Apple and Google Show That Stock Splits Are Cool Again

Spencer Platt/Getty Images It seems as if tech darlings don't want to scare off potential investors with sticker shock. Last Wednesday Apple (AAPL) became the latest company with a hefty share price to declare a stock split, agreeing to exchange every single share for seven shares trading at a much lower price. Stock splits are zero sum games. If an investor has 100 shares of Apple with the stock at $560 at the time of the 7-for-1 split, that investor would own 700 shares with a stock price of $80. But no matter how you slice it, the math still results in a $56,000 stake in the consumer tech giant. However, many think that there's a psychological benefit to having a stock appear to have a lower price. Apple isn't alone. Google (GOOG) also recently completed what was in effect a 2-for-1 stock split by giving investors a new share of non-voting stock for every share that they owned at the time. With Apple and Google validating the practice, don't be surprised if more stocks with large share prices go this route. A Split by Any Other Name Apple executed 2-for-1 stock splits in 1987, 2000 and 2005. It was quick on the trigger whenever its stock approached high double digits or poked its head into triple digits. However, the stock splits went away after that. Apple's stock continue to shoot higher as the iPod grew in popularity, followed by the introduction of the iPhone in 2007 and the iPad a few years later. Why did the company alter its behavior? The best bet is that Google changed the game when it went public around the time of Apple's final stock split. Google wanted to go public at a price that was as high as $135 during the summer of 2004. It had to settle for $85, but the message was clear: Google wasn't going to try to cater to conventional whims where companies would perform pre-IPO splits in order to hit the market at more accessible prices between $10 and 30. Google's reluctance to declare stock splits through nearly 10 years of trading let everyone know that it was in a race to hit the highest share price possible. It finally gave up the game a few weeks ago when it broke through the $1,000 ceiling, announcing a spinoff that was essentially a 2-for-1 stock split. Google's move now leaves just four stocks trading for more than $1,000 a share. The Rise and Fall and Rise of Stock Splits Stock splits were fashionable in the late 20th century. Retail investors were buying stocks in round lots of 100 shares at a time, and a company didn't want to limit its appeal. Individual investors who had just $20,000 to invest in a new stock would gravitate to 100 shares of a stock at $20 than to buy 20 shares of a stock at $100. Even today, some investors argue that a stock price can be too high. Market cap is the product of a stock's price and the number of shares outstanding. The stock price on its own is immaterial. A stock can be expensive if it's overvalued relative to its fundamentals, but there's really no such thing as a share price that is too high on its own. It's true that the greatest investor of our time is not a fan of stock splits. Warren Buffett has refused to declare a stock split on Berkshire Hathaway (BRK-A), though he reluctantly went on to offer a new class of shares (BRK-B) at a lower price several years ago. However, with the exception of a handful of successful companies, most companies don't like to see their prices get too high.

2 Business Models Creating Everlasting Investment Value

Running a business in its simplest explanation is taking inputs, adding value to the inputs, and then selling the output to make money. To that end, Brown-Forman (NYSE: BF-B  ) and Dunkin' Brands (NASDAQ: DNKN  ) have each found ways to take commoditized products and turn them into something consumers will pay a lot of money for, thus creating fantastic businesses.

Corn whiskey
Being a corn farmer is a rough business. You work long, hard hours, and then you basically have to sell your product for whatever the market is willing to pay you. That isn't an overly favorable situation.

Brown-Forman, on the other hand, buys that corn, dries it up, grinds it into cornmeal, mixes the cornmeal with water and yeast, boils ethanol out of the mixture, and lets it sit in a barrel for a couple of years -- and voila: Jack Daniel's. Of course, that was an overly simplistic version, but by going through this process it has created a product that consumers love and will pay plenty of money for.

Brown-Forman creates other liquor brands as well, but Jack Daniel's is the most prominent. Other factors that make Brown-Forman's business attractive from an investor standpoint are its highly regulated industry and its standing as one of the oldest and best-known players in its market.

Because of the nature of this business, it isn't feasible for someone to simply open up shop and begin to compete. There are many regulations, as well as a long waiting period after the initial investment, before any sales start to roll in. And there's the high level of competition from Brown-Forman and others.

These are all factors that have helped Brown-Forman achieve steady earnings growth of over 8.5% per year on average over the past 10 years, along with an average profit margin in the same time period of almost 17%.

The buzz on coffee
Dunkin' Brands has used a different method to create a similar outcome as Brown-Forman. Dunkin' sells coffee, which, like corn, is a commodity and is priced solely by the market. Again, not a favorable business.

Dunkin' doesn't convert the coffee into anything different, the way Brown-Forman turns corn into alcohol, but Dunkin' has added a fine brand and convenience to the commodity, which is something investors pay for.

Buying store-brand coffee in a tub and making it at home is obviously much cheaper than going out for coffee every morning. However, Dunkin' has succeeded in making consumers see value in the Dunkin' Donuts name on the side of the cup containing their freshly brewed, premium coffee every morning.

The company has also succeeded in creating a convenient option that consumers pay for. Just last week I stopped into a Dunkin' Donuts and ordered a medium coffee and bagel with cream cheese, and within one minute I had the coffee in my hand. Within another three minutes I was back in my truck and on the road again, with my wallet only around $3.50 lighter.

Dunkin' Brands also franchises nearly 100% of its stores, meaning the company gets a royalty fee based on sales from both its Dunkin' Donuts and Baskin-Robbins stores. This is just another factor investors should like, as Dunkin' Brands grows with the top line of its stores but is not exposed to store-level operations, which can be troubling in many cases.

Like Brown-Forman, Dunkin' has fared well, growing earnings over 33% a year the past five years on average, and sporting a profit margin over 20% in the past fiscal year.

Fool's take
If you're a true long-term investor, you wouldn't wnat to buy fad companies that don't have some sort of competitive advantage in their business model. Both Dunkin' and Brown-Forman have incredibly strong brands, which bring incredibly strong brand loyalty. They also both employ several other favorable advantages in their business models.

The market apparently likes both of these companies as well, as Dunkin' currently trades around 36 times earnings and Brown-Forman around 30 times, compared with a market average of 18.

So right now, even though they may be priced at a premium, you could still buy knowing you're getting pieces of excellent companies that will help your portfolio for many years to come. You could use each company's dividends to cost average further purchases at any price level and would most likely be satisfied holding these stocks for a long time to come.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Comcast in Charter deal to ease TWC bid

Comcast's plan to make its merger with Time Warner Cable palatable to regulators will elevate Charter Communications to the second-largest U.S. cable company.

The two companies announced a divestiture plan early today that would take effect after the close of the Comcast-Time Warner Cable merger. Charter would acquire about 1.4 million of Time Warner Cable's current subscribers in a cash deal, boosting its customer base from 4.4 million to 5.7 million.

Comcast and Charter will also swap about 1.6 million existing Time Warner Cable customers and 1.6 million Charter customers in a "tax-efficient like kind" exchange. After a tax-free reorganization, the "new" Charter will also acquire about 33% of a new Comcast-created and publicly traded spin-off company with about 2.5 million current Comcast customers.

Overall, these transactions, contingent on the approval of the merger between Comcast and Time Warner Cable, the deals would result in Comcast divesting about 3.9 million customers. That would put Comcast's managed residential subscriber base below 30% of total cable TV subscribers in the U.S., the same market share the company had in past deals with Adelphia in 2006 and AT&T Broadband in 2002, Comcast says.

"Today's Agreement follows through on our willingness to divest subscribers, while also marking an important step in our merger with Time Warner Cable," said Comcast CEO and chairman Brian Roberts in a statement. "The realignment of key cable markets achieved in these transactions will enable Comcast to fill in our footprint and deliver operational efficiencies and technology improvements."

Charter president and CEO Tom Rutledge said that the transactions "will provide Charter with greater scale, growth opportunities and improved geographical rationalization of our cable systems, which in turn will drive value for shareholders and more effective customer service."

After the merger and deals, the merged Comcast-Time Warner Cable company will be the largest cable ! operator at about 30 million customers.

The deal faces likely approval from the Justice Department but was recently met with reluctance by a Senate panel. "I am deeply concerned that Comcast's proposed acquisition of Time Warner Cable would give Comcast both the power and the incentive to act as a gatekeeper on the Internet, raising costs and limiting choices for consumers," wrote Sen. Al Franken, D-Minn., in a letter recently.

Ken Fisher's Price-to-Sales Strategy

For decades, the price-to-earnings ratio has been the most widely used valuation measure for investors. But in 1984, Kenneth Fisher sent a shockwave through the investment world when he introduced the price-to-sales ratio strategy, notes John Reese of Validea.

Fisher thought there was a major hole in the P/E ratio's usefulness. Part of the problem, he explained in his book Super Stocks, is that earnings—even earnings of good companies—can fluctuate greatly from year to year.

Fisher found that sales were far more stable. In fact, he found that the sales of what he termed Super Companies—those that were capable of growing their stock price three-to-ten times in value in a period of three-to-five years—rarely decline significantly.

Because of that, he pioneered the use of a new way to value stocks: the price-to-sales ratio (PSR), which compared the total price of a company's stock to the sales the company generated.

Fisher's findings—and his results—helped make the PSR a common part of investment parlance, and helped make him one of the most well-known investors in the world.

Since its July 2003 inception, my 10-stock Fisher-based portfolio has gained 256.4%, or 13.5% annualized, while the S&P 500 gained just 68.2%, or 5.3% annualized. That makes it one of my most successful long-term strategies.

Fisher is a student of investor psychology, and his observations about investor behavior are what led to his PSR discovery. Often, he found, companies will have a period of strong early growth, raising expectations to unrealistic levels. Then they have a setback, and their stocks can then plummet as investors overreact.

Fisher believed that these glitches are often simply a part of a firm's maturation. If you can buy a stock when it hits a glitch and its price is down, you can make a bundle by sticking with it until it rights the ship and other investors jump on board.

The key in all of this was finding a way to evaluate a firm when its earnings were down, or when it was losing money (remember, you can't use a P/E ratio to evaluate a company that is losing money, because it has no earnings.). The answer: by looking at sales, and the PSR.

While the PSR was key to Fisher's strategy, he warned not to rely exclusively on it. Terrible companies can have low PSRs simply because the investment world knows they are headed for financial ruin.

Other quantitative measures Fisher used include profit margins (he wanted three-year average net margins to be at least 5%; the debt/equity ratio (this should be no greater than 40%, and is not applied to financial firms); and earnings growth (the inflation-adjusted long-term EPS growth rate should be at least 15% per year.).

The variety of variables in my Fisher-based model are a big part of why I think it continues to work, long after the PSR has become a well-known stock analysis tool.

While it uses the PSR as its focal point, it also makes sure firms have strong profit margins, earnings growth and cash flows, and low debt/equity ratios.

Here's a look at five of the stocks that I currently hold in up my Fisher-based portfolio.

Zagg Inc. (ZAGG)

HollyFrontier Corp. (HFC)

Telecom Argentina (TEO)

Royal Dutch Shell Plc (RDS-A)

USANA Health Sciences, Inc. (USNA)

This strategy's well-rounded approach helped it get through one of the worst periods for the broader market in history and stay far, far ahead of the market over the long haul—All while the PSR has been a well-known investing tool. I expect this solid approach will continue to pay dividends over the long haul.

Subscribe to Validea here…

More from MoneyShow.com:

Intel and Microsoft: High Quality and Value

Finding Truly Great Dividend Values

Investing in Ben Graham Value Stocks

1 Thing Worth Watching at Comfort Systems USA

Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.

Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.

Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on Comfort Systems USA (NYSE: FIX  ) , whose recent revenue and earnings are plotted below.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.

Over the past 12 months, Comfort Systems USA generated $27.1 million cash while it booked net income of $17.0 million. That means it turned 2.0% of its revenue into FCF. That doesn't sound so great.

All cash is not equal
Unfortunately, the cash flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash flows are of high quality. What does that mean? To me, it means they need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).

For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable for the short term) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it's ordinary in recessionary times, and you can only increase collections so much. Finally, adding stock-based compensation expense back to cash flows is questionable when a company hands out a lot of equity to employees and uses cash in later periods to buy back those shares.

So how does the cash flow at Comfort Systems USA look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. TTM = trailing 12 months.

When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.

With 19.9% of operating cash flow coming from questionable sources, Comfort Systems USA investors should take a closer look at the underlying numbers. Within the questionable cash flow figure plotted in the TTM period above, other operating activities (which can include deferred income taxes, pension charges, and other one-off items) provided the biggest boost, at 8.7% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed 32.3% of cash from operations.

A Foolish final thought
Most investors don't keep tabs on their companies' cash flow. I think that's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated home-run stocks that provide the market's best returns.

If you're interested in companies like Comfort Systems USA, you might want to check out the jaw-dropping technology that's about to put 100 million Chinese factory workers out on the street – and the 3 companies that control it. We'll tell you all about them in "The Future is Made in America." Click here for instant access to this free report.

We can help you keep tabs on your companies with My Watchlist, our free, personalized stock tracking service.

Add Comfort Systems USA to My Watchlist.

Monday's Top Upgrades (and Downgrades)

This series, brought to you by Yahoo! Finance, looks at which upgrades and downgrades make sense, and which ones investors should act on. Today, with earnings season in full swing, we're seeing mainly analyst reactions to earnings news. Specifically, today we'll be looking at a pair of price target hikes for General Electric (NYSE: GE  ) and Honeywell (NYSE: HON  ) , followed by a downgrade for Nokia (NYSE: NOK  ) . Let's dive right in.

"General-ly" good news
We'll start off with General Electric which, at a $255 billion in market cap, is an economic bellwether that rings quite a bit louder than Honeywell, at $65 billion. This morning, The Wall Street Journal started off the week on a down note, lamenting recent disappointing economy and corporate-earnings reports -- slow retail sales growth of 0.4% in June, declining restaurant sales, and economist forecasts of only 1.5% annualized GDP growth in Q2.

If that's truly where the U.S. economy is heading, though, then somebody didn't get the memo, and that somebody is General Electric.

GE reported pretty anemic profits in Q2, granted, but the CEO also noted that six of his seven business segments were growing sales, with profit margins improving, and orders for new equipment simply flooding through the front door -- up 20% in the U.S. GE's now predicting strong growth in the second half of this year, and this good news inspired analysts at Argus Research to boost their target price on the shares by more than 10%, to $28 apiece.

So... who is right here? GE, or the WSJ? Honestly, it's hard to say, but with GE stock down 0.8% in early trading today, it appears investors are so far siding with the newspaper's view of the economy. And as good a report as GE put out last week, I cannot say that I blame investors for being cautious. GE shares, at 18.4 times earnings today, don't offer much -- or indeed, any -- margin of safety if all the company manages to do is grow at the 11% long-term rate Wall Street predicts for the company.

A 3.2% dividend yield is nice, sure, and helps to close the gap between price and value. But without faster growth, it's hard to see how this company can qualify for a buy rating, and hard to see how it can reach the new $28 price target Argus has set for it.

Second verse, same as the first 
I've got similar reservations about Honeywell, and the new $91 price target that RBC Capital Markets just set for that stock.

Robust gains in cash flow, improvement in profit margins, and a small gain in sales were the big news at Honeywell last week. (Also, there was the little matter of a small piece of electrical equipment hidden deep within a very large Boeing airplane, that's attracting some negative press.) Once again, this is a company that's not cooperating with the official view of a weak U.S. economy.

The valuation picture at Honeywell is, if anything, even less attractive than what we see at GE. Honeywell shares cost nearly 21 times earnings, or about 13% more than GE. These shares are expected to grow at closer to 10% per year over the next five years, however -- 6% slower than GE. And the dividend yield at Honeywell, an even 2%, is 38% worse than what GE pays out.

Long story short, if GE's valuation makes you nervous, Honeywell's should worry you even more.

Knocking Nokia
If there's one analyst move today that I do agree with, though (and don't get excited -- this is not good news), it's about Nokia. Analysts at Oppenheimer just knocked the stock down one notch to underperform, warning investors that far from reviving, Nokia's handset business looks more likely to drag down the rest of the company along with it.

Oppy sees a risk to Nokia's strategy of building high-quality smartphones equipped with superb camera optics... and selling them cheaply. Specifically, the analyst warns that Apple and Samsung are working to discount their phone offerings as well, and to shrink the price gap with Nokia's wares. As a result, Nokia's starting to look like it's caught in a price war that it cannot hope to win. Unprofitable already, and with an operating profit margin of just 5.5%, Nokia's phones business is ill-positioned to compete on price with Apple and its 30%-plus operating margin, for example.

Meanwhile, although the company has cut its rate of cash burn, and actually generated positive operating cash flow over the past year, its free cash flow number remains stuck in negative territory.

The upshot: While Oppenheimer likes Nokia's telecom equipment business, Nokia Siemens Networks, it holds out few hopes for the company as a whole. At least, not until the Lumia business starts gaining more traction in the marketplace.

Fool contributor Rich Smith owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and General Electric Company.

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Amazon Q1 income up 32% on brisk sales

Amazon.com, the giant online retailer that is rapidly expanding into digital media and hardware, said Thursday its first-quarter net income rose 32% from a year ago to $108 million as it registered higher sales in all major product lines.

Its diluted earnings of 23 cents per share matched estimates of analysts polled by Bloomberg.

Net sales increased 23% to $19.7 billion from the same quarter a year ago.

The results were announced after markets closed. Amazon shares inched up 0.52% in after-hours trading, to $338.89.

Amazon still generates a vast majority of its revenue by selling electronic goods and other items — sales of those rose 27% to $13 billion. Sales of media items, including digital files, are growing at a rapid clip, up 8% to $5.5 billion, amid heavy competition from Apple, Google and other giants.

Amazon's profit margins have usually been thin, given its heritage as an online retailer. And that isn't likely to change because it continues to invest heavily in other areas that normally would be found in Silicon Valley, including Internet hosting services, cloud computing, tablets and even video game development. Total expenses rose 23% to $19.6 billion, including nearly $2 billion on technology and content.

As usual, the Seattle-based company did not release detailed figures about sales of its Kindle line of tablets and e-readers, as well its Prime Instant Video service, the $99 annual membership that includes two-day delivery and some free streaming of TV and movies.

The company expects second-quarter net sales to be between $18.1 billion and $19.8 billion, or to grow between 15% and 26%, compared with second quarter 2013.

Amazon also expects an operating loss next quarter of $55 million to $455 million, compared with income of $79 million last year.

"I'm somewhat surprised the stock is trading up," said Michael Pachter of Wedbush Securities. "Revenue guidance is great ... but they expect an operating loss in (second quarter)."

T! he first quarter was an eventful one for the online retailer-turned Net content provider. Before it announced its earnings, Amazon said Prime subscribers could use a new grocery-delivery service called Prime Pantry to get a 45-pound box of groceries shipped for a flat rate of $5.99.

On Wednesday, the company struck an agreement with HBO to stream the cable network's popular, previously aired shows for Prime subscribers. As part of that deal, HBO Go will come to Amazon's new $99 Fire TV set-top box it brought to market earlier this month. Fire TV delivers streaming video from Amazon and other sources, including Netflix and Hulu.

And last month, Amazon told its 25 million Prime members that it was raising the annual fee from $79 to $99; that took effect April 17. "2014 is off to a kinetic start," said Amazon CEO and founder Jeff Bezos in a statement accompanying earnings.

Small Cap Synacor Inc (SYNC): At Least the Slide Has Slowed (SKYY, IGV & SOCL)

Small cap Synacor Inc (NASDAQ: SYNC) says its "where Tech, Hollywood and Madison Avenue meet in the cloud" but its not exactly been a blockbuster for investors – meanings its worth taking a closer look at the stock along with the performance of potential benchmarks like the First Trust ISE Cloud Computing Index (NASDAQ: SKYY), iShares North American Tech-Software (NYSEARCA: IGV) and Global X Social Media Index ETF (NASDAQ: SOCL).

What is Synacor Inc?

Small cap Synacor Inc calls itself a "Tech company at the intersection of Hollywood and Madison Avenue" or "where Tech, Hollywood and Madison Avenue meet in the cloud." More specifically, Synacor Inc's white-label platform enables cable, satellite, telecom and consumer electronics companies to deliver TV Everywhere, digital entertainment, cloud-based services and apps to their end-consumers across multiple devices, strengthening those relationships while monetizing the engagement. The company says it's the leading provider of next-gen startpages, homescreens, award-winning TV Everywhere solutions and cloud-based Identity Management (IDM) services, across multiple devices for cable, satellite, telecom and consumer electronics companies in the US and abroad

As for potential performance benchmarks, the First Trust ISE Cloud Computing Index tracks the ISE Cloud Computing Index through 41 holdings; the iShares North American Tech-Software tracks the S&P North American Technology-Software Index through 61 holdings; and the Global X Social Media Index ETF tracks the Solactive Social Media Index through 21 holdings. 

What You Need to Know or Be Warned About Synacor Inc

Synacor Inc debuted in early 2012 at $5 (sharply below its original plans of debuting at $10 to $12 a share), but it appears that shares quickly got way ahead of themselves thanks to the activities of certain promoters or traders plus the company has long warned that a growing number of consumers are using mobile devices instead of computers and software applications other than Internet browsers to access the Internet – hurting its search-and-display advertising (the company has been developing solutions to address these trends). Shares have largely been flat at the $2.50 level since early 2013.

In early March, announced financial results for the fourth quarter and fiscal 2013 with fourth quarter revenue coming in at $29.4 million verses $32.2 million as search and display advertising revenue came in at $24.0 million verses $27.1 million while subscription-based revenue came in at $5.4 million verses $5.1 million. For fiscal 2013, total revenue came in at $111.8 million verses $122.0 million for fiscal 2012 as search and display advertising revenue came in at $90.4 million verses $101.6 million and subscription-based revenue came in at $21.4 million verses $20.4 million. For the fourth quarter of 2013, Synacor Inc's net income came in at $0.2 million verses net income of $0.8 million while for the full fiscal year, the company's net loss came in at $1.4 million verses net income of $3.8 million for 2012. The CEO commented:

"Throughout 2013 and most intensively in our fourth quarter, Synacor made significant progress developing new multi-device touchscreen and mobile products for use in domestic and international markets. We're particularly excited about our latest Android homescreen, TV Everywhere search & discovery interfaces, and authentication offerings. We plan to aggressively rollout these new products during the next two quarters of this year and we're encouraged by the early market reception."

For fiscal 2013, it should be mentioned that Synacor generated $5.2 million in cash from operating activities verses $14.7 million in fiscal 2012, but the company ended the year with $36.4 million in cash and cash equivalents verses $41.9 million at the end of fiscal 2012. In addition, the earnings report noted a CEO succession plan plus announced a stock repurchase program under which the company may repurchase up to $5 million of its outstanding common stock.

Aside from earnings, investors should be aware of a large number of insider sales in recent months that are documented on Yahoo! Finances Insider Transactions page for the stock:

Insider Transactions Reported - Last Two Years

DateInsiderSharesTypeTransactionValue*

Apr 17, 2014	CHAMOUN GEORGEOfficer	10,000	Direct	Option Exercise at $0.20 per share.	2,000
Apr 15, 2014	CHAMOUN GEORGEOfficer	5,000	Direct	Automatic Sale at $2.54 per share.	12,700
Apr 9, 2014	FRANKEL RONALD NOfficer	11,500	Direct	Automatic Sale at $2.50 per share.	28,750
Mar 27, 2014	FRANKEL RONALD NOfficer	11,500	Direct	Automatic Sale at $2.45 per share.	28,175
Mar 18, 2014	CHAMOUN GEORGEOfficer	10,000	Direct	Option Exercise at $0.20 per share.	2,000
Mar 17, 2014	CHAMOUN GEORGEOfficer	5,000	Direct	Automatic Sale at $2.57 per share.	12,850
Mar 13, 2014	FRANKEL RONALD NOfficer	11,500	Direct	Automatic Sale at $2.62 per share.	30,129
Mar 11, 2014	CHAMOUN GEORGEOfficer	20,000	Direct	Option Exercise at $0.20 per share.	4,000
Mar 10, 2014	CHAMOUN GEORGEOfficer	5,000	Direct	Automatic Sale at $2.59 per share.	12,950
Feb 12, 2014	FRANKEL RONALD NOfficer	11,500	Direct	Automatic Sale at $2.49 per share.	28,635
Jan 30, 2014	FRANKEL RONALD NOfficer	11,500	Direct	Automatic Sale at $2.42 per share.	27,830
Jan 15, 2014	CHAMOUN GEORGEOfficer	10,000	Direct	Option Exercise at $0.20 per share.	2,000
Jan 15, 2014	FRANKEL RONALD NOfficer	11,500	Direct	Automatic Sale at $2.60 per share.	29,899
Jan 15, 2014	CHAMOUN GEORGEOfficer	5,000	Direct	Automatic Sale at $2.60 per share.	13,000
Jan 2, 2014	FRANKEL RONALD NOfficer	11,500	Direct	Automatic Sale at $2.48 per share.	28,520

 

Otherwise, it should be noted that Synacor Inc will hold a conference call to discuss financial results for its first quarter 2014 on Tuesday, May 13, at 5pm Eastern Time.

Share Performance: Synacor Inc vs. SKYY, IGV & SOCL    

On Tuesday, small cap Synacor Inc fell 0.79% to $2.51 (SYNC has a 52 week trading range of $2.13 to $4.17 a share) for a market cap of $68.95 million plus the stock is up 2.45% since the start of the year, down 12.5% over the past year and down 52.2% since February 2012. Here is a look at the long term performance of Synacor Inc verses potential ETF benchmarks First Trust ISE Cloud Computing Index, iShares North American Tech-Software and Global X Social Media Index ETF:

As you can see from the above chart, Synacor Inc peaked in the middle of 2012 when it began sliding but that slide largely dissipated several months ago.

Finally, here is a look at the latest technical charts for Synacor Inc, First Trust ISE Cloud Computing Index, iShares North American Tech-Software and Global X Social Media Index ETF:

The Bottom Line. While small cap Synacor Inc is definitely not for conservative investors, traders and anyone with a stomach for some risk might want to take a closer look at the stock.

3 Big Stocks on Traders' Radars

BALTIMORE (Stockpickr) -- Put down the 10-K filings and the stock screeners. It's time to take a break from the traditional methods of generating investment ideas. Instead, let the crowd do it for you.

>>Side-Step the Selling With These 5 Big Trades

From hedge funds to individual investors, scores of market participants are turning to social media to figure out which stocks are worth watching. It's a concept that's known as "crowdsourcing," and it uses the masses to identify emerging trends in the market.

Crowdsourcing has long been a popular tool for the advertising industry, but it also makes a lot of sense as an investment tool. After all, the market is completely driven by the supply and demand, so it can be valuable to see what names are trending among the crowd.

While some fund managers are already trying to leverage social media resources like Twitter to find algorithmic trading opportunities, for most investors, crowdsourcing works best as a starting point for investors who want a starting point in their analysis. Today, we'll leverage the power of the crowd to take a look at some of the most active stocks on the market today.

>>5 Hated Earnings Stocks You Should Love

These "most active" names are the most heavily-traded names on the market -- and often, uber-active names have some sort of a technical or fundamental catalyst driving investors' attention on shares. And when there's a big catalyst, there's often a trading opportunity.

Without further ado, here's a look at today's stocks.

Comcast

Nearest Resistance: $53.50

Nearest Support: $50

Catalyst: Q1 Earnings Beat

Comcast (CMCSA) is up more than 3% on big volume this afternoon, following first-quarter earnings numbers that beat estimates. Wall Street was looking for profits of 64 cents per share in the first quarter, but Comcast actually earned 68 cents on revenue that was $400 million higher than forecast. The earnings beat is solid, but it's the market's reaction to that news that investors should be paying attention to this week.

CMCSA has been locked in a downtrend since the start of February, corralled by a pair of well-defined trend lines. But shares broke out of that channel in today's session, an indication that a major change in trend is kicking off here. If you decide to buy Comcast today, I'd recommend keeping a protective stop at the 50-day moving average.

Barrick Gold

Nearest Resistance: $17.50

Nearest Support: $15.50

Catalyst: Merger Talk Issues

Barrick Gold (ABX) is treading water today after a sharp move lower in yesterday's session. Rumors of troubled merger talks between Barrick and Newmont Mining (NEM) are to blame for the drop, following reports that the miners were going to make a deal public this week.

From a technical standpoint, you don't want to own Barrick Gold here. Shares triggered a head and shoulders top pattern in yesterday's selloff, and there's a lot of downside risk at this point: $15.50 is a likely downside target. While the potential for a mended merger discussion does inject event risk into the equation (that is, it could invalidate the selling pressure in one fell swoop), that's a roll of the dice rather than a high-probability trade. Caveat emptor.

Netflix

Nearest Resistance: $420

Nearest Support: $350

Catalyst: Q1 Earnings

Netflix (NFLX) is up 6% on big volume this afternoon, drawing significant attention following its first quarter earnings results. Netflix grew domestic and international subscribers to 35.7 million and 12.7 million respectively, driving earnings to 86 cents per share, which came in well above analysts' expected 78-cent profit. Even if you missed today's big 6% move, however, now looks like a high-probability buying opportunity in NFLX.

Technically, NFLX was looking "bottomy" in the first part of April, so the big influx of buyers today had little trouble breaking shares out above $350. That's a buy signal as shares come up on their next resistance level up at $420. $420 is less a major price barrier than a stumbling block. Once cleared, it should give NFLX a second chance to retest highs from February.

To see these stocks in action, check out the at Most-Active Stocks portfolio on Stockpickr.



-- Written by Jonas Elmerraji in Baltimore.

RELATED LINKS:

>>3 Stocks Rising on Unusual Volume

>>5 Stocks Under $10 Ready to Explode

>>5 Rocket Stocks to Buy This Week

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to

TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

Follow Jonas on Twitter @JonasElmerraji

Top 5 Low Price Stocks To Invest In Right Now

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Nokia (NYSE: NOK  ) have gotten clobbered today, down by as much as 12% after the Finnish smartphone maker reported first-quarter earnings.

So what: Revenue in the first quarter totaled $7.7 billion, which missed the Street's forecasts. On the bright side, the company narrowed its loss to $0.07 per share. There was other good news, as Lumia shipments were strong and increased 27% sequentially to 5.6 million units. Nokia closed the quarter with $5.9 billion in net cash.

Now what: Total smartphones dropped precipitously as Nokia expectedly ramps down Symbian units, which were just 500,000. The company's Asha line of feature phones saw shipments of 5 million. Nokia's lower-end devices are under competitive pressure from Android devices targeting low price points. The networks business held up, and CEO Stephen Elop said that segment helped contribute to Nokia's cash position this quarter. However, investors were focusing on the weakness up top.

Top 5 Low Price Stocks To Invest In Right Now: Active Control Techn (ACTV)

The Active Network, Inc. provides organization-based cloud computing applications services to business customers in North America, Europe, and internationally. The company offers ActiveWorks, an organization-based cloud computing platform, which transforms the way organizers record, track, manage, and share information regarding activities and events. Its ActiveWorks back-office system pulls customers� participant management, operational reporting, volunteer management, and service and payment processing functions into one hosted system. The company also provides consulting services, which consist primarily of business mapping, project management services, and guidance on best practices in using its services; and implementation services, including system set-up and configuration, and data conversion, as well as develops customized training and education programs relating to both the use and administration of its services. It serves a range of customers, including communit y and sports organizations, large corporations, small and medium-sized businesses, educational institutions, federal and state government agencies, non-profit organizations, and other related entities. The company was formerly known as Racegate.com, Inc. and changed its name to The Active Network, Inc. in May 2001. The Active Network, Inc. was founded in 1998 and is headquartered in San Diego, California.

Advisors' Opinion:

• [By Jake L'Ecuyer]

  Equities Trading UP
  The Active Network (NYSE: ACTV) shot up 25.66 percent to $14.32 after the company agreed to be taken private by Vista Equity Partners for $1.05 billion.

Top 5 Low Price Stocks To Invest In Right Now: Nordion Inc. (NDZ)

Nordion Inc., a health science company, provides various products and services for the prevention, diagnosis, and treatment of diseases worldwide. The company operates in two segments, Sterilization Technologies and Medical Isotopes. The Sterilization Technologies segment offers Cobalt-60, a radioactive metal that emits radiation and sterilizes items by destroying contaminating micro-organisms; and dosimetry and professional services, as well as designs, constructs, and maintains commercial gamma sterilization systems. The Medical Isotopes segment provides various products that are used in the diagnosis and treatment of diseases, including cardiac and neurological conditions, and various types of cancer. It offers Molybdenum-99, which decays into Technetium-99, a diagnostic that is used in nuclear medical procedures; Xenon-133 used in lung scans; Iodine-131 to treat hyperthyroidism, thyroid cancer, and non-Hodgkin�s lymphoma; Iodine-125 to treat prostate cancer; and Yttri um-90 to treat liver cancer and non-Hodgkin�s lymphoma. This segment also provides cyclotron isotopes, such as Iodine-123 to diagnose thyroid disease; Thallium-201 to diagnose and assess risk of coronary artery heart disease; Palladium-103 for treating prostate cancer; Strontium-82 for cardiac imaging; and Indium-111 and Gallium-67 to diagnose cancer, as well as offers radiopharmaceutical and contract manufacturing services. Nordion Inc. serves radiopharmaceutical and pharmaceutical manufacturers, biotechnology companies, manufacturers of medical supplies and devices, contract sterilizers, hospitals, and academic and government institutions, as well as to food and consumer goods industries. The company was formerly known as MDS Inc. and changed its name to Nordion Inc. in November 2010. Nordion Inc. was founded in 1946 and is headquartered in Ottawa, Canada.

Advisors' Opinion:

• [By Jake L'Ecuyer]

  Leading and Lagging Sectors
  Monday morning, the healthcare sector proved to be a source of strength for the market. Leading the sector was strength from Nordion (NYSE: NDZ) and Pacira Pharmaceuticals (NASDAQ: PCRX). Utilities sector rose by just 0.19 percent in the US market today.

Top 5 Recreation Stocks To Watch Right Now: American Airlines Group Inc (AAL)

American Airlines Group Inc., formerly AMR Corporation, incorporated in October 1982, operates in the airline industry. The Company's principal subsidiary is American Airlines, Inc. (American). As of December 31, 2011, American provided scheduled jet service to approximately 160 destinations throughout North America, the Caribbean, Latin America, Europe and Asia. AMR Eagle Holding Corporation (AMR Eagle), a wholly owned subsidiary of the Company, owns two regional airlines, which do business as American Eagle-American Eagle Airlines, Inc. and Executive Airlines, Inc. (collectively, the American Eagle carriers). American also contracts with an independently owned regional airline, which does business as AmericanConnection (the AmericanConnection carrier). As of December 31, 2011, AMR Eagle operated approximately 1,500 daily departures, offering scheduled passenger service to over 175 destinations in North America, Mexico and the Caribbean.

American, AMR Eagle and the AmericanConnection airline served more than 250 cities in approximately 50 countries with, on average, 3,400 daily flights and the combined network fleet numbered approximately 900 aircraft as of December 31, 2011. American Airlines is also a founding member of the oneworld alliance, which includes British Airways, Cathay Pacific, Finnair, LAN Airlines, Iberia, Qantas, JAL, Malev Hungarian, Mexicana, Royal Jordanian and S7 Airlines. Together, oneworld members serve 750 destinations in approximately 150 countries, with about 8,500 daily departures. American is also one of the scheduled air freight carriers in the world, providing a range of freight and mail services to shippers throughout its system onboard American's passenger fleet.

To improve access to each other's markets, American has established marketing relationships with other airlines and rail companies. As of December 31, 2011, American had marketing relationships with Air Berlin, Air Pacific, Air Tahiti Nui, Alaska Airlines, British Airways, Cape Air, C! athay Pacific, China Eastern Airlines, Dragonair, Deutsche Bahn German Rail, EL AL, Etihad Airways, EVA Air, Finnair, GOL, Gulf Air, Hawaiian Airlines, Iberia, Japan Airlines (JAL), Jet Airways, JetStar Airways, LAN (includes LAN Airlines, LAN Argentina, LAN Ecuador and LAN Peru), Niki Airlines, Qantas Airways, Royal Jordanian, S7 Airlines, and Vietnam Airlines.

American has established the AAdvantage frequent flyer program (AAdvantage). AAdvantage members earn mileage credits by flying on American, American Eagle and the AmericanConnection carrier or by using services of other participants in the AAdvantage program. Mileage credits can be redeemed for free, discounted or upgraded travel on American, American Eagle or other participating airlines, or for other awards. American sells mileage credits and related services to other participants in the AAdvantage program. There are over 1,000 program participants, including a credit card issuer, hotels, car rental companies, and other products and services companies in the AAdvantage program. As of December 31, 2011, AAdvantage had approximately 69 million total members.

The Company competes with Alaska Airlines (Alaska), Delta Air Lines (Delta), Frontier Airlines, JetBlue Airways (JetBlue), Hawaiian Airlines, Southwest Airlines (Southwest) and AirTran Airways (Air Tran), Spirit Airlines, United Airlines (United) and Continental Airlines (Continental), US Airways and Virgin America Airlines.

Advisors' Opinion:

• [By Dan Caplinger]

  Southwest Airlines (NYSE: LUV  ) will release its quarterly report on Thursday, and investors have been increasingly optimistic about the prospects for the popular airline. In a favorable environment for air travel generally, Southwest has held its own against Delta Air Lines (NYSE: DAL  ) and American Airlines Group (NASDAQ: AAL  ) , despite passing up some of the lucrative money-making opportunities that its rivals have used to bolster their net income.

• [By Paul Ausick]

  American Airlines Group Inc. (NYSE: AAL) and Southwest Airlines Co. (NYSE: LUV) have not published revenue data or projections.

  While Delta’s news is spreading good cheer and rising share prices today, all the airlines are wary of a coming increase in a federal tax they pay to support the U.S. Transportation Safety Administration (TSA). Congress approved an increase to the fees paid to the TSA as part of the budget deal it reached last month.

• [By Jake L'Ecuyer]

  American Airlines (NASDAQ: AAL) was also down, falling 4.40 percent to $24.98 as traders looked exit the airline following its recent rally.

  Commodities
  In commodity news, oil traded up 0.67 percent to $100.22, while gold traded up 0.15 percent to $1,214.90. Silver traded up 1.54 percent Friday to $20.03, while copper fell 0.47 percent to $3.38.

• [By WWW.DAILYFINANCE.COM]

  Nam Y. Huh/AP DALLAS -- If you use miles to get a free ticket on American Airlines, you may have to pay to check that suitcase. American and US Airways announced changes Tuesday to their policies on checked-bag fees and redeeming miles for free flights. Passengers traveling on American on miles they earned or who paid full price for an economy seat won't get free checked bags anymore. Some elite-level frequent fliers on both airlines will get one less free bag than before. When it comes to redeeming miles for free flights, US Airways is ending blackout days. American will change the number of miles to get an unrestricted free flight -- more on popular travel days, fewer on less-busy ones. And it's making an array of changes to the miles needed for international trips. Suzanne Rubin, an American Airlines vice president who oversees the AAdvantage loyalty program, said the changes will increase revenue but she declined to give a figure. The two carriers merged in December and formed American Airlines Group (AAL), and Tuesday's changes are designed to bring the policies of the two closer together. Between them, they have 110 million loyalty-program members, Rubin said. Other changes: For U.S. travel on or after June 1, American members can redeem miles for an unrestricted "AAnytime" award at 20,000 miles, 30,000 miles or 50,000 each way instead of the current 25,000-mile flat rate. The less-flexible "MileSAAver" awards will continue to start at 12,500 miles. Mid-tier elite members (platinum on American; gold and platinum on US Airways) will get two free checked bags; a reduction of one for the US Airways' Dividend Miles elites. Lower-level elites (gold on American; silver on US Airways) will get one free checked bag, a reduction from two for the American customers. Removing a charge for second checked bags on trips to South America. Rubin said the company wasn't considering charging a fee for carry-on bags, as Spirit Airlines (SAVE) does.

Top 5 Low Price Stocks To Invest In Right Now: Integrys Energy Group(TEG)

Integrys Energy Group, Inc., through its subsidiaries, operates as a regulated electric and natural gas utility company in the United States and Canada. It provides natural gas utility services in Chicago, Wisconsin, Michigan, and Minnesota. As of December 31, 2009, the company served approximately 1,669,000 residential, commercial and industrial, transportation, and other customers. It had approximately 22,000 miles of natural gas distribution mains; and approximately 1,010 miles of natural gas transmission mains. The company also generates and distributes electric energy form coal, natural gas, fuel oil, hydroelectric, and wind resources in Wisconsin and Michigan. It served approximately 489,000 residential, commercial and industrial, wholesale, and other customers. In addition, Integrys Energy offers nonregulated energy supply and services; and electric transmission services. The company was formerly known as WPS Resources Corporation and changed its name to Integrys En ergy Group, Inc. in February 2007. Integrys Energy Group, Inc. was founded in 1883 and is based in Chicago, Illinois.

Advisors' Opinion:

• [By Justin Loiseau]

  Integrys (NYSE: TEG  ) announced this week that it's selling off one of its hydro dams, marking yet another utility's unease with hydroelectric power. Let's take a closer look to see whether this power company's piddling away profits -- or making smart moves for its future.

Top 5 Low Price Stocks To Invest In Right Now: Physicians Realty Trust (DOC)

Physicians Realty Trust, incorporated on April 9, 2013, is a real estate investment trust (REIT). The Company is a self-managed healthcare real estate company. The Company is engaged in acquiring, developing, owning and managing healthcare properties that are leased to physicians, hospitals and healthcare delivery systems. The Company invests in real estate that is integral to providing healthcare services. The Company�� properties are located on a campus with a hospital or other healthcare facilities or strategically located and affiliated with a hospital or other healthcare facilities. The Company�� principal investments will include medical office buildings, outpatient treatment facilities, acute and post-acute care hospitals, as well as other real estate integral to healthcare providers. The Company�� initial portfolio will consist of 19 medical office buildings located in 10 states with approximately 528,048 net leasable square feet. Effective August 27, 2013, Physicians Realty Trust acquired an undisclosed hospital, located in Plano, Texas, an owner and operator of hospital. In September 2013, Physicians Realty Trust completion of the sale-leaseback of the surgical hospital and adjacent medical office building occupied by the Foundation Surgical Hospital of El Paso, L.L.C. In October 2013, Physicians Realty Trust announced the completion of the acquisition of the Foundation Outpatient Care Building located in Oklahoma City, OK. Effective January 8, 2014, Physicians Realty Trust acquired an undisclosed ambulatory surgery center, located in Great Falls, Montana. In February 2014, the Company's operating partnership, Physicians Realty L.P., closed on the purchase and leaseback of four medical office buildings to an Atlanta, Georgia-based family medical practice.

The Company�� Surgical Hospital-New Orleans, Louisiana property is a 57,000 square foot, 42-bed acute care surgical hospital with six operating rooms. The hospital specializes in ortho/neuro spine surgery, orthopedics, ! weight loss surgery and other scheduled general surgery procedures. Surgical Hospital and Medical Office Building-El Paso, Texas property is a 77,000 square foot, 40-bed acute care hospital with six operating rooms. The Company's initial portfolio was acquired or developed by healthcare real estate funds managed by B.C. Ziegler & Company (Ziegler), a specialty investment banking firm focused on the healthcare industry, and another subsidiary of The Ziegler Companies, Inc. As part of its formation transactions, the Ziegler Funds will contribute their ownership interests in these properties to its operating partnership.

Advisors' Opinion:

• [By Marc Bastow]

  Healthcare REIT Physicians Realty Trust (DOC) was right up their with Ford in raising its quarterly dividend 25%, to 22.5 cents per share, payable Feb. 7 to shareholders of record as of Jan. 24.
  DOC Stock Dividend Yield: 7.02%

The Dow Upgrades Itself, and the Smartphone Era Begins

On this day in economic and business history ...

Technology and pharmaceuticals gained a permanent foothold in the Dow Jones Industrial Average (DJINDICES: ^DJI  ) on June 29, 1979. The index added IBM (NYSE: IBM  ) and Merck (NYSE: MRK  ) that day, replacing floundering automaker Chrysler and food-products company Esmark for only its second component swap in the previous 20 years -- still the slowest rate of changes in Dow history.

The addition of IBM was actually the start of its second Dow membership period, as it had been a component from 1932 to 1939. However, IBM's 1979 addition marked the first time that a specialized digital technology company held a place on the Dow -- IBM was not a computer maker (no one was) in the '30s, and neither longtime components AT&T nor General Electric had dedicated mainframe computer divisions, although both tried to enter the market. Merck's addition marked the first time any drugmaker had ever been a part of America's most-watched market index. It has since been joined by two other drugmakers, and one health insurer.

IBM's exclusion had been previously justified on account of the outsized effect its triple-digit share prices might have on the price-weighted index, but the computer maker enacted a 4-for-1 split earlier in 1979. The Dow missed out on some rather staggering gains during the years it excluded IBM, as the company's 22,000% gain over those four decades would have doubled the Dow's real value by 1979. The tech beachhead IBM opened on the Dow has since been stormed by four other technology stocks.

Building a leader
Home Depot (NYSE: HD  ) was founded on June 29, 1978. A year later, the ambitious young retailer opened its first two superstores. Within six years, Home Depot was a public company, and its trajectory continued to rise to the present day. To read more about Home Depot's history, click the link earlier in this paragraph.

The new computing craze
Apple's (NASDAQ: AAPL  ) flagship device finally reached consumers' hands on June 29, 2007, six months after Steve Jobs introduced it to the world. Crowds pressed up against the doors of Apple retail stores across the United States, rabidly awaiting the opportunity to own one of the first iPhones. The $599 smartphone sold briskly on its first day, and within two days, more than 270,000 people went home with new iPhones.

Despite the early hype, there were plenty of critics. Microsoft CEO Steve Ballmer burst out laughing when asked about the device's market potential, calling it "the most expensive phone in the world." Bloomberg writer Matthew Lynn also knocked the "luxury bauble," and other tech writers heaped scorn on the iPhone's unusual configuration in a phone era dominated by glorified PDAs with articulated keyboards. No one can criticize Apple now. Even if you don't like the iPhone, you can't argue with an industry-leading 320 million-plus unit sales across all models, accomplished in just the first six years since its introduction.

It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged among the five kings of tech. Click here to keep reading.

Disney Drops in After Hours as Earnings Beat, Networks Disappoints

Remember when I said investors weren’t necessarily betting against Disney’s (DIS) results? Perhaps that should be rescinded. The mega-entertainment company is falling in after-hours trading following the release of its earnings after the close.

Associated Press/Walt Disney Studios/Marvel

Disney reported a profit of 77 cents, beating analyst forecasts for 76 cents according to FactSet, on sales of $11.6 billion, ahead of analyst estimates for $11.4 billion.

Robert Iger, Disney’s CEO, was as happy as Winnie the Pooh with a jar of honey after the release. "We're extremely pleased with our results for Fiscal 2013, delivering record revenue, net income and earnings per share for the third year in a row," Iger said in a company press release. "It was another great year for the Company, both creatively and financially, and we remain confident that we are well positioned to continue our strong performance and drive long-term shareholder
value."

(Let’s assume Iger’s saying what he’s expected to say, because how can you describe Disney’s year as “great” on the creative front when it released both the Lone Ranger and Thor: The Dark World?)

Investors weren’t nearly as pleased, however. Disney’s shares have dropped 3% to $65.17 in after-hours trading.

Sterne Agee’s Vasily Karasyov and Kutgun Maral highlight the numbers from Disney’s cable networks. They write:

Cable Networks revenue $3.57 bln vs. $3.65 bln estimate SLIGHTLY LIGHT; operating income $1.28 bln WORSE than our $1.37 bln forecast.

We think the Street will view the results as soft given that cable networks revenue and operating income came in below our estimates. (We believe we were the Street low.)

 

Did This Chipmaker Bet on the Wrong Horse?

Following a series of big quarterly losses driven by long-term weakness in the PC market, Advanced Micro Devices (NYSE: AMD  ) CEO Rory Read decided to implement a new strategy. AMD's turnaround plan involves not only cutting costs, but also reducing AMD's reliance on the PC market by diversifying into adjacent markets.

Of particular interest to AMD are the "embedded" and "semi-custom" chip markets, because it expects those markets to continue growing (offsetting declines in the PC market), and a single design win can lead to a long revenue stream. AMD hopes to eventually derive 40% to 50% of its revenue from embedded and semi-custom chips. One of the biggest early targets for AMD in this respect was the game console market. Indeed, AMD won the designs for all three next-generation game consoles: Nintendo's Wii U, Sony's (NYSE: SNE  ) PlayStation 4, and Microsoft's (NASDAQ: MSFT  ) Xbox One.

Even AMD bears have praised the company for its success in the game console market. However, I am skeptical that this will prove to be a growth market as AMD anticipates. While the outgoing generation of game consoles sold more than 250 million units combined, a growing trend toward mobile and cloud-based gaming could mean that the game console market is ripe for disruption. In other words, AMD may have bet on the wrong horse.

Consumer unrest rising?
Nintendo was the first company to bring a new console to market for this generation, releasing its Wii U console last year. Sales fell flat, totaling just 3.45 million units in the first two quarters after launch. Slow console sales have led to weak developer support, which could make it even harder to boost sales going forward.

Still, AMD bulls and game console fans had high hopes for Sony's PlayStation 4, which was revealed back in February, and Microsoft's new Xbox console, which was unveiled just last month. AMD stated on its Q1 earnings call in April that Nintendo, Microsoft, and Sony were likely to ship more than 40 million game consoles combined in 2013, with that number expected to grow going forward.

However, rather than creating a wave of enthusiasm, Microsoft's Xbox One launch spawned protests among gaming enthusiasts who are worried about the use of digital rights management technology on Xbox One games. The games will need to be activated online, which would make it harder to trade games with friends and would give Microsoft and game publishers control of the massive used games market. Gamers are also worried about the possibility that PlayStation 4 will include some type of DRM, as details on PS4 have been very spotty so far.

Disruption in the console market
Obviously, some gamers will buy next-generation consoles regardless of whether or not they incorporate DRM. Plenty of other people will buy the new consoles primarily for their non-gaming features, such as Xbox One's interactive NFL content offering. However, selling more than 250 million units like the current generation of consoles will mean convincing a lot of people to shell out hundreds of dollars for a console, and then hundreds of dollars more for games. If Microsoft and Sony decide to go ahead with DRM, they could lose a lot of sales, which would directly impact AMD.

Moreover, consumers looking for a good gaming experience have more alternatives than ever before. First of all, the strong success of the Wii, PS3, and Xbox 360 means that plenty of households already have a gaming console. Many people may decide not to upgrade if they don't like the current alternatives. Second, PC gaming continues to offer an alternative to console gaming. Third, the widespread adoption of tablets and smartphones provides casual gamers with a more convenient alternative to game consoles.

Another long-term threat comes from NVIDIA (NASDAQ: NVDA  ) , which has developed a cloud-based GPU platform that will enable developers to offer "gaming as a service." This business model could become very popular with consumers, as it would eliminate the upfront cost of consoles and games, and allow users to stream games to any Internet-connected device. It could also prove to be much more customer-friendly, as people could try a game out before committing to subscribe and getting full access.

Foolish wrap-up
While the game console market is in flux, it should be clear by now that Nintendo, Microsoft, and Sony could have trouble convincing customers that they need to upgrade, given the ready availability of alternatives like mobile gaming and cloud-based gaming. If Microsoft and Sony don't placate fans quickly, the entire console market could stagnate or decline.

AMD is counting on game consoles becoming a long-term growth market, offsetting declines in the PC market. However, the game console market may be ripe for disruption, and the recent DRM controversy could be the catalyst for a shift toward newer gaming technologies. AMD has barely survived the disruption of the PC market. If the company has tied its fortunes to a declining industry yet again, it may not be so lucky in the future.

It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged among the five kings of tech. Click here to keep reading.

Wal-Mart offers lower-fee money transfer service

NEW YORK (AP) — Wal-Mart is offering another incentive to its customers to spend more time at its stores.

The world's largest retailer introduced a new money transfer service Thursday that it says will cut fees by up to 50% compared with similar services elsewhere. The Walmart-2-Walmart service is being rolled out in partnership with Ria Money Transfer, a subsidiary of Euronet Worldwide.

Shares of MoneyGram and Western Union plunged almost immediately Thursday after the announcement.

The service, which will be available starting April 24, allows its customers to transfer up to $900 to and from more than 4,000 Wal-Mart stores in the U.S.

It's a huge footprint that could reshape that industry and is likely to set off a pricing battle.

Customers can transfer up to $50 for a $4.50 service fee and up to $900 for $9.50.

Comparable services elsewhere cost up to $70 when transferring less than $1,000, according to Wal-Mart.

Western Union on its website puts the price of transferring $900 in New York between $20, if using a bank account, to $85 if using a credit or debit card.

Wal-Mart is creating an expanding menu of financial offerings for customers, particularly for those with limited exposure to banks. Wal-Mart already offers prepaid debit cards and tax preparation services.

Shares of MoneyGram International, which could get hit the hardest, fell more than 16% to $15.11 in afternoon trading. MoneyGram is the company that currently provides money transfers to Wal-Mart. The stock of Western Union, its rival, fell about 4% to $15.37.

MoneyGram could not be reached immediately for comment. But in a statement emailed to The Associated Press, Western Union said, "Our retail product and service offerings today are already quite diverse. "

It noted that people have the flexibility to send money in minutes or next day from a retail agent location or online and they can also send money directly into a bank account.

"The company is well positio! ned in the U.S. domestic money transfer space, having offered a fee of $5 for $50 since 2009," it added.

Wal-Mart is aggressively trying to increase foot traffic in its stores after seeing comparable-store sales decline for four consecutive quarters.

The Walmart-2-Walmart service may help stem that trend, giving customers just one more reason to spend more time inside Wal-Mart.

Daniel Eckert, Wal-Mart's senior vice president of services, said that the move into the money transfer business gained momentum after company officials heard complaints from customers about high fees elsewhere. He acknowledged in a conference call Thursday that the program could bring more customers into stores, but he insisted that the goal is to offer shoppers more financial choices.

Eckert told reporters that it didn't alert MoneyGram that it was teaming up with Ria, but said that for more than a decade Wal-Mart has had a strong partnership with MoneyGram and that it renewed its contract in 2012. He pointed out that MoneyGram has no money transfer limits and customers can transfer funds outside the U.S. using its services.

"Walmart-2-Walmart brings new competition and transparent, everyday low prices to a market that has become complicated and costly for our customers," Eckert said.

Shares of Wal-Mart Stores, based in Bentonville, Arkansas, rose 38 cents to $77.60 in trading Thursday.

Fed chief says interest rates to stay low

Federal Reserve Chair Janet Yellen said Wednesday that she views the risk of high inflation "as signficantly below" the chances of price increases persisting below normal, adding that such data likely will keep the Fed from raising interest rates rapidly.

Her remarks appeared intended to calm financial markets that had become worried about a sharper-than-expected rise in short-term rates.

Inflation currently is running below the Fed's target of 2% a year. In a speech Wednesday afternoon to the Economic Club of New York, Yellen said Fed policymakers are aware that the inflation could sometime rise substantially above 2%. "At present, I rate the chances of this happening as significantly below the chances of inflation persisting below 2%" but the Fed must be prepared to respond to unexpected outcomes, she said.

Yellen also said the labor market remains weak and interest rates would stay near zero as long as employment and inflation remain well below the central bank's targets. Low inflation could prompt consumers to put off purchases and make it more difficult for governments, businesses and consumers to repay debt.

"The larger the shortfall of employment or inflation from their respective objectives and the slower the projected progress toward those objectives, the longer the current target range for the federal funds rate is likely to be maintained," she said.

She gave no specific time frame for raising the Fed's benchmark short-term rate, saying the move would depend on the recovery's progress and a pick-up in inflation.

Yellen also said the gap between the 6.7% unemployment rate and the Fed's 5.2% to 5.6% estimate of the normal rate "remains significant, and in our baseline outlook, it will take more than two years to close."

Policymakers' forecasts released after the Fed's March 18-19 meeting raised concerns that rates could rise more abruptly than expected. That drove down stocks.

Yellen further fueled concerns when remarks she made at her press confere! nce after the meeting left financial markets speculating that the central bank's first short-term rate hike could occur as early as April 2015, months sooner than expected.

Market concerns were eased last week when minutes of the meeting showed that Fed policymakers were concerned that the change in the interest rate forecast "could be misconstrued as indicating" a sharper increase in rates. The minutes also revealed that the Fed's decision last month to eliminate the 6.5% threshold it had set for considering its first rate hike "did not imply a change in….policy intentions."

Instead of relying on threshold, which would soon be reached, the Fed said it would use a range of labor market indicators.

Yellen said Wednesday that such data "suggest that there may be more slack in labor markets that indicated by the unemployment rate." That means there are still many Americans who are unemployed or underemployed despite the sharp drop in the jobless rate in recent years.

For example, she said the share of Americans who are working part-time but prefer full-time jobs "remains quite high by historical standards." And the number of people out of work more than six months has fallen but "remains as high as any time prior to the Great Recession."

PriceSmart (PSMT): Plenty of Growth … But at What Cost?

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A little-known fact about PriceSmart (PSMT): It actually merged with Costco (COST) in 1993, only to be spun back off in 1994. But I enjoy the connection, because I very much think of PSMT as the Latin American Costco.

But is PSMT stock as attractive as Costco? Well…

All told, PSMT stock rises and falls based on the fate of the company’s 32 stores: six in Costa Rica; four each in Panama and Trinidad; three each in Guatemala, the Dominican Republic, and Colombia; two each in El Salvador and Honduras; and 1 each in Aruba, Barbados, Jamaica, Nicaragua, and the U.S. Virgin Islands. (PriceSmart also has expansion aspirations in other parts of Latin America.)

Everyone has their view about which emerging market will emerge the hardest. Various friends of mine in the investment and international communities view Latin America as the next big growth region. They are particularly excited about Costa Rica, Colombia and Brazil. I happen to agree, so any opportunity to place capital in these regions — especially with an established brand — is something I pay attention to.

PriceSmart recently reported earnings, and the market slammed PSMT stock — shares were off by about 11% and have bounced back only a bit since then. I’ll agree that PriceSmart was too expensive to buy into at the time, but PSMT’s battering appeared overdone … so, now’s a good time to revisit that thought.

For as bad as PSMT stock got beat up, though, the earnings report was actually pretty good.

PSMT Earnings

Net income rose to $28.3 million from $24.9 million last year, a 14% increase. That translated into an 8-cent-per-share analyst beat. Revenue increased 11% to $674 million, yet it fell short of analyst expectations of $678.91 million. Of course, I think it's crazy that a $4.91 million shortfall — less than 1% — would be considered such a disaster.

Gross margins decreased 19 basis points to 14.5%, but I hardly consider that to be the end of the world, either. But hey, if the market wants to discount the stock irrationally, I'm fine with that.

Let's check the overall financial picture to see if there's value here.

PSMT Financials

PriceSmart’s balance sheet looks pretty good, with about $79 million in cash and only $60 million in debt. The debt is comparably expensive, costing $5.2 million in interest annually, or about 9%. Yet that $5.2 million in the face of more than $100 million in annual net income for PSMT does not give me any reason for concern. Free cash flow has continually improved over the years, too, so there's no concern there.

Plenty of big-name mutual funds hold PSMT stock, so there's faith from the institutional community. I also love that insider holdings are at 37.5%. It means management's interests are strongly aligned with shareholders.

Bottom Line

I actually have very little problem with PSMT stock … until we actually hit the area that concerned me even before PriceSmart’s tumble: valuation.

PSMT stock is sitting around $93. FY14's projected earnings are $3.23 per share, giving PriceSmart a P/E ratio of 29. Long-term growth rate projections are at 17%, so on this basis, it's still overvalued.

The cash position isn't large enough to warrant a premium, nor is the FCF situation so overtly amazing that it earns a premium there, either.

Thus, despite now being well off its 52-week high of $126 — by a whopping 30% — PriceSmart still seems expensive to this value-driven investor.

I'm willing to pay for growth. I might even give it a 20x valuation on FY15's earnings because I like it so much.

But even then, PSMT stock would have to hit $70 to get me interested.

Back to the drawing board.

As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities. He is president of PDL Broker, Inc., which brokers financing, strategic investments and distressed asset purchases between private equity firms and businesses. He also has written two books and blogs about public policy, journalistic integrity, popular culture, and world affairs. Contact him at pdlcapital66@gmail.com and follow his tweets @ichabodscranium.

6 Stocks to Sell Now

Stock market volatility—especially downward volatility—is back. In seven trading sessions from April 3 through April 11, the Dow Jones industrial average experienced four single-day triple-digit drops, including one of 267 points, as well as one day with a gain of 181 points. For all the wild swings, however, the bull market remains in force. The broader Standard & Poor's 500-stock index, which has returned 199% since bottoming on March 9, 2009, is off a mere 4% from its record high.

See Also: Why Rising Interest Rates Won't Kill the Bull Market

Still, the market's shaky performance raises the question of whether this is a good time to take some profits. In that spirit, we've identified six stocks that we think are no longer the bargains they once were or whose growth prospects have become less rosy. If they're in your portfolio, think about cutting them loose. (The stocks are listed alphabetically; prices are as of April 11.)

Garmin (GRMN, $54.86). Smart phones are eating into the sales of makers of global positioning systems, or GPS. Case in point: Revenues at Garmin's auto division fell 13% last year. The Switzerland-based company is starting to diversify into areas such as fitness and aviation, which helped boost the stock 64% over the past year. But analysts don't expect profits to grow meaningfully again before 2015. And the stock is not particularly cheap, selling at 21 times estimated 2014 earnings.

Lululemon Athletica (LULU, $52.08). The Canada-based athletic apparel maker stumbled last year when shoppers complained that the store's pricey yoga pants were see-through. Lululemon is making amends, but other companies have since entered the high-end athletic apparel market. The stock's glamour days—it rose 13-fold from early 2009 to last June—are history. Analysts expect same-store sales—sales at stores open for at least one year—to rise only by low-to-mid-single-digit percentages in the current fiscal year, which ends in January.

Netflix (NFLX, $326.71). Shares of the online video-streaming company quadrupled in 2013. But Netflix is feeling the pressure from competitors. The Los Gatos, Cal., company plans to spend about $3 billion to acquire content this year, more than twice Netflix's cash balance. That means the company will need to raise funds. What's more, with a price-earnings ratio of 80, based on estimated 2014 earnings, the stock is vulnerable to any sort of disappointing news. Indeed, when word broke in March that Apple and cable TV giant Comcast could offer a joint video-streaming service, Netflix's stock fell 6.7% in a single day.

RadioShack (RSH, $2.03). The consumer-electronics chain repeatedly fell short of analysts' earnings estimates last year. The Fort Worth, Tex., company is trying to bounce back, but consumer-electronics is an intensely competitive business, especially when it comes to selling mobile phones. In 2013, sales of mobile phones, which account for more than half of Radio Shack's revenues—declined 10.4% in stores that were in existence for at least one year. So far this year, the stock has declined 22%. Its low-single-digit price suggests that investors think there's a good chance Radio Shack is heading toward oblivion.

Rite Aid (RAD, $7.04). The nation's third-largest drugstore chain wowed investors on April 10 when it reported better-than-expected profits for the quarter that ended March 1. What's more, the Camp Hill, Pa., company projected higher sales and earnings in the current fiscal year, thanks in part to its recent purchase of RediClinic, which operates 30 in-store health clinics in Texas. As a result, the stock surged 8.4% on what was a miserable day for most stocks. But much of the good news may already be baked into the share price. The stock has more than tripled over the past year and now trades for 19 times estimated year-ahead earnings. By contrast, Rite Aid's main rivals, CVS Caremark and Walgreens, trade at 16 and 17 times estimated year-ahead profits, respectively. Rite Aid also carries much more debt than other drugstore chains. That could come back to haunt the company if its turnaround stumbles.

Tesla Motors (TSLA, $203.78). Despite a recent pullback, Tesla's stock has nearly quintupled over the past year and trades at 116 times estimated 2014 earnings. But the Palo Alto, Cal., company, which went public in 2010, may not be able to keep up with investor expectations. A report by UBS says the rich share price assumes that Tesla will produce one million vehicles per year a decade from now, a daunting task. Meanwhile, Tesla needs to reduce the cost of its car batteries in order to roll out lower-priced models. "The downside is material," UBS says.

Is HP a Buy Today?

In the following video, Fool contributor Matt Thalman points out one big reason why he believes opening a new position in Hewlett-Packard (NYSE: HPQ  ) is not worth the risk today. While Matt feels that Meg Whitman has, up to this point, performed wonderfully in pulling the struggling technology company back from the edge of the cliff, the turnaround strategy still has a number of hurdles to overcome, and too many things still have to go according to plan. 

The massive wave of mobile computing has done much to unseat the major players in the PC market, including venerable technology names like Hewlett-Packard. However, HP's rapidly shifting its strategy under the new leadership of CEO Meg Whitman. But does this make HP one of the least-appreciated turnaround stories on the market, or is this a minor blip on its road to irrelevance? The Motley Fool's technology analyst details exactly what investors need to know about HP in our new premium research report. Just click here now to get your copy today.

T-Mobile US Inc Won't Give AT&T Inc a Break

AT&T (NYSE: T  ) added 566,000 postpaid customers in the fourth quarter. That was good enough to best Sprint (NYSE: S  ) , but trailed Verizon (NYSE: VZ  ) and T-Mobile (NYSE: TMUS  ) . A huge number of those net new customers were tablet owners -- 440,000.

Now, T-Mobile is attempting to put the hurt on AT&T even more, by attracting those important tablet owners to its wireless network. The Un-Carrier announced "Operation Tablet Freedom" Thursday, offering wireless customers free data and less-expensive tablets.

The value of tablet owners
Tablets using cellular connections in the U.S. increased 46% in 2013, according to NPD. Meanwhile, total U.S. mobile subscribers are increasing only marginally.

For AT&T, in particular, tablet subscribers are a large part of what's buoying subscriber numbers. T-Mobile continues to gain share in handsets, but AT&T and Verizon are both attracting high-end tablet customers. As mentioned, 440,000 of AT&T's net new postpaid subscribes in the fourth quarter were on tablets. Verizon added 625,000 tablet subscribers, but nearly one million more handset subscribers in the fourth quarter.

The situation at Sprint would be much worse without its growing number of tablet subscribers. The company added 58,000 net new postpaid subscribers in the fourth quarter, which belies the nearly 400,000 phone subscribers it lost in the quarter. The carrier added 466,000 tablet subscribers for the quarter due to aggressive installment pricing and holiday sales. Sprint's weak performance in handsets recently led to a round of 1,400 job cuts.

T-Mobile, on the other hand, has been hard pressed to add tablet subscribers. The company introduced its free data for life plan in the late fourth quarter, offering 200 megabytes of 4G data every month to tablet owners. Still, the company added just 69,000 mobile broadband subscribers, primarily composed of tablet owners, that quarter.

The new deal
With "Operation Tablet Freedom," T-Mobile is extending its early termination fee reimbursement program to tablet owners. It will let tablet data plan subscribers switch to T-Mobile, trade-in their old tablets, and put that trade-in credit toward the purchase of a new tablet. What's more, that new tablet will be the same price as the WiFi-only model, and T-Mobile will finance it for you. On top of that, T-Mobile is offering an additional gigabyte of 4G data per month in addition to the free 200 megabytes through 2014.

It's an incredibly attractive offer, and new tablet purchasers will struggle to find a reason not to take T-Mobile up on it.

T-Mobile is obviously using the promotion as a loss-leader to attract new handset subscribers. With the growth in tablet data subscribers in the last year, it's not a bad strategy. NPD estimates there are 10.4 million tablet subscribers as of the end of 2013. If T-Mobile can attract just one-fourth of that market, it would be enough to reach its goal of 2 million to 3 million net new postpaid in 2014.

1.2 GB per month appears to be the perfect amount of data for tablet owners too. That same NPD study found that tablet users consumed just under 1 GB per month on average during the fourth quarter.

What's AT&T to do?
T-Mobile's announcement comes shortly after Verizon announced it was adding 1 GB of data for tablets on its "More Everything" plan for just $10 per month. Verizon isn't taking T-Mobile's announcement lightly, as it's already announced that new customers will get a bonus gigabyte of 4G data for life for tablets on its More Everything plan.

AT&T has become increasingly reliant on tablet activations, as has Sprint, and needs to cook up an offer of its own or risk losing subscribers to T-Mobile.

The biggest thing to come out of Silicon Valley in years
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now... for just a fraction of the price of AAPL stock. Click here to get the full story in this eye-opening new report.