Best Stocks to Invest in 2024|Top Stocks to Buy 2024: Best Investment 2012

Showing posts with label Best Investment 2012. Show all posts

Is FLIR's Stock Expensive by the Numbers?

Numbers can lie -- but they're the best first step in determining whether a stock is a buy. In this series, we use some carefully chosen metrics to size up a stock's true value based on the following clues:

The current price multiples.
The consistency of past earnings and cash flow.
How much growth we can expect.

Let's see what those numbers can tell us about how expensive or cheap FLIR Systems (Nasdaq: FLIR ) might be.
We'll look at the numbers against some competitors and industry mates: L-3 Communications Holdings (NYSE: LLL ) , Lockheed Martin (NYSE: LMT ) , and Honeywell International (NYSE: HON ) .
The current price multiples
First, we'll look at most investors' favorite metric: the P/E ratio. It divides the company's share price by its earnings per share -- the lower, the better.
Then, we'll take things up a notch with a more advanced metric: enterprise value to unlevered free cash flow. This divides the company's enterprise value (basically, its market cap plus its debt, minus its cash) by its unlevered free cash flow (its free cash flow, adding back the interest payments on its debt). Like the P/E, the lower this number is, the better.
Analysts argue about which is more important -- earnings or cash flow. Who cares? A good buy ideally has low multiples on both.
FLIR has a P/E ratio of 18.5 and an EV/FCF ratio of 29.9 over the trailing 12 months. If we stretch and compare current valuations to the five-year averages for earnings and free cash flow, FLIR has a P/E ratio of 19.9 and a five-year EV/FCF ratio of 23.3.
A positive one-year ratio under 10 for both metrics is ideal (at least in my opinion). For a five-year metric, under 20 is ideal.
FLIR ! has a mi xed performance in hitting the ideal targets, but let's see how it compares against some competitors and industry mates.?

Company	1-Year P/E	1-Year EV/FCF	5-Year P/E	5-Year EV/FCF
FLIR Systems	18.5	29.9	19.9	23.3
L-3 Communications Holdings	7.1	7.4	7.7	7.7
Lockheed Martin	8.8	11.3	8.9	9.4
Honeywell International	15.7	25.0	18.3	14.5

Source: S&P Capital IQ.

Numerically, we've seen how FLIR's valuation rates on both an absolute and relative basis. Next, let's examine...
The consistency of past earnings and cash flow
An ideal company will be consistently strong in its earnings and cash flow generation.
In the past five years, FLIR's net income margin has ranged from 13.7% to 20.6%. In that same time frame, unlevered free cash flow margin has ranged from 8.2% to 22.2%.
How do those figures compare with those of the company's peers? See for yourself:

Source: S&P Capital IQ; margin ranges are combined.

Additionally, over the last five years, FLIR has tallied up five years of positive earnings and five years of positive free cash flow.
Next, let's figure out...
How much growth we can expect
Analysts tend to comically overstate their five-year growth estimates. If you accept them at face value, you will overpay for stocks. But while you should definitely take the analysts' prognostications with a grain of salt, they can still provide a useful starting point when compared to similar numbers from a company's closest rivals.
Let's start by seeing what this company's done over the past five years. In that time period, FLIR has put up past EPS growth rates of 16.5%. Meanwhile, Wall Street's analysts expect future growth rates of 14.8%.
Here's how FLIR compares to its peers for trailing five-year growth:

Source: S&P Capital IQ; EPS growth shown.

And here's how it measures up with regard to the growth analysts expect over the next five years:

Source: S&P Capital IQ; estimates for EPS growth.

The bottom line
The pile of numbers we've plowed through has shown us the price multiples shares of FLIR?are trading at, the volatility of its operational performance, and what kind of growth profile it has -- both on an absolute and a relative basis.
The more consistent a company's performance has been and the more growth we can expect, the more we should be willing to pay. We've gone well beyond looking at an 18.5 P/E ratio, and we see that its price multiples are elevated for companies linked to the defense industry. Its multiples are higher than each of its comps.
However, looking at margins and growth over the last five years, FLIR also beats L-3, Lockheed, and Honeywell. On an absolute basis, its margins are quite impressive.
Although FLIR's price multiples ! are expe nsive, its operational numbers could justify them. Our CAPS community rates FLIR four stars out of five despite the uncertainty of defense budgets. But these initial numbers are just a start. If you find FLIR's numbers or story compelling, don't stop. Continue your due diligence process until you're confident one way or the other. As a start, add it to My Watchlist to find all of our Foolish analysis.
I wrote about a stock that's flying under the radar in our brand new free report: "The Stocks Only the Smartest Investors Are Buying." I invite you to take a free copy to find out the name of the company I believe Warren Buffett would be interested in if he could still invest in small companies.

Woz loves Android, but iPhone is still good for most in 2012

(gigaom.com) -- My primary phone is the iPhone. I love the beauty of it. But I wish it did all the things my Android does, I really do.
Speaking to Dan Lyons in an article comparing the iPhone to Android devices, Apple co-founder, Steve Wozniak points out the relative limitations of Apple’s iPhone. Woz makes the case made by many smartphone power-users, suggesting the iPhone is still a great device for most people, but with a little effort and understanding, more can be done to an Android phone. Greater customization and user control have always been key selling points for Android devices; both the high-end smartphones and even the low-cost units.

Favorite Large Bank Picks For Jan-2012

Yesterday, major regional banks (fourteen in number) sported gains of almost 1.16 percent, collectively. Among these banks, Bank of America's share price gained the least ($0.18), while? M&T Bank Corp's share price gained the most ($3.8).

Share price gains were surprising given that the Federal Reserve proposed steps to strengthen regulation and supervision of large bank holding companies with consolidated assets equal to or greater than $50 billion or those designated to be systemically important. The proposals include risk-based capital and leverage requirements implemented in two phases that would include subjection to the Fed's capital plan rule that requires firms to develop annual capital plans, conduct stress tests, and maintain adequate capital ratios, as well as a proposal issued by the Fed to implement a risk-based capital surcharge based on the framework and methodology developed by the
Basel Committee on Banking Supervision. Firms would also be subjected to annual stress tests. Credit exposure of a covered financial firm would be limited to a single counterparty as a percentage of the firm's regulatory capital. The Fed noted that it is proposing that firms would need to comply with many of the enhanced standards a year after they are finalized. Requirements related to stress tests would take effect shortly after the rule is finalized.

Compliance with Fed's proposals would not only increase regulatory costs but would also limit strategic options for these banks. So Fed's announcement should have had a negative impact. Yesterday that didn't happen but would surely happen as the market digests the import of Fed's proposals. This should lead to adjustments, positive on some and negative on some other, in the share prices of these fourteen banks. Though I am not giving the workings of the detailed share price impacts, nevertheless I will pick my favorite stocks among these fourteen.

Fifth Third Bancorp? (NASDAQ:FITB)

Fifth Third! 's capit al position is already well in excess of established standards, likely standards, and most peers. Holding company cash is currently sufficient for more than 2 years of obligations. Minimal holding company or bank debt maturities until 2013, so need for new capital at above peer average cost of marginal capital is minimal. Fifth Third has completely exited all crisis-era government support programs and it is one of the few large banks that
have no TLGP-guaranteed debt to refinance in 2012. In addition, it has no direct European sovereign exposure; total exposure to European peripheral borrowers is less than $0.2 billion and gross exposure to European banks less than $0.3 billion.

I expect FITB share to test $15.5 and establish $15 in January 2012.

State Street Corporation? (NYSE:STT)

STT has two powerful platforms for growth namely State Street Global Services ($21.5 trillion in assets under custody and administration), and State Street Global Advisors (1.9 trillion in assets under management). Nearly 78 of its top 100 clients use both asset servicing and asset management and they account for about 35% of total management fee revenue (YTD 2011).

As of end September 2011, STT's tier 1 common ratio was 16 percent,which is significantly higher than 12.5 percent for The Bank of New York Mellon Corporation? (NYSE:BK), and 11.8 percent for Northern Trust Corporation? (NASDAQ:NTRS). Moreover, even under Basel III, STT's tier 1 common ratio was 11.7 percent, which is significantly higher than 6.5 percent for The Bank of New York Mellon Corporation (NYSE:BK), and 11.8 percent for Northern Trust Corporation (NASDAQ:NTRS).

I expect STT share to test $50 and establish $49 in January 2012.

Other stocks that I think could benefit include SunTrust Banks, Inc.(NYSE:STI), U.S. Bancorp (NYSE:USB), and JPMorgan Chase & Co. (NYSE:JPM).{$end}

Buy, Sell or Hold: The Clorox Co. (NYSE:CLX) Is Cleaning Up

The Clorox Co. (NYSE:CLX) on Thursday reported net earnings of $171 million on sales of $1.52 billion for the fourth quarter of fiscal year 2010 ended June 30, compared to net earnings of $170 million on net sales of $1.5 billion the year prior.

This continued the company's trend of improvement. But more importantly, the bulk of Clorox's profit and margin growth came from its international unit, and the firm projected an expansion in earnings per share of at least 10% to 14% for next fiscal year.

Boring is beautiful when you're dealing with consumer staples, since share prices improve with incremental increases in sales and margins. In Clorox's case, this has meant taking advantage of low rates and dependable cashflow to finance expansion plans. But the good news is that the high financial leverage results in an exorbitant return on equity.

Clorox's strong cashflow affords the company very comfortable debt coverage ratios. Its level of debt to earnings before income tax, depreciation and amortization (EBITDA) has declined in the last three years from 3.3-times to 2.2-times, improving its creditworthiness. Clorox's interest coverage ratio (EBITDA to interest expense) also has improved strongly, to 8.96-times from 6.27-times. This trend has warranted an improvement in the firm's credit rating outlook, which in the investment grade is BBB+ to stable.

There is no question that this is a sound strategy with interest rates so low. A few years from now, as interest rates normalize and the cost of debt goes up, this strategy will be more costly. But, by that time, the company's effort to improve its earnings/debt ratio will have put it in a better position to face higher borrowing costs.

Of course, there's more to Clorox's recent success than shrewd borrowing.

In the past two years the company has set out to recover the slight profit ! margin e rosion brought on by the economic disaster. And in that time, Clorox has recovered much its lost market share through disciplined cost cutting, better pricing power and lower commodity prices. You see, in this business, little differences add up. That means careful marketing, advertising, distribution and cost controls, as well as an optimal financing structure are of paramount importance. And that's precisely where Clorox has excelled.

For example, Clorox is already number two in U.S. market share, behind The Procter & Gamble Co. (NYSE: PG). In fact, Clorox is ranked in the top two in almost every one of its key brands. And those brands represent 88% of the company's total portfolio.

While double-digit earnings growth is achievable via growth in both its core U.S. operations and in its international units, do not expect miracles. The likely range for outperformance or underperformance is relatively small at first sight. Yet, the relatively low weight of international sales within the company and a proven capacity for successful and profitable innovation make its objectives achievable. There is some room for upside surprises with both new products and developments in fast-growing emerging economies.

Clorox concentrates some 71% of its international presence in home cleaning and bleach and laundry products in Latin America. And the fact that Asia today represents only 5% of sales is actually a plus, since it leaves lots of room for improvement in the long term. So, we have a superbly managed marketing company, with plenty of room to grow internationally.

This success is the result of a carefully managed process that prioritizes margin and market share expansion, allocating resources based on economic profit. We expect continued margin improvement through the continuation of relentless cost savings initiatives, information technology investment, and innovation. In addition, market s! hare imp rovement will come from the launching of carefully targeted products - the emphasis being in value and superior customer perception.

Health and wellness are key themes that will drive future growth. Clorox has very sophisticated market segmentation, product positioning and overall marketing strategy in these sectors. It is bound to deliver results, based on their proven track record.

Earnings momentum is at its back due to a mix of carefully tested marketing and financial initiatives. The stock is valued at 13-times earnings at a nice discount to the Standard & Poor's 500 Index. Its Price/Earnings/Growth (PEG) ratio is high at 1.43, though not disqualifying.

We can overpay a little for growth that we are pretty certain lies ahead. And Clorox offers an attractive 3.4% dividend yield. That dividend is easily sustainable at a dividend payout ratio of only 47%. In fact, it was just raised by 10% in May.

Technically, the stock is almost "boringly" bullish. Its 200-day moving average shows a very steady upward slope. At just over $64 a share Clorox is sitting right near its 50-day moving average and in the middle of the Bollinger bands, in an oversold condition. This bodes very well for an entry point.

However, the stock also is approaching the 2007 all-time high, so it should start showing some short-term resistance. So what is the investment proposition?

With this type of stability and high dividend yield, Clorox should be a core holding in any portfolio that is not purely speculative. Rather than sitting in ten-year U.S. Treasury bonds, we can sit on Clorox stock, get paid much more and have the upside of a first-class equity that can actually adjust prices up if inflation becomes a problem.

If we see some resistance here, we could run a short-term covered-call strategy: Buy the stock and sell some out of the money calls on it. The one-month calls we sell lower our entry poi! nt in th e stock by the amount of premium we collect and would probably expire worthless. The traditional risk-minimization strategy is to dollar-cost average into the stock over the next couple of months.

Recommendation: Dollar-cost average into The Clorox Co. (NYSE:CLX) on a weekly basis over the next two months (**).

(**) - Special Note of Disclosure: Horacio Marquez holds no interest in The Clorox Co.

[Editor's Note: Horacio Marquez knows how to make a market call. It was Marquez who told investors that lithium was going to be big - a year before other "experts" made the same call. Now Marquez has isolated the major profit opportunities being created by the possible broadband breakdown - a situation that the news media is only just now starting to understand. To find out all about those top profit opportunities, check out this new report.]

Former SEC Exam Chief Walsh: SEC Whistleblower Program 'Showing Traction'

The former chief counsel at the Securities and Exchange Commission’s exam division, John Walsh, has formed a Whistleblower Response Team with several of his colleagues at the law firm Sutherland Asbill & Brennan to help firms develop whistleblower response programs as Walsh says the SEC’s “initiative is beginning to show traction.”

Walsh, a 23-year veteran of the SEC where he played a key role in creating the Office of Compliance Inspections and Examinations (OCIE), including serving as OCIE’s chief counsel, said in a statement that the SEC’s Whistleblower program, which the agency expanded under Dodd-Frank, is beginning to “see results.”

Walsh cites the November report issued by the SEC detailing the first seven weeks of the Whistleblower program that found that between Aug. 12 and Sept. 30, the SEC received 334 whistleblower tips, an average of nearly 48 per week.

The SEC report notes that the most common complaint categories were market manipulation (16.2%), corporate disclosures and financial statements (15.3%), and offering fraud (15.6%). The commission received whistleblower submissions from individuals in 37 states, as well as from several foreign countries, including China (10) and the United Kingdom (nine).

“Senior SEC officials have stated publically that they are now receiving high-quality information,” Walsh said. “As a result, we believe it is critical that companies receive the most up-to-date information and proper counsel to effectively respond to whistleblower claims as they emerge.”

Other members of Sutherland’s Whistleblower response team are Cynthia Krus, Allegra Lawrence-Hardy, and Holly Smith. The legal team will help clients create effective whistleblower response programs, respond to whistleblower claims, and defend against SEC enforcement actions and civil litigation.

Walsh, the former associate director and chief counsel at OCIE, retired from the agency at the

end of September, and joined Sutherland’s Financial Services Group and Securities Enforcement and Litigation Team in Washington, D.C., on Oct. 1.

In August, the SEC launched a web page that allows individuals to report a violation of the federal securities laws and apply for a financial award. The whistleblower program provides a monetary incentive of between 10% and 30% of sanctions the SEC collects for whistleblowers who voluntarily provide the agency with original information that leads to a successful SEC action with sanctions exceeding $1 million.

While 170 applicable enforcement judgments and orders issued from July 21, 2010 through July 31, 2011 included the imposition of sanctions exceeding the statutory threshold of $1 million, the SEC explained in its report, because the 90-day application period had not passed with respect to any of these actions as of the end of the fiscal year, applications for awards had not yet been processed. Accordingly, the commission did not pay any whistleblower awards during fiscal year 2011.

Stocks Attractive to Traders Today in 2012: BLK, JCI, UNP, MS, UNH, KCG, EGHT

CEO Laurence D. Fink of BlackRock, Inc. (NYSE:BLK), wants corporations to adopt shareholder friendly practices, according to Bloomberg. The company holds at?a minimum?5% of the shares of 2,400 companies worldwide. In letters to 600 of the firm’s biggest holdings,?Fink wrote?that BlackRock seeks to “engage in dialogue” with management to address issues that will be raised this year at shareholder meetings.
Shares of Johnson Controls, Inc. (NYSE:JCI) are trading 8.09% lower today, with consensus?of $44.03B. Johnson Controls lowers their Euro assumption to $1.30 from $1.35,?having seen Europe auto production at 20.1M units, +1.5%.
Versus a consensus of $5.06B,?Union Pacific Corporation (NYSE:UNP) reports Q4 revenue of?$5.1B.
Shares of Morgan Stanley (NYSE:MS) are trading 4.5% higher today, as the company is rumored to be cutting senior banker and trader pay 20%-30%, according to?Bloomberg. Sources with knowledge of the plan were cited.
Shares of UnitedHealth Group Inc. (NYSE:UNH) are trading 2.97% lower today, after?FY12 revenue $107B-$108B vs. consensus $108B is being projected.
Shares of Knight Capital Group Inc. (NYSE:KCG) are trading 9.28% higher today, following reports of Q4 revenue $341.3M vs. consensus $312.47M. Q4 Electronic Execution Services projects revenue $40.6M vs. $37.1M. And Market Making revenue is projecting?$187.4M vs. $111.0M.
Shares of? 8×8, Inc. (NASDAQ:EGHT) are trading 24.11% higher today, after it was revealed that business customer churn decreased to a record low of 2.0%, compared to a churn rate of 2.2% in the same period in 2011 and 2.1% in the 2012. Ending Q3 with 27,677 business customers, 8×8 reported Q3 revenue $23.3M vs. consensus $22.09M.

Credit Crisis Update: U.S. Stocks Skid as Bailout Bogs Down, President to Address the Nation

NEW YORK (CNNMoney) -- Greece and its private sector creditors remain mired in deep negotiations over a deal to reduce the nation's crushing debt load.
Institute of International Finance director Charles Dallara, who represents the private sector investors and banks that hold Greek debt, said "it's not entirely clear" how close the parties are to a deal.
"I wouldn't say I'm confident, but I'm hopeful we'll reach agreement," Dallara told CNN International's Richard Quest in a phone interview from Athens.
The talks ended Wednesday without an agreement. They will resume Thursday and Dallara said final terms could be reached in the days ahead.
The IIF has been in discussions with the Greek government over an agreement to voluntarily write down the value of Greek government bonds by 50%.
The private sector holds over €200 billion worth of Greece's total debt load -- estimated at €350 billion.
Dallara said the group intends to follow through on the 50% writedown, which was announced following a summit of European Union leaders in December.
That would result in significant losses for the private sector. But it would also help reduce Greece's debt load to 120% of economic output by 2020.
In addition, Dallara said 15% of the remaining amount that Greece owes the private sector would be paid in cash. Another 35% would be restructured, or replaced with loans that have longer maturities and lower interest rates.
The talks broke down last week amid demands for even larger write downs, and Greek Prime Minister Lucas Papademos' call for a private sector participation rate of 100%.
Dallara told CNN he's confident the group can "mobilize a high participation." But that doesn't mean 100%, he added.
The deal is a key condition for Greece to receive additional bailout funds from the European Union and International Monetary Fund. Without additional financial support, Greece may not be able to make a €14 bill! ion paym ent it owes on bonds coming due March 20.
Dallara stressed that both sides are interested in finding "common ground."

World Bank warns on risk of global recession

He said the creditors recognize that a portion of Greece's debt needs to be written off in order to avoid a "disorderly" default, which could have severe repercussions for the global economy. But he acknowledged that some investors may be worried that other euro area governments could extract similar concessions.
All governments have an interest in resolving Greece's debt problems "in a cooperative manner" so that investors will be confident that issues this extreme can be resolved "in a mutually satisfactory way," said Dallara.
-- CNN's Jim Boulden contributed to this report from London.

Best Stocks To Buy Right Now

Best Stocks To Buy Right Now: Constellation Brands (NYSE: STZ)

Constellation Brands (NYSE: STZ), the largest wine company in the world by revenue and the largest premium wine company, offers a value-priced play on the potential growth of the US wine market.
Constellation also owns 50% of Crown Imports, the joint venture that distributes Corona Extra and Corona Light, the best selling imported beer in the US. As well, Constellation owns Svedka Vodka, one of the fastest growing premium vodkas.
The company’s well-known wine labels include Woodbridge and Robert Mondavi (acquired in 2004), Vendange (2001), Franciscan Oakville Estate, Estancia, Ravenswood, Arbor Mist (1998), and Clos du Bois (2007).
If you notice a number of acquisitions on this list, that is because Constellation spent the decade between 1998 and 2007 building up its position as the largest premium wine maker in the US, with sizeable positions in the UK, Canada, Australia and New Zealand as well.

Best Stocks To Buy Right Now: ETJ

High food prices aren’t helping either, for the same reasons. US consumers spend less of their total income on these two items than their counterparts in the developing world, where higher food prices will cause social disruption.
Covered-call funds typically give investors the advantage of producing income in flat markets, but don’t do well in quickly rising or falling markets. We like the idea that gently rising or falling markets can be profitable for such funds.
One such fund we’ve previously recommended is the Eaton Vance Risk-Managed Diversified Equity Income (ETJ). Its advantage is in the risk-managed part of its title. The fund sells calls like most covered-call funds, but also buys puts to guard against a market decline.
Today the fund trades at a steep discount of 9.5%, and offers a yield of 10.1%. We think their new policy of buying protective put spreads is a prudent strategy, although it may have scared off some current holders, depressing the price.
The largest holdings are in information technology at 18.04%, financials at 15.58%, health care at 11.82% and consumer staples at 11.45%.

Best Stocks To Buy Right Now: Zalicus (ZLCS)

Zalicus (ZLCS)—my top pick for a biotechnology stock breakout in 2011—is proving its worth, based on fourth-quarter results.
The company burned $2.1 million in cash during the quarter, and ended the period with $46.5 million in cash and equivalents. As is usual with development-stage biotech companies, aside from cash levels and cash burn, the accounting numbers were less important than management’s program update.
Zalicus has one product on the market: Exalgo, for chronic pain, marketed by a subsidiary of Covidien (COV).
When Covidien reported their results, they mentioned “good sales of our new Exalgo” product. I had forecast $400,000 in Exalgo royalties to Zalicus in the December quarter, so I was pleased to learn that they hit that right on the button.
With the initial distributor inventory back in balance, from here on Exalgo royalties should track prescription growth.
This year, I expect Covidien to target 12,000 frequent prescribers and sell about $50 million in Exalgo, yielding around $4 million to Zalicus at my 8% royalty estimate. Sales should increase to $100 million in 2012, $200 million in 2013 and level off at around $300 million in 2014.
The associated royalties of at least $8 million, $16 million and $24 million will help fund research and clinical trial expenses, with no stock dilution. Zalicus says the royalty rate is “tiered,” so my 8% estimate is conservative.

Best Stocks To Buy Right Now: Cloud Peak Energy (CLD)

One company is likely to take advantage of Asia’s long-term growth without bearing its share of risks. It’s Cloud Peak Energy (CLD), the fourth-largest thermal coal miner in the US.
Unlike base metals, thermal coal (which is used to generate electricity) is highly leveraged to long-run GDP growth.
Despite all the imbalances in Asia, the continent still benefits from an increasingly educated workforce, millions of people moving to cities, and so on. I believe Asian economic output and electricity demand will be much higher in 2021 than in 2011.
Of course, generating all that electricity will require a lot more thermal coal, even if nuclear and renewable energy become much more prevalent. Moreover, China and India have both become significant coal importers in recent years amid soaring demand.
Cloud Peak has not fully taken advantage of these trends and is trading for an exceptionally low valuation. We believe both are poised to change.

Best Stocks To Buy Right Now: UPS (NYSE: UPS)

UPS delivers economies of scale, operational efficiency, and an attractive dividend approaching 3%, write Josh Peters and Keith Schoonmaker of Morningstar DividendInvestor.
UPS (NYSE: UPS) is the colossus among global transportation companies, and powerful barriers to entry guard its economic profit. Its $45 billion of revenue in 2009 exceeded the combined sales of the four largest North American railroads.
The stock looks about fairly valued here, but we’re encouraged that the company’s recent 10.6% boost to its dividend will be the first of several handsome increases as the global economy revives.
Despite its extensive unionization and asset intensity, UPS produces returns on invested capital about double its cost of capital and margins well above those of its competitors. We credit the firm’s leading package density and outstanding operational efficiency, enhanced by extensive investment in information systems.
UPS and its competitors have turned to Asia and developing nations for growth, and we think UPS has a lot of runway left to build speed. Even existing operations have revenue expansion potential because of the firm’s rare pricing power.
While rapid changes in shipping demand during 2009 demonstrate the potential for short-run uncertainty because of macroeconomic factors, we are only optimistic about UPS’ future—and expect solid, if not record, results for 2011.
No Letup in Sight
UPS is in fine shape, financially speaking, with a Morningstar credit rating of A-. The firm has increased its use of debt in recent years, both to satisfy pension obligations and repurchase shares, but debt burdens remain fairly modest. In 2010, the dividend represented 53% of earnings, and the indicated payout ratio for 2011 looks to be around 50%.
While UPS operations are cyclical thanks to the high fixed costs of supporting its worldwide network, profits covered the dividend with room to spare even in the trough year of 2009 (per-share earnings of $2.31), and free cash flow remained strong.
While the cyclical nature of its business has kept UPS from raising its dividend every year, it has either increased or maintained its dividend for more than four decades, and the dole has risen in ten of the 12 years since the stock’s 1999 debut on the public market. (This probably has a lot to do with the fact that an impressive 36% of outstanding shares are Class A stock owned by employees, retirees and descendants of founders.)
The compound growth rate for dividends over the past decade has been a handsome 10.6%, although this pace includes an upward drift in the payout ratio (which averaged 39% from 2002 to 2007).

We believe overall global parcel-shipping market expansion and consistent price increases will enable UPS to grow at a compound annual rate of 8% during the next five years, a pace we expect the dividend to match.
At the stock’s current yield of 2.8%, we think UPS can deliver average total returns approaching 11% a year.

Best Stocks To Buy Right Now: TAL International Group (TAL)

TAL International Group (TAL) is one of the world’s largest lessors of containers and chassis. The company buys intermodal containers that can be transported on ships, trucks, and railcars—enabling containers full of goods to travel great distances with a minimum of handling.
TAL’s operations include buying, leasing, and subsequently selling multiple types of intermodal containers. TAL is also involved in reselling containers to container traders and users, as well as financing port equipment, such as container cranes, reach stackers, and so on. The company owns 856,000 intermodal containers.
Full Speed Ahead for Trade
Demand for containers dwindled in 2009, but rebounded with a vengeance in 2010. TAL’s utilization rate reached a record 98.6% at the end of 2010, even though the company added 180,000 containers during the year.
Container purchases are primarily financed by the company’s bond offerings. TAL’s bonds are rated “A” by Standard & Poor’s, and carry an interest rate of 4.8%.
Strong demand is causing a global shortage for containers, which is driving leasing rates and resale prices significantly higher—all to the benefit of TAL. Part of the stronger demand can be attributed to reduced direct container purchases by TAL’s shipping customers, which are trying to avoid new capital expenditures.
TAL has ordered another 180,000 containers for delivery in 2011, many of which have already been committed to leases. As a result, the company expects profits to accelerate during the next several quarters.
Sales increased 7%, and earnings per share catapulted from $0.72 in 2009 to $2.32 in 2010.

Best Stocks To Buy Right Now: Pfizer (NYSE: PFE) & Abbott Laboratories (NYSE: ABT)

Those are Pfizer (NYSE: PFE) and Abbott Laboratories (NYSE: ABT). Maybe I’ll take those in order.
Pfizer is a stock where everyone’s worried about the Lipitor patent expiring later in 2011. But there’s much more to Pfizer than just Lipitor.
If you look to 2012—which will be the first full year after the Lipitor is gone from Pfizer—the company should earn somewhere north of $2 a share, by our estimates as well as the guidance of the company.
The stock is trading at $19 or thereabouts, so you’re looking at a company that’s trading at roughly nine times earnings once you’re past this one negative event. That just seems way too cheap a price for that stock.
Looking at Abbott, it’s in a very similar situation in that they have one blockbuster drug, Humira, and people are thinking that Abbott today is going to be like Pfizer was a couple years ago where they’re just dependent on this one blockbuster.
Abbott is also just trading at a very cheap price. They should earn somewhere just below $5 a share, and the stock is in the mid 40s. So again you’re looking at a stock trading at about nine times earnings.
Or, if you want to strip away Humira and just assume that that falls off the planet a year from now, you’re looking at a stock that’s trading ex-Humira at about twelve times [earnings], which is still—even if that drug was gone—a very low price for a company of Abbott’s quality.

Tesoro Shares Plunged: What You Need to Know in 2012

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 Tesoro (NYSE: TSO ) are plunging today, down by as much as 10%, after the company updated its fourth-quarter guidance.
So what: The company expects to report a net loss between $0.55 and $0.80 per share, compared to the $0.65 profit analysts are looking for. Tesoro cited an extremely weak margin environment in California and the collapse of the West Texas Intermediate (WTI) to Brent crude oil spread.
Now what: The Tesoro Index for the California area was a negative $0.05 per barrel, down over $6 compared to the sequential and year-over-year prices. The WTI to Brent spread fell from $26 per barrel in September to just $8 per barrel in December. The decline reduces benchmark margins at Tesoro's refineries and the margin on long-haul foreign crude oil barrels indexed to WTI. When you're in the oil business, volatility is simply the name of the game.

As Fidelity Re-Opens Magellan Fund, Investors Review Top Holdings (FMAGX, NOK, GLW, GOOG, SLB, CNQ, SPLS, T, AGN, MON)

It’s official. Fidelity’s Magellan Fund (FMAGX) is being re-opened for new investors. This fund at one point in 1997 became so large that the fund closed itself to new funds and outside investment commitments. As of the last seen date Fidelity’s Magellan Fund had some $43.3+ Billion in assets under management.

Fidelity says that as the investor base is now 10 years older, they have had adequate redemptions and portfolio manager Harry Lang says: "We believe that the time is right to make Magellan available to a new generation of investors………… We believe that generating new sales to offset future redemptions will help stabilize the fund’s cash flows and assist Harry in most effectively directing investment strategies for the benefit of fund shareholders. It’s effectively the inverse of the reason why we limited new purchases of the fund 10 years ago. At that time, we were seeing strengthening cash inflows, and we expected that trend to continue."

More importantly, Harry Lang also noted, "I’ve been fortunate to find great stocks here in the U.S. and abroad to include in the portfolio. If we’re able to achieve a better balance of cash flows in the fund going forward, I’ll regularly have the cash on hand to capitalize on attractive investment opportunities as I find them."

Fidelity noted that some 85% of the funds assets are deemed for retirement (IRA, 401K etc.), and therefore the fund would seem to take more of a longer-term view. The top 10 Holdings are unfortunately as of September 30, 2007, so we’ll have another two weeks or so before we know what the real holdings are: The TOP 10 as of then are as follows:

Nokia (NOK, Corning (GLW), Google (GOOG), Schlumberger (SLB), Canadian Natural Resources (CNQ), Staples (SPLS), AT&T (T), Allergan (AGN), Monsanto (MON), Renewable Energy Corp. AS (overseas). This list was posted! on Dece mber 30, 2007, so it might be more updated than some of the aggregator financial news and data web sites that take time to update.

If you want to see the full holdings the list on their site is here. With more than $43 Billion in assets this could create quite a lot of buying in stock names where Fidelity wants to put capital to work. We would surmize that the fund might not add as much to some of its key holdings if it can put capital to work in some of the names it owns less of that might like to own more of.
Also be advised that the full holdings list is 45 days old and we know for certain that many of the positions and many of the weightings have already changed from November 30, 2007. We’d actually start screening out some of the smaller holdings off of that master list to see which are attractive in growth and/or value that will still do well in a slowing economy or even a recession. If you were opening a decade-long closed fund, you might be tempted to disperse more of the new inflows into other names that might be under-owned or under-weighted in the fund.

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