Investing 101: 7 Undervalued Stocks With Improving Profit Margins

If you're on the hunt for undervalued companies with encouraging accounting information, the following may be a good starting point for your search.

We started with a universe of companies that have reported rising gross margins year over year for the past three years. Gross Margin is the percentage of profits a company makes for each dollar generated in sales after paying all production expenses. Costs include overhead, payroll, and taxation.

Gross Margin = Gross Profit / Revenue

The higher the percentage, the greater the gross profits taken from revenue. A rising gross margin often indicates a company is better able to control its costs.

The Graham Equation
Next we searched for companies that appear undervalued when applying the Graham Number. The Graham number is a value equation created by the "godfather of value investing," Benjamin Graham. The equation calculates the maximum fair value for any stock, and it's based on only two data points: current earnings per share and current book value per share.

The Graham Number = Square Root of (22.5) x (TTM Earnings per Share) x (MRQ Book Value per Share)

This equation assumes that a stock is overvalued if P/E is over 15 or P/BV is over 1.5. Therefore, stocks trading significantly below their Graham Number are "undervalued" according to the equation.

The list
Combining these ideas, the following list of companies have reported rising gross margins and are undervalued according to the Graham equation.

Rising gross margin implies the company has become more profitable, but these names are still trading at a discount to fair value. Do you think they will rise in value? (Click here to access free, interactive tools to analyze these ideas.)

1. Calamos Asset Management: Provides investment advisory services to individuals including high net worth individuals, and institutions. Gross profit margins increased from 77.12% to 77.46% during the first time interval (12 months ending 2008-12-31 vs. 12 months ending 2007-12-31). For the second time interval, gross margins increased from 77.46% to 77.99% (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). And for the final time interval, gross margins increased from 77.99% to 78.69% (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). Diluted TTM earnings per share at 1.06, and a MRQ book value per share value at 9.32, implies a Graham Number fair value = sqrt(22.5*1.06*9.32) = $14.91. Based on the stock's price at $11.77, this implies a potential upside of 26.67% from current levels.

2. Solar Capital (Nasdaq: SLRC  ) : A business development company specializing in investments in leveraged companies, including middle market companies. Gross profit margins increased from 74.88% to 81.86% during the first time interval (12 months ending 2008-12-31 vs. 10 months ending 2007-12-31). For the second time interval, gross margins increased from 81.86% to 84.74% (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). And for the final time interval, gross margins increased from 84.74% to 85.32% (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). Diluted TTM earnings per share at 1.44, and a MRQ book value per share value at 21.2, implies a Graham Number fair value = sqrt(22.5*1.44*21.2) = $26.21. Based on the stock's price at $22.19, this implies a potential upside of 18.11% from current levels.

3. Level 3 Communications (Nasdaq: LVLT  ) : Engages in the communications business in North America and Europe. Gross profit margins increased from 57.06% to 57.94% during the first time interval (12 months ending 2008-12-31 vs. 12 months ending 2007-12-31). For the second time interval, gross margins increased from 57.94% to 58.4% (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). And for the final time interval, gross margins increased from 58.4% to 59.19% (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). Diluted TTM earnings per share at -5.67, and a MRQ book value per share value at -4.4, implies a Graham Number fair value = sqrt(22.5*-5.67*-4.4) = $23.69. Based on the stock's price at $17.64, this implies a potential upside of 34.31% from current levels.

4. Nanometrics: Provides high-performance process control metrology systems used primarily in the fabrication of semiconductors, high-brightness LEDs, data storage devices, and solar photovoltaics. Gross profit margins increased from 42.13% to 43.81% during the first time interval (52 weeks ending 2008-12-27 vs. 52 weeks ending 2007-12-29). For the second time interval, gross margins increased from 43.81% to 47.09% (53 weeks ending 2010-01-02 vs. 52 weeks ending 2008-12-27). And for the final time interval, gross margins increased from 47.09% to 54.37% (52 weeks ending 2011-01-01 vs. 53 weeks ending 2010-01-02). Diluted TTM earnings per share at 2.36, and a MRQ book value per share value at 8.99, implies a Graham Number fair value = sqrt(22.5*2.36*8.99) = $21.85. Based on the stock's price at $18.01, this implies a potential upside of 21.31% from current levels.

5. Medallion Financial (Nasdaq: TAXI  ) : Operates as a specialty finance company in the United States. Gross profit margins increased from 40.26% to 54.65% during the first time interval (12 months ending 2008-12-31 vs. 12 months ending 2007-12-31). For the second time interval, gross margins increased from 54.65% to 59.25% (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). And for the final time interval, gross margins increased from 59.25% to 60.86% (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). Diluted TTM earnings per share at 1.04, and a MRQ book value per share value at 9.59, implies a Graham Number fair value = sqrt(22.5*1.04*9.59) = $14.98. Based on the stock's price at $11.14, this implies a potential upside of 34.47% from current levels.

6. Molson Coors Brewing (NYSE: TAP  ) : Distributes beer brands. Gross profit margins increased from 40.19% to 40.5% during the first time interval (52 weeks ending 2008-12-28 vs. 52 weeks ending 2007-12-30). For the second time interval, gross margins increased from 40.5% to 43.05% (52 weeks ending 2009-12-26 vs. 52 weeks ending 2008-12-28). And for the final time interval, gross margins increased from 43.05% to 44.32% (52 weeks ending 2010-12-25 vs. 52 weeks ending 2009-12-26). Diluted TTM earnings per share at 3.26, and a MRQ book value per share value at 43.61, implies a Graham Number fair value = sqrt(22.5*3.26*43.61) = $56.56. Based on the stock's price at $43.77, this implies a potential upside of 29.22% from current levels.

7. KBR (NYSE: KBR  ) : Operates as an engineering, construction, and services company supporting the energy, hydrocarbon, government services, minerals, civil infrastructure, power, and industrial sectors worldwide. Gross profit margins increased from 4.77% to 5.81% during the first time interval (12 months ending 2008-12-31 vs. 12 months ending 2007-12-31). For the second time interval, gross margins increased from 5.81% to 5.88% (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). And for the final time interval, gross margins increased from 5.88% to 6.82% (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). Diluted TTM earnings per share at 3.06, and a MRQ book value per share value at 16.98, implies a Graham Number fair value = sqrt(22.5*3.06*16.98) = $34.19. Based on the stock's price at $28.6, this implies a potential upside of 19.55% from current levels.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.

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List compiled by Eben Esterhuizen, CFA. Kapitall's Eben Esterhuizen and Rebecca Lipman do not own any of the shares mentioned above. EPS and BVPS data sourced from Yahoo! Finance, accounting data sourced from Google Finance.

Can Starbucks Jolt Itself Out of European Doldrums?

Coffee purveyor Starbucks' (Nasdaq: SBUX  ) profits rose 18.5% as it got a boost from its operations in the Americas and China. In fact, the company's global same-store sales rose by 7% -- a combined effect of an increase in the number of customers as well as customers spending more per visit.

China powers on
The strongest returns came from China and the Asia-Pacific region, where same-store sales rose by a staggering 18%. It's interesting to note that McDonald's (NYSE: MCD  ) had recently raised some concerns that the sale of "discretionary items," as well as products such as desserts and snacks, were falling in China, with Chief Operating Officer Don Thompson saying McDonald's expected "challenging economic conditions with slow growth in China."

But Starbucks didn't really feel this slowdown as it recorded its seventh straight quarter of growth at a higher-than-20% level. Interestingly, Starbucks Chief Financial Officer Troy Alstead, while speaking about China, said that "we haven't seen any of the slowness that I've heard others talk about," as reported by The Wall Street Journal (subscription needed). China is the key to Starbucks' growth plans, with the company aiming to make it its second-biggest market after the U.S. by as early as 2014.

The lag
Despite Starbucks witnessing strong growth globally, Europe has been weaker, with same-store sales declining by 1% from the Europe, the Middle East, and Africa (EMEA) region. Europe has been a problem area for the world's largest coffee purveyor as economic conditions in the region haven't been the best and this has taken its toll on consumer spending. The EMEA region accounted for nearly 10% of Starbucks' total revenue; however, it also reported an operating loss of $5.5 million.

The mission to overhaul its European business has been handed over to Michelle Gass, who was recently appointed president of the EMEA region. Though it will look to expand its business in the region, Starbucks will first try to win customers by catering to the region-specific needs of customers in Europe and focus on brand building in the region.

Serving it up
Starbucks' plans to enter the single-serve coffee market with its high-pressure brewer, the Verismo, could help. Many think the Verismo was designed to directly compete with Green Mountain Coffee Roasters' (Nasdaq: GMCR  ) popular Keurig brewer, which has dominated the single-serve coffee market for a while now.

However, Starbucks CEO Howard Schultz said the Verismo was instead intended to rival Nestle's coffee machine. Nestle's Nespresso coffee system, according to Euromonitor data, controls 35% of the global market. The single-serve coffee market is popular in Europe, especially Western Europe. Maybe tapping this market will help Starbucks revive its European business.

Though the situation in Europe isn't the best at present, Schultz hopes to emulate the way Starbucks turned around its business in the U.S. In fact, speaking on the condition in Europe, he said, "We've seen this movie before, and I'm proud to say it had a very good and positive ending."

Can he turnaround Starbucks' business in a tough European market? I'll wait on the sidelines and watch. If you'd like to stay up to date on the progress more closely, add Starbucks to your free watchlist.

We've seen that Starbucks is banking on the emerging Chinese market to drive its growth. However, it's not the only one looking at emerging markets. For three such global plays, check out our free report "3 American Companies Set to Dominate the World." The report won't be available forever, so we invite you to click here to get your copy today!

Johnson & Johnson, Forest Labs Will Make You Sick

Johnson & Johnson (NYSE:JNJ) posted a profit decline�in the�third quarter. It’s suffering from a boatload of self-inflicted wounds — demonstrating just how difficult it is for a long-time market leader to adapt to change. Would drug-maker Forest Laboratories (NYSE:FRX) be�a better bet?

The health care industry used to be so cozy and profitable. R&D money led to patented products with high prices. Profits went into giving doctors fancy vacations, touted as science seminars,�so they’d prescribe their patented products to patients.

But that cozy world is gone forever. Here are three reasons why:

• Pharmacy Benefit Managers (PBMs) — they negotiate with drug companies on behalf of corporate health plans — now decide which drug to prescribe, not doctors.
• Generic pharmaceutical makers make off-patent drugs at much lower prices and they always get the PBM nod of approval.
• Biotechnology companies are much better at developing new drugs than the pharmaceutical R&D labs that keep spending more and more money for fewer and fewer blockbuster drugs.

Companies that used to prevail in the good ol’ days are now threatened by all these changes. And it seems that often, they just decide to punt by finding a merger partner and hoping that cost-cutting will help fix their basic problem — an inability to adapt to change.

Tuesday’s third-quarter financial report from Johnson & Johnson reflects some of these problems. Its profit was down 6% thanks to product recalls in its implants and stents, more competition from generic drugs and the costs of an acquisition — its $21 billion acquisition of�medical device maker Synthes will close in June — all this bad news dwarfed the�benefits JNJ got from higher foreign sales.

The good news for JNJ shareholders is that the company beat expectations. The 6% drop in net income to $3.2 billion yielded adjusted EPS of $1.24 — three cents�ahead of analysts’ estimates. But J&J fell just $20 million short of the $16.02 billion in sales that analysts�were expecting. Nevertheless, those revenues were up 7% — but half of that came from “favorable currency exchange rates,” according to Associated Press.

With all these problems, would investors be better off owning Forest Labs? In�a word, no. In Tuesday’s�second-quarter report,�Forest disappointed investors. Its�net income fell 13% to $249.8 million on a 7.3% rise in revenue to $1.17 billion. But its adjusted EPS of�91 cents a share was eight cents below expectations — although it beat revenue forecasts by $10 million.

Does this mean you should avoid both stocks? Yes. Here’s why:

• Johnson & Johnson: No growth, but strong margins; expensive stock. While JNJ’s revenues have dropped 0.5% to $64.4 billion in the past 12 months, net income has climbed 8.7% to $11.4 billion — creating a strong 17.7% net profit margin. Its PEG of 2.22 (where a PEG of 1.0 is considered fairly priced) is expensive, however, on a P/E of 13.1 and expected earnings growth of 5.9% to $5.25 in 2012.
• Forest Laboratories: Good growth, high margins; but plunging profit forecast. Forest Labs’ revenues climbed a decent 5.4% to $4.5 billion in the past 12 months, while net income jumped 53.4% to $1.19 billion — yielding a whopping net profit margin of 25.1%. Its PEG is undefined, though, because its trades at a P/E of 8.8 and its earnings are expected to plunge 67% to $1.22 in fiscal year 2013.

Just because an industry is big and important doesn�t mean you should invest in it. Johnson & Johnson and Forest Labs appear to be saddled with too much baggage to make the agile moves needed to earn an attractive return on their shareholders� investment.

As of this writing, Peter Cohan did not own a position in any of the aforementioned stocks.

Making Money With Options the ‘Write’ Way

Many investors, when they hear the word �options,” immediately think, �gambling.� That�s not a bad guess, either. Typically, when somebody touts options, the pitch is for you to buy these instruments in order to speculate on the movement of a stock or commodity. With a small stake in options, the tease goes, you can multiply your money 100%, 200% and more if the market swings in your direction. Furthermore, your risk is �strictly limited� if you happen to be wrong.

All true enough. However, there are some caveats. The most important: Options have a fixed life. If you pay $1 for a call option that entitles you to buy 100 shares of �XYZ� stock at $20 within the next three months, and �XYZ� never goes above $20 during that period, your call will expire and become worthless. Yes, your risk is limited — to a 100% loss!

It�s this time decay in the value of an option that causes most options buyers to lose money over the long run. As in a gambling casino, the odds are stacked in favor of the house. The longer you play, the more likely you�ll end up a loser.

Ah, but what if you could change seats and assume the role of the house yourself? Actually, you can — by selling or (in the parlance of the trade) �writing� options. Writing options isn�t a one-way ticket to riches, but if conducted properly, it can add to your overall portfolio returns while shaving your risk.

Covered Calls

The best place to begin is by selling calls against stocks you already own. Known as �covered� call writing, this technique lets you collect a premium for giving the option buyer the right to purchase your stock at a specified price until a certain date.

In the example I gave you earlier, �XYZ� shares may be trading around $19. Calls that can be exercised at $20 per share for three months may be quoted around $1. You sell one call, representing the 100 shares of �XYZ� you already own.

If, by expiration date, �XYZ� has never traded above $20, you�ll be able to keep the $100 premium (less brokerage commission). On the other hand, if �XYZ� climbs above $20, chances are the buyer will �call� your stock away, paying $20 per share for it. In effect, you�ll have sold your stock for $21 (less commissions).

As you probably can see if you�ve followed me this far, the key is to set the exercise price (also known as the strike price) of the option far enough above the current price of the stock to prevent your shares from being called away, yet low enough to earn a reasonable premium for the option.

How do you achieve this balancing act? Here are two guidelines:

• Sell calls when the market indices, and your stock, are relatively high.

Look for situations where the headline stock indices (Dow and S&P) have risen 10% or more in the last 13 weeks, and where your stock is trading near a 13-week high.

• Write options with expiration dates within the next four to eight weeks.

The time decay of an option accelerates sharply during the last few weeks of the option�s life. You want the hourglass to run out soon.

Among the stocks I�m following, several may offer call-writing opportunities in the next few weeks. Keep an eye on Abbott Laboratories (NYSE:ABT), ConAgra (NYSE:CAG), Kimberly-Clark (NYSE:KMB), McDonald�s (NYSE:MCD), Microsoft (NASDAQ:MSFT) and Raytheon (NYSE:RTN).

Let a Fund Do It

Persistent, skillful call writers can significantly boost their portfolio profits. (In the example I cited earlier, you could theoretically earn about 20% a year on your �XYZ� stake if you wrote a call every three months that expired worthless.) Like most trading techniques, though, call writing requires a lot of attention to the market�s daily — and even hourly — squiggles.

For most amateurs, a better alternative might be to invest in a fund that systematically writes calls against the stocks in its portfolio. A number of closed-end funds have successfully mined this specialized niche, but my top pick is Eaton Vance Tax-Managed Buy-Write Opportunities Fund (NYSE:ETV).

With dividends reinvested at net asset value, ETV has chalked up a compound annual return of about 17% over the past three years, versus about 14% for the S&P.

Like many closed-end funds, ETV adheres to a �managed� distribution policy, which means the fund pays the same cash dividend each quarter regardless of actual earnings. Thus, you shouldn�t take ETV�s current 10.5% yield literally. Barring a market moonshot in 2012, at least part of your payout will constitute a tax-free return of capital (i.e., a return of your original investment).

What counts is the sum of dividends and price change — and on that score, ETV has been a winner since inception in 2005.

Stocks mixed on Europe jitters and jobs data

NEW YORK (CNNMoney) -- U.S. stocks closed mixed Thursday, with the broader market falling for a third day, amid renewed worries about the debt crisis in Europe.

The Dow Jones industrial average (INDU) slid 12 points, or 0.4%, to end at 13,060. The S&P 500 (SPX) eased 1 point, or 0.1%, to 1,398. The Nasdaq (COMP) rose 13 points, or 0.4%, to 3,080.

Traders said volumes were low Thursday with many market participants absent ahead of the holiday. U.S. markets will be closed Friday in observance of Good Friday, and bond markets will close early.

The Dow and S&P 500 both fell for a third day, ending the four day week lower. Despite modest gains on Thursday, the Nasdaq also ended the week down. All three indexes suffered the largest weekly decline of 2012.

Stocks opened lower Thursday as investors continued to digest Wednesday's lackluster auction of Spanish government bonds. The yield on 10-year Spanish bonds jumped to 5.8% Thursday amid worries about the government's budget deficit.

"Credit concerns are flaring given the rise in Spanish bond yields," said Nick Kalivas, market strategist at Hadrian Partners. "It feels like the sovereign debt crisis is surfacing again."

In addition, investors have been sidelined this week by concerns the Federal Reserve may not launch a third round of quantitative easing when the current program, known as Operation Twist, ends in June.

"Traders may soon be forced to operate without a safety net for the first time since the 2008 collapse," said Karl Schamotta, senior market strategist Western Union Business Solutions. "The implications will be profound."

Meanwhile, the U.S. job market has been in focus this week ahead of Friday's report on hiring and unemployment from the Labor Department. Two reports released Thursday pointed to continued improvement in the labor market.

Stocks fell Wednesday after minutes from the Fed's latest policy meeting dashed hopes for additional stimulus from the central bank.

Sell in April and hide under the table?

Meanwhile, demand for U.S. Treasuries rebounded Thursday after prices fell sharply earlier in the week, said Guy LeBas, chief fixed-income analyst at Janney Capital Markets. But the gains came on low volume ahead of Friday's holiday.

"The combination of the impending Good Friday holiday, prevalence of school spring breaks this week, and the start of the Masters Golf tournament Wednesday afternoon all conspired to keep volumes low," LeBas said.

Economy: Initial jobless claims for the week ended March 31 totaled 357,000, the government reported before Thursday's opening bell, compared with analyst expectations of 355,000.

Outplacement firm Challenger, Gray & Christmas said planned job cuts declined to roughly 38,000 in March, the lowest since May of last year.

On Friday, the Labor Department will release the latest update on job growth and the unemployment rate.

Economists surveyed by CNNMoney expect that report to show employers added 200,000 jobs in March and the unemployment rate fell to 8.2%. In February, the economy added 227,000 jobs.

World markets: European stocks ended mixed. Britain's FTSE 100 (UKX) added 0.3% and France's CAC 40 (CAC40) rose 0.2%, but the DAX (DAX) in Germany lost 0.1%.

In a widely expected move, the Bank of England's monetary policy committee voted to hold interest rates at 0.5% and maintain the size of its 325 billion pound asset-purchasing program.

Meanwhile, the International Monetary Fund said Portugal has made "good progress" on its economic reform program and approved the disbursement of €5.2 billion in bailout funds.

Asian markets ended mixed. Japan's Nikkei (N225) slid 0.5% and Hong Kong's Hang Seng (HSI) fell 1%, while the Shanghai Composite (SHCOMP) rose 1.7%.

Wall Street needs a Republican - Survey

Companies: Shares of wine company Constellation Brands (STZ) fell after the company reported a drop in revenue and weak guidance for the upcoming fiscal year.

Pier 1 Imports (PIR) and Carmax (KMX, Fortune 500) reported earnings and revenue roughly in line with analyst expectations.

Macy's (M, Fortune 500) shares rose after the company reported that its same-store sales for the month of March had increased 7%. Fellow retailer Bed Bath & Beyond (BBBY, Fortune 500) gained after announcing a 7% increase in quarterly same-store sales.

Clothing sellers Gap Inc (GPS, Fortune 500) and TJX Companies Inc (TJX, Fortune 500) were up on strong same-store sales.

Costco (COST, Fortune 500)'s March same-store sales in the U.S. increased by 6%. Limited (LTD, Fortune 500) said March same-store sales increased 8%.

Obama: How to get to 6% unemployment

Currencies and commodities: The dollar gained against the euro and British pound, but slipped against the Japanese yen.

Oil for May delivery rose $1.84 to end the day at $103.31 a barrel.

Gold futures for April delivery rose $16.20 to settle at $1,628.50 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 2.19% from 2.23% late Wednesday. 

Japan shares rise on weaker yen to lead Asia

HONG KONG (MarketWatch) � Most Asian markets ended higher on Wednesday, with Japanese stocks catching a tailwind from the yen�s weakness while mainland Chinese shares gained on hopes for a relaxation in policy toward the property sector.

The Nikkei Stock Average JP:100000018 �rebounded from a wobbly start to finish 1% higher at 9,554 in Tokyo, as the U.S. dollar extended its recent gains against the yen to lift Japanese exporters.

China�s Shanghai Composite Index CN:000001 �rose 0.9% to 2,403.59, Hong Kong�s Hang Seng Index HK:HSI �gained 0.3% to 21,549.28 and Taiwan�s Taiex added 1% to 8,001.68.

Elsewhere, South Korea�s Kospi KR:SEU �inched up 0.2% to 2,028.65, while Australia�s S&P/ASX 200 index AU:XJO �ended fractionally higher at 4,293.10.

Stocks in had slipped in early trading on doubts over the durability of the latest Greek rescue plan, but recovered as the day progressed.

Click to Play Chinese millionaires head West

Best-selling Chinese writer Shi Kang is one of a growing number of Chinese millionaires looking to leave China, in search of a better life and a healthier environment for their families.

�It�s getting to the point where people are feeling that developments in Europe are becoming largely irrelevant to Asia,� said Andrew Sullivan, principal sales trader at Piper Jaffray.

Referring to the early weakness for Asian stocks, Sullivan said the Greek rescue plan announced Tuesday �didn�t give people detail or confidence.�

An increase in oil prices to a nine-month high weighed on Wall Street overnight, and also contributed to a poor start in the region. Read more on Tuesday crude-oil trading. Read more on U.S. stocks.

But the high prices lured buyers to the energy sector, with Inpex Corp. JP:1605 IPXHY rising 1.4% in Tokyo, while PetroChina Co. HK:857 �PTR �gained 1.4% in Hong Kong and 0.1% in Shanghai. In Sydney, Woodside Petroleum Ltd. WOPEY �AU:WPL �climbed 2.5%, also supported by news that an LNG venture of the company was on track for a start-up in March.

Japanese car makers and other exporters swung to gains as the dollar strengthened against the yen USDJPY .

Toyota Motor Corp. JP:7203 �TM �climbed 1.8% and Nissan Motor Co. JP:7201 �NSANY �added 2.3%, while Nintendo Co. NSANY �JP:7201 �advanced 3%.

Chinese property firms jumped on mainland bourses as well as in Hong Kong, in the wake of a report in the Shanghai Securities Journal that the city will soon ease certain restrictions on home purchases.

�Chinese property firms are doing quite well... probably because they have been quite heavily shorted in the last few days� said Sullivan.

China Overseas Land & Investment Ltd. HK:688 � CAOVF �jumped 2.8% and China Resources Land Ltd. HK:1109 �CRBJF �climbed 2.9% in Hong Kong.

In Shanghai, Gemdale Corp. CN:600383 �climbed 3.9% and Poly Real Estate Group Co. CN:600048 �rose 2.7%, while China Vanke Co. CVKEY �gained 3.4% in Shenzhen.

Also on Wednesday, HSBC�s China �flash� Purchasing Managers� Index showed a smaller contraction in manufacturing activity in February than in January. See report on HSBC China flash PMI results.

Shares of Alibaba.com Ltd. shot up 42.7% in Hong Kong as trading resumed for the first time since Feb. 9, after its parent group confirmed plans to take the company private. See report on Alibaba privatization plans.

Earnings reports also lent support to trading action in Australia, with CSL Ltd. AU:CSL �CMXHF �rising 2.5% after reporting a slight drop in first-half net profit but raising its second-half outlook due to strong demand for its products.

Shares of Seven West Media Ltd. AU:SWM �WANHF surged 7.4% after reporting a sharp jump in first-half net profit.

Monday Bond Market Recap

By Maulik Mody

US government bonds became cheaper and stocks recovered after the Fed finished purchasing about $15 billion of Treasuries Monday. This is the highest amount of securities purchased in a single day after the Fed announced $600 billion of asset purchases in November. Trading volume was lower as compared to last week. Commodities and energy prices advanced and the dollar strengthened.

Interest Rates

Treasuries pared gains after the Fed’s purchase as part of the added stimulus to sustain the recovery. The yield on the benchmark inched up 2 bp to 3.34%. The 2-yr was flat at 0.60%, while the 5-Yr advanced slightly as its yield fell a basis point to 1.95%. The Long Bond weakened and traded a basis point higher at 4.44%.

Inflation expectations, as seen by the difference in yields of the 10-Yr Treasury and 10-Yr inflation indexed bonds (TIPS), narrowed by a basis point to 2.28%.

Bonds advanced across the Atlantic. 5-Yr German Bunds advanced as its yield shed 8 bp to 1.95%. 5-yr France bonds also gained pushing its yield 6 bp lower to 2.19%. 5-Yr UK Gilts gained slightly as yields fell a basis point to 1.95%.

Yields ended tighter among peripheral nations too. The benchmark Greece bond pushed higher and traded at 12.48%. Ireland’s bond yield fell 7 bp and traded last at 7.45%. Portugal’s bond gained slightly and ended at 5.24%. Yield on Spain’s bond fell 7 bp to 4.69%.

Capital Markets

Stocks ended slightly higher as investors gained confidence in the recovery towards year end. The S&P gained a quarter of a percent to 1247.08. NASDAQ also advanced by the same amount to 2649.56. The VIX volatility index gained to 16.41.

The dollar DXY index strengthened to 80.596. Euro fell 0.3% against the greenback to 1.3131. The British Pound eased slightly to 1.5513.

ETF for New Smartphone King

Samsung released its quarterly earnings performance report on Friday, and on the surface the numbers were decent. Despite seeing an earnings dip over the past three months, the company managed to beat analyst expectations.

Digging deeper, however, investors can uncover some impressive news regarding the firm's smartphone division. Although Samsung is still considered a relative newcomer to the industry, the company's products have taken off in popularity.

See if (AAPL) is in our portfolio

In fact, over the past quarter, Samsung managed to usurp the throne from Apple(AAPL) to become the world's leading player in the industry, with 24% market share. According to a Reuters report, Samsung shipped nearly 28 million units over the past three months, handedly outpacing Apple's 17 million units. This shakeup is exciting, and it will be interesting to see if Samsung can maintain its position at the top over the long run. In the near term, there are ways investors can target the new king of the smartphone industry. For ETF investors looking for ample exposure to the Korea-based conglomerate, few products can compare to the iShares MSCI South Korea Index Fund(EWY). This fund is designed to provide investors with broad exposure to the South Korean marketplace, spreading its assets across a pool of more than 100 different names across the market spectrum. Companies like Hyundai, Posco(PKX) and Shinhan Financial Group(SHG) each represent respectable slices of the fund's index. However, Samsung Electronics is the firm that will likely drive much of the fund's day-to-day action over time. Alone, this company accounts for more than 17% of the fund's assets. Like many other nations, South Korea's marketplace struggled in August and September as the European crisis and fears of a Chinese hard landing weighed heavily on investor confidence. As global fears have waned over the past month, however, shares of EWY have had an impressive rebound. Since the start of October, the fund has been on a steep upward trajectory, breaking through to levels last seen in early August. This action has aided the fund's positioning within our short-term momentum rankings. News of Samsung's newfound dominance in the smartphone industry may be enough to fuel the fund higher in the days ahead.

1 2 Next › Last »

EWY is not an ETF that I would encourage investors to go all in on, though. On the contrary, those interested in wading into this Asian nation should view EWY as a small niche component within an otherwise well-diversified portfolio.

Analysts have noted in the past that South Korea boasts a number of developed nation characteristics. However, the country is still considered an emerging market and will likely witness volatility similar to other developing regions in the foreseeable future.

Any volatility will likely be magnified by the top heavy structure of EWY's underlying index. Samsung is attractive at this time given the good news surrounding the company's earnings and smartphone dominance. However, we have seen in the past how a concentrated product like this can leave an investor vulnerable to market shakeups. In addition, investors with exposure to EWY will want to keep a close watch on the ongoing trials steering macroeconomic sentiment. South Korea's performance is heavily influenced by its exporting industries. Therefore, in the event that fears reemerge and investors begin to once again doubt global growth prospects, the nation could be in for a rocky ride. As a short term play, the South Korea ETF is an attractive option for investors looking to gain ample exposure to the new king of the smartphone industry. I encourage those interested in EWY to remain flexible, however. Over the long run, there are a number of hurdles to keep a watch on.RELATED ARTICLES: >>Cramer: Buy the Banks and Chipmakers>>ETF International Exposure Beyond Europe

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CVS In-Line, Pharmacy Services Robust

CVS Caremark’s (CVS) fourth quarter earnings came in at 79 cents per share, a cent above the Zacks Consensus Estimate of 78 cents and higher than 70 cents reported in the year-ago period. Revenues increased 7% year-over-year to $25.8 billion primarily due to robust growth of both segments - Pharmacy Services and Retail Pharmacy.

For the full-year 2009, CVS reported earnings per share of $2.74 compared to $2.44 in 2008. Revenues recorded a 12.9% growth at $98.7 billion.

We are pleased to see the robust performance of the pharmacy services segment during the reported quarter. Revenues increased 14.5% to $13.5 billion. Revenue growth would have been higher at 18.3% but for the recent generic introductions.

Pharmacy network claims processed during the quarter decreased 5.6% year-over-year to 151.4 million due to the termination of two large contracts (effective beginning of 2009) and fewer reporting days during the fourth quarter of 2009, partially offset by new client wins and the addition of RxAmerica claims. However, mail choice claims increased 4.4% to 16.7 million due to inclusion of new clients.

The performance of the retail pharmacy business is also quite commendable. Revenues increased 4.5% to $14.5 billion in the fourth quarter of 2009. Despite industry-wide pricing pressure in the pharmacy business, results over the past several quarters have demonstrated strong sales trends with comparable same store sales growing at solid rates.

During the reported quarter, total same-store sales increased 4.9% over the prior-year period. While pharmacy same-store sales rose 7.3%, front-end same-store sales increased 0.3%. Pharmacy same-store sales were negatively impacted by 290 basis points due to recent generic introductions whereas, the Maintenance Choice program had a positive impact of 270 basis points. Generic dispensing rate increased both in the pharmacy services and retail segment by 220 basis points to 68.9% and 260 basis points to 70.6%, respectively.

The company has not provided guidance for 2010. During the third quarter of 2009, CVS disclosed that its PBM segment had lost contracts worth approximately $4.8 billion for 2010. We have an Underperform rating on the stock.

2010 Q4 Earnings: Morgan Stanley’s Net Income Makes Big Jump on Strong Sales

Morgan Stanley reported earnings early Thursday of $867 million, or $0.43 per share, vs. $460 million, or $0.18 a share for the same year-ago period. Net revenues were $7.8 billion for the quarter compared with $6.8 billion last year.

Analysts had expected earnings of $0.35 a share on sales of $7.35 billion.

The brokerage firm’s stock was trading up 3.6% on above-average volume in early afternoon trading Thursday to $28.75.

"Morgan Stanley delivered improved performance across most of our businesses during the fourth quarter, and the strength of our premier client franchise was evidenced by participation in virtually every major transaction that helped raise capital for governments and leading corporations across the globe,” said President and CEO James P. Gorman, in a press release.

Retail Brokerage Results

Morgan Stanley said its global wealth-management unit had net inflows – or net new client assets – in the fourth quarter of 2010 of $14.1 billion vs. outflows of $6.8 billion in the same year-ago period. Inflows in the third quarter of 2010 were $5 billion.

“In global wealth management, the strong performance we delivered in the fourth quarter – and the strong net new asset growth we achieved during 2010 - are the clearest signs yet of the important progress we have made in integrating Morgan Stanley Smith Barney,” said Gorman in the statement.

MSSB now includes 18,043 financial advisors, down 1% from 18, 135 a year ago and off slightly from 18,119 in the third quarter of 2010.

Average revenue (or gross production) per advisor now stands at $742,000, an increase of 7% from $692,000 last year and 6% from $686,000 in the third quarter.

Sales for the unit, which includes investment banking and asset-management operations, rose 8% over last year and 7% over the prior quarter to $3.35 billion. Excluding interest, revenues for global-wealth operations were $3.01 billion.

Total assets for wealth management are $1.67 trillion as of the fourth quarter of 2010, or about $92.5 million per financial advisor, up from about $86 million per advisor a year ago and $88.5 million in the third quarter of 2010.

“Retail firms of all stripes have a renewed sense of optimism and confidence and are scrambling to boost both the numbers and quality of their salesforces,” said executive search consultant Mark Elzweig (left) in a statement.

Still, “The Morgan Stanley Smith Barney combination has been far from seamless,” explained Elzweig. “Morale on the Smith Barney side of the house is still an issue."

(On Jan. 14, Charlie Johnston, the co-president of MSSB and former head of Smith Barney said he would retire at year-end. Greg Fleming, another Merrill Lynch veteran like Gorman, has been tapped as the new head of global wealth management.) 

Net income applicable to Morgan Stanley in the fourth quarter was $166 billion vs. $29 billion a year and $144 billion in the third quarter of 2010. (MSSB is 49% owned by Citigroup.)

The unit’s pre-tax margin rose to 12% from 7% last year and 9% in the prior quarter, as compensation expenses and benefits as a percent of revenue dropped to 59% from 63% last year and 62% in the third quarter.  

Read AdvisorOne's 2010 Q4 earnings calendar for the financial sector for release dates and links to earnings stories.

Congress = Uncertainty Inc.

NEW YORK (CNNMoney) -- House Republicans say the two-month payroll tax cut extension passed overwhelmingly by the Senate would inject uncertainty into the economy.

"A two-month extension creates uncertainty and will cause problems for people who are trying to create jobs in the private sector," House Speaker John Boehner said Monday.

But no matter how lawmakers resolve the impasse, Congress has already injected plenty of confusion into the lives of ordinary Americans and businesses.

For starters, Congress' inability to move coherently on the payroll tax cut "reinforces the very deep feeling of uncertainty people have that Congress can't even do the simple stuff," said Clint Stretch, managing principal of federal tax policy at Deloitte Tax.

Payroll tax: What a mess

And while the payroll tax cut, which would affect 160 million people, is garnering all the attention, dozens of other soon-to-expire tax breaks have thus far been largely ignored by Congress.

One of them allows businesses to accelerate their depreciation on equipment purchases.

That tax break can be a big help to cash-strapped small businesses: It lets them more quickly write off their investments and reduce their tax bills, Stretch said.

Max Baucus, the lead senator on tax policy, said in a statement over the weekend that his Finance Committee will "keep fighting" to extend the other tax cuts in January.

The goal, he said, is to act early in the year to maximize the tax break extensions' effect and provide certainty.

Well, that may work. But in some respects, it may be a little late.

Peter Boockvar, chief market strategist with Miller Taback & Co., told CNNMoney that recent signs of strength in the manufacturing sector, including an uptick in new orders for durable goods, may have stemmed from businesses rushing to take advantage of the so-called bonus depreciation before it expires.

Payroll tax cut: What's at stake

That could lead to less business spending than otherwise would be the case in the first quarter of next year.

And even if companies remain confident that some of the staple business tax breaks -- such as the research and development credit -- will be extended eventually, they may not be able to benefit quickly, Stretch said.

Why? Because if a company has to file a quarterly financial statement before a given tax break is extended, it won't be able to reflect the value of that break on the statement.

--CNNMoney's Ben Rooney contributed to this report. 

Cadence Pharmaceuticals: Encouraging Formulary Acceptance for Ofirmev

Overview and Stock Opinion

I continue to recommend purchase of Cadence (CADX) based on trends seen in the 1Q, 2011 period. The details of my recommendation are outlined in my report of March 13, 2011.

I believe that Ofirmev meets a major unmet need for an alternative to narcotics and NSAIDs in the intravenous analgesic market. There has been very little innovation in this area and hospitals are under intense pressure to reduce narcotics use without sacrificing pain relief.

The company just reported 1Q, 2011 results in which sales of Ofirmev were $350,000 based on 34,000 doses sold. The company is now 15 weeks into the launch and at this point, investors are focusing on formulary acceptance to gauge potential success. More meaningful sales should begin in 3Q and 4Q of 2011.

I do not have access to all of the Street estimates for Ofirmev sales and in the numbers I cite below there is some chance that the numbers may not accurately represent the range. However, my best judgment is that they are reasonably reflective of what investors are looking for.

• Street expectations for 2Q, 2011 sales of Ofirmev range from $1.5 million to $2.5 million. This is probably a reasonable expectation in my opinion, but the numbers aren't that meaningful.
• The full year numbers for 2011 will be more meaningful. I am looking for sales of $25 million. Street estimates range from $13 million to $35 million.
• Expectations for 2012 are $110 to $142 million. I am at $125 million.
• Peak sales estimates range from $400 to $500 million. I think there is a case to be made that this is too low.

Formulary Acceptance Continues to Be Excellent

A new paradigm that has emerged in biotechnology investing over the last few years has been slow formulary acceptance and resultant disappointment in introductory sales. The recent experience with Cumberland's (CPIX) Caldolor, Savient's (SVNT) Krystexxa, and NeurogesX's (NGSX) Qutenza are examples.

Cadence stands apart with the rapid formulary acceptance experienced by Ofirmev. As of April 30, 2011, the company in just 15 weeks of marketing has obtained formulary acceptance at 675 hospitals representing over 30% of the targeted market opportunity. This has caused the company to increase guidance on formulary acceptance from 800 to 1200 hospitals by the end of the year. This would represent 50% of the total US intravenous analgesic market opportunity for Ofirmev.

It takes about six to eight weeks to take place from the time Ofirmev is placed on formulary until physicians begin to use it. This is the due to working out logistics to supply the product to the hospital at places where it is needed.

In 75% of the 675 formularies now offering Ofirmev, it has been added on an unrestricted or minimally restricted basis. Management reported that just under 600 hospitals are actually stocking the product. The company's success rate for acceptance after the first presentation is about 90%. There are several hundred meetings scheduled in the immediate future.

CEO Ted Schroeder stated that in past product launches with which he has been involved, he would have been happy to have had 675 meetings scheduled at this point in the launch. He is very encouraged by already being in 675 formularies.

Comparing Ofirmev to Launch of Caldolor

Caldolor is an injectable formulation of the NSAID ibuprofen that was approved in June of 2009 and has been on the market for about 18 months. It is indicated for the same patient audience as Ofirmev. As an NSAID, it has a black box warning for cardiovascular and gastrointestinal side effects that is carried by all members of this class of drugs.

Caldolor has struggled mightily to find a foothold in the market and has had difficulty in gaining formulary acceptance. It was on 300 formularies at the end of 3Q, 2010, 375 at 4Q, 2010 and 400 at 1Q, 2011. Sales are annualizing at somewhere between $0.5 and $1.0 million per year.

This brings home how striking the rate of formulary acceptance has been for Ofirmev.

Bringing on Second Manufacturing Facility

The FDA approved a supplemental NDA in March 2011 for a second manufacturing facility in Anagni Italy. This is the plant that produces intravenous acetaminophen for Bristol-Myers in Europe. Having a second manufacturing facility is important for adding capacity and geographic diversity. Reliance on one manufacturing facility carries significant risk from natural or manmade disasters. Cadence's first facility that is owned by Baxter is located in Cleveland, Mississippi. Imagine if the tornados that just ravaged the south had destroyed this plant. Having backup is important.

The capacity of the Baxter manufacturing facility is 15 million units per year which translates into end sales of $158 million. The specific capacity of Anagni was not stated other than to say that with Baxter and Anagni, Cadence now has far more capacity than will be needed in the next couple of years,

Not Yet Exercising Option to Acquire Incline Therapeutics

Cadence elected not to exercise its just expired first option to acquire Incline Therapeutics for up to $135 million. Management stated that it wanted to focus on the Ofirmev launch. Cadence continues to be very interested in Incline and expects that company to file a sNDA for its Ionsys fentanyl transdermal system in late 2012 or early 2013. Cadence expressed continued interest in acquiring Incline at a price of up to $228 million during the second option period which extends until 30 days after Incline files an IPO or December 2013.

Financials

Cadence reported a cash position of $109 million at 1Q, 2011. I am estimating a cash burn rate of $20.3 million in 2Q, 2011, $17.1 million in 3Q, 2011 and $14.9 million in 4Q, 2011. This would result in a year end cash position of $57 million. My projections indicate that the company may be close to positive cash flow for full year 2012. The company has adequate cash to take the company into positive cash flow by my projections without an equity raise.

Terumo Alliance

Cadence received a $5.3 million milestone payment for Terumo in April for rights to commercialize intravenous acetaminophen in Japan.

Disclosure: I am long CADX.

Cairo Clashes Kill One, Injure Hundreds

Clashes in Cairo's Tahir Square Saturday between Egyptian riot police and protesters killed one person and injured hundreds Saturday.

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The violence comes less than 10 days before Egypt is set to begin parliamentary elections and underscores tension between the country's transitional military rulers and a public increasingly angry over the speed of reform since the ouster of longtime leader Hosni Mubarak in February.

Get alerts before Link and Cramer make every trade

The violence began when riot police used tear gas and rubber bullets to dismantle a tent camp set up to commemorate the bloody uprising that forced out Mubarak. The police attacked about 200 protesters who had camped overnight in the square, the Associated Press reported. Other protesters, alerted via Twitter, joined in to defend against the police, and clashes spread into the streets surrounding Tahir Square, the AP added. Health Ministry official Mohammed el-Sherbeni said a 23-year-old protester died from a gunshot and that at least 676 people were injured, the news agency added.Protesters surrounded an armored police truck and set it on fire and after dark, thousands of protesters re-entered the square and set tires on fire, the AP said.

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Pfizer Acquires Excaliard, an Isis Spinout With Drug to Fight Excessive Scarring

Pfizer (NYSE: PFE  ) is making a new bet on a new drug to fight excessive scarring, by acquiring a former skunkworks project from Isis Pharmaceuticals (Nasdaq: ISIS  ) .

New York-based Pfizer said today it has reached an agreement to acquire Carlsbad, CA-based Excaliard Pharmaceuticals, a spinoff from Isis. Terms of the deal aren't being disclosed, but Isis said today it is getting $4.4 million upfront, and as much as $14 million over time for its equity stake, plus further milestones and royalty payments. Excaliard was founded in 2006 with technology from Isis, and the company received a $15.5 million Series A investment the following year from Alta Partners, ProQuest Investments, and RiverVest Ventures.

Excaliard was started to use Isis' gene-silencing technology, known as antisense, to curb the activity of certain genes implicated in excessive skin scarring. As I described in a feature story in these pages two years ago, Excaliard's hope is to make scars less visible and bumpy, like those from the 1 million Caesarian section births performed each year, knee surgeries, and reconstructive plastic surgeries. It could also be used for some rarer dermatology conditions like hypertrophic scars that are red, raised, itchy and swollen, or keloids, that are large and raised above the skin like a benign tumor.

If Excaliard can demonstrate this approach works in clinical trials, it could have a wide-open market opportunity, since there are no other FDA approved drugs that it can consider direct competitors. The company said in a statement that it has completed three mid-stage clinical trials, although it didn't describe the results.

"The acquisition of Excaliard is part of our corporate research and development strategy to actively complement our robust internal project pipeline with innovative and differentiated drugs from biotech partners," said Mikael Dolsten, Pfizer's president of worldwide R&D, in a statement.

More from Xconomy.com:

• Excaliard, an Isis Spinoff With Anti-Scarring Drug, Marches Ahead in Clinical Trials
• Genzyme Places Big Bet on Antisense RNA With Isis Deal
• Isis, Alnylam to Collaborate on Single-Stranded RNA Drugs; Deal Could Add Up to $31 Million to Isis� Coffers

What Will the Markets Do Today?

Yesterday, two of the major indices closed the day in the green, with the Dow ending the day virtually flat.

Index	Gain / Loss	Gain / Loss %	Ending Value
Dow Jones Industrial Average (INDEX: ^DJI )	-2.72	-0.02%	12,415.7
Nasdaq (INDEX: ^IXIC )	+21.50	+0.81%	2,669.86
S&P 500	+3.76	+0.29%	1,281.06

Surprisingly enough, though the Nasdaq was the most dominant index yesterday, the real story was financials. Bank of America (NYSE: BAC  ) was tops on the Dow with its 8.6% surge to greatness. This was largely fueled by the rumors of a refinancing plan for American homeowners. The White House later refuted the rumors, though, so financial stocks are likely to lose some steam today.

The market certainly showed some resilience yesterday after it clawed back the early morning loses. Will today be the same? Well, that largely depends on the quality of news released. Unemployment figures are due out early today. The market is expecting the unemployment level to come in at 8.7%, up from the prior 8.6%. This will come in the form of two major reports -- one from the Bureau of Labor Statistics, and one from the U.S. Department of Labor.

Also keep your eyes on the hourly earnings and average work-week figures. These are key measures for gauging industrial production and personal income.

Specifics to watch
The U.S. dollar made big gains against the euro, so look today to see whether it can hang on to the gains.

Sirius XM (Nasdaq: SIRI  ) made huge waves yesterday on the news that it added 540,000 subscribers in the fourth quarter of 2011. That brings its year-end total user base to 21.9 million. The company also reaffirmed its 2012 outlook, and adjusted earnings are expected to grow by 20%. This is all great news, but can the stock hang onto the 11.5% gain it rang up by market close? Only time will tell, but after a big push like that the stock may lose some steam today.

Look for a lot of activity in Direxion Daily Financials Bull 3X leveraged ETF (AMEX: FAS  ) The ETF picked up big gains yesterday, rising 3.6%, but the rumor-squashing by the White House could deflate its sails a bit. Leveraged ETFs are always a dicey bet and are best played over the short term. Investors holding this today should remember to be diligent and monitor the holding closely.

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Growing Trade Deficit Quashing Recovery- Again!

The November data, just reported Friday morning by the Commerce Department, shows a rising overall trade deficit ($47.8 in November up from $43.3 in October). This worsening trade picture is spearheaded by declining net exports to China ($293.0 billion for the 12 months ending in November) as shown in the graph below:

In the summer of 2010 (the so-called "summer of recovery"), President Obama's massive stimulus would have produced an economic recovery, but it leaked abroad as growing trade deficits due to the adoption by many U.S. trading partners of China's mercantilist currency-manipulation strategy, as shown in the chart below:

Well it's deja vu all over again. The very latest job claims numbers show that the signs of recovery in unemployment from the fourth quarter 2011 are being quashed again. Since Obama took office in January 2009, the U.S. has lost 800,000 manufacturing jobs on top of the 1,200,000 that his predecessor lost during 2008. Balancing trade would create about 5 million American manufacturing jobs (assuming about $100,000 worth of product per worker). It would also create opportunities for providing services to the newly employed manufacturing workers.

The Obama administration could still balance trade and revive the American economy. All it would need to do is invoke the WTO rule, last invoked by the United States in 1971 when President Nixon applied an across-the-board 10% tariff upon imports. Article XII of the WTO agreement gives countries that are experiencing chronic trade deficits the right to impose tariffs (such as a Scaled Tariff) to compel balanced trade.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Gold and Silver Manias Updated

A couple of weeks ago I had two posts (here and here) outlining the mania in precious metals. Then starting early Monday of this week silver started to blow up. As I mentioned in the second post, I got some push back from some commenters on Seeking Alpha who essentially were saying that the fundamental argument of debt and money printing meant that precious metals could not go down.

Even if I was incorrectly interpreting those comments we have all read commentaries that have said precious metals can't go down. My reply to this is and always has been that anything can go down in price at any time for no apparent reason. That silver started to drop so quickly after my comments is just a coincidence as I can assure you I had no idea when it would correct and now that it is correcting I have no idea how long this will last.

What I try to understand is when manias are occurring and how they might impact client portfolios. Those two posts, among other things, reminded any clients who read them that occasionally there are distortions in the market like the extreme lift up and now a decline that seems to be pretty big. We have increased volatility in our exposure to materials and energy so for example we were down a hair more than the SPX yesterday and I would expect that with our current exposure anytime energy, materials and related foreign markets fare worse than the SPX so too will our portfolio.

As I said yesterday in an interview about the decline in silver "a long term strategy that unravels based on one week's trading was never a long term strategy to begin with."

I would also repeat something else I always say during these sorts of things; these type of events have come along before and are guaranteed to come along again in the future. The key for most types of market participants is to not learn that you had too much exposure to something that is going down a lot after it has declined - such that you panic out at a low.

Whitney Tilson Explains General Growth, Iridium and Berkshire Holdings

Recently, Whitney Tilson and Glenn Tongue's hedge fund T2 Partners gave a presentation at the Boys and Girls Harbor Investment Conference that took place on February 3rd, 2010. Their presentation included a look at the macro situation and three stock picks: Berkshire Hathaway (BRK.A), General Growth Properties (GGWPQ.PK), and Iridium (IRDM). When we covered T2's investor letter, we saw T2 they had large long positions in all three names.

Embedded below is T2's recent presentation on all three stocks:




You can download the .pdf here.


Additionally, last week we posted Whitney Tilson & T2 Partners' analysis of Berkshire Hathaway (BRK.A / BRK.B). Below you will find their revised slide-deck:




You can download the Berkshire presentation via .pdf here.

In a separate post this morning we'll also be covering Bill Ackman & Pershing Square's presentation on Kraft (KFT) from the same investment event, so stay tuned.

Original article

The Unappreciated Awesomeness at Cooper Tire & Rubber

It takes money to make money. Most investors know that, but with business media so focused on the "how much," very few investors bother to ask, "How fast?"

When judging a company's prospects, how quickly it turns cash outflows into cash inflows can be just as important as how much profit it's booking in the accounting fantasy world we call "earnings." This is one of the first metrics I check when I'm hunting for the market's best stocks. Today, we'll see how it applies to Cooper Tire & Rubber (NYSE: CTB  ) .

Let's break this down
In this series, we measure how swiftly a company turns cash into goods or services and back into cash. We'll use a quick, relatively foolproof tool known as the cash conversion cycle, or CCC for short.

Why does the CCC matter? The less time it takes a firm to convert outgoing cash into incoming cash, the more powerful and flexible its profit engine is. The less money tied up in inventory and accounts receivable, the more available to grow the company, pay investors, or both.

To calculate the cash conversion cycle, add days inventory outstanding to days sales outstanding, then subtract days payable outstanding. Like golf, the lower your score here, the better. The CCC figure for Cooper Tire & Rubber for the trailing 12 months is 46.5.

For younger, fast-growth companies, the CCC can give you valuable insight into the sustainability of that growth. A company that's taking longer to make cash may need to tap financing to keep its momentum. For older, mature companies, the CCC can tell you how well the company is managed. Firms that begin to lose control of the CCC may be losing their clout with their suppliers (who might be demanding stricter payment terms) and customers (who might be demanding more generous terms). This can sometimes be an important signal of future distress -- one most investors are likely to miss.

In this series, I'm most interested in comparing a company's CCC to its prior performance. Here's where I believe all investors need to become trend-watchers. Sure, there may be legitimate reasons for an increase in the CCC, but all things being equal, I want to see this number stay steady or move downward over time.

Source: S&P Capital IQ. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.

Because of the seasonality in some businesses, the CCC for the TTM period may not be strictly comparable to the fiscal-year periods shown in the chart. Even the steadiest-looking businesses on an annual basis will experience some quarterly fluctuations in the CCC. To get an understanding of the usual ebb and flow at Cooper Tire & Rubber, consult the quarterly-period chart below.

Source: S&P Capital IQ. Dollar amounts in millions. FQ = fiscal quarter.

On a 12-month basis, the trend at Cooper Tire & Rubber looks very good. At 46.5 days, it is 8.1 days better than the five-year average of 54.6 days. The biggest contributor to that improvement was DSO, which improved 5.6 days compared to the five-year average. That was partially offset by a 1.8-day increase in DPO.

Considering the numbers on a quarterly basis, the CCC trend at Cooper Tire & Rubber looks good. At 51.8 days, it is little changed from the average of the past eight quarters. With both 12-month and quarterly CCC running better than average, Cooper Tire & Rubber gets high marks in this cash-conversion checkup.

Though the CCC can take a little work to calculate, it's definitely worth watching every quarter. You'll be better informed about potential problems, and you'll improve your odds of finding the underappreciated home run stocks that provide the market's best returns.

• Add Cooper Tire & Rubber to My Watchlist.

Stock Market Story: Sept. 28

Stocks finished sharply lower Wednesday, slammed by heavy selling into the closing bell as investor optimism about the progress of debt discussions in Europe faded.

The Dow Jones Industrial Average finished down 180 points, or 1.6%, at 11,011. The blue-chip index dipped as low as 10,997 after running as high as 11,317 earlier. The S&P 500 lost 24 points, or 2.1%, at close at 1151 while the Nasdaq dropped 55 points, or 2.2%, to settle at 2492.Signs of commitment from Europe's leaders to stem the eurozone debt crisis helped stoke a three-day rally in stocks after major U.S. equity indices fell more than 6% overall last week, the biggest decline since October 2008 when the markets were in the first fits of the financial crisis.Specifically, comments from European Commission President Jose Manuel Barroso on Wednesday urging European leaders to do whatever it takes to protect the eurozone propped up hopes for a unified plan from the region.Also, Finland's parliament approved an expansion of the European Financial Stability Facility, a day after Slovenia gave its okay. So far, 10 out of 17 members of the eurozone have agreed to proposed changes to the rescue fund. Germany is scheduled to vote on Thursday.No significant developments came out of Europe Wednesday afternoon, giving investors added opportunity to step back and assess where Europe stands on its debt troubles. "The market has been rocking and rolling, and very sharp rallies have not followed through," says Ralph Fogel, head of investment strategy at Fogel Neale Partners. Fogel considers the market to be on "life support." "It will be a while before it can walk a little bit then run up the stairs," he continued. Once the 20-day moving average crosses the above the 50-day moving average for the S&P 500, then the market will be in better shape, Fogel added.Contributing to uncertainty on Wednesday was another sign of weakness in the U.S. economy. The U.S. Census Bureau said durable goods orders dipped 0.1% in August, missing expectations for an uptick of 0.2%. Orders, excluding transportation, also fell by 0.1%. August's declines compare to growth of 4.1% and 0.7%, respectively, in July. European markets finished lower with the FTSE in London down 1.4%, and the DAX in Frankfurt was off by 0.9%. Overnight, in Asia, the Hong Kong's Hang Seng lost 0.7%, while Japan's Nikkei added 0.07%.Market breadth was tipped to the negative, with about 80% of stocks lost ground and 20% rose. Some 4.3 billion shares traded on the New York Stock Exchange and 1.9 billion traded on the Nasdaq.The basic materials sector put in the weakest performance, with Alcoa(AA) and DuPont(DD) among the Dow's biggest laggards. Bank of America(BAC), losing 4.9%, sunk to the bottom of the Dow.

In corporate news, shares of Amazon.com(AMZN) gained 2.4% to $229.50 on the company's unveiling of its new tablet device, the Kindle Fire. Priced at $199, the Fire, which has a 7-inch screen and is powered by Android, is Amazon's response to Apple's(AAPL) iPad. The company also revealed new versions of its Kindle e-reader, including the Kindle Touch, which will cost $99.

Electronics manufacturing services company Jabil Circuit(JBL) reported better-than-expected fourth-quarter earnings and issued a bullish outlook for its first quarter late Tuesday. The stock gained 8.4% to $18.84.Paychex(PAYX), a human resources and benefits outsourcing company, inched up 0.9% to $26.92 after it topped analysts' estimates by 3 cents a share with first-quarter earnings of 41 cents a share. The Energy Information Administration said crude oil inventories rose by 1.9 million barrels in the week ended Sept. 23. Analysts had expected supplies to remain unchanged, according to a Platts poll of analysts. Late Tuesday, the American Petroleum Institute said crude supplies rose by 568,000 barrels last week.The November crude oil contract shed $3.23 to trade at $84.45 a barrel, and gold for December delivery lost $34.40 to trade at $1,618.10 an ounce. The dollar was gaining against a basket of currencies, with the dollar index up 0.181%. The benchmark 10-year Treasury was declining 8/32, lifting the yield to 1.999%. . >To order reprints of this article, click here: Reprints

Intel: Needham Cuts To Hold On Inventory Questions

Several analysts with bullish takes on Intel (INTC) rushed to the company’s defense this morning after the chip maker announced Q4 revenue will probably fall a billion short of prior expectations.

But one downgrade has emerged this afternoon, from Needham & Co.’s Quinn Bolton, who cut his rating to Hold from Buy, writing that the shares are now fairly valued given some “near-term risks” raised by the shortfall.

Bolton asks whether inventory buildup over “the last several quarters” were responsible for boosting revenue growth at Intel, and if so, by how much.

He also wonders how long PC makers and the rest of the distribution chain will be cutting chip inventory.

While Bolton can’t answer those questions, he concludes “We believe these questions will be answered next year by the slope of Intel�s revenue recovery.”

Bolton cut his Q4 estimate to $13.7 billion and 59 cents EPS from a prior $14.6 billion and 69 cents. For 2012, he now sees $56 billion in revenue and $2.40 per share in profit, down from a prior $58 billion and $2.60 per share.

Intel shares continue to trade in about the same range they’ve marked all day, currently down $1.19, or 4.8%, at $23.82.

CVS Caremark Should Acquire Walgreen

By Matthew Coffina

Walgreen (WAG) needs a new strategic direction. Its services are becoming increasingly commodified, as its convenience advantage is eroded by cheap prescriptions offered through the mail and many other retailers. On its current trajectory, we think the company is likely to be on the losing end of a major change in payer/provider dynamics. If the merger of Express scripts (ESRX) and Medco (MHS) receives regulatory approval, both Walgreen and CVS Caremark (CVS) should look for a countermove. A combination of the two companies could be the ideal solution.

A fundamental shift is occurring in the relationship between health-care payers and providers in the United States, thanks to a combination of health-care reform, the prolonged economic slump, and an increasing awareness of the unsustainability of health-care spending growth. We see two paths.

On the one hand, traditionally adversarial relationships between payers and providers are becoming ever more contentious, leading to public reimbursement disputes and providers exiting or being kicked out of provider networks. The most prominent example is the contract termination between Express scripts and Walgreen, but smaller-scale disputes have boiled to the surface between managed-care organizations and hospitals. With narrower networks, payers gain bargaining leverage and can direct patients away from the highest-cost providers.

On the other hand, we also see increasing cooperation between some payers and providers. Rather than trying to control costs through more aggressive negotiations--a tactic that generally has failed for the past 50 years--some payers and providers are partnering with each other to keep patients healthier and to encourage cost-effective health-care consumption decisions. Examples include the CVS-Caremark merger, recent acquisitions of provider groups by managed-care organizations, and the emerging accountable care organization model.

It's an open question as to which approach has the better chance of actually slowing health-care spending growth. Employers, governments, and individuals seem increasingly willing to accept restricted access to providers in exchange for lower costs. Combined with consolidation among payers, this should boost payer bargaining power, perhaps allowing them to squeeze providers on reimbursements. But providers are also consolidating, improving their own bargaining position. Over the long run, vertically integrated providers, including CVS Caremark and ACOs, threaten to disintermediate third-party payers. In a best-case scenario (for consumers), this could greatly reduce administrative costs across the health-care system and result in improved health-care outcomes.

Either way, CVS Caremark and Walgreen would be better off together than apart. If the relationship between payers and providers remains adversarial, the combined company would have much greater bargaining power against third-party pharmacy benefit managers. If enhanced cooperation between payers and providers turns out to be the best way to control costs, CVS Caremark-Walgreen could provide a highly differentiated offering to both PBM and retail clients.

We see both firms as motivated to do a deal. While CVS Caremark stands to gain modestly from the Walgreen-Express scripts dispute in the short run, the same long-term threats facing Walgreen are also concerning for CVS. The Express scripts-Medco merger is particularly dangerous, as that would result in a PBM around 50% larger than Caremark. With its greater bargaining leverage and stronger competitive position, Express scripts-Medco could steal market share on the PBM side and pressure margins on the retail side.

Despite Its Potential, CVS Caremark Has Much to Prove
We think CVS Caremark holds tremendous potential. It is unique among PBMs in its ability to seamlessly integrate mail-order and retail prescription dispensing. Caremark is also the only PBM that can offer face-to-face interactions between patients and pharmacists, which may improve patient engagement and therapy adherence. In the future, the company will probably combine primary care and disease management with pharmacy services through MinuteClinic, offering a superior platform for helping clients keep members healthy and out of the hospital.

However, CVS Caremark still has much to prove, in our view. PBM margins are set to fall again in 2012, marking the fourth consecutive year of declining profitability. Since 2008 (the first full year following the merger of CVS and Caremark) the Caremark PBM has massively underperformed its independent peers in both EBITDA per adjusted prescription and overall operating profit dollars.

We continue to believe that if clients really saw value in the integrated retail PBM model, CVS Caremark would be able to charge a premium for its services, rather than having to sacrifice margin to maintain and win market share. However, management is making the case that only now, with a few years of experience, is it beginning to gather the quantitative evidence to back up its claims about improved health-care cost-containment. It projects PBM operating profit dollars to increase 11%-15% in 2012, which is a major improvement on the declines of the past two years but is still only about in line with peers.

Acquiring Walgreen would allow CVS Caremark to take its integrated model to the next level. Currently, around 28% of CVS' retail prescription drug sales come from Caremark PBM members, while around 19% of PBM claims are fulfilled by CVS retail stores. These percentages have steadily increased, but CVS is still far from having the capacity to fill a majority of its PBM members' prescriptions. Adding Walgreen's stores would greatly reduce CVS Caremark's reliance on the third-party pharmacy network and increase engagement with the majority of members who aren't CVS retail customers.

CVS Caremark-Walgreen Would Be Better Positioned to Defend Retail Margins
While CVS Caremark fills more prescriptions than any other company, Walgreen is larger when considering just the retail stores. Walgreen has more locations (7,800 drugstores compared with 7,300 for CVS) and larger stores and generates slightly higher sales per square foot.

But despite $72 billion of sales in fiscal 2011 compared with around $59 billion for CVS' retail segment, Walgreen is the less profitable retailer. Walgreen's operating margin fell from 5.9% in 2007 to 5.1% in 2009, before improving to 5.4% in the most recent year. While the weak economy and reimbursement pressure have contributed to this result, CVS was affected by the same headwinds, yet managed to steadily improve its retail margin during this period.

We attribute CVS' superior retail profitability to better execution. For example, the company's earlier shift to a customer-centric store format may have contributed to lower administrative costs, while its ExtraCare rewards program may be enabling more effective promotions. The presence of the PBM may also be resulting in stronger margins through enhanced bargaining power with suppliers and lower customer acquisition costs. It is also possible that CVS Caremark's intrasegment accounting decisions have boosted the appearance of the retail segment at the expense of the PBM.

Retail pharmacies face an ongoing margin headwind from increasing competition and reimbursement pressure. While CVS Caremark and Walgreen are already better positioned than most, the combination of the two companies would create a retail powerhouse that in 2011 would have dispensed around 37% of all prescriptions by revenue. While PBM clients may be willing to exclude one large pharmacy chain from their networks, excluding both CVS and Walgreen would be a tough sell. This would shift bargaining power in CVS Caremark-Walgreen's favor, allowing the combined retailer to extract preferential reimbursements from payers. Combined with CVS' already superior margins, we see the potential for significant synergies from a deal. Just bringing Walgreen's margins closer to CVS' level could generate well over $1 billion in additional operating income. While we currently rate Walgreen as having a narrow economic moat, a merger with CVS would widen that moat.

The New iPad Is Insufficient As A Real E-Reader

First, from Walt Mossberg's (Wall Street Journal) hands-on review:

iPad could be described as a personal display through which you see and manipulate text, graphics, photos and videos often delivered via the Internet. So, how has the company chosen to improve its wildly popular tablet? By making that display dramatically better and making the delivery of content dramatically faster. ... These upgrades are massive. Using the new display is like getting a new eyeglasses prescription — you suddenly realize what you thought looked sharp before wasn't nearly as sharp as it could be.

This makes it seem as though the new iPad is designed and built for an audience of one, me. I use my iPad regularly and intensively. And daily as an e-Reader. My eyesight, while not horrible, is not very good, so I appreciate all the innovations and upgrades that Apple (AAPL) keeps providing... Miraculously, at the same price.

So, yes, I await my new iPad with outstretched hands and welcoming eyes. You see, I have taken the measure of my iPad 1, and found it wanting. Specifically, its processor and 256Mb of RAM, and, for an app, iBooks. To wit,

• iOS 5.0 (and its successive upgrades, 5.01 and 5.1) tax the processor and RAM to the point where apps repeatedly time out or crash; no problems prior to iOS 5.0
• iBooks 1.5 (and 2.0 and 2.1) is neither designed nor built to accommodate a library the size of mine (6100+ ePub files, ~10Gb)

What I have found, and confirmed independently, is that the larger the library, the more frequent the timeouts, low memory issues (check your diagnostics and usage page), and repeated crashes of iBooks. This all means that its functionality - nay, its usability - as eReader is rendered nil.

I would not ordinarily complain or moan about such items. Technology - heck, life - is about discovering limitations, and expanding beyond them, whether by design or effort. No, what bothers and troubles me is that Apple - which by all measures designed a gorgeous interface for iBooks but stinted on its functionality (though, I admit, Apple continually improves iBooks over successive generations) - hides the fact that iBooks cannot handle a library larger than x size. (Well, I have seen no ad nor fine print that states this shortcoming.) Such an item would be good to know; certainly in advance of a device pushed beyond its limits. And, for the record, my 10Gb of ePubs take up only 15% of the 64Gb hard drive; why should such a small usage percentage cause such fits?

And, to make matters worse, Apple's engineers hide behind the scrim of minor app tweaks (stop syncing, etc) that have nothing to do with the hardware that lacks necessary oomph, and an app designed for beauty and elegance but not functionality. Apple's engineers are not stupid - these problems have been known since day 1 (do a Google search) - but neither are Apple's customers (stupid). Why must we waste our time on minor settings tweaks all the way up to and through complete restores... when the company knows the problem and its causes? (btw, the iPad 2 has 512Mb of RAM, the new iPad purportedly offers 1Gb of RAM.)

Which all means I am forced to upgrade. I would buy the new iPad anyway; I loved my iPad 1, and am certain to propose marriage to my new iPad. Nonetheless, I sure would appreciate more honesty and transparency from Apple.

PIMCO Sets Low Price for Total Return ETF; El-Erian on QE3

In a filing with the SEC Thursday, Pacific Investment Management Co. announced its new PIMCO Total Return Exchange-Traded Fund will charge 55 basis points, or 0.55%.

PIMCO announced April 20 that it was seeking permission to roll out a similar version of its popular Total Return Retail mutual fund in an exchange-traded fund wrapper.

In related news, PIMCO head Mohamed El-Erian (left) on Thursday put “low odds on a third round of U.S. monetary stimulus unless there is a ‘major further deterioration’ in the U.S. economic outlook,” according to a live blogging question and answer session on Reuters.com

"We would assign a low probability (at) this stage to QE3 given the general recognition that the forward-looking cost-benefit analysis has shifted away from the potential benefits and toward greater costs and risk," El-Erian wrote, according to Reuters. "Therefore, it would take a major further deterioration in the economic outlook, combined with willingness by the Fed to take greater reputational and political risks."

The new ETF was being watched by the industry. "When you first hear of something like this you think, ‘OK, actively managed ETFs have arrived,’” Morningstar ETF Analyst Robert Goldsborough said in an interview with AdvisorOne at the time. “No one can say they still need to be tested as a product class when someone like Bill Gross gets in the game. This is big.”

While Goldsborough noted PIMCO already offers actively managed ETFs—PIMCO Intermediate Municipal Bond Strategy Fund and PIMCO Enhanced Short Maturity Strategy—he expects the new ETF to attract “a tremendous amount of investor interest."

“I don’t think anyone can argue Bill Gross isn't a fantastic investor,” Goldsborough said, adding Gross has been named Manager of the Year and Manager of the Decade by Morningstar. “He has made some contrarian bets against the bond market recently, and you don’t bet against someone like [Gross]. That said, I don’t think the ETF version will differ that dramatically from the mutual fund, but how its managed might, meaning it might trade after the mutual fund.”

Be (Cautiously) Optimistic Going Into Q2

Everybody knows it: Stocks put in another rip-roaring quarter as the closing-bell rang last Friday. The bulls are back and confident as ever, the economy is improving, Europe is solved and politicians are once again holding hands and skipping through flower fields.

Fine, maybe that�s not exactly the state of affairs, but the media sure makes things look real rosy at the moment. Whether or not everything really is as great is a topic for another column, but let�s look at the technical side of the S&P 500, which is a good barometer for the broader trends in U.S. stocks.

The S&P 500 on Friday rose 0.8% to 1,408.47 and closed the first quarter of 2012 up 12%.

It sure was a great start to the year, and historically speaking, this should last for the remainder of the year — and the index should close higher for the year. However, no two times are the same, and this time with central bank liquidity infusions, it is anything but a “normal” recovery.

Stocks rose nicely in the first quarters of 2010 and 2011, but the second quarter brought more volatility and lower prices in both years. Will this year see a repeat? I hesitate to simply look back to a recent year for comparisons, but in this case it might at least — at the margin — make sense to look over the left shoulder, as central bank stimulus of this magnitude has simply never been done before.

From a pure technical perspective, here is where the S&P 500 stands in terms of next support and upside resistance levels:

Click to Enlarge The latest big swing up started on Dec. 19 and measured about 17%. The very strong uptrend since then brings us our first support level at 1,388, which also served as support on March 23 and just a few points higher served as support last week.

The 30-minute chart looking back to late February shows the development of what could become a classic head-and-shoulders formation. A break below the 1,388 level could result in a move to 1,360, which would be the classic target if the head-and-shoulders pattern works out.

The daily chart looking back to December 2011 shows the aforementioned uptrend. Should 1,388 break, the next support to look for would be at 1,375, followed by 1,340. A break of 1,340 could then trigger a move down to the 1,290-1,310 area for next support.

Click to Enlarge In case of a further rally, my next upside targets are 1,424 and 1,440. The latter level was resistance in May 2008 and could act as a magnet if we break 1,420 and any of the aforementioned support levels hold.

In order to trade off the technicals on the charts, it is important to understand the dynamics in play here. Central banks have more ammunition yet, but understand that if stocks turn for a breather (or worse), it will come quickly and won�t leave much — if any — time to get out.

Reducing or at least hedging long positions in stocks here might be something to consider as we slip into the second quarter.

Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter.

Grates – An Critical Facet In Building Magnificent Pools

A swimming pool will always be a welcome treat to everyone, specially during summer time. Apart from injecting an exciting way to unwind and have merriment with family and friends, it as well significantly augments the mood of any area, regardless of whether it be indoors or outdoors.

Although, aside from centering on the visual value, it’s vital that you observe the safety measures in constructing a pool, and such calls for conscientious selection of resources, including the pool grates.

Consider Safety, Utilize Only Goods Of The Finest Quality, Like Grates

One safety measure is the setting up of pool grates that are exclusively planned and manufactured to keep kids safe. They also prevent hair from being entrapped, thereby reducing the likelihood of drowning.

Besides the pool grates, another preventive measure is using a fence round the perimeter of the pool. Often, a non-permanent, detachable fence is the perfect choice. It is most nifty for families with little ones or toddlers, to inhibit them from plunging into the pool when they are alone.

One more crucial and handy feature is an alarm system and CCTV cameras. Position the alarm on entrances as well as door ways entering the swimming pool zone. The same is true with the cameras, so you are able to still observe the swimmers if you happen to be in another location, as in whenever you’re busy cooking in the kitchen.

The Usefulness Of Pool Grates

Pool gratings are of various forms. The most typical are made of metal, stone and granite. The perfect ones are rust-free and those that possess low liquid absorption so they wouldn’t tinge whilst they come in contact with pool water.

Pool grates are so versatile, they could be utilized on pool overflows as well as decks. They also offered in different measurements, motifs and colours in order to go with the motif or design style of the pool zone.

Everyone knows that swimming pools bring in a lot of enjoyment to people of all ages, likewise, it enhances the wonder of the area whereby it’s built. But, you can only be certain that you get the most out of this huge venture if it is totally safe and secure for everybody, particularly the younger ones, including kids and infants.

Jonite is a provider of a wide array of grates made of reinforced natural stone. It offers grating products that boasts of green and sustainable designs. Contact us now to learn more about our solution ideas for residential, construction or industrial projects.. Unique version for reprint here: Grates – An Critical Facet In Building Magnificent Pools.

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To hear debt-weary politicians in the U.S. and Europe tell it, the budget ax is being sharpened, and dramatic cuts in public spending are on the way -- all of which could be bad news for companies involved in projects to build or operate roads, ports and bridges, among other things.

But analysts say that's not quite the case. Indeed, dig deeper into the global to-do list and it looks like, rather than using an ax, political leaders will need to keep reaching for picks and shovels. Just to keep pace with the world's growing population, governments and the private sector will have to spend at least $53 trillion on transportation, telecom, energy and other infrastructure projects by 2030, according to the Organisation for Economic Co-operation and Development, a policy forum whose members include 34 nations. That means spending about what Germany generates in economic activity every year for 18 years, on everything from power grids in Latin America and China to natural gas pipelines in the U.S. For the companies involved in these projects, that spells long-term opportunity, says Michael Avery, who has devoted about a quarter of the $25 billion Ivy Asset Strategy fund he comanages to infrastructure-related stocks. Avery is hardly alone. The number of funds specializing in infrastructure-related plays has doubled since 2008, to 35 -- with investors pouring about $700 million into the group over the past year.

Smart Picks

The following companies are poised to benefit from infrastructure projects around the globe, experts say.

Enbridge (ENB)

The Canadian firm operates gas and oil pipelines in the U.S. and Canada, and should benefit from both oil discoveries in North Dakota and the natural gas boom nationwide, says Gary Anderson, comanager of the Scout International fund. Enbridge has also boosted its dividend for 15 consecutive years.

Hutchison Whampoa (HUWHY)

The Hong Kong conglomerate operates ports in 26 countries, including deep-sea, coastal and river ports in China and stands to benefit as China's western provinces develop. The shares are cheap as well, trading at two-thirds the value of its assets, says Michael Avery, comanager of the Ivy Asset Strategy fund.

Cemig (CIG)

Brazilian utility Companhia Energ tica de Minas Gerais, or Cemig, trades at eight times earnings about half what comparable but slower-growing U.S.-based utilities trade

at, says Forward Global Infrastructure fund manager Aaron Visse. Plus, Brazil's government has promised an upgrade of its power grid.

ABB (ABB)

Executives of the Swiss company, whose power businesses benefit from both urbanization and the shift to more energy efficiency, told analysts they want ABB's profits to grow at twice the rate of global economic growth through 2015. That said, ABB's business is strongly affected by the ups and downs of the global economy, analysts say.

Abertis Infraestructuras (ABE.MC)

The Spanish firm manages toll roads, airports and telecom systems in 15 countries. Executives told analysts last fall they expected the company's profitability to improve in all of its businesses despite the economic downturn. In the interim, it has generated relatively steady cash, and it paid a special 13 percent dividend in 2011. Investors can get the stock, which trades on the Madrid exchange, through many brokers.

While the forecasts for infrastructure spending are not exactly new, the bridge and grid builders have recently become far more attractive investments, thanks to a couple of catalysts: privatization and price. Analysts say many European infrastructure stocks are trading at 15 to 25 percent below year-ago levels because some investors worry about their business prospects amid the latest financial crisis. But investor interest could spike over the next decade, as Europe sells state-owned assets -- a move that often follows sovereign-debt crises, says Bulent Gultekin, an associate finance professor at the University of Pennsylvania's Wharton School who has advised governments on such sales. While the pace of privatization may take a while and be subject to changing political winds, cash-strapped governments faced with the options of increasing taxes, slashing spending or selling public assets may opt to do more of the latter, Gultekin says.

Indeed, Greece is expected to sell stakes in some utilities, ports and rails by 2015, and Spain has talked about selling some of its stakes in airports in Barcelona and Madrid. Over the next 12 to 18 months, Europe could privatize 10 billion euro ($13.3 billion) worth of assets, and potentially five times that over the next four years, says Andrew Maple-Brown, comanager of the $21 million Delaware Macquarie Global Infrastructure fund.

To be sure, these stocks could be volatile if Europe's financial troubles curtail projects or China's slowdown is worse than expected. But fund managers say many of the firms, especially those that operate projects, like Spain's Abertis Infraestructuras, are well-diversified and generate a growing share of their business from emerging markets that aren't facing the same fiscal pressures. Says Joshua Duitz, who runs the Alpine Global Infrastructure fund, "These are the stocks I want to own in general -- but especially through an economic crisis."