McDonald's sets 2020 sustainability goals

Ronald McDonald is wearing a new-and-improved sustainability hat.

McDonald's, on Wednesday, announced new goals for sustainability and social responsibility by 2020 – including sustainable beef production – but at least one environmental group found the goals too modest and and not transparent enough.

"While it appears to be a positive move, McDonald's whole business model is based on disposable matter and cheap food that's cheaply produced," says Lisa Archer, director of the food technology program at Friends of the Earth, a national environmental group. "Their whole business model is based on an unsustainable system. So they have a long way to go."

McDonald's executives says the goals are a big deal. "We are focusing on the areas that are core to our business and that make a real difference," says J. C. Gonzalez-Mendez, senior vice president of McDonald's global corporate social responsibility, sustainability and philanthropy, in a statement.

The move comes at a time Millennials are increasingly attracted to companies – particularly food and restaurant companies – that practice sustainable business habits. Buying or using green products, for example, is important to four in 10 Millennials, which is greater than to any other age group, according to a recent survey by Shelton Group, a communications agency focused on sustainability.

Perhaps that's why everyone from Coca-Cola to PepsiCo to Chipotle upped their sustainability communications via social media last year, reports the Social Media Sustainability Index.

Among McDonald's 2020 goals:

– Supporting sustainable beef production and beginning purchasing an unspecified portion of beef from verified sustainable sources in 2016.

– Sourcing 100% of coffee, palm oil and fish that is verified to support sustainable production.

– Purchasing 100% of fiber-based packaging from certified or recycled sources.

– Serving 100% more fruit, vegetable, low-fat diary or whole grains in nine o! f its top markets.

– Increasing in-restaurant recycling by 50%.

– Increasing energy-efficiency in company-owned restaurants by 20% in seven of its top markets.

"We're on our way to mainstreaming sustainability," says Bob Langert, McDonald's vice president of corporate social responsibility and sustainability.

But Archer, of Friends of the Earth, says McDonald's has no choice but to make these changes – and more. "They are losing market share as customers seek more sustainable food," she says. "They are making these changes because they have to."

Newmont Mining & Barrick Gold: How Dead is Dead?

A deal between Barrick Gold (ABX)and Newmont Mining (NEM) might make sense, but it ain’t gonna happen as long as Barrick’s co-chairman keeps insulting Newmont in the press.

Bloomberg

That was the gist of a letter sent by Newmont Mining to Barrick Gold’s board, ending the talks between the two gold mining giants.

While our team has found your management team's engagement to be constructive and professional, the same constructive nature cannot be said of our discussions with your Co-Chairman on certain fundamental strategic and structural issues over the past two weeks. Our efforts to find consensus have been rejected out of hand repeatedly. And, as we contemplated further dialogue, we read in the continuing reporting of the transaction in the financial press a pointed characterization of our company as "extremely bureaucratic and not shareholder-friendly." Nothing could be further from the truth. Moreover, none of this suggests that we have the mutual respect or shared values today that we believe are necessary for the enterprise that would result from the combination of our companies to realize its full potential.

It is, in fact, because of our deep commitment to our shareholders that we reluctantly have had to unanimously conclude that we need to put aside our attempts to resuscitate this initiative and should pursue our course as an independent company.

Sterne Agee’s Michael S. Dudas and Satyadeep Jain wonder if a deal is really dead:

We believe Barrick drove too much control while Nemwont’s Nevada asset base would likely provide more synergistic value. In releasing a letter notifying Barrick, Newmont’s Board highlighted displeasure with Barrick’s methods, especially in the press. We believe door remains slightly ajar for some sort of transaction, but requires a reset, in our view.

Shares of Newmont Mining have dropped 6.4% to $24.76 at 2:25 p.m., while Barrick Gold has fallen 3.4% to $17.28, both worse than the 2.3% decline in the Market Vectors Gold Miners ETF’s (GDX) 2.3% drop.

Fannie and Freddie Defy Obama, Look Invincible

NEW YORK (TheStreet) -- Just a couple of years ago it looked like no one in Washington wanted to let Fannie Mae (FNMA) and Freddie Mac (FMCC) live, but the government sponsored entities (GSEs) have lately found defenders in unlikely places and are even showing signs of being independent of the Obama Administration.

The surprising resilience of the mortgage giants comes ahead of a scheduled vote in the Senate Banking Committee Tuesday on legislation sponsored by Sens. Tim Johnson (D., SD) and Mike Crapo (R., ID) aimed at winding down Fannie and Freddie, a stated goal of President Obama.

While the bill is expected to pass the Senate Banking Committee with at least 12 votes, it will likely require approval from 15 of the 22 committee members to have a chance at passing the full Senate, argues FBR Capital Markets analyst Ed Mills in a report published Monday.

Even then, passage in the House is seen as a near impossibility given that House Financial Services Committee Chairman Jeb Hensarling (R., Texas) has sponsored his own housing reform legislation which, as Mills describes it "fully privatizes the housing industry." While the Johnson Crapo bill winds down Fannie and Freddie, it still leaves a large role for the government. An unusual combination of conservative and liberal groups have opposed the Johnson Crapo bill for various reasons. And a slowing home sales market appears unlikely to help matters. Moody's Analytics on Monday estimated the proposal will cause mortgage rates to rise by 0.41-0.58%. But opposition to the bill took a dramatic turn late on Friday, as The Wall Street Journal published a total of five separate documents from Fannie, Freddie and their regulator, the Federal Housing Finance Administration. Over 90 pages, single spaced, with small type, the documents (which were not intended for publication) listed a host of concerns. If the legislation were to pass, "the risk Freddie Mac would not be able to carry out its Core Policy Function is extremely high," read one of the documents, an April 16 letter from Freddie Mac CEO Donald Layton to FHFA Director Melvin Watt. A draft memo of "identified issues" from the FHFA to the Senate Banking Committee states the legislation could create "regulatory confusion and potential for arbitrage." The memo also argues Johnson Crapo would allow large banks to "further their dominance" in the housing finance market. "Large banks could (and do) play several roles (originator, aggregator, guarantor and servicer), thus dominating the housing finance market -- but they would be primarily regulated by the Federal banking agencies, whose regulatory focus is safety and soundness of individual institutions and not on the functioning of the housing finance system," the memo states.

FBR Capital Markets' Mills sees "long odds for the bill to become law this year." And next year could be even more difficult, since Johnson is retiring and the likely next Chairman of the Senate Banking Committee, whether Sherrod Brown (D., Ohio) or Richard Shelby (R., Ala.) are both seen as opponents of the legislation. Several giant hedge funds as well as mutual fund company Fairholme Funds have invested in Fannie and Freddie common and preferred shares. The Fannie and Freddie preferred shares, which were essentially worthless after they were put into government conservatorship, have now recovered nearly half their original value. The common shares in the two entities, which were also essentially worthless now have a market value of about $34 billion.

The securities sold off sharply when the Johnson Crapo legislation was unveiled, since it leaves little if any value for private shareholders. Still, private investors are suing the government and much of the value residing in the shares may be attributable to the potential success of the litigation. In any case, publication of the issues raised by the GSEs and their regulator appeared to have little impact in trading of the common shares on Monday. Fannie finished down 1.04% at $3.80, while Freddie shares gave up 0.51% to close at $3.88.

Follow @dan_freed    

Stock quotes in this article: FNMA, FMCC 

A High-School Freshman's Investing Lesson: Time Horizons Matter

You don't have to be old enough to drive to play master of the universe. I'm just 15 years old, but in a national stock-market game sponsored by the Securities Industry and Financial Markets Association, I quickly grasped the way hedge fund managers must feel when they make decisions.

My friend Zachary Weiss and I had two months to beat 1,235 other groups of New Jersey high schoolers. There wasn’t any real money at stake, so we were playing for glory and, in the case of Northern Valley Demarest Regional High School, where we're freshmen, a tour of the New York Stock Exchange.

Unfortunately, we won't be visiting the Big Board. We didn’t even finish in the top half. But we learned some valuable lessons. First, that you shouldn’t have a two-month time frame in mind when investing. And second, that people do funny things when their own money isn’t at stake.

As the game was getting underway, my dad, who writes The Wall Street Journal's Ahead of the Tape column, showed me some of the most volatile securities out there, which my partner and I thought of as essential for victory in a short-term game where anything can happen.

Deciding the market probably would rise, we sold short securities that produced double the daily return of VIX futures. My dad explained that, on average, they should lose over 90% of their value each year. We also bought securities that did the opposite. We used the proceeds from our shorts and bought on margin, increasing our risk and potential return. Then Vladimir Putin came into our lives and we found ourselves in 1,016th place.

However, we weren't going to give up there. We took advantage of a bombed-out Russian stock market and bought an ETF tracking it for a quick gain. Then we took a big risk by shorting GW Pharmaceuticals PLC, a company riding the cannabis stock fad that had just hit an all-time "high," up 1,000% in nine months. That was our biggest winner.

In 16th place overall early this month and well ahead of nearly everyone from our high school, we had the tour of the stock exchange in the bag. But we wanted to win the whole contest and we rolled the dice again. Not a good idea. Knowing that natural gas was the most volatile commodity, we shorted a note that pays three times the performance of the fuel. Oops! A late spring cold wave later, we had lost over 30% on the bet.

We ended the contest in 706th place. The only consolation is that just 9% of our fellow students beat the S&P 500. Why? Most chose flashy stocks familiar to them, like Tesla Motors Inc. and Apple Inc., that also struggled over the two months we were playing the game.

Clearly, not every decision we made was the right one. But I don't regret our strategy. Our goal was to beat out a bunch of other teams that were all chasing crazy returns over a very short span, so we had to go big or go home.

We would have done it differently if we were saving real money for retirement. And if you're in the mood to take advice from a 15 year old, believe me when I say: you should too.

Jonah Jakab, a freshman at Northern Valley Demarest Regional High School in Demarest, New Jersey, is the son of Spencer Jakab, who writes the Wall Street Journal's Ahead of the Tape column. 

How to Get in the Game and Profit

A few weeks ago, I told you a story about a woman who took my advice and used it to overcome her fear of investing.

As it turns out, it was an incredibly popular column.

Reader Robert from Vancouver wrote:

Thanks Shah for trying to provide some financial education.

There is a real and urgent need to teach people at least the basics of investing, the economy, and business.

And I wholeheartedly agree.

That's why I wanted to come back and build on the advice I originally gave you.

You see, once you make a decision to start investing, the next step is to make a commitment to become successful.

And today I'm going to show you how to make that next step...

To Be Successful, You Have to Put on Trades

In a nutshell, the advice I gave in my March 27 column was:

Start by taking positions in companies you know something about. It doesn't matter if you like or hate it. Just that you know enough about the company's products, services, whatever they do, so the stock's ups and downs make sense to you.

Once you pick a stock, you always start the same way. You put on the trade.

Never think that your trade, or your position, is an investment. It isn't. It is a trade.

You can get out of it at any time.

If it turns into a brilliant pick, your trade will turn into an "investment" because it's worth holding onto.

But to become a successful investor you have to start by putting on trades.

You can't make money watching from the sidelines. But you also can't be a deer in the headlights either. You can't go into a trade and think it's an investment and you're stuck with it when it goes against you. It's a trade!

And the reality is that some of your trades will be losers...

That means you will get out of positions with small losses. It's part of the game. You will have some losses but they will be monumentally overwhelmed by the trades that will make great money. And the ones that keep going up and maybe pay you dividends will become the "core" of your investment portfolio.

And that's your ultimate goal. You want to create an investment plan that leads to financial freedom.

Psychology and Perception Are More Important Than Data and Facts

One of the reasons I say that you don't need to be an expert on any company, or on any stock, is that no matter how much homework you do, no matter how much analysis you do, what makes perfect sense on paper may have nothing to do with how your stock trades.

When you watch your stock going up and down, you begin to understand the "psychology" of other investors - what they're looking at, how they interpret news and data.

You're one person with one position. There are millions of people like you watching that same stock. Collectively, their perception of news and data and the psychology of their fear and greed ultimately motivate them to take action, which moves the stock.

I can't tell you how many times I've done copious amounts of research and been absolutely confident that I was putting on a winning trade, only to have my head handed to me because other traders' perception of something that came along (it could be out of nowhere) was interpreted as a reason to sell the stock.

My saying - and I live by this - is:

Money moves markets, but psychology moves money.

What I'm saying is: Go ahead and do your homework. But your knowledge of your stock, or your position, has to include your understanding about how other investors perceive the stock and its likelihood to go up or down.

Market psychology is everything. I can trade anything, any stock, any bond, any commodity, any derivative, anything, because I trade on OPP - Other People's Psychology.

It's not easy reading the market's psychology, or the perception the market has about a stock's prospects. But it's not hard either.

First of all, understand that there are two ways to trade psychology.

You go with the flow.

You go against the flow.

I do both, and quite successfully.

Going with the flow is all about the "trend."

The Trend Is Your Friend

Live by that and you will make a lot of money.

In terms of market psychology I always look for the big picture first. What is the big trend? Is the market (we're talking about stocks) in an uptrend or downtrend?

If it's an uptrend I want to be buying stocks. If it's a downtrend I want to be shorting.

Always go with the flow by trading within the big trends.

After all, if the market is going higher, why would you fight it? You don't, you ride it.

Of course, there are nuances in following the big trend. The general market may be going higher but maybe the stock you want to buy falls in an industry that's not going along with the big trend. You have to be careful about that.

That's where going against the flow might come into play.

I make a lot of money following the trends and riding them. But, sometimes I go against the trend.

The reasons to go against the big trend start with the big trend. Maybe you see it stalling out. Maybe you think it's about to turn around and go the other way. It's at these junctures that going against the trend, in measured fashion, can be very profitable.

If I think the psychology has changed and the general market is turning bearish, but the market has still been holding onto its gains, such that I see selective selling, or profit-taking, I will put on a counter-trend position.

If you put on counter-trend positions at inflection points, meaning where the market seems like it could change, you aren't taking a stupid risk. Instead, you are taking a shot that you can get ahead of the bigger shift in psychology.

What's critical is that whenever you take a counter-trend position, you don't "get married" to the position.

You're going against the trend, which you don't generally want to do. But because picking tops and bottoms can be extremely lucrative (and trying to do that exponentially ups your learning curve), it's worth the risk. Again, you only do that when you think you sense a change in the trend.

If I take a counter-trend position and the trade starts out against me, I get out just as the big trend reconvenes its footing and continues. I will lose a little and move on.

Here's another way to play a counter-trend within a bigger trend: Buy that stock you wanted to buy but didn't because its industry group wasn't following the big trend higher.

At some point, when I think that stock and its industry may be out of favor enough, I'd consider buying in. Why? Because if the big trend is still up and I think it's strengthening, then buying an out-of-favor stock that has already gone down (but is a fundamentally good company, not some crazy stock) isn't as risky as it seems.

And if you've done your homework and like the stock but have been surprised that it has gone down in a rising market, then you'll know instinctively if it has gone down enough to make it a good "value" in the rising market. That's not a risky position.

I can't impress upon you enough that you know more than you think. You have to trust yourself. Use your own knowledge of how people react to gauge mass psychology, which sometimes is mass delusion. But that's another lesson.

So, I'll say it again. Tune yourself into the psychology of the market. The psychology of other traders and investors, of what they are reacting to, of their fear and greed.

Perception is reality when it comes to how money reacts.

Former Entergy Employee Arrested on Charges of Falsifying Documents

Entergy (NYSE: ETR  ) released a statement yesterday outlining details of the arrest of a former employee on Tuesday on federal charges of falsifying documents at the company's Indian Point Energy Center in Buchanan, N.Y. 

According to the utility, the individual most likely falsified documents last year related to the quality of fuel in back-up tanks used for the emergency generators at Entergy's Indian Point Energy Center. Entergy did not name the ex-employee in its press release.

However, in a Tuesday press release, the U.S. Attorney's Office for the Southern District of New York laid out details of charges brought against Daniel Wilson, 57, of Walden, N.Y., a former Indian Point supervisor. Wilson was the chemistry manager at Indian Point from 2007 to 2012, according to the U.S. Attorney's statement that alleges he engaged in "deliberate misconduct in violation of the rules of the Nuclear Regulatory Commission" by fabricating records detailing particulate matter levels in the tanks' diesel fuel.

U.S. Attorney Preet Bharara said in a statement:

Any alleged deliberate misconduct at a facility like Indian Point is a matter of grave concern to this Office. One need look no further than recent natural disasters to know that at important facilities, backup generators and other systems must be maintained in working order because in an emergency they may be critical.

Entergy said other Entergy employees were the first to notice the discrepancies, which were then reported to the Nuclear Regulatory Commission. Entergy conducted its own investigation, during which the employee left the company, the company said.

Although the utility found that the fuel quality in question would not have affected the plant's performance or safety, it noted that "[f]alsification of records is totally unacceptable, and there are swift and real consequences for workers who do not exhibit the highest standards of integrity." Entergy said it will cooperate fully with the U.S. Attorney's Office.

link

Global markets start to realize the risks of Russia's move into Ukraine

As the unrest in Ukraine gets more real by the day, the financial markets start to show signs of caution. In macroeconomic parlance, there are early signs of a persistent momentum move unfolding, and you might want to get ahead of it. Investors start to seek shelter

Russia's debt-rating gets trimmed to one notch above junk status, which is probably at least one notch above where it should be. A slow and steady selloff of Russian assets

Kerry warns Putin to stop the Russian military drills or he might be forced to issue another stern warning. Don't make me stop this car

The U.S. manufacturing renaissance that Schwab's Liz Ann Sonders has been promising for years is finally starting to show up. The data show U.S. manufacturing has reached No. 2 behind China in terms of global competitiveness. Worker productivity has doubled since the 1960s

But the housing recovery has stalled in a big way. Housing in U.S. cools as rate rise hits sales

Peter Schiff remains outside the mainstream sense of reality with another prediction of gold at $5,000 an ounce. Consensus expectations for the U.S. recovery and Fed actions are all wrong

The SEC, following the lead of last year's Finra warning, plans to take a closer look at alternative strategy mutual funds. Spending six months studying 25 funds

Five examples of how international sanctions work, or are supposed to work. The U.S. and Iran have been at loggerheads for 35 years

A Rebounding AMD Is a Good Bet

Semiconductor maker Advanced Micro Devices (NYSE: AMD  ) has been showing improved performance in the last few quarters. It was dominated by Intel (NASDAQ: INTC  ) in the past, and the declining PC industry was not helping its cause. The company's ongoing recovery is spurred by the transition from conventional PCs to semi-customs, dense servers, and professional graphics. All of these markets allow for future growth and present AMD with an opportunity to capitalize.

Revenue and EPS
The company posted revenue of $1.40 billion this quarter, which translates to a 12% decrease sequentially and a 28% increase on a year-over-year basis. The year-over-year figure is more relevant, as the nature of AMD's business is cyclical.

Source: Earnings press release

Revenue increased due to the custom chip business, which grew in the wake of Sony PlayStation 4 and Microsoft Xbox One sales. Discrete graphics also grew, due to the increasing popularity of AMD's R7 and R9 graphics cards. However, revenue growth was capped by the declining computing segment, due to negative growth in the PC market. The diagram bellows shows the changing mix of AMD's revenue and its declining reliance on the PC industry:

Figures from CFO commentary

AMD posted a net loss of $20 million, as opposed to a loss of $146 million in the same quarter last year. We can see in the graph below that earnings per share improving -- apart from cyclical changes, the trend is an upward one.

Data from Yahoo! Finance, earnings report and estimates

The above argument for revenue growth also holds true for EPS. The operating income of the graphics business fell to $91 million, from $121 million in the previous quarter, due to the cyclical nature of custom SoCs and a slight increase in operating expenses. The company has managed its operating expenses, but they are expected to increase and remain at $450 million per quarter going forward.

Data from CFO commentary

Overall, the revenue and EPS position of the company is improving on a year-over-year basis thanks to semi-custom growth, increased ASP of GPUs, and lower operating expenses in the computing segment. The company will experience growth in the future, as Sony and Microsoft are expected to sell approximately 5 million and 4 million units of their respective consoles in 2014. ARM-based dense servers also hold promise for AMD beyond 2015.

Cash and balance sheet position
The cash and cash equivalent balance, including marketable securities, stands at $982 million, compared to $1.2 billion in the adjacent quarter. A payment of approximately $200 million to Global Foundries caused the decline in cash and cash equivalents. However, the current ratio stands at 1.94 ,and the interest cover is also above 1, indicating that the company does not face any short-term liquidity problems. AMD got its long-term financing in order recently by reprofiling its near-term debt maturities. Overall, AMD's balance sheet position is satisfactory and the risk of bankruptcy is remote.

Cash and cash equivalent trend

Valuation and final thoughts
The valuation is derived by taking management's 2014 guidance and making projections based on IDC and Gartner data, using free-cash-flow methodology. Revenue and net income is as follows:

Assumptions for FCF calculations:

Standard capital asset pricing model assumptions. Growth of 12% p.a. is assumed until 2018, based on IDC and Gartner sales projections. Growth of 4% is assumed in perpetuity. Capital expenditures are assumed to grow at a compound annual rate of 5%. It is assumed that the beta is correlated to the volatility of the business.

The price target reveals potential upside and is justified by AMD's strategy to focus on growth segments like custom SoCs and professional graphics. Note that the effect of dense servers is assumed to offset the PC decline, but barely. However, this is a prudent view, as dense servers will grow at a much faster pace amid cloud and data-center growth.

AMD is still transitioning away from its PC business. Its graphics segment is supporting the growing revenues, and the company is improving its quarterly performance. Consoles will continue to boost profits going forward. New design wins will further strengthen AMD's position. It seems to have a promising future.

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Report: Oil, Natural Gas Companies Shift Funds Towards Exploration, Away from Property Buys

Related PBR Balanced View on Petrobras - Analyst Blog Company News for April 08, 2014 - Corporate Summary

Some interesting statistics, released this week by the U.S. Energy Information Administration (IEA), suggest the North American shale oil boom has shifted big energy company funds away from land purchases, and more towards finding and developing new sources of oil and gas.

The EIA examined annual reports from 42 oil and natural gas companies, from giants like Brazil's Petrobras (NYSE: PBR) and ExxonMobil (NYSE: XOM) to smaller firms like Talisman Energy (NYSE: TLM) and Encana (NYSE: ECA) – companies that reportedly made up about 40 percent of non-OPEC production last year, and that had combined market capitalization of over $2.4 trillion.

Related: Germany's Lufthansa Teams Up With Gevo To Test Biomass Jet Fuel

The study, which also looked at upstream expenditures over the past 14 years, found spending on oil and natural gas exploration and development increased by five percent, or $18 billion, last year, while property acquisitions fell by $17 billion.

"In the past two years," according to an EIA press statement, "flat oil prices and rising costs have contributed to declining cash flow for this group of companies. Continued declines in cash flow, particularly in the face of rising debt levels, could challenge future exploration and development. However, reduced spending levels could be offset by rising drilling and production efficiency."

The oil and natural gas exploration trend has also been picked up by some national governments. South Korea, according to Platts, is expected to complete a plan by the end of the year to explore oil and gas reserves off its coast.

In Mexico, the state-owned PEMEX says it has discovered seven new deep-water, natural gas fields in the Gulf of Mexico and plans to begin production next year.

Posted-In: energy land purchases Mexico Natural Gas Oil oil and natural gas oil exploration Pemex South KoreaNews Commodities Travel Global Economics Markets General Best of Benzinga

© 2014 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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Mortgage Application Volume Falls Again

Rising interest rates appear to be taking their toll. The Mortgage Bankers Association reported this morning that its index of weekly mortgage application activity fell by 2.6% last week compared to the week before.

Given their sensitivity to higher mortgage rates, applications to refinance dropped by 4% and are now at their lowest level since July 2011. Over the last 10 weeks alone, the figure is down by 55%.

Alternatively, purchase-money applications were actually up last week on a seasonally adjusted basis by 1%. On a non-seasonally adjusted basis, they were up by 26% compared to the prior week, and by 5% compared to the same week last year.

The latter results add credibility to the hypothesis that rising mortgage rates may paradoxically end up being good for the housing market. I discussed that here, and we've recently seen convincing evidence of this in the earnings reports from some of the nation's largest banks.

At the end of last week, Wells Fargo (NYSE: WFC  ) reported that its purchase-money mortgage originations shot up in the second quarter by 46% compared to the first quarter, while JPMorgan Chase's (NYSE: JPM  ) were higher by 44%. Earlier today, meanwhile, Bank of America (NYSE: BAC  ) said that its first-lien mortgage production was up by 40% compared to the same quarter last year.

If this trend is reflective of the underlying market dynamics, then it's hard to deny that rising mortgage rates, within reason, might end up being a net positive for the housing market in particular, and the economy more generally.

Despite these positive developments, many investors remain terrified about investing in big banking stocks after the crash. But, importantly, the sector has one notable stand-out. In a sea of mismanaged and dangerous peers, it rises above as "The Only Big Bank Built to Last." You can uncover the top pick that Warren Buffett loves in The Motley Fool's new report. It's free, so click here to access it now.

David Einhorn: 'We Are Witnessing Our Second Tech Bubble in 15 Years'

Hedge-fund manager David Einhorn just joined the growing list of market watchers warning about a market bubble.

“There is a clear consensus that we are witnessing our second tech bubble in 15 years,” said Mr. Einhorn of Greenlight Capital Inc. “What is uncertain is how much further the bubble can expand, and what might pop it.”

He described the current bubble as “an echo of the previous tech bubble, but with fewer large capitalization stocks and much less public enthusiasm.”

There are three reasons he cited in an investor letter that back his thesis: the rejection of “conventional valuation methods,” short sellers being forced to cover positions and big first-day pops for newly minted public companies that “have done little more than use the right buzzwords and attract the right venture capital.”

He didn’t specify which companies he felt met that criteria.

Mr. Einhorn isn’t the first investor to warn of a bubble. Pricey stock valuations, record high levels of margin debt and a near record number of money-losing companies going public have made some investors nervous that the market has rallied far beyond what the fundamentals dictate.

Some of the market's biggest momentum plays, such as biotech, Internet and social-media stocks, have been hit hard since early March amid concerns that they have gotten too pricey. Many of those names have recovered some of those losses over the past week and a half.

Without disclosing specific names, Mr. Einhorn said he has shorted a basket of so-called momentum stocks. He highlighted the risk of such a move: “We have repeatedly noted that it is dangerous to short stocks that have disconnected from traditional valuation methods,” Mr. Einhorn said. “After all, twice a silly price is not twice as silly; it’s still just silly.”

But now that there is “a clear consensus” that tech stocks are in a bubble, he said he is more comfortable shorting a basket of these high-flying stocks.

“A basket approach makes sense because it allows each position to be very small, thereby reducing the risk of any particular high-flier becoming too costly…When the prices reconnect to traditional valuation methods, the de-rating can be substantial,” he said. “There is a huge gap between the bubble price and the point where disciplined growth investors (let alone value investors) become interest buyers.”

The last time the Internet bubble burst in the early 2000s, Cisco Systems dropped 89% and Amazon.com Inc. fell 93%, he said. “While we aren’t predicting a complete repeat of the collapse, history illustrates that there is enough potential downside in these [momentum] names to justify the risk of shorting them,” Mr. Einhorn said.

Greenlight Capital lost 1.5% in the first quarter, the New York hedge fund said Tuesday. The firm said it lost money on its bets against Keurig Green Mountain Inc.(GMCR) and Chipotle Mexican Grill Inc.(CMG), among other wagers, while making money on Micron Technology Inc.(MU)

No Letup for Last Year’s Top IPO

MLPs have been on a tear lately, and one of the hottest of them all has been Phillips 66 Partners (NYSE: PSXP). The partnership is comprised of midstream assets dropped down from its sponsor, the refiner Phillips 66 (NYSE: PSX).

Phillips 66 Partners launched on July 23 as one of the most anticipated IPOs of the year. The IPO was initially pegged at 15 million shares in an indicated range of $19 to $21. But demand proved so strong that the deal was upsized to 16.4 million shares and the price increased to $23 a unit.

Even then, investors who were able to get shares before the start of public trading got what proved to be a sweetheart deal. Shares opened more than 25 percent above the IPO price at just under $29 and closed on the first day of trading at nearly $30. To me this seemed a bit exuberant considering that the IPO prospectus put the minimum yield at $0.85 per unit on an annualized basis. At $30 per unit, that translated into an indicated yield of 2.8 percent.

I expected the price to correct downward if the initial distribution was near the minimum. On Oct. 23, the partnership announced an initial quarterly distribution of $0.1548 per unit, which was based on the $0.85/unit minimum but prorated since the IPO took place during the quarter. Units did decline by about 6 percent over the next month, but have soared since that late November low point.

PSXP made a strong move up in December, before the partnership declared a fourth-quarter distribution of $0.2248 per limited partnership unit. This represented an increase of 5.8 percent over the minimum, and shares rallied further from that point.

On Jan. 22, the day the fourth quarter distribution was declared, units traded at $38. This represented a 31 percent gain in six months for those that bought in at the start of trading following the IPO, and a 65 percent gain for those who managed to get allocated shares at the $23 IPO price. At tha! t point the annualized yield of 2.4 percent was even lower than at the close of first day of trading, and investors could certainly be forgiven for taking profits.

But they would have done so just before units had their biggest rally to date. Between Jan. 22 and April 17, units advanced another 54 percent to close Thursday at $57.66. Investors who got in at the IPO price have now seen a 151 percent gain, while those who bought at the start of the first day of trading and held have gained 94 percent. Not bad at all for a conservative midstream MLP. But the rally has the annualized yield now pushed down to 1.6 percent — its lowest yet.


PSXP performance since IPO

It would be easy to conclude that PSXP is overextended at this point, but one of the major factors behind the rally was the partnership's first post-IPO acquisition in February. The acquisition included Phillips 66's Gold Product Pipeline System (the "Gold Line System") and the Medford Spheres, two newly constructed refinery-grade propylene storage spheres.

According to the PSXP press release announcing the acquisition, the Gold Line System consists of a 681-mile refined products pipeline system that runs from the Phillips 66 operated refinery in Borger, Texas, to Cahokia, Ill., with access to the Phillips 66 refinery in Ponca City, Okla., (where I once worked, incidentally) as well as two parallel 54-mile lateral lines from Paola, Kan., to Kansas City, Kan. The system has a maximum throughput capacity of 132,000 barrels per day and includes terminals in Wichita, Kan., Kansas City, Kan., Jefferson City, Mo. and Cahokia, Ill., with 172,000 barrels per day of aggregate throughput capacity and 4.3 million barrels of storage capacity.

The Medford Spheres are located in Medford, Okla. and have a total working capacity of 70,000 barrels. They were scheduled to comm! ence oper! ation March 1, providing an outlet for delivery of refinery-grade propylene from the Phillips 66 refinery in Ponca City, Okla., through interconnections with third-party pipelines to Mont Belvieu, Texas.

The partnership announced that it will finance the $700 million acquisition with cash on hand of $400 million, the issuance of additional units valued at $140 million, and a 5-year, $160 million note payable to a subsidiary of Phillips 66. (Phillips 66 shares have also rallied by 9 percent since the announcement.) Issuance of the new units results in an approximate 5 percent dilution.

This dropdown took place March 1 and was expected to be immediately accretive to earnings and distributable cash flow (DCF). The partnership expects the new assets to contribute EBITDA of $65 million to $70 million during the first full year of operation — roughly double the annual pre-acquisition EBITDA.

Thus, units have rallied on the expectation of a rough doubling of DCF, and hopes that PSX will drop down additional assets. Investors who are looking for a growth story may find one here, but PSXP's fortunes are somewhat tied to those of Phillips 66. The refining industry is very cyclical, but Phillips 66 is one of the more diversified and vertically integrated refiners.

In conclusion, I would only suggest this MLP for aggressive investors looking for a growth story. Even then, I think buying at the current price runs a significant risk of being caught in a correction. My recommendation for investors interested in PSXP is to wait for a pullback, while recognizing that if the partnership announces more acquisitions in the near future one may not be forthcoming.

(Follow Robert Rapier on Twitter, LinkedIn, or Facebook.)

Jeff Ubben on Valeant and Microsoft

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Larry Roth's doing a lot more than selling nontraded REITs

Gerardo Tabones

Larry Roth surprised some people last summer when he jumped ship as chief executive of leading independent broker-dealer network Advisor Group to become chief executive at Realty Capital Securities.

The move struck some as odd, because Realty Capital is the wholesaling broker-dealer for nontraded real estate investment trusts sponsored by American Realty Capital. Advisor Group, owned by American International Group Inc., is a broker-dealer network of four firms and 6,135 reps and advisers — a markedly different business.

At the time, Nicholas Schorsch, CEO of ARC, said that Mr. Roth would be at the forefront of distributing products, from mutual funds to nontraded REITs, with an emphasis on wirehouses. The potential for Realty Capital's and ARC's new relationships with wirehouses is “a huge area for Larry,” Mr. Schorsch said.

(See also: Brash REIT boss hires his opposite)

A number of people in the industry doubted his pronouncements. Mr. Roth is a known dealmaker, having spent 2001 to 2005 at Berkshire Capital, a top mergers and acquisition investment bank that focuses on financial services firms and independent broker-dealers.

Such prowess looked to be a perfect fit for Realty Capital. Its parent, RCS Capital Corp., has been on a buying spree, with RCS Capital or related entities completing one broker-dealer acquisition and announcing four others since last June. The transactions affect almost 9,000 reps and advisers.

(More: No end in sight for Schorsch tear)

Why would Mr. Schorsch hire Mr. Roth and ignore his M&A expertise, particularly as Mr. Schorsch and RCS Capital were assembling a top-tier IBD network? That was a prevalent industry question when Mr. Roth joined Realty Capital last September.

Well, it looks as though Mr. Roth has been doing a lot more than wholesaling alternative mutual funds and nontraded REITs in the past several months. In fact, he was sitting at Mr. Schorsch's side, at least through the initial discussions of RCS Capital's most significant deal to date, the pending $1.15 billion purchase of Cetera Financial Group from private equity manager Lightyear Capital.

According to RCS Capital's proxy filing with the Securities and Exchange Commission on April 8, Mr. Roth and Mr. Schorsch met Donald Marron, chairman of the Cetera board and Lightyear's founder, on Nov. 23 in Lightyear's New York offices. The purpose of the meeting, which involved a smattering of other Lightyear and Realty Capital executives, was “to discuss a potential strategic transaction between [RCS Capital] and Cetera,” the filing states. The deal progressed rapidly and was announced in January.

Meanwhile, the industry is waiting for Mr. Schorsch's next acquisition. RCS Capital indicated such a move in March, saying it had another potential broker-dealer acquisition teed up but was waiting for the Cetera ! purchase to close.

Will Mr. Roth be sitting next to Mr. Schorsch when that deal is done? Will he help engineer a bid for another large broker-dealer network that he knows well?

Don't be surprised if he does.

Why SolarCity (SCTY) Stock Is Gaining Today

NEW YORK (TheStreet) -- SolarCity (SCTY) was gaining 7.4% to $61.30 Tuesday following research notes from Brean Capital and Goldman Sachs (GS), according to The Fly On The Wall.

In its note Goldman Sachs said that SolarCity is set-up favorably ahead of its earnings report. The firm said it expects the company to report deployments in the high-end of its guidance in its quarterly report. Goldman Sachs has a "conviction buy" rating for SolarCity.

Brean Capital helped raise the company's stock with its new "buy" rating for competitor SunPower (SPWR), which also commented on the growth in the Asia-Pacific solar market.

Must read: Warren Buffett's 10 Favorite Growth Stocks SELL NOW: If you own any of the 900 stocks that TheStreet Quant Ratings has identified as a 'Sell'...you could potentially lose EVERYTHING in the next 6-12 months. Learn more. TheStreet Ratings team rates SOLARCITY CORP as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation: "We rate SOLARCITY CORP (SCTY) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow, poor profit margins, generally high debt management risk and feeble growth in its earnings per share." Highlights from the analysis by TheStreet Ratings Team goes as follows: Net operating cash flow has significantly decreased to -$8.43 million or 113.02% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower. The gross profit margin for SOLARCITY CORP is rather low; currently it is at 20.82%. It has decreased significantly from the same period last year. Despite the weak results of the gross profit margin, the net profit margin of 56.43% has significantly outperformed against the industry average. The debt-to-equity ratio of 1.08 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, SCTY has managed to keep a strong quick ratio of 1.89, which demonstrates the ability to cover short-term cash needs. SOLARCITY CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, SOLARCITY CORP reported poor results of -$0.75 versus -$0.56 in the prior year. For the next year, the market is expecting a contraction of 244.0% in earnings (-$2.58 versus -$0.75). Compared to other companies in the Electrical Equipment industry and the overall market, SOLARCITY CORP's return on equity significantly trails that of both the industry average and the S&P 500. You can view the full analysis from the report here: SCTY Ratings Report STOCKS TO BUY: TheStreet's Stocks Under $10 has identified a handful of stocks that can potentially TRIPLE in the next 12-months.Learn more.

Stock quotes in this article: SCTY 

3 Distributors Stocks to Buy Now

Popular Posts: 7 Biotechnology Stocks to Buy Now10 Best “Strong Buy” Stocks — UA POWR QIHU and moreHottest Energy Stocks Now – RIG ESV DO ATW Recent Posts: 4 Health Care Provider Stocks to Buy Now 5 Stocks With Bad Earnings Growth — BBRY TCI ZQK RBCN ARL 5 Stocks With Prime Earnings Growth — OME KNOP LRCX CODI INOC View All Posts

This week, three distributors stocks are improving their overall rating on Portfolio Grader. Each of these rates an “A” (“strong buy”) or “B” overall (“buy”).

Edgen Group Inc. Class A () is bettering its rating of C (“hold”) from last week to a B (“buy”) this week. Edgen Group is a holding company which distributes specialty products to the energy sector. In Portfolio Grader’s specific subcategory of Equity, EDG also gets an A. .

This week, United Rentals, Inc.’s () ratings are up from a C last week to a B. United Rentals is an equipment rental company that serves construction and industrial companies, manufacturers, utilities, municipalities, homeowners, and government entities. With a price of $93.25, it is above the 50-day moving average of $89.22. .

Aircastle Limited () is seeing ratings go up from a C last week to a B this week. Aircastle is engaged in acquiring, leasing, and selling commercial jet aircrafts to passenger and cargo airlines throughout the world. .

Louis Navellier’s proprietary Portfolio Grader stock ranking system assesses roughly 5,000 companies every week based on a number of fundamental and quantitative measures. Stocks are given a letter grade based on their results — with A being “strong buy,” and F being “strong sell.” Explore the tool here.

3 Stocks I'm Watching Closely This Earnings Season

Earnings season kicks off this week, which means a lot of early mornings and long nights for Wall Street analysts. For us Fools, earnings season is really just a time to check in with the companies we own, in order to make sure the investment thesis remains intact. That being said, there are some companies that do need to be watched a bit more closely, which is why I'm going to be paying special attention to the following three names.

Nuverra Environmental Solutions (NYSE: NES  )
It was a tough quarter for Nuverra as its name change didn't help boost its stock price, which declined by almost 33%. Other than slightly missing earnings due to weather issues, it was a fairly quiet quarter for the company. The only other real news during the quarter was the company's acquisition of a solid waste disposal site in the Bakken.

This quarter I'll be looking to see if the company changes its guidance for full-year revenue and adjusted EBITDA. The guidance numbers to watch are revenue of $750 million-$825 million and adjusted EBITDA range of $200 million-$225 million, which the company held steady even after missing guidance last quarter due to the aforementioned weather problems. If Nuverra misses again, causing it to reduce guidance, it could signal that the company is experiencing deeper problems than expected. Meanwhile, reaffirming guidance at the upper end of the range would be a welcome sign that its full-cycle environmental solution is really beginning to catch on with customers.

SandRidge Energy (NYSE: SD  )
While all has been quiet at Nuverra, the same can't be said for SandRidge. The company, which was under pressure from activist investors, decided it was time to show founder and former CEO Tom Ward the door. Now with new leadership in place, SandRidge needs to move past its past and begin to live up to its promise.

That promise is as vast as its massive 1.85 million net acre position in the Mississippian Lime formation. With enough capital to develop the play through 2015, the key for the company now is to simply execute on its plan to produce high rates of return from the play. That means I'll be keeping an eye on well costs as well as oil production. The key numbers here are well costs below $3 million per well and oil production growth of at least 64% in the Mississippian. If SandRidge can remain on pace to meet or exceed those numbers this quarter, it should bode well for its future.

Magnum Hunter Resources (NYSE: MHR  )
The last company I'll be watching this quarter is Magnum Hunter, which will finally be delivering its first quarter results on July 9. The company has been behind in providing investors with results this year after it fired its auditors, which caused its annual report, and subsequent first-quarter report, to be delayed.

I'll not only be interested to see what management has to say about its first quarter, which ended in March, but also what it has to say about the just ended June quarter. The key areas to watch are the company's liquidity as well as an update on its Utica drilling program. While the sale of its Eagle Ford acreage added to the company's financial flexibility, there isn't a whole lot of wiggle room looking ahead to next year. That's why it will be important to see if the company has made any progress on its non-core asset sales. Execution on those asset sales, as well as on the Utica, is key for investors if the company is to deliver solid gains in the years ahead.

Final Foolish thoughts
I'm most interested to hear what the new management team at SandRidge has to say. The company has vast potential and its trading at a real discount to that potential. The problem is that the company's checkered past seems to be clouding its future potential. 

Finally, while all three stocks are benefiting from the elevated price of oil, I wouldn't say that these are the best three names to play oil these days. To get those names, you need to check out The Motley Fool's "3 Stocks for $100 Oil." For FREE access to this special report, simply click here now.

Report: Pfizer Inc. Attempted to Buy AstraZeneca plc (PFE, AZN)

According to an article on Bloomberg on Sunday evening, pharma giant Pfizer (PFE) was recently in talks to purchase London-based biopharmaceutical company AstraZeneca (AZN). The negotiations have since ended, and the companies are no longer discussing the purchase.

Bloomberg referenced two people familiar with the matter, regarding details of the discussions, and these two people also insist that the talks happened months ago, and that the deal is no longer active. The news was originally reported by the Sunday Times in London, which claimed that Pfizer had offered $101 billion for AZN. Neither Pfizer or AstraZeneca has confirmed any of the report.

For more on pharmaceutical companies, check out How Much Dividend-Paying Drug Makers Spend on Research and Development.

Pfizer stock was up 45 cents, or 1.49%, in pre-market trading. YTD, the stock is down 0.69%.

AZN stock was up $3.35, or 5.28%, in pre-market trading. YTD, the stock is down 8.4%.

Halliburton Company Turns to Profit in Q1; Beats Estimates (HAL)

Before Monday’s opening bell, Halliburton Company (HAL) reported higher first quarter financial results that came in above analysts’ estimates. 

HAL’s Earnings in Brief

HAL posted Q1 earnings of $622 million, or 73 cents per share, compared to a loss of $18 million or 2 cents per share, a year ago. Revenue increased to $7.35 billion from $6.97 billion last year. On average, analysts expected to see earnings of 71 cents per share and $7.24 billion in revenue. HAL noted that it expects its earnings to grow by 25% in the second quarter.

CEO Commentary

Dave Lesar, chairman, president and CEO of HAL commented:  ”I am pleased with total company revenue of $7.3 billion, which was a record first quarter for Halliburton. Operating income of $970 million was 8% higher than adjusted operating income in the first quarter of 2013, and was the result of our double-digit growth in the Eastern Hemisphere.”

HAL’s Dividend

HAL paid its last 15 cent dividend on March 26.  We expect the company to declare its next dividend in May.

Stock Performance

Halliburton shares were up 61 cents, or 1.00% during premarket trading Monday. The stock is up 20% YTD.

HAL Dividend Snapshot

As of market close on April 17, 2014

Click here to see the complete history of HAL dividends.

Sick from work? My grandma would laugh at you

This week I got lucky. I scored a business trip to a Lockheed Martin facility where they make all kinds of warfare simulators—everything from tank mock-ups to pretend F-35 jet fighters. I got to play, but even playing was stressful.

I can't imagine how stressful it must be in real life, being a soldier on patrol in hostile territory for hours at a time.

Well, actually, I can imagine it a little bit. It's called "going to the office."

My job is sooooooo stressful. You have no idea.

We Americans love talking about how stressful our work is, how tough it is to juggle all the demands put upon us, as if our ancestors wondering if they had enough food for winter were living on Easy Street.

My grandparents scraped out a living on a farm in Arkansas. My grandmother gave birth ten times. Eight babies lived. My mom was the youngest (and she hopped a train to California pretty much the day she turned 21).

The few photographs I've seen of my mother's mother show a woman who looked pleasant but serious. Grandma didn't need to "Lean In" and network with others to find a work-life balance. She didn't need anti-anxiety meds. By all accounts, she wasn't especially stressed. She was too tired to be stressed.

Now, in the 21st century, we are a nation filled with people who are stressed about being stressed. We brag about how exhausted we are. I do it all the time. Maybe if I had to raise eight kids and run a farm, I'd be too exhausted to talk about how exhausted I am.

A recent survey by Monster.com found that 2 out of 5 Americans have actually changed jobs because of a stressful work environment. More than half say they experience "very stressful lives." Meanwhile, in India, the number of people changing jobs due to stress is only 19%. Perhaps the prospect of no job is even more stressful there.

'Physical ailments'

What is the biggest cause of stress? Forty percent of respondents to the Monster survey said "professional relationships with their boss is the great! est cause of work stress." That's not even counting the stress related to a personal relationship with the boss.

We're so stressed out at work it's making us sick. Monster.com's survey claims 80% of us—4 out of 5!—have experienced "somewhat severe illnesses including missing time at work and other physical ailments" due to work stress. Seven percent say the stress has even sent them to the hospital!

When one out of every dozen working Americans is being hospitalized over work stress, either this survey is out of whack or we have a serious problem on our hands.

Perhaps we need to put it all in perspective. I realize jobs are important because they pay the bills, keep us off the streets and put food on the table. But it's all relative. Living in North Korea is "very stressful." Trying to avoid roadside bombs in Afghanistan is "very stressful." Sitting with a sick child in the hospital is "very stressful."

Being passed over for promotion, dealing with a worthless manager, fighting for a better parking space ... my grandmother would look at you like you were an idiot. Here's the upside to all this: If these things stress you out, it means the important things in life must be fine.

So, yes, I will continue to complain about stressful deadlines, grueling hours and the need for "date nights." And then I will thank God my grandparents worked so hard, so I don't have to.

MORE: The best (and worst) jobs for 2014

MORE: The No. 1 source of stress at work

MORE: Workaholic Americans don't take all their vacation

CNBC is a USA TODAY content partner offering financial news and commentary. Its content is produced independently of USA TODAY.

Why Has Kraft Stock Soared After Its Spinoff?

When shares of old Kraft stock broke into two components last fall, most investors expected the higher-growth Mondelez International (NASDAQ: MDLZ  ) global snacks business to be the more attractive segment of the two post-spinoff companies. Yet the North American grocery business that now trades as Kraft Foods Group (NASDAQ: KRFT  ) has shown surprising success as an independent company, and as it's turned out, shares of the new Kraft stock have done a lot better than Mondelez during the first nine months of their separate existence. Let's take a closer look at exactly how the new Kraft has done so well and what's in store for its stock going forward.

The appeal of the food business
The old Kraft was a monster food company, so it's important to know which company got which brands in the spinoff. Mondelez kept its global snack-food business, which include brands like Nabisco, Cadbury, Oreo, and Trident. Meanwhile, Kraft got equally familiar grocery-store brands including Jell-O, Oscar Mayer, Velveeta, and Capri Sun, as well as its namesake Kraft lines of products such as macaroni and cheese.

The original reason for the split was to allow Mondelez to free itself from what was perceived as a mature, slow-growth grocery business. With North America having fewer high-growth prospects than international markets, especially in emerging markets, the new Kraft was expected to lag behind while Mondelez could be more nimble in taking advantage of growth opportunities around the world.

But Mondelez has suffered some headwinds. In its most recent earnings report last month, Mondelez reported weakness in its coffee segment, forcing it to cut prices in Europe in order to stay competitive. Moreover, Hershey (NYSE: HSY  ) has stepped up its presence in the lucrative emerging market regions, where Mondelez has enjoyed substantial revenue growth. In addition, the rise of private-label offerings from ConAgra (NYSE: CAG  ) as it works with grocery store chains to offer competing products to those Mondelez offers has hit the global snack company especially hard, given its many premium-priced snack offerings that especially lend themselves to private-label knockoffs.

Meanwhile, Kraft has been the one to seek to breathe new life into some of its products. By converting its once-popular Kool-Aid from powder to liquid, Kraft is hoping to get new customers interested in the product as sales have been weak lately. Moreover, the company has reported 16% growth in its Velveeta sales, and other important brands, such as Miracle Whip and its Oscar Mayer packaged meat line, might well have similarly surprising potential.

Making shareholders happy
But what's really pushed Kraft stock higher has been its attention to shareholder-friendly initiatives. Understanding that revenue growth isn't the only important factor for investors, Kraft has moved to make its business more efficient, cutting costs and reducing unnecessary bulk in its operations. By producing more free cash flow and generating greater returns on its invested capital, Kraft hopes to follow in the dividend-paying footsteps of the old company.

Kraft/Mondelez Total Return Price data by YCharts.

That emphasis came out in its most recent quarterly report last month, when Kraft crushed earnings expectations in producing 2% growth in sales. Operating income rose 9% on gains in productivity and falling overhead, and although the company didn't raise its earnings guidance for the full year, Kraft is clearly putting in place the drivers it needs to accomplish its long-term goals.

Most importantly, dividend investors prefer Kraft to Mondelez, given Kraft's dividend yield being more than double what Mondelez pays out. Greater growth could help Mondelez raise its payout more sharply in the future, but with Kraft's focus on cash flow rather than growth, it should have fewer needs than Mondelez to reinvest cash into business growth.

Keep watching
Kraft stock has proven to be a smart investment for those who held onto their shares after the spinoff. For investors, the performance of Kraft stock serves as a good reminder that fast growth isn't always a necessary component of strong stock performance, especially when moves to boost efficiency pay off on the bottom line.

Want to know more? Read about the company in the Motley Fool's premium report, in which we guide you through everything you need to know about Kraft, including the key opportunities and threats facing the company. To get started, simply click here now.

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

The Biggest Companies That Don't Pay Dividends -- But May Be About To

This month marks the five-year anniversary of an era many would rather forget. 

The S&P 500 fell nearly 10% in June 2008, and investors began to brace for an eventual market crash later in the year. That was also a time when companies sealed the hatches and girded for tough days ahead, in many instances eliminating dividends that had been in place for many years. 

Though many companies eventually restored those dividends, some companies are only now contemplating such a move. By following a few simple markers, you can make some well-informed predictions about which companies could soon issue a fresh dividend.

Before digging into these markers, let's take a quick look at the 15 largest companies in the S&P 500 that do not currently pay a dividend.

Right away, we can eliminate certain types of companies from contention, simply because they have had many decades to pursue a dividend policy, and never have done so. Warren Buffett's Berkshire Hathaway (NYSE: BRK) is a perfect example. His company is such an active acquirer of businesses that retaining cash flow is a key ingredient of success.

 

This, of course, may change when Buffett relinquishes control. After all, Berkshire has now generated more than $10 billion in free cash flow in each of the past four years, after never having generated more than $7.2 billion in free cash flow in any prior year in its history. The company's gross cash balance reached $47 billion at the end of 2012, and the topic of a dividend is surely raised at the company's board meetings.

For that matter, it's unwise to expect an imminent dividend from the other two $100 billion companies on the list, Amazon.com (Nasdaq: AMZN) and Google (Nasdaq: GOOG). These companies are aggressively investing in future growth initiatives in their bid to conquer the technology landscape. 

Neither company is showing signs of maturity just yet -- but it's hard to ignore Google's ever-rising free cash flow, which hit $13.3 billion in 2012, or its $48 billion gross cash balance at year end. If Google used all of its free cash flow for a dividend, then the payout would be $40 a share, good for a 4.6% yield.

Earlier, I noted key markers to look for. Free cash flow and current cash are two of them, along with capital spending. A great industry example is Big Pharma, which includes major drug stocks such as Merck (NYSE: MRK), Pfizer (NYSE: PFE) and others. 

These firms long ago realized that that free cash flow handily exceeded their capital spending needs (mainly research and development), and to attract investor interest, a dividend made sense. (A caveat: These companies are growth constrained and often can't afford dividend hikes. Merck's dividend, for example, has barely budged since 2004).

Yet you'll notice a pair of large biotechs on the table above, Gilead Sciences (Nasdaq: GILD) and Celgene (Nasdaq: CELG). With each passing year, these companies are starting to resemble the Big Pharma stocks with their rising free cash flow that now exceeds capital spending. Why don't they pay dividends? Short answer: They will. 

In fact, biotech pioneer Amgen (Nasdaq: AMGN) has already kicked off the trend, with its first-ever dividend in 2011 (for 56 cents a share) and a payout that now approaches $2 a share.

Not paying a dividend made sense for Celgene in 2004 through 2008, when the company generated an average annual free cash flow of $125 million. That figure hit $800 million in 2009 and $1.6 billion by 2011, and is on track to exceed $2 billion this year. Gross cash now exceeds $4 billion, even after Celgene has acquired a variety of smaller biotechs over the past five years. 

The fact that Gilead Sciences has never had a dividend is even more perplexing. Free cash flow has averaged $2.5 billion a year over the past five years, and as I noted this week, a soon-to-be-approved new drug may take that cash flow even higher. 

In the past few years, Gilead has taken advantage of a weak stock price to buy back more than 300 million shares. Yet with shares now breaking out to new heights, buybacks make less sense. Of these two, Gilead looks to be a first mover in terms of a dividend initiation, though Celgene and Biogen Idec (Nasdaq: BIIB) may not be far behind.

The No-Brainer Pick
Yet there is one company on the table above for which a dividend -- and a good one at that -- appears to be in the offing. It's a company that once paid out annual dividends in excess of $10 a share, was decimated by the 2008 financial crisis, and is now a lot healthier than many realize. 

I'm talking about American International Group (NYSE: AIG), the once-reviled insurer that needed a massive government bailout but has since exited many risky lines of business. AIG now focuses on a pair of insurance lines (life and property/casualty) that generate steady predictable cash flow. In 2012, free cash flow exceeded $3.5 billion, and analysts see that figure hitting $5 billion by next year. With 1.7 billion shares outstanding, a $2-a-share dividend would be quite feasible, and as interest rates rise (boosting AIG's returns on its gross cash holdings), this dividend could climb higher from there.

Frankly, with shares trading well below tangible book value of $65 a share, a stock buyback makes even more sense. CEO Robert Benmosche discussed both of these options in a recent interview with CNBC.

Risks to Consider: Dividend growth has been a key investment theme in recent years -- yet as we saw in 2008, a weak economy can lead to dividend cuts, so don't be alarmed if your dividend-paying stock does so. History says that dividends will be back at full strength after the economic weakness passes.

Action to Take --> Don't just focus on companies that don't yet have dividends. Some companies that have only recently begun to offer a payout also have the potential for robust dividend growth. My favorite example is Ford (NYSE: F), which in my view could triple its current 40-cent-a-share dividend over the next few years without making a dent in the balance sheet.

If you are looking for potential dividend initiators, focus on companies with a history of solid and rising free cash flow, manageable (and preferably falling) levels of debt, and minimal needs for cash in terms of capital spending or acquisitions.

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

Test Drive: Electric Chevy Spark a powerhouse

As much torque as a Hemi V-8, less rear-seat space than a picnic basket, an absurdly high price unless you qualify for all the "eco" credits.

But the Chevrolet Spark EV, on sale since June in California and Oregon, has a premium feel that we didn't notice in the gasoline model. No doubt the extraordinary sling-about go-power of the EV put a higher-level patina on the whole car.

Spark's a minicar, a little bigger than a Fiat 500. The gasoline models are priced about 58% of the EV, so it's hard to imagine you'd save enough on fuel to pay the difference.

And you're not really the green hero you might imagine. While there's no exhaust emission from the car, you've tapped into the utility company's power grid to recharge, and nearly half the electricity flowing on that grid, on average, is generated by generators burning coal.

Juice is cheaper than gasoline now, but if electrics catch on, the price of power will rise with increasing demand. That's because the grid's about maxed out, and it's very expensive to add more power plants. Carried to extremes, it's fair to argue that your EV raises my electricity bill.

But how is the Spark EV as a car, a drivable thing that gets you here and there? Pretty sweet, actually.

First, it's simple. Hop in, push the ignition switch, pull the lever into gear and away you go.

Second, it's comfy if you're in front. Seats are well-formed and controls and instruments are about where they ought to be.

Third, the buggy flat goes, at least once it's rolling a couple miles per hour. The one-speed transmission isn't a gem for zooming away from a dead start, but the 400 pounds-feet of torque the electric motor has is instantly available and slings the Spark EV forward delightfully once underway. Chevy quotes 0 to 60 mph in 7.6 seconds. We bet it could be 6 seconds or less if there were a transmission with low gearing to get rolling.

Fourth, Chevy parent General Motors does in-car electronic connectivity linkup very nicely. The MyLin! k setup (shared with the gas version of Spark) made fast and faithful friends with Test Drive's too-hip Windows phone.

The connection is fully integrated via Bluetooth, no wire connection needed (unless you want to plug into the 12-volt outlet to charge). All phone controls are available via the car controls. When playing phone tunes, the screen in the center of the dashboard shows title and artist, whether the music is stored on the phone or piped in via the phone's Pandora application.

The Chevy allows switching tracks and adjusting the volume via the dashboard — things you have to do on the phone instead of the car in some lesser system. Picking up the phone to find another song is a driver distraction that Spark avoids.

It's enough to make Ford Sync owners weep.

What you might dislike about an otherwise appealing little go-buggy:

Hooking up the charging cable. Minor, but more work than stuffing a gas nozzle into the fuel filler. The fat electric cord used by 240-volt chargers is stiff and kinky and unpleasant to coil up when out of use. Almost always dirty, too, because it drapes along the ground to reach your car.

Short range. Well, 82 miles, government rated, is in the ballpark for mainstream electrics, but unless all your miles are home to work and back, you're going to start feeling that "range anxiety" they talk about.

Driving highway-fast, with lights and climate control operating, we burned off 1.3 miles of indicated battery range for every mile driven. That was a thirsty surprise. The kick-it-and-go suburban driving we did took only about 0.9 of a mile of range for every mile driven.

Back seat. So cramped for knee and leg space that even the kids will yowl. The head restraints are terrible, too. They'll drop down when unused to improve rear visibility, but that wrenches the head and neck of the people who hop in and forget to raise them. Once raised, they often hit the skull at just the wrong spot.

It's more practical! to have ! a back seat than not, but Spark's is an impractical back seat, at best.

Styling. If you hate how it looks, of course, you wouldn't buy it in the first place. But if you're on the fence, be warned that the stumpy, truncated appearance seems like a car trying to emerge from the industrial equivalent of a photo zip file, and not quite making it. Reasonable people often disagree on matters of taste, so you might think Spark's eye candy.

Most telling? In a driveway full of appealing machines, including BMWs, which car did we take for that midnight milk run, and fast hop to pick up a prescription? Spark EV. Easy to use, small enough to park almost anywhere. And, yum, wonderfully powerful.

We hope GM decides not to limit it to California and Oregon much longer. The world at large needs a shot at an EV that'll blow the doors off some sporting machines. The sooner we make this fuel-saving business a joy ride, the sooner we'll have a lot of converts.

CHEVY SPARK DETAILS

What? Electric-power version of Spark four-door, four-passenger, front-drive minicar.

When? Went on sale in California and Oregon mid-June. Sale in other areas under consideration.

Where? Made in South Korea using U.S. drivetrain.

How much? $27,495, including $810 shipping for 1LT base model. Similarly equipped gasoline version is $15,820.

Up-level 2LT test car, which has different upholstery and steering-wheel trim, is $27,820.

Some EV buyers qualify for as much as $7,500 in federal tax credit. California gives $2,500 credit. Lease is $199 monthly for 36 months, $999 down.

Most owners will spend another $1,000 or more for a 240-volt charger to cut the long recharging time using the standard-issue 120-volt charger.

What makes it go? Electric motor rated 130 horsepower and 400 pounds-feet of torque, driving front wheels through a single-speed transmission.

How big? About 5 inches longer, an inch narrower than a Fiat 500. Maximum ! cargo spa! ce, 23.4 cubic feet.

How thirsty? Electrics are rated differently from gasoline, diesel and hybrid models. Government says Spark EV will go 82 miles on a full charge, and has mile-per-gallon equivalent ratings of 128 mpg in the city, 109 highway, 119 mpg-e in combined city/highway driving; uses 28 kilowatt-hours per 100 miles.

Test car observations: Full charge showed range of 82 to 85 miles on instrument panel. High-speed highway driving used 1.3 miles of range for every mile driven. Vigorous suburban driving used 0.9 mile of range for every mile driven.

Trip computer showed overall power consumption of 24.4 kwh per 100 miles. According to government nationwide averages, a kwh is about 13 cents, equating to $3.17 in electricity per 100 miles.

Gasoline Spark is rated 32 mpg in combined city/highway, or 3.13 gallons per 100 miles. At $3.40 a gallon, a recent nationwide average, the gasoline Spark would use $10.64 in petroleum fuel per 100 miles. That's nearly 3.4 times the cost of electricity to go as far.

Overall: Gotta love that torque; a real scooter. Back seat's a joke. Cheaper fuel cost can't erase higher purchase cost.

4 Dates for Netflix Investors to Watch This Summer

Netflix (NASDAQ: NFLX  ) is going to have a busy summer. There will be a few interesting dates for investors to watch out for next month. New shows are coming. Old shows are leaving. There's also the theatrical debut of a very important movie, and we have what should be one of the most important quarterly reports in the company's history.

No pressure, Netflix. No pressure.

Let's go over four dates in July that may move Netflix stock.

July 1
Content goes both ways at Netflix. The shows going out never make as much noise as shows being added to the service's growing digital catalog, but licensing deals for shows and movies all have expiration dates on Netflix. The dot-com darling simply has to pick what's worth paying to keep arounjd.

Families with young children found that out the hard way last month, when Viacom's (NASDAQ: VIA  ) Nickelodeon and Nick Jr. content was retired from Netflix's streaming library. Kids said bon voyage to SpongeBob SquarePants and adios to Dora the Explorer.

There were also a few of Viacom's MTV and Comedy Central shows that went away, but the real hit to Netflix came from the departure of the popular Nick programming for kids. Well, come next month adults will get a taste, as Downton Abbey goes away. Netflix's streaming rights end on July 1. In a shrewd coincidence, Amazon.com (NASDAQ: AMZN  ) has picked up streaming rights for both Viacom's content and the popular BBC series.

It there's an outcry about the end of Downton Abbey on Netflix, you can bet that Amazon will be a beneficiary. That's not the kind of attention Netflix wants.

July 11
Thankfully, Netflix isn't just losing content. A smart strategic move by the company has been the push to bankroll deals for original or exclusive first-run content.

After the success of House of Cards in February and Arrested Development last month, don't be surprised if buzz builds for Orange Is the New Black. The show centering on a prison for women is the handiwork of Weeds creator Jenji Kohan.

Sure, Netflix hasn't exactly hit it out of the park in terms of mass appeal with Lilyhammer and Hemlock Grove, but every show is an opportunity for Netflix to remind subscribers why they should stick around. The Orange Is the New Black trailer is also far more compelling than the subject matter, so don't be surprised if it's the first sleeper hit for the service when it rolls out on July 11.

July 17
DreamWorks Animation (NASDAQ: DWA  ) hits theaters everywhere with Turbo on July 17. The latest computer-rendered release out of the studio behind Shrek, Kung Fu Panda, and Madagascar is a movie about an insanely fast snail with dreams of racing in the Indy 500.

Why will Netflix investors want to keep an eye on a movie playing on the big screen? Well, it's not just about the long-term deal with DreamWorks Animation that will bring future releases to Netflix's streaming platform. This movie will be even more important, because Netflix has signed up to be the exclusive home for Tubro: F.A.S.T., a show based on the movie's characters.

Netflix will begin streaming the new show in December, so the hope is that it's a big enough blockbuster that it will help young children forget about the Viacom content that went away in May and has now made a new home at Amazon's Prime Instant platform.

July 24
Netflix has yet to announce the date for its second-quarter report, but it has historically taken place in late July. There's a lot riding on this report. After the blowout subscriber growth and dramatic fiscal improvement during Netflix's first quarter, expectations are high for the good times to keep rolling at Netflix.

After the company topped $1 billion in quarterly revenue for the first time during the first three months of the year, analysts are looking for sequential improvement. Wall Street sees profitability nearly quadrupling since last year's second quarter on a healthy 21% year-over-year spike in revenue.

There have been no indicators that Netflix won't be able to live up to these lofty expectations. The service's popularity is exploding worldwide, with more than 36 million global streaming subscribers. The stock has been one of the market's biggest winners since bottoming out last year, and a strong report will be necessary to keep that momentum going.

More than four dates
Naturally, there will be plenty of important dates for Netflix next month. Analysts will make moves. Content deals will be announced. Rivals will jockey for position. However, we already know these four dates will be material to the company's success this summer for investors.

Hold on tight, Netflix investors. It's going to be a wild summer.

The tumultuous performance of Netflix shares since the summer of 2011 has caused headaches for many devoted shareholders. While the company's first-mover status is often viewed as a competitive advantage, the opportunities in streaming media have brought some new, deep-pocketed rivals looking for their piece of a growing pie. Can Netflix fend off this burgeoning competition, and will its international growth aspirations really pay off? These are must-know issues for investors, which is why The Motley Fool has released a premium report on Netflix. Inside, you'll learn about the key opportunities and risks facing the company, as well as reasons to buy or sell the stock. The report includes a full year of updates to cover critical new developments, so make sure to click here and claim a copy today.