (AMZN, Fortune 500) are slated to open their books. Facebook (FB) is also set to report its first quarterly earnings as a public company.

Related: China oil giant buys into North America

Shares of Nexen (NXY) jumped more than 50% after China's state-owned oil producer CNOOC (CEO) agreed to buy the Canadian oil and gas producer for $15.1 billion.

Shares of GenOn (GEN) and NRG Energy (NRG, Fortune 500) climbed after NRG agreed to buy the Houston-based wholesale power provider in an all-stock deal worth about $1.7 billion.

RailAmerica's (RA) stock was higher after Genesee & Wyoming agreed to buy the company for $1.39 billion in cash.

-- CNN producer Isa Soares contributed