Why Investors Dread Yet Another Debt Ceiling Fight

A U.S. debt ceiling debate is once again on Congress' agenda. Congress has about three weeks to pass a budget, and the White House has said that U.S. President Barack Obama will not negotiate over raising the 2013 debt ceiling provisions.

We've seen this script before on debt ceiling deadlines, and with so many other pressing issues. Congress will again kick the can down the road.

Before that, a brewing showdown will again unfold, one with distinct consequences for other forms of legislation and the country.

Republicans will likely display the debt ceiling talks to voice opposition to other parts of the Obama agenda. According to policy experts, 80 GOP members of the House have said they will only support a budget resolution that defunds Obamacare.

With this year's IRS mishaps, the revelations of the National Security Agency spying program, and Congressional approval hovering at near lows, the debt ceiling is creating a cloud of uncertainty that could leave Washington in complete disarray...

U.S. Debt Ceiling: A Game of Chicken

Congress has raised the debt ceiling - which refers to the amount of money the country can borrow - on 78 occasions since 1960, with 49 increases happening under Republican presidents and 29 under Democratic presidents, according to the U.S. Treasury Department.

Hot Insurance Companies To Own For 2014

The United States hit its $16.7 trillion borrowing ceiling in May 2013; however, Treasury Secretary Jack Lew has used a number of tricks to delay the official date that the government is unable to meet its financial obligations.

That date, which now is arbitrary and somewhat dangerous given so, will hit in mid-October to coincide with the looming Congressional showdown.

That showdown, however, is part of a very crowded political calendar that will likely require some maneuvering on both sides.

Even though Lew and President Obama have vowed not to negotiate, the legislative body has several critical votes on the docket. For example, Congress is expected to debate immigration reform at a time when it was expected to be the sole big-ticket item on the fall schedule.

Now that there are other issues, the debt ceiling debate has more ammo for both sides - and this is contributing to a perfect storm for the markets...

What Would Happen in a Government Shutdown?

Many argue that a government shutdown would immediately lead to a U.S. default on its obligations. It would mark the first time in the U.S. government's history that it has not paid its debts.

As a result, it would dramatically raise interest rates, require immediate cuts to government budgets, and sack the value of government bonds owned around the world. In addition, the United States would slash or halt government-issued income streams like Social Security, Medicare reimbursements, and military salaries.

"Operating the government with no borrowing authority, and with only the cash on hand on a given day, would place the United States in an unacceptable position," Jack Lew wrote in a letter to Republican House Speaker John Boehner.

The financial impact is obvious. But additional market factors like Syria and the U.S. Federal Reserve's desire to taper its $85-billion-a-month bond-purchasing program are creating the markets' "perfect storm."

Rising interest rates could lead to catastrophic damage as the United States must service higher interest payments. These payments provide no value to the economy and only act as a drain on production and savings.

Moving forward, the economy will likely remain in a holding pattern as Congress focuses on Syria first and investors await a critical announcement by the Fed on tapering its quantitative easing (QE) bond-buying program come Sept. 18.

For more on how the QE taper could affect markets, check out this chart.

How to Buy Prime Manhattan Real Estate for Less Than $100

Unless you own a home in each of America's 20 biggest cities - or you're an economist - a 12.4% increase in the S&P/Case-Shiller Index doesn't mean much.

You can't make money from a nationwide statistic. Not in real estate...

Cleveland, for example, may have seen a 3.4% increase from July 2012 to July 2013. But that's nothing compared to Los Angeles, where prices jumped 20.8%. Or San Francisco, which posted a 24% year-over-year increase.

Las Vegas prices jumped even higher, up more than 27%.

And then there's New York, where you can make a killing on some prime Manhattan real estate right now...

There's a hassle-free way to do it, too. So you'll never have to worry about tenants, taxes, insurance, maintenance...

You won't need a million-dollar down payment, either.

Thanks to one savvy New York firm, you can start building your own Manhattan real estate empire with less than $100...

You Can Invest in These All-Cash Deals

The recent housing and real estate recovery is a double-edged sword. There are amazingly low rates, but it's much harder to get a loan, especially if you're an average borrower.

The real driver of higher prices, particularly in neighborhoods like Beverly Hills and Manhattan, is all-cash international and institutional buyers.

And Vornado Realty Trust (NYSE: VNO) is one of these big buyers.

The Manhattan-based real estate investment trust (REIT) owns more than 28 million square feet of high-end office, retail, and residential space in its home town. (You can tour its New York properties right here.)

It owns high-rent properties in San Francisco, too, and in Washington, D.C.

But this is not your average REIT...

The Dividend Is Just a Bonus

Most people buy REITs because they come with above-average dividends. And Vornado certainly pays a decent one, at 3.4%.

But this is more than an income play. Way more...

First, this REIT comes with billionaire investor Stephen Roth, Vornado's founder. Thanks to his expertise, Vornado has bested the returns on the S&P 500 by a factor of six to one... since 1990.

Second, in addition to its substantive commercial real estate holdings in prime locations throughout the country, Vornado has equity stakes and minority holdings in many well-known businesses. The company currently has a 6% ownership stake in retailer J.C. Penny (NYSE: JCP), a 33% stake in privately owned retailer Toys R Us, and ownership of the landmark Chicago Merchandise Mart.

And third, Vornado is an equity REIT. So, unlike risky mortgage REITS, it's largely immune to the negative pressures of a rising interest rate environment.

That's one of the reasons why Vornado is so well positioned right now. The firm actually invests directly in prime real estate properties. And the rents from these properties are what Vornado uses to generate its income.

And if you buy Vornado's shares today, it'll be your income, too...

Robert Hsu is one of the world's leading financial analysts. He made his mark on the financial world early, first as a quant analyst for a billion-dollar hedge fund, then as a portfolio manager for Wall Street powerhouse Goldman Sachs. He earned his first million at 29 and then retired at 31.

After five years in retirement, Robert founded the world-class money management firm Absolute Return Capital Advisors LLC to help private investors build their wealth. He currently serves as president and lends his special expertise in income investing to his clients and subscribers.

Robert is a published author and appears regularly on national financial TV and radio shows like Bloomberg and CNBC. He graduated from the University of California-Los Angeles with a degree in economics. Robert and his family divide their time between their homes in Beverly Hills and Taipei.

Dry Bulk Shipping Rebounds... Sort Of, Almost (EGLE, DRYS, FREE)

September is on pace to be a banner month for shipping stocks FreeSeas Inc. (NASDAQ:FREE), DryShips Inc. (NASDAQ:DRYS), and Eagle Bulk Shipping Inc. (NASDAQ:EGLE). They're up 290%, 62%, and 115%, respectively, month-to-date, overcoming an amazingly long dry spell. The question is, why have EGLE, FREE, and DRYS been so strong all of a sudden, and more than that, are these rallies built to last?

The answer to the first question is, because the Baltic Dry Index (of average maritime shipping rates) is on the rise in a major way. The answer to the second question: Yes, and no.

The Baltic Dry Index is the aggregation of daily charter rates being offered by the world's Capesize, Panamax, Supramax, and Handysize goods-carrying oceanic vessels. Oil tankers as well as container ships are specifically excluded from the aggregation, though it's not a stretch to say the charter prices for bulk cargo boats moves in tandem with costs to charter other types of maritime shipping vessels.

More important to investors, the Baltic Dry Index has skyrocketed its way out of a long-term lull to prices that, well, may not mean wild profits for companies like DryShips, FreeSeas, and Eagle Bulk Shipping, but prices that are at least strong enough to keep them in business rather than mothballing entire fleets of these boats. And for investors, that glimmer of hope now and the possibility of a complete turnaround in the near future is compelling enough to turn the heat up on DRYS, EGLE, ad FREE.

Specifically, the Baltic Dry Index (or BDI) is currently at 2127. That's up 88% from August's ending level, and up 200% from the lows we saw over the course of 2012 (which were multi-year lows, by the way). In fact, 2127 is the highest BDI reading we've seen since late 2011. But, the sheer size, speed, and strength of the current surge may well indicate that this long, agonizing drought is over. Ergo, the long, agonizing drought for DryShips, FreeSeas, and Eagle Bulk Shipping is also over.

5 Best Financial Stocks To Watch Right Now

That's not to say these stocks are an immediate but, however.

As firm and strong as the Baltic Dry Index's rise has been, there's nobody who would argue it hasn't been overdone. It's due for some sort of correction, even if just a mild one, in the foreseeable future. For the same reason it's overbought, so too are the industry's most popular stocks. In other words, investors interested in buying these names may want to be patient and let them cool off a bit first.

All of that being said, it should be noted that even this meteoric rise in the BDI's value won't inherently mean these shippers start turning a profit again. It will get them closer to positive earnings, but may not get them all the way there. As such, these are still speculative investments.

There is no "magic number" per se, since each company's operating costs differ. Just for the record though, 2008 was the last "good" year for Eagle Bulk Shipping Inc. (before revenue started to rise while profits started to fall). The Baltic Dry Index was around 900 for the better part of that year. EGLE remained profitable - though just barely - through 2010, when the BDI level averaged something around 2500. Ditto for DryShips Inc. - it can stay alive with a BDI around 2500, but needs something well above that level for comfortable margins. The same goes for FreeSeas Inc. Point being, once the BDI gets above the 2500 level to stay, then these speculative trades become actual investments again.

For more information and perspective likes this - along with trading ideas and market calls - sign up for the free SmallCap network newsletter today.

Why Commodity ETFs Work Better Than You Thought

In a previous article, we reviewed some of the factors that determine the price of a futures contract, including the spot price, borrowing costs (time value of money), storage costs for physical commodities, and any convenience yield ("What Determines Futures Prices?").

Once you understand that futures prices are driven by more than just the spot price, it is possible to remove some of the confusion about securities products that use futures to track the price of important commodities. First, let's review the claim about tracking error in exchange-traded products (ETPs), and then explain why those products function better than many investors realize.

A common tactic for skeptics of ETPs that track commodities like crude oil or natural gas - think of USO or UNG - is to show the change over some period in the spot price of the commodities and compare that change with the return achieved by the ETPs. Inevitably, the tradable products perform "worse," often seemingly dramatically so. This leads frequently to claims that such products are "broken" or not useful - not because the investment thesis in the underlying commodity was wrong, but because the tracking funds did not deliver the returns they were supposed to.

The problem with any spot-to-ETP comparison of this sort is that time series of spot prices does not reflect the real costs to holding a physical commodity. In a sense, the spot market does not exist: the total return for a commodity bought on the spot at time zero will not, at any time one, be exactly that of the change in spot price by time one. To see why, imagine going out and buying some natural gas right now on the spot market. Where are you going to store it? Storage space is not free; in fact, in 2012, there was such a glut of natural gas supply that investors were justifiably troubled by the prospect of gas E&P companies burning off their surplus to resolve the dilemma of insufficient storage and the potential loss of drilling rights if they let la! nd lie dormant. If you decide you've had enough one day, you'll also need to transport your gas to a place where there is someone who wants to buy it, or lower your sale price to reflect the buyer's transport costs. Additionally, the time spent owning any commodity is time that the money used to buy that commodity isn't earning the risk-free rate of return; if the money to purchase was borrowed, the cost of that capital creates an additional headwind.

As we saw in the previous article, the spot-futures parity relationship tells us that the real costs that would be borne by someone who bought the commodity today in the spot market will be reflected in the prices of futures contracts for that commodity. An investor who wants to own that commodity can expect to pay those costs, no matter whether they buy the physical stuff and store it, buy and roll futures contracts, or buy an ETP that buys futures and/or the physical stuff. If the futures are in contango - if costs to ownership increase with time - and if the spot price of the asset does not change very much, then it is even possible for the returns to a commodity investment to be dominated by these non-spot factors the longer the investment is held.

UNG and S&P GSCI� Natural Gas Total Return Index returns, 2008-2013. Source: S&P, Condor Options

The best measure of the returns to owning some commodity, then, will be indexes that track the value of rolling investments in commodity futures. For example, instead of looking at spot prices for natural gas, investors can track something like the S&P GSCI� Natural Gas Index, or buy and roll futures contracts themselves. And if we compare the returns to a tradable ETP like United States Natural Gas (UNG), we find that the exchange traded product tracks the index very well over time.

OptionsProfits can be followed on Twitter at twitter.com/OptionsProfits

Jared can be followed on Twitter at twitter.com/CondorOptions

At the time of publication, Jared Woodard held positions in NG.

Financial crisis caused 5,000 suicides

The crash of 2008 triggered a rise in suicides among men in Europe and North America the following year.

LONDON (CNNMoney) The stresses of recession and unemployment triggered by the global financial crash of 2008 led to a spike in suicides among men in Europe and North America.

New research published in the British Medical Journal showed the impact of the crisis led to nearly 5,000 additional suicides in 2009 compared to the norm. Nearly the entire increase can be attributed to men taking their own lives, according to the survey of data from 54 countries.

Top Biotech Companies To Invest In 2014

In the U.S. and Canada, male suicides jumped by nearly 9% in 2009, while newer members of the European Union, including Poland, Hungary, Lithuania, saw their male suicide rates spike by an average of 13.3%.

The results show suicides generally jumped when unemployment levels surged, particularly among men in countries that had previously enjoyed healthy employment levels.

Across North and South America, the largest spike in suicides was seen among 45 to 64-year old men. In Europe, 15 to 24-year old men were most affected.

And what about women? The data shows there was very little change in suicide levels among women. In Europe, there was no change at all, but countries in the Americas saw an average 2.3% rise in female suicides.

Researchers from universities in Hong Kong, Oxford and Bristol collaborated on the study, the first of its kind to look at international trends.

The results are consistent with previous research that shows economic downturns and rises in unemployment are followed by spikes in suicides.

The recorded suicide numbers may only be the tip of the iceb! erg. The researchers estimate that for every suicide, approximately 30 to 40 people make suicide attempts.

Another research report from 2009 estimates that the Asian financial crisis in 1997-1998 led to over 10,000 extra suicides in Japan, Hong Kong and Korea.

Retailers: Fear Built In, Sector Still Not a Buy, Sterne Agee Says

Pain. That one word just about sums up how investors felt about retailing stocks after second-quarter earnings. Abercrombie & Fitch (ANF)? Down 22% during the past month. Aeropostale (ARO)? Off 30%. Urban Outfitters (URBN)? Down 3.4%.

Bloomberg News

Those big drops were the result of disappointing earnings that have caused analysts to slash their forecasts across the board. It’s still not enough to make Sterne Agee analysts Ike Boruchow and Tom Nikic want to buy the entire sector wholesale. They explain:

Comparing today’s 2H Street estimates to forecasts made prior to Q2 earnings, one can see the fear that has been built into the group, as comp estimates have been cut by 150bp on average (to 2-3%) and OMs have been lowered by 120bps (to 14.6% - vs. 15.2% LY). 70% of retailers saw their 2H margin outlook cut by the Street -as there is low confidence in their ability to drive full-price selling into year end. The lowered bar likely presents a more-balanced risk-reward environment, but we continue to urge investors to stay selective…

10 Best Low Price Stocks To Own For 2014

Their recommendations: Buy Fifth & Pacific (FNP), L Brands (LTD), Urban Outfitters, Ross Stores (ROST) and the TJX Companies (TJX).

Fifth & Pacific has gained 0.6% to $24.98, L Brands has risen 1% to $59.56, Urban Outfitters has ticked up 0.1% to $34.82, Ross Stores has advanced 0.3% to $71.09 and the TJX Companies have gained 0.8% to $55.72.

5 Stocks Ready for Breakouts

DELAFIELD, Wis. (Stockpickr) -- Trading stocks that trigger major breakouts can lead to massive profits. Once a stock trends to a new high, or takes out a prior overhead resistance point, then it's free to find new buyers and momentum players that can ultimately push the stock significantly higher.

One example of a successful breakout trade I flagged recently was airline player Gol Linhas Aereas Inteligentes (GOL), which I featured in Aug. 30's "5 Stocks Ready to Break Out" at $3.77 a share. I mentioned in that piece that shares of GOL were uptrending strong for the last few months, with shares moving higher from $2.74 to $3.83 a share. Shares of GOL had recently formed a double bottom chart pattern right above its 50-day moving average at $3.57 to $3.55 a share. That move was quickly pushing shares of GOL within range of triggering a near-term breakout trade above some key overhead resistance levels at $3.83 to $4.14 a share.

Guess what happened? Shares of GOL didn't wait long to trigger that breakout since the stock cleared those overhead resistance levels the following week with strong upside volume. Shares of GOL have hit an intraday high today of $5 a share, which represents a gain of 30% from when I flagged this setup. I don't think this stock is done going higher since the current uptrend remains intact, and shares of GOL are starting to take out more resistance today at $4.93 a share. This stock could easily tag $5.50 to $6 in the coming weeks, if the uptrend continues.

Breakout candidates are something that I tweet about on a daily basis. I frequently tweet out high-probability setups, breakout plays and stocks that are acting technically bullish. These are the stocks that often go on to make monster moves to the upside. What's great about breakout trading is that you focus on trend, price and volume. You don't have to concern yourself with anything else. The charts do all the talking.

Trading breakouts is not a new game on Wall Street. This strategy has been mastered by legendary traders such as William O'Neal, Stan Weinstein and Nicolas Darvas. These pros know that once a stock starts to break out above past resistance levels, and hold above those breakout prices, then it can easily trend significantly higher.

With that in mind, here's a look at five stocks that are setting up to break out and trade higher from current levels.

Sarepta Therapeutics

One name that's starting to trend within range of triggering a big breakout trade is Sarepta Therapeutics (SRPT), which discovers and develops RNA-based therapeutics for the treatment of rare and infectious diseases. Its lead product candidate is eteplirsen. This stock has been uptrending strong so far in 2013, with shares up 45%.

If you take a look at the chart for Sarepta Therapeutics, you'll notice that this stock has been uptrending strong over the last month, with shares moving higher from its low of $29.71 to its intraday high of $38.16 a share. During that uptrend, shares of SRPT have been consistently making higher lows and higher highs, which is bullish technical price action. Shares of SRPT have now started to spike back above its 50-day moving average of $37.50, and that move is quickly pushing SRPT within range of triggering a big breakout trade.

Traders should now look for long-biased trades in SRPT if it manages to break out above its 50-day at $37.50 a share and then once it clears some key near-term overhead resistance at $39.12 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average volume of 1.65 million shares. If that breakout hits soon, then SRPT will set up to re-test or possibly take out its next major overhead resistance levels at $46 to $47 a share.

Traders can look to buy SRPT off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $35.31 to $35 a share. One can also buy SRPT off strength once it takes out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Aeropostale

Another stock that looks poised to trigger a major breakout trade is Aeropostale (ARO), which operates as a mall-based retailer of casual apparel and accessories for young women and men in the U.S. This stock has been destroyed by the sellers so far in 2013, with shares off by 31%.

If you take a look at the chart for Aeropostale, you'll notice that this stock has been downtrending badly for the last month and change, with shares plunging from its high of $15.73 to its recent 52-week low of $7.78 a share. During that downtrend, shares of ARO have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of ARO have now started to rebound sharply off that $7.78 low and are quickly moving within range of triggering a major breakout trade.

Traders should now look for long-biased trades in ARO if it manages to break out above its gap down day high of $9.55 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action 3.12 million shares. If that breakout hits soon, then ARO will set up to re-fill some of its previous gap down zone from August that started near $11.50 a share. If that gap gets filled with volume, then ARO could even hit $12 to $13 a share.

Traders can look to buy ARO off any weakness to anticipate that breakout and simply use a stop that sits right below its 52-week low of $7.78 a share. One could also buy ARO off strength once it takes out $9.55 a share with volume and then simply use a stop that sits a comfortable percentage from your entry point.

GTx

One biopharmaceutical player that's rapidly moving within range of triggering a major breakout trade is GTx (GTXI), which is dedicated to the discovery, development and commercialization of small molecules that selectively target hormone pathways to treat cancer, osteoporosis and bone loss, muscle loss and other serious medical condition. This stock has been hammered by the bears so far in 2013, with shares off sharply by 53%.

If you look at the chart for GTx, you'll notice that this stock recently gapped down sharply from over $4 to below $1.50 a share with heavy downside volume. Following that gap down, shares of GTXI have rebounded sharply and started to uptrend, with the stock moving higher from its low of $1.31 to its recent high of $1.96 a share. During that move, shares of GTXI have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of GTXI within range of triggering a major breakout trade.

Traders should now look for long-biased trades in GTXI if it manages to break out above some near-term overhead resistance at $1.96 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action of 1.35 million shares. If that breakout triggers soon, then GTXI will set up to re-fill some of its previous gap down zone from August that started just above $4 a share. Some possible upside targets if GTXI gets into that gap with volume are $2.50 to $3 a share, or possibly even $3.50 a share.

Traders can look to buy GTXI off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $1.50 a share. One can also buy GTXI off strength once it takes out $1.96 a share with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Nam Tai Electronics

Another stock that's starting to move within range of triggering a big breakout trade is Nam Tai Electronics (NTE), which is an electronics manufacturing and design services provider to a select group of the world's leading OEMs of telecommunications and consumer electronic products. This stock has been destroyed by the sellers so far in 2013, with shares off sharply by 41%.

If you look at the chart for Nam Tai Electronics, you'll notice that this stock has been uptrending for the last month and change, with shares moving higher from its low of $6.05 to its recent high of $8.38 a share. During that uptrend, shares of NTE have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of NTE within range of triggering a big breakout trade.

Traders should now look for long-biased trades in NTE if it manages to break out above some key near-term overhead resistance levels at $8.38 to $8.79 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 647,483 shares. If that breakout triggers soon, then NTE will set up to re-fill some of its previous gap down zone from April that started near $11.50 a share. If this stock gets into that gap with volume, then the upside is tremendous and we could easily see NTE hit $11 to $12 a share.

Traders can look to buy NTE off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day at $7.42 a share, or below more key support at $7.22 a share. One can also buy NTE off strength once it takes out that breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Potash

My final breakout trading prospect is Potash (POT), an integrated fertilizer and related industrial and feed products company that owns and operates five potash mines in Saskatchewan and one in New Brunswick. This stock has been hit hard by the bears so far in 2013, with shares off sharply by 19%.

If you look at the chart for Potash, you'll notice that this stock gapped down sharply back in July from $38 to $29 with heavy downside volume. Following that gap down, shares of POT have formed a bottoming chart pattern as the stock has started to uptrend, with shares moving higher from its low of $28.55 to its recent high of $33.38 a share. Shares of POT have been flirting with its 50-day moving average today at $33.11 a share, and it's quickly moving within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in POT if it manages to break out above some near-term overhead resistance levels at Friday's high of $33.30 to some key overhead resistance at $33.38 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 12.87 million shares. If that breakout triggers soon, then POT will set up to re-fill some of its previous gap down zone from July that started near $38 a share.

Traders can look to buy POT off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $31.39 a share to $30 a share. One could also buy POT off strength once it clears those breakout levels with volume and then simply use a stop that sits a conformable percentage from your entry point.

To see more breakout candidates, check out the Breakout Stocks of the Week portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

Best Blue Chip Stocks For 2014

Over a long and enviable career, Warren Buffett and Berkshire Hathaway have amassed one of the most enviable track records in all of investing. Having kept to the basics of largely buying great companies he understands at fair prices, Buffett has been an example for investors the world over. And while technology has famously been an area he's avoided like the plague, he has purchased one tech stock -- the venerable IBM (NYSE: IBM  ) . And while it remains a solid blue chip, the company's been in a bit of a rut lately. In this video, Fool contributor Andrew Tonner breaks down the recent goings-on at Big Blue and whether it remains a buy for investors today.

One of IBM's new growth engines could be big data, because the amount of data we store every year is growing by a mind-boggling 60% annually! To make sense of this trend and pick out a winner, The Motley Fool has compiled a new report called "The Only Stock You Need to Profit From the NEW Technology Revolution." The report highlights a company that has gained 300% since first recommended by Fool analysts but still has plenty of room left to run. To get instant access to the name of this company transforming the IT industry, click here -- it's free.

Best Blue Chip Stocks For 2014: International Business Machines Corporation(IBM)

International Business Machines Corporation (IBM) provides information technology (IT) products and services worldwide. Its Global Technology Services segment provides IT infrastructure and business process services, including strategic outsourcing, process, integrated technology, and maintenance services, as well as technology-based support services. The company?s Global Business Services segment offers consulting and systems integration, and application management services. Its Software segment offers middleware and operating systems software, such as WebSphere software to integrate and manage business processes; information management software for database and enterprise content management, information integration, data warehousing, business analytics and intelligence, performance management, and predictive analytics; Tivoli software for identity management, data security, storage management, and datacenter automation; Lotus software for collaboration, messaging, and so cial networking; rational software to support software development for IT and embedded systems; business intelligence software, which provides querying and forecasting tools; SPSS predictive analytics software to predict outcomes and act on that insight; and operating systems software. Its Systems and Technology segment provides computing and storage solutions, including servers, disk and tape storage systems and software, point-of-sale retail systems, and microelectronics. The company?s Global Financing segment provides lease and loan financing to end users and internal clients; commercial financing to dealers and remarketers of IT products; and remanufacturing and remarketing services. It serves financial services, public, industrial, distribution, communications, and general business sectors. The company was formerly known as Computing-Tabulating-Recording Co. and changed its name to International Business Machines Corporation in 1924. IBM was founded in 1910 and is based in Armonk, New York.

Advisors' Opinion:

• [By Peter Hughes]

  International Business Machines (IBM) -- our aggressive pick for the year -- is one of the world's most dominant technology companies, with annual revenues of $105 billion and net income of $16 billion.

• [By Victor Mora]

  IBM is a global technology company that provides widely-adopted �products and services to companies and consumers. Recently, the company issued a positive earnings report for the last quarter. The stock has not made much progress this year, but is now seeing a post-earnings pop. Over the last four quarters, earnings have been decreasing, while revenue figures have been increasing, which has produced mixed feelings among investors. Relative to its peers and sector, IBM has been a weak year-to-date performer. WAIT AND SEE what IBM does in coming weeks.

Best Blue Chip Stocks For 2014: Apple Inc.(AAPL)

Apple Inc., together with subsidiaries, designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide. The company sells its products worldwide through its online stores, retail stores, direct sales force, third-party wholesalers, resellers, and value-added resellers. In addition, it sells third-party Mac, iPhone, iPad, and iPod compatible products, including application software, printers, storage devices, speakers, headphones, and other accessories and peripherals through its online and retail stores; and digital content and applications through the iTunes Store. The company sells its products to consumer, small and mid-sized business, education, enterprise, government, and creative markets. As of September 25, 2010, it had 317 retail stores, including 233 stores in the United States and 84 stores internationally. The company, formerly known as Apple Computer, Inc., was founded in 1976 and is headquartered in Cupertino, California.

Advisors' Opinion:

• [By Victor Mora]

  Apple strives to provide innovative products and services that consumers and companies �love to own. The company has just unveiled its latest iPhone products, the iPhone 5S and iPhone 5C, but may have disappointed investors who expected a larger link with China Mobile. The stock recently formed a solid base and has now broken above that base. Over the last four quarters, earnings have been decreasing while revenues have been rising. Relative to its peers and sector, Apple has been a weak year-to-date performer. WAIT AND SEE if Apple can hold current price levels.

• [By Roberto Pedone]

  Finally, we're revisiting Apple (AAPL) this week. Last week, Apple was just starting to break out above it's the downtrending resistance line that's held shares lower for months. And sure enough, in the sessions that have followed, Apple has quietly made a move to test its last swing high at $466.

  That price is the nearest important resistance level for the stock; traders should treat a move through $466 as a buy signal. If Apple's downtrend is truly broken, we'll want to see the stock make a series of higher lows and higher highs. Now, the $436 billion firm is finally in a position where it can start to do that. This week's price action could get interesting for Apple bulls.

  I'm still recommending buyers keep a protective stop on the other side of the 50-day moving average; it should start looking like a decent proxy for support when a move through $466 happens.

• [By Geoff Gannon] >Starbucks (SBUX) and Exxon Mobil (XOM) can only grow up in very special environments." Can you elaborate on that statement? I don't understand what you mean by "special environments."
  
  By special environments I meant that the companies grew on a societal wave that allowed them to become so huge. They ended up serving enormous markets. They didn�� really grow these markets purely by force of will. In some cases, like Apple, they contributed a lot to the growth of these markets. But it�� not like they invented these markets. And it�� not like these markets needed these particular companies to grow the market. The markets for oil and coffee would be very big with or without Exxon and Starbucks. Those companies grew to be really big companies in really big markets. So, part of it is their own success story ��that�� true. But equal success in a smaller market would never have led them to become so big. It�� not possible for most companies to achieve that kind of growth, because most companies are limited by the carrying capacity of their market.
  
  Essentially, a company is limited by a few factors:
  
  路 Carrying Capacity
  
  路 Time
  
  路 Assets
  
  路 Will
  
  A business is: a thing that exercises its will over assets through time.
  
  So, the size of a company is determined by its assets and its ability to exercise its will over those assets. Will is exercised by the company�� agents ��its employees. At some companies, the exercise of will is mostly concentrated in one person. At other companies, the exercise of will is mostly dispersed over thousands of employees.
  
  The growth of a bank is constrained by its ability to exercise its will over its assets. Unless a branch can be opened with the right people in place, the chance of reliable growth is poor.
  
  Berkshire Hathaway (BRK.A)(BRK.B)�� growth was also constrained by its inability to exercise its will. Berkshire tried to establish insurance operations that would grow float very early on! . They had some success buying insurance businesses. They had less success starting insurance operations from scratch. In the early 1980s, Berkshire Hathaway�� insurance operations (at headquarters) were managed by Mike Goldberg. Later this job was given to Ajit Jain.
  
  When Buffett talks about how valuable Jain is to Berkshire he means that Jain allowed Berkshire to remove a constraint on its growth ��Berkshire�� inability to reliably grow low-coast float. Once Berkshire could do that, it was possible to grow the company much faster than it otherwise would have been. Berkshire would not have achieved the growth it has over the last 25 years if it had to rely on it insurance operations as of 1985 as the engine of that growth.
  
  Berkshire�� reinsurance business is much better than it was 25 years ago. And this is mostly just a matter of human capital at the very top. Berkshire was always capable of buying good, little insurance businesses in specific niches. Returns in insurance were not the problem. Growth was the problem. The insurance businesses that were easiest to grow were not the best underwriters, and the best underwriters were not very easy to grow.
  
  That�� one example of growth being constrained by an inability to exercise the company�� will. Buffett always knew what he wanted the reinsurance business to become. He just couldn�� make it happen until he had the right person in the job.
  
  This is also true outside of insurance.
  
  It is critical for Berkshire Hathaway to purchase businesses with management in place so the exercise of will can be maintained. By doing this, Berkshire Hathaway ensures that all capital allocation decisions above the company level are centralized in Warren Buffett. And all capital decisions at the company level and below are kept away from Warren Buffett. If this separation failed, Warren Buffett�� attention would be overloaded and the ability of the company to exercise its will over its assets would be impaired.
  
  Time! combines! with assets to create growth. Companies grow their assets over time. This is frequently achieved through the company�� return on assets. If a company has $100 in assets and earns 8% on those assets it will have $108 in assets if it does not disburse any of this assets.
  
  Now, it�� true that a company can grow or shrink through increasing or decreasing its leverage ��taking on or taking off liabilities ��rather than through asset growth achieved through retained earnings. However, such changes have larger short-term impact than long-term impact because the amount of future leveraging or deleveraging is always limited by the present leverage ratio of the business (if you are a non-financial company leveraged 3 to 1 you can�� triple your leverage again and if you are a non-financial leveraged 1 to 1 you can�� cut your leverage by half again). This is only one part of the growth through leverage problem.
  
  The other problem is a reliability issue. If we are talking about making a business very, very big ��we are sometimes going to be talking about companies that constantly use a reasonable amount of leverage. But we will rarely be talking about companies that use an abnormally high amount of leverage. In general, extremely high leverage ratios and extremely fast growth rates so strongly increase the risk of requiring a company to slam on the brakes at some point in its history that when you look back over 20, 30 or 40 years you often find that it was not the company that maximized the rate of growth and amount of leverage in each period that ended up becoming the biggest company. It is often a company that grows at the high end of the reasonable range year after year that ends up being one of the biggest companies in its industry.
  
  So, the long-term growth of any business is going to be dependent on its return on assets. Asset growth is positively correlated with past profitability and negatively correlated with future profitability. In other words, companies tend to increa! se assets! after they have recently earned a high return on assets. And companies tend to earn a low return on assets after they have had high asset growth. There is a bit of momentum here. So, I do not mean that companies immediately start seeing lower ROAs after increasing asset growth. Rather, high ROAs and asset growth go hand in hand for a short burst of prosperity in which the company does not yet realize the mistake it has made ��and then this is followed by paying for the mistake with lower ROAs in subsequent years.
  
  There is one exception to this rule. Retaining earnings and leaving them in cash doesn�� have much of a relationship with future profitability ��this may be because companies retain earnings in cash form only when they and their competitors have little opportunity to grow the business. It may also be that certain management types are more likely to retain cash even while earning high ROAs and that such managers are less likely to allow their business to earn lower ROAs in the future. Basically, managers who retain cash are not short-term greedy. And short-term greedy companies are the companies most likely to have the lowest long-term return on assets.
  
  Putting aside cash, the general rule of business growth is this: Businesses grow their assets through their return on assets and businesses earn lower returns on assets after growing their assets.
  
  If you look at a company like Apple (AAPL), it has recently had a lot of asset growth resulting from very high returns on assets. This is generally followed by lower returns on assets. It doesn�� have to be. But if a company attempts to keep growing assets along with their very high return on assets ��in essence, if they don�� hoard cash, buyback shares, pay dividends, etc. ��they will usually experience a reduction in both their return on assets and their growth rate.
  
  This is the efficiency versus reliability argument. Efficiency means earning the highest return on your assets right now. And having the faste! st growth! velocity at this instant in time.
  
  Reliability means achieving the highest average return on assets and the highest average speed over time.
  
  So, a company that grows to be very, very big tends to be a company that can achieve a high average return on assets and grow those assets at a high average speed over a long period of time.
  
  Many companies fit this description. They have the competitive advantages needed to reliably earn very high ROAs even while having very high asset growth. In fact, a great many small companies around the world fit this description.
  
  Will they all become big companies?
  
  No. Most of them will not. And it is no fault of the management. It is no lack of a moat ��some small companies have much wider moats than multibillion dollar businesses.
  
  Remember, in the 1980s, Berkshire Hathaway had the best collection of businesses it would ever own in terms of returns on tangible assets. The group earned a better than 50% return on tangible invested assets. Berkshire�� current collection of businesses can�� approach that level of return on assets. Why?
  
  Two reasons. One, they tend to be more asset-heavy businesses now. They use leverage. So, ROEs can still be comparable. Although in this case, we know they aren��. BNSF is no See��. Two, they tend not to have as wide moats as the businesses Berkshire bought in the 1980s. The Nebraska Furniture Mart had a very wide moat. See�� had a very wide moat.
  
  If Nebraska Furniture Mart and See�� had some of the widest moats on planet earth ��why aren�� they Fortune 500 companies?
  
  There are two possible reasons. I think there is truth in both explanations. Explanation No. 1 is that the companies simply did not aggressively pursue growth. Management was timid expanding into new markets.
  
  Explanation No. 2 is more complicated. And more about the environment a company grows up in.
  
  Imagine there is a mystical place with only two predators. There are wolves and cougars.! There is! very little cover in this area. It is very flat. And the length of the days is extremely long.
  
  Whatever prey is out there is going to see a predator coming from very far away. And whenever a predator kills something it is going to be quite obvious where that kill is.
  
  So the three things the ideal predator should have in this environment are:
  
  1. Ability to take down prey even after prey has been alerted to the predator�� presence
  
  2. Ability to defend a kill
  
  3. Ability to steal a kill
  
  I would not want to be a cougar in that place. I would much rather be a wolf.
  
  But does that mean that wolves will be plentiful in this environment?
  
  No. All we have done is looked at competition between predators. We haven�� looked at the availability of prey.
  
  The ideal industry is one with abundant ��rey��and a prey population that grows faster than the predator population.
  
  Technology companies excite people because of the possibility that there will be a giant and growing prey population. Very often technology is just another ��much better ��way to serve an existing need people have. So, it�� obvious once the TV is introduced that there are a lot of people out there who want one. We know people love radios, we know they watch plays, we know they read novels, we know they rush out to the movies, we know they read newspapers. Now they can have all those sorts of things delivered in a slightly different form directly into their living room. So we knew right away that the TV market was going to be huge.
  
  The problem is that in the TV set manufacturing business more wolves and cougars could enter the market as quickly as the deer at home in their living rooms could repopulate. And so you had abundant prey. But you also had abundant predators. And the predators had a really hard time specializing on one kind of prey. The key to catching prey was sadly similar however you tried to divide the market ��the predator with the lowest price got! the kill! . So you had all these companies competing for the same sorts of customers using the same attribute ��low price.
  
  This is far from the ideal situation where we have different predators competing ��using different attributes ��on specific groups within an abundant population of possible prey. Some will ambush. Others will outlast. In this way, we have an environment that can support predator growth for years and years to come.
  
  I talked about Apple and Exxon Mobil and Starbucks growing up in very special environments.
  
  Let�� start with Starbucks (SBUX). I talked about coffee before. It is not easy to dominate the coffee business remotely. You need to dominate it locally ��close to the consumer. This is different from the wine business, the cola business, etc. However, coffee is still a huge market like wine and cola. Starbucks is to coffee what Coke and Pepsi are to cola in the U.S.
  
  The carrying capacity for local coffee shops is huge. Starbucks did not have to worry about prey availability. It just had to figure out a strategy for taking out the other predators. And then it had to repeat that strategy across the country. That�� what Starbucks did. Starbucks is not a better competitor than some much smaller companies. I enjoy their coffee. I enjoy their stores. But I think there are better retailers out there. Those retailers just don�� sell coffee. I think coffee is among the best products a retailer could sell if a retailer wanted to get very, very big very, very fast.
  
  So, the special environment Starbucks grew up in is one with abundant prey and abundant predators. The prey were all similar. The predators were all different from Starbucks. So Starbucks entered an environment as a differentiated predator with an endless supply of prey. You can grow very big that way.
  
  Exxon Mobil is a strange example. Exxon Mobil is just a rump Standard Oil. There�� no point discussing Exxon apart from Standard Oil. I recommend reading Ron Chernow�� Titan: The Li! fe of Joh! n D. Rockefeller to understand how Standard Oil got that big.
  
  American Telephone and Telegraph is an even more obvious situation. Basically, if you know the Microsoft growth story you know the AT&T story. Microsoft was just a replay of AT&T a century later.
  
  It�� also important to note how unimportant both patents and quality were in each case. Neither Microsoft nor AT&T could really claim to have better products except insofar as their products were quickly available and universally adopted. And AT&T lost its phone patent in the 1890s. It didn�� matter. The road to dominance for AT&T took about 15-20 years (no more).
  
  Once you have one AT&T there is no need for another. A standard is a competitive advantage that vanishes after use. Once a standard is established, the environment is changed. And it is not realistic to think you could duplicate the history of Microsoft or AT&T in the same industry. You can do the same thing in other industries that don�� yet have a standard. But to get big in the way AT&T and Microsoft got big, you have to grow in an environment without an established standard.
  
  One difference between AT&T and Microsoft is that while both became big businesses only Microsoft became a great business. AT&T was a highly mediocre investment for a very, very long time before it was broken up.
  
  This reminds us that bigger isn�� always better. And that competitive dominance may be a necessary condition for a great business ��but it is not a sufficient condition. There are some businesses with very high market share and unremarkable returns on assets.
  
  But the question here is growth ��not greatness.
  
  Unless you sell a product that millions of people can use ��you aren�� going to grow to be the size of any of these companies. That doesn�� mean you don�� have a wide moat. And it doesn�� mean you will do worse for your shareholders over time.
  
  A lot of small companies made their shareholders much richer than AT&T�� shareh! olders ev! en though they did not grow as fast as AT&T or achieve that company�� size.
  
  As an example, here is a list of the best performing stocks from 1972 to 2002:
  
  路 Southwest (LUV)
  
  路 Wal-Mart (WMT)
  
  路 Walgreen (WAG)
  
  路 Intel (INTC)
  
  路 Comcast (CMCSA)
  
  Those are big companies. But, with the exception of Wal-Mart, those aren�� the biggest companies in the United States.
  
  It does tell you something though. All of those businesses weren�� just strong competitors. A key element in every case was that they were in markets with a huge carrying capacity. The volume of plane flights is huge. The volume of ��eneral retail��is huge. Intel is the only company on that list that isn�� consumer facing. But even then consumer demand for its customers��products was huge.
  
  So the biggest companies in the world can�� just be dominant in their industry. In fact, they don�� even have to dominate their industry. But they do have to serve a really, really big market.
  
  If you grow up in a market environment that can never support a company of that size ��you��l simply never get to be one of the biggest companies in America.
  
  That doesn�� mean you can�� be a good investment.
  
  But really big companies can only grow up in market environments that can support them.
  
  So it has to be a market with an almost endless supply of customers.
  
  Read Geoff�� Other Articles
  
• [By Michael Fowlkes]

  Tech-giant Apple (AAPL) has seen its shares take a serious beating in recent months, but we believe the selloff has just about reached its end. The underlying fundamentals remain strong and we expect to see several new products next year. The concerns that have led to the recent sell off are real, but at the same time not as material as some would like you to believe. A big concern is theslowing of its earnings growth. Last year it had 100% earnings growth, but that has dropped to 23% this year.

  You need to ask yourself, considering Apple’s size, is a 23% jump in earnings growth really a bad thing? Apple has become a victim of its own success, and is having a hard time keeping up with its past successes. This does not mean the company is in trouble, it just means that investors need to have a more realistic view of the company’s business. Once the current panic subsides, we believe investors will come back to the stock, and realize that it is a great value with its current P/E of just 12.

Top 5 Dividend Stocks To Invest In 2014: Chevron Corporation(CVX)

Chevron Corporation, through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. It operates in two segments, Upstream and Downstream. The Upstream segment involves in the exploration, development, and production of crude oil and natural gas; processing, liquefaction, transportation, and regasification associated with liquefied natural gas; transportation of crude oil through pipelines; and transportation, storage, and marketing of natural gas, as well as holds interest in a gas-to-liquids project. The Downstream segment engages in the refining of crude oil into petroleum products; marketing of crude oil and refined products primarily under the Chevron, Texaco, and Caltex brand names; transportation of crude oil and refined products by pipeline, marine vessel, motor equipment, and rail car; and manufacture and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives. It a lso produces and markets coal and molybdenum; and holds interests in 13 power assets with a total operating capacity of approximately 3,100 megawatts, as well as involves in cash management and debt financing activities, insurance operations, real estate activities, energy services, and alternative fuels and technology business. Chevron Corporation has a joint venture agreement with China National Petroleum Corporation. The company was formerly known as ChevronTexaco Corp. and changed its name to Chevron Corporation in May 2005. Chevron Corporation was founded in 1879 and is based in San Ramon, California.

Advisors' Opinion:

• [By Victor Mora]

  Chevron provides essential energy products and services to growing companies and consumers worldwide. The stock has been on a bullish run for many years that has taken it to all-time high prices. Over the last four quarters, earnings and revenue figures have been mixed, however, investors in the company have been mostly happy with earnings reports. Relative to its peers and sector, Chevron has been a year-to-date performance leader. Look for Chevron to OUTPERFORM.

• [By Victor Mora]

  Chevron provides essential energy products and services to a wide range of companies operating in different industries around the world. The stock has been on a bullish run for the last several years and is now trading near all-time high prices. Earnings and revenue figures have been mixed but investors have been pleased during most of the last four quarters. Relative to its peers and sector, Chevron has led in year-to-date performance by a wide margin. Look for Chevron to continue to OUTPERFORM.

Best Blue Chip Stocks For 2014: Colgate-Palmolive Company(CL)

Colgate-Palmolive Company, together with its subsidiaries, manufactures and markets consumer products worldwide. It offers oral care products, including toothpaste, toothbrushes, and mouth rinses, as well as dental floss and pharmaceutical products for dentists and other oral health professionals; personal care products, such as liquid hand soap, shower gels, bar soaps, deodorants, antiperspirants, shampoos, and conditioners; and home care products comprising laundry and dishwashing detergents, fabric conditioners, household cleaners, bleaches, dishwashing liquids, and oil soaps. The company offers its oral, personal, and home care products under the Colgate Total, Colgate Max Fresh, Colgate 360 Advisors' Opinion:

• [By ChuckCarlson]

  Colgate-Palmolive Company (CL), together with its subsidiaries, manufactures and markets consumer products worldwide. The company has raised distributions for 48 years in a row. The 10 year annual dividend growth rate is 12.40%/year. The last dividend increase was 9.40% to 58 cents/share. Analysts are expecting that Colgate Palmolive will earn $5.52/share in 2012. I expect that the quarterly dividend will be raised to 64 cents/share in 2012. Yield: 2.60%

Best Blue Chip Stocks For 2014: Philip Morris International Inc(PM)

Philip Morris International Inc., through its subsidiaries, engages in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States. Its international product brand line comprises Marlboro, Merit, Parliament, Virginia Slims, L&M, Chesterfield, Bond Street, Lark, Muratti, Next, Philip Morris, and Red & White. The company also offers its products under the A Mild, Dji Sam Soe, and A Hijau in Indonesia; Diana in Italy; Optima and Apollo-Soyuz in the Russian Federation; Morven Gold in Pakistan; Boston in Colombia; Belmont, Canadian Classics, and Number 7 in Canada; Best and Classic in Serbia; f6 in Germany; Delicados in Mexico; Assos in Greece; and Petra in the Czech Republic and Slovakia. It operates primarily in the European Union, Eastern Europe, the Middle East, Africa, Asia, Canada, and Latin America. The company is based in New York, New York.

Advisors' Opinion:

• [By Michael Brush]

  Philip Morris International (PM) has a dividend yield of 3.7%.

  This company is the world's second-biggest cigarette seller, after China National Tobacco. Philip Morris International controls the rights outside the United States to such brands as Marlboro, Virginia Slims and Parliament. So it's positioned to sell more cigarettes as smokers in rapid-growth emerging markets earn more and trade up to premium brands.
  

   

  Insiders continue to buy the stock, suggesting room for further appreciation. And, of course, tobacco's addictive nature assures steady revenue. If you oppose smoking for moral, health or other reasons, this stock is not for you. As an ex-smoker, I'd understand.

Best Blue Chip Stocks For 2014: McDonald's Corporation(MCD)

McDonald?s Corporation, together with its subsidiaries, operates as a worldwide foodservice retailer. It franchises and operates McDonald?s restaurants that offer various food items, soft drinks, coffee, and other beverages. As of December 31, 2009, the company operated 32,478 restaurants in 117 countries, of which 26,216 were operated by franchisees; and 6,262 were operated by the company. McDonald?s Corporation was founded in 1948 and is based in Oak Brook, Illinois.

Advisors' Opinion:

• [By Victor Mora]

  McDonald�� is a well-recognized company that fulfills cravings and demand for quick and delicious food choices that many consumers across the globe enjoy. The stock has been steadily chugging higher but is now pulling-back a bit from all-time high prices. Over most of the last four quarters, earnings and revenue figures have been on the rise, however, investors have grown to expect a little more from the company. Relative to its peers and sector, McDonald’s has been an average performer, year-to-date. Look for McDonald’s to stabilize and OUTPERFORM.

Best Blue Chip Stocks For 2014: Visa Inc.(V)

Visa Inc., a payments technology company, engages in the operation of retail electronic payments network worldwide. It facilitates commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses, and government entities. The company owns and operates VisaNet, a global processing platform that provides transaction processing services. It also offers a range of payments platforms, which enable credit, charge, deferred debit, debit, and prepaid payments, as well as cash access for consumers, businesses, and government entities. The company provides its payment platforms under the Visa, Visa Electron, PLUS, and Interlink brand names. In addition, it offers value-added services, including risk management, issuer processing, loyalty, dispute management, value-added information, and CyberSource-branded services. The company is headquartered in San Francisco, California.

Advisors' Opinion:

• [By Rebecca Lipman]

   Operates retail electronic payments network worldwide. Market cap of $82.48B. EPS growth (5-year CAGR) at 15%. According to Morgan Stanley: "Global penetration of electronic payments remains low with 85% of the world's transactions still cash-based, leaving ample runway to support healthy growth prospects through (at least) 2015."

• [By Victor Mora]

  Visa strives to help consumers, companies, governments, and other entities by providing methods of easy transaction worldwide. The company recently reported earnings that made investors happy, and the stock is now trading near all-time high prices, with still more room to rise. Over the last four quarters, earnings and revenue figures have been increasing, which has pleased investors in the company. Relative to its strong peers and sector, Visa has been an average year-to-date performer. Look for Visa to continue to OUTPERFORM.

• [By Victor Mora]

  Visa facilitates transactions for consumers, companies, governments, and other entities around the world. The company recently reported earnings that have sat really well with investors. The stock has been steadily trending higher and is now trading near all-time high prices. Over the last four quarters, earnings and revenue figures have been increasing which has really pleased investors. Relative to its strong peers and sector, Visa has been an average year-to-date performer. Look for Visa to OUTPERFORM.

• [By Charles Sizemore]

  One of the “big picture” economic themes that I expect to play out over 2011 and beyond is the secular shift to a global cashless society.?Though the process is well on its way in the U.S. and Europe, roughly 40% of all transactions are still made with cash and paper checks according to Barron’s.

  This means that even in “boring” developed markets, there is ample room for growth in electronic payments. And there is no better company to benefit from this trend than credit card giant Visa (NYSE: V).

Here's How the 'Smart Money' Is Playing Gold Stocks

Part of the recent move up in gold prices to more than $1,400 an ounce and the uptick in gold stocks is a response to the crisis in Syria.

However, there is a lot more occurring just beneath the surface than geopolitics.

But investors would never get that sense from Wall Street, which is still in the midst of its perennial "hate gold" campaign.

Take, for instance, the hullabaloo over the liquidation by hedge fund manager John Paulson of a large part of his position in SPDR Gold Trust (NYSE: GLD).

In the second quarter of this year, Paulson cut his position in GLD from 21.8 million shares to 10.2 million shares. At first glance, he seemed to have lost faith in gold and was getting out.

But, there's more to that story...

The Financial Times reported that Paulson offset much of the sale of GLD by purchasing gold swaps on the over-the-counter (OTC) market.

Part of the reason may be cost. GLD has a management fee of 0.4%. The FT reported that with gold forward curve flattening, there's little cost to holding gold derivatives.

Another reason may be less transparency, making it easier to make a major move. In the OTC derivatives market, not everyone can figure out exactly what Paulson is doing with regard to investing in gold. 

Editor's Note: This chart, with a few simple lines, illustrates a major reason to be investing in gold now - take a look here.

The real underreported action, however, may not be in the gold market, but in gold stocks.

More Smart Money Investing in Gold Stocks

Li Ka-shing, 85, is one of Hong Kong's richest businessmen. Bloomberg estimates his net worth to be about $27 billion.

He is also known as one of the world's savviest investors, buying assets on the cheap.

And he recently made a major move into gold stocks.

One of his companies, Cheung Kong Holdings Limited (CHEUY), recently formed a 50/50 joint venture with Canadian Imperial Bank of Commerce (NYSE: CM) called CEF Holdings. They want to invest into beaten-down mining stocks and particularly gold equities.

The CEO of the joint venture, Warren Gilman, told Bloomberg, "Long term, gold is a good place to be."

He added that gold's drop in price this year "is great" because his firm can now make quality long-term investments into certain gold stocks on the cheap.

Gilman said to Bloomberg, "It's tougher and tougher to find economic gold deposits in safe jurisdictions. You [will] see mine supply struggling to keep up with demand long term. That's a great recipe for higher prices in the longer term."

The bullishness of Li Ka-shing and CIBC echoes thoughts expressed recently by Money Morning Chief Investment Strategist Keith Fitz-Gerald.

Fitz-Gerald said, "I could very easily make the argument that gold miners are unloved, undervalued and probably the worst investment of the year. But, we know from history that's precisely the best time to buy. History shows you want to buy when there's blood in the streets."

Gold Stocks Rebound

For individual investors who have fewer resources than Gilman to research specific gold-mining companies, an ETF such as the Market Vectors Gold Miners ETF (NYSEArca: GDX) is a good option for investing in gold stocks.

Since hitting bottom in early July, GDX has soared about 30%. This caught some investors' attention, and now inflows into the fund are up.

But it has more upside potential for investors - and if it dips again, that would be an even better time to follow Li Ka-shing and others into gold stocks.

More support for investing in gold stocks now is the gold-stocks-to-gold ratio flagged by Money Morning Global Resource Specialist Peter Krauth. Krauth said this indicator is flashing the best buy signal in a dozen years.

In fact, Krauth found four bullish gold-price indicators all flashing buy signals now. Take a look...

Related Articles:

Money Morning:
Why Gold Mining Stocks Are a Buy Now Money Morning:
Today's Gold Convergence Is Your Best Buy Signal Yet ETF Trends:
Paulson Slashes GLD Stake Financial Times:
Paulson's Faith in Gold Unshaken Despite ETF Sale Bloomberg:
Li Ka Shing -Backed CEF Seeking to Make Gold Investments ETF Trends:
A Double for Popular Gold Miners ETF? Maybe

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Home Foreclosures Continue Downward Trend in July

In the month of July, 49,000 U.S. home foreclosures were completed, down from a revised total of 53,000 in June and down from 65,000 in July 2012, according to research firm CoreLogic Inc. (NYSE: CLGX). While an improvement, the number of foreclosures is still well above the 2000 to 2006 average of 21,000 foreclosures per month. CoreLogic notes that since September 2008, some 4.5 million foreclosures have been completed in the United States.

The five states with the highest number of completed foreclosures in the past 12 months were Florida (110,000), California (65,000), Michigan (61,000), Texas (45,000) and Georgia (41,000). The five states with the fewest foreclosures in the 12 months through July were District of Columbia (141), North Dakota (484), West Virginia (505), Hawaii (512) and Maine (754).

The five states with the largest inventories of foreclosed properties are Florida (8.1%), New Jersey (5.9%), New York (4.7%), Connecticut (4%) and Maine (4%). The five states with the lowest inventories of foreclosed properties are Wyoming (0.4%), Alaska (0.6%), North Dakota (0.7%), Nebraska (0.7%) and Colorado (0.8%).

CoreLogic executives noted:

Foreclosures and delinquency rates continued their rapid descent in July. Every state posted a year-over-year decline in foreclosures and serious delinquencies fell to the lowest level since December 2008. … As the housing market continues to recover, the foreclosure inventory is declining quickly, down by 32 percent from a year ago.

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The research firm also noted that about 949,000 homes were in some stage of foreclosure during July, down from 1.4 million in July 2012. CoreLogic said the foreclosure inventory in July represented 2.4% of all mortgaged homes, compared with 3.4% in July a year ago.

McDonald’s Corporation (MCD) Dividend Stock Analysis for 2013

McDonald's Corporation (MCD), together with its subsidiaries, franchises and operates McDonald's restaurants primarily in the United States, Europe, the Asia Pacific, the Middle East, and Africa. This[/color]dividend champion has paid dividends since 1976 and increased distributions on its common stock for 36 years in a row.

The company's last dividend increase was in September 2012 when the Board of Directors approved a 10% increase to 77 cents/share. The company's largest competitors include Yum Brands (YUM), Starbucks (SBUX) and Burger King (BKW).

Over the past decade this dividend growth stock has delivered an annualized total return of 19.50% to its shareholders.

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The company has managed to an impressive increase in annual EPS growth since 2003. Earnings per share have risen by 18.30% per year. Analysts expect McDonald's to earn $5.60 per share in 2013 and $6.11 per share in 2013. In comparison McDonald's earned $5.36/share in 2012.

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The company's international operations have fueled the strong growth in McDonald's earnings over the past twenty years. Despite the fact that a little over half of the company's profits are derived internationally, this segment could continue to deliver solid performance in the future. Another factor fueling the company's growth and maintenance of its edge against competitors and other threats has been its ability to innovate in its menu and reinvent itself in order to win. Some examples of that include the addition of salads to its menu a few years ago, as well as the introductions of premium drinks for customers. Other examples include extending store hours as well as focusing on the core brands through disposition of Chipotle Mexican Grill (CMG). Th! e company has also been able to focus on streamlining operations and focusing on same-store sales, rather than mindlessly expanding at all costs. However, it still plans on expanding store count, while also reimaging existing locations, in order to improve the customer experience.

McDonald's growth targets include:

- Average annual sales growth of 3% to 5%
- Average annual operating income growth of 6% to 7%, and
- Return on incremental invested capital in the high teens

The company also has a strong brand name, which has also allowed it to pass on price hikes onto customers, who nevertheless are still perceiving it's menu in the "value" category. As a result, inflationary pressures should not affect profitability by a wide margin.

The return on equity has expanded from 13.20% in 2003 to 36.80% in 2012. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.

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The annual dividend payment has increased by 28.40% per year over the past decade, which is much higher than to the growth in EPS.

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A 28% growth in distributions translates into the dividend payment doubling every two and a half years. If we look at historical data, going as far back as 1976 we see that McDonald's has actually managed to double its dividend every three and a half years on average. I expect dividend growth to average 10%/year over the next decade.

The dividend payout ratio has increased from 34% in 2002 to 53.50% in 2012. The expansion in the payout ratio has enabled dividend growth to be faster than EPS growth over the past decade. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact ! of short-! term fluctuations in earnings.

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Currently, McDonald's is attractively valued at 16.80 times earnings, yields 3.10% and has an adequately covered dividend.

Full Disclosure: Long MCD and YUM

Does TiVo Support Higher Prices?

With shares of TiVo (NASDAQ:TIVO) trading around $12, is TIVO an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

TiVo is a developer and provider of software and technology that enables the search, navigation, and access of content across sources, including linear television, on-demand television, and broadband video. The company provides these capabilities through set-top boxes that include DVRs or non-DVR set-top boxes, tablet computers, mobile phones, and other screens. It also provides advertising solutions for the media industry, including a platform for interactive advertising and audience measurement services. As consumers look for improved methods to access their entertainment, TiVo is well-positioned to provide these valuable services. Consumers are engaging with media technology at an increasing rate so as long as TiVo continues to improve, rising prices should be in sight.

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T = Technicals on the Stock Chart are Mixed

TiVo stock has seen a consistent uptrend over the last several years. The stock has pulled-back from a long-term selling level but may be getting ready to coast higher. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, TiVo is trading around its key averages which signal neutral price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of TiVo options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
TiVo Options	77.89%	83%	80%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
June Options	Steep	Average
July Options	Steep	Average

As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bearish over the next two months.

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On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on TiVo’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for TiVo look like and more importantly, how did the markets like these numbers?

	2012 Q4	2012 Q3	2012 Q2	2012 Q1
Earnings Growth (Y-O-Y)	-351.82%	309.52%	-35.29%	-116.35%
Revenue Growth (Y-O-Y)	33.68%	26.64%	6.66%	48.12%
Earnings Reaction	-0.08%	6.35%	-3.41%	-4.68%

TiVo has seen decreasing earnings and increasing revenue figures over most of the last four quarters. From these figures, the markets have had mixed feelings about TiVo’s recent earnings announcements.

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P = Poor Relative Performance Versus Peers and Sector

How has TiVo stock done relative to its peers, AT&T (NYSE:T), Microsoft (NASDAQ:MSFT), Sony (NYSE:SNE), and sector?

	TiVo	AT&T	Microsoft	Sony	Sector
Year-to-Date Return	-2.03%	10.32%	22.61%	70%	11.23%

TiVo has been a relative underperformer, year-to-date.

Conclusion

TiVo provides software and technology products that allows consumers to access their entertainment at their preferred times at any location. The stock has not done too well in recent times but is now displaying signs of life. Earnings and have decreased over most of the last four quarters while revenues have increased, overall, not pleasing investors. Relative to its peers and sector, TiVo has trailed significantly in year-to-date performance. WAIT AND SEE what TiVo does this coming quarter.

How Do I Advise Thee? Let Me Count the Ways: Live Blog, Day 2

Possibly the most valuable content at the Morningstar Investment Conference is a rather technical session on the subject of “gamma” whose applications have immediate take-home value for financial advisors.

Morningstar’s David Blanchett delivered the talk. He, along with his Morningstar colleague Paul Kaplan, is the mastermind of gamma, a nifty Greek letter that comes after alpha and beta in the Greek alphabet but, as it does alphabetically, goes beyond those two in terms of adding value.

While alpha investors are looking to add that 100 basis points in total return and beta investors are seeking to match the market while minimizing risk, Blanchett and Kaplan estimate that gamma enables advisors to enhance the welfare of their clients to the tune of 29% more income, which equates to 1.82% in added alpha.

Better still, alpha is a zero-sum game—your win as a buyer is another investor’s loss as a seller. With gamma, however, every advisor and every client can win.

In practical terms, financial advisors often face a skeptical public that questions whether they are worth the fees they charge. If clients perceive that the key value the advisor adds is fund selection, many will cut out the middleman and buy the funds themselves, using consumer ratings.

What Blanchett and Kaplan have attempted to do is quantify all the ways an advisor adds value.

In a Thursday session at Morningstar’s Chicago conference, Blanchett divided an advisor’s value into five key areas: total wealth allocation; dynamic withdrawal strategy; annuity allocation; tax-efficient asset location; and retirement portfolio construction.

Tax-efficient asset location may provide the simplest example of a service advisors provide that increases client wealth.

Do-it-yourself investors may make excellent investment selections, theoretically, but limit the benefits of those investments by leaving “tax alpha” on the table.

A classic example is bonds. Because their realized income is taxed at ordinary income rates, they are highly inefficient from a tax standpoint.

Stocks, on the other hand, are far more tax-efficient, incurring a 15% capital gains rate.

So an advisor, because he understands the client may be paying a 35% tax on an investment whose historical average has been just 5% (and is possibly in secular decline), will recommend the client keep the bonds he needs in a nontaxed traditional IRA or 401(k), for example.

Blanchett says a good advisor will first determine the appropriate allocation for the client’s unique circumstances, and only then determine where to locate the assets across accounts.

Another illustration of advisors adding gamma is in the area of retirement income, where their ability to frame the decisions and tailor them for clients with different outlooks is key.

It is common for people to see portfolio withdrawal strategies as sexy and annuities as somehow grotesque, Blanchett says.