Delta picks Microsoft for pilot tablets

MINNEAPOLIS (AP) — Delta Air Lines plans to buy 11,000 Microsoft Surface 2 tablets for its pilots to replace the heavy bundles of books and maps they haul around now.

Other airlines, including American and United, have been buying Apple's iPad for that purpose.

Delta says the Surface tablets will save it $13 million per year in fuel and other costs. Right now, each pilot carries a 38-pound flight bag with manuals and maps.

Delta plans to test the tablets on its Boeing 757s and 767s, which are flown by the same group of pilots. The airline is hoping for Federal Aviation Administration approval next year to use the tablets throughout a flight, and it hopes to be using the devices on all of its other planes by the end of next year.

One reason Delta picked a Microsoft device was that it's easier to give pilots separate sections for company and personal use, said Steve Dickson, Delta's senior vice president for flight operations.

Pilots will be able to install personal software and keep their own items such as photos on the personal section of the devices, while another portion will be dedicated to Delta's software, Dickson said.

"We trust them to manage that side of the device," Dickson said.

Another reason for picking the Surface tablet is that Delta's training software also runs on the same Windows operating system as the tablets, reducing the need to redo that software for another device, Dickson said.

Delta has already done a test program where pilots could bring their own devices, including iPads.

In August, Delta said its flight attendants will get Windows phones to process in-flight sales of food, better seats, and other items.

Microsoft announced last week that it is updating its tablet line, which includes the Surface 2s that Delta is buying. The Surface 2 is the cheaper of the two versions sold by Microsoft, retailing for $449 each. Dickson declined to say how much Delta is paying.

Is Tesla Motors a Buy After an Explosive Run?

With shares of Tesla Motors (NASDAQ:TSLA) trading around $165, is TSLA 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

Tesla Motors designs, develops, manufactures, and sells electric vehicles and electric vehicle powertrain components. The company also provides services for the development of electric powertrain systems and components and sells electric powertrain components to other automotive manufacturers. It markets and sells its vehicles through Tesla stores, as well as over the Internet. Consumers and companies are looking to save at the pump, and what better way than with electric vehicles?

When Tesla Motors first introduced its unconventional Model S finance plan back in April, critics questioned the strategy's potential and charged the automaker with overstating customer savings. However, now it looks like electric car genius Elon Musk is once again ready to have the last laugh, because more and more analysts are coming around and recognizing the plan's boosted revenue potential, and soon, more traditional automakers may also be jumping on board.

T = Technicals on the Stock Chart Are Strong

Tesla Motors stock has been flying higher in the last several months. The stock is currently trading at all-time high prices and looks poised to continue. 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, Tesla Motors is trading above its rising key averages, which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

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

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Tesla Motors Options	55.44%	13%	11%

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

	Put IV Skew	Call IV Skew
October Options	Flat	Average
November Options	Flat	Average

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

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

E = Earnings Are Increasing 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 Tesla Motors's stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Tesla Motors look like and more importantly, how did the markets like these numbers?

	2013 Q2	2013 Q1	2012 Q4	2012 Q3
Earnings Growth (Y-O-Y)	105.62%	113.95%	-1.27%	-66.67%
Revenue Growth (Y-O-Y)	1420.08%	1762.78%	677.88%	-13.13%
Earnings Reaction	14.34%	24.39%	-8.77%	8.92%

Tesla Motors has seen improving earnings and rising revenue figures over the last four quarters. From these numbers, the markets have been very excited about Tesla Motors's recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Tesla Motors stock done relative to its peers, General Motors (NYSE:GM), Toyota Motor (NYSE:TM), Ford Motor (NYSE:F), and sector?

	Tesla Motors	General Motors	Toyota Motor	Ford Motor	Sector
Year-to-Date Return	386.40%	26.10%	35.64%	34.29%	32.91%

Tesla Motors has been a relative performance leader, year-to-date.

Conclusion

Tesla Motors offers electric vehicles that consumers and companies are opting for over other luxury vehicles. The company's new spin on financing may be attracting other vehicle companies worldwide. The stock has been flying higher over the last few years and is now trading at all-time high prices. Over the last four quarters, earnings have been improving while revenues have been rising which has left investors very excited about the company. Relative to its peers and sector, Tesla Motors has been a year-to-date performance leader. Look for Tesla Motors to continue to OUTPERFORM.

3 Enticing Value Opportunities in Latin America

Latin American economies have been hit hard by the uncertainty surrounding the global GDP growth. The drivers of which, are the mixed economic data coming out of China and gyrating demand for commodities. This has affected commodities prices and affected the regions' economic growth, primarily because Latin America's economies are export oriented with commodities being among the key exports. This has created a number of bargains for investors among some of the region's largest publicly traded companies.

Latin America's economic outlook downgraded
Already the 2013 outlook for Latin America's economic growth has been cut significantly. At the end of 2012 the International Monetary Fund had forecast 2013 GDP growth of 3.4% but it has already revised that figure to 3% annually. More concerning is that Spanish banking giant BBVA has recently forecast even lower annual GDP growth of 2.7% for the region.

This decline in economic growth has triggered significant capital outflows, growing sovereign bond spreads, stock market volatility and currency devaluations across the region. As a result many Latin American economies have weakened, further leaving major publicly traded companies trading at what appears to be significant discounts to their non-Latin American peers.

What are some of the best bargains?
Growing resource nationalism, continuing government interference in the energy sector, falling crude prices and the pessimistic economic outlook has seen investors shy away from investing in Latin American energy companies. This has seen many of the region's major energy companies including Colombian government controlled Ecopetrol (NYSE: EC  ) , Brazilian government controlled Petrobras and Argentine government controlled YPF fall to new 52 week lows.

But it is Ecopetrol who is down 27% year-to-date that offers an intriguing value for investors. On the basis of its enterprise-value to EBITDA – which allows for an apples-to-apples comparison with competitors – of six times appears moderately priced.

Company

Enterprise-value to EBITDA

Ecopetrol	6
Petrobras	7
Chevron	5
Exxon	6
Anadarko	8

                              Source data: Company financial filings second quarter 2013.

Ecopetrol's weakness can be attributed to lower crude prices, softer margins and ongoing investor concern over Ecopetrol's low proved reserves of 1.8 billion barrels of oil. But among Latin American oil companies it is one of the best managed in conjunction with the least amount of political interference. In addition, the company offers a dividend yield of over 6%, making the equity look attractive while investors hold out for capital appreciation.

Bancolombia appears attractively priced
Another Colombian company that appears under-valued is the Andean country's largest commercial bank Bancolombia (NYSE: CIB  ) . For the year-to-date Bancolombia's share price fell 17% because of a weak second quarter bottom-line. This decline was primarily caused by the bank's net income plunging by 41% year-over-year because of mark-to-market losses caused by the value lost in the bank's securities portfolio.

Investors sold-off the bank, touching a new 52 week low in July, leaving behind a compelling valuation proposition. 

Company

Price-to-book ratio

Bancolombia	1.2
Banco Bradesco	1.8
Itau Unibanco	1.9
Wells Fargo	1.5

                               Source data: Ycharts.

Despite its poor second quarter 2013 result Bancolombia's fundamentals remain strong. Net loans for that period were up by 22% year-over-year and impaired loans remained at an acceptable 2.8% of total loans. Capital adequacy is also high, with the bank having a tier-one-capital ratio of just under 12% at the end of the second quarter. This indicates that Bancolombia remains in a strong financial position and is well placed to continue capitalizing on the growth potential that exists in its key markets of Colombia and El Salvador.

Bancolombia pays a healthy dividend yield of just under 3%, which is significantly higher than the token yields paid by Bank of America and Citibank. It is also comparable to U.S. giants, Wells Fargo and JP Morgan, which have yields of around 3%. Finally, for those investors concerned by the quality of governance in Latin American financial institutions, Bancolombia has been a regular recipient of awards recognizing its strong internal governance and management practices.

Vale appears irresistibly cheap
Latin America's commodities sector has been particularly punished by the market, primarily because of unpredictable economic data coming out of China. One company that now appears to be an irresistible value is the world's second largest mining company, Brazil's Vale (NYSE: VALE  ) . For the year-to-date Vale has seen its share price plunge 24% and in July it touched a new 52 week low.

The key drivers are concerns over the direction of the price of iron-ore, from which Vale derives over 60% of its revenue. This makes Vale particularly vulnerable to movements in iron ore prices. For the year-to-date iron-ore has softened by 9%, but up signiciatly from last Septermber's low of $100 per metric ton. 

The gyrations in the price of iron ore have affected earnings, but with Vale having realized $1.6 billion in cost savings during the first-half of 2013, it is now well positioned to take advantage of the bounce prices.  

Finally, Vale's compelling dividend yield of 5% is superior to competitors  BHP Billiton's 3.6%, Rio Tinto's 4% and Cliff Natural Resources 3% yield. This means it will reward patient investors as its share price grows in value on the back of cost reductions and stabilized iron ore price.

Foolish final take
The worse than expected outlook for Latin American economies, in conjunction with recent currency devaluations across the region and outflows of capital has seen investors reduce their exposure to the region. 

Many investors are terrified about investing in big banking stocks after the crash, but the sector has one notable stand-out. In a sea of mismanaged and dangerous peers, it rises above as "The Only Big Bank Built to Last." You can uncover the top pick that Warren Buffett loves in The Motley Fool's new report. It's free, so click here to access it now.

 

Six Stocks That Could Get An October Bump From The FDA

With the stock market struggling to make headway, investors might look for event-driven trades to find equities with pending news that could lead to a price pop. One of the biggest movers of stock prices is an FDA OK. Of course, a thumbs down from the regulatory agency typically leads to a crushing.

iStock has identified four drugs/products that are up for approval in October. If any of them get the OK, shares of the underlying companies could possibly rock.

On October 3rd, next Thursday, Pfizer Inc. (PFE) and Ligand Pharmaceuticals Incorporated (LGND) expect to hear from the FDA on bazedoxifene/conjugated estrogens (BZA/CE), a potential new medicine for non-hysterectomized women for the treatment of moderate-to-severe vasomotor symptoms (VMS) and vulvar and vaginal atrophy (VVA) associated with menopause, as well as the prevention of postmenopausal osteoporosis.

The FDA has assigned a Prescription Drug User Fee Act (PDUFA) date of October 14, 2013 for Antares Pharma Inc.'s (ATRS) OTREXUP, which is a potential new product for the subcutaneous delivery of methotrexate (MTX) using Medi-Jet™ technology, has been accepted by the U.S Food and Drug Administration (FDA) indicating that the application is sufficiently complete to permit a substantive review. OTREXUP is being developed for self-administration of MTX to enhance the treatment of rheumatoid arthritis (RA), poly-articular-course juvenile RA and psoriasis.

On October 17th, pSivida Corp. (PSDV) and Alimera Sciences, Inc. (ALIM) will be waiting anxiously for word from the FDA on the resubmission of the NDA and the new PDUFA for ILUVIEN. ILUVIEN (190 micrograms fluocinolone acetonide intravitreal implant in applicator) is a sustained release intravitreal micro-insert used to treat vision impairment associated with chronic diabetic macular edema (DME) considered insufficiently responsive to available therapies. Each ILUVIEN implant provides a therapeutic effect of up to 36 months by delivering sustained sub-microgram levels o! f fluocinolone acetonide (FAc). ILUVIEN is injected in the back of the patient's eye to a position that takes advantage of the eye's natural fluid dynamics.

Finally, October 21st will be FDA-day for AMAG Pharmaceuticals, Inc.'s (AMAG) for Feraheme® (ferumoxytol) Injection for Intravenous (IV) use. The company's supplemental new drug application (sNDA) for Feraheme requests FDA approval to expand the indication for ferumoxytol beyond the current indication for the treatment of iron deficiency anemia (IDA) in adult patients with chronic kidney disease (CKD) to adult patients with IDA who have failed or could not take oral iron treatment.

Investors with the stomach for high risk for potential substantial returns might consider adding the aforementioned names to their Google calendars. If any or all of them hit the FDA jackpot, so could shareholders.

The Wind Is Turning For Oracle's CEO

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Following five straight days of losses, U.S. stocks opened strong this morning, with the S&P 500 (SNPINDEX: ^GSPC  ) and the narrower, price-weighted Dow Jones Industrial Average (DJINDICES: ^DJI  ) up 0.62% and up 0.67%, respectively, as of 10:05 a.m. EDT. Initial jobless claims coming in near a six-year low will not have hurt investor sentiment this morning.

As Oracle (NYSE: ORCL  ) CEO Larry Ellison celebrates the come-from-behind yachting victory of his Team Oracle in the America's Cup, a storm may be quietly brewing on another front that is close to the software mogul's heart -- or to his pocket, at least.

With Mr. Ellison declining to address the crowd at the Oracle OpenWorld conference on Tuesday in order to follow the yacht race, some investors are increasingly questioning whether his compensation is in line with his commitment and contribution to the business.

These are a couple of the facts, as reported in a Wall Street Journal article published yesterday evening:

Mr. Ellison received a total compensation package valued at $76.9 million for the fiscal year ended in May. In a proxy statement filed last week, the Oracle board indicated it was disappointed that shareholders chose to reject its pay practices in a nonbinding "say-on-pay" vote last year, and yet it concluded, "Significant changes to our executive compensation program were not warranted"!

As the Journal remarks:

It is unusual for companies with say-on-pay defeats to dodge substantive fixes in their executive-pay practices. While the votes aren't binding, they can be embarrassing, and companies from Hewlett-Packard Co. to Walt Disney Co. and General Electric Co. have made adjustments to pay in the wake of a loss or in order to head one off.

Oracle's refusal to change its compensation structure has not gone unnoticed. Yesterday, CtW Investment Group, which invests on behalf of the Change to Win labor federation, sent a letter to Bruce Chizen, Oracle's compensation committee chairman, requesting that Oracle set limits on its option awards and appoint an independent director to the compensation committee, failing which it will vote against the firm's compensation practices and could push for a reshuffle of the committee.

Oracle would do well to heed CtW's letter, as activist investors have shown themselves increasingly willing to take on megacap technology companies. Carl Icahn recently took a position in Apple and has begun discussions with CEO Tim Cook regarding capital allocation. Another example that ought to give Mr. Ellison pause is that of ValueAct Capital Management, which owns a 0.8% stake in Microsoft (NASDAQ: MSFT  ) . With ValueAct's involvement heating up, Microsoft recently announced that longtime CEO Steve Ballmer would step down within a 12-month timeframe.

The Two Words Larry Ellison Doesn't Want You to Hear
Forget activist investors; this radical technology shift could force Mr. Ellison into a premature retirement. Meanwhile, early in-the-know investors are already getting filthy rich off of it by quietly investing in the three companies that control its fortune-making future. You've likely heard of one of them, but you're probably never heard of the other two. To find out what they are, click here to watch this shocking video presentation!

Real Goods Solar is Just as Well-Positioned as LDK Solar & ReneSola (SOL, RSOL, LDK)

Three weeks ago, I recommended Real Goods Solar, Inc. (NASDAQ:RSOL) as a buy. Though the stock was still drifting in the shadow of a huge May pullback - from a high of $7.17 to a low of $2.13 by mid-June - RSOL was finding some support at key moving average lines, and even pushing up and off of them. Not many of you (and I'm using "you" interchangeably with "investors in general") seemed to care. So why am I looking at Real Goods Solar again now? Because, with competitors LDK Solar Co., Ltd (NYSE:LDK) and ReneSola Ltd. (NYSE:SOL) seeing their shares surge today, odds are good RSOL is going to get swept up in that move. Real Goods Solar shares are a better bet, however, in that - unlike SOL and LDK - they aren't overbought yet.

The prod for the big moves from Chinese solar panel makers LDK Solar Co. and ReneSola Ltd was the announcement that China's government is aiming to install 10 gigawatts of new solar power generating capacity by 2015.

Great, but in-the-know solar investors will immediately recognize that LDK and SOL are Chinese players equipped to serve the now-growing Chinese market. Real Goods Solar, on the other hand, is an American panel manufacturer serving the United States market. What's one got to do with the other? As they say, there's more to the story.

Just to paint the bigger picture first, nations and regions have become very protectionist when it comes to their solar industries. The renewed willingness from China to support its solar panel makers is partly an effort to stimulate its own economy, but also partly a snub of last year's new tariffs the U.S. placed in imports of Chinese solar panels, and this year's yet-to-be-enacted (but certain) 67% tariff on Chinese panels imported by European nations.

Even that's a simplified explanation, though. Suffice it to say that over the past several years, stressed supply agreements and tolerances have essentially made the solar panel industry a "you serve your country and we'll serve ours" kind of playing field.

And that's when the upside for Real Goods Solar, Inc. becomes clearer. Not that there was much of a chance of foreign-made solar panels making their way into the United States in the first place, but no that Chinese-made panels are going to be used in China and European-made panels are going to be used in Europe, United States panel makers are poised to enjoy minimal competition in supplying the surprisingly-fast-growing U.S. solar power market. RSOL is well-positioned to do just that.

Just for perspective, the United States' solar market grew by 76% in 2012; $11.5 billion was spent on solar installations. Yet, only 1.2 million homes in the United States are powered by solar. That means a lot of opportunity for Real Goods Solar, now without a lot of competition to fend off. RSOL installed 25 megawatts of the 3313 megawatts put into place in the U.S. last year. The fact that the chart's still finding support at those key moving average lines is just a little gravy right now.

If you'd like more trading ideas and insights like this, be sure to sign up for the free SmallCap Network e-newsletter today. You'll get picks, industry insights, market calls, and more.

The Secret to Superior Returns

From the Editor: You're going to hear plenty of analysts telling you where to put your money today. But tomorrow you're going to hear them telling you to put it somewhere else. That's because mainstream advice is reactive, driven by headlines. Results, on the other hand, are driven by time-tested strategy... like the one you'll find in this excerpt from Keith's book, "The Money Map Method."

Many people are surprised to learn that dividend income and reinvestment can account for nearly 90% of total stock market returns over time.

That's right. Not a quarter... Not half... But 90%.

That's why placing a high priority on dividends in the [Money Map's proprietary] 50-40-10 Strategy is paramount to its success.

Unfortunately, this goes counter to the inclinations of far too many investors. They spend the bulk of their time chasing "the next hot stock" or searching for the next "sure thing."

No doubt we all love the elation that goes with being up 25%, 50%, 100%, or more.

Don't get me wrong, though. I'll take gains like that too - and we get more than our fair share in The Money Map Report model portfolio. Yet when it comes to consistently growing and protecting our money, I'd rather focus on getting the cold, hard cash that dividends kick off. That's because I know those are a much bigger component of overall investment returns over time.

I point this out because what most people fail to realize is that successful investing is a matter of continuous performance - NOT instantaneous performance.

Here's where it gets really interesting...

The Returns Can Be North of 1,000%

In some cases, the dividends are so steady and increase so much that over time you can actually make more in dividends than you originally paid to buy the stocks that produced them.

Two of the founding fathers of modern investing made that abundantly clear in the 1930s.

Benjamin Graham and David Dodd pointed out in their seminal work, Security Analysis (1934), that dividends were the primary contributing factors to long-term total return.

A few years later, John Burr Williams noted in his book, The Theory of Investment Value (1938), that "a stock is worth the present value of all the dividends ever to be paid upon it, no more, no less."

If you don't believe those assertions, ask anyone who invested in Altria Group Inc. (NYSE: MO) back in 1999 if they'd disagree.

They've enjoyed total returns north of 1,000%.

Folks who've held Kinder Morgan Energy Partners LP (NYSE: KMP) or Reynolds American Inc. (NYSE: RAI) over the same time frame have seen total returns of 1,578% and 3,311%, respectively - with returns from dividends far exceeding capital gains in both cases.

Not bad for having held through an extraordinarily difficult decade that a lot of investors wrote off as "uninvestable."

There will be plenty of trying times ahead just like the past 12 years - and once again, it will be dividends that maximize your returns.

Granted, building wealth through dividends takes time - but time is the one guaranteed asset you have to work with. Instead of constantly trying to cheat it, learn to work with it.

Chances are excellent that your money will thank you.

In fact, working with time is a key element of the next strategy employed in the Money Map Method: investing in real value...

[Editor's Note: You can get Keith's "Money Map Method"for free today. That's because Keith makes sure every single one of his Money Map Report subscribers gets their very own copy... so they know exactly how to maximize the strategy's potential. And when you join today, here's everything your new membership entitles you to...]

Canaccord Genuity Raises Price Target on Avago (AVGO)

Canaccord Genuity announced on Monday that it has raised its price target on Avago Technologies Ltd (AVGO).

The firm has maintained a “Buy” rating on AVGO, and has increased the company’s price target from $45 to $53. This price target suggests a 20% upside from the stock’s current price of $42.55.

Analyst Michael Walkly commented: "Teardown analysis of the iPhone 5S and 5C by iFixit suggests Avago has maintained very strong RF dollar content share.”

“We believe these trends are consistent with our long-term thesis that Avago is well positioned to benefit from the rapidly growing demand for FBAR/BAW filters needed to support the growing mix of LTE smartphones.”

“We also believe Avago’s proprietary technologies, strong IP portfolio, and diverse customer base in several growth markets position the company for strong long-term growth trends with industry leading margins,” added the analyst.

Looking ahead, the analyst expects to see 2015 EPS of $3.93 per share. Revenue is expected to be $3.4 billion.

Avago Technologies shares were up 93 cents, or 2.26%, during Monday morning trading. The stock is up 34% YTD.

Hire a Nanny or Send Your Child to Day Care?

Choosing whether to send your child to day care or hire a nanny is a tough decision to make -- both emotionally and financially. My husband and I recently struggled to decide which of these two care options would be best for our third child and for us.

SEE ALSO: Tax-Friendly Ways to Pay for After-School Care

For our first two children, we hired nannies to watch them. The arrangement was great because I worked from home and was able to eat lunch with my girls most days, and the nannies did a good job of keeping them occupied (and away from me) while I was writing. And financially, it made more sense to hire one person to care for our two kids than to pay for both girls to go to day care.

Our daughters are in school now, so our son is the only child in the family who needs daytime care. This time, we opted for day care because it costs us at least $100 a week less than employing a nanny and, in all honesty, it's easier.

If you recently had a child or are returning to the workforce and now need child care, here are the pros and cons of day care and nannies.

Day care

Pros. Selecting a day-care facility for your child can be just as difficult as finding a good nanny. But once you've found the right fit, day care is a breeze. My husband or I drop off my son and the center's staff handle everything while we work. I don't even have to pack a lunch or snacks for him; food is provided at the center. We can have weekly payments automatically deducted from our checking account. And it's reliable. If his regular care provider is sick, there are others on staff to fill in.

Plus, you can offset some of the cost of day care with tax breaks. You can claim the child-care tax credit if you pay for care for children younger than 13 while you work. You can count up to $3,000 in qualifying child-care expenses for one child, or up to $6,000 for two or more children. The tax credit is worth a percentage of the amount spent on child care. The percentage ranges from 20% to 35%, depending on your adjusted gross income.

However, if your employer offers a dependent-care flexible spending account, that may be a better deal. You can set aside up to $5,000 a year to cover child-care costs for children younger than 13. The money you contribute to an FSA escapes income taxes and Social Security and Medicare taxes. You might be able to take advantage of both tax breaks. See Claiming the Child-Care Credit for more information.

Cons. Most facilities operate during normal daytime work hours. So if you work, say, from the afternoon into the night, day-care hours might not mesh with your work hours. If you have two or more children, then day care might cost more than paying the salary of one nanny to watch all of your kids. And germs are spread so easily among little kids at day care that you might have to frequently take off days from work to care for a sick child (and you'll still have to pay for those days when he's home).

Nanny

Pros. Your child doesn't have to compete with several other children to get the caregiver's attention. He can interact one-on-one with a nanny in the comfort of his own home, take naps in his own bed and play with his own toys that a multitude of other kids haven't stuck in their mouths. If you work from home, you'll have the opportunity to interact occasionally with your child during the day. And a nanny can offer flexible hours and accommodate parents who don't have typical 9-to-5 work schedules.

Cons. Hiring a nanny is taxing -- literally. I can tell you from experience that dealing with the tax implications of employing a nanny is a pain. You must withhold and pay Social Security and Medicare taxes if you pay a household employee $1,800 or more a year. For 2013 you'll pay the employer's share of 7.65% of wages -- 6.2% for Social Security and 1.45% for Medicare --and you'll withhold the same amount (the employee's share) from your nanny's paycheck.

You also have to pay a federal unemployment tax on the nanny's first $7,000 of wages if you pay her $1,000 or more in any calendar quarter. Your state may levy an unemployment tax, as well. Check with your state's labor department. The federal unemployment tax is 6%, but you may be able to get a credit of up to 5.4% by paying your state's unemployment tax. Stephanie Breedlove, head of Care.com HomePay and founder of Breedlove and Associates, a nanny payroll service, says you can offset some of these household employee taxes by taking advantage of the child-care tax credit or a dependent-care FSA (see above)

To pay these so-called nanny taxes, there's lots of paperwork involved. You must get an employer identification number by filling out a federal Form SS-4 or applying online at IRS.gov. You must also fill out the appropriate form with your state to get an identification number. You must make quarterly estimated payments to cover your extra tax liability (or adjust your tax withholding from your paycheck). You'll file a Schedule H with your federal tax return in the spring to report household employment taxes. You're not required to withhold federal income taxes from your nanny's paycheck, but you can if the nanny asks and you agree. If so, complete a Form W-2, "Wage and Tax Statement," and a Form W-3, "Transmittal of Wage and Tax Statements." To avoid hassles, you can pay for a nanny payroll service such as Care.com HomePay, which Breedlove says charges $175 a quarter.

Housing Recovery Is a Confidence Game

NEW YORK (TheStreet) -- The housing recovery is showing signs of strain as rising rates, higher home prices and a shortage of homes for sale has dampened homebuyer enthusiasm.

Bank of America Merrill Lynch economist Ethan Harris noted in a report Friday that a number of housing indicators have weakened recently including housing starts, mortgage applications and new-home sales.

This is worrying, especially if interest rates rise further. As Harris put it, "While borrowing costs remain very low by historic standards, it is not clear whether the market is ready to come off 'life support' yet."

Bank of America Merrill Lynch's economists have so far maintained that the recent rise in interest rates would not derail the recovery as homebuyers continue to expect prices to go higher. That momentum from higher price expectations should offset the impact of rising rates. The economists expect home prices to rise 12% in 2013 and then expect gains to moderate to about 6% in 2014. But a collapse in home prices is unlikely, according to Harris, for three reasons. First, home prices are fairly "sticky" because buyers are slow to change their expectations in response to evolving trends. Secondly, the housing market is not as interest-rate sensitive today because there is significant pent-up demand from homeowners who exited in the downturn. Plus in the current credit market, it is the availability of credit rather than interest rates that are influencing the decision of buyers, particularly at the lower end. Basically, the buyers who are sensitive to interest rates are weeded out by the tough credit conditions. Lastly, Harris cited academic models that have found that interest rates have a smaller impact on home prices. Still, home prices respond with a lag to weakening activity so it might make more sense to study more timely demand data such as starts and permits and mortgage applications as well as the Michigan survey on home price expectations.

He added that if expectations of home prices continue to drop, BofA will cut its forecast.

In sum, the housing recovery right now rests on homebuyer confidence. Given the state of the economy now, the foundation is still weak.

-- Written by Shanthi Bharatwaj in New York.

>Contact by Email. Follow @shavenk

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

Questions Remain at Kinder Morgan: Jefferies

NEW YORK (TheStreet) -- Richard Kinder, the billionaire co-founder of pipeline giant Kinder Morgan (KMI), has not put to rest concerns about the firm's sharply falling capital expenditure, according to a research report from investment bank Jefferies.

In a Wednesday morning conference call, Kinder Morgan provided investors with a line-by-line explanation of ita falling capital expenditure in the wake of its acquisition of El Paso in 2011, including an account of merger-related synergies. In spite of the call, Jefferies said questions remain about the firm's capital reported expenditure.

"While we appreciate the added detail provided on the call, we do not believe the issues have been fully explained/resolved," Jefferies analyst Christopher Sighinolfi wrote in a Thursday research note.

Those lingering questions underscore a wave of confusion that has gripped the energy master limited partnership (MLP) sector since Kevin Kaiser, a 26-year old Hedgeye Risk Management energy analyst, called Kinder Morgan a "house of cards" in a recent research note report and questioned the accounting of Linn Energy (LINE) and Breitburn Energy Partners (BBEP). In particular, those firms' reliance on 'maintenance capital expenditure,' a non-GAAP accounting metric that drives dividend payouts across the MLP sector, has come into question. On Wednesday, Linn Energy said in a filing with the Securities and Exchange Commission that it will no longer report maintenance capital expenditure or distributable cash flow (DFC), another non-GAAP accounting metric. Linn Energy said in the filing that its partnership agreement didn't provide for the use of maintenance capital expenditure or DCF, and some analysts speculated the company's decision to change its accounting definitions may have been pushed by the SEC amid an informal review. Now, lingering concerns raised by Jefferies about Kinder Morgan center on how the company's El Paso Pipeline Partners (EPB) business characterizes its maintenance capital expenditure relative to MLP industry peers. Reliance on non-GAAP reporting of capital expenditure also appear to have been done in a non-standard fashion across the entire energy MLP sector and firms such as Kinder Morgan are now working hard to alleviate investor uncertainty. It remains to be seen whether there will be any financial impact. Linn Energy's changing definitions had no material impact on its finances, however, the company is now left with uncomparable non-GAAP accounting metrics relative to industry peers, according to Wells Fargo analysts. Richard Kinder, meanwhile, said on his firm's conference call that many of Hedgeye's calculations were "flat out wrong" and he spent the better part of the hour-long investor call providing an itemized detail of Kinder Morgan's reported capital expenditure. Much of Kinder's focus centered on what Kinder Morgan describes as capital expenditure versus what it describes as operating expense. For instance, in 2011 El Paso spent $73.9 million on anomaly repairs to its pipeline infrastructure and just $33.9 million in expense. After acquiring El Paso, however, Kinder Morgan plans to spend $96.8 million in anomaly repairs, with just $5.3 million in capital expenditures this year. Overall, Kinder Morgan noted that a $222 million variance between El Paso's 2011 capex of $354 million and its projected $132 million in 2013 capex could be explained by the expense items versus capex items and various merger synergies. Jefferies, nevertheless, said it would like to see more detail on Kinder Morgan's falling operating expense, even as much of legacy El Paso capex has become an expense item. Jefferies' biggest issue centered on Kinder Morgan's pipeline transportation business, Kinder Morgan Energy Partners (KMP), and capex the unit reports for its CO2 enhanced oil recovery (EOR) business by way of what is called "sustaining capex," a measurement of the spending needed to keep the business operational. While Kinder Morgan Energy Partners reporting of its sustaining is consistent with the definition featured in its partnership agreement, it is different than the definition used by other MLP's. "As Kinder Morgan Energy Partners has operated EOR assets for some time, many investors & analysts appear comfortable with this treatment - we are not," Jefferies wrote. "[There] are 16 upstream MLPs who largely derive cash flows from the production of hydrocarbons and their existence and collective approach to maintenance capex makes KMP's treatment." Part of the problem is Kinder Morgan's longtime use of accounting definitions that have changed as other industry competitors have grown. The other problem is a lack of clear definitions of what is and what isn't maintenance or sustaining capex, a point underscored by the changes Linn Energy made to its accounting on Wednesday. "In the absence of a formally-established definition for maintenance capex and recognizing that all MLPs have an incentive to spend only what is necessary (maintenance capex reduces DCF), investors have no better option than to compare companies' practices against one another," Jefferies wrote. The energy MLP sector has become a favorite of dividend-seeking investors who are weary of the headaches of equity market volatility. Unfortunately, it appears that because the once steady dividend-yielding energy MLP sector relies on non-GAAP accounting metrics and non-standard definitions, there is much due diligence left for investors to consider. Whether a possible rationalization of accounting metrics used by MLP's like Linn Energy and Kinder Morgan impact any of their financial results or dividend payouts is still to be seen. What is clear is that firms now face a more skeptical investor base that will have to work much harder to derive industry valuations. Kinder Morgan shares rose over 3% on Wednesday, while Kinder Morgan Energy Partners (KMP) shares rose over 1%. Both firms opened up in early Thursday trading. --Written by Antoine Gara in New York Follow @antoinegara

Apache Sells Certain Assets in Canada (APA)

On Wednesday, oil and gas company Apache Corporation (APA) announced that it has agreed to sell some of its gas producing properties in Canada for $112 million.

The company will sell its Hatton, St. Lina, Marten Hills, Snipe Lake, Valhalla and a part of its Hawkeye properties. These properties are primarily located in Saskatchewan and Alberta and total approximatly 4,000 operating wells and 1,300 non-operating wells. The average daily production for these locations is about 38 million cubic feet of natural gas and 750 barrels of oil.

The sales will be made in two separate deals. Both of these deals are expected to close in the fourth quarter.

Apache shares were mostly flat during pre-market trading Wednesday. The stock is up 12% YTD.

How NSEL fiasco thrashed people's gold investment dreams

Where Stree Dhan given to daughters in marriage is sacrosanct, alas NSEL had not committed this sin of depriving these mothers who had a dream of accumulating this Gold by investing with them. 

As far as Gold accumulation goes, E-Gold looked very viable option as you build the corpus by periodically investing to buy units of Silver and Gold, moreover you didn't have to worry for designs getting dated. But investor came face to face with some other worry, designed by NSEL.

I am one such mother who relied heavily on building Gold & Silver corpus for my daughter's marriage which is good 10 years ahead. It started on June 2011 and since then I have been counting my units and happily calculating that I am just this much units behind my target.

But it did not last long, my hopes were dashed on July 16, 2013 when Ministry's dictat for NSEL came for not to launch new contracts until further instructions and sought an undertaking that existing contracts would be settled on due date.

For commoners, it was not even easy to understand that what had happened, they just came to know that they can no longer buy E-Gold or E-Silver units and they should opt for refund.

Panic gripped amidst pessimism and then started series of form filling exercise, refund claims and I was no exception to this. After furnishing relevant documents and not less than 30 signatures here and there, my form was submitted to NSEL and it's almost 25 days, I have not heard from them. Forget a phone call, not even a mail on updating the status of my application. 

The NSEL crisis has shaken up not only the commodities exchanges but the entire capital market setup not just small investors like me.

Today I read in newspapers that Economic Offences Wing (EOW) is probing Jignesh Shah, following the complaints from small investors. But can we expect Government to intervene here and arrange for small investors who are worst hit and paying heavily for the innocence, to get this refund at the earliest. Inspite of repeated promises, Jignesh Shah has defaulted on refunds.

Hope he is not buying time for the dust to settle so that he can get away with this sin, like so many others involved in various scams. Hope Government acts no sooner than later here and save investors from trauma.  So that mothers can take forward their dream of giving Stree Dhan to their daughters.

The writer is Chief Editor of apnapaisa. ApnaPaisa is India's leading Online market place for financial products such as loans , credit cards and insurance plans .

Is TiVo Undervalued?

With shares of TiVo (NASDAQ:TIVO) trading around $10, 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. Consumers are engaging with media technology at an increasing rate so as long as TiVo continues to improve, rising prices should be in sight. However, a recent settlement has not produced positive vibes among investors in the company.

T = Technicals on the Stock Chart are Mixed

TiVo stock has been chugging higher, albeit with some volatility, over the last several years. The stock was making positive progress but is now seeing a good amount of selling pressure. 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 below its key averages which signal neutral to bearish price action in the near-term.

(Source: Thinkorswim)

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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	42.49%	0%	0%

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

	Put IV Skew	Call IV Skew
July Options	Steep	Average
August 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 minimal amount of call and put option contracts and are leaning neutral to bearish over the next two months.

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?

	2013 Q1	2012 Q4	2012 Q3	2012 Q2
Earnings Growth (Y-O-Y)	47.06%	-351.82%	309.52%	-35.29%
Revenue Growth (Y-O-Y)	21.84%	33.68%	26.64%	6.66%
Earnings Reaction	2.05%	-0.08%	6.35%	-3.41%

TiVo has seen mixed earnings and rising revenue figures over the last four quarters. From these numbers, the markets have been a bit confused about TiVo’s recent earnings announcements.

P = Poor Relative Performance Versus Peers and Sector

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

	TiVo	AT&T	Sony	Microsoft	Sector
Year-to-Date Return	-12.51%	6.23%	82.14%	30.89%	11.56%

TiVo has been a poor relative performer, year-to-date.

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Conclusion

TiVo is a provider of media content management that serves many busy consumers who need to schedule entertainment at their own time. The stock has been moving higher, with some volatility, and is now seeing some selling due to a recent settlement. Over the last four quarters, earnings have been mixed while revenues have been on the rise, confusing investors in the company. Relative to its peers and sector, TiVo has been a poor performer year-to-date. WAIT AND SEE what TiVo does in coming quarters.

Is Macy’s Stock Fashionable Again?

Macy's (NYSE:M) has emerged from the ashes of the financial crisis as the clear leader in big name retail. With strong brand equity and a revitalized operational strategy, Macy's, unlike its competitors, has figured out how to capitalize on renewed consumer confidence. Macy's share price—currently trading at around $48.50—is up 41 percent in the past year. Can it maintain its lead in the highly competitive retail industry? Let's use our CHEAT SHEET investing framework to decide whether Macy's is an OUTPERFORM, WAIT AND SEE, or STAY AWAY.

C = Catalysts for the Stock's Movement

Macy's substantial investment in its technological infrastructure seems to be paying off as it has added at least $1 billion to its top line in each of the past three years. The company has increased its IT spending in order to reduce inventory costs. For example, Macy's can now optimize its inventory distribution so that an online order will be filled at the store least likely to sell through its supply. It has also focused on strengthening its omnichannel retail strategy: integration of physical store shopping and online and mobile shopping. Macy's CEO Terry Lundgren says that Macy's is focusing on developing its business with the millennial generation. Macy's strong investment in its omnichannel retail strategy has struck a cord with millennials who enjoy the flexibility of being able to shop online or in a physical store.

After a huge restructuring program back in 2009, Macy's eliminated around 4 percent of its personnel, cut its dividend by more than half, and changed its operational structure. While the news was not popular with investors initially, it now appears to be paying off. From this restructuring effort came My Macy's. The organization changed from seven operating divisions operating 50 to 100 stores in multiple states to one centralized 'control center' and 69 divisions operating 10 stores within close proximity of one another. First off, this initiative greatly increases economies of scale for Macy's by establishing one central hub. Secondly, divisions can now tailor its product offerings to suit local preferences. The new operational structure gives Macy's a distinct competitive advantage over its competitors—at least until they can replicate it. So far, the results have been overwhelmingly positive.

E = Earnings and Revenues Are Increasing

Macy's showed that its recovery is for real as it announced impressive first quarter earnings in May. Same-store sales, arguably the most important metric in retail, rose 3.8 percent for the quarter, and its first quarter profit jumped 20 percent. As you can see from the chart below, both earnings per share and revenue have been increasing at an overwhelmingly positive rate.

	2013 Q1	2012 Q4	2012 Q3	2012 Q2	2012 Q1
EPS YoY Growth	27.91%	4.29%	12.50%	21.84%	43.33%
Revenue YoY Growth	3.97%	7.18%	3.79%	3.01%	4.31%

E = Exceptional Performance Relative to Peers

Macy's recent success is related to its competitors' consistent struggles since the financial crisis. The following table shows some key financial ratios from Macy's and its chief competitors: J.C. Penney (NYSE:JCP), Saks (NYSE:SKS), Dillard's (NYSE:DDS), and Kohl's (NYSE:KSS).

From the table, we can see that Macy's and Dillard's are the frontrunners of the group. Macy's, Dillard's and Kohl's all have comparable forward price to earnings multiples, while J.C. Penney does not have a P/E after posting an earnings loss and Saks’ is much higher at 26.27. Macy's also has an attractive FY2013 growth estimate at 14.2%, second only to that of Dillard's. Additionally, Macy's has the second highest forward dividend yield at 2.1%.

	M	JCP	SKS	DDS	KSS
Forward P/E	10.82	N/A	26.27	10.13	10.84
Growth Est. (2013)	14.20%	11.10%	-10.90%	17.90%	4.80%
Dividend Yield	2.1%	N/A	N/A	0.2%	2.8%

Conclusion

Macy's is a market leader in the retail industry. With its My Macy's business model starting to flourish, expect the retailer to hold on to its competitive advantage even as laggards like J.C. Penney and Kohl's get back in the fold. Additionally, Macy's is well positioned in the millennial market with its strong omnichannel retail strategy. Macy's forward price to equity multiple suggests that it is actually relatively cheap compared to the rest of the retail industry. The company just announced increases in its dividend and share buyback program to boot. Look for Macy's to continue to OUTPERFORM.

Is DirecTV Unstoppable?

With shares of DirecTV (NASDAQ:DTV) trading at around $63.99, is DTV an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock's Movement

Understanding the DirecTV situation is simple. Business is slowing on the domestic front, but it's exploding in Latin America.

Latin American subscribers have increased 28.9 percent year-over-year, and it's also still early in the game. Remember when DirecTV was new and exciting in the United States? Well, that's the situation in Latin America. If Latin American trends follow U.S. trends, then there are many years of growth ahead before DirecTV loses momentum. And losing momentum isn't a guarantee. Since DirecTV has already experienced slowing growth in the United States, it's likely to do its best to formulate a plan to not let the same thing happen in Latin America. Perhaps some form of innovation will take place. It's doubtful that the company will rely on cutting costs to keep the bottom line steady when growth slows.

As far as the domestic market goes, the situation isn't as bright. The good news is that out of Comcast Corporation (NASDAQ:CMCSA), Time Warner Inc. (NYSE:TWX), Dish Network (NASDAQ:DISH), and DirecTV, only DirecTV saw an increase in net subscribers in 2012. However, the rate of growth has slowed substantially, and future losess in net subscribers seems to be inevitable. DirecTV is doing its best to retain customers.

Overall, DirecTV expects EPS growth between 20 percent and 25 percent in the coming years. It's also committed to buying back stock. The biggest headwinds are increased programming costs and slower growth in the United States. Another smaller headwind is Venezuelan currency devaluation. The Venezuelan market accounts for approximately 3.5 percent of revenue. However, these headwinds should be overcome. Just take a look at the last quarter as a recent example.

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The chart below compares fundamentals for DirecTV, Comcast, and Dish Network.

	DTV	CMCSA	DISH
Trailing P/E	13.57	18.21	35.77
Forward P/E	10.75	15.59	16.66
Profit Margin	9.61%	10.18%	3.46%
ROE	N/A	14.21%	360.32%
Operating Cash Flow	5.41B	14.83B	1.84B
Dividend Yield	N/A	1.80%	N/A
Short Position	1.90%	1.10%	2.10%

Let's take a look at some more important numbers prior to forming an opinion on this stock.

T = Technicals Are Strong

DirecTV has outperformed its peers year-to-date. It’s also the best-situated going forward.

	1 Month	Year-To-Date	1 Year	3 Year
DTV	14.17%	27.57%	34.52%	70.05%
CMCSA	2.83%	16.14%	49.80%	157.8%
DISH	3.14%	6.62%	29.38%	97.06%

At $63.99, DirecTV is trading above its averages.

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50-Day SMA	57.12
200-Day SMA	52.47

E = Earnings Are Strong

Earnings have been very impressive. Revenue has also increased for three consecutive years. This is impressive, considering many companies throughout the broader market suffered a revenue decline in 2012.

Fiscal Year	2008	2009	2010	2011	2012
Revenue ($) in billions	19.69	21.56	24.10	27.23	29.74
Diluted EPS ($)	1.37	0.95	2.30	3.47	4.58

When we look at the last quarter on a year-over-year basis, we see an increase in revenue and earnings.

Quarter	Mar. 31, 2012	Jun. 30, 2012	Sep. 30, 2012	Dec. 31, 2012	Mar. 31, 2013
Revenue ($) in billions	7.05	7.22	7.42	8.05	7.58
Diluted EPS ($)	1.07	1.09	0.90	1.542	1.20

Now let's take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

T = Trends Might Support the Industry

Trends don't support the industry in the United States. The losses in net subscribers throughout the industry are an example. Many consumers would prefer not to pay for programming they don't watch. That said, trends strongly support the industry in Latin America.

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Conclusion

Revenue and earnings have consistently improved on an annual basis, capital allocation is superb, and the stock should be somewhat resilient if any stock market corrections should occur. In addition to those factors, analysts love the stock: 12 Buy, 10 Hold, 1 Sell.

Can LinkedIn Continue to Move Higher After Its Offering?

With shares of LinkedIn (NASDAQ:LNKD) trading around $240, is LNKD 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

LinkedIn is a professional network on the Internet with more than 90 million members in over 200 countries and territories. Through the company's platform, members are able to create, manage, and share their professional identity online as well as build and engage with their professional network, access shared knowledge and insights, and find business opportunities. Its platform also provides members with applications and tools to search, connect and communicate with business contacts, learn about career opportunities, join industry groups, research organizations, and share information. Networking and social contact is rising in importance for consumers and companies all around the world.

LinkedIn is planning to offer $1 billion worth of its stock — which has been trading near all-time highs and gained 110 percent in the past year — in a move to strengthen its balance sheet. Some have speculated that the business social networking site could be planning a big acquisition. Co-founder and Chairman Reed Hoffman will still retain the majority of control of the company, Forbes reports.

Also, LinkedIn shares have been on the rise after the company reported second quarter earnings that topped expectations. The professional networking service's earnings came in above the company's own typically conservative forecasts. There are now a total of 238 million members on the site with 20 million being added in the second quarter, a 36 percent increase in membership versus a year ago.

T = Technicals on the Stock Chart Are Strong

LinkedIn stock has been surging higher over the last several years. The stock is now consolidating slightly below all-time high price so it may need a bit of time before its next move. 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, LinkedIn is trading above its rising key averages which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

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

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
LinkedIn Options	37.29%	60%	57%

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

	Put IV Skew	Call IV Skew
September Options	Flat	Average
October Options	Flat	Average

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

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

E = Earnings Are Increasing 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 LinkedIn’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for LinkedIn look like and more importantly, how did the markets like these numbers?

	2013 Q2	2013 Q1	2012 Q4	2012 Q3
Earnings Growth (Y-O-Y)	137.50%	400.00%	604.00%	-50.00%
Revenue Growth (Y-O-Y)	59.37%	72.29%	117.68%	108.22%
Earnings Reaction	10.60%	-12.93%	21.26%	-0.06%

LinkedIn has seen rising earnings and revenue figures over the last four quarters. From these numbers, the markets have been happy with LinkedIn’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has LinkedIn stock done relative to its peers Facebook (NASDAQ:FB), Google (NASDAQ:GOOG), Monster Worldwide (NYSE:MWW), and sector?

	LinkedIn	Facebook	Google	Monster Worldwide	Sector
Year-to-Date Return	109.80%	56.65%	22.28%	-21.00%	27.84%

LinkedIn has been a relative performance leader, year-to-date.

Conclusion

LinkedIn allows consumers, companies, and groups to network worldwide from the comfort of their computers. The company is set to offer more stock in order to clean up its balance sheet. The stock has been surging higher over the last few years and is now trading near highs for the year. Over the last four quarters, earnings and revenues have been rising, which has kept investors in the company pleased. Relative to its peers and sector, LinkedIn has been a year-to-date performance leader. Look for LinkedIn to continue to OUTPERFORM.

Lockheed Martin Corp. (LMT) Dividend Stock Analysis

Linked here is a detailed quantitative analysis of Lockheed Martin Corp. (LMT). Below are some highlights from the above linked analysis:

Company Description: Lockheed Martin Corp., the world's largest military weapons manufacturer, is also a significant supplier to NASA and other non-defense government agencies. LMT receives about 93% of its revenues from global defense sales.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value (see page 2 of the linked PDF for a detailed description):

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

LMT is trading at a premium to all four valuations above. Since LMT's tangible book value is not meaningful, a Graham number can not be calculated. The stock is trading at a 9.1% premium to its calculated fair value of $115.47. LMT did not earn any Stars in this section.

Dividend Analytical Data: In this section there are three possible Stars and three key metrics (see page 2 of the linked PDF for a detailed description):

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

LMT earned one Star in this section for 3.) above. LMT earned a Star for having an acceptable score in at least two of the four Key Metrics measured. Rolling 4-yr Div. > 15% means that dividends grew on average in excess of 15% for each consecutive 4 year period over the last 10 years (2003-2006, 2004-2007, 2005-2008, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. The company has paid a cash dividend to shareholders every year since 1995 and has increased its dividend payments for 11 consecutive years.

Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or! Treasury bond? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:

1. NPV MMA Diff.
2. Years to > MMA

LMT earned a Star in this section for its NPV MMA Diff. of the $14,215. This amount is in excess of the $2,400 target I look for in a stock that has increased dividends as long as LMT has. The stock's current yield of 3.65% exceeds the 3.22% estimated 20-year average MMA rate.

Memberships and Peers: LMT is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index. The company's peer group includes: Boeing Co. (BA) with a 1.8% yield, Northrop Grumman Corporation (NOC) with a 2.6% yield and United Technologies Corp. (UTX) with a 2.1% yield.

Conclusion: LMT did not earn any Stars in the Fair Value section, earned one Star in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of two Stars. This quantitatively ranks LMT as a 2-Star Weak stock.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $243.37 before LMT's NPV MMA Differential decreased to the $2,400 minimum that I look for in a stock with 11 years of consecutive dividend increases. At that price the stock would yield 1.9%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $2,400 NPV MMA Differential, the calculated rate is 9.0%. This dividend growth rate is equal to the 9.0% used in this analysis, thus providing no margin of safety. LMT has a risk rating of 1.75 which classifies it as a Medium risk stock.

LMT is the largest defense contractor in the world and dominates next-generation defense platforms. It owns supply contracts for key programs such as the F-35, which assures the company multiple years of revenue. However, LMT is dependent on government funding. U.S. defense spending over the next sev! eral year! s will likely worsen as the U.S. continues to wind down Overseas Operational Contingency spending and the impact of sequestration begins to kick in by year end. In an attempt to maintain operating margins, the firm proactively reduced head count to 120,000 in 2012 from 146,000 in 2008.

I am also concerned with the company's continued increase in its free cash flow payout (73% up from 62% in February 2013) and high debt to total capital (90% up from 75% in February 2013). In addition LMT is trading at a premium to my calculated fair value of $115.70. Given these concerns, I will not add to my position at this time.

Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.

Full Disclosure: At the time of this writing, I was long in LMT (0.5% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.

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- More Stock Analysis

How I Gave Myself A 30% Raise

As my last days in the military drew near, I was not concerned about money at all.

Unlike some of my colleagues, I had a good plan in mind on how to make money as a civilian. I had already been able to supplement my income while in service with a little known area of the stock market.

 

Once I "got" what I'm about to share with you, a new income stream immediately started supplementing my military income by 10% -- while in the middle of a war zone with very limited time and enormous stress.

As soon as I left the military, I not only replaced my income, but I exceeded it by 30%. And both my income and net worth continue to grow to this day, thanks to this often misunderstood area of the market.

I don't want to beat around the bush or make this sound like some super-secret investing strategy only I can tell you about. I am talking about selling options.

Now, before you decide that you never want to try options trading, let me show you what a recent subscriber to my Income Trader newsletter had to say about this strategy:

"When I first started using [Amber's] picks, my goal was to earn $500. Then I quickly realized I can earn at least $1,000 per month. I use the profits to buy more... Not only are your picks excellent with low risk, it teaches you to look for other options on your own, which I have done."
--Nathan S., West Long Branch

I know you're probably thinking that to be able to make that much money a month, there must be enormous risk involved. That actually couldn't be further from the truth.

While it is a fact that 80% to 90% of options buyers lose money, there's a flip side... It means that 80% to 90% of options sellers make money. And that's where I like to focus.

As you may already know, "put" options give buyers the right -- but not the obligation -- to sell a stock at a specified price before a specified date.

When we sell a put contract, we receive cash, or what I call "Instant Income," upfront.

Selling a put means we're expecting the stock not to fall to a certain price. If it does, for every contract we agree to, we have to buy 100 shares at that price (more on why that's not a bad thing in a minute).

If the stock goes up, or doesn't sink to the price we specified, we pocket that upfront money as pure profit.

All 22 of my recommended trades have made gains so far this year. Take a look at how much income my top five and bottom five closed trades have generated so far in my Income Trader newsletter:

Every trade has been a winner. While our top trades really blew it out of the water, even the trades that didn't still produced annualized returns between 38.4% and 51.1%.

On average, we've generated 8.7% in Instant Income on our money since February -- an average annualized gain of 78.8%.

If an investor were to just sell one contract for each recommended trade, they would have pocketed a total of $1,808 in Instant Income since the service launched just six months ago. And that's fully scalable -- if an investor had sold 10 contracts of each recommended trade for the year, they would have amassed a cool $18,080 in Instant Income.

So what's the downside risk? As my colleague Bob Bogda explained recently, you can end up buying shares of the underlying stock if they fall below the strike price.

For example, let's say a stock falls 12% in a single day on news of a Securities and Exchange Commission investigation. Assuming shares fall below the option's strike price, investors that sold puts might be required to buy the stock for more than its current price.

But, my strategy has an answer to that potential problem...

My risk analysis goes deeper -- and into the companies themselves. I always make sure that we are selling options on stocks we wouldn't mind having in our portfolios.

When this happens, you get the opportunity to buy shares of a company you want to own anyway -- just at a lower price than the market was offering when you sold the put. You'll even know the price upfront before you enter the trade.

Of course, this does not happen often. In my experience, more than 85% of options expire worthless, meaning we don't have to buy shares, and the Instant Income we receive when selling puts is pure profit.

In fact, many of my readers are have already generated $6,000... $19,500... and even just under $150,000 in Instant Income. If doubling or even tripling your income stream sounds appealing to you, you can start your subscription of Income Trader right now by clicking here.

P.S. -- Despite today's gains, the Dow Jones Industrial Average has suffered a net loss of more than 620 points since the start of the month. Could this be the start of the 'Triple Top' threat that I've been warning about? The one that could lead to a 60% market plunge? To learn more about this potentially devastating threat -- and how you can keep growing your income regardless of what the market does -- I urge you to read my latest report here.

Making an Impact in Challenging Times: A Profile of Donor Advised Funds' Giving

Since 1991, Fidelity Charitable has made more than $14 billion in grants to some 160,000 nonprofit organizations recommended by account holders in its national donor-advised fund program.

On Monday, the organization issued a report detailing the demographics and giving patterns of some 94,000 individuals who advise on DAFs at Fidelity.

At present, Fidelity’s DAF program has 57,774 giving accounts, many of which have more than one individual with advisory privileges. Donors come from all 50 states, and range in age from 20 to 100.

The average primary account holder is 62 years old and sets up an account at age 54. Forty percent of donors have maintained a giving account for more than a decade, and 13% have had an account at least 15 years.

In 2012, donors recommended grants totaling $1.6 billion across all charitable sectors. The number of grants per giving account averaged about seven. The average grant size was $3,773, though more than $900 million was granted in amounts of $50,000 or more. 

Over the past decade, the total volume of grants grew each year, rising from 154,000 in 2003 to 429,000 in 2012. This was true during the worst years of the financial crisis (2008–2009), with more than $1 billion granted out each year.

Fidelity said in a statement that the consistent number of outgoing grants through the financial crisis demonstrated that donors used their accounts as a “ready reserve” of funds to maintain their charitable impact during challenging economic times.

The number of grants recommended in advance or recommended for recurring distribution rose at an even faster pace than overall grants, showing donors’ planned-giving approach. In 2012, scheduled grant recommendations accounted for 21% of all grants, up from 17% in 2008.

By sector, religious organizations accounted for the largest proportion of grants made at 27% in 2012, but education attracted the largest proportion of grant dollars at 26%.

Fidelity also analyzed giving accounts by size. This showed that the proportion of grants made to religious organizations decreases dramatically as the size of the account increases.

The proportion of grants to nonprofits in education, human services, society benefit and health go the opposite way, increasing as the account size grows. Grants to environment and animals, arts and culture, and international affairs remain steady regardless of account size.

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Read New Widget Makes Donor-Advised Fund Giving Easier on AdvisorOne.

Check out: Top seven investment mistakes

Last week, on a road trip from Bangalore to Pondicherry, I wondered why investors do not plan the same way as holiday-makers. After all, they are the same individual. We normally think about where we wish to reach, and at what time. Which is the mode of transport to use, and where will we stay? Of course, what�s the total budget planned for the holiday? This gave rise to the first list of common mistakes that investors make. 

Not having a planned financial goal: If we do not know where we wish to reach, we�ll never know when we have. There are speed breakers on our journey, traffic lights and �dashing� pedestrians. We may be a bit delayed in reaching, with a higher fuel consumption (investments may not deliver the desired returns); but we should never lose sight of the final destination.

Taking more risks than that are necessary: It is imprudent to budget three hours to complete a 300 km road journey on Indian roads, where the maximum speed limit is 80 km/ hour. There is a possibility that you may reach faster: conversely, you may not reach at all. Keep a close watch on your asset allocation.

Targeting maximum returns on all investments at all times: How often have changed lanes to the �faster-moving� one in city driving only to realize that our original �investment� was better!  It will be unwise to bet the savings that we need for a committed payment in the next three months in the equity market, irrespective of the euphoria prevailing. Equities are only meant for the long-term.

Aiming for maximum safety: October 2008 was as close to doomsday as we may possibly imagine. We proceed albeit at a slower pace when the road is dotted with potholes; but we do not abandon driving altogether. For financial goals that are some distance away (three years or plus), we need to benchmark investments suitably, rather than comparing them on a weekly basis. Keep in mind your returns post-tax and net of inflation.

Relying on tips -- and neighbours: When one of my colleagues boasted of his conquests in trading, I was at first envious of him. Then I wanted to emulate him. As I grew wiser, I realized that he would only publicize his successes, and never his failures. Don�t we get tips of what to buy and when, but never when to sell? And that�s how dud stocks adorn our demat statements.

Do- it- Yourself Mania: Ever wondered where India would have been if the world did not seek outsourcing? Handing over what you can�t do best to an expert is an accepted norm. But with the recent media explosion, we do feel that we have the ammunition to manage finances on our own. My mantra is that three conditions need to co-exist: detailed understanding of finance; (full) time at our disposal; and ability to remove our emotions from our investment decisions (can sell poor selections at a loss) --- only then can we do without a qualified financial advisor.

Each one of us believes he is unique. Yet, we are checking if our list of investment mistakes matched that of others. And therein is the seventh mistake. With the New Year around the corner, it seems a good time to discard this baggage and start afresh.

(The author is the Managing Director and Chief Financial Planner of International Money Matters Pvt. Ltd.)