AdvisorOne’s Best Comments: Goldfarb, Fiduciary, Referrals

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But the best comments can help continue the conversation of any story or blog for our readers—and for us—beyond the article’s own words.  So AdvisorOne will be regularly highlighting some of the better comments that are posted to keep the conversation alive. The comments weren’t highlighted because they were long or short, just, hopefully, thought-provoking.

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1. The Curious Case of Alan Goldfarb, and Why All Advisors Should Care: Investment Advisor Editor-at-Large Bob Clark wrote his weekly blog on June 12 off an interview with Alan Goldfarb, the former CFP Board chair who was asked to resign last year.

Comment by Ron Rhoades

Submitted on 6/12/2013 at 17:48

Bob, an excellent article on a confusing case. Due to the confidentiality of CFP Board disciplinary proceedings, we are never likely to obtain a full knowledge of the facts, even in summary form, as they were presented at the CFP Board hearing. Accepting Alan Goldfarb's statements as both true and complete (which I do, for he has long been a man of honor and a leader of the profession), I remain perplexed about two aspects of the CFP Board's ruling to (1) find that a violation occurred; and (2) impose the draconian penalty of a public sanction.

FIRST, there does not appear to be any explanation of the term "salary" on the CFP Board's web site. I receive a salary from my fee-only investment advisory firm; can I use the term "salary"? Or, since all compensation DERIVES from either fee compensation (i.e., paid directly by the client) or commission-based compensation, should all advisors describe themselves as either "fee-only" or "fee-and-commission" or "commission-and-fee" or "commission-only" on the CFP Board's web site? In other words, who - if anyone - is permitted to utilize the term "salary"? Given such, is the misunderstanding that occurred not the fault of Mr. Goldfarb, but rather the fault of the CFP Board? And ... would not others have been caught in the trap of this ambiguity - and what happened to their cases?

SECOND, why a public sanction for such the alleged seemingly minor transgression - if it was a transgression at all? It seems that other disclosures provided by Alan Goldfarb and his firm corrected any misunderstanding any client or potential client would possess - if indeed there was any violation at all, and if indeed any client or potential client was confused by the language found on the CFP Board's web site. Alan Goldfarb was apparently thorough and prompt in his reply to the CFP Board. Moreover, Alan Goldfarb very publicly resigned his CFP Board Chairmanship in order to preserve the reputation of the CFP Board while this investigation was pending. In other words, there does not appear to be any harm to Alan Goldfarb's clients, nor to the public. And Mr. Goldfarb, by his very public resignation last year, already burdened himself with public discussion of the situation. Are the CFP Board's disciplinary guidelines, as to sanctions imposed for the alleged offense, so uncompromisingly rigid that a public sanction was warranted (even assuming, again, that a transgression of the CFP Board's rules even occurred)? You characterize the case as "curious." I would go further, and say that the CFP Board's decision in this matter poses a grave concern.

At the minimum, and without reference to any particular case before it (now or in the past), the CFP Board should adequately and prominently define for its Certificants the term "salary" and specify the circumstances in which it can be utilized (and when it cannot). Even then, any retrospective application of such an explanation appears unjust and a denial of due process - not only for Alan Goldfarb, but also for any other persons trapped by the ambiguity which has been so created by the CFP Board.

2. The Curious Case of Alan Goldfarb, and Why All Advisors Should Care

Comment by Anonymous (Mary Malgoire)

Submitted on 6/14/2013 at 17:41

Bob, your old pal Mary Malgoire here. Excellent article... I would like to clarify one thing about NAPFA's standards for admission. We recognize that some fee-only advisors are indeed salaried professionals in a stand-alone business unit that is owned by a commission-based firm. Since there could be expectations, even incentives, to refer business to the "product side" of the house. NAPFA requires a signed statement from the salaried individual's supervisor that said professional has NO obligation to recommend the subsidiaries products and may recommend ANY product that is suitable for the client. In some situations the applicant's supervisor refuses to sign such a statement. That tells you something!

So my quesiton here is whether or not Mr. Goldfarb was under any obligation to satisfy client product needs via the firm's subsidiaries? The ADV Part 2 also helps NAPFA to understand and can enlighten. I too hope the CFP Board and other professional associations will clarify these issues as my own investigation indicates that there are many professionals associated with commission and fee firms who claim "fee-only" on "find a planner' searches. If the firm's website lists a broker-dealer affiliation, it is a misrepresentation to the public to list yourself as fee-only? My solution to all of this, as I said at the Fiduciary Summit yesterday, is to simply require dislcosure of the adviser's (and advisory firm's) actual $ financial interest and let the marketplace work it's magic.

3. Will Indexing Kill the Market?: In his May column for Research magazine, published on AdvisorOne on April 29, 2013, Marshall Jaffe wrote: “Yet hidden in the shadows of indexing’s monumental success is a growing body of evidence that this truly elegant idea not only has the potential to threaten the stability of the market, but has already changed market behavior in ways few if any investors understand.”

Comment by Anonymous (James McRitchie)

Submitted on 6/13/2013 at 16:22

The larger problem with indexed funds is that they have little if any incentive to actually monitor management since they compete with other indexed funds on the basis of low fees. Any benefit that occurs because of their active monitoring goes equally to their competitors, but every dime they spend is only their own expense. We have reached the point that a majority or close to a majority of stock in most large companies is held by indexed funds. The result is that either they defer to management (which I suspect is most frequently the case) or they defer to ISS and Glass Lewis. Either way is problematic. I discuss this more thoroughly in a three part post, beginning with "Agency Capitalism: Corrective Measures (Part 1)." My post includes suggested solutions, including proxy advisor contests, which will allow much more time and analysis than the estimated average of $2,000 per proxy spent by ISS.

4. What a Pretzel Entrepreneur, a Navy Widow and an Ex-Rep All Need From Their Advisors Investment Advisor Editor-in-Chief John Sullivan wrote this news piece on June 14, 2013, from the TD Ameritrade Institutional Elite Advisor’s conference, reporting on a consumer panel moderated by Barbara Roper of the Consumer Federation of America. “The panel, convened to discuss consumer awareness of the concept of fiduciary, quickly deviated into other issues, as panelists agreed that acting in their best interest was important even if they never heard the term ‘fiduciary’ used in that context.”

Comment by Anonymous

Submitted on 6/14/2013 at 11:01

What was the point of the article? Has anyone asked the CFPBOS [the CFP Board of Standards] why for decades they actively fought the imposition of a fiduciary standard? If it was core to the practice then it would have been embraced at the onset.

5. 5 Tips for a Successful Referral Request: In this article by Paul McCord, originally published June 13, 2013, on AdvisorOne’s sister publication LifeHealthPro, the author wrote, “Let’s take a look at the primary problems the traditional referral 'method' creates.”

Comment by Stephen Wershing, CFP

Paul, a lot of good points. One key is understanding why people make referrals. We all engage in referral behavior all the time, and it is because we get rewards for it. Advisors do not widely understand this, and so they think we have to pry them out of clients, totally disrespecting why the client would do it and actually helping prevent future referrals. Also, as you point out, clients do not generally understand who to refer. Addressing these issues, like I do on my blog , The Client-Driven Practice,  and other places, you can get people referring -- without asking! There is also more about this in the interview I did with Investment Advisor magazine last August: How to Succeed at Referrals (Without Even Asking).

New Data on Biogen's Eloctate - Analyst Blog

Biogen Idec (BIIB) and Swedish Orphan Biovitrum AB recently presented new data on their hemophilia A candidate, Eloctate, at the XXIV International Society on Thrombosis and Haemostasis (ISTH) Congress.

Data presented by Biogen and Swedish Orphan Biovitrum supported Eloctate's safety and efficacy profile.

According to the new data, a single injection of Eloctate helped control more than 87% of bleeds while more than 97% of bleeds could be controlled by two or fewer injections. Moreover, bleeding during and after 9 major surgeries were controlled by Eloctate in 9 patients with hemophilia A.

Biogen also presented data on Eloctate from a population pharmacokinetics (popPK) model as well as an evaluation based on the usage of two investigational hemostasis assays.

We note that Biogen and Swedish Orphan Biovitrum had initially presented positive top-line results on Eloctate from the global, multi-center, phase III A-LONG study last year. About 98% of bleeding episodes were controlled with one or two injections of Eloctate. Eloctate was found to be generally well-tolerated.

Eloctate is currently under US Food and Drug Administration (FDA) review – a response regarding its approval status should be out early next year.

The company's hemophilia B candidate, Alprolix, is also under FDA review with a response expected by year end.

A convenient dosing schedule (supported by a longer duration of action and a suitable safety profile) could help Alprolix and Eloctate capture share from existing products in the hemophilia market.

Biogen currently carries a Zacks Rank #1 (Strong Buy). Avonex and Tysabri should continue contributing significantly to sales. Tecfidera should help drive long-term growth. We are also encouraged by Biogen's progress with its hemophilia candidates.

A few other companies that look equally well-positioned are Aeterna Zentaris (AEZS), Cytori Therapeutics, Inc. (CYTX) and Protalix BioTherapeutics, Inc. (PLX). All three! are Zacks Rank #1 stocks.

Edmunds: Try placing trust in your staff

Hello, Gladys, I consider myself successful in my business. I own a temporary employment agency and I haven't been on vacation in 10 years. The reason is, I can't be comfortable when I'm not in my office. It's ironic my company is very good at matching temps to employers, but I can't seem to find good people to work for me. I spend most of my day putting out fires that my staff presents me with. It's just one thing after the other. I often have to oversee or at least double-check their work. And in most cases it has to do with customer satisfaction. Do you have any suggestions? -- Jon

You seem to be micromanaging, and that can be counterproductive to business success.

Your hiring procedures should be consistent with your business visions and objectives. Before interviewing people, have you made a list of the qualities that you need in the hire? Are you asking for references to support the qualifications claimed by the applicant? Are your new hires clear on what is expected of them? Taking the time to address these things along with anything else that can be beneficial to your company is crucial.

If you find that there is nothing wrong with your people when you hire them, then we can assume that the problem starts after they have been hired. Therefore it is time to look at how your management style. I have often told the story about my father never allowing my brothers to mow the lawn when we were kids because my dad believed that my brothers could not do the good job that he could do himself. On the few times that he allowed one of my brothers to mow the grass or cut the hedges he would stand over them like a hawk and yell out instructions on how he wanted it done.

STRAUSS: Empower your employees

My husband used to micromanage the repairman that he called in to make a home repair of some sort. He would watch their every move while asking a bunch of questions and periodically throwing in a few suggestions. Never mind that he knew nothing about the repairs being! performed.

This kind of behavior can scare a person out of their wits and force them to become defensive or let you do their job. And, it can work on your nerves as well. I know how difficult it can be. Try backing off a bit and let your employees have a little responsibility of their own. Many entrepreneurs feel that if the job is to be done right they will have to do it themselves.

This belief can also find its way into other aspects of the entrepreneur's life. I volunteered to be on a fundraising committee for an organization. The chairperson was an entrepreneur. She wanted to micromanage how each of us approached our prospects for a contribution. Meanwhile she had never done charitable fundraising herself. And her constant nagging and demanding to be told step-by-step each thing we did or said was annoying.

Try letting your staff to do their own work. Make them feel like a part of your company by backing off and trusting them a little more. Those employees who actually can't handle responsibility will most likely leave on their own; otherwise you can feel comfortable in letting them go. Hold regular meetings that focus on the kind of training that is consistent with goals and/or your company mission statement. You will probably be pleasantly surprised. Employees who are made to feel like a real part of the company will take pride in their work. They will also feel free to express their ideas and suggestions that can help your company to grow.

A final point: Expect the best from your staff and let them know they are capable of performing with excellence. And you will most likely get it.

Gladys Edmunds, founder of Edmunds Travel Consultants in Pittsburgh, is an author and coach/consultant in business development. Her column appears Wednesdays. E-mail her at gladys@gladysedmunds.com. An archive of her columns is here. Her website is gladysedmunds.com.

Has Walgreen Bounced Back for Good?

Next Tuesday, Walgreen (NYSE: WAG  ) will release its latest quarterly results. Amid plenty of news pointing to the company's growth prospects, the stock recently hit all-time highs, but its gains appear to have plateaued over the past several months as investors seek further catalysts for gains.

Walgreen already has an enviably strong position within the drugstore business, and its recent strategic moves aim to broaden its appeal on a global scope. Yet, investors are still concerned about damage that a major dispute might have done to its long-term business prospects. Let's take an early look at what's been happening with Walgreen over the past quarter, and what we're likely to see in its quarterly report.

Stats on Walgreen

Analyst EPS Estimate	$0.91
Change From Year-Ago EPS	26%
Revenue Estimate	$18.44 billion
Change From Year-Ago Revenue	3.9%
Earnings Beats in Past 4 Quarters	3

Source: Yahoo! Finance.

Has Walgreen resolved all its problems?
In recent months, analysts have had narrowly mixed views about Walgreen's earnings prospects. They've cut their May-quarter estimates by $0.01 per share, but they've boosted their fiscal 2014 consensus by the same penny. The stock has made additional gains, rising about 9% since mid-March.

The ongoing long-term concern that many investors have had about Walgreen stems from its dispute last year with pharmacy benefits manager Express Scripts (NASDAQ: ESRX  ) . Following its merger with Medco Health Solutions, Express Scripts became an increasingly important source of business in the industry, and an exodus of customers from Walgreen boosted the prospects for its competitors. Indeed, long-struggling Rite Aid was able to take advantage of the situation to engineer a sharp turnaround, posting an annual profit last year for the first time in six years, and demonstrating just how extensive the damage was to Walgreen's business.

Since resolving that dispute, Walgreen has made a number of smart strategic moves to bolster growth. In March, the company entered into a 10-year agreement with drug distributor AmerisourceBergen that will fit well with its global expansion plans. Walgreen's purchase of a substantial stake in European drugstore chain Alliance Boots created the need for a more extensive distribution network, and by creating what amounts to a vertically integrated supply chain, Walgreen is setting up the infrastructure for further growth overseas.

Preliminary results show decent success with Walgreen's strategy. During April, same-store sales rose 1.2%, with larger gains of 4.7% in pharmacy sales pointing to customers returning to Walgreen's fold. May's increase in comps of 2.8% showed the same tilt toward the pharmacy side of the business. Yet, rival CVS Caremark (NYSE: CVS  ) has also given investors some positive news, guiding earnings and revenue last month to the upper end of previously provided ranges amid favorable impacts of greater generic-drug availability. Despite Walgreen's success, CVS remains a strong competitive threat, especially with its combination of pharmacy benefits management and retail drug stores.

In Walgreen's report, watch for further guidance about the path the company intends to take strategically. By identifying the role its international expansion will play, Walgreen should be able to show shareholders what will further drive share-price gains in the future.

In 2011, a massive shift began. With the first of the baby-boomer generation reaching Medicare age, America's health-care landscape was forever changed. Combine the aging population with the impact of Obamacare, and the need for innovative solutions for skyrocketing health care costs is as clear as ever. Express Scripts is part of that solution, and in this brand new premium report on the company, we clearly lay out the opportunity in front of this misunderstood stock. Claim your copy by clicking here now.

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

The Dell "Heist" Is Proceeding as Planned

U.S. stocks are flat this morning, with the S&P 500 (SNPINDEX: ^GSPC  ) and the narrower, price-weighted Dow Jones Industrial Average (DJINDICES: ^DJI  ) losing less than two points each as of 10 a.m. EDT.

The perfect crime
In a few years' time, technology executives and investors will marvel at the deal Michael Dell and Silver Lake Partners put together to take PC manufacturer Dell (NASDAQ: DELL  ) private. I can't be certain of this, of course, but I think they will end up making out like bandits. The $13.65 per share they are preparing to pay is an insolent offer, yet the acquirers, particularly Michael Dell, are absolutely brazen, which is why I refer to the deal as a "heist." Where is the board, whose duty is to protect shareholders' interests, in all this?

Unfortunately, the company filed proxy materials this morning with the SEC, according to which the board is recommending that shareholders accept the offer when it is put to a vote in July. Admittedly, the counteroffer from hedge fund manager Carl Icahn and Southeastern Asset Management has not been made fully clear; multiple board inquiries regarding the financing of their offer have gone unanswered. However, that does not mean the board is obligated to accept the first fully financed offer it receives.

Why do I write that that $13.65 per share is an insolent offer? Take a look at the 10-year Dell share price graph:

DELL data by YCharts.

Michael Dell and Silver Lake Partners picked a point at which the shares were essentially at a decade-plus low before swooping in with an offer that represents just a 37% premium to the price prior to the rumor of the deal surfacing (the shares bottomed last November at $8.86; prior to that the bottom was $8.04 on March 9, 2009, but this was the date on which the S&P 500 hit its own low). If you believe that Dell is in terminal decline, that offer is more than acceptable. If, like long-term shareholder Southeastern Asset Management (and me), you believe Dell has a solid franchise beyond just its PC business, the offer is an insult and the board is derelict in protecting the interests of shareholders not named Michael Dell.

It's incredible how much our digital and technological lives are shaped 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 by the five kings of tech. Click here to keep reading.

Capital Southwest to Change CEOs in June

Dallas-based Capital Southwest Corp. (NASDAQ: CSWC  ) will have a new CEO soon. The asset manager and venture capitalist says Chairman, President, and Chief Executive Officer Gary L. Martin will resign effective June 17 and be replaced by new President and CEO Joseph B. Armes, who currently serves as CEO of family investment vehicle JBA Investment Partners.

Martin joined Capital Southwest in 1972 as chief financial officer.

In a filing with the SEC, Capital Southwest disclosed that it will be paying Armes an annual base salary of $430,000, plus:

An annual cash bonus of up to 150% of base salary. 7,500 stock options vesting over five years. 1,250 shares of restricted stock. 6,000 "phantom stock options," which allow Armes to benefit from an appreciation in Capital Southwest's stock price (if it happens) as if he had exercised stock options and sold stock for a profit -- but do not require him to go through with the actual mechanics of such exercise and sale.

link

1 Potential Roadblock for the Pfizer Stock Run-up

Investors holding Pfizer (NYSE: PFE  ) stock are sitting pretty these days. Since they say that a picture is worth a thousand words, I'll let this picture explain why.

PFE data by YCharts.

Pfizer is walloping the S&P 500, which isn't doing too badly itself. But all good things must come to an end, right? Let's look at the one thing most likely to put a halt to this stock's terrific run of late.

Checking off the list
This should be a piece of cake. Nearly all of the big pharma companies continue to face problems due to the patent cliff. Surely an expiring patent could soon derail the Pfizer stock run, right? Actually, no.

It's true that Pfizer's revenue took a substantial hit from Lipitor going off patent. However, the company doesn't face any significant drugs losing patent protection this year. The U.S. patent for arthritis drug Celebrex expires in 2014, but that's still a ways off. 

Drug company stocks often get zapped by bad results from a late-stage trial. Is there a study coming up that could dent Pfizer stock? Judging from the Food and Drug Administration's calendar for the rest of the year, that answer is "no."

Shares of Johnson & Johnson (NYSE: JNJ  ) and Merck (NYSE: MRK  ) have also moved up quickly. J&J's price-to-earnings multiple is at its highest point since 2006. Merck's P/E is higher than it's been since the beginning of 2012. These higher valuations could lead to profit-taking and bring down shares. Is Pfizer also at risk? Not really.

Although Pfizer's P/E has been on the move upward, it's still actually close to its lowest levels since late 2011. And it's well below the trailing P/E values for both J&J and Merck.

Of course, that begs the question: Is there something wrong with Pfizer's stock if it's not doing as well as these peers? We have to remember that J&J isn't just a pharmaceutical company; it's also a consumer products and medical device company. Actually, its medical device business has been thriving more than any segment lately.

Merck is more akin to Pfizer. The two companies' P/E multiples tracked pretty well until this year. What happened?

Nothing to worry about. Pfizer's sale of its nutrition business generated extra earnings that brought its trailing P/E down. This doesn't undermine the argument that Pfizer is trading cheaply, though. Its forward P/E is still attractive.

Pfizer has caught some heat recently from Congress over its pricing for rheumatoid arthritis drug Xeljanz, which was developed in collaboration with the National Institutes for Health. However, I don't expect this issue to derail the stock.

Perhaps sales for newer products such as Xeljanz could prove disappointing. Again, I don't think this will be the case. Xeljanz should live up to expectations.

So should Eliquis, the blood-thinning drug developed with partner Bristol-Myers Squibb (NYSE: BMY  ) . Pfizer and Bristol received FDA approval for the drug in December.Some analysts project that Eliquis could generate annual sales of $3 billion to $5 billion. Those numbers are music to the ears of both Pfizer and Bristol.

This has turned into more of a challenge than initially appeared. What can stop Pfizer's momentum?

The one thing
Of course, plenty of wild cards could cause Pfizer stock to drop. Unexpected product safety issues or controversies could rear up. However, the most likely roadblock ahead for the big drugmaker is one that it can't control: the economy.

Current world tensions could escalate into something serious. Unemployment could head in a negative direction. A wide variety of issues could come up that cause overall markets to fall, bringing Pfizer stock down with them.

The possibility of such macroeconomic problems appears to be the one thing most likely to get in the way of the current Pfizer stock steamroller. However, fear of what could happen can result in missing out on good things that are happening. And right now, Pfizer has a lot of good things going on.

The best investing approach is to choose great companies like Pfizer and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

Why Zumiez Shares Popped

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 sports-apparel retailer Zumiez (NASDAQ: ZUMZ  ) jumped as much as 16% today after reporting better-than-expected same-store sales.

So what: The skateboard-and-snowboard specialist said that comparable sales increased 2.1%, while analysts had expected a drop of 7.5%. Total company sales for the five-week period ending April 6 increased 20%. The action sport retailer said both higher prices and greater unit sales helped drive the same-store sales improvement.  

Now what: Zumiez was one of a number of retailers to post better-than-expected same-store sales, helping to drive the broader market higher. One month's results do not make for a particularly strong investing thesis, and the company seems to have benefited from low expectations.  March is also a generally slow month for the retailer, which makes most of sales in the second half of the year, but expect analysts to raise their estimates for the quarter. Currently, the consensus is just $0.10 a share.

Stay up to date on Zumiez. Add the company to your Watchlist by clicking right here.

Urban Outfitters pulls offensive sweatshirt

Urban Outfitters has removed the Kent State sweatshirt from its website. NEW YORK (CNNMoney) After coming under fire on social media, Urban Outfitters has apologized for selling a "vintage" Kent State sweatshirt that many found highly offensive.

The $129 sweatshirt has been removed from Urban Outfitters (URBN)' website. But images of the sweatshirt, which has red spots on it that critics say resemble blood stains, have been widely circulated online.

The edgy youth store issued a statement saying "it was never our intention to allude to the tragic events that took place at Kent State in 1970."

On May 4, 1970, four students were killed and nine others were injured at Kent State University in Ohio after National Guard soldiers opened fire on protesters demonstrating against the Vietnam War.

Kent State University issued a statement denouncing Urban Outfitters for "using our pain for their publicity and profit."

"This item is beyond poor taste and trivializes a loss of life that still hurts the Kent State community today," the statement reads.

The sweatshirt was panned on Twitter (TWTR, Tech30)as "tasteless," "tacky" and "awful."

The "one-of-a-kind" sweatshirt was sold as part of Urban Outfitters' "sun-faded vintage collection" and was not altered in any way, according to the statement. There is no blood on the garment and Urban Outfitters said the red stains are due to "discoloration," while holes in the sweatshirt are due to "natural wear and fray."

Now, the sweatshirt is for sale on eBay (EBAY, Tech30). The seller is asking $2,500 for the "infamous one of a kind Kent State Sweater." The starting bid was $550 for the sweater, which the seller says is "perfect for Halloween or whatever your deal is."

The seller promised to donate half of the proceeds to The Southern Poverty Law Center.

This is not the first time Urban Outfitters, which caters to young consumers who want to seem "hip," has offended the wider public.

Urban Outfitters (URBN) has previously come under fire for selling woman's T-Shirts with "Eat Less" and "Depression" printed on it. The Philadelphia-based retailer has also been criticized for a shirt that evoked the stars that Jews were forced to wear during the Holocaust.

5 Stocks Set to Soar on Bullish Earnings

DELAFIELD, Wis. (Stockpickr) -- Short-sellers hate being caught short a stock that reports a blowout quarter. When this happens, we often see a tradable short squeeze develop as the bears rush to cover their positions to avoid big losses. Even the best short-sellers know that it's never a great idea to stay short once a bullish earnings report sparks a big short-covering rally.

>>5 Stocks Under $10 Poised to Pop in June

This is why I scan the market for heavily shorted stocks that are about to report earnings. You only need to find a few of these stocks in a year to help enhance your portfolio returns -- the gains become so outsized in such a short time frame that your profits add up quickly.

That said, let's not forget that stocks are heavily shorted for a reason, so you have to use trading discipline and sound money management when playing earnings short-squeeze candidates. It's important that you don't go betting the farm on these plays and that you manage your risk accordingly. Sometimes the best play is to wait for the stock to break out following the report before you jump in to profit off a short squeeze. This way, you're letting the trend emerge after the market has digested all of the news.

Of course, sometimes the stock is going to be in such high demand that you risk missing a lot of the move by waiting. That's why it can be worth betting prior to the report -- but only if the stock is acting technically very bullish and you have a very strong conviction that it is going to rip higher. Just remember that even when you have that conviction and have done your due diligence, the stock can still get hammered if The Street doesn't like the numbers or guidance.

>>Buy These 5 Rocket Stocks to Beat the Market

If you do decide to bet ahead of a quarter, then you might want to use options to limit your capital exposure. Heavily shorted stocks are usually the names that make the biggest post-earnings moves and have the most volatility. I personally prefer to wait until all the earnings-related news is out for a heavily shorted stock and then jump in and trade the prevailing trend.

With that in mind, here's a look at several stocks that could experience big short squeezes when they report earnings this week.

Bed Bath & Beyond

My first earnings short-squeeze play is home furnishing retail stores operator Bed Bath & Beyond (BBBY), which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Bed Bath & Beyond to report revenue of $2.69 billion on earnings of 95 cents per share. Just today, UBS decreased its price target on Bed Bath & Beyond to $65 and slapped a neutral rating on the stock.

>>3 Big-Volume Stocks to Trade for Breakouts

The current short interest as a percentage of the float for Bed Bath & Beyond is notable at 4.9%. That means that out of the 195.31 million shares in the tradable float, 9.57 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 24.6%, or by about 1.88 million shares. If the bears get caught pressing their bets into a bullish quarter, then shares of BBBY could easily rip sharply higher post-earnings as the bears rush to cover some of their trades.

From a technical perspective, BBBY is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has recently formed a triple bottom chart pattern at $60.55, $60.29 and $59.89 a share. Shares of BBBY are now starting to spike modestly higher off those support levels and it's quickly moving within range of triggering a big breakout trade post-earnings.

If you're bullish on BBBY, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $61.67 to $63.03 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 2.76 million shares. If that breakout hits post-earnings, then BBBY will set up to re-test or possibly take out its next major overhead resistance level at $65.14 a share. Any high-volume move above that level will then give BBBY a chance to re-fill some of its previous gap-down-day zone from April that started above $68 a share.

I would simply avoid BBBY or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 52-week low of $59.89 a share high volume. If we get that move, then BBBY will set up to re-test or possibly take out its next major support levels at $55 to $54, or even $53 a share.

KB Home

Another potential earnings short-squeeze trade idea is homebuilding player KB Home (KBH), which is set to release its numbers on Friday before the market open. Wall Street analysts, on average, expect KB Home to report revenue $563.10 million on earnings of 20 cents per share.

>>5 Stocks Setting Up to Break Out

Recently, RBC Capital predicted that KB Home's second quarter EPS and homebuilding revenue should surpass consensus estimates. The firm thinks the company can benefit from strong volumes, gross margin expansion and solid price increases. RBC maintained an outperform rating on the stock.

The current short interest as a percentage of the float for KB Home is extremely high at 24%. That means that out of the 67.75 million shares in the tradable float, 16.85 shares are sold short by the bears. This is a stock with a big short interest and a relatively low tradable float. Any bullish earnings news could easily spark a large short-squeeze post-earnings that forces the bears to cover some of their positions.

From a technical perspective, KBH is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending over the last month and change, with shares moving higher from its low of $15.40 to its intraday high of $18.03 a share. During that uptrend, shares of KBH have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now started to push shares of KBH within range of triggering a big breakout trade post-earnings.

If you're in the bull camp on KBH, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $19.41 to its 52-week high of $20.78 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 3.85 million shares. If that breakout kicks off post-earnings, then KBH will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $25 to $30 a share.

I would simply avoid KBH or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below both its 200-day moving average of $17.38 a share and its 50-day moving average of $16.55 a share with high volume. If we get that move, then KBH will set up to re-test or possibly take out its next major support level at its 52-week low of $15.40 a share.

Finish Line

Another potential earnings short-squeeze candidate is specialty retailer of athletic shoes, apparel and accessories Finish Line (FINL), which is set to release numbers on Friday before the market open. Wall Street analysts, on average, expect Finish Line to report revenue of $394.17 million on earnings of 21 cents per share.

>>4 Big Stocks on Traders' Radars

Recently, Canaccord predicted that first-quarter results for Finish Line should be in-line with expectations. The firm continues to see solid momentum coupled with improved execution and easy second-quarter comps. Canaccord has a buy rating on shares of FINL with a $32-per-share price target.

The current short interest as a percentage of the float for Finish Line is notable at 6.8%. That means that out of the 47.11 million shares in the tradable float, 3.21 million shares are sold short by the bears. If the bulls get the earnings news they're looking for, then shares of FINL could easily soar sharply higher post-earnings as the bears jump to cover some of their trades.

From a technical perspective, FINL is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong over the last five months, with shares moving higher from its low of $22.86 to its recent high of $30.48 a share. During that uptrend, shares of FINL have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of FINL within range of triggering a big breakout trade post-earnings.

If you're bullish on FINL, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance at $30.42 a share to its 52-week high at $30.48 a share (or above Thursday's intraday high if greater) with high volume. Look for volume on that move that hits near or above its three-month average action of 660,530 shares. If that breakout materializes post-earnings, then FINL will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $35 to $40 a share.

I would avoid FINL or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below 50-day moving average of $28.51 a share with high volume. If we get that move, then FINL will set up to re-test or possibly take out its next major support levels at its 200-day moving average of $26.31 to $25 a share.

AZZ

Another earnings short-squeeze prospect is electrical equipment maker and engineered services provider AZZ (AZZ), which is set to release numbers on Friday before the market open. Wall Street analysts, on average, expect AZZ to report revenue of $191.37 million on earnings of 54 cents per share.

>>A Small-Cap Stocks With Big Upside Potential

The current short interest as a percentage of the float for AZZ is notable at 5.7%. That means that out of the 24.76 million shares in the tradable float, 1.43 million shares are sold short by the bears. If this company can deliver the earnings news the bulls are looking for, then shares of AZZ could easily spike sharply higher post-earnings as the bears move to cover some of their trades.

From a technical perspective, AZZ is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been trending sideways and consolidating for the last three months, with shares moving between $41.37 on the downside and $46.67 on the upside. Shares of AZZ are now starting to spike higher right off both its 50-day and 200-day moving averages and that move is starting to push shares of AZZ within range of triggering a big breakout trade above the upper-end of its recent sideways trading chart pattern.

If you're bullish on AZZ, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $46.04 to $46.67 a share with strong volume. Look for volume on that move that hits near or above its three-month average action of 100,958 shares. If that breakout triggers post-earnings, then AZZ will set up to re-test or possibly take out its 52-week high at $49.64 a share. Any high-volume move above that level will then give AZZ a chance to trend north of $50 a share.

I would simply avoid AZZ or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some key near-term support levels at $43.55 to $43.12 a share with high volume. If we get that move, then AZZ will set up to re-test or possibly take out its next major support levels at $42 to $41 a share, or even $40 a share.

Lennar

My final earnings short-squeeze play is homebuilding player Lennar (LEN), which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Lennar to report revenue of $1.68 billion on earnings of 51 cents per share.

Just this morning, Cleveland Research said Lennar has modest risk to new-home volumes but that that will largely be offset with margin progress and share gains. Cleveland Research thinks Lennar is positioned to outperform.

The current short interest as a percentage of the float for Lennar is very high at 14.4%. That means that out of the 178.19 million shares in the tradable float, 25.73 million shares are sold short by the bears. If Lennar can deliver the earnings news the bulls are looking for, then shares of LEN could easily surge sharply higher post-earnings as the shorts jump to cover some of their bets.

From a technical perspective, LEN is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock is starting to spike higher right above its 50-day moving average of $39.69 a share. That move is beginning to push shares of LEN within range of triggering a major breakout trade post-earnings above some key overhead resistance levels.

If you're in the bull camp on LEN, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $42.28 to $42.68 a share and then once it clears its 52-week high of $44.40 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 3.15 million shares. If that breakout gets underway post-earnings, then LEN will set up to enter new 52-week-high territory above $44.40 a share, which is bullish technical price action. Some possible upside targets off that breakout are $50 to $55, or even $60 a share.

I would avoid LEN or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below its 50-day moving average of $39.69 a share with high volume. If we get that move, then LEN will set up to re-test or possibly take out its next major support levels at its 200-day moving average of $38.07 to $36.33 a share. Any high-volume move below those levels will then give LEN a chance to tag $34 to $32 a share.

To see more potential earnings short squeeze plays, check out the Earnings Short-Squeeze Plays portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

RELATED LINKS:

>>5 Hated Earnings Stocks You Should Love

>>5 Stocks With Big Insider Buying

>>5 Blue-Chip Stocks to Trade for Gains: Must-See Charts

Follow Stockpickr on Twitter and become a fan on Facebook.

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

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including

CNBC.com and Forbes.com.

You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

Dr. Dre may be "first billionaire in hip-hop"

The in-studio video posted Thursday on actor Tyrese Gibson's Facebook page is raucous and choppy, a party scene with a mix of explicit language, big laughs and nimble dance moves.

But its message is unmistakable, delivered by Dr. Dre himself: "The first billionaire in hip-hop, right here from the (expletive deleted) West Coast."

With that line, spoken just over camera-wielding Gibson's right shoulder, Dr. Dre appeared to both confirm rumors of Apple's imminent acquisition of Beats Electronics and announce a landmark moment in hip-hop history.

Will Dre, who rose to prominence in the 1980s as a fierce Los Angeles-based rapper with the controversial group N.W.A, indeed become the street-bred genre's first billionaire? Odds are yes.

Although his stake in the company that bears his name has never been made public, "most feel he's got between 20% and 25% of it," says Chuck Creekmur, CEO AllHipHip.com. "That would mean he'd get there first, before Diddy and Jay-Z."

Dre ranked second in Forbes magazine's most recent list of top-earning rappers, at $550 million. P. Diddy was first with $700 million and Jay-Z third at $520. If the Apple purchase price of $3.2 billion for Beats' suite of headphones and electronics goods as well as its recently launched streaming music service proves accurate, that could put Dre's stake of Beats at around $800 million.

To see a guy many of us grew up with make it this big is really going to inspire others.

Chuck Creekmur, CEO AllHipHop.com

Dre breaking that billion-dollar barrier will have a huge impact on the hip-hop community, says Creekmur.

"Hip-hop is a very aspirational culture, and many of the people in it certainly aspire to become as affluent as the American dream says you can be, even though it's eluded most of us," he says. "Most of the people in hip-hop are first generation business people, so to see a guy many of us grew up with make it this big is really going to inspire others to push to do the same."

Making the mome! nt even more powerful is the fact that, when compared to Diddy and Jay-Z, Dre has long preferred to stay in the background, cultivating not so much a celebrity vibe as a reputation for being among one of the best producers in the music business with a set of ears second to none.

In fact, Creekmur says the video with Gibson, which was soon pulled off the actor's Facebook page, represents "a real exception to his normal reclusive M.O.," perhaps attributable, per Gibson's crack on the 80-second clip, to the group having consumed a few beers.

For many in the hip-hop community, Dre will first and foremost be synonymous with crushing beats and not business deals.

"Regardless of the success of this deal, the legacy Dre has built as a musician and producer will never be undercut," says Jermaine Hall, editor of Vibe magazine. "It's like Magic Johnson. He may have gone on to be a great businessman, but he'll always be the face of the Lakers franchise."

Hall says Dre's magic lies in having "ears that tell him exactly where the bass and treble should be at" for a given song, ears that have also been used to tune the Beats line of headphones with a decidedly bass-heavy bent.

"You combine that with the savvy and marketing of (Beats' other founding force, producer) Jimmy Iovine and you were bound to get a winner," says Hall, who adds that Apple would be making a mistake if it rebranded its Beats purchase. Beats accounts for around two-thirds of the premium headphone market, where products sell for anywhere from $200 to $400 a pair.

In the end, the deal may have cultural repercussions that equal its fiscal ones.

"When you step back, for someone from the hip-hop culture to reach the billion-dollar mark is pretty incredible," says Hall. "And in many ways, Dre getting there first before those other two guys is the better story. He's the common man behind the scenes, and he won."

Blackstone Discusses Fannie and Freddie Stake

NEW YORK (TheStreet) -- Blackstone Group  (BX) President and COO Hamilton "Tony" James confirmed the company's preferred equity stake in Fannie Mae  (FNMA) and Freddie Mac  (FMCC) but said he does not believe the asset management giant will drive the debate over the future of the government sponsored enterprises (GSEs).

"I honestly don't think we are going to be the mover and shaker on this," James told TheStreet during a press conference following the company's first quarter earnings release Wednesday. He added the firm does not have so large a position it will be a make or break player in the debate.

"We think we have a plan that makes a lot of sense in terms of getting the GSEs out of being a liability for the government," James said.

James did not elaborate on the plan, though in a follow up email exchange a Blackstone spokesman said the company's plan is distinct from a proposal floated by Fairholme Capital in November that Blackstone was reported to be behind.

"We have our own plan but do not want to comment on details," wrote spokesman Peter Rose.

It seems unlikely government officials would be receptive to any plan backed by private investors, something James, who is friendly with many at the highest levels of government in both major parties, knows better than anyone.

"Clearly this is going to be a highly political process," he said.

GSE reform legislation proposed by Sens. Tim Johnson (D, SD) and Mike Crapo (R., ID) effectively ignores current shareholders, which in addition to Blackstone include high profile investors such as Perry Capital, Fairholme Funds and Pershing Square Capital among many others, as well as consumer advocate Ralph Nader.

It also codifies the Treasury Department's controversial 2012 amendment to the 2008 conservatorship of Fannie and Freddie. The amendment changed the terms of Fannie and Freddie's debt to the government. Instead of owing the Treasury an annual 10% dividend, the GSEs suddenly owed the Treasury all of their profits for an indefinite period, aside from minimal capital buffers. That amendment -- also known as the "net worth sweep" -- is at the crux of many of the roughly 20 lawsuits brought against the government by GSE shareholders. The lawsuits taking issue with the sweep contend it violates the Fifth Amendment of the U.S. constitution's prohibition of the taking of private property for public use without just compensation. Blackstone is not a party to any of the lawsuits, though it will benefit if they succeed. GSO Capital Partners, a unit of Blackstone, commissioned a liquidation analysis of Fannie and Freddie by restructuring firm Alvarez & Marsal. The report, published last month, projected the mortgage giants would be worth about $170 billion combined if they were wound down.

Follow @dan_freed

Stock quotes in this article: FNMA, FMCC, BX 

Google spreading Fiber fingers to more cities

SAN FRANCISCO - Google unveiled big expansion plans for its fast Fiber Internet service on Wednesday, stepping up pressure on incumbent cable and Internet providers such as Comcast, Verizon and AT&T.

Google, the world's largest Internet search engine, identified nine urban areas encompassing up to 34 cities across the U.S. as possible sites for deployment.

"We aim to provide updates by the end of the year about which cities will be getting Google Fiber," Google said on its blog. "Between now and then, we'll work closely with each city's leaders on a joint planning process that will not only map out a Google Fiber network in detail, but also assess what unique local challenges we might face."

Google Fiber is about 100 times faster than what most Internet users live with today, according to the company.

When the service started in 2011 in Kansas City, Mo., it was considered by some to be an experiment, rather than a serious new business for the web giant. But Wednesday's announcement may put such theories to rest, while also sending a message to existing cable, telecom and Internet providers that a new, cash-rich rival has arrived.

"Google Fiber is an attempt by Google to build a profitable, stand-alone business," Carlos Kirjner, an Internet analyst at Bernstein Research, wrote in a note to investors on Wednesday. "It may not make a huge difference for Google or for the incumbents in the next one, two or three years, but Google is taking the long view and we think in 5 or more years, it could turn out to be a significant, profitable business for Google and headwind for incumbents."

The 34 cities being considered are: Phoenix, Scottsdale, and Tempe in Arizona; San Jose, Santa Clara, Sunnyvale, Mountain View and Palo Alto in California; Atlanta, Avondale Estates, Brookhaven, College Park, Decatur, East Point, Hapeville, Sandy Springs and Smyrna in Georgia; Nashville-Davidson in Tennessee; Charlotte, Carrboro, Cary, Chapel Hill, Durham, Garner, Morrisville and Raleigh i! n North Carolina; Portland, Beaverton, Hillsboro, Gresham, Lake Oswego and Tigard in Oregon; San Antonio in Texas; and Salt Lake City in Utah.

Fiber in Kansas City, Mo., costs $70 each month for an Internet connect that has data-transfer speeds of 1 gigabit per second. For $120 a month, users can get Internet, TV and a Nexus 7 tablet. A 5 Mbps service is offered at no monthly charge but costs $300 for a one-time construction fee.

In Provo, Utah, monthly prices are the same but require a one-time construction fee of $30.

Latest Economic Data On Brazil Points To Slower Growth

Oh, poor Brazil. President Dilma Rouseff has turned this economy into the Rodney Dangerfield of the BRICs.

Tuesday industrial production (IP) data showed a manufacturing sector confused over inflation and expecting weaker growth. December IP fell 3.5% month over month, on a seasonally adjusted basis. Consensus was -1.7%. This was the biggest monthly contraction since December 2008, when the global financial crisis was at its peak. In yearly terms, industrial production dropped 2.3%, well below expectations of a 0.1% drop.

A closer look at the data shows poor performance across the board, says George Lei, an analyst for Nomura Securities in New York. On a monthly basis, intermediate goods were down 3.9%, consumer goods 2.5% lower and capital goods fell 11.6%. Although the reading for capital goods was somewhat affected by one-off factors in several truck-producing companies, the magnitude of the plunge is still concerning, particularly after an already hefty 3.5% drop in November.  For the emerging markets Americas team at Nomura, the disappointing capital goods number heralds weaker investment momentum ahead.

President Dilma Rousseff of Brazil. Investors blame changes in macro-economic policy for much of the problems facing the economy these days. Weak industrial production figures show a sector unclear on inflation and worried about growth.

November IP was also revised lower to -0.6% from -0.2%.

The data picture for 2013 is looking clearer, says Lei. After a relatively robust performance in the first half of last year, IP deteriorated sharply in the second half. On a quarterly basis, having expanded 1.7% in the first and 0.3% in the second, IP fell 1.3% in the third and declined 0.8% in the fourth.

Last year "proved to be another lost year for Brazilian industry, despite a short-lived recovery early in the year," Lei wrote in a note to clients today.

Tightening of financial conditions in Brazil, caused by domestic and global factors, should come to affect growth over the next 3-6 months, primarily through channels of investments. Lei said he expects investments to expand around 1.5% in 2014, versus over 6% in 2013.

Moreover, December data was not affected by the currency devaluation in Argentina.

"The ongoing situation in Argentina may have a substantial impact on Brazilian industry, as over three-quarters of Brazilian exports to Argentina are manufactured goods, and the majority of manufactured goods are vehicles and auto-parts," he wrote.

Last week, Nomura said that it expected the turmoil in Argentina to shave at least 0.2 percentage points off Brazilian growth in 2014. As IP data for the first quarter comes in, investment banks like Nomura will likely start lowering their outlook for Brazil in 2014.

The 10 Most Powerful Businesswomen In Brazil

What Qualities Matter Most When You're Hiring a Lawyer?

Getty Images Few people enjoy hiring lawyers. That's just a fact. If it takes a serious automobile accident, a divorce, or a death in the family to get you into a lawyer's office, then pretty much by definition, you're visiting under duress. But when trouble strikes and you actually need a lawyer, how do you pick one? According to Lawyers.com, the cost of legal services varies widely, from as little as $50 an hour to as much as $1,000 "or more." With such a wide range of prices to choose from, you'd think that the first factor people would look for in a lawyer is price -- specifically, a low price. Something closer to that $50 mark than to the $1,000, and as far away as possible from that ominous "or more." That turns out to not be the case. Earlier this month, online "legal Q&A forum, directory and marketplace" Avvo.com asked its users what they look for in a lawyer. While cost certainly was a factor (65 percent of respondents called it "very important"), it wasn't as important as "respect in the legal community," which 67 percent of those surveyed think is more important, or "track record" (80 percent). So it would appear that hiring a lawyer is actually a bit like buying a car. Price plays a role, of course, but more important is buying the right product, and getting good value for your money. Further bolstering the point, it appears that people who have more experience with lawyers are even more inclined to choose perceived quality over price. As Avvo's results reveal, the people most likely (72 percent) to pick a cheap lawyer over a good lawyer are those who've never used a lawyer before. Let's Get Personal All other things being equal, though, what specific qualities should you look for when choosing between two lawyers charging equivalent prices for their services? According to consumers polled by Avvo, the top three personal qualities that most customers look for when choosing a lawyer are confidence, realism, and aggressiveness. These beat out qualities such as friendliness, ability to reassure a client, or compassion. As Avvo explains, the feedback it got from its respondents is that when seeking a lawyer, they're looking for someone who's "a realistic go-getter" rather than "a hand-holder." And again, this makes sense. After all, the law is a complex thing. Most of us would much rather leave it alone, and not have to deal with it if at all possible -- which is one reason we avoid lawyers in the first place. It makes sense then that if you do run into some bad luck and find yourself with a legal dilemma that absolutely, positively, must be dealt with by a lawyer, you'd prefer to hand it over lock, stock, and barrel to a confident, realistic, and aggressive professional and let them deal with it. And really, for $1,000 an hour "or more," that's the least they could do.

It Might Be the Time for Beer

After a couple of capital increases and what looks like a weak strategy for its growth in different South American countries, Chile's beer king Compania Cervecerias Unidas (CCU) – most commonly knows as CCU - is selling at a steep discount to its peers. In other words, being down by 23% year to date, I think it might be the time to start thinking of buying CCU's shares.  

A Weak Growth Strategy

CCU recently issued more than 50 million shares and plans to use the proceeds for organic growth as well as M&A in South America. Possible targets could be related to soft drinks in Colombia, dairy in Chile, or a multi-category approach in Argentina and Uruguay (where the company recently acquired a mineral water company). That being said, I agree with most analysts. CCU should focus on its wonderful beer business in Chile (where the company is an effective monopoly) and on returning capital to its shareholders through dividends and buybacks.  

Results Are Still Wonderful

Despite having lost some ground in terms of market share in its main market against its rival, the Brazilian giant AmBev (ABEV), CCU's results are still ameliorating fast. Revenues were up by 13% year over year, EBITDA increased 6% year over year and their net income grew by 21% year over year. Better yet, consolidated organic volumes (the most important figure for beverage companies) increased by 7% year over year while pricing was also up by 5% year over year. That said, cost increases in Chile, Argentina and Uruguay (where the company is still losing money) were behind the 1.2% EBITDA margin contraction. Even when CCU's figures look very compelling, the company needs to work a lot on its cost structure and on focusing on its main market. After all, CCU's 18.4% EBITDA margin is well below AmBev's 50% margins.  

Valuation Contraction Looks Overdone

Despite the unnecessary capital increase, I believe it's time to take a deep look at the shares. Price is! what you pay and value is what you get, and at the current market price, I think you will get more than you pay for if you buy CCU's shares. The Chilean beverage leader sells for 7.7 times 2014 EV/EBITDA and 15 times earnings. Meanwhile, AmBev, which is down by 16% year to date, currently trades at 13 times 2014 EV/EBITDA and 20 times earnings. Even when the Brazilian beverages leader pays a much higher cash dividend yield than CCU (2.95% versus 1.95%), I believe the valuation gap is too wide. Moreover, with CCU you always have the M&A free call attached to the asset. The Chilean beer leader would be a wonderful target for the much bigger AmBev, which has been (unsuccessfully) trying to enter the Chilean market for more than a decade now. The Brazilian company could buy CCU and put into practice its wonderful famous cost-cutting strategies in order to boost margins.

Investors such as Carl Icahn and Richard Perry have held CCU for long periods of time. Maybe they should be buying once more. Always remember: “Price is what you pay and value is what you get.”

Also check out: Carl Icahn Undervalued Stocks Carl Icahn Top Growth Companies Carl Icahn High Yield stocks, and Stocks that Carl Icahn keeps buying

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Apple (AAPL) Unveils Free OS at iPad Event, Microsoft (MSFT) Drops

NEW YORK (TheStreet) -- Though much of what Apple (AAPL) revealed at Tuesday's event was as expected, one surprise takeaway was the tech giant revealing that its updated operating system OS X Mavericks and productivity suite iWork will be available free of charge.

Along with its launch of the iPad Air and iPad Mini, the iPhone maker announced that the refreshed operating system will be available for download immediately through the App Store, free to Mac users with OS X Moutain Lion- or Snow Leopard-enabled hardware. For OS X Server (a multi-user business platform), there is a $19.99 upgrade charge.

Unlike rival Microsoft (MSFT), which sells Windows 8.1 and Pro for $120 and $200, respectively, at retail, Apple seems content with its strategy of giving the intangibles away for free to drive hardware sales. In response, Microsoft shares dropped 1.17%, with its biggest falls of the day coinciding with the Apple event.

Mavericks, modeled on the iOS 7 for the iPhone and iPad, introduces 200 new features, including iBooks (which syncs a user's books and reading activity across all iCloud devices) and Apple maps. It also improves the performance and battery life of the Mac. "We want every Mac user to experience the latest features, the most advanced technologies and the strongest security," said Craig Federighi, Apple's senior vice president of software engineering, in a statement. "We believe the best way to do this is to begin a new era of personal computing software where OS upgrades are free." Shares of the Cupertino-based company dipped 0.29% at market close, but have since gained 0.25% in after-hours trading. TheStreet Ratings team rates Apple Inc as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about its recommendation: "We rate Apple Inc (AAPL) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself." Highlights from the analysis by TheStreet Ratings Team goes as follows: AAPL's revenue growth has slightly outpaced the industry average of 0.7%. Since the same quarter one year prior, revenues slightly increased by 0.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share. AAPL's debt-to-equity ratio is very low at 0.14 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, AAPL has a quick ratio of 1.54, which demonstrates the ability of the company to cover short-term liquidity needs. 41.67% is the gross profit margin for APPLE INC which we consider to be strong. Regardless of AAPL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AAPL's net profit margin of 19.53% compares favorably to the industry average. Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Computers & Peripherals industry and the overall market, APPLE INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500. APPLE INC's earnings per share declined by 19.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, APPLE INC increased its bottom line by earning $44.16 versus $27.67 in the prior year. For the next year, the market is expecting a contraction of 10.8% in earnings ($39.38 versus $44.16). You can view the full analysis from the report here: AAPL Ratings Report

Rieder: Support crucial for non-profit journalism

Steve Waldman has a modest proposal for securing the future of non-profit news outlets.

How about if companies that have flourished in the new economy — think Apple, Google, Verizon — stepped up to the plate and subsidized some of these valuable but financially struggling upstarts, the journalist and Web entrepreneur asks.

"If the winners of the new economy put a tiny bit of their wealth into this (area), this whole space would be transformed," says Waldman, the principal author of the FCC's major 2011 study of the state of the American news media.

Waldman issued the challenge at a recent conference at the Pew Research Center in Washington, D.C., on the future of non-profit journalism. In recent years, as traditional news organizations have cut back deeply in the face of the digital tsunami, non-profits large and small, generally online operations, have arisen to help fill the gap. While their total workforce is a mere fraction of the journalism jobs that have vanished, many of the new players are doing important work, ranging from powerful investigative reporting to granular, street-level local coverage. They are an exciting addition to the media mix.

But most if not all are supported by philanthropy, and major foundations generally don't like to fund their beneficiaries forever. As my friend Ed Wasserman, now dean of the Graduate School of Journalism at the University of California-Berkeley, has pointed out, "Going to rich people periodically asking for money isn't a real business model."

So the key question is: Can non-profit journalism go the distance?

Moderator Alan Murray, president of the Pew Research Center, kicked things off on a positive note. "The fact that we're having such a forum means there is a future," he said.

And there was some tangible good news to emerge at the conclave. Michael Maness, head of the John S. and James L. Knight Foundation's Journalism & Media Innovation program, disclosed that Knight was on the verge of making "a pre! tty sizable amount of money" available to the non-profits. While the pot of gold still needs approval by the foundation's board, it sounded like the largess will soon be a done deal.

Often, the non-profits are launched with support from a single angel. One of the keys to staying afloat is diversifying the revenue base. And that means two different things: diversifying the lineup of donors and finding new money streams — from advertising, from staging events, from memberships.

The big daddy in the field is ProPublica, an investigative powerhouse with 41 staffers in its New York City newsroom, 23 of them reporters. But many of the start-ups are lean and mean, with one- and two-person staffs, fueled by passion and commitment.

Launched in 2008 with money from the wealthy, liberal-leaning Sandler family, ProPublica reduced the Sandler share of its budget to 38% last year and hopes to shrink it to 30% this year, according to President Dick Tofel.

Tofel stresses that it's important to distinguish between family foundations like the Sandlers' and institutional foundations, which tend to act more like venture capitalists and don't plan on doling out the dollars indefinitely.

In order to attract and retain philanthropic support, the non-profits need to show that they are having an impact. But how do you measure that? Foundations like "metrics." But what are the right ones? Simply counting how many people visit the websites doesn't really cut it.

In fact, tallying the number of unique visitors "is worth zero," says Joel Kramer, co-founder and CEO of MinnPost, a non-profit news site in the Twin Cities. That stat, he says, is irrelevant unless you're in the business of selling national advertising.

What really matters is what the journalism accomplishes. Did it sweep out corrupt politicians or lead to important reforms? The key is "what happens because of what you do," says Mark Horvit, executive director of Investigative Reporters and Editors. "You can't simply look at h! ow many e! yeballs are coming to the site."

One piece of good news: The Knight Foundation and the Bill & Melinda Gates Foundation are underwriting a study at the University of Southern California to find better ways to measure engagement and impact. "What funders really care about are outcomes," says Daniel Green, who manages media and information grants at the Gates Foundation. "It's not helpful to say you need metrics if we don't help you figure out what the right ones are."

Foundations often want to see their charges wean themselves from charity and stand on their own. But that's an unrealistic expectation for many non-profit news operations, cautions Kevin Davis, CEO and executive director of the Investigative News Network, a consortium of more than 80 non-profit newsrooms.

As in the case of symphony orchestras, "Philanthropy needs to remain in the mix," he says. "Certain content will need to be subsidized. Not all will be self-sustaining."

And it's just not good enough if only the big boys like ProPublica and the Berkeley, Calif.-based Center for Investigative Reporting survive while smaller but worthy outfits succumb. If that turns out to be the case, Davis says, "We will have failed."

It would be great if the Googles and the Apples of the world listen to the wisdom of Waldman and reach for their checkbooks. The non-profit news movement is well worth the investment.

The Future Of Cryptocurrency

A cryptocurrency is a digital currency that is created and managed through the use of advanced encryption techniques known as cryptography. Cryptocurrency made the leap from being an academic concept to (virtual) reality with the creation of Bitcoin in 2009. While Bitcoin attracted a growing following in subsequent years, it captured significant investor and media attention in April 2013 when it peaked at a record $266 per bitcoin after surging 10-fold in the preceding two months. Bitcoin sported a market value of over $2 billion at its peak, but a 50% plunge shortly thereafter sparked a raging debate about the future of cryptocurrencies in general and Bitcoin in particular. So, will these alternative currencies eventually supplant conventional currencies and become as ubiquitous as dollars and euros someday? Or are cryptocurrencies a passing fad that will flame out before long? The answer lies with Bitcoin.

Bitcoin – the Current Standard

Bitcoin is a decentralized currency that uses peer-to-peer technology, which enables all functions such as currency issuance, transaction processing and verification to be carried out collectively by the network. While this decentralization renders Bitcoin free from government manipulation or interference, the flipside is that there is no central authority to ensure that things run smoothly or to back the value of a Bitcoin. Bitcoins are created digitally through a "mining" process that requires powerful computers to solve complex algorithms and crunch numbers. They are currently created at the rate of 25 Bitcoins every 10 minutes and will be capped at 21 million, a level that is expected to be reached in 2140.

These characteristics make Bitcoin fundamentally different from a fiat currency, which is backed by the full faith and credit of its government. Fiat currency issuance is a highly centralized activity supervised by a nation's central bank. While the bank regulates the amount of currency issued in accordance with its monetary policy objectives, there is theoretically no upper limit to the amount of such currency issuance. In addition, local currency deposits are generally insured against bank failures by a government body. Bitcoin, on the other hand, has no such support mechanisms. The value of a Bitcoin is wholly dependent on what investors are willing to pay for it at a point in time. As well, if a Bitcoin exchange folds up, clients with Bitcoin balances have no recourse to get them back.

Increasing Scrutiny

Bitcoin's main benefits of decentralization and transaction anonymity have also made it a favored currency for a host of illegal activities including money laundering, drug peddling, smuggling and weapons procurement. This has attracted the attention of powerful regulatory and other government agencies such as the Financial Crimes Enforcement Network (FinCEN), the SEC, and even the FBI and Department of Homeland Security (DHS). In March 2013, FinCEN issued rules that defined virtual currency exchanges and administrators as money service businesses, bringing them within the ambit of government regulation. In May that year, the DHS froze an account of Mt. Gox – the largest Bitcoin exchange – that was held at Wells Fargo, alleging that it broke anti-money laundering laws. And in August, New York's Department of Financial Services issued subpoenas to 22 emerging payment companies, many of which handled Bitcoin, asking about their measures to prevent money laundering and ensure consumer protection.

Alternatives to Bitcoin

Despite its recent issues, Bitcoin's success and growing visibility since its launch has resulted in a number of companies unveiling alternative cryptocurrencies, such as:

Litecoin – Litecoin is regarded as Bitcoin's leading rival at present, and it is designed for processing smaller transactions faster. It was founded in October 2011 as "a coin that is silver to Bitcoin's gold," according to founder Charles Lee. Unlike the heavy computer horsepower required for Bitcoin mining, Litecoins can be mined by a normal desktop computer. Litecoin's maximum limit is 84 million – four times Bitcoin's 21-million limit – and it has a transaction processing time of about 2.5 minutes, about one-fourth that of Bitcoin. Ripple – Ripple was launched by OpenCoin, a company founded by technology entrepreneur Chris Larsen in 2012. Like Bitcoin, Ripple is both a currency and a payment system. The currency component is XRP, which has a mathematical foundation like Bitcoin. The payment mechanism enables the transfer of funds in any currency to another user on the Ripple network within seconds, in contrast to Bitcoin transactions, which can take as long as 10 minutes to confirm. MintChip – Unlike most cryptocurrencies, MintChip is actually the creation of a government institution, specifically the Royal Canadian Mint. MintChip is a smartcard that holds electronic value and can transfer it securely from one chip to another. Like Bitcoin, MintChip does not need personal identification; unlike Bitcoin, it is backed by a physical currency, the Canadian dollar. The Future

Some of the limitations that cryptocurrencies presently face – such as the fact that one's digital fortune can be erased by a computer crash, or that a virtual vault may be ransacked by a hacker – may be overcome in time through technological advances. What will be harder to surmount is the basic paradox that bedevils cryptocurrencies – the more popular they become, the more regulation and government scrutiny they are likely to attract, which erodes the fundamental premise for their existence.

While the number of merchants who accept cryptocurrencies has steadily increased, they are still very much in the minority. For cryptocurrencies to become more widely used, they have to first gain widespread acceptance among consumers. However, their relative complexity compared to conventional currencies will likely deter most people, except for the technologically adept.

A cryptocurrency that aspires to become part of the mainstream financial system may have to satisfy widely divergent criteria. It would need to be mathematically complex (to avoid fraud and hacker attacks) but easy for consumers to understand; decentralized but with adequate consumer safeguards and protection; and preserve user anonymity without being a conduit for tax evasion, money laundering and other nefarious activities. Since these are formidable criteria to satisfy, is it possible that the most popular cryptocurrency in a few years' time could have attributes that fall in between heavily-regulated fiat currencies and today's cryptocurrencies? While that possibility looks remote, there is little doubt that as the leading cryptocurrency at present, Bitcoin's success (or lack thereof) in dealing with the challenges it faces may determine the fortunes of other cryptocurrencies in the years ahead.

Should You Invest in Cryptocurrencies?

If you are considering investing in cryptocurrencies, it may be best to treat your "investment" in the same way you would treat any other highly speculative venture. In other words, recognize that you run the risk of losing most of your investment, if not all of it. As stated earlier, a cryptocurrency has no intrinsic value apart from what a buyer is willing to pay for it at a point in time. This makes it very susceptible to huge price swings, which in turn increases the risk of loss for an investor. Bitcoin, for example, plunged from $260 to about $130 within a six-hour period on April 11, 2013. If you cannot stomach that kind of volatility, look elsewhere for investments that are better suited to you. While opinion continues to be deeply divided about the merits of Bitcoin as an investment – supporters point to its limited supply and growing usage as value drivers, while detractors see it as just another speculative bubble – this is one debate that a conservative investor would do well to avoid.

Conclusion

The emergence of Bitcoin has sparked a debate about its future and that of other cryptocurrencies. Despite Bitcoin's recent issues, its success since its 2009 launch has inspired the creation of alternative cryptocurrencies such as Litecoin, Ripple and MintChip. A cryptocurrency that aspires to become part of the mainstream financial system would have to satisfy very divergent criteria. While that possibility looks remote, there is little doubt that Bitcoin's success or failure in dealing with the challenges it faces may determine the fortunes of other cryptocurrencies in the years ahead.

What’s Wrong With Twitter’s IPO?

If you want any evidence that Facebook's (ticker: FB ) botched May 2012 initial public offering was a traumatic event, just look at the following headlines regarding the most anticipated IPO since the "Facebook fiasco", which I culled from today's Yahoo! Finance homepage:

Challenges abound for Twitter heading into the IPO (Associated Press)

Success of Twitter's Business Model Questioned Ahead of IPO (Breakout/Yahoo! Finance)

As Twitter IPO prices, poll says it's not worth hype (CNBC.com)

Good News for Twitter IPO: Small Investors Are Skipping It (The Exchange/Yahoo! Finance)

But who, exactly, was traumatized? Investors or financial journalists? One headline tells a different story from those I just cited -- one of enthusiasm, rather than skepticism:

Twitter boosts IPO range amid strong investor demand (Reuters)

Although they maintained the size of the offering at 70 million shares, Twitter and its underwriters have raised the previous $17 to $20 pricing range for the stock to $20 to $25. If the underwriters exercise the overallotment option for an additional 10 million shares, Twitter will end up raising $2 billion at the top end of that range. The final pricing is expected for Wednesday, and the shares will begin trading on Thursday.

The truth is that this is a fantastic time for Twitter to go public: The stock market has had a great run this year and growth-stock IPOs have been making eye-popping debuts (witness the shares of sandwich chain Potbelly, which more than doubled on their first day of trading). Finally, the most highly visible social networking stocks -- Twitter's peer group -- have way outpaced the market, as the following performance graph of Facebook and LinkedIn (NYSE:LNKD ) illustrates:

With those precedents in mind, should investors ignore the skeptical articles regarding Twitter and plow into the stock? My answer: No.

Where Facebook and LinkedIn are solidly profitable, Twitter isn't. In that regard, it's closer to local-bus! iness review site Yelp, which has yet to turn a quarterly profit (although that hasn't stopped the stock from gaining 241% this year.) Twitter is a fascinating platform, and it has already made a massive impact on business and popular culture, but as a business model, it's still finding its feet. Several ad buyers at major advertising firms recently told the Financial Times that the funds they allocate to Twitter come out of their "experimental" budgets.

I think the odds are excellent that Twitter's stock will post muscular gains once the shares begin trading in the secondary market on Tuesday, but whether it will prove an excellent long-term investment looks much more uncertain. Investors who are interested in buying the shares should first ask themselves what they expect to achieve, over what timeframe ... and how much they are prepared to lose in an adverse scenario.

The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

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'The Commoditization of the Starbucks Experience'

In 2007, Starbucks Founder Howard Schultz wrote a memo to key executives at SBUX entitled "The Commoditization of the Starbucks Experience." Here is a reprint of that memo, with emphasis added on my part in bold:

"As you prepare for the FY 08 strategic planning process, I want to share some of my thoughts with you.

Over the past ten years, in order to achieve the growth, development, and scale necessary to go from less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in retrospect, have lead to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand.

Many of these decisions were probably right at the time, and on their own merit would not have created the dilution of the experience; but in this case, the sum is much greater and, unfortunately, much more damaging than the individual pieces. For example, when we went to automatic espresso machines, we solved a major problem in terms of speed of service and efficiency. At the same time, we overlooked the fact that we would remove much of the romance and theatre that was in play with the use of the La Marzocca machines. This specific decision became even more damaging when the height of the machines, which are now in thousands of stores, blocked the visual sight line the customer previously had to watch the drink being made, and for the intimate experience with the barista. This, coupled with the need for fresh roasted coffee in every North America city and every international market, moved us toward the decision and the need for flavor locked packaging. Again, the right decision at the right time, and once again I believe we overlooked the cause and the affect of flavor lock in our stores. We achieved fresh roasted bagged coffee, but at what cost? The loss of aroma -- perhaps the most powerful non-verbal signal we had in our stores; the loss of our people scooping fresh coffee from the bins and grinding it fresh in front of the custome! r, and once again stripping the store of tradition and our heritage?

Then we moved to store design. Clearly we have had to streamline store design to gain efficiencies of scale and to make sure we had the ROI on sales to investment ratios that would satisfy the financial side of our business. However, one of the results has been stores that no longer have the soul of the past and reflect a chain of stores vs. the warm feeling of a neighborhood store. Some people even call our stores sterile, cookie cutter, no longer reflecting the passion our partners feel about our coffee. In fact, I am not sure people today even know we are roasting coffee. You certainly can't get the message from being in our stores. The merchandise, more art than science, is far removed from being the merchant that I believe we can be and certainly at a minimum should support the foundation of our coffee heritage. Some stores don't have coffee grinders, French presses from Bodum, or even coffee filters.

Now that I have provided you with a list of some of the underlying issues that I believe we need to solve, let me say at the outset that we have all been part of these decisions. I take full responsibility myself, but we desperately need to look into the mirror and realize it's time to get back to the core and make the changes necessary to evoke the heritage, the tradition, and the passion that we all have for the true Starbucks experience. While the current state of affairs for the most part is self induced, that has lead to competitors of all kinds, small and large coffee companies, fast food operators, and mom and pops, to position themselves in a way that creates awareness, trial and loyalty of people who previously have been Starbucks customers. This must be eradicated.

I have said for 20 years that our success is not an entitlement and now it's proving to be a reality. Let's be smarter about how we are spending our time, money and resources. Let's get back to the core. Push for innovation and do the things nec! essary to! once again differentiate Starbucks from all others. We source and buy the highest quality coffee. We have built the most trusted brand in coffee in the world, and we have an enormous responsibility to both the people who have come before us and the 150,000 partners and their families who are relying on our stewardship.

Finally, I would like to acknowledge all that you do for Starbucks. Without your passion and commitment, we would not be where we are today.

Onward…"

For me, this memo is instructive, and reveals a plethora of gems about business development and sustainability that investors might find fruitful; some insights I took away include:

1) The Importance of Brand Identity – As you listen to Mr. Schultz discuss Starbucks, you can sense that he is coming from a position of personal connection, rather than a purely financial perspective. His emphasis is centered on what makes a Starbucks different, and how that has been lost in the search for efficiency; ironically, it was the rush to short-term profitability and growth that led to the impending commoditization of the Starbucks brand.

2) The Street's Misguided Guidance – As Howard notes in the first paragraph, the company sacrificed on the experience in order to achieve the growth, development, and scale necessary to go from less than 1,000 stores to 13,000 stores in just 10 years (that's an average of more than three new stores each and every day for a decade). A lot of this was in hopes of satisfying the street, which led to decisions focused on short-term growth rather than long-term sustainability. Unfortunately, the commoditization of the cookie cutter model destroys brand equity, and leads to price competition; considering that a cup of black coffee at Starbuck's is more than twice the cost of a black coffee at McDonald's (MCD), it appears that management made the right decision in rethinking the brand experience and moving back towards the core: differentiation.

3) Balancing the Qualitativ! e and the! Quantitative – It's important to recognize that Mr. Schultz isn't oblivious to the financials; as he notes, for example, the store design the company was using at the time was chosen to gain efficiencies of scale and to make sure the ROI would satisfy the financial side of our business. But this cannot be looked at in a vacuum, particularly for someone like SBUX that isn't looking to compete purely on price. Some of the costs may not seem entirely economical in a spreadsheet, but can add intangibles to the experience or the brand that can be explained in an anecdotal sense – for example, the ability to draw in captive customers who willingly pay more than twice for your product despite the availability of convenient and comparable alternatives.

CONCLUSION

When this memo was written, Mr. Schultz had spent the previous seven years as chairman of the board after having stepped down from the CEO role at the turn of the century; as discussed in his book, "Onward," the initial reaction to the memo was a mixture of skepticism and sloth, with few/no serious changes made in the following six months. By the beginning of 2008, the stock had fallen by more than half from its peak in 2006, and Mr. Schultz stepped in to redirect the company from an obsession with growth towards a focus on brand integrity.

While the stock bottomed along with the market in the early months of 2009, it has ballooned more than 7x ever since; since Mr. Schultz returned to the helm, the stock is up more than 175%, while the DJIA and the S&P 500 are both in the red.

To this day, the company finds themselves under constant pressure from McDonald's, which has continually attempted to replicate their product offerings but at a lower price point; considering the strong business results Starbucks has continually delivered, it's safe to say that the brand has escaped commoditization as was once feared.