Eagle Rock Soars With These 2 Metrics

Eagle Rock Energy Partners (Nasdaq: EROC  ) carries $111.3 million of goodwill and other intangibles on its balance sheet. Sometimes goodwill, especially when it's excessive, can foreshadow problems down the road. Could this be the case with Eagle Rock?
Before we answer that, let's look at what could go wrong.
AOL blows up
In early 2002, AOL Time Warner was trading for $66.27 per share.
It had $209 billion of assets on its balance sheet, and $128 billion of that was in the form of goodwill and other intangible assets. Goodwill is simply the difference between the price paid for a company during an acquisition and the net assets of the acquired company. The $128 billion of goodwill in this case was created when AOL and Time Warner merged in 2000.
The problem with inflating your net assets with goodwill is that it can -- being intangible after all -- go away if the acquisition or merger doesn't create the amount of value that was expected. That's what happened in AOL Time Warner's case. It had to write off most of the goodwill over the next few months, and one year later that line item had shrunk to $37 billion. Investors punished the stock along the way, sending it down to $27.04 -- or nearly a 60% loss.
In his fine book It's Earnings That Count, Hewitt Heiserman explains the AOL situation and how two simple metrics can help minimize your risk of owning a company that may blow up like this. Let's see how Eagle Rock holds up using his two metrics.
Intangible assets ratio
This ratio shows us the percentage of total assets made up by goodwill and other intangibles. Heiserman says he views anything over 20% as worrisome, "because management might be overpaying for the acquisition or acquisitions that gave rise to the goodwill."
Eagle Rock has an intangible assets ratio of 6%.
This is well below Heiserman's threshold, and ! a sign t hat any growth you see with the company is probably organic. But we're not through; let's also take a look at tangible book value.
Tangible book value
Tangible book value is simply what remains after subtracting goodwill and other intangibles from shareholders' equity (also known as book value). If this is not a positive value, Heiserman advises you to avoid the company because it may "lack the balance sheet muscle to protect [itself] in a recession or from better-financed competitors."
Eagle Rock's tangible book value is $935.2 million, so no yellow flags here.
Foolish bottom line
To recap, here are Eagle Rock's numbers, as well as a bonus look at a few other companies in its industry:
Company
Intangible Assets Ratio
Tangible Book Value (millions)
Eagle Rock Energy Partners 6% $935
DCP Midstream Partners LP 14% $388
Enterprise Products Partners LP 11% $7,660
Data provided by S&P Capital IQ.
Eagle Rock appears to be in good shape in terms of the intangible assets ratio and tangible book value. You can never base an entire investment thesis on one or two metrics, but there are no yellow flags here. If any companies you're researching do fail one of these checks, make sure you understand the business model and management's objectives. I'll help you keep a close eye on these ratios over the next few quarters by updating them soon after each earnings report.

The Frosty, Festive World Of Investing

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Click for full photo gallery: What Makes Emerging Markets Great Investments?
by�Andrew Beattie
The store windows are frosted with artificial snow, the eggnog is flowing, and frantic shoppers are crowding the malls – that’s right, it’s Christmas time. In keeping with the yuletide spirit, let’s take a look at the investing vocabulary that goes along with this credit card-shattering time of year.

Tutorial: Seven�Reasons To Pick ETFs Over Stocks
Santa Claus Rally
He’s bearded, he’s jolly and he’s permanently associated with Coca-Cola – yep, that’s Santa Claus. Santa’s origins are a matter of speculation, but according to popular belief, he is derived from a Dutch mythical character based on the historical figure Saint Nicholas, who supposedly gave presents to the poor. The modern-day Santa spends his time spreading cheer and promoting world peace by delivering gifts all over the globe.
In the investing world, Santa brings investors a “gift” in the form of a jump in the price of stocks, known�as the�Santa Claus rally. This rally usually occurs between Christmas and New Year’s day. There are many theories as to why this happens. Some people believe it is a result of year-end tax considerations, while others say it’s because all the market pessimists are away on holidays or because people are buying stock in anticipation of the�January effect. Those of us who believe in the magic of Christmas think the rally may be due to seasonal cheer infecting the usually dour inhabitants of�Wall Street – a true Christmas miracle.
Boston Snow Indicator
In 1942, Irving Berlin wrote a song cal! led R 20;White Christmas”, which Bing Crosby brought to life in an immensely popular recording. Since then, a snowy landscape�is the�ideal place to spend Christmas day.
The�Boston�snow indicator is a market theory that posits that a white Christmas in�Boston�will cause stock prices to climb. This is one of several dubious indicators that, while it may appear to be accurate, teaches us more about the fallibility of statistics than the behavior of the market. Other popular indicators of this sort include the�skirt-length indicator and the attention paid to the ties worn by�Alan Greenspan (the Federal Reserve Board’s�former chairman). The accuracy of the�Boston�snow indicator is perhaps best summed up by its nickname: “BS indicator.”

5 Top Price-Compare Apps - SmartMoney.com

With fast-ending sales, stackable coupons and online-only discounts, in-store shoppers often have good reason to question whether the price they see is really the best deal out there. More are turning to a growing roster of price-comparison apps for an answer -- and getting mixed results.

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Nearly 40% of smartphone owners use their phones for in-store price comparisons, making it the top mobile shopping-related activity, according to Nielsen. And even those with regular cell phones run price checks: During the 2011 holiday shopping season, 19% of consumers used their phone to compare products or prices in store, up from 15% in 2010 and 3% in 2009, according to customer service research firm ForeSee. "It's such a great development for consumers," says Deborah Mitchell, executive director for the Center of Brand and Product Management at the University of Wisconsin-Madison.
Experts warn, however, that the apps may not always be so effective and some stores are determined to thwart them. "Retailers obviously don't like them," says Brad Spirrison, the managing editor for review site Appolicious. To keep customers from making an easy comparison, some now use store-specific barcodes that the apps can't scan, or negotiate with manufacturers for exclusive model numbers -- which means a fast search won't turn up any results.
Apps are also only as good as their underlying price-search engine, says Edgar Dworsky, the founder of ConsumerWorld.org. Some stores or sites may be excluded from results, and partner retailers may be given preference in the listings. The software may update pri! ces only sporadically or fail to include shipping, which can distort results, he says. And local search results are often limited to big-box retailers, with no mom-n-pop listings. "Maybe I'm being a little old-fashioned, but I tend to do my homework on a computer at home before I go to the store," he says. "That makes it easier to check a few sites for comparison."
Still, having a reliable price-comparison app or two on your phone can be a smart spot-check. Some stores may even be willing to match deals the apps find. Here are five the experts say are worth the download:
RedLaser
  • iPhone, Android, Windows
One of the big names in mobile price checks, RedLaser lets shoppers scan barcodes or conduct manual searches by typing in a product's name, Spirrison says. Experts say it tends to read product barcodes more easily and accurately than other apps, which may cut down search time. Searches for a $200 Microsoft Xbox 360 4GB turned up an extensive 99 online results, including eBay auctions (eBay acquired the startup in 2010), and listed a few independent shops in local results, too. Cheapest prices: $144 on eBay, $190 at a nearby Dell store. Local results are sorted by proximity rather than price, however, so be prepared to scroll through to find the cheapest deals. A spokeswoman says the cheapest local price is noted at the top of overall search results, but it's worth looking through them all -- Toys R Us allows users to link through the app to reserve items for in-store pickup, and Best Buy will too at some point this spring.
Decide.com
  • iPhone, Android
Not only will this free app find gadget prices online and nearby, it also notes whether there's a new model due out soon or other factors that could impact pricing. "It'll tell you whether you should buy the item now or wait," Dworsky says. A new 2012 model 42" Panasonic Viera, for example, gets a "buy" rati! ng, sinc e the site expects prices to hold steady. It found sets for $600 at a nearby Best Buy, and online as cheap as $470 at PCConnection.com. App users can scan barcodes or type in a product name to find items, and sign up for price-drop alerts if they decide to wait. But check the confidence rating on predictions about price changes -- Decide.com claims 77% turned out to be accurate on average. "It's a bit like the weather," says spokesman Michael Paulson. "But an 80% chance is still good buying information."
Google Shopper
  • iPhone, Android
"One scan and it will show you all the places an item is available online, and near you," says Michelle Madhok, the founder of SheFinds.com. Shoppers can also hunt for a product by snapping a picture some items, or saying its name. A hunt for the game "The Elder Scrolls V: Skyrim" on PlayStation 3, regularly $60, turned up a new copy for as little as $36 online -- and a note that the seller didn't have any reliability rating. Local results were plentiful, too, although none were below sticker price. Google Shopper also integrates with other Google products, letting users get Google Maps directions to that local store or check the latest daily deals via Google Offers, she says. Local listings note availability, although Madhok says it's still a good idea to call and confirm. (Clicking on a store listing includes the option to call.) A Google spokeswoman says the feeds are updated on a regular basis.
Price Check by Amazon
  • iPhone, Android
"As a consumer it pays to keep track of what Amazon is doing," says Mitchell. If there's a cheaper price online, they're often the site that has it, she says, so it's worthwhile to try the free price-check app, which lets users search by scanning a barcode, snapping a picture or saying or typing in the product name. (Users on other platforms, including BlackBerry and Windows, can try the ! Amazon M obile app, which offers the same price-checking capabilities, but requires an extra click or two to access them among other features in the app.) A $450 Dyson AM02 tower fan at Sears came up as cheap as $339 on the site. The catch with both Amazon apps, of course, is that they only check prices on Amazon. The company did not respond to requests for comment.
Consumer Reports Mobile Shopper
  • iPhone, Android
At $5 for one-year access, Consumer Reports' offering is among the priciest price-compare apps. But users also get the group's expert ratings, reviews and buying advice, which cost $30 a year to see online, says Dworsky. Shoppers can scan a barcode, type in a product or look for top picks by category. Searches for a "best buy"-rated $60 Expert Finish steam iron, for example, turned up online prices as cheap as $49 at TechLoops.com, and also pointed to a local Best Buy that had it in stock. App users can also access brand reliability ratings for single-brand retailers like Gap or Cole Haan. Users can't access auto ratings, however, and complaints about the app on iTunes say some ratings aren't up-to-date. Spokesman Kevin McKean says the ratings are CR's latest, but because the nonprofit buys and tests everything itself, some categories may not have ratings for every item, or have them immediately.

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