Keep a contingency fund handy for emergencies

Here is the edited transcript of the interview on CNBC-TV18.

Q: How important is a contingency fund and is there any standard that pegs the ideal amount one should invest keeping in mind their salary?

A: It is important. In fact contingency fund should be the first step before you get into wealth creation. That is the liquid money which comes handy. Let me give you an example, during the July 26 downpour in Mumbai, a couple of years ago, phone lines were not functioning and ATMs were not working.

People could have had crores of rupees worth of assets, but no liquid money. That is where you are in trouble. You need to have contingency fund. In terms of what kind of reserve that you should have, it should ideally be equivalent to about three months of mandatory expenses.

Keep aside about three months of reserve. If you are retired, it maybe six months and if your income is volatile, it maybe for a little longer. But, usually for a standard middle class Indian family, about three months mandatory expenses should be kept for the contingency fund. Keep about 15-20 days of money in cash form at home and the rest could be in savings bank account linked to FD with an ATM facility.

Q: So you hold the balance money in a savings account which is withdrawable through an ATM. That's what you mean or would it be easily liquefiable bank FDs?

A: We now have savings accounts which are linked to fixed deposits. So you put your money in savings accounts, but banks transfer it into FD and whenever you want to withdraw money you can do it. If the savings account does not have sufficient balance, automatically the FD would be broken and you will get your money.

So instead of just leaving it idle in savings bank account at 4 percent interest, you would rather keep it in fixed deposit linked accounts. Even if it is midnight and you require the money, you do not have to follow any procedure to break that FD. They call it two in one account or transfer account.

Q: An investor and his wife are professionals with no dependents. They cumulatively hold around Rs 8 lakh in Sensex related stocks and mutual funds. They are sufficiently covered with term insurance policies and also have health insurance plans. Investor's question is do they still require to keep a contingency fund or can their insurance policies and reasonably liquid investments take care of their needs?

A: No, you still need to keep a contingency fund. As I gave you an example of the July 26 downpour, if there is a terrorist attack or if there is a tsunami, you require money to buy vegetables, milk or basic grocery, for healthcare requirements. Neither your stocks will be useful, nor your mediclaim policy would be useful. Moreover, if it is a Friday or a Saturday night then you have to wait till Monday-Tuesday. You will need to have three months mandatory reserves in the form of contingency irrespective of the size of assets that you have.

Consumer Confidence Improves from Early August

David Paul Morris/Bloomberg via Getty Images NEW YORK -- U.S. consumer sentiment retreated in August from last month's six-year high, though Americans were slightly more upbeat in their outlook than earlier in the month, a survey released Friday showed. The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment slipped to 82.1 in August from 85.1 in July. The final result did manage to top an initial mid-month reading of 80.0 and beat economist expectations for a final read of 80.5. "Most of the late August gain was due to more favorable income expectations, with consumers expecting the largest income gains in nearly five years, although the median expected increase was just 0.9 percent, less than the expected rate of inflation," survey director Richard Curtin said in a statement.

10 Best Safest Stocks To Own For 2014

However, households with incomes below $75,000 grew more pessimistic about the future, and all households expected higher interest rates over the next year and slightly slower growth. That helped drive the gauge of consumer expectations down to 73.7 from 76.5. The survey's barometer of current economic conditions slipped to 95.2 from 98.6 in July. Long-term interest rates have risen by more than a full percentage point over the last three months on the view that the Federal Reserve will start scaling back as soon as next month its hefty support for the economy. That has pushed up mortgage rates. Economists fear consumer sentiment could weaken if higher interest rates start to slow momentum in a housing revival that has been one of the brightest spots in the overall U.S. recovery The one-year inflation expectation fell to 3 percent from 3.1 percent while the five-to-10-year inflation outlook edged up to 2.9 percent from 2.8 percent.

Why Accuray Shares Jumped

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

What: Shares of Accuray (NASDAQ: ARAY  ) , a designer of medical radiation systems for the treatment of cancer, jumped as much as 14% after reporting its fourth-quarter earnings results.

So what: For the quarter, Accuray reported a 15.5% increase in sales to $84.9 million as its loss narrowed to slightly to an adjusted $0.20 per share. Both figures slid past Wall Street's estimates, which had called for revenue of $81 million and a loss of $0.21 per share. Net new product orders rose by 32% with backlog increasing by 7% to $317 million. Looking ahead, Accuray anticipates delivering revenue in fiscal 2014 of $325 million to $345 million as compared to the current consensus estimate of $349.9 million.

Now what: Today's move is a little bit confusing -- despite the quarterly beat -- given that Accuray's fiscal 2014 revenue forecast came in below expectations. In addition, Accuray also announced that it's seeking a new manufacturing strategy for the InCise multileaf collimator option on the CyberKnife M6 System, which signals to me that there's a possibility of product delays over the very near term. While I really like Accuray's technology, I still can't overlook a long history of losses. For now I'd suggest adding Accuray to your watchlist, but would stick to the sidelines until this company gets a lot closer to profitability.

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Hot Financial Companies To Invest In 2014

On Friday, Wells Fargo (NYSE: WFC  ) reports earnings for the first three months of 2013. Because it and JPMorgan Chase are the first two big banks to do so, analysts take a close look at them to predict how the rest of earnings season may play out. In the video below, Motley Fool contributor John Maxfield discusses the three things that Wells Fargo's investors should be watching for.

Wells Fargo's dedication to solid, conservative banking helped it vastly outperform its peers during the financial meltdown. Today, Wells is the same great bank as ever, but with its stock trading at a premium to the rest of the industry, is there still room to buy, or is it time to cash in your gains? To help figure out whether Wells Fargo is a buy today, I invite you to download our premium research report from one of The Motley Fool's top banking analysts. Click here now for instant access to this in-depth take on Wells Fargo.

Hot Financial Companies To Invest In 2014: First M & F Corporation(FMFC)

First M&F Corporation operates as the holding company for Merchants and Farmers Bank that provides community banking services to middle market and professional businesses in Mississippi, Alabama, Tennessee, and Florida. It offers various deposit products, including interest and non-interest bearing NOW and money market, savings, and time deposits, as well as certificates of deposit. The company also provides loan products, such as commercial, financial, and agricultural loans; non-residential real estate loans; residential real estate loans; and consumer loans. In addition, it offers various services, such as business checking, treasury management, and secured and unsecured lines of credit; sweep accounts and letters of credit; debit cards, automated teller machine access, and overdraft protection plans. Further, the company provides credit life insurance and general insurance agency services; and real estate property management services, as well as involves in asset-based lending operations. First M&F Corporation operates through its main office and two branches in Kosciusko and its branches within central and north Mississippi. The company was founded in 1890 and is based in Kosciusko, Mississippi.

Hot Financial Companies To Invest In 2014: China Real Estate Information Corporation(CRIC)

China Real Estate Information Corporation, together with its subsidiaries, provides real estate information, consulting, advertising, promotional event, and online services in China. The company provides CRIC system, a real estate information database and analysis system, which include data on specific real estate development projects and parcels of land, real estate-related news, macroeconomic, demographic and real estate industry-specific statistics, and research reports about the real estate industry It also offers real estate information services, which include data subscription services and data integration services; real estate consulting services comprising land acquisition consulting, real estate development consulting, marketing consulting, and comprehensive solution consulting services; and real estate advertising design and sales services primarily to real estate developers. In addition, the company provides promotional event services that include securing venu es, hiring caterers and other service providers, formulation of event themes, and inviting speakers and guests for real estate promotional events; and real estate online services, including region-specific real estate news and information, property data, and access to online communities through local Websites covering 138 cities across China. It serves real estate developers, banks, institutional investors, and other financial institutions and appraisers, as well as academic and research institutes, national and local governmental agencies, and home design or the media industries. The company was formerly known as CRIC Holdings Limited and changed its name to China Real Estate Information Corporation in September 2009. China Real Estate Information Corporation is headquartered in Shanghai, China. China Real Estate Information Corporation is a subsidiary of E-House (China) Holdings Limited.

Best Gold Stocks To Own For 2014: National Western Life Insurance Company(NWLI)

National Western Life Insurance Company provides life insurance products for the savings and protection needs of policyholders and annuity contracts for the asset accumulation and retirement needs of contract holders. Its life products include universal life insurance and interest-sensitive whole life, as well as traditional products, such as term insurance coverage; and annuity products comprise flexible premium and single premium deferred annuities, fixed indexed annuities, and single premium immediate annuities. The company markets and distributes its insurance products primarily through independent national marketing organizations to residents of various countries in central and South America, the Caribbean, the Pacific Rim, eastern Europe, and Asia. It also engages in small real estate, nursing home, and other investment operations. The company was founded in 1956 and is based in Austin, Texas.

Hot Financial Companies To Invest In 2014: Investec(INVP.L)

Investec plc provides various financial products and services primarily in the United Kingdom, South Africa, and Australia. The company operates in six divisions: Asset Management, Wealth and Investment, Property Activities, Private Banking, Investment Banking, and Capital Markets. The Asset Management division offers investment products and services to institutional and individual investors. The Wealth and Investment division provides investment management services for private clients, charities, and pension schemes and trusts, as well as independent financial planning advice for private clients and businesses. The Property Activities division involves in the property investments, property fund and asset management, property trading and development, and property backed distressed debt acquisition activities. The Private Banking division offers personal savings, mortgage services, treasury products, and cash management; growth and acquisition finance; wealth management; sp ecialized lending; structured property finance; and trust and fiduciary services targeting high net worth individuals, wealthy entrepreneurs, professionals, self-employed entrepreneurs, owner managers in mid-market companies, and investors. The Investment Banking division provides corporate finance, institutional research, sales and trading, direct investments, and private equity services to the listed and unlisted companies, fund managers, government, and parastatals. The Capital Markets division offers asset and liability management, treasury, interest rate, structured equity, financial, structured and asset finance, project finance, commodities and resource finance, debt capital market, and corporate and leveraged debt services to corporate clients, public sector bodies, and institutions. The company was founded in 1974 and is based in London, the United Kingdom. Investec plc operates as a subsidiary of Investec Group.

12 financial resolutions for 2012

The end of a year, or the beginning of another, marks a significant opportunity for personal reflection.  It is at this time that it is customary to look back on goals or resolutions that were made at the start of the previous year and assess how well or how poorly they were addressed.

But while everyone around us makes half-hearted promises to quit smoking, lose weight or spend more time with family, why shouldn�t we consider making some real financial resolutions that would help us improve our financial well being?

It is so unfortunate that though we spend half of our lives working long hours to make our ends meet, yet we are barely able to take out time to manage our personal finances.  The need of the hour is to not only earn, but also allocate our time in managing our money and creating a sweeping change in our mindset.

The New Year unfolds optimism for us to start afresh, grab new opportunities and forget our past mistakes. 

So let�s start this year with resolutions that could drastically improve our financial well being. 

1. Improve your financial knowledge:  Today most of us suffer from financial diseases like low returns, debt trap, underinsurance, insufficient retirement funds etc. The major cause of these problems is that though we had studied various subjects like mathematics and science at school, but we were never taught about personal finance. PERSONAL FINANCE is a subject you ought to have knowledge of, wherever you go in life. Hence, improving financial knowledge is the first step towards financial well- being.

2. Create an emergency fund: Life is full of uncertainties and it is often difficult to incorporate such uncertainties in our financial plan. Emergency fund not only helps in fulfilling the financial needs during uncertainties but also secures us from mental disturbances which may arise due to financial crisis. Our emergency fund should be equal to an amount of our monthly expenses plus our loan EMI of 4-6 months and yearly insurance premium.

3. Reduce your loan burden: We should review our existing loans and ensure that all loans help us in increasing our net worth.  In case they do not, we should plan for repaying the same. We should also find out ways to reduce our interest burdens.

4. Take adequate insurance cover: Insurance is probably the most critical, and yet the least seriously dealt with aspect of financial planning by most people. Though most of us take life insurance or health insurance covers, but the amount of cover is usually not adequate.

While buying life insurance, you need to consider the immediate, future and living expenses that your family might have to incur in case a tragedy strikes you. You should not mix insurance and investment. Hence, the right strategy is to buy pure term insurance with adequate cover. Looking at the increasing medical costs, one should also plan to take health insurance for each member of the family.

5. Prepare saving plan for each goal: Set goals and plan their achievement levels, especially when it comes to the financial ones.  Financial goals can be of three types: short, medium and long - term.  A short-term goal could be anything like say purchasing a car, a medium � term goal may include planning your child's education and a long - term goal could be your retirement planning.  Whatever be the financial requirement, it can be fulfilled by determining its urgency and thereby making a saving plan for each goal.

6. Invest as per your risk appetite: We should understand that risk and return are the two sides of the same coin and an investment with a higher return indeed bears a higher risk. Therefore, we should plan our investments as per our risk appetites. We should also ensure that the post tax returns on our investments are able to beat inflation and additionally, have sufficient liquidity.

7. Tax planning in conjunction with Financial Planning:  For most of us, tax planning is an end-of-the year, last minute exercise. Tax planning should actually be done keeping in mind our needs, life goals and risk appetite in conjunction with the overall financial planning.

8. Budgeting: To gain control over your finances, you need to know how much you are earning and where you are spending. Budgeting will help you to identify high expense area and realise that a good amount of your income is being wasted there. This knowledge can be very helpful in saving money. 

9. Write your WILL: In the normal course, we plan to write our WILL after 60-70 years of age. But unfortunately, most people die without writing their WILL and hence we see several family feuds around us. Therefore a person above 18 years, having sound mind and assets/life insurance policy should write WILL.

10. Share your financial affairs with at least one trusted person:  We often read in newspapers about billions of unclaimed money being stashed in bank accounts.  The undelying cause for this is that no other member in the family of the deceased person is aware about the finances left behind, and hence the money can not be used by the surviving family members.  Therefore, one should share all the financial matters with at least one trusted person.

11. Take advice from the right experts: In India, the financial service providers often focus on providing commission based recommendations. They are not bothered about providing knowledge to their customers to help them manage their money for financial well being. Hence, we need financial experts who can give solutions considering one�s over all needs, attitude, life style, risk tolerance and financial situation. 

Transparency and honesty are the main aspects you must consider while selecting a financial planner for yourself. While we often seek expert professional advice in every field, such as consulting a doctor for our health, an architect for constructing our home, a CA for managing our taxes, or a lawyer for handling our legal matters, then why do we not consider taking the advice of a Certified Financial Planner cm for our Financial Planning?

12.  Review your Finance: Keeping a regular eye on your personal finances will help you make the most of your money. Reviewing things like your goals, bank accounts, loans, insurance, savings, and investments will also help make sure they're still right for you. It will also alert you early to potential financial problems.

The author is principal financial planner at ARIHANT Capital Markets Ltd.

PPL Corp. Revamps Renewable Assets - Analyst Blog

PPL Corporation's (PPL) subsidiary, PPL Montana announced the allotment of a new 60-megawatt (MW) powerhouse to the residents of the region. The company's $245 million investment in the new powerhouse replaces a century old powerhouse at the Ranibow Dam hydroelectric facility. This powerhouse will generate sufficient clean electricity to power 45,000 homes.

The newly constructed powerhouse is located approximately 2,500 feet downstream from the Rainbow Dam in the Great Falls and is 200 feet from the previous powerhouse.

In addition, PPL Corporation replaced over 23 miles of 100-kilovolt (KV) power lines and structures, improved the substations at each plant, and fixed a new Crooked Falls switchyard. Currently, water runs through a 2,500-foot power canal and a 25-foot diameter penstock to the new turbine generator.

This venture will help PPL Corporation to improve the competence and reliability of the electrical systems by linking five hydro plants of the Great Falls to NorthWestern Energy's grid.

PPL Corporation started its development process at the new facility in Oct 2009 and finished the same at the beginning of 2013. This facility commenced commercial operation from Apr 2013.

The project created over 200 construction jobs in the locality. In addition, the venture will increase Rainbow's generating capacity by 70% without the need for building new and big dams.

We note that utilization of renewable energy for electricity generation is increasing primarily due to its clean nature and a growing consciousness among the masses about its benefits. This has influenced utility providers to shift their energy mix to water, solar and wind from fossil fuels.

In fact, several countries have rolled out mandates for minimizing pollution level for power generation. In Aug 2005, the U.S Environmental Protection Agency circulated a regulation that each of the federal agencies will consume renewable energy-fuelled power of not less than 7.5% in 2013 and on! ward.

To fulfill the environmental legislations, most of the utility providers invested substantial amounts for developing and upgrading their renewable utility assets. Apart from PPL Corporation, other utility providers including ALLETE, Inc. (ALE), Northeast Utilities (NU) and NRG Energy, Inc. (NRG) are investing heavily to develop and upgrade their renewable emission-free utility assets to comply with stringent regulations.

Fossil fuels still remain the most popular fuel source among energy producers owing to its abundance in the U.S. but it continues to face tough competition from the renewable power generation sources.

Allentown, Pa.-based PPL Corporation is an energy and utility holding company. The company currently has a Zacks Rank #3 (Hold).

EMC May Be Stronger Than It Looks

So far, this is looking like a quarter where the IT hardware space is still in rough shape, but not quite as bad as feared. That's good news for EMC (NYSE: EMC), as storage equipment budgets generally follow the overall space. It also looks as though VMware (NYSE:VMW) may be recovering faster/better than expected, and it's worth noting that EMC delivered an in-line quarter even though the launches of the new VNX2 products have slipped into third quarter. All told, while this wasn't a quarter worthy of a victory dance, the idea that EMC's performance is improving seems realistic and the stock's valuation still looks attractive.

In-Line Good Enough For Now
Most of the excitement for EMC's quarter is going to come from the fact that VMware seems to be rebounding both stronger and faster than expected. And while it's true that EMC's Info Intelligence and Security businesses were weaker than expected, I think the solid result in the core Storage business shouldn't be overlooked.

SEE: A Primer On Investing In The Tech Industry

Revenue rose 6% from the year-ago quarter, or 4% on a sequential basis and was pretty much bang in line with sell-side expectations. Storage revenue grew 4% (with 3% product revenue growth), with emerging products (which includes the company's flash efforts) up 39%. Info Intelligence revenue declined 6%, while security improved 4%. VMware was the real surprise though, as revenue improved 14% (with product revenue up 4%) on 9% license growth.

Margins support the idea that things are getting better. Although gross margin was still down a half-point from last year (on a big decline in security, but also declines in Info Intel and storage), but up more than a point sequentially. It's worth mentioning that on a non-GAAP basis, gross margin was down 10bp from last year. Operating income rose 8%, and the GAAP operating margin expanded by 40bp from the year-ago period.

Storage Gaining Share, And Likely To Re-accelerate
It's becoming old hat to mention this, but EMC (and NetApp (Nasdaq:NTAP)) continue to take share in the storage market from traditional competitors like IBM (NYSE:IBM) and Hewlett-Packard (NYSE: HPQ). Whether or not those company's executives would acknowledge it or not, this is likely to continue as they simply aren't investing the resources necessary to stay relevant with EMC and NetApp in the market.

Even apart from share gains, though, I believe there's a case to be made that EMC is likely to see improving growth in the second half of the year. More than a few sell-side analysts thought that EMC would miss the quarter due to delays in launching the new VNX2 and VNX2e products (the older versions of which contribute about 15% of revenue). These new products are likely to get a good reception from the market (offering better integration of HDDs and flash), and for EMC to make numbers even without their contribution, I believe that points to good pent-up demand for the second half of the year.

SEE: EMC Strengthens Security Portfolio

I also see the company continuing to build the business for long-term success. EMC has been seeing good interest in its Xtrem line of SSD/flash products, and the acquisition of ScaleIO improves the company's position in virtual SAN storage and continuous a theme of "self-obsolescence" by allowing customers to use heterogenous equipment and avoid "locking in" with a single supplier. Not only does this seem to match a similar move from Fusion-io (NYSE: FIO) with ION Data Accelerator, but if ScaleIO really takes off, I would think the reduced need for fabric switches would be a bad development for Brocade (Nasdaq: BRCD).

The Bottom Line
EMC has a winning formula of coupling strong internal development with as-needed acquisitions to stay on the leading edge of technology and customer needs in storage. I see no reason that that will change, as EMC has the resources to acquire or build whatever it believes clients need. As such, the biggest risks I see are the possibility that management badly misreads the future evolution of the storage market (including the risk of outsourcing to companies like Amazon (Nasdaq:AMZN)) and/or gets too aggressive with its M&A.

For now, though, I continue to believe this is an exceptionally undervalued stock. I'm looking for long-term revenue growth of 5% (against a trailing 10-year growth rate of 15%) and free cash flow growth of less than 6%. Even with a slight penalty to my estimated S&P 500 discount rate, that works out to a fair value of more than $38 per share. For today's price to be fair, you have to assume zero future growth, and even with the long-term risks facing IT hardware and VMware, that seems too conservative. Accordingly, I continue to believe this is one of the best long-term buys in tech today.

Disclosure – As of this writing, the author owns shares of EMC.

Mondelez's Vietnam Training Center - Analyst Blog

Mondelez International, Inc. (MDLZ) recently announced the opening of a farmer training center in Vietnam to help coffee farmers improve the productivity and quality of their crop. This will ensure high quality coffee beans for iconic brands such as Jacobs, Carte Noire and Kenco of Mondelez, one of the largest buyers of coffee in Vietnam.

The training center is the first project under Mondelez's $200 million "Coffee Made Happy" sustainability program. The program aims to train around 1500 farmers and supports Mondelez's goal to buy 100% ethically sourced coffee in Western Europe by 2015. The packaged food company plans to invest more than $1 million in Vietnam and Indonesia over the next two years to support the plan.

Mondelez's Vietnam investment comes on the heels of similar efforts by the coffee giant, Starbucks Corporation (SBUX) earlier this year. In March, Starbucks purchased a 240-hectare coffee plot in Costa Rica with plans to convert it into a global agronomy research and development center. The farm will be used to grow new blends of coffee and support Starbucks' billion-dollar commitment to buy 100% ethically sourced coffee by 2015.

Mondelez carries a Zacks Rank #3 (Hold) as the company is still in a transitional stage and it is likely to take some time to stabilize. Mondelez emerged from a split of Kraft Foods, Inc last year when the latter was demerged into two companies– Mondelez and Kraft Foods Group (KRFT). Kraft Foods Group consists of the North American grocery business of the old Kraft Foods while Mondelez handles the latter's snack business, which includes brands like Cadbury and Toblerone chocolates.

Another consumer staple stock that is worth a look is Flower Foods Inc. (FLO), carrying a Zacks Rank #1 (Strong Buy).

Yields @ new lows: Anil Rego picks 3 funds to invest in now

Top Tech Stocks To Watch Right Now

Below is the verbatim transcript of Rego's interview with CNBC-TV18.  

Q: Given that yields for government bonds are practically at an all time low and with interest rates beginning to come down, how should investors approach the debt mutual funds and any specific recommendations that you could give us?

A: Interest rates have come off a reasonable bit, thanks to the rate cuts by the Reserve Bank of India's Governor. Therefore, one would find that income funds are doing well at this point of time. However, over six month period the interest rate will continue to come down but I am not sure about longer term, one year or more than one year period.

So, in a scenario like this I would suggest to look at short-term income funds or even dynamic bond funds. One can look at Birla Sun Life Dynamic Bond Fund or ICICI Prudential Ultra Short Term Plan . One can also look at funds like Templeton India Short Term Income Fund .

New categories of MF investments: How to gain from it

Caller Q: I can invest Rs 10,000 per month. How should I allocate the same? There is no specific goal at all.

A: For your age profile and the fact that you do not have any clear goals, I would think you can end up taking a higher level of risk. The best thing you could do is to start-off systematic investments into a combination of largecap and midcap funds. You could use funds like HDFC Top 200 Fund , Birla Sun Life Frontline Equity Fund , ICICI Prudential Discovery Fund and IDFC Premier Equity Fund . So, a combination of these is what you could use.

If you want to play a little safe then you could also use balanced funds like HDFC Prudence Fund and if you need some bit of liquidity, let us say about a year or so or you want to plan for liquidity in the future then you could use some of the short-term income funds that we discussed about.

So basically, you can take a high level of risk and use systematic investments.

Asia Stocks Set to Snap Longest Winning Streak Since Jan.

Asian stocks fell, with the benchmark index capping its first weekly retreat since June, as Nikon Corp. (7731)'s reduced profit forecast overshadowed a larger-than-estimated increase in China's industrial output.

Nikon, a Japanese camera maker, slumped 14 percent, dragging consumer shares lower. BHP Billiton Ltd. (BHP), the world's largest mining company, climbed 1.8 percent in Sydney, leading raw-materials firms to the largest advance among the 10 industry groups of the Asia-Pacific benchmark gauge. DeNA Co., a mobile-game site operator, surged 11 percent in Tokyo after posting a 9.6 percent increase in first-quarter sales.

The MSCI Asia Pacific Index slid 0.2 percent to 133.57 at 5:34 p.m. in Hong Kong. The gauge retreated 1.5 percent since Aug. 2, snapping a six-week rally, the longest stretch of gains since January.

"Earnings expectations are high," Evan Lucas, a Melbourne-based market strategist at IG Markets Ltd., a provider of trading services for equities, currencies and commodities, said by telephone. "Things had started to get to a top. We need to see if the Chinese government is in control and pulling the right levers for the economy."

The MSCI Asia Pacific Index fell 7.5 percent from a five-year high on May 20 amid concern a slowdown in Chinese growth will worsen and as the Federal Reserve weighed a reduction in U.S. stimulus. The gauge gained 3.3 percent this year, compared with a 19 percent surge on the S&P 500.

Regional Gauges

The Asia-Pacific measure traded at 13 times estimated earnings, compared with 15.4 for the S&P 500 Index and 13.9 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Japan's Topix rose 0.1 percent, paring its decline this week to 4.6 percent. That is the worst weekly performance among 24 developed markets tracked by Bloomberg.

Even after falling for the past three months, the gauge is still up 33 percent this year, retaining Japan's position as the world's best-performing developed equity market. The measure has risen amid optimism Prime Minister Shinzo Abe will push through reforms while the Bank of Japan provides record stimulus.

Hong Kong's Hang Seng Index added 0.7 percent and China's Shanghai Composite gained 0.4 percent. The Hang Seng China Enterprises Index of mainland firms trading in Hong Kong advanced 1.2 percent. The gauge will extend its decline this year to 30 percent as China's manufacturing contracts and bad loans keep rising, said Guy Stear, Hong Kong-based head of Asia research at Societe Generale SA.

Markets Closed

Australia's S&P/ASX 200 Index fell 0.2 percent as the Reserve Bank of Australia lowered its 2013 growth outlook to 2.25 percent from 2.5 percent as the economy transitions from a focus on mining investment. South Korea's Kospi index and New Zealand's NZX 50 Index both retreated 0.2 percent.

Markets in India, Singapore, Malaysia, Indonesia, and the Philippines were closed for holidays.

Futures on the Standard & Poor's 500 Index (SPX) dropped 0.3 percent. The equity measure climbed 0.4 percent yesterday, halting a three-day drop, as Chinese trade data topped estimates and U.S. jobless claims fell.

Reports today showed China's annual inflation rate remained at 2.7 percent in July from June and industrial production in China rose 9.7 percent from a year earlier, exceeding analyst estimates.

Growth Target

The Chinese government has signaled that it will defend its 7.5 percent economic-growth target for the year after expansion slowed for a second quarter. China last month announced measures to support the economy, including ordering companies in 19 industries to curb overcapacity as well as tax cuts for small firms and aid to exporters. Data yesterday showed exports rose 5.1 percent in July, while imports advanced 10.9 percent.

Claims for U.S. unemployment benefits in the four weeks ended Aug. 3 declined to 335,500 on average, the least since November 2007, a report showed yesterday. They rose to 333,000 last week, in line with the median forecast of 50 economists surveyed by Bloomberg News, from 328,000 the prior week.

Nikon slumped 14 percent to 1,726 yen in Tokyo after cutting its full-year net-income estimate by almost a quarter as demand for compact cameras weakens. Global shipments of compact digital cameras slid 48 percent in May compared with a year earlier, according to the Camera & Imaging Products Association in Tokyo.

Yamada Loss

Yamada Denki Co. tumbled 16 percent to 3,295 yen after the Japanese electronics retailer reported a loss last quarter.

DeNA surged 11 percent to 2,059 in Tokyo. The gaming operator reported a 9.6 percent increase in quarterly sales.

The MSCI Asia Pacific Materials Index climbed 0.7 percent, capping a seventh week of gains. BHP Billiton advanced 1.8 percent to A$35.96 and Rio Tinto Group (RIO), the world's second-largest mining company, added 1.3 percent to A$60.25 in Sydney. Jiangxi Copper Co., China's biggest producer of the metal, rose 5.3 percent to HK$14.22 in Hong Kong.

Top 10 Insurance Stocks To Own Right Now

China Resources Enterprise Ltd., the nation's No. 2 hypermarket chain, jumped 7.8 percent to HK$25.70 in Hong Kong after saying it plans to form a venture with Tesco Plc, the biggest U.K. retailer.

The Basics of Forex Leveraging

Top 10 Value Stocks To Buy For 2014

Leverage in trading simply refers to the ability to increase the size of your trade or investment by using credit from a broker. When trading using leverage, you are effectively borrowing from your broker, while the funds in your account act as collateral. This collateral is referred to as margin.

The amount of leverage available is based on the margin requirement of the broker. Margin requirement is usually shown as a percentage, while leverage is expressed as a ratio. For example, a broker might require a minimum margin level of 2%. This means that the customer must have at least 2% of the total value of an intended trade available in cash before opening the position. A 2% margin requirement is equivalent to a 50:1 leverage ratio. In practical terms, using 50:1 leverage, having $1,000 in your account would allow you to trade up to $50,000 worth of a given financial instrument. At a 50:1 leverage, a 2% loss in the instrument traded completely wipes out a fully leveraged account. Conversely, a 2% gain doubles the account.

Leverage by Market and Instrument
Leverage available differs substantially depending on what market you are trading and from which country you are based. For example, the degree of leverage available for trading stocks is relatively low. In the United States, investors typically have access to 2:1 leverage for trading equities, a margin level of 50%.

The futures market offers much higher degrees of leverage, such as 25:1 or 30:1, depending on the contract traded.

The leverage available in the forex market is higher still at 50:1 in the U.S. and as high as 400:1 offered by brokers internationally.

Leverage in Forex Trading
High leverage availability, coupled with a relatively low minimum balance to open an account, has added to the allure of the forex market to retail traders. However, excessive use of leverage is often and correctly cited as the primary reason for traders blowing out their accounts.

The danger that extreme leverage poses to investors has been recognized and acted on by the U.S. regulatory bodies, which have created restrictions on the amount of leverage available in forex trading. In August 2010, the Commodity Futures Trading Commission (CFTC) released final rules for retail foreign exchange transactions, limiting leverage available to retail forex traders to 50:1 on major currency pairs and 20:1 for all others.

As of 2013, brokers outside the U.S. continue to offer leverage of 400:1 and higher.

Examples of Leveraged Trades in the Forex Market
In our first example, we'll assume the use of 100:1 leverage.

In this case, to trade a standard $100K lot you would need to have margin of $1K in your account. If, for example, you make a trade to buy 1 standard lot of USD/CAD at 1.0310 and price moves up 1% (103 pips) to 1.0413, you would see a 100% increase in your account. Conversely, a 1% drop with a standard 100K lot would cause a 100% loss in your account.

Next, let's assume you are trading with 50:1 leverage and 1 standard $100K lot. This would require you to have margin of $2K (2% of 100K).

In this case, if you buy 1 standard lot of USD/CAD at 1.0310 and price moves up 1% to 1.0413, you would see a 50% increase in your account, while a 1% drop with a standard 100K lot would equal a 50% loss in your account.

Consider here that 1% moves are not uncommon and can even happen in a matter of minutes, especially after major economic releases. It could only take one or two losing trades using the leverage described in the examples above to wipe out an account. While it's exciting to entertain the possibility of a 50% or 100% increase in your account in a single trade, the odds of success over time using this degree of leverage are extremely slim. Successful professional traders often suffer a string of multiple losing trades but are able to continue trading because they are properly capitalized and not overleveraged.

Let's now assume a lower leverage of 5:1. To trade a standard $100K lot at this leverage would require margin of $20K. An adverse 1% move in the market in this case would cause a far more manageable 5% loss.

Fortunately, micro lots enable traders to use lower leverage levels such as 5:1 with smaller accounts. A micro lot is equivalent to a contract for 1,000 units of the base currency. Micro lots allow flexibility and create a good opportunity for beginning traders, or traders starting with smaller account balances, to trade with lower leverage.

Margin Calls
When you enter a trade, your broker will keep track of your account's Net Asset Value (NAV). If the market moves against you and your account value falls below the minimum maintenance margin, you may receive a margin call. In such an event, you could receive a request to add funds to your account, or your positions could simply be flattened automatically by the broker to prevent further losses.

The Use of Leverage and Money Management
The use of extreme leverage is fundamentally antithetical to the conventional wisdom on money management in trading.

Among the widely accepted tenets on money management are to keep leverage levels low, to use stops and to never risk more than 1-2% of your account on any one trade.

The Bottom Line
Data disclosed by the largest foreign-exchange brokerages as part of the Dodd-Frank financial reform legislation has shown that a majority of retail customers lose money trading. A substantial if not leading cause is the misuse of leverage.

However, leverage has key benefits, providing the trader with greater flexibility and capital efficiency. The absence of commissions, tight spreads and available leverage are certainly beneficial to active forex traders, creating trading opportunities not available in other markets.

U.K. Stocks Pare Decline Before Carney’s Guidance Review

U.K. stocks pared their decline as investors awaited Bank of England Governor Mark Carney's review of guidance for interest rates.

Randgold Resources Ltd. (RRS) slid 4.1 percent after reporting that second-quarter net income slumped. Rio Tinto Group, the world's second-biggest commodity producer, lost 1.7 percent. Old Mutual Plc (OML) advanced 5.3 percent after Africa's biggest insurer said profit rose 14 percent in the first half.

The FTSE 100 Index (UKX) slipped 10.36 points, or 0.2 percent, to 6,593.85 at 9:55 a.m. in London, paring a drop of as much as 0.6 percent. The equity benchmark has still rallied 9.4 percent from a low on June 24 as the Federal Reserve said it remains flexible on the pace of bond buying and as the BOE gave forward guidance on interest rates for the first time. The broader FTSE All-Share Index also retreated 0.2 percent today, while Ireland's ISEQ Index lost 0.4 percent.

In his first press conference since taking office in July, Carney will discuss policy makers' analysis of future interest rates and the thresholds governing its quantitative-easing program. The BOE's Monetary Policy Committee last week left its target for bond purchases at 375 billion pounds ($574 billion) and its key rate at 0.5 percent, a record low.

Top Insurance Stocks To Watch Right Now

Carney speaks at 10:30 a.m. in London, after the MPC releases its quarterly report on inflation.

Weight Loss Isn't Just for Looking Good Anymore

It wasn't that long ago that obesity drugs were considered a lifestyle drug. Doctors, the Food and Drug Administration, and insurers believed losing weight was a vanity issue. Doctors were reluctant to prescribe them, the FDA wouldn't approve them unless they had squeaky-clean safety records, and insurers wouldn't pay for them.

The tides appear to be changing.

After getting rejected once, Arena Pharmaceuticals' (NASDAQ: ARNA  ) Belviq and VIVUS'  (NASDAQ: VVUS  ) Qsymia were both approved by the FDA last year. And the FDA seems open to approving a third drug, Orexigen's (NASDAQ: OREX  ) Contrave.

Getting FDA approval is a necessary step, but it isn't sufficient to gain blockbuster sales. VIVUS and Arena's marketing partner Eisai have to convince doctors to prescribe the drugs and insurers to cover them.

VIVUS is making progress. On its first-quarter conference call, the company said 34% of privately insured lives cover Qsymia. Its goal is to have coverage for half of privately insured patients by the end of the year.

Endocrinologist endorsed
Obesity drugs are included in the latest version of the American Association of Clinical Endocrinologist Comprehensive Diabetes Management Algorithm, which endocrinologists and general practitioners use as a guide to determine how to treat diabetics and those who may become diabetic.

Listed after lifestyle modifications -- eating less and working out more -- the algorithm suggests using Belviq, Qsymia, Roche's Xenical, or phentermine, the safer part of phen-fen that's available as a generic. The association clearly sees a connection between obesity and type 2 diabetes, with weight loss being an important method for controlling diabetes.

Spending money to save more
From an insurer's perspective, it only makes sense to cover obesity medications if patients are willing to cover the added expense with higher premiums or if the expense now can help lower medical costs, thus keeping premiums down.

Higher premiums might be an option for some plans, especially for employer-sponsored health insurance, where the employers could benefit from increased productivity from healthier employees.

It's clear insurers could save money by increasing weight loss. According to a study by the Campaign to End Obesity, increases in obesity rates are responsible for $74.6 billion in higher spending by private health insurers.

But those benefits from losing weight are seen years down the line. The study recommends looking out 25 years. How many people are going to have the same insurance now as they will 25 years from now?

Government wild card
The solution could be for the government to require insurers to cover obesity medications like it does with vaccines, which also have pay-now and save-later benefits. If all the insurers are required to cover the drugs, then they'll all be on a level playing field for increased premiums, and they can all benefit down the line no matter who previously insured the patient.

If the government is going to require insurers to cover the drugs, it would have to cover them in the plans it runs, Medicare and Medicaid. I think we're likely to see that as a first step before making it a requirement for private insurers, although it may take awhile given the push to decrease costs now.

Who will win the obesity drug market?
Can VIVUS pick up its lagging sales and fend off the competition, or will Arena Pharmaceuticals reign supreme in the obesity space? If you're in the dark, grab copies of The Motley Fool's premium research reports on VIVUS and Arena Pharmaceuticals to stay up to date. The reports have all the must-know information, including an in-depth look at the obesity market and reasons to buy and sell both stocks. Click now for an exclusive look at Arena and VIVUS -- complete with a full year of free updates -- today.

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More Expert Advice from The Motley Fool

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

Dow Flat Ahead of Jobless Report

LONDON -- Stock index futures at 7 a.m. EDT indicate that the Dow Jones Industrial Average (DJINDICES: ^DJI  ) may open down by one point this morning, while the S&P 500 (SNPINDEX: ^GSPC  ) may open 0.9 points lower. Both indexes closed at new record highs yesterday, and are around 15% up on the year to date.

European markets edged back from recent highs this morning, as investors took profits and several large stocks went ex-dividend. In London, investors were cautious ahead of today's policy announcement from the Bank of England, when it confirmed, as expected, that interest rates would remain unchanged at 0.5%, and the Bank's asset purchase program would be maintained at 375 billion pounds.

Today's key U.S. economic report is due at 8:30 a.m., when the weekly initial jobless claims figures will be published. Consensus estimates suggest that 335,000 new jobless claims were filed last week, up from 324,000 the previous week. At 10 a.m., March wholesale inventories will be released; they are expected to have risen by 0.4%, after falling 0.3% in February.

AES reported a 30% drop in adjusted first-quarter earnings this morning, while Precision Castparts reported a 25% increase in fiscal fourth-quarter revenues compared to the same period last year, and a 22% increase in earnings per share, which rose to $2.82. Windstream reported that its first-quarter revenues dropped 3% to $1.5 billion and said that adjusted earnings per share fell 23% to $0.10, from $0.13 for the same period last year.

Other firms due to report before the opening bell this morning include NVIDIA, Dean Foods, Carlyle Group, Cooper Tire & Rubber, Coeur d'Alene Mines, and Apache. Companies due to report later today include priceline.com, DISH Network, Cablevision, and Molycorp.

Green Mountain Coffee Roasters was 18% higher in pre-market trading, after the firm reported earnings above expectations last night, and announced that its deal with Starbucks would be extended for at least another five years. Tesla stock was also 18% higher before the bell after its breakeven results pleased investors, while Groupon stock was up 11% in pre-market trading after it beat analysts' first-quarter sales estimates. News Corp. was 2.8% ahead in early trading, after reporting profits ahead of expectations last night, while video-games maker Activision Blizzard was down 6.3% after it warned of a disappointing second-half outlook.

Finally, let's not forget that the Dow's daily movements can add up to some serious long-term gains. Indeed, Warren Buffett recently wrote: "The Dow advanced from 66 to 11,497 in the 20th century, a staggering 17,320% increase that materialized despite four costly wars, a Great Depression and many recessions."

If you, like Buffett, are convinced about the long-term power of the Dow, you should read "5 Stocks to Retire On." Your long-term wealth could be transformed, even in this uncertain economy. Simply click here now to download this free, no-obligation report.

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5 Reasons Not to Worry This Week

It's not a perfect world out there for investors, but things may be starting to get better.

The major market indexes rose sharply last week, and investors are starting to realize that this earnings season may not be so bad after all.

I recently went over some of the companies that are expected to post lower quarterly profits when they report this week. Thankfully, they're the exceptions and not the rule.

Let's go over some publicly traded companies that are expected to stand tall this week by posting year-over-year improvement on the bottom line.

Company

Latest Quarter EPS (estimated)

Year-Ago Quarter EPS

American Capital (NASDAQ: ACAS  )	$0.27	$0.24
3D Systems (NYSE: DDD  )	$0.21	$0.17
Sirius XM Radio (NASDAQ: SIRI  )	$0.03	$0.02
LeapFrog Enterprises (NYSE: LF  )	($0.07)	($0.14)
ZAGG (NASDAQ: ZAGG  )	$0.21	$0.16

Source: Thomson Reuters.

Clearing the table
Let's start at the top with American Capital. Business development companies -- or BDCs -- have become popular for investors seeking healthy yields in this climate of low interest rates. BDCs provide small and medium-size companies that don't typically qualify for conventional commercial bank financing with capital at compelling rates. BDCs then return the lion's share of the payments to investors.

American Capital has a unique structure. It doesn't pay out dividends when it's trading at a discount to its net asset value, choosing instead to return money to its stakeholders by buying back its shares outstanding. It's a move that has resulted in American Capital retiring nearly 18% of its shares outstanding since the third quarter of 2011.

Analysts see healthy improvement on the bottom line, and that will likely result in more ammo to repurchase shares.

3D Systems was one of last year's hottest stocks, soaring 271% as investors warmed up to the potential of 3-D printing. Mr. Market's reality check sent the stock lower earlier this year, but 3D Systems has made back most of those declines to be trading only 3% lower in 2013.

The long-term promise of 3-D printing is real. The applications of printing physical objects are revolutionary. However, 3D Systems is already starting to benefit from the early adopters. Wall Street sees revenue and earnings per share climbing 30% and 24% when it reports quarterly results tomorrow.

Sirius XM is another company projected to show bottom-line growth tomorrow.

The only game in town when it comes to satellite radio has made the most of the successful merger between Sirius and XM four years ago. Sirius XM is now consistently profitable, and it's hard to argue with the record 23.9 million subscribers that it had on its rolls when the year began. With car sales strong and consumers not flinching when it comes to premium entertainment subscription services, Sirius XM should have another strong showing tomorrow morning.

LeapFrog Enterprises raised the bar on electronic learning toys when it introduced its namesake product line that helps young children improve their reading and math skills. LeapFrog has evolved, putting out the popular Leapster portable system and the recently successful LeapPad learning tablet.

As one can imagine, LeapFrog's strongest quarters come during the latter half of the year, when merchants load up on its gadgetry ahead of the holiday shopping season. Red ink this time of the year is natural for LeapFrog, but analysts see the company losing half as much as it did a year earlier.

Finally, we have ZAGG. ZAGG's first big break came when it introduced its invisibleSHIELD protective film for smartphones and tablets. ZAGG's product line has expanded to included keyboard covers and audio accessories.

ZAGG is a popular stock to bet against. There were more than 8 million shares sold short as of mid-April, and that's a pretty big deal for a stock where the average daily volume lately has been less than 400,000 shares. Analysts see double-digit revenue and earnings growth, and bulls will naturally be hoping that a strong showing out of ZAGG will trigger a short rally.

Hot Canadian Companies To Buy For 2014

Cross those fingers, but know the fundamentals
Investors in these five stocks have a right to be excited. They are all improving their financial situations. They are worthy of the gains that the market rally has bestowed upon them over the past year.

I wouldn't be uncomfortable owning any of these companies. They're doing the right thing, regardless of Mr. Market's mood swings.

The expectations may be high, but these five stocks wouldn't have it any other way.

Learn more about 3D Systems
3D Systems is at the leading edge of a disruptive technological revolution, with the broadest portfolio of 3-D printers in the industry. However, despite years of earnings growth, 3D Systems' share price has risen even faster, and today the company sports a dizzying valuation. To help investors decide whether the future of additive manufacturing is bright enough to justify the lofty price tag on the company's shares, The Motley Fool has compiled a premium research report on whether 3D Systems is a buy right now. In our report, we take a close look at 3D Systems' opportunities, risks, and critical factors for growth. You'll also find reasons to buy or sell the stock today. To start reading, simply click here now for instant access.

Top 10 Blue Chip Stocks To Own Right Now

After its worst day of the year yesterday, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) bounced back today as investors saw buying opportunities and responded to a strong housing report and some bullish earnings reports. The blue chips finished the session up 1.1%.

Housing starts in March topped 1 million for the first time since 2008, hitting an annual rate of 1,036,000. Last month's figure beat expectations by more than 100,000, and was a strong gain from starts in February at 968,000, which was revised up from 917,000. Construction of multifamily units jumped 27%, while single-family homes dropped 4.8%. Building permits, a leading indicator for housing starts, came in below expectations, possibly indicating that last month's spike will be short-lived. The Consumer Price Index also declined slightly in March, essentially in line with expectations, indicating that despite the Fed's continued stimulus, the economy is far away from any inflation concerns.

Top 10 Blue Chip Stocks To Own Right Now: 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 Chuck Carlson]

  Chevron provides administrative, financial, management and technology support to the United States and international subsidiaries that engage in petroleum operations, chemicals operations, mining operations, power generation and energy services. Cramer holds 500 shares of CVX stocks. CVX has a dividend yield of 3.21% and returned 10.91% since the beginning of this year. It has a market cap of $195.53B and a P/E ratio of 8.52. Phill Gross and Robert Atchinson invested over $300 million in CVX.

• [By Hawkinvest]

  Chevron Corporation (CVX) is a leading integrated energy company with exposure to oil, natural gas, refining, etc. This could be one of the most undervalued stocks in the market. Chevron pays a dividend that beats many other stock and bond yields, plus it has a below market price to earnings ratio of about 8 times earnings. The average stock in the S&P 500 Index currently trades for over 12 times earnings. If oil prices continue to rise, the already healthy profit estimates for Chevron might be too low. With oil prices showing strength this early in the season, Chevron could be poised to beat earnings in the coming months. However, the stock is trading at the upper end of the recent trading range. Recently, it has been possible to buy this stock at about $102 per share, so waiting for dips could pay off.

  Here are some key points for CVX:

  Current share price: $104.25

  The 52 week range is $85.63 to $110.01

  Earnings estimates for 2012: $12.66 per share

  Earnings estimates for 2013: $13.20 per share

  Annual dividend: $3.42 per share which yields 3.1%

Top 10 Blue Chip Stocks To Own Right Now: 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 Ed Carson]

  The holiday season was hit or miss for many retailers, but indicators are that consumers were using plastic. Visa shares have risen steadily for the past seven months, with a strong 6% gain so far in 2013. Even in America, consumers continue to shift more from cash and checks to credit and debit cards. Overseas, consumers are adopting plastic, while some are bypassing cards and going straight to mobile payments. Visa wants to make sure it's part of that mobile solution.

  Visa earnings growth has decelerated for the past two quarters from 30% to 24% to 21%. Revenue growth in the latest quarter picked up to 15%, matching the best gains of the past two years.

• [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).

• [By Jeff Reeves]

  Despite a very rough 2011 so far, payment processor Visa (NYSE:V) is right there beside Apple with gains of nearly 30% since the first of the year. Visa stock continues to set 52-week highs and is within striking distance of new all-time highs above $97.

  Visa doesn’t have quite the track record of many blue chips, having only gone public in 2008. However, there are some big reasons to expect that the recent growth is not just a flash in the pan.

  For starters, the demographic trends are hard to ignore. The percentage of cashless transactions continues to rise. Despite rapid growth from fees for payment processing, 40% of all transactions in the U.S. still are done with cash or paper checks. That’s to say nothing of rapid growth of debit and credit card business in emerging markets. Visa’s logo is everywhere and will only be accepted in more places as the months go by.

  And don’t forget, Visa is not a financial stock. Service fees account for more than one-third of revenue — meaning the stock is little more than a toll-taker on the road between a merchant and a customer’s checking account. It is not exposed to bad debt the way financial stocks like Bank of America (NYSE:BAC) and others are.

  Visa has seen year-over-year earnings growth every single quarter since going public, and it should keep up that growth. Additionally, revenue was up 17% from fiscal 2009 to fiscal 2010 and is forecast to jump another 12% in fiscal 2011.

  There is big growth to be had at Visa. It might not be Apple, but its strong growth potential and dominant brand make it a go-to stock for large-cap investors.

• [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."

Best Performing Companies To Watch 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 Louis Navellier]

  Colgate-Palmolive (NYSE:CL) is a staple of consumer products, selling its oral, personal, home care and pet nutrition products in over 200 countries. A nice year-to-date return of 16% has helped keep Colgate stock holders happy all year.

Top 10 Blue Chip Stocks To Own Right Now: 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.

• [By MelvinPasternak]

  Philip Morris International Inc. (PM), through its subsidiaries, manufactures and sells cigarettes and other tobacco products. The company has raised distributions since the spin-off from Altria Group in 2008. The last dividend increase was 20.30% to 77 cents/share. Analysts are expecting that Philip Morris International will earn $5.22/share in 2012. I expect that the quarterly distribution will reach 85 cents/share in 2012. Yield: 3.90%

Top 10 Blue Chip Stocks To Own Right Now: 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 Jeff Reeves]

  McDonald’s (NYSE:MCD) isn’t quite as dramatic as Apple when it comes to stock performance. The company has “only” doubled since 2007 and “only” tripled since 2005 — compared with 330% gains since 2007 and 900% gains since 2005 for Apple.

  But you have to admit, those gains still are incredibly impressive — especially for a mammoth blue chip like McDonald’s that is dominant worldwide.

  Also worth consideration is the fact that, since 2007, McDonald’s has paid dividends totaling $9.26 per share. Since McDonald’s stock was trading around $45 four years ago, that means on top of doubling your money via the share appreciation, you would have gotten back about 20% of your initial investment via dividends alone. Or if you reinvested those funds, you really could have supercharged your returns even more.

  Looking forward, McDonald’s shows no signs of slowing down. It has surpassed analysts’ expectations in?four of its past five earnings reports, most recently with second-quarter numbers boasting a 15% increase in profits. While its revenue has risen at a modest 3.6% annual rate during the past five years, net income has surged at a 14.6% annual rate — proving MCD can maintain margins and grow profits even if sales don’t soar.

  McDonald’s, like Apple, knows how to deliver small-cap gains despite its blue-chip size. That makes this pick a keeper.

• [By ETF_Authority]

  McDonald’s Corporation (MCD), together with its subsidiaries, operates as a foodservice retailer worldwide. The company has raised distributions for 35 years in a row. The 10 year annual dividend growth rate is 26.50%/year. The last dividend increase was 14.75% to 70 cents/share. Analysts are expecting that McDonald's will earn $5.73/share in 2012. I expect that the quarterly dividend will reach 77 cents/share in 2012. Yield: 2.80%

• [By Martin]

  The company is one of the world’s most recognized brands. The Golden Arches has locations all over the world. McDonald’s has managed to continually reinvent itself and its menu, and delivered strong shareholder returns in the process. However, it is lagging behind Yum! Brands (NYSE:YUM) in China, which is a key market for growth. While the 10-year dividend growth rate is at 26%, I expect distribution growth over the next decade to average 10%.

• [By Brian Gorban]

   Fast food giant and world-renowned company McDonald’s (NYSE: MCD) is undoubtedly a name you’ve heard of, as “the golden arches” are ubiquitous--and with good reason: The company operates over 33,000 restaurants in 119 countries. With over $27 billion in revenue and a market capitalization near $90 billion, McDonald’s is simply a juggernaut and should continue to be a beneficiary of the global growth story happening predominately in the “BRIC” (Brazil, Russia, India, and China) countries in the years and decades to come.

  Of course, those countries have not been spared the current economic carnage and that has caused the company to miss the past two quarters’ consensus estimates, but that has created a buying opportunity. With the stock trading not far above its $83.31 52-week low, McDonald’s is now yielding an attractive 3.5% dividend yield, and with a low 54% payout ratio, look for the dividend to not only be safe but be raised in the near future. Add in the fact that the company has a comparatively and historically low 16x forward and trailing P/E, and I think MCD should serve investors well for the long-term while one can wait and happily collect the nice 3.5% dividend.

Top 10 Blue Chip Stocks To Own Right Now: 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 Kevin M. O'Brien]

  Apple Inc. (AAPL) will reach $500.00/share at some point in 2012. I view Apple as trading at an extreme discount right now. I am expecting to see a run-up in price ahead of the company's next earnings call on January 17, 2012. I am also expecting that this earnings release is going to be absolutely fantastic. It would be a wise choice to block out all the negative rumors and sentiment surrounding Apple right now. This is a stock that is so attractively priced right now that it will not stay at this level for very long. Check back with me after January 17th next year.

• [By Jim Jubak]

   Not all my picks for 2013 are riding trends. Some, including Apple (AAPL), make their own trends. If Apple's remarkable and maddening stock performance in 2012 demonstrated anything, it was that this stock dances to its own music. Apple shares are capable of climbing when everything else is tumbling and of plunging while the rest of the market is slowly moving ahead.

  The stock ended 2012 in deep retreat as sentiment, rather than fundamentals, turned against it. (And sentiment on this baby can quickly go into reverse.) Apple fell from $589 on Nov. 11 to $509 on Dec. 14 -- and that's after a plunge from $702 on Sept. 19 to $526 on Nov. 15.

  Investors sold Apple at the end of 2012 on downgrades from Wall Street analysts that cited order reductions to Apple suppliers. But curiously, sellers seem not to have read all the way through these opinions. For example, the analyst at Canaccord Genuity who cut his target price to $750 from $800 (while maintaining a buy rating) wrote that reduced orders to iPhone suppliers could be a result of softer-than-expected sales in international markets or Apple's intention to launch a new iPhone model in June. Other technology analysts,most notably Horace Dediu on Asymco, have argued that Apple is moving to a six-month cycle from a new-model-every-year cycle. This would be a huge change, and I find the argument convincing.

Top 10 Blue Chip Stocks To Own Right Now: 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 Louis Navellier]

  IBM (NYSE:IBM) is an international IT company made famous by its line of personal computers and various IT services. A year-to-date gain of 18% shows IBM stock has a lot to offer.

• [By Paul]

  IBM. Emerging markets are a big growth driver for this computer systems and software provider. Not only that, Resendes says, IBM has "a bullet-proof balance sheet that will allow it to weather the current storm and position it for superior growth and profitability in the long term." He thinks the stock, which recently traded at $93, is worth $120 a share: ''There are some obvious companies that offer much bigger discounts, but you have to incorporate the safety factor. You're getting a premium company here that's a good spot to be in within the tech space."

• [By Jim Cramer]

  When this company talked about lofty EPS for 2015, initially the street was skeptical especially after IBM reported a blah quarter soon after the expectations were laid out. I now think the company has $20 earnings per share capabilities out three years and that $13 is doable for 2011. You keep the multiple the same and you get a $169 stock. I think it does just that. This one's cheap, way too cheap and it will be cheap next year, too, but on a bigger earnings base which is how it can get to my price target.

Digital Realty Trust (DLR): Trap or Value?

Overall Revenue Growth Rate: 29% [ Enlarge Image ]
-FFO Growth Rate Per Share: 18%
-Dividend Growth Rate Per Share: 16%
-Current Dividend Yield: 5.5%
-Credit Rating: BBB

Digital Realty Trust appears to offer a compelling combination of dividend yield and dividend growth. There exists some drama regarding differing opinions about the future of the REIT and accounting disagreements, which has brought the price down considerably.

OverviewDigital Realty Trust, Inc. (NYSE: DLR) is a large Real Estate Investment Trust (REIT) that focuses on data centers.

Digital Realty provides a number of services, including turn-key modular data center solutions (accounting for 57% of DLR's rent income) where Digital Realty does practically all of the work, or powered-base buildings (accounting for 32% of DLR's rent income) where they focus on the real estate, shell, and electrical/mechanical aspects while the client company focuses on the critical data center aspects. Smaller aspects of the business contribute the remaining revenue.

In terms of geography, Digital Realty Trust has over 120 properties which are leased out to over 600 tenants. The properties are placed in high population states across the United States, as well as several countries in Europe, plus Australia, Hong Kong, and Singapore. Currently, 80% of revenue comes from North America, 18% from Europe, and 2% from Asia.

The tenants are from a number of industries:
29% IT Services
27% Telecom Providers
19% Financial Services
25% Other Corporate Enterprises

The top ten tenants represent about one third of total rent for Digital Realty, with the largest tenant, CenturyLink, representing about 9% of total rent.

Data center shells have a life expectancy of 40-50 years, while the electrical and mechanical systems are far more expensive per square foot and have life expectancies of onl! y 25 and 35 years respectively.

Revenue[ Enlarge Image ]
(Chart Source: DividendMonk.com)

Revenue growth over this period was about 29.5% per year on average, which is explosive. To get that kind of growth, however, Digital Realty continually issues new shares to bring in new equity and expand its base of outstanding shares, so the number of shares outstanding increased by about fivefold over that period.

The rate of revenue growth per share over this time is highly dependent on which time period is used, because a huge relative increase in the number of shares occurred during 2005-2007 and then relaxed to a lower expansion rate. So, the seven year annual revenue growth rate per share (2005-2012) is only 3.4%, but the five year annual revenue growth rate per share (2007-2012) is nearly 12%, and the three year annual revenue growth rate per share (2009-2012) is 10%.

FFO and Dividends[ Enlarge Image ]
(Chart Source: DividendMonk.com)

The FFO growth rate per share over this period was over 18% per year, while the dividend growth rate was over 16% per year. The FFO and dividend growth going forward are going to be lower as DLR is maturing; the dividend increased by 7.3% and 6.8% per year during the previous two years respectively, and the long-term dividend growth potential is ultimately constrained by their revenue growth per share.

The current dividend yield is 5.5%.

Approximate historical dividend yield at beginning of each year:

YearYield

Current	5.5%
2013	4.3%
2012	4.1%
2011	4.1%
2010	3.5%
2009	4.3%
2008	3.5%
2007	3.3%
2006	4.! 5%

Balance SheetDigital Realty currently has BBB credit ratings. The total debt/equity ratio is 1.4x, and the interest coverage ratio is about 4.4x.

Investment ThesisData usage continues to explode in volume. Corporate data, social networking, trading platforms, and online retail continue to grow, and telecom services are supplying ever greater numbers of data contracts rather than just cellular phone service. Meanwhile, cloud computing has shifted from being a buzz word to being more and more of the status quo, which means more applications are shifting towards servers and away from clients.

Cisco currently has an estimate for 29% compounded annual global IP traffic growth per year between 2011 and 2016, which means a three or fourfold increase in traffic over a five year period.

In addition, the International Data Corporation's Worldwide Data Census expects 18% of data centers to be outsourced in 2017, which is nearly a doubling of the current (2013) figure of 10%.

Putting the two projections together, the industry is looking at a multifold increase in global data usage and then a doubling of the percentage of data centers that are outsourced. Digital Realty Trust, being by far the largest at what it does, is poised to continue to capture a healthy chunk of this growth.

RisksDLR's data center properties are more specific and technical than many other REITs, so while they may be geographically diversified, they are heavily focused on a few industries, as described in the overview section.

A few months ago, Jon Jacobson gave a damning opinion of the REIT, calling DLR a short opportunity. The varied arguments were that it's a commodity (no moat) business, the fundamentals are deteriorating, and larger cloud-based competitors like Amazon, Microsoft, or Google can move in as essentially unstoppable larger competitors. The most specific argument was that the REIT substantially understates its real capital expenditures, and when his est! imate for! the capital expenditures is factored in, then FFO and therefore the fair value is substantially lower than the current trading price.

On the other hand, Gary Brode from Silver Arrow presented a bullish case for the REIT, and countered Jacobson's short thesis. He provided opposing arguments for some of the arguments that it's a short, such as stating that Amazon, Microsoft, and Google are not really direct competitors, and pointing out that the estimate for higher capital expenditures is based on faulty assumptions, and that the REIT is in fact properly reporting its real capital expenditures on its income statement.

Conclusion and ValuationI decided to publish a report at this time due to last week's earnings release. DLR reported a fair quarter, but dropped in stock price from nearly $64/share to under $57/share, and this is coming after previous drops in price that once priced shares at nearly $80. Overall, DLR shares have underperformed the market during the 2010-2013 period.

This quarterly drop seems to be primarily based on an accounting change, which may be affecting qualitative opinions much more than quantitative opinions. In other words, an accounting change following the Jacobson criticism of their accounting is spooky to some investors, and it resulted in a drop in price.

Investors will have to decide for themselves if the fundamentals of the company appear sound. The industry that this REIT operates in is a quicker-moving one than the typical REIT, so rewards and risks are amplified. Some opinions are that this is a classic example of a falling knife, while others view it as a strong value opportunity.

Applying the Gordon Growth Model with a 10% discount rate (target rate of return), DLR would have to produce compounded 4.5% annual dividend growth for the foreseeable future to make the current price of $57 fair, which is comfortably below the current revenue growth per share rate and the most recent dividend increase of 6.3%.

Therefore, the cu! rrent pri! ce appears to offer a reasonable safety margin for some impact of accounting questions, industry commoditization, or large cloud competitors that short proponents cite as issues, if one is bullish about the industry and believes the fundamentals to be sound.

To increase the margin of safety further, another way to enter a position with DLR is to sell put options at a strike price of $55 for January 2014. As of this writing, this would result in entering the stock at a cost basis of $50.60 if the shares are assigned, or obtaining an 8+% rate of return from premiums over a five-and-a-half month period if they're not assigned.

Either way, investors interested in exposure to this industry may find Digital Realty at this price to be worth looking further into to see if their view of the fundamentals matches some of the more bullish arguments.

Full Disclosure: As of this writing, I have no position in DLR.