Tuesday, February 28, 2012
Will Tesla's 'Brick' Issues Weigh on Its Stock Price? (The Motley Fool)
Saturday, February 18, 2012
Sunday, January 22, 2012
A Semiconductor Stock to Stay Away From This Year (The Motley Fool)
When I wrote about Veeco Instruments (Nasdaq: VECO - News) last year, I had said that terrible times are in the offing for this semiconductor equipment provider. The company's stock has continued its downward journey since then, and to top it all, Veeco has left its investors poorer by some 52% this year as almost all of its businesses took a hammering.
Now let's see how bad the new year may turn out for Veeco and also check if the company has some fuel in its tank to deliver a surprise in 2012.
A year to forget
First, let's do a background check on Veeco. The company has been compounding its revenue at the rate of 20% annually over the last five years. Also, its revenue growth so far this year comes in just above that mark -- at 25% -- when compared with the same period a year ago. However, a number of factors squeezed the company's margins badly and led to a more than one-third drop in earnings this year. Let's see what went wrong.
Veeco manufactures and sells LEDs, solar panels, and hard-disk drives. In 2011, it saw all its product lines take a hit due to global economic uncertainties. Moreover, the management revealed in the third-quarter earnings release that bookings for Veeco's products have halved from 2010, which doesn't bode well for it in the coming year. The company's revenue growth has already slowed this year, and it won't come as a surprise if the top line ceases to grow next year.
Industry blues
Established players in the industry such as Cree and Aixtron have had a bad time this year, and it seems everyone's woes are likely to go into the new year as well. The weakness in the solar industry coupled with uncertainty in the LED market make the coming year look even more tenuous. Throw in the uncertain future of hard drives as the world moves toward the mobile computing platform, and we see Veeco facing some more headwinds.
The Foolish takeaway
With the way the industry is shaping up at the moment and the possibility of an awful year looming large over Veeco's head, it seems the company's woes are set to continue.
Fool contributor Harsh Chauhan doesn't own any shares in the companies mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Friday, September 30, 2011
This Stock Is at the Top of Its Industry (The Motley Fool)
Disclaimer: My favorite news source is The Financial Times, which is owned by Pearson (NYSE: PSO - News), the subject of this article. Having confessed my potential conflict of interest, I can now, with clear conscience, set about telling you why Pearson is a publishing company that's keeping up with the digital age, and a company worth keeping your eye on.
Tom Clancy approved
Pearson is an international media and education powerhouse and publishes in the education, business, and consumer markets. If you've ever read Tom Clancy, Nora Roberts, John Steinbeck, or a host of other well-known authors, you've read a Penguin book. Penguin is a Pearson holding.
But 68% of Pearson's sales come from the education side of the business, and the company's revenue in that space is the highest in its peer group, a space that includes industry stalwarts McGraw-Hill (NYSE: MHP - News) and Apollo Group (Nasdaq: APOL - News).
Not your father's publishing company
Second-half results for 2011 paint a growing and profitable picture for Pearson:
Penguin's sales are 4% lower, but profits have stayed steady because of rapid digital growth. Dame Marjorie Scardino, Pearson's chief executive, recently told The Financial Times that the company was "well placed to exploit accelerating structural changes in its industries, such as the move to digital delivery of content." Walking the digital talk:
Pearson's digital education platform and service registrations are up 15%.FT.com subscriptions are up more than 30%, which is extra impressive considering there's a pay wall.Penguin e-book revenue is up almost 130%.And developing markets -- including Africa, Middle East, Asia, and Latin America -- are another bright spot for Pearson, with total sales for all areas up 40%.
There's nothing to fear but un-Foolish fears
Pearson is currently trading for slightly less than $18, with a very attractive P/E of just 7.3. Peer Scholastic (Nasdaq: SCHL - News) has a P/E right now of 23. John Wiley & Sons' (NYSE: JW-A - News) is 15.
Investors have steered clear of traditional publishing companies lately, fearing they weren't making the necessary adjustments to stay competitive in the digital age. Pearson is not one of these companies. It's forward-thinking, forward-moving, and worthy of a closer look by the investment community.
To add Pearson, PLC to My Watchlist, a FREE service of The Motley Fool that lets you keep track of all the stocks on your investment radar, simply click here.
Fool contributor Motley Fool newsletter services have recommended buying shares of John Wiley & Sons. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Sunday, September 18, 2011
This Coffee Stock Is No Starbucks (The Motley Fool)
Warning! Consuming too many shares of coffee bean purveyor Coffee Holding (Nasdaq: JVA - News) has been shown in Motley Fool labs to stunt your portfolio's growth.
As a high-flying favorite of speculators in the coffee sector, Coffee Holding was priced for perfection prior to its earnings report yesterday. The way I saw it, anything short of phenomenal revenue and earnings growth was going to be taken as a disappointment -- and that's precisely what investors got, a heaping dose of disappointment.
For the quarter, Coffee Holding earned $0.03 while watching revenue soar 88% over the year-ago period. The only problem is that the company earned $0.08 in the year-ago period with significantly better margins. The company blamed the lackluster results on greater sales of lower-margin green coffee versus its higher-margin roasted coffee. In addition to lower margins, Coffee Holding also suffered a $1.2 million loss attributed to marking its options to market value during the quarter.
As has long been my greatest beef with Coffee Holding, the company reported yet another quarter of rising expenses and relatively weak cash flow. As I detailed back in July, the company then had less than $1 million in levered free cash flow over the trailing 12-month period. While this quarter showed improvement, cost of sales stood at 94.2% of net sales, which is a hefty jump from the 87.1% it reported last year. The company also hasn't produced more than $2 million in free cash flow in a given year since 2004, yet it again approved a dividend payout of $0.03 to shareholders.
Another concern I have for current shareholders is Coffee Holding's reliance on Green Mountain Coffee Roasters (Nasdaq: GMCR - News) for approximately half of its revenue. With Green Mountain's growth and earnings running wild, it's a bit disconcerting that Coffee Holding is having trouble maintaining a profit and keeping its margin even level with the year-ago period despite these huge revenue increases.
This leads back to the most important aspect of investing: The bottom line matters. Revenue increases are meaningless if they don't translate into growth of the bottom line. While you may not want to hear it, direct competitors like Starbucks (Nasdaq: SBUX - News) and Peet's Coffee & Tea (Nasdaq: PEET - News) are significantly safer and more profitable choices for your portfolio. These two companies have considerably more diverse revenue streams and sport unmistakably stronger gross margins than Coffee Holding. While a case can be made that Coffee Holding is a growth story in the making, I'm more inclined to believe it's the grounds at the bottom of my coffee cup.
The Motley Fool owns shares of Starbucks. Motley Fool newsletter services have recommended buying shares of Starbucks and Green Mountain Coffee Roasters, creating a short position in Peet's Coffee & Tea, and creating a lurking gator position in Green Mountain Coffee Roasters.
Fool contributor TMFUltraLong We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Saturday, September 17, 2011
1 Stock for the Long Haul (The Motley Fool)
In the book Rule Breakers, Rule Makers, Motley Fool co-founder and CEO Tom Gardner lays out certain criteria for judging a company worthy of "rule maker" status, i.e., a company that's the undisputed king of its market space, making for an investment that can be profitably held onto for years.
This investing basics series takes well-known, consumer-facing companies and runs them step-by-step through Tom's merciless rule-maker gauntlet. Today we're looking at Starbucks (Nasdaq: SBUX - News), ubiquitous purveyor of caffeinated beverages and enabler of coffee addictions. For our analysis, we'll be using the earnings numbers Starbucks released for the quarter ending July 3.
1. Automatic for the people
In terms of mass-market, repeat-purchase, (relatively) low-priced goods, Starbucks is it. People across the country, and increasingly around the globe, equate Starbucks with great coffee and come back day after day to get their fix.
2. Pricing power
Gross margin indicates brand strength and pricing power, and at 58%, Starbucks' is extraordinarily healthy, coming in just shy of our top-tier benchmark of 60%. For comparison, peers Dunkin Donuts (Nasdaq: DNKN - News) and McDonald's (NYSE: MCD - News) come in at a mouth-scorching 80% and a pleasant 40%, respectively.
3. The top line
Who doesn't like to see revenue increase? Starbucks picked up $320 million in new revenue for the quarter, giving growth of 12.3% and handily surpassing our top-tier benchmark of 10%.
4. The bottom line
Net margin tells us how much profit a company makes from every dollar of sales. Starbucks' is 9.5%, coming in just shy of our top-tier benchmark of 10%.
5. Cash rules, Fools
Rule makers should be cash heavy and debt light, ideally having at least 1.5 times more cash than debt. A look at the balance sheet tells us Starbucks has $549.4 million in debt and $1.72 billion in cash, for a cash-to-debt ratio of 3.13. Well done, Starbucks.
6. Lean and mean
The Foolish flow ratio measures how well a company manages its inventory and cash. To calculate it, take current assets minus cash and divide by current liabilities. Starbucks comes in at 1.0, telling us the company is keeping its inventory and accounts receivables low and paying suppliers on its own terms. The best companies have Foolish flow ratios of 1.0 or less.
7. What's in a name?
A lot. Your familiarity and interest in a company help you understand exactly what the business does and how it makes money, thereby lowering your overall risk. For me, Starbucks and its already iconic brand and simple business model get top marks.
Pretender to the throne, or king?
Mass-market appeal. Solid pricing power. Exceptional top and bottom lines. A great Foolish flow ratio and an easily understandable business model.
There's no doubt Starbucks is a coffee, and profit, making machine, but is it a rule maker? Stay tuned for Part 2 of this article, where we torture the numbers even more and find out what makes a rule maker a rule maker, and whether you should put your money where your latte is.
Fool contributor Motley Fool newsletter services have recommended buying shares of Starbucks and McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Monday, September 12, 2011
Is It Time to Cement a Golden Opportunity With This Stock? (The Motley Fool)
It's not uncommon for stocks to find a bottom before actual economic figures underlying those stocks completely hit rock bottom. Simply seeing things as "less bad" than before is enough to trick most investors into thinking that things are getting better, which can send stocks rallying. I rarely encourage anyone to buy into companies with weakening fundamentals, because many of those stocks could just as easily pull a Circuit City and never be seen again. But for shareholders of Cemex (NYSE: CX - News), the world's third-largest producer of cement, it may be time to cement in a golden opportunity to buy shares at multiyear lows.
It's no great secret that the U.S. housing market is a mess. After a brief rebound triggered by the first-time-homebuyers tax credit, housing demand and prices resumed their pre-legislative trend southward. Even companies that had been performing well relative to peers are now succumbing to decreased demand and increased cancellation rates. MDC Holdings (NYSE: MDC - News) and NVR (NYSE: NVR - News), possibly the only two healthy names in the U.S. homebuilding sector, both saw a rise in cancellation rates and a dramatic drop-off in operating income over the year-ago period.
Despite all of these negatives, there are plenty of reasons to be positive about Cemex's outlook, especially in the U.S. where it derives a substantial amount of its business.
First of all, inflation figures have been tame in both the U.S. and Mexico. According to the latest data available for July in the U.S., the Producer Price Index -- a measure of inflation -- rose by a modest 0.2%, while in Mexico, prices ticked up just 0.09% in the first half of August. As long as inflation rates remain under control, purchases sensitive to interest rates (like homes) will remain at the forefront of buyers' minds. At 4.5%, Mexico's rates are near historic lows, and the Federal Reserve has already established a rough two-year timeline where it plans to keep lending rates at historic lows of 0.25%. These figures all work in favor of Cemex, which is a main supplier to the housing industry.
Relative to other publicly traded cement companies, Cemex offers the greatest risk-versus-reward ratio. Texas Industries (NYSE: TXI - News) and Eagle Materials (NYSE: EXP - News) trade at price-to-book valuations of 1.4 and 1.8, respectively, and are projected to be profitable in 2012 no easy task considering the weakness built into housing demand. Cemex, on the other hand, is currently priced at only 36% of book value and has a long term growth rate more than double that of Texas Industries or Eagle Materials. True, it does have a considerably higher debt load than its peers, but its growth rate should easily shoulder the load of its interest payments.
Finally, the worst-case scenario outlook is already built into the stock price. Recently, the company's results have been hampered by high U.S. unemployment, weakened demand for housing, a potential cut in U.S. infrastructure spending tied to the passing of U.S. debt-ceiling legislation, and weather-related catastrophes. Cemex has been hit with everything except for the kitchen sink. The only real concern shareholders should have is whether Cemex can hit its debt obligations, and according to its own vice president of finance, the company can easily do so through December 2013.
While it may not be smooth sailing ahead, Cemex has witnessed the proverbial perfect storm of negative news and has come out the other side intact. I don't see a more solid rebound candidate in the construction sector over the next few years than Cemex.
What you put money to work into Cemex here? Share your thoughts in the comments section below and consider adding Cemex to your watchlist.
Fool contributor TMFUltraLong. Motley Fool newsletter services have recommended buying shares of MDC Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that'll drop a house on your sister if you don't do your research.
Friday, September 2, 2011
How the major stock indexes fared Thursday (AP)
Stocks fell Thursday, ending a four-day rally, after regulators took action against a former Goldman Sachs subsidiary over its mortgage and foreclosure practices. Traders were also nervous that a jobs report due out Friday could revive worries of another recession in the U.S.
Goldman Sachs fell 3.5 percent after the Federal Reserve ordered the bank to review foreclosure practices at Litton Loan Servicing, saying there was a "pattern of misconduct and negligence" there. Bank stocks fell more than the rest of the market as investors worried about regulatory moves against other banks. Financial stocks in the S&P 500 dropped 2.4 percent, the most of the 10 company groups that make up the index.
The Dow Jones industrial average fell 119.96 points, or 1 percent, to close at 11,493.57.
The Standard & Poor's 500 index fell 14.47 points, or 1.2 percent, to 1,204.42.
The Nasdaq composite index fell 33.42, or 1.3 percent, to 2,546.04.
For the week:
The Dow is up 209.03, or 1.9 percent.
The S&P 500 is up 27.62, or 2.3 percent.
The Nasdaq is up 66.19, or 2.7 percent.
For the year to date:
The Dow is down 83.94, or 0.7 percent.
The S&P 500 is down 53.22, or 4.2 percent.
The Nasdaq is down 106.83, or 4 percent.
Thursday, July 14, 2011
Even Down 22%, This Stock Is Grossly Overvalued (The Motley Fool)
I don't know what's gotten into the coffee sector, but investors seem to like it. Whether it's the caffeinated beverages or the rising price of coffee beans worldwide, investors are sipping up coffee stocks like they're going out of style -- and it's producing some sky-high valuations.
Green Mountain Coffee Roasters (Nasdaq: GMCR - News), the name behind the Keurig single-serve K-Cup craze, has blasted to an all-time high and is currently valued in excess of 110 times trailing-12-month earnings. Peet's Coffee & Tea (Nasdaq: PEET - News), another provider of roasted coffee beans in the U.S., is also trading in the stratosphere with a trailing P/E of 41 and a forward P/E of 34. Not even coffee giant Starbucks (Nasdaq: SBUX - News) or smaller chain Caribou Coffee (Nasdaq: CBOU - News) can escape the bullish action, with each stock up more than 40% over the past year. But next to Coffee Holding (Nasdaq: JVA - News), these companies seem like they're at bargain-basement prices.
Even with yesterday's 24% drop, Coffee Holding, a manufacturer, roaster, packager, marketer, and distributor of blended coffees in the U.S. and Canada, still appears grossly overvalued. Now down 22% from its all-time high set earlier in the week, the company is still up more than 500% since the year began. I suggest we take a closer look at Coffee Holding so you can make up your mind whether this stock is just getting started or if, as I feel, shareholders are about to be burned to a crisp.
Source: Yahoo! Finance.
On paper, the company's five-year growth projection of 11.6% and forward P/E of 29 seem reasonable. Heck, I can even swallow a PEG ratio of 1.76 without spitting up my coffee. Where the hint of overvaluation starts to become an unwavering stench is when we begin examining its recent growth, its margins, and its cash flow.
Coffee Holding relies very heavily on Green Mountain for its business. In fact, Green Mountain last quarter accounted for 47% of Coffee Holding's revenue in 2010. While some may cheer the strength behind Green Mountain's trust in such a small company, it's worrisome that so much of Coffee Holding's revenue is tied up with one company.
Even more concerning are the company's razor-thin margins and surprisingly weak free cash flow. Full-year revenue has risen by 63% since 2006, but free cash flow remains stagnant. In the trailing-12-month period, the company failed to produce even $1 million in levered free cash flow. Doing the math, this means Coffee Holding is trading at a whopping 125 times its levered free cash. Compare this to Starbucks and Peet's Coffee, which trade at a still pricey but relatively reasonable 44 and 63 times levered free cash flow, respectively, and you'll see why I think shareholders are playing with fire.
History has often shown that it's a dangerous idea to invest in a company that relies on one customer for a large percentage of its revenue. While coffee prices remain strong and Green Mountain is showing no signs of slowing down, Coffee Holding's lack of growth in free cash flow, coupled with its small profit margin, make it a coffee stock that could seriously let down its shareholders.
What's your take on this recent highflier? Are you feeling jazzed about its prospects or just jittery after looking over its balance sheet? Share your thoughts in the comments section below and consider adding Coffee Holding to your watchlist to keep up on the latest in the coffee sector.
Fool contributor
has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name
. The Motley Fool owns shares of Starbucks.
Motley Fool newsletter services
have recommended buying shares of Starbucks and Green Mountain, as well as creating a short position in Peet's Coffee & Tea and Green Mountain.
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have recommended creating a lurking gator position in Green Mountain. Try any of our Foolish newsletter services
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that four out of five dentists recommend.
Friday, June 10, 2011
Slow economy weighing on stock market, finally (AP)
CHICAGO – The stock market comeback has proceeded at a rapid clip for more than two years. Yet the economic recovery has been frustratingly slow.
Now a spate of disappointing economic news is interrupting the market rally. It has money managers questioning whether the market can pull out of reverse and again leave the sputtering economy in its dust. If it does, credit the same factor that's driven stocks up 89 percent since their bottom in March 2009: record corporate profits.
It's a concern that will be top-of-mind at the annual Morningstar Investment Conference. The nearly 1,700 financial planners and fund managers in Chicago this week face a more complicated picture about where to put their clients' money.
It's hard to find any clear choices two years after the recession's official end in June 2009, with 9.1 percent unemployment, falling housing prices and weak consumer spending.
Stocks have fallen five weeks in a row, and appear headed toward a sixth. The Standard & Poor's 500 index is down 6 percent since the end of April. Many financial analysts think this slump is more serious than the market's other pauses in the past two-plus years.
Chuck de Lardemelle, who co-manages a pair of stock-and-bond funds, IVA Global and IVA International, recently trimmed the stock holdings in his two funds to around 68 percent.
His chief concern: The recoveries in the economy and the market may be unsustainable unless consumers feel confident enough to spend more freely. Their spending is crucial because it drives about two-thirds of the economy.
"People aren't interested in expanding the house, or buying a new car, because they're in bad shape," de Lardemelle says.
Yet corporate profits remain at record levels, due in part to expense cuts made during the recession. That's the main reason de Lardemelle thinks stocks might continue their comeback, despite the challenges consumers face.
"It's the golden age of corporate profits," he says.
These indicators show the different paths the economy and the market have taken -- and why fund managers are so concerned:
THE ECONOMY
• The economy is recovering at a slower pace than it has following past recessions. The nation's gross domestic product — the economy's total output of goods and services — grew 3 percent in the first 12 months of this recovery. That was about half the average first-year growth of 6.2 percent following recessions since 1949, according to Standard & Poor's Equity Research. The growth rate continued to lag the historic average in the just-completed second year of the recovery, and is predicted to do so again in the third.
• Unemployment is off its highs, but it's still high. The unemployment rate was 9.1 percent last month, compared with 9.5 percent when the recession ended. That's a 4 percent decline in the rate, over two years. Coming out of previous recessions, improvement in the jobless rate has typically been far more rapid — 14 percent on average at this stage of a recovery, according to Moody's Analytics.
• Wages are only creeping higher. Hourly compensation is up 3.3 percent since the recession ended, according to Moody's. That's about one-third of the average 9.8 percent rise at this stage of a recovery. If wages aren't rising fast enough, consumers can't help the economy.
• The housing recovery remains elusive. A report last week found home prices in big metro areas have sunk to their lowest since 2002. Since the bubble burst in 2006, prices have fallen more than they did during the Great Depression.
THE STOCK MARKET
• Stocks have had a much stronger comeback. The S&P 500 is up 45 percent from the end of the recession.
That's far ahead of the average 24 percent gain historically posted at this stage of a recovery, according to Moody's.
But there's a caveat, one that market pros are well aware of. If historic patterns hold up, any market gain in the third year of this recovery should be modest. The average gain has been 4.9 percent, according to S&P. — Companies are earning record profits. Wall Street analysts expect full-year operating profits among the S&P 500 to rise nearly 18 percent this year, according to S&P Equity Research. That would make 2011 a record year. In 2012, another record is forecast, with a projected 14 percent rise in earnings. But, another caveat: Heavy equipment makers like Caterpillar and Cummins and even consumer products maker Procter & Gamble are generating an increasingly larger share of their earnings abroad, where emerging markets are growing more steadily.
Stocks still look cheap. The S&P 500's price-earnings ratio — a measure that shows investors how much they're paying for a dollar in earnings — is modest by historical standards. The P/E, based on operating earnings for the last 12 months, is 15.5 — below the median of 18.1 since 1988, according to S&P. The market is even cheaper, with a P/E of 13.7, based on earnings projections for this year.
Brian Peery, a manager at Hennessy Funds, points to such data in arguing that the bull market isn't at an end. He expects stock returns to average around 8 percent per year over the next three to five years. Double-digit gains aren't likely, given the rough patch the economy is in.
A key short-term challenge is this month's wind-down of a $600 billion bond-buying program by the Federal Reserve known as quantitative easing. It's one of a series of stimulus measures the government took to promote investment in riskier assets like stocks.
Then there's the deficit, which has de Lardemelle worried because investors are likely to grow increasingly pessimistic about the government's ability to meet its obligations. They may demand higher yields, raising the government's borrowing costs to further hamper the economy.
"Their answer has been, `Let's print money, and hope the consumer comes back,'" de Lardemelle says of U.S. policymakers. "The consumer won't be back anytime soon."
___
AP Personal Finance Writer Dave Carpenter contributed to this report.
Questions? E-mail investorinsight(at)ap.org
Thursday, May 26, 2011
Tesla rolling out more stock to fund 'Model X' (AFP)
NEW YORK (AFP) – Tesla Motors announced plans on Wednesday to offer another 5.3 million shares in the US electric carmaker to the public to help fuel development of another model.
The Palo Alto, California-based Tesla, which was founded in 2003 by Elon Musk, a co-founder of PayPal and SpaceX, said it is also granting up to 795,000 shares of common stock to its underwriter at $26 a share.
In addition, Tesla said Musk, the company's chief executive, plans to buy 1.5 million shares directly from Tesla in a private placement and Blackstar Investco, an affiliate of Germany's Daimler, plans to purchase up to 644,475 shares.
Tesla hopes to raise $214 million from the various operations and plans to use the money to fund development of a Model X crossover vehicle.
In a filing with the US Securities and Exchange Commission (SEC), Tesla said it plans to produce a prototype of the Model X by the end of 2011 and to begin selling the vehicle in the fourth quarter of 2013.
Tesla said it is seeking with the Model X to "incorporate the functionality of a minivan with the consumer appeal of a sports utility vehicle."
Tesla's first car was the Tesla Roadster, a high-performance sports car.
The Tesla Roadster costs more than $100,000 and can go nearly 250 miles (400 kilometers) on a single charge.
In the SEC filing, Tesla said it had delivered around 1,650 Tesla Roadsters to customers in over 31 countries and would end production of the car in December.
Tesla is currently developing a four-door sedan known as Model S. The Model S, expected in 2012, has an anticipated base price of around $50,000.
Tesla conducted an initial public offering in June of last year, raising $226 million.
Tesla shares gained 8.46 percent on Wall Street on Wednesday to close at $28.98.
Thursday, March 24, 2011
ICI: Stock Fund Expenses on the Decline (U.S. News & World Report)
Good news for fund investors: Annual fees for stock funds are falling, according to a new study from the Investment Company Institute (ICI). In 2010, the average expense ratio for stock funds fell two basis points from a year earlier to 0.84 percent, while the average expense ratio for bond funds stayed flat at 0.64 percent.
ICI attributes the decline in stock fund expenses to increasing assets. Net assets in stock funds rose 15 percent in 2010 to $5.4 trillion as of the end of December. "Mutual fund expense ratios often vary inversely with fund assets, as fixed fund expenses are spread across a larger asset base," according to the study. Investors in stock funds paid an average of 0.95 percent in fees in 2010, including sales charges, or loads--down three basis points from 2009.
[See top-rated funds by category ranked by U.S. News Score.]
Net assets in bond funds rose 18 percent last year, to $2.6 trillion, but average fees stayed the same. "While we saw strong growth in the bond market in 2010, those expense ratios stayed flat due to two reasons. Investors moved more assets into in global bond funds, which tend to have higher expense ratios, and into funds that use a unified fee structure, in which fees are a constant percentage of fund assets. Given these trends, it's not surprising to see bond fund expense ratios bucking the typical inverse relationship between asset growth and expenses," says ICI senior economist Sean Collins. Bond fund investors paid an average of 0.72 percent--down one basis point from 2009.
[See Where to Find the Dividends Now.]
Money market fund expenses also dropped last year. Average fees fell by seven basis points to 0.26 percent. Given that yields are meager these days, many funds have waived expense ratios to offer clients a break. In the survey, ICI says fees could move higher once short-term interest rates begin to rise.
Twitter: @benbaden
Tuesday, March 1, 2011
AIG to sell MetLife stock earlier than planned (Reuters)
NEW YORK (Reuters) – American International Group Inc (AIG.N) will sell MetLife Inc (MET.N) shares it received in the 2010 sale of American Life Insurance Co to MetLife earlier than originally planned, the company said on Tuesday.
MetLife and AIG have agreed to waive some provisions of the original agreement to allow AIG to sell the common stock and equity units in an underwritten secondary share offering. AIG said it would use the proceeds to speed up its payments to the U.S. Treasury Department.
MetLife plans to sell 68.6 million common shares, Alico plans to sell 78.2 million MetLife shares and AIG will offer 40 million common equity units of MetLife.
MetLife plans to use the proceeds from the secondary offering to buy back 6.9 million contingent convertible preferred shares owned by AIG.
(Reporting by Alina Selyukh; Editing by Bernard Orr)
The Irrelevant Stock Market (The Motley Fool)
Reuters blogger Felix Salmon wrote a very interesting op-ed in The New York Times last week about our increasingly irrelevant stock market:
... the glory days of publicly traded companies dominating the American business landscape may be over. The number of companies listed on the major domestic exchanges peaked in 1997 at more than 7,000, and it has been falling ever since. It's now down to about 4,000 companies, and given its steep downward trend will surely continue to shrink.Nor are the remaining stocks an obvious proxy for the health of the American economy. Innovative American companies like Apple and Google may be worth hundreds of billions of dollars, but most of them don't pay dividends or employ many Americans, and their shares are essentially speculative investments for people making a bet on how we're going to live in the future.Put another way, as the number of initial public offerings steadily declines, the stock market is becoming little more than a place for speculators and algorithms to compete over who can trade his way to the most money. ...Meanwhile, the companies in which people most want to invest, technology stars like Facebook and Twitter, are managing to avoid the public markets entirely by raising hundreds of millions or even billions of dollars privately. You and I can't buy into these companies; only very select institutions and well-connected individuals can. And companies prefer it that way.
Sadly, he's all sorts of right. The only reason a company should go public is to gain access to capital markets. If they can privately obtain all the capital they need and bypass the public circus of high-frequency traders, quarterly earnings roasts, and regulatory flame-throwing, then by all means they should do so.
But to play devil's advocate, the decline of public markets might not be as bad as it looks.
The number of listed companies shouldn't be of upmost importance in judging markets' relevancy. The quality of those companies should get some weight, too. The number of listed companies may have peaked in 1997, but what kind of companies were these? Data from the World Federation of Exchanges shows the Nasdaq is responsible for essentially the entire decline since then -- fully 35% of Nasdaq listings vanished between 1998 and 2003. Maybe these were good companies looking to escape the rigors of public life. Or maybe they never should have been public to being with -- because they weren't real companies, just dot-com dreams someone managed to take public. More than 65% of Nasdaq companies were profitable last year. My humble data source doesn't go back far enough, but one can only imagine it was a fraction of that in 1997.
And Apple (Nasdaq: AAPL - News) and Google (Nasdaq: GOOG - News) may not pay dividends or employ many people, as Salmon notes, but neither, presumably, do Facebook or Twitter, the privately held stars he mentions. Twitter, in fact, recently employed just 300 people -- the equivalent of 0.002% of the population of Billings, Mont. And 72% of S&P 500 companies do actually pay a dividend. For every dividend-free Apple or Google, one can point out an Intel (Nasdaq: INTC - News) or MSFT (Nasdaq: MSFT - News), which are innovating, employing, and paying good dividends to shareholders. Good companies worthy of your money are still public. Many of them. Probably more than there ever have before. Even with 4,000 listed companies, the average investor is still completely overwhelmed with opportunity. Most would be better off with fewer listed companies tempting them to invest in areas they have no hope of understanding.
In the end though, I don't think Salmon's larger point can be argued. Companies don't have the incentive to be public today that they did in years past. Other options are available, and the annoyances of public life are multiplying in force.
Will this trend continue? Is it something investors should worry about?
You tell me.
Fool contributor Motley Fool Inside Value recommendations. Google is a Motley Fool Rule Breakers pick. Apple is a Motley Fool Stock Advisor choice. The Fool has written puts on Apple. The Fool owns shares of and has bought calls on Intel. Motley Fool Options has recommended a diagonal call position on Intel. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Sunday, February 27, 2011
The Irrelevant Stock Market (The Motley Fool)
Reuters blogger Felix Salmon wrote a very interesting op-ed in The New York Times last week about our increasingly irrelevant stock market:
... the glory days of publicly traded companies dominating the American business landscape may be over. The number of companies listed on the major domestic exchanges peaked in 1997 at more than 7,000, and it has been falling ever since. It's now down to about 4,000 companies, and given its steep downward trend will surely continue to shrink.Nor are the remaining stocks an obvious proxy for the health of the American economy. Innovative American companies like Apple and Google may be worth hundreds of billions of dollars, but most of them don't pay dividends or employ many Americans, and their shares are essentially speculative investments for people making a bet on how we're going to live in the future.Put another way, as the number of initial public offerings steadily declines, the stock market is becoming little more than a place for speculators and algorithms to compete over who can trade his way to the most money. ...Meanwhile, the companies in which people most want to invest, technology stars like Facebook and Twitter, are managing to avoid the public markets entirely by raising hundreds of millions or even billions of dollars privately. You and I can't buy into these companies; only very select institutions and well-connected individuals can. And companies prefer it that way.
Sadly, he's all sorts of right. The only reason a company should go public is to gain access to capital markets. If they can privately obtain all the capital they need and bypass the public circus of high-frequency traders, quarterly earnings roasts, and regulatory flame-throwing, then by all means they should do so.
But to play devil's advocate, the decline of public markets might not be as bad as it looks.
The number of listed companies shouldn't be of upmost importance in judging markets' relevancy. The quality of those companies should get some weight, too. The number of listed companies may have peaked in 1997, but what kind of companies were these? Data from the World Federation of Exchanges shows the Nasdaq is responsible for essentially the entire decline since then -- fully 35% of Nasdaq listings vanished between 1998 and 2003. Maybe these were good companies looking to escape the rigors of public life. Or maybe they never should have been public to being with -- because they weren't real companies, just dot-com dreams someone managed to take public. More than 65% of Nasdaq companies were profitable last year. My humble data source doesn't go back far enough, but one can only imagine it was a fraction of that in 1997.
And Apple (Nasdaq: AAPL - News) and Google (Nasdaq: GOOG - News) may not pay dividends or employ many people, as Salmon notes, but neither, presumably, do Facebook or Twitter, the privately held stars he mentions. Twitter, in fact, recently employed just 300 people -- the equivalent of 0.002% of the population of Billings, Mont. And 72% of S&P 500 companies do actually pay a dividend. For every dividend-free Apple or Google, one can point out an Intel (Nasdaq: INTC - News) or MSFT (Nasdaq: MSFT - News), which are innovating, employing, and paying good dividends to shareholders. Good companies worthy of your money are still public. Many of them. Probably more than there ever have before. Even with 4,000 listed companies, the average investor is still completely overwhelmed with opportunity. Most would be better off with fewer listed companies tempting them to invest in areas they have no hope of understanding.
In the end though, I don't think Salmon's larger point can be argued. Companies don't have the incentive to be public today that they did in years past. Other options are available, and the annoyances of public life are multiplying in force.
Will this trend continue? Is it something investors should worry about?
You tell me.
Fool contributor Motley Fool Inside Value recommendations. Google is a Motley Fool Rule Breakers pick. Apple is a Motley Fool Stock Advisor choice. The Fool has written puts on Apple. The Fool owns shares of and has bought calls on Intel. Motley Fool Options has recommended a diagonal call position on Intel. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.