Ford Will Outshine Competitors In 2012

U.S. auto sales spiked in March, a good sign for the improving sector. Auto sales were estimated by LMC Automotive to have risen by 6% to a four-year high. The firm also predicted that sales would continue to improve throughout the year and that some automakers could reach all-time sales records. Chrysler reported a 34% increase in U.S.-based sales in March, while competitors General Motors (GM) and Ford (F) also reported increases of 12% and 5%, respectively. General Motors moved down on the news while Ford moved up, but both stocks are ready to trend higher.
March was Ford's best month in five years. Monthly sales reached 223,418 vehicles, a 5% improvement from last month. Sales in four of Ford's top-line models increased to new highs, including the Fusion, Focus, Edge and the F-series pickup trucks. The company has increased sales by 9% in the first quarter of 2012, a continuation of the trend in car sales started last year.
Ford has been improving sales and gaining market share since last year, but the stock price does not reflect this yet. The stock has been trading between $12 and $13 for more than three months, and is only valued at 6.5 times earnings.
Signs of growth in the U.S. auto market is a reassuring indication of an improving economy. However, it would be nice to know if people are merely taking advantage of low rates and great deals to replace old vehicles, or if the market is really back for a sustainable period of time. Subprime buyers helped drive the new sales figures, drawn by deals not available to them since the financial crisis.
There is other good news too, news that supports the strengthening trend in U.S. auto sales. The final number for fourth-quarter GDP held stable at 3%. There were 243,000 jobs added in January, and other unemployment statistics are still trending down. The four-week moving average of initial claims, the number of continuing claims and total claims all continued to trend down.
Initial jobless claims data were getting rosy until revisions to the week ending March 17 put a stop to what was shaping up to be a nice downward trend in initial unemployment claims. Now, with the revisions it looks as if layoffs and job losses are beginning to bottom out and there is a renewed risk that unemployment could rise from four-year lows. A rise in unemployment could derail the trend in car sales.
Ford is ready to move higher. I think the stock is ready to explode to the upside. The question is what will be the catalyst. The company should be releasing earnings in the next month and that could be it. The stock could easily gain 15%-25% and trade in a range between $15 and $16 dollars. The dividend, around 1.5% at the current prices, comes as an added bonus.
General Motors is doing well too, seeing strong improvements since it emerged from restructuring. The company's March sales improved by 12%, led by small cars and crossovers with over 30 miles per gallon. The total sales of all General Motors passenger vehicles increased by 22% in the month. CEO Daniel Akerson seems to be getting the company under control, but it is still carrying some dead weight. Sales of Buick and Cadillac both fell by more than 13% in March. The two brands only represent a small percentage of General Motors' sales but remain a drag on improvements.
I do expect to see a continuation of market leadership from the company. It is scheduled to unveil a number of redesigned vehicles during 2012 and expects to have updated vehicles in 60% of market segments by year-end. Continued competition with foreign and domestic automakers will help the entire industry improve. Competition is good for business and is what's bringing the U.S. auto market back.
Both companies have been improving in overseas markets, despite worries of slowing global growth. General Motors set another February sales record in China by selling over 240,000 vehicles. This was a 30% increase from February last year. Ford Export and Growth Director Hal Feder recently reported that the Export and Growth segment set an all-time monthly sales record in February 2012 and continued a 15-month streak of new records.
General Motors stock has been trading in tight range over the last three months, just like Ford. Currently trading around $26, the stock is building support and looks as if it is ready to move to the upside as well. Shares of General Motors could easily gain $6-$7 and trade in the range between $32 and $35. The company comes with a caveat Ford does not: The government still owns a large chunk of the company stock and will be a seller when the price moves high enough.
Asian-based competitor Toyota Motors (TM) also increased its U.S. sales in March. The company increased sales by over 15% but failed to meet analyst expectations. Consensus estimates expected a gain of 21%. March marked the first time since 2008 that Toyota sold more than 200,000 vehicles in the U.S. Toyota stock is trading around $86.50 and looks extended. The market in this stock is thinly traded and is not as good a choice to ride the improving U.S. market. The stock is grossly overvalued at 56 times earnings compared to Ford and General Motors, which are both valued around 6.5 times earnings.
Nissan Motor (NSANY.PK) reported a 12.5% increase in March sales and set a company record. Sales were helped by incentives that helped draw buyers into the market. Nissan is trying to sell off its remaining Altimas in preparation for the release of an updated version scheduled to be released in July.
German automaker Volkswagen AG (VLKAF.PK) reported that sales rose 35% in the month and broke a record last set in 1973.
The data clearly show that the U.S. auto market continues to improve. The trends in sales that began last year are expected to continue this year. The stock of U.S. automakers is undervalued compared to earnings and is poised to rise. I think that Ford is the clear choice to ride this market. Ford is undervalued compared to the Japanese automakers and insulated from the European debt crisis, unlike German-based Volkswagen. Ford is stronger than General Motors, simply because it was able to restructure and regain its competitive edge without any government assistance. General Motors carries the stigma of bailout money and bankruptcy. The effects of the bailout will impact General Motors' price until the government sells it shares in the company and long after. Ford, unlike General Motors, also pays a dividend, which adds a little extra to the trade. Both companies are going higher; Ford is just a better choice.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Down Memory Lane as Dow Closes Above 13000 - SmartMoney.com

Also See

• The Dumbest Investment Move
• With Funds, How Important Is Family, Really?
• Dow Hits 13,000, But What Next?

After flirting with the milestone for days, the Dow managed to close above 13000 today -- a mark not reached since 2008.
It may just be a number -- the market didn't undergo a magical transformation upon hitting 13000 -- but such milestones do have a psychological impact, experts say. And even if pronouncements made following big numbers have a history of being way off base, investors and analysts just can't help speculating. "They're really psychological levels that people can relate to," says Scott Wren, senior equity strategist for Wells Fargo Advisors. "Investors think, 'When was the last time we were here?'"

A Brief History of Market Milestones

2:20

As the Dow pierces 13,000 on Friday, Jonnelle Marte joins Markets Hub with a look back at other milestones. Photo: Associated Press.

As the market nears 13000 this time around, some investors are reflecting on how far they've come since the financial crisis. While many recovered what they lost in 2008, others are still trying to bounce back. The average participant in a 401(k) plan broke even between 2007 and 2010, according to Vanguard. Some investing pros also view the Dow's recent gains as a sign that markets are calming and a sign that gains might continue in the coming months.
But for all the hoopla around market milestones, investing pros say these thresholds don't really move markets too much up or down. Some jittery investors come off the sidelines and back into the market after reaching such levels, while others use the opportunity to sell some shares and take gains. Either way, experts say investors often get carried away with emotion and ignore key factors like stock valuations, monetary policy and economic growth that have a bigger impact on markets. That's why it pays to look back at the last few times stocks hit a big milestones and whether investors' expectations weren't met. "We need to learn from history," says Diane Pearson, an adviser with Legend Financial Advisors in Pittsburgh.
Here is a recap of some of the Dow's biggest milestones, how investors viewed the market at the time, what really happened and what lessons were learned.

Dow 5000

• November 21, 1995

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What the pros predicted: When the Dow crossed the 5000 mark for the first time in November 1995, President Bill Clinton was in his second year of office, the U.S. was coming out of a recession and the world was buzzing about the newly launched World Wide Web. Having crossed 4000 just nine months before, pros expected more rally ahead.
What happened: The threat of another recession interrupted some of that run-up, but the U.S. recovered and technology stocks took off as anticipated, says Wren. By Valentine's Day 1997, the Dow had topped 7000.
Lesson for investors: Watch trading volume. While stocks kept increasing, it was a minority of investors pushing stocks higher, says Pearson. If the broader market isn't behind a move up, it may not be sustainable, says Pearson.

Dow 10000

• March 29, 1999

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What the pros predicted: Investors bedazzled by the Internet began to dump other quality stocks to get a piece of the technology sector, driving the Dow above 10000 for the first time in March 1999. Some pros began to question whether traditional measures like valuations, which showed that stocks were beginning to get expensive, would still matter in a post-web world where stocks were expected to keep soaring. "We had that feeling of unlimited potential," says Wren.
What happened: The tech bubble burst and stocks peaked at 11723 in January 2000. The Dow tumbled in the following years, bottoming out at roughly 7200 in October 2002.
Lessons for investors: Don't ignore valuations. The fact that the rally was led by two sectors -- technology and telecom -- should have been a warning sign that it was not sustainable, says Wren. And many investors need to have a sell strategy for taking profits and cutting losses when stocks are on their way down, says Pearson.

Dow 12000

• Oct 19, 2006

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What the pros predicted: The Dow had risen 12% so far that year, as both regular investors and fund managers loaded up on blue chips. And while some investing pros raised red flags about the slumping housing market (it was also the 19th anniversary of the 1987 stock-market crash), many other analysts and fund managers said the rise would continue so long as inflation and interest rates remained in check.
What happened: Stocks would shoot up another whopping 2000 points over the next nine months, peaking at about 14000.
Lesson for investors: When formerly jittery investors throw caution to the wind and starting snapping up stocks, analysts say the market may be due for a correction -- or a crash. By mid-2008, stocks would be begin their steep descent back down (see next slide) and the U.S. would see its worst downturn since the Great Depression.

Dow 13000

• April 25, 2007

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What the pros predicted: After the Dow doubled in five years to reach 13000 in April 2007, investors were emboldened by a growing global economy, a booming housing market and low interest rates. Optimistic investors briefly pushed the Dow to 14000 just three months later and many expected the run to continue.
What actually happened: The housing market collapsed and the credit crunch took a toll on businesses, causing stocks to take a 50% dive by March 2009. Unemployment soared, forcing many investors to pull out of stocks and lock in their losses.
Lessons for investors: High levels of debt, at both the individual and business level, can weigh down the economy, says Wren. Many investors also ignored signs that pointed to a strained housing market, he adds. Advisers say investors should remember to scrutinize companies' balance sheets to prioritize low debt and strong balance sheets.

Dow 14000

• July 19, 2007

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What the pros predicted: After the Dow topped two major milestones in nine months, some investors viewed 14000 as just another notch in the market's steady climb up. Encouraged by strong corporate profits, many continued to buy stocks.
What actually happened: The Dow's reign above 14000 was fleeting. Early signs of the credit crisis sent stocks tumbling soon after, and the index plunged below 12000 in the months that followed. The Dow hit 13000 again in 2008 before stocks plummeted to a low of 6547 in March 2009.
Lesson for investors: Many of the largest market moves happened on days when trading volume was low, a sign the gains were artificial, pros say. Investors learned the degree to which high oil prices, a weakening mortgage market and economic uncertainty could take their toll on stocks.

Japan: Assessing The Aftershocks - SmartMoney.com

In the days following Japan's earthquake and tsunami last March, money manager Neil Hennessy had a decision to make. Should he continue with the trip to Tokyo he had planned for April, visit the managers of his Hennessy Select Sparx Japan funds and check on the country where his subadvisory firm manages about $50 million in assets? At the time, Tokyo still trembled with regular aftershocks, and fears ran high of radiation leaks from the nuclear plant to the north. Hennessy's wife and friends bluntly told him to cancel the trip.
But within hours of touching down at Narita International Airport, Hennessy knew he had made the right call. The nighttime view from his 27th-floor room at the InterContinental Hotel sparkled less than on previous trips, because Tokyo's neon lights had gone dark. But instead of being alarmed, Hennessy took the massive civic effort to conserve power as a sign of Japan's ability to surmount the crisis.

Four Japanese Themes

Many pros say it's a bad idea to buy the broad Japanese stock market; rather, you need to pinpoint a strategy. Some options.
Robotics titans.Japan has seen its dominance challenged in the auto and consumer-electronics industries, but most analysts agree that it remains No. 1 in robotics.
Asian connectors. "An increasing number of Japanese manufacturers get up to 25 percent of their revenue from China,"
says Charles de Vaulx,
chief investment officer
of IVA Funds.
Savvy buyers. Japanese firms have a reputation for overpaying for acquisitions, but analysts say many firms today are wisely taking advantage of the strong yen to diversify strategically.
Global-production leaders. For years, Japan's aging and expensive labor force spurred firms to outsource their production. Now many companies do the lion's share of their production abroad, making them far more efficient, pros say.

Now, a year after that visit, Hennessy says that Japan may indeed be one of the best places in the world to find breakout stocks. It's the kind of statement, certainly, that merits a double take or two. After all, this is the same market that many investors have written off as the biggest value trap in the developed world. One of Japan's main stock indexes, the Nikkei 225, was down about 17 percent in 2011, about as much as the indexes of the world's other developed nations (except the U.S.; Standard & Poor's 500-stock index was flat, not including dividends). Long before the cataclysm of Mar. 11, 2011 a tragedy that took more than 15,000 lives, destroyed coastal towns and pummeled the country's industrial supply chain there were plenty of seasoned money managers who wouldn't touch Japan with a 10-foot samurai sword. Real estate prices in some areas have been on a 20-year decline. The country has struggled with an aging population, mounting debt and deflation. What's more, the strong yen has hurt exporters by making their products more expensive abroad.
But Japan is quietly attracting the interest of some big names in investing. The list includes everyone from William Kennedy, manager of the $8.1 billion Fidelity International Discovery fund, who says he's finding "incredibly good companies" there, to a guy named Warren the Oracle of Omaha says he's shopping for a "big investment" in the country. (Buffett doesn't do things small.) In all, dozens of managers are now flocking to Japan, looking to pick up great companies on the cheap, even if they're still wary of Japan's market as a whole. Indeed, what has emerged in the year since the great quake is a surprising, almost Dickensian plotline a tale of two recoveries. On the one hand, many experts and investors say they hold little hope for a swift resurgence of Japan's economy, yet many of those same folks see a slew of blue-chip stocks that are on the cusp of a bull run.
There are at least a dozen big companies, Japan watchers say, that have the potential to outperform even if the broad Japanese stock market continues to slump. These companies are pushing into new markets, outsourcing production and making smart acquisitions. They're no different from successful companies anywhere; they just happen to have their headquarters in Japan. Case in point: Nidec, a Kyoto-based maker of small motors for hard drives and other applications. The company's CEO and founder, Shigenobu Nagamori, is a true iconoclast, says Taizo Ishida, lead manager of the $132 million Matthews Japan fund. In his meetings with Ishida, Nagamori always says, "We have nothing to do with the Japanese economy."
Another strategy, say some fund managers, is to focus on firms in industries in which Japan remains the global leader. One favorite is Fanuc, a robot manufacturer, which makes the big arms that move cars through the production line. Japan's industrial firms will have to rely more and more on factory automation to replace aging skilled workers, say experts, while China has increasingly turned to robots, following years of double-digit wage inflation.
To be sure, even Japan's best-positioned companies aren't immune to a global recession. But in a sense, says Ishida, these firms may have a surprising edge in a low-growth environment; they've been dealing with one domestically for more than 20 years, he points out. The successful companies have adopted strategies to cope, such as looking beyond Japan's borders for economic opportunities.
While funds are the easiest way for investors in the U.S. to access Japanese stocks (most of which are not listed on U.S. exchanges), several brokerages, including Fidelity, Schwab and Raymond James, allow customers to buy stocks directly on the Tokyo or Osaka exchanges, with certain limitations. Ironically, though, it's another limitation that's prodding some investors to make the leap into Japan: There might not be much more money to lose. Japan's stock market has fallen a jaw-dropping 78 percent from its 1989 peak. The Nikkei 225 index now trades for less than its book value, or the sum of the companies' parts. The S&P 500, by contrast, trades for 1.9 times book value, according to FactSet Research Systems. Given how steep the fall has been, many managers say whatever downside remains is likely to be modest. That's partly why Josh Strauss, manager of the $200 million Appleseed fund, decided to invest after last year's quake. "The risk that worries me is dead money," Strauss says. "The risk in this market is the kind I'm willing to take."

10 Rules For Trading Calendar Spreads

Would you like to profit from sideway markets or stocks? Would you like to take advantage of the different time decays and different Implied Volatility in different expiration months? Then calendar spreads might be for you.
A calendar spread is a strategy involving buying longer term options and selling equal number of shorter term options of the same underlying stock or index with the same strike price. Calendar spreads can be done with calls or with puts, which are virtually equivalent if using same strikes and expirations. They can use ATM (At The Money) strikes which make the trade neutral. If using OTM (Out Of The Money) or ITM (In The Money) strikes, the trade becomes directionally biased.
Let's take a look at a sample Apple (AAPL) trade which I shared at my Premium Educational Forum on March 11, 2012:

• Sell AAPL April 545 call
• Buy AAPL May 545 call

The trade could be done last Thursday after the iPad announcement for a debit of $7.50-7.60. The P/L graph looks like a tent:
The maximum gain is realized if the stock is at $545 by April expiration. If this happens, the April call will expire worthless but the May call will still have value. How much value? Depends on IV (Implied Volatility) at that moment. We can estimate that it might be around $16-18. So with initial debit of $7.50, the trade will give us over 100% gain. I personally would close it much earlier. My profit target of calendar spreads is typically 20-30%.
How the calendar spread makes money?
The first way is the time decay. The idea is that the near term option is losing value much faster than the back month option. Sounds good, doesn't it? The problem is that the stock will not always act according to our plan. If the stock makes a significant move, the trade will start losing money. Why? Because if the stock moves up to say $650, both options will have very little value and the spread will shrink. Of course $650 is a bit extreme move in one month, but you get the idea.
The second way a Calendar Trade makes money is with an increase in volatility in the far month option or a decrease in the volatility in the short term option. If there is a rise in volatility, the option will gain value and be worth more money. In case of Apple, IV of the April options was high due to the pending iPad announcement and was expected to go down.
Managing the position is the key. What happens when the stock makes a significant move and the trade starts losing money? Having an exit plan before entering the trade is extremely important.
Here are some basic rules and guidelines to follow with calendar trades:

1. Always check the P/L graph before placing the trade. You can use your broker tools or some free software. I generated the P/L graph using the OptionsOracle software.
2. Avoid trading through dividends date.
3. Avoid trading through major news like earnings announcements. The only exception to that rule is when you want to take advantage of the inflated IV of the front month, but those are highly speculative trades which might have a significant loss if the stock has a large post-earnings move.
4. The front month options should expire in 5-7 weeks.
5. Have an exit plan before you enter the trade. My profit target is typically 20-30% and my mental stop loss is around 15-20%.
6. If the stock reaches one of the break-even points, I would typically adjust by opening another calendar spread around the current price, converting it to a double calendar.
7. Trade stocks which are in a range or having a positive volatility skew (front month IV is higher than back month).
8. Never hold through the expiration week of the front month to avoid the gamma risk.
9. Most of the time, placing the trade with puts will be cheaper than with calls.
10. Most of the time calendar spreads work better when IV is low. Those are vega positive trades which means they benefit from increase in IV.

Those are my rules, yours might be different. They just fit my comfort zone.
So how is our Apple calendar spread is doing?
Well, with the way the stock is moving in the last few days, you would assume the trade is a huge loser. However, since the April IV went down after the iPad announcement and the May IV went slightly up, the trade could be closed this Tuesday for around $8.50. In fact, even yesterday (Wednesday), the trade could be still closed at 8.30-8.40, even with the stock at $582. That's 10-13% gain, despite the huge movement of the stock.
Always make the Implied Volatility your friend. It will save you a lot of money.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

5 Stocks That Could Be Bought Out In 2012

It's only one week to go before Valentine's Day and we're keeping an eye out for any eye-catching stocks that could lure bigger companies into a buyout.
Milking it
Neogen Corp (NEOG) has a stable of unique intellectual property and it has the financial results to prove it. Its gross margin has consistently been around 50% for the last 10 years, dipping briefly in 2009, and it has kept its net margins between 11 and 12%. No wonder the maker of food safety testing kits and veterinarian products is a debt-free cash machine of note.
The suitor
In 2010, financial analyst Andy Cross punted Neogen as a private equity buyout target, but I think its product range will perfectly complement another larger manufacturer in the veterinary and food safety industry.
The product range of IDEXX Laboratories, Inc. (IDXX) sticks closely to all of veterinary science's disciplines, with antibiotic screening tests for dairy producers and water microbiology testing as add-ons. Neogen also covers veterinary diagnostic instruments and pharmaceuticals, but it has toxicology, food safety, genomic solutions, and research test kits that will add girth to IDEXX's portfolio.
Neogen is trading around $33 at the moment and has a market capitalization of $778.22 million; nearly 30% down from its one-year high. If shareholders want to hold out for that kind of reward, a buyout would cost $1.1 billion or around $46 per share, but I think we could see an offer nearer to $40.
Disruptive influences
We are witnessing the downfall of long established industries that played dominant roles in the economy and thought they would do so in perpetuity. Fixed line telecoms and postal service-related businesses are on their last legs unless they can adapt. But in manufacturing, the seeds are only germinating now.
Stratasys, Inc. (SSYS) is the leading producer of 3D or direct digital manufacturing printers. A computer-aided design goes straight from a computer and immediately the part can be manufactured without any set-up. This enables customers to manufacture low volume products at mass production costs. Ideal for prototypes, which was its first application, but it also allows for mass customization to take place.
The suitor
Best described as diversified, Dover (DOV) has four divisions and thirty two subsidiaries that produce a range of products from all-wheel-drive power train systems to hearing aid components. Its largest segment is the engineered systems division that manufactures industrial components as well as sophisticated manufacturing equipment.
The one thing Dover's subsidiaries have in common though, is the autonomy they're allowed. This system will suit Stratasys who will still enjoy independence while gaining sales from Dover's existing clients. Dover on its part will gain a further subsidiary that produces sophisticated manufacturing equipment, but also offers design, prototyping, and consulting services.
Stratasys, trading around $40, has a market capitalization of $864.81 million and an enterprise value of $849.58 million according to YCharts. It might prove an incentive to be part of a large conglomerate, but I expect an offer to still come at a premium. An offer between $47 and $48 per share, or between $990 million and $1.02 billion could make shareholders give way.
Broadening the spectrum
It has built its business model specializing primarily in the production of diagnostic kits for infective diseases, but Meridian Bioscience, Inc. (VIVO) also has a smaller Life Science subsidiary. The subsidiary manufactures bulk antigens and reagents, proteins and other biologicals for use in the discovery of drugs and vaccines and as bulk medical reagents.
The suitor
According to Trefis.com, 26.3% of Merck & Co's (MRK) stock price is attributed to anti-infective drugs, which is also the biggest contributor to the stock price. Its market share has dropped from 33.5% in 2007 to 28.9% and it is predicted to steadily slide into the lower twenties over the next three years.
Apart from alimentary and metabolism drugs, accounting for 18.3% of its share price, all its product ranges are predicted to lose market share over the next five years. Alimentary and metabolism drugs are predicted to grow Merck's market share from 7.3% to 11.4% in 2018. It's time for this drug manufacturer to diversify.
Meridian's $740.73 million enterprise value is small change for Merck, but it will be a good start on the way to diversifying the company. We could see an offer around $25, up from Meridian's current trading price of around $18.
Pupil and master
The economic downturn has been unexpectedly good to certain industries. The tough career market has pushed many people who are in mid-career to undertake further training to advance their careers. This is illustrated by the rise in middle-aged student debt, the majority of which can be attributed to enrollment in for-profit schools.
One of the schools to have benefited from the upturn is Grand Canyon Education (LOPE). The institution provides on campus and online post-secondary education services, and focuses on graduate and undergraduate degree programs in its core disciplines of education, business, and healthcare. The fact that it is located in Phoenix, Arizona has also been a boon to the school. The city has the second highest job creation data in healthcare and education jobs - two of the main focus areas of the school.
The suitor
With two schools - Ashford University located in Iowa and University of the Rockies in Colorado - Bridgepoint Education (BPI) was only founded in 1999 and acquired its first two for-profit education institutions in 2005 and 2007. Bridgepoint could feel it's time to extend its footprint into Arizona.
Grand Canyon has revenues of $108.91, which it produces with a gross profit margin of 55.07% and profit margin of 11.82%. Its stock is currently trading around $17, although we could still see an offer over its $753.82 million market capitalization. Perhaps a bid around the 52 week high of $19.30 would entice Grand Canyon shareholders to allow the companies to merge.
The eye of the beholder
Revlon, Inc. (REV) manufactures color cosmetics, women's hair color, skin care, fragrances, antiperspirants and deodorants, and beauty tools. The company's name is still closely associated with color cosmetics by consumers, but debt levels haven't allowed it to develop any strong brands recently.
The suitor
It will need someone to realize the potential that could be created from Revlon's name. The Estee Lauder Companies, Inc. (EL) might be that someone. The majority of the company's value is created by strong brands in its skincare and cosmetics range, with fragrances and hair care the lesser elements, and it has the ability to extract gains from a buyout of the smaller stock.
Revlon's market capitalization is $824.97 million and the stock trades around $16. I don't see an offer reaching the stock's 52-week high of $19.33; rather a buyout offer could be made below $18 per share.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Advantages of Virtual Office for Business Owners

With the great advancement in technology and the development of the internet, the idea of a virtual office has become very popular. You have to know that virtual office is an affordable alternative for an office space that would involve different types of overheads like meetings, office rent and other infrastructure expenditure. Modern technology allows people to use fax, email, instant messaging, teleconferencing and telephone in connecting group of people at different parts of the globe to give them an opportunity to work for one business owner.
With the internet offering great facilities, you can build a great virtual network of employees. Both the employer and employees could function independently, but still in fusion. This is a great way to save time and money. In fact, working anytime and anywhere is the most beneficial feature of the virtual office. As well, that way you will not have any restrictions that you can deal with in a traditional office.
Setting up virtual office you may avoid insurance, health care and some other similar expenses.
In fact, the virtual office is the best option to choose if you:
- work from home, but still need business identity,
- are conscious of your budget and do not want to invest more than needed into your business,
- work from home, however still require business identity,
- do not want to spend time on commuting,
- are on the move and therefore you do not want to spend on the office space,
- are just developing your business.
You should know that virtual business owners face some difficulties when they run their home based businesses. Time management may become hard as working from home may cause distractions such as children. But using the art of managing your time well and becoming disciplined in your work, then you could become successful virtual business owner.
Want to run business in Hong Kong? Consider make use of company registration Hong Kong. You can even save some money starting with virtual office Hong Kong for some time.

How Apple Sways the S and P 500 Index

The Wall Street Journal recently had a couple of articles on Apple that I found interesting and thought I’d share with you. These articles basically show the tremendous outsized impact that Apple shares have had on the S&P 500’s performance over the past few days as Apple’s stock has risen higher and higher.
But, before I go on, let me give you some background on Apple, for those of you who don’t follow stocks actively, or Apple specifically. Apple shares traded mostly flat from 1985 to 1999. In late 1999 and early 2000, Apple shares started rising, from about $26 in January 2000 to $200 in January 2008, gaining about 30% annually. Then shares dropped to $90 during the mortgage banking crisis, but rebounded stronger than ever; to the $515 level they’re at now. That’s an 80% gain every year over the past three years. And on January 25 (2012) Apple became the largest company by market capitalization as it pulled ahead of Exxon Mobil. And since then, Apple shares have surged even higher, giving Apple a market cap of about $480 billion: making it more valuable than Microsoft and Google combined, that’s pretty darn amazing!
Okay, so now that you know Apple sports the largest market cap, let’s get back to the Wall Street Journal articles I read. The Journal interviewed Howard Silverblatt, a Senior Index Analyst at Standard & Poors and a rapid-fire Brooklyn resident who is perhaps best known as a sort of high priest, historian and keeper of the S&P 500 stock index. Howard’s the guy who meticulously tracks and manages data on the index and has a wealth of information on his fingertips. When asked about Apple, Howard’s take was that Apple’s stock surge over the past few years has had a rather meaningful impact on the performance of the S&P 500 index as a whole, and more specifically on the technology sector within the S&P 500. According to Howard’s data:
Apple’s market cap accounts for 3.8% of the total market cap of all S&P 500 companies. That’s pretty amazing in itself, because if all the stocks in the S&P 500 were equally treated, Apple would only account for 0.2%: but Apple’s pulled far ahead to garner a 3.8% share
So while the S&P 500’s technology sector gained 9.8% from its October 2007 high, it would have been down 4.1% had Apple not been in the Index: so Apple has disproportionately skewed the Index, which can be misleading if investors take the Index’s performance at face value and assume it accurately depicts the average performance of all companies in the Index.
And while the entire S&P 500 index is down 13% from October 2007, it would have been down an additional 2% without Apple.
And, year to date over the past two months of 2012, while the S&P 500 has gained 8.2%, gains would only have been 7.7% without Apple.
Interestingly, according to Howard, Apple is still not the record breaker: that distinction is still held by IBM, which accounted for 6.3% of the S&P 500 index from 1981 to 1983. In the early 1980s, AT&T accounted for over 5%. IBM and AT&T are still in the Top 10 at #4 and #7 respectively, and IBM still holds 1.85% of the Index. And just fyi, the top 10 now are, in order, Apple, Exxon Mobil, Microsoft, IBM, Chevron, GE, AT&T, Johnson & Johnson, Procter & Gamble and Wells Fargo.
On the tech-heavy Nasdaq, Apple has an even higher 16.6% weighting – more than Google, Intel and Amazon combined. Now, the Nasdaq is heavily followed by tech investors so it’s important to strip out Apple and see how the rest are doing.
So when comparing corporate earnings and stock market trends, apples to apples, it may just make more sense to toss out Apple! Because it’s gargantuan size clouds the overall picture of earnings and the profit margins for other American corporations. So many stock analysts at major firms like Goldman Sachs, Barclays, Wells Fargo and UBS, are now looking at overall market trends sans Apple to get a clearer picture of how the rest of the economy is doing. And more so within the tech sector – as David Kostin of Goldman Sachs points out, the tech sector will likely show an earnings increase of 21% for the fourth quarter of 2011 with Apple, but only 5% without it: 21% with Apple versus 5% without it – that’s pretty stark! So Apple, as you can see, has significantly distorted the overall economic outlook, for the better. Apple is way ahead of other companies in terms of revenue and income performance; but many other companies are struggling to meet analyst expectations but that is not easily apparent in the aggregate because of Apple’s outsized positive influence.
And, cuing to my Dividend piece in an earlier show, Apple has a cash hoard of about $100 billion, and while it does not currently pay dividends, it’s becoming an investment fad because many are rushing to buy Apple thinking, and hoping, that it will start paying out dividends sometime soon. And you know how investment fads tend to work out! Think tech in the 90’s and real estate in 2005.
Apple’s done amazingly well and many expect that it will continue to do so, perhaps it is now a crowded trade, perhaps it’s too much in the limelight, no one can really say. If you already own Apple shares, I am really happy for you, and want to suggest that you also calculate your overall stock market gains without Apple to get a more realistic picture of how your portfolio has performed.
So how does all this matter to you? It matters because I want you to know that you cannot always take the Index as a whole at face value and assume it represents the average performance of all 500 companies in it. You should always watch for special circumstances that may have overly influenced performance, positively or negatively, and review performance without these outliers to get a clearer picture. Moreover, though we’re talking Indexes today, always look for the outlier effect in all your analyses. For example, with mutual fund performance; a manager’s great performance may be attributed to just a few well-timed and lucky picks.
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Steven L. Pomeranz, CFP is a 29 year investment management veteran and host of “On The Money!” which airs on NPR station, WXEL in South Florida. He concentrates on serving high net-worth individuals and has been named one of the Top 100 Wealth Advisors 2007, by Worth magazine (October 2007 Issue), honoring America’s premier financial and wealth strategists.