VIX Traders Are Complacent

As the government lurches toward a shutdown tomorrow and the October 17 deadline for a debt ceiling deal approaches, volatility traders appear surprisingly complacent. Writing this article midday on Monday, the VIX is a little south of 17, lower than its historical average of about 20. According to the latest commitments of traders data from the CFTC, "leveraged funds", a category that includes hedge funds and other money managers, are heavily net short VIX Futures: 33,327 contracts long, 163,413 short and 37,361 spreading.

The "smart money" is betting that these issues will be resolved without much ado. And traders have good reason for thinking this: shorting the VIX through ProShares Short VIX Short-Term Futures ETF (SVXY) or VelocityShares Daily Inverse VIX Short-Term ETN (XIV) has been a winning strategy during the last several episodes of government squabbling, from last December's budget battles to the Cyprus bailout and the sequester. Even after it became clear this morning that a shutdown is likely, front-month VIX futures have hardly budged. At a current price of 16.15, the front month contract is now selling below the spot VIX price, a somewhat unusual phenomenon known as backwardation. What this means is that market participants believe the VIX will decline from current levels when the October 15 contract expires in fifteen days. VIX shorts are so optimistic that they are willing to pay a premium in the form of time decay to VIX longs for the right to bet on this decline. This does not usually happen, because shorts typically demand a premium from the longs in order to take on the risk of a sudden sharp spike in expected volatility or "black swan".

I believe that shorts are making a bad bet. Even if the government shutdown is averted or only lasts a few days, October 17 is still the key date on the upcoming risk calendar. Both sides of the aisle seem intransigent and willing to play chicken with the economy for the sake of scoring political points. ! On the left, the Affordable Care Act is non-negotiable and Obama's key domestic policy achievement. On the right, the Affordable Care Act threatens the economy and represents worrisome government overreach. I will not comment on the merits of the legislation here, but only note that both sides are itching for a fight and risk alienating their bases if they back down. In the end, political survival depends upon votes, and many voters appear to prefer confrontation to compromise.

So if the government shutdown is avoided by a last-minute compromise or only lasts a few days, both sides will be left unsatisfied. They will seek to appear tough during the debt ceiling fight, which will likely consume the news during the first half of October. VIX shorts appear to think that while there may be some posturing, the debt ceiling debate will be concluded by October 15th. I'm not so sure. Even if there is only a 20% chance of the debt ceiling debate going to the last hour and only 1% chance of a technical default or constitutional crisis, the risk-return seems asymmetrical to me. A debt default or constitutional crisis poses a much greater threat to the global financial system than some federal government workers getting furloughed.

John Kenneth Galbraith once quipped that the financial memory is very short, and VIX shorts appear to have forgotten about 2008, 2010, and 2011 already. The short trade has been the path to riches since the beginning of 2012, but now the trade is getting crowded and traders are complacent. Every few years, volatility suddenly spikes and short VIX positions lose 50% or more. Complacency is replaced by fear as VIX shorts and other leveraged "risk-on" players scramble for the exits in the face of margin calls and evaporating portfolios. October may become another episode of VIX shorts getting pulled out to sea.

Personally, I'm waiting on the sidelines for a washout of the shorts to initiate a short position myself. It is only when traders are reminded that VIX fu! tures are! extremely risky and the shorts capitulate to fear that the short trade really pays off.

Source: VIX Traders Are Complacent

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

CIT And John Thain's Stunning Turnaround

Wall Street is a forgiving place. How else would you explain the stunning turnaround of former Merrill Lynch CEO John Thain and the once bankrupt CIT Group CIT Group?

 Former Merrill Lynch Chief Executive and current head of CIT Group John Thain.

Well, a healthy business helps too.

CIT took some $2 billion in TARP funds in 2009 then filed for bankruptcy months later after being denied a second bailout. The move wiped out shareholders.

Thain, a former Goldman Sachs exec and CEO of NYSE, was brought in February 2010 to clean up the mess shortly after an embarrassing exit from Bank of America Bank of America Merrill Lynch.

Under Thain CIT has repaid or refinanced $31 billion in debt, shares have climbed 58%, the firm has  returned to profitability and is repurchasing $200 million in shares in 2013. Its market cap is $10 billion.

You might recall Thain was in charge of Merrill when it was sold to Bank of America and then forced out after awarding big bonuses to executives despite his firm's massive losses. CIT, a commercial lender to small and middle market businesses, declared Chapter 11 bankruptcy amid the financial crisis when its loans soured and it was unable to pay bondholders or access the credit market.

Fast forward three years and both CIT and Thain have reemerged stronger than before.

"CIT has done an amazing job," says Henry Coffey Jr., an analyst at Sterne Agee. "They outlined a plan after the bankruptcy and systematically delivered on it."

That plan: Pay off and refinance debt, build assets and move past its the regulatory restrictions. CIT and Thain have accomplished all of that. The Fed imposed an oversight plan after the bankruptcy which restricted CIT on dividends, buybacks, and hiring among other things. The oversight was lifted in May.

CIT's biggest problem leading to its bankruptcy in 2009 was its heavy reliance on funding from bonds and short-term debt, also known as commercial paper. For example, CIT was paying its senior debt holders Libor plus 10–an astronomical rate for a company trying to make money by financing others.

Today CIT is funded much differently. CIT launched an FDIC regulated bank in October 2011 which now has $14 billion in assets and $11 billion in deposits. Those deposits represent about 35% of CIT's funding today compared to 10% back in 2009. Thain plans to grow that number.

Expenses are also down as Thain cut headcount from over 4,000 in 2010 to 3,420 today.

The turnaround has sparked talks of a potential acquisition of the company by one of the big banks. Thain has acknowledged the attractiveness of CIT saying traditional big bank are awash in deposits and unable to generate attractive assets while his company holds high-yielding assets.

"Some things are very easy in this business and CIT is the best example of that. They gave you a plan, showed you the numbers and executed. Now they're at a ROE of 10% or 12%," says Coffey.

Being upfront about upfront money

In an effort to attract top talent in a highly competitive industry, some firms have escalated the recruiting packages to an unprecedented level. These lucrative—and some may say inflated—transition bonuses in the form of upfront money have also caught the attention of regulating bodies including FINRA.

Historically, to help offset many of the costs of making a move to a new affiliation as well as provide signing incentives, firms developed transition packages.

Although the hard dollar cost of transition really hasn't increased over the past 15 years, the upfront money some firms are offering has.

On face value, more upfront money may seem great from an adviser's point of view. However, there a few truths the adviser should be aware of.

Truth: Upfront money is a taxable event to the financial adviser. Over the term of the loan, a portion of the note is “forgiven” and “taxed” annually.

The upfront money an adviser receives to change affiliations is compensation. Firms typically wrap the offering into a promissory note detailing how the loan will be forgiven over a three, five, seven or nine-year period. Once the financial adviser moves, the “upfront” portion of the loan is provided. In the wirehouse or regional channel, a financial adviser could receive “cash up front.” (Sometimes as much as 100%-140% of the trailing 12-month revenue.)

Each month, an amortized portion of the loan is “forgiven” and becomes taxable income. Employee firms (wirehouses, regionals) will automatically withhold and escrow the estimated taxes due on the income. Independent firms will 1099 the financial adviser each year.

Advisers should request a hypothetical illustration detailing the transaction and tax implications. While receiving the money upfront could create a cash high, advisers will have a future tax liability. In the case of the employee adviser, monthly taxes are withheld on the amortized income from the upfront money in addition to the taxes withheld on their monthly production.

Truth: As a recruit of the firm, large upfront money is attractive, but as a practicing adviser of the firm your view may change.

As a practicing adviser you will likely hope your firm is continually investing in areas designed to help you grow your business and serve your clients—integrated compliance, innovative technology, dynamic marketing and ample staff support.

If a firm's philosophy leans too heavily on recruiting new advisers, you may be disappointed with the amount invested to serve existing advisers. This is especially true if firms are using w! orking capital to overly incentivize future advisers.

Bottomline: Most financial advisers will change firms during the tenure of their career for a variety of reasons. Ultimately, the decision to change firms should create added value to the adviser's clients and foster business growth. The advisers most pleased with their decisions to move are those who determined the “cost of staying” far out-weighed the cost of change.

Tom

MAKO Surgical (MAKO) Just Cleared Its Last Hurdle

Investors looking for a turnaround story should put MAKO Surgical Corp. (NASDAQ:MAKO) on their watchlist, if not in their portfolio. And just to be clear, I specifically mean long-term investors, as opposed to short-term traders. MAKO has dropped some long-term hints that its long-term slump is about to be reversed and turned into a long-term rally.

Just to be clear, the prompt for this bullish call on MAKO is a technical (chart) based one. While such tactics and clues are generally reserved short-term trading, they can still be useful to long-termers. The key is which clues and signals you choose to examine.

For MAKO Surgical Corp. shares, the big clue today is the 200-day moving average line (green). The stock pushed above this pivotal long-term line in the sand today after failing to cross above it the last two times it was tested. But, given how the 50-day and 100-day moving average lines (purple and gray, respectively) have started to offer support to MAKO shares when they pull back, this cross of the 200-day line has the right foundation behind it.

As compelling as that may be, the weekly chart of MAKO Surgical tells an even more compelling story. As you can see on the weekly chart below, this chart's been working on a slow, U-shaped turnaround from 2012's implosion for a while. It's the shape of that rebound that makes this new cross of the 200-day moving average line such a big deal.

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Whereas V-shaped reversals can and often do fail, the slow, arc shape of this budding recovery suggests investors are being methodical and deliberate about it. The slow transition from a net-bearish to a net-bullish environment isn't the kind of effort that's going to up-end the rally the very minute a few people feel the best is behind MAKO and it's time to lock in gains. Rather, it's the kind of move that doesn't attract much attention until the momentum is so strong that nobody would dare sell into the bullish avalanche.

Great, but is MAKO Surgical Corp. even close - at the corporate level - to giving the market the kind of news that will allow the rally to keep rolling (or at least avoid the kind of bad news that can give the market a reason to sell it)? In a word, yes.

MAKO makes surgical robotics and implants. Last year was clearly a tough one for the company. Lawsuits, the possibility that the market for its products would quickly dry up after some serious snafus, and patent fights were just the beginning. As is too often the case though, the market assumed the worst, and priced in problems that it didn't need to. Now that the fog is lifting and we can see the company's not on its death bed, investors are starting to trickle back in. As was described above, though, that trickle is now quickly becoming stampede that few are going to try and fight.

Bottom line? Time to take a shot.... a small one anyway.

If you'd like to get future updates on MAKO Surgical and other medical device stocks, register for the SmallCap Network daily e-newsletter. You'll get stock picks, market calls, analysis, and more. Best of all, it's free. Sign up today.

5 Toxic Stocks You Should Sell

BALTIMORE (Stockpickr) -- Don't be fooled by last week's bounce -- some stocks are still looking toxic right now.

Despite a big bounce last Wednesday, the S&P 500 is actually down 0.14% since the Fed announced that the taper caper was off. If the end to QE was really priced into the market, as so many said, then stocks sure aren't showing it. While the broad market still looks bullish overall, owning weak individual names is still a big liability in this market.

That's why we're taking a closer look at five "toxic" stocks you should sell today. Now. To be fair, the companies I'm talking about today aren't exactly "junk."

By that, I mean they're not next up in line at bankruptcy court. But that's frankly irrelevant; from a technical analysis standpoint, they're some of the worst positioned names out there right now. For that reason, fundamental investors need to decide how long they're willing to take the pain if they want to hold onto these firms this summer. And for investors looking to buy one of these positions, it makes sense to wait for more favorable technical conditions (and a lower share price) before piling in.

For the unfamiliar, technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock's price action and trends. Once the domain of cloistered trading teams on Wall Street, technicals can help top traders make consistently profitable trades and can aid fundamental investors in better planning their stock execution.

So without further ado, let's take a look at five toxic stocks you should be unloading.

Campus Crest Communities

2013 is panning out to be a rough year for Campus Crest Communities (CCG) -- shares of the small-cap student housing REIT have slid 12.7% since the calendar flipped over to January. While that sounds bad enough as it is, it's actually 31% underperformance vs. the S&P 500. And a quick glance at the chart makes it pretty clear to see why.

CCG is stuck in a textbook downtrend right now, bouncing between trendline resisatnce to the upside and a parallel support level below. You don't have to be an expert technical analyst to figure out where CCG's high probability price action is from here; it's down. Trendline resistance has acted as a ceiling for shares on the last four tests in 2013 – and with shares hitting their head on that resistance level this week, now's the optimal time to sell (or short) this REIT.

If you're looking for an opportunity to buy CCG, you could be in for a long wait. But the 50-day moving average has been a pretty good proxy for resistance since the start of the summer. I'd recommend waiting for that line to get broken before even thinking about doing anything but selling this stock. Until then, it's toxic.

Nissan Motor

Nissan Motors (NSANY) has fared somewhat better this year -- at least the Japanese automaker is up year-to-date. But Nissan has still significantly underperformed the S&P since the start of the year -- and it's underperformed Japan's Nikkei 225 index by a much larger margin.

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Now Nissan looks likely to drop. Here's why.

Nissan is currently forming a descending triangle pattern, a bearish setup that's formed by downtrending resistance above shares and horizontal support to the downside at $20. Basically, as Nissan bounces in between those two technical levels, it's getting squeezed closer and closer to a breakdown below that $20 support line. When that happens, look out below.

The setup in Nissan isn't exactly textbook. This stock spent the preceding months before the descending triangle pattern consolidating sideways, rather than slipping lower. But that doesn't change the trading implications of Nissan right now. If shares can't catch a bid at $20, it's time to sell.

L Brands

Retail stocks have turned out some strong performance so far this year, and L Brands (LTD) has been no exception -- the $17 billion specialty retail name is up more than 26% since the calendar flipped over to January. But that's all in the past. Now, LTD looks "toppy."

L Brands is currently forming a double top, a price setup that's formed by two swing highs that peak at the same level. Those two tops happened in early August and then again in the middle of this month. A move through $56 is the signal that it's time to be a seller in LTD.

Whenever you're looking at any technical price pattern, it's critical to think in terms of those buyers and sellers. Double tops, triangles, and other pattern names are a good quick way to explain what's going on in a stock, but they're not the reason it's tradable. Instead, it all comes down to supply and demand for shares.

That support level at $75 is a price where there had been an excess of demand of shares; in other words, it's a place where buyers were more eager to step in and buy shares at a lower price than sellers were to sell. That's what makes a breakdown below $75 so significant -- the move would indicate that sellers are finally strong enough to absorb all of the excess demand above that price level. That's why it makes sense to wait for that indication before you sell.

JPMorgan Chase

Last up is JPMorgan Chase (JPM), a stock that's showing traders a textbook reversal pattern right now. Financial sector stocks have benefitted in a big way from this rally all the way up. After all, in many ways, they're a lot like a leveraged bet on stocks. But a head and shoulders top pattern is decoupling JPM's price action from that of the broad market this month.

The head and shoulders pattern is a bearish reversal setup that indicates exhaustion among buyers. It's formed by two swing highs that top out around the same level (the shoulders), separated by a bigger peak called the head; the sell signal comes on the breakdown below the pattern's "neckline" level, which is right above $50 at the moment for JPM. That's significant for a couple of reasons: It's a round number that's sure to get more attention from investors, and it's a price that acted as resistance on the way up back in March.

If you think that the head and shoulders is too popular to be worth trading, the research suggests otherwise: a recent academic study conducted by the Federal Reserve Board of New York found that the results of 10,000 computer-simulated head-and-shoulders trades resulted in "profits [that] would have been both statistically and economically significant." If you decide to short JPM on a move below $50, I'd still recommend keeping a protective stop at $54.

To see this week's trades in action, check out the Technical Setups for the Week portfolio on Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.

Regado Biosciences Inc (RGDO): An Under $10 Stock To Transform, Dominate ACS Market

Regado Biosciences, Inc. (NASDAQ:RGDO) offers investors the rare opportunity for exposure to a highly differentiated, advanced stage drug in the $1 billion plus acute coronary syndrome (ACS) market for little over cash value.

Acute coronary syndrome happens when the heart is not getting enough blood, leading to unstable angina and heart attack. Regado's product pipeline encompasses three actively controllable antithrombotic systems: REG1, REG2, and REG3.

Regado's lead program, REG1, is a novel anti-coagulant system for patients with ACS with a potent factor IX inhibitor and active "brake system" to inactivate the anti-coagulant rapidly and prevent bleeding.

REG1 is being developed for use in patients with a wide variety of acute coronary syndromes, or ACS, undergoing a percutaneous coronary intervention, or PCI, a hospital-based procedure used to mechanically open or widen obstructed coronary arteries.

Regado has a unique platform of actively controllable antithrombotic drugs for patients with cardiovascular disease that is leveragable across multiple indications. REG2 and REG3 are in the preclinical stages being studied for venous thromboembolism (VTE) prophylaxis and Diabetic Vasculopathy, respectively.

"With tangible de-risking events in 2014 and 2015, we believe that significant upside potential exists as Regado seeks to defeat brand leader ANGIOMAX in a high-profile head-to-head study with favorable phase 3 design features," BMO Capital Markets analyst Jim Birchenough said in a client note.

The ongoing phase 3 REGULATE study of REG1 versus brand leader Angiomax in patients with non-ST elevated myocardial infarction (NSTEMI) and elective angioplasty patients is well designed to demonstrate superior ischemic event reduction against a lesser comparator than heparin.

Meanwhile, a review of phase 2b data historical trials of Angiomax compared to Heparin suggest that the worst case result for REG1 (upper bound of the 95 percent confidence interval) would still ! beat a consistent average result for Angiomax by 28 percent. In 2012, the Medicines Company (NASDAQ:MDCO) reported net Angiomax global sales of $548 million, including $502 million in the US.

"With ~$1B in brand sales potential in both the US and EU, we believe that a superiority claim to ANGIOMAX, lower bleeding risk than heparin and pharmacoeconomic benefit of early catheter removal and patient release should readily support the $600M peak sales estimate," Birchenough said.

The company recently announced the enrollment of the first patient in its REGULATE-PCI clinical trial. The late state study compares the effects of Regado's REG1 to bivalirudin in patients undergoing percutaneous coronary intervention (PCI) electively or for the treatment of unstable angina (UA) or non-ST elevated myocardial infarction (N-STEMI).

REGULATE-PCI, if successful, will become the cornerstone of Regado's international new drug applications, expected to be filed in early 2016.

Because of its actively controllable nature, REG1 may offer several advantages over the current standard of care heparin and Angiomax, including reduced ischemic events, reduced rate of serious bleeding events, predictable dosing, favorable pharmacoeconomics, and improved patient experience.

Each year in the US, approximately 1.36 million hospitalizations have ACS listed as either the primary or secondary discharge diagnosis. REG1 is expected to cost roughly $1,300 per patient, at a slight discount to bivalrudin.

"We expect that REG1 will enter the market in 2017 and increase its market share to roughly 50% by 2022, in both NSTEMI-ACS and elective PCI patients and remain at that level through 2025, the outer limit of our model," Birchenough said.

"We estimate initial launch of REG1 in the US in 2017 with $63M in estimated sales and $12.6M in REG1 royalties, assuming 20% royalty rate on future partnership. We estimate US sales increasing to $611M in 2022," the analyst added.

Ultimately, the phase 3 progr! ess with ! lead product REG1 would attract large pharma interest in the form of partnership or M&A.

Regado, which went public in August 2013, is up 48 percent since its IPO. In its short trading period, RGDO traded as high as $9.39. 

How Capital Markets Will React to FOMC News

NEW YORK (TheStreet) -- In my opinion, Federal Reserve policy failed as soon as the FOMC cut the federal funds rate below 3% on March 18, 2008, to 2.25%. It was Dec. 16, 2008, when the Fed cut this rate to 0%, where it could remain for years to come if Janet Yellen becomes the next Fed chairman in early 2014.

The Fed's quantitative easing programs began in late November 2008 when the Federal Reserve Open Market Trading Desk in New York began to purchase $600 billion in mortgage-backed securities. Two years later the Fed announced another round of purchases and this time it was $600 billion in longer-dated U.S. Treasuries by the end of second quarter of 2011. This second wave was dubbed QE2. [Read: Before Buying ConAgra, Read the Label]

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QE3 was announced on Sept. 13, 2012, and QE4 was announced on Dec. 12, 2012. QE3 is the purchase of $40 billion per month in mortgage-backed securities and QE4 added another $45 billion of longer-dated Treasuries per month. There has been talk that the Fed will begin to reduce these purchases following today's FOMC meeting. Some say yes, others say no, I say it doesn't matter as the program has failed in its objective, which is to lower mortgage rates.

Before QE3 and QE4 were implemented the yield on the Treasury 10-year note traded as low as 1.377% on July 25, 2012. The lowest point for this year is 1.612% set on May 1, just about the time when speculation began that the FOMC will likely taper securities purchases following today's FOMC meeting. The high yield in anticipation of tapering has been 3.007% set on Sept. 6. Instead of pushing mortgage rates lower as intended, the bond market became worried about future inflation that the massive QE's could create, and for this reason the combination of the QEs and the 0% federal funds rate has been a failed monetary policy. [Read: Affordable Care Act Reality Check] Continue to trade the bond market just like a stock using iShares 20+ Year Treasury Bond (TLT) ($103.71). The Treasury ETF remains below its 50-day simple moving average at $105.67 after setting a multi-year low at $102.11 on Aug. 21. The weekly chart shows an oversold condition with the five-week modified moving average at $105.25 and the 200-week SMA at $107.77. This week's value level is $100.96 with a monthly pivot at $105.75. My semiannual value level lags at $92.32 with annual risky levels at $116.26 and $120.42.

Continue to trade the gold market just like a stock using SPDR Gold Trust (GLD) ($126.50). The ETF is below its 50-day SMA at $129.14 with the 200-day SMA at $143.62. The weekly chart is negative with the five-week MMA at $129.81 and the 200-week SMA at $143.36. My monthly value level is $118.35 with a weekly risky level is $135.75.

Continue to trade crude oil using the Energy Select Sector SPDR Fund (XLE) ($84.31) The EFT traded to a new multi-year high at $84.66 on Monday. The 50-day and 200-day SMAs are supports at $82.41 and $78.61. The weekly chart is positive but overbought with the five-week MMA at $82.75 and the 200-week SMA at $68.78. My weekly value level is $81.68 with monthly and semiannual risky levels at $87.91 and $88.35.

For the major equity averages the Russell 2000 tested a new all-time high at 1066.39 at Tuesday's close. The Nasdaq set a new multi-year high at 3756.24 on Monday staying shy of my semiannual risky level at 3759. The other three major averages stayed below their all-time highs at 15,658.43 for the Dow Industrial Average, set on Aug. 2, 1709.67 for the S&P 500 set on Aug. 2 and 6686.86 Dow transportation average set on Aug. 1.

It seems highly likely that all five major averages will power to new highs given a positive reaction to the Fed statement and to comments by Ben Bernanke at his press conference this afternoon. [Read: Crunch Time for Gold Again] If the Nasdaq has a weekly close above 3759 the upside is to my semiannual risky levels at 16,490 Dow Industrial Average, 1743.5 on the S&P 500, 7104 Dow transports and 1089.43 on the Russell 2000. As I have said before, if you cannot confirm cycle highs, new highs will likely follow. SPDR Dow Jones Industrial Avg ETF Fund (DIA) ($155.29) is above its 50-day SMA at $152.68 with the 200-day SMA at $145.42 with the Aug. 2 high at $156.24. The weekly chart shifts to positive with a weekly close above the five-week MMA at $152.22. My weekly value level is $149.35 with monthly and semiannual risky levels at $163.25 and $164.06.

PowerShares QQQ Trust Series 1 (QQQ) ($78.37) is above its 50-day SMA at $76.06 with the 200-day SMA at $70.80 and set a multi-year high at $78.72 on Monday. The weekly chart is positive but overbought with the five-week MMA at $76.52. My quarterly value level is $73.00 with monthly and weekly pivots at $78.18 and $78.63 with semiannual risky levels at $79.76 and $80.87. [Read: HED-HERE]

SPDR S&P 500 ETF Trust (SPY) ($171.07) is above its 50-day SMA at $167.69 with the 200-day SMA at $157.92 and new all time high at $171.24 set on Monday. The weekly chart shifts to positive with a weekly close above its five-week MMA at $167.56. My weekly value level is $166.42 with a semiannual risky level at $174.10.

At the time of publication the author held no positions in any of the stocks mentioned.

Follow @Suttmeier This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Suttmeier has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. In 1981 he formed the Government Bond Department at LF Rothschild and helped establish that firm as a primary dealer in 1986. Richard began writing market research in 1984 and held positions as market strategist at firms such as Smith Barney, William R Hough, Joseph Stevens, and Rightside Advisors. He joined www.ValuEngine.com in 2008 producing newsletters covering the U.S. capital markets, and a universe of more than 7,000 stocks. Richard employs a "buy and trade" investment strategy and can be reached at RSuttmeier@Gmail.com.

Analyzing An Acquisition Announcement

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When one company acquires another there is a possibility that the deal will be a tremendous success, or a catastrophic failure. The key for investors is to be able to decipher the news reports and then to determine whether the deal warrants the investment in, or the immediate sale of the purchasing company. Read on for some suggestions for analyzing acquisition deals.

Gauge Cash Needs
Some companies are well capitalized. They have all the money they need for the foreseeable future to grow their businesses and remain competitive. However, many companies are not so lucky. They routinely have to tap the equity or debt markets, or seek bank loans in order to obtain funds.

For this reason, investors should read what management is saying about the company it is about to acquire, or has recently acquired. Is cash needed to fund future growth, add employees, or to build additional office space? If the company being acquired is a public company, review its most recent 10-Q or 10-K.

Check the cash position. If the company is losing money, try to determine its burn rate. This will enable you to gauge if and when the company will need additional funds.

If you think the company will need a cash infusion try to determine how it will be supplied. Does the acquiring company have ample cash to fund the acquired company's growth with no problem, or will a potentially dilutive stock offering have to be completed in order to secure funds? These are all questions that should be answered in order to determine the deal's impact on the acquiring company's financials.

You should also remember that unless a company receives an offer it simply can't refuse, companies that are on solid financial footing typically don't sell at all.

Assess Debt Loads
One of the worst things that a company can do is to acquire an enterprise that has a huge volume of debt that's scheduled to come due at some later date. After all, increased debt loads can be a tremendous distraction to the acquiring company, particularly in the troughs of a business cycle.

That said, in some instances, large volumes of debt can provide a significant opportunity for the suitor. How? Through refinancing! In fact, during the late 1990s and early 2000s, a number of high-profile casinos scooped up smaller players, and saved a ton of money for their shareholders by refinancing debt that had originally been issued at high coupon rates.

In short, lofty debt loads should send up a red flag. That is, unless the suitor has deep pockets/collateral, and a reputation as a low credit risk so as to refinance the obligations at a materially lower rate.


Consider Liability/Litigation Risk
When a deal is announced, or even suspected, and both the buyer and the seller are known, investors should immediately go to the seller's proxy statement and 10-K to review Management's Discussion & Analysis, as well as any content about risks or disclosures. The idea is to try to determine whether the suitor will be acquiring a huge potential liability.

Look for lawsuit details, or guarantees the company has offered to secure the debt of third parties. Read the fine print. You'll be happy you did.

Almost every public company at one point or another will be sued. For the most part, a large number of the suits will be settled without anyone declaring bankruptcy. However, if a number of suits are pending, and management's description of the situation is ominous, consider steering clear of the situation.

Ponder the Details of Integration
Obviously, when the acquisition is consummated, there is no need for two chief executives or two chief financial officers. In addition, there may be no need for some facilities because of these redundancies. As such, investors need to determine how long a successful integration will take and at what cost.

There will be some costs associated with the combination of two companies, particularly if two sales forces are merging. However, if the costs seem excessive, or if management is suggesting that the deal won't add to earnings for a year or more, consider bailing! Remember, there are plenty of things that can go wrong in a year's time. Ideally, you want to be on the lookout for acquisitions that are immediately accretive to earnings, or that can be soon after the deal is inked.

Determine the Severance Costs
In conjunction with the elimination of redundancies, layoffs are likely to occur. Many former employees may be entitled to pension benefits and a host of other costly payroll items. This is just one (of the many) reasons why consolidation in unionized industries isn't more popular - the cost of paying benefits to thousands of laid-off union members would be prohibitively expensive.

If a company that you're interested in announces an acquisition, be on the lookout for how much severance costs will amount to, and whether they can be booked in a short period of time. If it appears that these costs may go on for a number of years or consume a significant percentage of earnings, consider heading for the exits.

Bottom Line
Acquisitions can present tremendous opportunities or major disasters for investors. It is up to the investor to determine how a stock will be affected and, if necessary, get out before it's too late.

CoreLogic: Home Prices Climb as Homebuilder Shares Slide

Since hitting a five-year peak in mid-May of this year, shares of homebuilders' stocks have dropped between 15% to 33%. That is about the time that mortgage interest rates began climbing and home prices regained their 2003 to 2004 levels. As both prices and interest rates continue to rise, homebuilders could be looking at further share price declines.

Home prices rose 12.4% in July, compared with the same month a year ago, for a 17th consecutive monthly year-over-year gain, according to research firm CoreLogic Inc. (NYSE: CLGX). Home prices rose 1.8% from June to July. The data include sales of distressed properties, and the index is a non-seasonally adjusted three-month weighted average.

Excluding distressed sales, July prices rose 1.7% compared with June, and the year-over-year price rose by 11.4%. Home prices remain 17.6% below their April 2006 peak when distressed sales are counted, and 12.9% below the peak when distressed sales are excluded.

When Toll Brothers Inc. (NYSE: TOL) reported earnings two weeks ago, earnings per share met estimates, but revenues did not. Still the company forecast full fiscal year revenues up nearly 31%, as its average sales price rose $75,000. Toll Brothers sits at the high-end of the new home market and until mortgage rates rise well above 5% the company could perform well. Shares are down about 16% since mid-May.

PulteGroup Inc. (NYSE: PHM) also expects the housing market to improve. When it reported results in July, the company's CEO said that the U.S. home market is "solidly on track towards a sustained, long-term recovery" and that the rise in interest rates had "little effect" on buyers. Shares are down about 32.5% since mid-May.

The fiscal year for D.R. Horton Inc. (NYSE: DHI) ends this month, and the consensus estimate for the company's earnings per share is $1.29, compared with earnings of $2.77 a share last year. Horton's shares are down about 33% since mid-May.

Rising home prices also affect the home improvement stores, Home Depot Inc. (NYSE: HD) and Lowe's Companies Inc. (NYSE: LOW). Since mid-May, Home Depot stock is down about 2% while Lowe's stock is up nearly 10%. And for the past 12 months, Home Depot is up about 33% and Lowe's is up about 62%. Of the housing stocks, only PulteGroup shows a gain over the past year.

As home values increase it makes sense for homeowners to update and remodel their homes, whether to sell or to add value for potential sale sometime down the line. Add in the number of existing homes being sold, which new owners often choose to "fix up," and the rise in Home Depot's and Lowe's stocks has a much better chance of continuing than do stock price rises in homebuilders.

CoreLogic expects August housing prices to rise another 12.3% year-over-year and to rise by 0.4% month-over-month. Excluding distressed sales, CoreLogic's year-over-year increase for June is forecast at 12.2% and the month-over-month estimate is forecast to rise by 1.2%.

Hot Casino Stocks To Watch For 2014

The company's chief economist noted:

Looking ahead to the second half of the year, price growth is expected to slow as seasonal demand wanes and higher mortgage rates have a marginal impact on home purchase demand.

Including distressed sales, July year-over-year home prices rose the most in Nevada (prices up 27%), California (23.2%), Arizona (17%), Wyoming 16.4%) and Oregon (15%). Only Delaware (-1.3%) posted a year-over-year home price decline, while the other states with the smallest gains include New Mexico (0.03%), Vermont (1.4%), Alabama (2%) and Mississippi (2.2%).

Roth’s Exit From Advisor Group: ‘A Big Deal’

News that the Larry Roth, who has led the Advisor Group of 6,000 independent reps for the past six years, is set to be CEO of Nicholas Schorsch's Realty Capital Securities on Monday has raised eyebrows and questions for broker-dealer recruiters and other experts.

Peter Harbeck is serving as interim president and CEO of the Advisor Group, which includes the IBDs Royal Alliance, FSC Securities, SagePoint Financial and Woodbury Financial.

“This is a big deal. It leaves a big void,” said Jon Henschen, president of Henschen & Associates, a broker-dealer recruiting firm, in an interview.

Chip Roame, head of Tiburon Strategic Advisors, agrees. “Larry did a terrific job leading Advisor Group through the AIG crisis and rebuilding it afterward,” he said. “It would be difficult to rate his performance other than an A.”

Top Warren Buffett Stocks For 2014

Losing such an “A-level” executive is tough in any business, particularly in the highly competitive, bottom-line-focused field that IBDs play in today.

Two years ago, in fact, Roth predicted that many small broker-dealers “are gone or will be soon” because of technology, compliance and other business costs. “You cannot expect longevity if you’re a small niche player,” he said in an interview at the time. “This business is not for wimps.”

“Certainly Roth’s departure has the potential to cause weakness for Advisor Group in the marketplace today,” Roame said. “I do not know how the reps perceived Larry. But from the outside, he held the place together and grew it, so I assume they see him as a loss.”

Still, the industry consultant added, “I don’t think any rep leaves for this reason alone. If they had a foot out the door, this might speed them along. But no, I do not expect this to drive a lot of turnover.”

Harbeck (right), who has worked for Advisor Group for nearly a decade, says the firm is “home to some of the industry’s greatest leaders … I am confident our more than 6,000 financial advisors understand our commitment to their success.”

Advisor Group, which is owned by AIG, wrapped up its purchase of Woodbury Financial Services from The Hartford in December, adding some 1,400 advisors and $25 billion in assets under management to its network. It hosted its annual conference for female advisors in May,emphasizing how important it is to expand the diversity of its advisor force.

Recently, it’s had a good run of recruiting. For instance, Royal Alliance Associates added a group of 50 independent advisors with $1.4 billion in assets and some $8 million in yearly fees and commissions in July. The group had previously been affiliated with Walnut Street Securities.

However, Henschen wonders if part of Roth’s motivation in leaving is the direction of the Advisor Group of IBDs. The group has done some consolidating recently, he says, and could stand to trim more staffers from its back offices. “That could be a tough thing to do, but it still has lots of overhead,” the recruiter said.

6 More Stocks Moving on Unusual Volume

DELAFIELD, Wis. (Stockpickr) -- At Stockpickr, we track daily portfolios of stocks that are the biggest percentage gainers and the biggest percentage losers.

Stocks that are making large moves like these are favorites among short-term traders because they can jump into these names and try to capture some of that massive volatility. Stocks that are making big-percentage moves either up or down are usually in play because their sector is becoming attractive or they have a major fundamental catalyst such as a recent earnings release. Sometimes stocks making big moves have been hit with an analyst upgrade or an analyst downgrade.

Regardless of the reason behind it, when a stock makes a large-percentage move, it is often just the start of a new major trend -- a trend that can lead to huge profits. If you time your trade correctly, combining technical indicators with fundamental trends, discipline and sound money management, you will be well on your way to investment success.

With that in mind, let's take a closer look at a several stocks under $10 that are making large moves to the upside today.

IMRIS (IMRS)

This company develops, assembles and installs VISIUS Surgical Theatres that are used for a variety of medical applications, as well as provides ancillary products and services and extended maintenance services. This stock closed up 7.3% to $1.90 in Thursday's trading session.

Thursday's Range: $1.75-$1.92

52-Week Range: $1.75-$4.75

Thursday's Volume: 80,000

Three-Month Average Volume: 97,189

From a technical perspective, IMRS jumped higher here and reversed strong after the stock hit a new 52-week low at $1.75 with decent upside volume. This stock has been downtrending badly for the last month, with shares plunging from its high of $3.40 to its new 52-week low at $1.75. During that downtrend, shares of IMRS have been consistently making lower highs and lower lows, which is bearish technical price action. That move has now pushed shares of IMRS into oversold territory, since the stock's current relative strength index reading is 35.85. Oversold can always get more oversold, but it's also an area where a stock can rebound sharply higher form.

Traders should now look for long-biased trades in IMRS as long as it's trending above its 52-week low of $1.75, and then once it sustains a move or close above some near-term overhead resistance levels at $2 to $2.09 with volume that hits near or above 97,189 shares. If we get that move soon, then IMRS could easily rebound higher towards its 50-day moving average of $2.52 to possibly $2.80.

Renren (RENN)

This company is engaged in the operation of social networking internet platform, as well as provision of online advertising services and internet value-added services, including online gaming operations, online talent show and other IVAS, among others. This stock closed up 3.1% to $3.61 in Thursday's trading session.

Thursday's Range: $3.50-$3.69

52-Week Range: $2.52-$4.63

Thursday's Volume: 3.51 million

Three-Month Average Volume: 3.09 million

From a technical perspective, RENN bounced notably higher here right off its 50-day moving average of $3.44 with above-average volume. This stock recently formed a double bottom chart pattern at $3.25 to $3.22, after dropping from its August high of $4.62. Following that bottom, shares of RENN have now trended higher right off its 200-day at $3.20 and back above its 50-day at $3.44 with decent upside volume flows. That move has now pushed shares of RENN within range of triggering a big breakout trade. That trade will hit if RENN manages to take out some near-term overhead resistance at $3.80 with high volume.

Top Small Cap Stocks To Invest In Right Now

Traders should now look for long-biased trades in RENN as long as it's trending above its 50-day at $3.44 or its 200-day at $3.20, and then once it sustains a move or close above $3.80 with volume that hits near or above 3.09 million shares. If that breakout hits soon, then RENN will set up to re-fill some its previous gap down zone from August that started near $4.60.

Athersys (ATHX)

This is a biopharmaceutical company that is focused in the field of regenerative medicine. It is engaged in the discovery and development of best-in-class therapies designed to extend and enhance the quality of human life. This stock closed up 4.6% to $1.79 in Thursday's trading session.

Thursday's Range: $1.69-$1.82

52-Week Range: $0.95-$2.42

Thursday's Volume: 832,000

Three-Month Average Volume: 325,552

From a technical perspective, ATHX bounced sharply higher here right off its 50-day moving average of $1.69 with heavy upside volume. This move is quickly pushing shares of ATHX within range of triggering a near-term breakout trade. That trade will hit if ATHX manages to take out some near-term overhead resistance levels at $1.85 to $1.99 with high volume.

Traders should now look for long-biased trades in ATHX as long as it's trending above its 50-day at $1.69 or its 200-day at $1.60, and then once it sustains a move or close above those breakout levels with volume that hits near or above 325,552 shares. If that breakout triggers soon, then ATHX will set up to re-test or possibly take out its next major overhead resistance levels at $2.16 to $2.25. Any high-volume move above those levels will put its 52-week high at $2.42 into range for shares of ATHX.

Document Security Systems (DSS)

This company is engaged in fraud and counterfeit protection for all forms of printed documents and digital information. This stock closed up 7.5% to $1.28 in Thursday's trading session.

Thursday's Range: $1.21-$1.33

52-Week Range: $1.08-$4.60

Thursday's Volume: 851,000

Three-Month Average Volume: 540,666

From a technical perspective, DSS bounced sharply higher here right above its 52-week low of $1.08 with heavy upside volume. This stock has been downtrending badly for the last four months, with shares plunging from its high of $3.64 to its recent low of $1.08. During that move, shares of DSS have been consistently making lower highs and lower lows, which is bearish technical price action. That move has pushed shares of DSS into oversold territory, since the stock's relative strength index reading recently dipped below 30. Oversold can always get more oversold, but it's also an area where a stock can experience a powerful bounce higher from.

Traders should now look for long-biased trades in DSS as long as it's trending above its 52-week low of $1.08, and then once it sustains a move or close above Thursday's high of $1.33 with volume that hits near or above 540,666 shares. If we get that move soon, then DSS will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day of $1.54 to $1.68. We could even see DSS tag $1.75 to $1.88 if it bounces higher from here with volume.

Pulse Electronics (PULS)

This company produces precision-engineered electronic components and modules. This stock closed up 6.6% to $3.99 in Thursday's trading session.

Thursday's Range: $3.80-$4.09

52-Week Range: $2.10-$10.60

Thursday's Volume: 42,000

Three-Month Average Volume: 36,605

From a technical perspective, PULS ripped sharply higher here right off its 50-day moving average of $3.86 with above-average volume. This move is quickly pushing shares of PULS within range of triggering a major breakout trade. That trade will hit if PULS manages to take out some near-term overhead resistance levels at $4.27 to $4.42 with high volume.

Traders should now look for long-biased trades in PULS as long as it's trending above its 50-day at $3.86 or above its 200-day at $3.53, and then once it sustains a move or close above those breakout levels with volume that hits near or above 36,605 shares. If that breakout triggers soon, then PULS will set up to re-test or possibly take out its next major overhead resistance level at $5. Any high-volume move above $5 will then give PULS a chance to re-fill some of its previous gap down zone from August that started at $6.96.

KiOR (KIOR)

This is a development stage company. The company is a next-generation renewable fuels company, producing cellulosic gasoline and diesel from abundant non-food biomass. This stock closed up 1.1% to $1.80 in Thursday's trading session.

Thursday's Range: $1.65-$1.85

52-Week Range: $1.30-$9.52

Thursday's Volume: 622,000

Three-Month Average Volume: 544,436

From a technical perspective, KIOR rose modestly higher here with above-average volume. This stock has been downtrending badly for the last two months, with shares plunging lower from its high of $5.94 to its recent low of $1.30. During that downtrend, shares of KIOR have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of KIOR have now started to rebound off that $1.30 low to its recent high of $1.94 with some strong upside volume days. That rebound is also coming off oversold territory, since the stock's current relative strength index reading is 28.7. Oversold can always get more oversold, but it's also an area where a stock can experience a powerful bounce higher from.

Traders should now look for long-biased trades in KIOR as long as it's trending above Thursday's low of $1.65, and then once it sustains a move or close above some near-term overhead resistance at $1.94 with volume that hits near or above 544,436 shares. If we get that move soon, then KIOR could rebound sharply higher towards its next major overhead resistance levels at $2.50 to $2.73.

To see more stocks that are making notable moves higher today, check out the Stocks Under $10 Moving Higher portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

RELATED LINKS: >>5 Tech Stocks Spiking on Big Volume >>5 Stocks Setting Up to Break Out >>4 Red-Flag Stocks to Sell This Fall

 

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

 

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

 

Best Tech Stocks To Buy Right Now

With shares of Google (NASDAQ:GOOG) trading around $900, is GOOG an OUTPERFORM, WAIT AND SEE,or STAY AWAY? Let�� analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock�� Movement

Google is a global technology company focused on improving the ways people engage with information. The business is focused on the following areas: search, advertising, operating systems and platforms, and enterprise. The company generates revenue primarily by delivering online advertising. Google is a search giant with most of the market share, largely because of its execution and delivery. An increasing number of consumers and companies worldwide are coming online, which will surely increase the amount of eyes on the company�� ads and in turn, advertising revenue. Doing what it does, look for Google to remain on top of the Internet world.

Best Tech Stocks To Buy Right Now: Tele Celular Sul Participacoes S.A.(TSU)

TIM Participacoes S.A. provides mobile telecommunications services through global system mobile (GSM) technology to business and individual customers in Brazil. It provides prepaid and post paid services. The company also offers value-added services, including short message services or text messaging, multimedia messaging services, push-mail, Blackberry services, video call, turbo mail, wireless application protocol downloads, Web browsing, business data solutions, songs, games, TV access, voice mail, conference calling, chats, and other content and services, as well as interconnection services to fixed line and mobile service providers. In addition, it provides fixed telecommunications services for data, local, long distance, and international modalities. Further, the company sells handset models and BlackBerry from various manufacturers, including Nokia, Samsung, Motorola, Sony, Ericsson, and BlackBerry through its dealer network, which consists of its own stores, franch ises, authorized dealers, and department stores. As of December 31, 2010, its services were marketed through a distribution network of approximately 8,989 points of sale, which include approximately 70 company owned stores. The company also had 398,392 recharging points for prepaid services. It offers mobile telecommunications services under TIM brand to approximately 51 million customers. The company was formerly known as Tele Celular Sul Participacoes S.A. and changed its name to TIM Participacoes S.A. in August 2004. TIM Participacoes S.A. was founded in 1998 and is headquartered in Rio de Janeiro, Brazil. TIM Participacoes S.A. is a subsidiary of TIM Brasil Servicos e Participacoes S.A.

Best Tech Stocks To Buy Right Now: Cascade Bancorp(CACB)

Cascade Bancorp operates as the holding company for Bank of the Cascades that offers a range of commercial and retail banking services. The company?s deposit products include checking, money market, time deposit, and savings accounts. Its loan portfolio comprises commercial real estate loans, real estate construction and development loans, commercial and industrial loans, and residential mortgage loans, as well as consumer installment, line-of-credit, credit card, and home equity loans. Cascade Bancorp also provides investment and trust related services, cash management services, Internet banking, automated teller machines, safe deposit facilities, electronic bill payment, and remote deposit services. The company operates 32 full service branches in central Oregon, southern Oregon, Portland/Salem, and Boise/Treasure Valley. It serves small to medium-sized businesses, municipalities and public organizations, and professional and consumer relationships. The company was foun ded in 1977 and is headquartered in Bend, Oregon.

Top Safest Companies To Watch In Right Now: QUALCOMM Incorporated(QCOM)

QUALCOMM Incorporated engages in the development, design, manufacture, and marketing of digital wireless telecommunications products and services. The company operates in four segments: Qualcomm CDMA Technologies (QCT), Qualcomm Technology Licensing (QTL), Qualcomm Wireless and Internet (QWI), and Qualcomm Strategic Initiatives (QSI). The QCT segment develops and supplies code division multiple access (CDMA)-based integrated circuits and system software for wireless voice and data communications, multimedia functions and global positioning system products. The QTL segment grants licenses to use portions of its intellectual property portfolio comprising patent rights useful in the manufacture and sale of wireless products, such as products implementing cdmaOne, CDMA2000, WCDMA, CDMA TDD, GSM/GPRS/EDGE, and/or OFDMA standards and their derivatives The QWI segment consists of Qualcomm Internet Services that provides content enablement services for the wireless industry and pu sh-to-talk and other products and services for wireless network operators; Qualcomm Government Technologies, which offers development, hardware, and analytical services to the United States government agencies involving wireless communications technologies; Qualcomm Enterprise Services that provides satellite and terrestrial-based two-way data messaging, position reporting, wireless application services, and managed data services to transportation and logistics companies and other enterprise companies; and Firethorn, which builds and manages software applications that enable mobile commerce services. The QSI segment makes strategic investments to support the worldwide adoption of CDMA- and OFDMA-based technologies and services. QUALCOMM Incorporated primarily operates in China, South Korea, Taiwan, Japan, and the United States. The company was founded in 1985 and is based in San Diego, California.

Advisors' Opinion:

• [By Victor Mora]

  Qualcomm provides digital communications products to a variety of consumers and companies worldwide. The company is joining the smart watch game, as it has introduced its newest product, Toq. The stock has been rising higher in recent years and is now testing multiyear highs. Over the last four quarters, earnings and revenues have been increasing, which has led to pleased investors. Relative to its peers and sector, Qualcomm has been an average year-to-date performer. Look for Qualcomm to OUTPERFORM.

• [By Sally Jones] Impact to Portfolio: -2.54%
  
  Current Shares: 2,363,199
  
  Up 7% over 12 months, Qualcomm Inc. has a market cap of $114.85 billion; its shares were traded at around $66.95, with a P/E of 17.70. The P/B ratio is 3.10.
  
  Track historical pricing:
  
  [ Enlarge Image ]
  
  Guru Action: As of June 30, 2013, Halvorsen reduced his position by 72.64%, selling 6,275,300 shares at an average price of $63.8, for a gain of 4.9%.
  
  He has averaged a gain of 17% on 16,654,706 shares bought at an average price of $57.23 per share. On shares sold, he has averaged a gain of 6% on 14,291,507 shares sold at an average price of $63.33 per share.
  
  REDUCED: Boeing Co. (BA)
  
  Impact to Portfolio: -2.26%
  
  Current Shares: 77,995,460
  
  Up 48% over 12 months, Boeing Co. has a market cap of $79.62 billion; its shares were traded at around $105.53, with a P/E of 19.20. The P/B ratio is 10.60.
  
  Track historical pricing:
  
  [ Enlarge Image ]
  
  Guru Action: As of June 30, 2013, Halvorsen reduced his position by 35.39%, selling 4,379,618 shares at an average price of $95.01, for a gain of 11.3%.
  
  He has averaged a gain of 35% on 12,375,078 shares bought at an average price of $78.12 per share. On shares sold, he has averaged a gain of 11% on 4,379,618 shares sold at an average price of $95.01 per share.
  
  REDUCED: Alexion Pharmaceuticals Inc. (ALXN)
  
  Impact to Portfolio: -2.15%
  
  Current Shares: 5,544,949
  
  Up 7% since January, Alexion Pharmaceuticals Inc. has a market cap of $20.96 billion; its shares were traded at around $107.19, with a P/E of 61.10. The P/B ratio is 9.40.
  
  Track historical pricing:
  
  [ Enlarge Image ]
  
  Guru Action: As of June 30, 2013, Halvorsen reduced his position by 41.4%, selling 3,917,493 shares at an average price of $96.37, for a gain of 11.2%.
  
  He has averaged a gain of 123% on 9,462,442 shares bought at an average price of $95.39 per share. On shares sold, he has averaged a gain of 11% on 3! ,917,493 shares sold at an average price of $96.37 per share.
  
  SOLD OUT: Hewlett-Packard Co. (HPQ)
  
  Impact to Portfolio: -1.5%
  
  Up 29% over 12 months, Hewlett-Packard has a market cap of $42.95 billion; its shares currently trade at around $22.27 with a P/B ratio of 1.80.
  
  Guru Action: As of June 30, 2013, Halvorsen sold out his position, selling 10,484,671 shares at an average price of $22.48, for a loss of 0.8%. His only gain in six quarters was in the first quarter of 2013 when he averaged a gain of 19.8% on 10,484,671 shares bought at an average price of $18.60.
  
  SOLD OUT: Williams Companies Inc. (WMB)
  
  Impact to Portfolio: -1.5%
  
  Up 12% over 12 months, Williams Companies Inc. has a market cap of $24.75 billion; its shares currently trade at around $36.22 with a P/E ratio of 39.30.
  
  Guru Action: As of June 30, 2013, Halvorsen sold out his position, selling 6,478,991 shares at an average price of $36.00, for a gain of 0.6%. He had modest gains in all four quarters of holding since the third quarter of 2012.
  
  SOLD OUT: Citigroup Inc. (C)
  
  Impact to Portfolio: -1.4%
  
  Up 67% over 12 months, Citigroup Inc. has a market cap of $150.84 billion; its shares currently trade at around $49.60 with a P/E ratio of 15.90.
  
  Guru Action: As of June 30, 2013, Halvorsen sold out his position, selling 5,411,100 shares at an average price of $48.08, for a gain of 3.6%. His highest gain was 78.9% in the fourth quarter of 2011, and this holding almost always yielded double-digit gains throughout his five-year history.
  
  Here is the complete portfolio of Andreas Halvorsen.
  
  
  
  Be sure to read:

Top 5 Canadian Companies For 2014

Just over a year ago, we launched a buy-and-hold model portfolio, specifically designed for investors who don't want to spend a lot of time reviewing their positions and are not interesting in active trading.

For this portfolio, we��e focused on individual blue-chip stocks that we felt offered both long-term growth potential and regular dividend payments.

We included both Canadian and US issues and each stock was given a 10% weighting. We also added a 20% weighting in a bond ETF to provide some downside protection in the event of a stock-market plunge.

At the time, we stated that the objective was to generate decent cash flow and slow but steady growth. Given the nature of the portfolio, the intention was to make changes only when absolutely necessary. These are the securities we selected.

Top 5 Canadian Companies For 2014: Newmont Mining Corporation(Holding Company)

Newmont Mining Corporation, together with its subsidiaries, engages in the acquisition, exploration, and production of gold and copper properties. The company?s assets or operations are located in the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand, and Mexico. As of December 31, 2009, it had proven and probable gold reserves of approximately 93.5 million equity ounces and an aggregate land position of approximately 27,500 square miles. The company was founded in 1916 and is headquartered in Greenwood Village, Colorado.

Top 5 Canadian Companies For 2014: Nu Skin Enterprises Inc.(NUS)

Nu Skin Enterprises, Inc. develops and distributes anti-aging personal care products and nutritional supplements worldwide. The company sells its personal care products under the Nu Skin brand; and nutritional supplements under the Pharmanex brand. Its personal care product line includes core systems, targeted treatments, total care, cosmetic, and Epoch, a product formulated with botanical ingredients. The company?s nutritional supplements product line comprises micronutrient supplements, targeted solution supplements, and weight management products. It also sells Vitameal, which are nutritious meal products for starving children or purchased for personal food storage. In addition, the company offers other products and services consisting of digital content storage, water purifiers, and other household products. It sells its products primarily through a network of independent distributors in north Asia, the Americas, Greater China, Europe, and the south Asia/Pacific. The c ompany also operates retail stores to sell its products in China. As of December 31, 2010, Nu Skin Enterprises operated 40 stores throughout China. The company was founded in 1984 and is headquartered in Provo, Utah.

Top 10 Casino Companies For 2014: Oshkosh Truck Corporation(OSK)

Oshkosh Corporation designs, manufactures, and markets a range of specialty vehicles, and vehicle bodies worldwide. Its Defense segment manufactures severe-duty, heavy, and medium-payload tactical trucks for the Department of Defense, including hauling tanks, missile systems, ammunition, fuel, and troops and cargo for combat units. The company?s Access Equipment segment offers aerial work platforms and telehandlers used in a range of construction, agricultural, industrial, institutional, and general maintenance applications. This segment also manufactures towing and recovery equipment and related parts; and leases equipments for short-term to rental companies. The company?s Fire and Emergency segment provides custom and commercial fire apparatus, and emergency vehicles, including pumpers, aerial and ladder trucks, tankers, rescue vehicles, wildland rough terrain response vehicles, mobile command and control centers, bomb squad vehicles, hazardous materials control vehicl es, and other emergency response vehicles. This segment also offers snow removal vehicles in airports; custom ambulances for private and public transporters, and fire departments; mobile medical trailers for medical centers and service providers; mobile command and control centers and simulation units; and vehicles for broadcasters, TV stations, broadcast production, and radio stations. Oshkosh Corporation?s Commercial segment manufactures refuse collection vehicles for the waste services industry; front and rear discharge concrete mixers, and portable and stationary concrete batch plants for the concrete ready-mix industry; and field service vehicles and truck-mounted cranes for the construction, equipment dealer, building supply, utility, tire service, and mining industries. The company was formerly known as Oshkosh Truck Corporation and changed its name to Oshkosh Corporation in February 2008. Oshkosh Corporation was founded in 1917 and is based in Oshkosh, Wisconsin.

Advisors' Opinion:

• [By Stephen]

  This company has gotten shellacked lately as a reduced government budget could put a damper on future profits. Other factors are also weighing down on the stock as describedhere. For example, the company was able to win an important project from the government for armored vehicles but may actually be losing money due to higher than expected costs. Regardless, Oshkosh also sells some products commercially, most importantly trucks, so there’s still plenty of reason to like this company. Terex (TEX), who se business is reasonably similar to Oshkosh’s, lags in certain notable metrics. For instance, both gross margin and operating margin are lower. Additionally, 4 of the past 5 quarters have not been profitable for Terex, while Oshkosh brought in net income for all of those same quarters. OSK is also very attractive for its price/earnings growth and price to sales ratios, which are 0.78 and 0.22 respectively. Perhaps OSK’s best stat though is its price to book ratio of 1.01, which is pretty much a steal for any non-financial. Oshkosh’s cash flows are also reasonably strong, although debt levels are a bit worrisome.< /span> Regardless, with a beta of 2.50, look this stock to skyrocket once the economy recovers in 2012.

Top 5 Canadian Companies For 2014: Crown Castle International Corporation (CCI)

Crown Castle International Corp., through its subsidiaries, owns, operates, and leases towers and other wireless infrastructure primarily in the United States and Australia. Its infrastructure includes distributed antenna system (DAS) networks, as well as rooftop installations. The company involves in the rental of antenna space of its towers to wireless communications companies. It also provides network services relating to its towers, which primarily include antenna installations and subsequent augmentations, as well as additional services, such as site acquisition, architectural and engineering, zoning and permitting, other construction, and other services related network development. As of December 31, 2010, it owned, leased, or managed approximately 23,900 towers, including 43 completed DAS networks. The company was founded in 1994 and is headquartered in Houston, Texas.

Advisors' Opinion:

• [By CRWE]

  Crown Castle International Corp. (NYSE:CCI) plans to release its third quarter 2012 results on Wednesday, October 24, 2012, after the market closes. In conjunction with the release, Crown Castle has scheduled a conference call for Thursday, October 25, 2012, at 10:30 a.m. Eastern Time.

Top 5 Canadian Companies For 2014: Airgas Inc.(ARG)

Airgas, Inc., through its subsidiaries, distributes industrial, medical, and specialty gases, as well as hardgoods in the United States. The company offers various gases, including nitrogen, oxygen, argon, helium, and hydrogen; welding and fuel gases, such as acetylene, propylene, and propane; and carbon dioxide, nitrous oxide, ultra high purity grades, special application blends, and process chemicals. Its hardgoods products comprise welding consumables and equipment, safety products, and construction supplies, as well as maintenance, repair, and operating supplies. The company also engages in the rental of gas cylinders, cryogenic liquid containers, bulk storage tanks, tube trailers, and welding and welding related equipment. In addition, the company manufactures and distributes liquid carbon dioxide, dry ice, nitrous oxide, ammonia, refrigerant gases, and atmospheric merchant gases. It serves repair and maintenance, industrial manufacturing, energy and infrastructure co nstruction, medical, petrochemical, food and beverage, retail and wholesale, analytical, utilities, and transportation industries. The company operates an integrated network of approximately 1100 locations, including branches, retail stores, packaged gas fill plants, specialty gas labs, production facilities, and distribution centers. Additionally, it provides retail solutions to retail customers, such as florists, grocers, restaurants and bars, tire and automotive service centers, and others. The company markets its products through multiple sales channels, including branch-based sales representatives, retail stores, strategic customer account programs, telesales, catalogs, e-business, and independent distributors. Airgas, Inc. was founded in 1982 and is based in Radnor, Pennsylvania.

Advisors' Opinion:

• [By Tom Bishop]

  Airgas Inc. (NYSE:ARG) was also the subject of a takeover bid, this one a little unwelcome. The company received a bid from Air Products (NYSE:APD) at $60 per share, a 38% premium from where the stock had been trading.
  
  Airgas rejected the offer claiming that the offer "very significantly undervalues Airgas and its future prospects and is not in the best interests of Airgas stockholders." Airgas finished up 39% in February 2010, and is currently trading at $65 per share as the market is anticipating a possible higher bid.

As U.S. Energy Boom Begins, Is Exxon a Good Buy?

Just two years ago, Exxon Mobil (NYSE:XOM) vied with Apple Inc. (NASDAQ:AAPL) for the title of the world's most valuable company. Apple has surpassed Exxon in terms of market capitalization, but Exxon remains a corporate powerhouse. It has the second highest market capitalization in the world at $407.51 billion. With that being said, we will use our CHEAT SHEET framework to decide whether Exxon is an OUTPERFORM, WAIT AND SEE, or STAY AWAY. Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

Catalysts

There is no time like the present for American oil and gas companies. As of May 31, the United States is producing more oil than it imports—an occurrence that it has not experienced in sixteen years. The big guns in the oil and gas industry stand poised to gain from America's burgeoning energy independence.

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Exxon Mobil is the largest publicly traded oil and gas company. It is an international powerhouse for oil production and distribution, manufacturing 3 percent of the world's oil. Quarterly revenues have been mostly positive over the past three years. Exxon has benefitted from rising oil prices and new technological developments in oil production: fracking and horizontal drilling. Two key decisions coming from Washington in the coming months could provide a surge in company profits if they go Exxon's way. Shareholders and potential investors should keep a close eye on developments concerning the Keystone XL pipeline and the decision as to whether US oil companies will be able to export natural gas. If both of these decisions play out in Exxon's favor the company should see unprecedented growth in profits.

The sharp increase in domestic oil production benefits the United States' balance of trade, but we have yet to see if the increased supply of domestic oil will put downward pressure on prices. A fall in oil prices will clearly hurt Exxon's profits. Additionally, because of the lingering weak macroeconomic conditions from the financial crisis, worldwide demand for oil has been subdued.

Let's use some fundamental analysis to help determine whether Exxon is an OUTPERFORM, WAIT AND SEE or STAY AWAY.

Fundamentals

Despite a slight decline in operating cash flow growth over the past several quarters, Exxon's balance sheet is strong. The company is sitting on around $10 billion in cash — enough to cover its yearly dividend payout four times over. The company generates a lot of cash without much debt; its debt-to-equity ratio is 0.08, which is low relative to its competitors. Moreover, Exxon's debt is rated AAA suggesting that the possibility of default is close to zero.

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Last year, Exxon Mobil's return on capital was 25 percent, the best in the industry. This metric is especially important to consider when analyzing oil and gas companies because the industry is very capital-intensive. Exxon's dividend yield is 2.88 percent, low by some standards. However, the company stresses dividend growth, so investors can expect to see larger dividends in the future.

Insider trading activity can provide helpful information to investors about the current valuation of a stock price and whether the stock is poised for growth. Generally, insiders buy stock when they think the share price is undervalued or they see exciting growth prospects in the company. With this being said, Exxon's Vice President Patrick Mulva recently bought $979,000 worth of Exxon stock, so we can infer that the vice president believes either that the share price will rise or the stock is undervalued.

Technicals Are Mixed

At Friday's close of $90.58, Exxon is currently trading slightly below its 50-day moving average of $90.73 but above its 200-day moving average of $89.35. Generally, when a stock trades above its 200-day moving average, the stock is experiencing an uptrend. Investors should keep an eye on the share price in relation to the 50-day moving average. If the stock price breaks through the 50-day moving average, Exxon may be beginning an uptrend.

Conclusion

While Exxon has been in the news recently for disasters that you would think would lower the stock price (the state of Arkansas sued Exxon today for a March pipeline spill), these events are unavoidable occurrences in the industry and do not do much to affect the company's stability in the long run. What will affect Exxon's future profitability is its ability to withstand potentially sharp declines in the price of oil. Exxon is based in the United States but is a huge multinational corporation, supplying 3 percent of the world's oil. Even if oil prices fall in the States or demand falters in emerging markets, Exxon is so large and diversified that these events are unlikely to affect their long-term profitability. With its strong free cash flow growth, minimal debt, a history of selecting profitable oil exploration projects, and an attractive dividend growth rate for investors, Exxon looks poised to cash in on the energy renaissance emerging in the United States. If you are looking to add a low risk oil giant to your portfolio, Exxon Mobil is an OUTPERFORM.

Where Will Dell Go Next?

With shares of Dell (NASDAQ:DELL) trading around $12, is DELL 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

Dell is a global information technology company that offers its customers a range of solutions and services, which are delivered directly by Dell, as well as other distribution channels. The company operates in four segments: Large Enterprise, Public, Small and Medium Business, and Consumer. Dell serves a wide range of customers: global and national corporate businesses; educational institutions; government, health care, and law enforcement agencies; small and medium-sized businesses; as well as end users. Through its four segments, Dell is able to provide information technology products to a growing user base around the world.

Dell shareholders are due to vote on founder Michael Dell's $24.4 billion buyout offer today, but some are expecting the vote to be postponed again as Mr. Dell works to drum up support for his bid. Dell is competing against billionaire Carl Icahn to take the struggling the company private. Dell shareholders are in a predicament: many don't feel that Dell's offer is high enough, but they also recognize that the company's stock could take a major hit the longer the uncertainty lasts.

T = Technicals on the Stock Chart are Mixed

Dell stock has been in a decline over the last few years. The stock has been trading sideways as the buyout war continues. Analyzing the price trend and its strength can be done using key simple moving averages.

What are the key moving averages? They are the 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Dell is trading between its key averages, which signal neutral price action in the near-term.

(Source: Thinkorswim)

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

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Dell Options	45.25%	86%	83%

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

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

As of today, there is 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 very 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 what that means for Dell’s stock.

E = Earnings Are Decreasing 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 Dell’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Dell 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)	-80.56%	-29.00%	-44.90%	-12.50%
Revenue Growth (Y-O-Y)	-2.41%	-10.71%	-10.70%	-7.50%
Earnings Reaction	-0.22%	0.21%	-7.32%	-5.34%

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

P = Excellent Relative Performance Versus Peers and Sector

How has Dell stock done relative to its peers, Apple (NASDAQ:AAPL), HP (NYSE:HPQ), IBM (NYSE:IBM), and sector?

	Dell	Apple	HP	IBM	Sector
Year-to-Date Return	26.48%	-16.86%	82.74%	2.74%	15.73%

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

Conclusion

Dell offers a variety of technology products and services to companies and consumers worldwide. The recent buyout battle has put shareholders of the company in a tough spot. The stock has declined in the last several years, but looks to remain stagnant until the buyout of company is settled. Over the last four quarters, investors in the company have been disappointed, as earnings and revenue figures have decreased. Relative to its peers and sector, Dell has been a year-to-date performance leader. WAIT AND SEE what Dell does this coming quarter.

Can General Electric Continue This Bull Run?

With shares of General Electric (NYSE:GE) trading around $22, is GE 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

General Electric is a diversified industrial, technology, and financial services company that operates worldwide. The products and services of the company range from aircraft engines, power generation, water processing, and household appliances to medical imaging, business and consumer financing and industrial products. General Electric’s segments include: Energy Infrastructure, Aviation, Healthcare, Transportation, Home & Business Solutions and GE Capital. General Electric is a leading provider of a wide range of products and many are essential in daily lives of consumers and companies around the world.  So long as economies exist, General Electric will continue to see a rise in profits by providing key products on an ongoing basis.

T = Technicals on the Stock Chart are Mixed

General Electric stock has seen a consistent uptrend since establishing lows during the 2008 Financial Crisis. The stock has been displaying higher highs and higher lows and looks poised to continue this pattern. 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, General Electric is trading around key averages which signal neutral price action in the near-term.

(Source: Thinkorswim)

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

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	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
General Electric Options	18.88%	0%	0%

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

	Put IV Skew	Call IV Skew
May Options	Average	Average
June Options	Average	Average

As of today, there is an average demand from call and put buyers or sellers, neutral over the next two months. To summarize, investors are buying a very small amount of call and put option contracts and are leaning neutral 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 General Electric’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for General Electric 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)	17.24%	8.72%	50%	-17.14%
Revenue Growth (Y-O-Y)	-0.49%	3.57%	2.79%	2.46%
Earnings Reaction	-4.05%	3.47%	-3.41%	0.35%

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

P = Average Relative Performance Versus Peers and Sector

How has General Electric stock done relative to its peers, Siemens (NYSE:SI), United Technologies (NYSE:UTX), Koninklijke Philips Electronics (NYSE:PHG), and sector?

	General Electric	Siemens	United Technologies	Koninklijke Philips Electronics	Sector
Year-to-Date Return	6.12%	-5.03%	11.43%	3.54%	8.71%

General Electric has been an average performer, year-to-date.

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Conclusion

General Electric provides a wide range of products to companies and consumers participating in an array of industries around the world. The stock has been making excellent gains in recent years but has slowed down to consolidate a bit. Earnings and revenue figures have increased for most of the last four quarters, however, investors have had mixed feelings about the recent earnings announcements. Relative to its peers and sector, General Electric has been an average year-to-date performer. WAIT AND SEE what General Electric does this coming quarter.