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.

Defense Suppliers Compete for a Piece of India’s Multibillion-Dollar Military Revamp

The Boeing Co. (NYSE: BA) is in talks with India for a $5.8 billion military aircraft deal as the country triples its defense budget, leading defense suppliers to compete for a piece of the multibillion-dollar action.

India is negotiating with Boeing over the purchase of 10 C-17 Globemaster III aircraft, which would be the largest defense order from India for Boeing, the second-largest U.S. defense contractor. India's Finance Minister Pranab Mukherjee said in February the government would spend $33 billion on defense in the fiscal year starting April 1.

The Asian country's "defense procurement budget is quite huge," Laxman Kumar Behera, a research fellow at the Institute for Defense Studies and Analyses in New Delhi, told Bloomberg. "The U.S. arms industry has become quite interested in the Indian defense market."

Boeing expects to bid for as much as $31 billion of military contracts in the next 10 years as India looks to replace aging Russian-made equipment.

"We've had a long-standing relationship with Russia. But that's changing now," Sitanshu Kar, a spokesman for India's Ministry of Defence, told The Washington Post last year.

U.S. President Barack Obama is slated to visit India early next month and will discuss securing more defense deals that - with the Boeing contract - could total $10 billion to $12 billion.

Boeing is targeting international contracts to counteract a slowdown in U.S. defense spending, and India's relationship with American defense suppliers has tightened over the past couple years.

"There's been increasing cooperation between India and the United States from both the defense side and security side," said Mark Kronenberg, vice president of business development at Boeing. "More importantly, from the Boeing perspective, it's not just about increased presence on the military side - we've always had a strong commercial presence here - we think with Indian suppliers and partnerships we can be here for a long time to come."

A closer business relationship with India could also open the door to Boeing benefiting from India's growing air travel demand. Earlier this month the chief executive officer of Boeing rival Airbus SAS said he expects India's aircraft need to climb over the next couple decades.

"Our market forecast is usually quite conservative but we should expect at least an additional 1,000 in the next 20 years here in India," Airbus CEO Tom Enders told a media briefing. "India next to China is one of the big growth hubs for the aviation industry."

Other U.S. companies hoping to cash in on India's multibillion-dollar defense spending are General Electric Co. (NYSE: GE), defense contractor Northrop Grumman Corp. (NYSE: NOC) and Lockheed Martin Corp. (NYSE: LMT), the world's biggest arms supplier. The companies have been wooing India since last year when the country signaled a shift from Russian suppliers.

But U.S. companies will face competition from global counterparts, like Moscow-based United Aircraft Corp., France's Dassault Aviation SA (EPA: AM) and European Aeronautic Defense and Space Company (EADS).

Suppliers who usually rely on U.K. defense spending are turning to India for business as the U.K. coalition government is expected to announce defense-spending cuts on Tuesday. The British media has reported that the Royal Air Force may lose some aircraft orders and U.K. defense suppliers could see their operating margins fall in coming years. France and Germany will also be reviewing their budgets to trim expenses, putting more strain on suppliers.

While India's growing economy has attracts more foreign investment each year, some companies are frustrated with the strict government regulation that limits foreign involvement in sectors such as technology and energy. President Obama is expected to address concerns over market access during next month's meeting with Indian officials, especially in regards to a recently passed Indian law that exposes nuclear technology firms to accident liability.

"We will not be able to support nuclear programs in countries where the nuclear liability regime is not consistent with international norms," Michael Tetuan, a spokesman for GE, told The Wall Street Journal.

These kinds of laws turn some businesses off from dealing with India, which some say has used its attraction of having incredibly high economic growth to control business and investment negotiations.

"India's pretty cocky right now," Charles Maddox, a professor of corporate law at the Jindal Global Law School outside New Delhi, told The Journal. "They're playing a brinksmanship game with the United States."

But experts say the progress made with U.S.- India relations marks a dramatic improvement from prior decades and is sure to continue.

"In any relationship where you have growing commercial activity, you're going to have challenges and disagreements," Francisco Sanchez, U.S. undersecretary of commerce for international trade, said in a recent interview. "But the advancement over the last 20 years has been significant. We need to keep plugging away."

The Big Case for Small-Cap Stocks

The market is "risk-on" and investment strategists are shifting their focus to small-cap stocks, reports CBS News.
"U.S. small-cap stocks are the best long-term investment idea in the entire global equity market this year," says Richard Bernstein, CEO of Richard Bernstein Advisors." A new report from UBS agrees.
The case being made is that while yes, small-cap stock offer higher risk, lower liquidity, and lower market value than large cap stocks, their potential rewards are also more significant.
After a weak performance in 2011 UBS says small caps can offer "superior long-term return potential," adding that given current valuations, "the timing for investment could be fortuitous."
According to CBS News, UBS says small caps have performed better than large caps in the long term (tracked over many decades). There is also more opportunity to add value "since markets are less efficient and small companies have the potential to grow faster." Furthermore, smaller companies are "easier to understand."
Business section: Investing ideasUBS seems to think small caps have a strong role in the balanced portfolio.
If you're interested in researching small-cap companies for your portfolio, we want to provide you with a starting point.
To find some interesting prospects, we created a universe of small-cap stocks with market caps between $100 and $300 million. To make sure our list is comprised of relatively liquid stocks, we took the top 150 with the greatest trading volume.
We then screened these stocks with high ratios of levered free cash flow/enterprise value (LFCF/EV).
Levered free cash flow is the free cash flow after deducting interest payments on outstanding debt. Enterprise value is the sum of the firm's value from all ownership sources: market cap, outstanding debt, and preferred shares.
Companies with high ratios of levered free cash flow/enterprise value may be undervalued by the market.
So, do you think these small-cap companies should be trading higher? (Click here to access free, interactive tools to analyze these ideas.)
1. Gentiva Health Services: Provides home health services and hospice care in the United States. Market cap at $226.54. Levered free cash flow at $112.85M vs. enterprise value at $1.04B (implies a LFCF/EV ratio at 10.85%).
2. Willbros Group (NYSE: WG  ) : Provides engineering, procurement, and construction services to the oil and gas, refinery, petrochemical, and power industries primarily in the United States, Canada, and Oman. Market cap at $226.24. Levered free cash flow at $64.11M vs. enterprise value at $472.28M (implies a LFCF/EV ratio at 13.57%).
3. Obagi Medical Product: Develops and markets topical aesthetic and therapeutic prescription skin care systems. Market cap at $207.02. Levered free cash flow at $25.13M vs. enterprise value at $185.62M (implies a LFCF/EV ratio at 13.54%).
4. Anadigics (Nasdaq: ANAD  ) : Provides semiconductor solutions to the broadband wireless and wireline communications markets. Market cap at $202.46. Levered free cash flow at $15.28M vs. enterprise value at $140.96M (implies a LFCF/EV ratio at 10.84%).
5. FuelCell Energy (Nasdaq: FCEL  ) : Engages in the development, manufacturing, and sale of high temperature fuel cells for clean electric power generation primarily in South Korea, the United States, Germany, Canada, and Japan. Market cap at $168.78. Levered free cash flow at $14.57M vs. enterprise value at $134.95M (implies a LFCF/EV ratio at 10.8%).
6. Excel Maritime Carriers (NYSE: EXM  ) : Provides sea borne dry bulk cargo transportation services worldwide. Market cap at $160.9. Levered free cash flow at $291.38M vs. enterprise value at $1.18B (implies a LFCF/EV ratio at 24.69%).
7. Majesco Entertainment (Nasdaq: COOL  ) : Provides interactive entertainment products primarily in the United States and Europe. Market cap at $107.87. Levered free cash flow at $14.35M vs. enterprise value at $96.28M (implies a LFCF/EV ratio at 14.9%).
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.

Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Data sourced from Yahoo! Finance

Best Wall St. Stocks Today: C,WFC

Citigroup Inc. (NYSE: C) and Wells Fargo & Co. (NYSE: WFC) earnings are a bit different this morning. Today looks like a prime example of “the good bank versus the bad bank.”

Citigroup reported that earnings fell 11% and its earnings came in at $0.38 EPS versus estimates of $0.49 EPS.? Keep in mind that many bank earnings expectations had been cratering in the weeks prior to the actual news. Still, the figures
were short. The “bad bank” asset unit of Citi?Holdings managed a narrower loss of -$806 million versus a loss at -$1.02 billion in the fourth quarter of 2010. There is some good news this morning.? That makes two profitable years now for Citi.?

Wells Fargo & Co. (NYSE: WFC), now the healthiest of earners in the ‘new bank operating environment,’ managed to show a 20% earnings gain of 20% to $4.11 billion.? The boost was said to be from gains related to mortgage financing, but the translation was $0.73 EPS versus estimates of $0.72 EPS.? The loan loss provision was down again, close to $2 billion from $3 billion a year earlier.

Citigroup shares are indicated down over 4% at $29.45 in pre-market trading.? Citi’s 52-week range is $21.40 to $49.60 and shares were up over 15% year to date.? The bank reported book value of $60.78 and a tangible book value of $49.81.

Wells Fargo was negative at first but shares are now up 0.9% at $29.88 in the pre-market.? Its 52-week range is $22.58 to $34.25 and its stated book value was $24.64.?

JON C. OGG

Netflix: A Year in Review

Sometimes you have bad years, and then you have a colossal implosion on the level that Netflix's (Nasdaq: NFLX  ) CEO Reed Hastings is now experiencing.
Even some of the video buffet operator's biggest critics had a hard time saying something bad about Hastings earlier this year. The bearish argument on Netflix revolved largely on valuation. Long-term concerns about the model's viability and the way that the company accounts for its content licensing liabilities were other naysayer knocks. But knocking Hastings? Never!
Well, with Hastings' name bubbling up near the top of most "Worst CEO of 2011" lists, it's time to break down the year that once began so promisingly for Netflix.
Things started out well for Netflix. The stock had nearly doubled in 2009, going on to more than triple in 2010. Netflix had proven its recession-resistant mettle by drawing a horde of new subscribers, kicking off 2011 by topping 20 million members.
The warning signs that investors missed
Even though Netflix's stock would go on to nearly double again by the summer of 2011, there were already signs that things were starting to come undone.
Amazon.com (Nasdaq: AMZN  ) began offering customers who were paying $79 a year for Amazon Prime memberships -- a program that features free two-day shipping on Amazon-warehoused goods -- unlimited access to a small yet growing digital catalog of streaming titles in February. In a sense, Netflix had its first true big-name competitor.
A month later, AT&T (NYSE: T  ) became the latest broadband provider to cap data usage on its DSL home service. As the country's biggest primetime data hog, Netflix is responsible for a growing chunk of the bandwidth that broadband customers go through in any given month. If more providers follow suit, Netflix's value proposition won't! truly b e unlimited.
March was also when CBS's (NYSE: CBS  ) Showtime decided to pull early seasons of Dexter and Californication from Netflix's digital catalog. Instead of hoping to hook subscribers to the premium movie channel by giving them a taste of its content -- and cashing in on juicy streaming revenue along the way -- Showtime apparently felt that it was more important to protect the priced prestige of its shows. It may not have seemed like a big deal at the time, but it should have alerted investors that licensing deals go in both directions long before Liberty Media's (Nasdaq: LMCA  ) Starz decided that it would not be renewing its meaty content deal that provides Netflix streaming with many of its first-run celluloids.
Look out below
In retrospect, the market misinterpreted Netflix's biggest blunder. The day after Netflix alienated its customer base by announcing that it would raise prices on some of its plans by as much as 60% -- essentially turning the streaming service that was available at no additional cost to customers on unlimited disc plans into a premium offering -- the stock went on to hit its all-time high of $304.79.
Yes, Hastings' biggest blunder is one that was initially applauded by many analysts and investors. Go figure.
International expansion plans became aggressive. Canada's launch in late 2010 inspired Netflix to establish a streaming-only service in 43 different countries through Latin America and the Caribbean this September. By the time that Netflix announced plans to enter Ireland and the U.K. in early 2012 -- and that the move would lead to an initial overall deficit -- investors began to realize that there was a price to pay for Netflix's globe-trotting ways.
Also lost in the excitement -- when Canada hit a million subs in its first year up north -- was the fact that net additions were decelerati! ng after its first complete quarter in Canada.
Subscribers were miffed. Expansion wasn't cheap. Starz was starting to pack up its copies of Toy Story 3 and Sling Blade for an early 2012 exit.
However, Hastings' biggest truly boneheaded move was yet to come.
Qwikster quandary
How could Netflix distance itself further from its already alienated user base? By telling its biggest customers -- the ones on dual plans who were the only ones hit with the summertime rate increase -- to take a hike.
The proposed plan to split Netflix into two distinct sites, forcing DVD and Blu-ray renters to manage independent queues at both Netflix.com and Qwikster, was a disaster. It was a call that Hastings thankfully reversed a few weeks later, but not before it was broadly lampooned.
Netflix's already tarnished reputation met a wrecking ball.
Could things get any worse? You know the answer. Customer defections proved to be worse than Netflix had originally feared in its latest quarter, and now Netflix sees red ink for all of 2012.
The moat that began the year as impenetrable finds a Netflix that is truly vulnerable. Coinstar's (Nasdaq: CSTR  ) Redbox and DISH Network's (Nasdaq: DISH  ) Blockbuster are hoping to swipe Netflix's DVD rental business, while Amazon and others waiting in the wings have their sights set on gobbling up market share in streaming.
If 2011 was a dream, then it surely was a bad one. The stock that seemed as if it would pull off another market-thumping performance this year has shed 60% of its value, and we still don't know when the situation will stabilize.
Good luck in 2012, Hastings. You're going to need it.