Higher Rates Can't Hinder Housing's Recovery

If the recent rise in home sales is yet another indication of the real estate market returning to normal, now may be the time to consider investing in homebuilders.

In July, home sales rose to their highest level since November 2009, when a federal tax credit spurred a surge of homebuying. This July's seasonally adjusted sales rate was up 17% from July 2012, and the 5.39 million homes sold beat economists' estimates of 5.15 million. In a sign that demand for homes is picking up, median home prices have risen to $213,500, up 14% from July 2012. That's the biggest year-over-year gain since 2005.

Will rising rates scare buyers away?
Market experts are predicting that sales could slow due to rising rates on mortgages, but prices should remain high if the inventory of homes remains tight . USA TODAY reports that interest rates have risen a full percentage point since May, meaning that a median-price homebuyer with a 20% down payment can expect to pay about $100 more a month.

The participants in the housing market are also changing. According to ABC News, investors now make up 16% of home purchasers, down from February's 22%. The data also noted that first-time homebuyers haven't joined in, making up only 29% of July sales. A healthy real estate market usually has about a 40% participation rate from first-time buyers .

While stock prices for homebuilders have fallen in recent months due to rising mortgage rates, the sector may provide buying opportunities for patient investors who believe that housing demand should return to normal levels in the next few quarters. After all, even those higher rates remain historically low. Let's examine how some of the top names in U.S. homebuilding are benefiting from stronger housing demand despite rising mortgage rates.

Lennar reports demand in its markets outpacing supply
Lennar's (NYSE: LEN  ) second-quarter net earnings for the period ended May 31 were $137.4 million, or $0.61 per diluted share. Earnings were hurt by the partial reversal of a deferred tax asset worth $41.3 million, or $0.18 per diluted share. Note that a deferred tax asset is used to decrease the company's tax expense in future periods. Earnings for the second quarter dropped about 70% from $452.7 million, or $2.06 per diluted shares in the previous year . 

CEO Stuart Miller remains confident in a solid housing recovery. Demand in all of Lennar's markets is outpacing supply as it is being squeezed by a limited availability of land and fewer competitors. Despite the rate increases, Miller believes homes are still affordable and has noted little impact on unit sales or pricing .

Toll Brothers has rising sales volume and unit prices
For the third quarter ended on July 31, Toll Brothers' (NYSE: TOL  ) net income was $46.6 million, or $0.26 per share. The latest income figures were down 24% from last year's third-quarter results of $61.6 million, or $0.36 per share. The company's total quarterly revenues were $689.2 million, up 24% over last year, and homebuilding deliveries were 1,059 units, up 10% compared to the same period last year .

According to CEO Douglas C. Yearley, both sales volume and prices increased during the quarter; this pattern is consistent with recent quarters. He confirmed that he believes the housing recovery is in its early stages. The company is committed to growth and increased its land position during the quarter. Toll Brothers' community count was 225 at the end of the third quarter, and is projected to grow 10% to 15% by the end of fiscal 2014 .

PulteGroup has high growth expectations
PulteGroup (NYSE: PHM  ) reported $36 million, or $0.09 per share, of net income for its second quarter ended June 30. Net income included charges for several events that took place in the quarter. In the prior year's quarter, the company reported net income of $42 million, or $0.11 per share. CEO Richard J. Dugas Jr. believes the housing market is on track to a long-term recovery. He finds that consumers see good value in the market, despite a limited supply of housing inventory, rising prices, and higher interest rates.

Adjusted home sales gross margin for the third quarter was 23.9%, an increase of 360 basis points. Net new orders for the second quarter were 4,885 homes, down 12% from prior year. On a dollar basis, the value was $1.5 billion, a decrease of 5% from 2012 .

My foolish conclusion
The average PEG ratios for Toll Brothers -- 0.73 -- and PulteGroup -- 0.51-- are much less than the industry average of 1.92. Sales of Toll Brothers' homes may also be less susceptible to rising mortgage rates since the company caters to a more affluent consumer. Both Toll Brothers and PulteGroup have high five-year growth rate projections of about 54% and 30%, as compared to an industry average growth rate of approximately 20%. 

Based on these numbers, and increasing evidence of a strengthening market, Toll Brothers and PulteGroup may offer a good value for investors looking to invest in the early stages of the housing recovery. 

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Government Shutdown Threatens Growing U.S. Wealth

U.S. households are getting wealthier and earning more, but the threatened government shutdown puts that good news in jeopardy.

While this week’s economic data sheds new light on the growing net worth of U.S. families along with a rise in personal income, analysts fear that brinkmanship in Washington over the debt ceiling and “Obamacare” threatens that growth.

“A shutdown would slow the expansion because output lost when workers are furloughed subtracts from gross domestic product,” wrote Jeanna Smialek and Ian Katz in a Bloomberg analysis on Friday. “The combined prospect of a budget standoff between the White House and Congress and haggling over the debt ceiling could have a bigger impact on the economy as businesses hold off on investment and households delay spending.”

Frank Fantozzi, CEO of Planned Financial Services, a Cleveland, Ohio-based firm affiliated with LPL, agreed that U.S. GDP could take a hit if the government shuts down.

“If the government stops spending money, it will bring down GDP, and this is a concern that the Federal Reserve has raised,” Fantozzi said in a phone interview on Friday. “One of the reasons the Fed has cited is that because GDP is 2% or a little less, we’re approaching a stall rate. If the government shuts down and they can’t put money into the system, the fear is that paltry GDP rate will go to nothing and the economy will stall.” “Theoretically that can happen, though I have my reservations that we’ll see a government shutdown that puts us over the cliff.”

Shutdown Casts Gloom on Sunny Income and Net Worth Data

The U.S. Bureau of Economic Analysis reported Friday that personal income in August increased $57.2 billion, or 0.4%, as personal consumption expenditures increased $34.5 billion, or 0.3%. Private wages and salaries, meanwhile, increased $28.5 billion in August.

Further, on Wednesday, the Federal Reserve reported that household net worth was $74.8 trillion at the end of the second quarter, about $1.3 trillion more than at the end of the first quarter — putting it at the highest level since the Fed began keeping records in 1945.

But now, brinkmanship is back, and with the defunding of President Barack Obama’s Affordable Care Act brought into the budget debate, Bank of America Merrill Lynch global economist Ethan Harris believes that a government shutdown is more likely now than during the 2011 debt ceiling debate.

Until recently, the economists at BofA-Merrill had been cautiously optimistic about a replay of the spring, but last week, they raised the probability of a shutdown in the next several months to 30% from 15%.

“After a welcome hiatus, brinkmanship battles have returned to Washington,” Harris wrote in a comment published Friday. “Now two new battles loom: there needs to be a continuing resolution by the end of this month and the debt ceiling needs to be raised sometime in mid-to-late October.”

‘We Can’t Entirely Rule Out a Shutdown Next Week’

Harris predicts that the latest drama in Washington could come to a climax over the weekend, when he expects the Senate to pass a “clean” continuing resolution that doesn’t include the defunding of Obamacare. That would put the ball back in the House’s court, and the House might decide to pass the Senate bill and postpone the fight for later when the debt ceiling approaches, Harris wrote. Or, he surmised, the House may propose a different, less aggressive limit on the health care law such as postponing the individual mandate a year and send that back to the Senate.

Here’s the bad news, according to Harris: “The Senate would then almost certainly reject that bill. This back and forth will likely continue until time runs out. Our base case is that the House decides to delay the real fight for the debt ceiling, but we can’t entirely rule out a brief shutdown next week.”

Morgan Stanley analysts Vincent Reinhart and Ellen Zentner add to the gloom with their prediction of a one-in-four chance of a shutdown — just as U.S. consumers are finally getting on their feet.

“Only in the past three months has consumer confidence in the U.S. finally reached a level considered historically 'normal' in recovery,” Zentner wrote in a note to clients titled “Households Finally ‘Feel’ the Economy.” Yet in her report with Reinhart, Zentner said there would be a direct arithmetic impact on GDP from a shutdown.

“Compensation of nondefense employees and civilian defense employees makes up about one-fifth of real federal spending and about 1.5% of GDP. Eliminate a third of that in a shutdown as nonexempt workers stay home, and GDP is haircut 0.5%,” Zentner and Reinhart wrote. “Annualized, this reduces quarterly GDP growth by around 0.15 percentage points per week of shutdown. Even if ex post legislation makes up the missed pay and therefore avoids a hit to personal income, the real numbers will be gone for good because the hours worked will not be made up.”

A shutdown would mean more than just a furlough of all but essential government employees, OppenheimerFunds Chief Economist Jerry Webman wrote in a Sept. 3 comment, “When Doves Cry.” It would mean a billion-dollar hit to the U.S. economy, Webman warned.

“Shutdowns can affect hundreds of thousands of workers and contractors, not to mention civilians awaiting approval of various government applications (including small business loans), businesses that rely on tourism, and so on,” Webman wrote. “The costs of past government shutdowns to taxpayers and private businesses have extended into the billions of dollars. So, although the conventional wisdom may be that a shutdown is no big deal, it is something that the economy just doesn’t need right now.”

---

Check out Head Start, Meals on Wheels Among Programs Bruised by Budget Impasse on ThinkAdvisor.

Stocks to Watch: J.C. Penney, Hertz, Eli Lilly

Among the companies with shares expected to actively trade in Thursday’s session are J.C. Penney Co.(JCP), Hertz Global Holdings Inc. and Eli Lilly(LLY) & Co.

Concerns are growing about J.C. Penney as it considers raising fresh capital heading into the holiday season. The Wall Street Journal reported the struggling department store chain is exploring the possibility of borrowing more money with the help of investment bankers at Goldman Sachs(GS). Meanwhile, debt analysts from Goldman Sachs warned Wednesday that weak performance, particularly in Penney’s home department, could put pressure on its available cash in the quarter that ends in October. The retailer issued a statement Thursday saying it was pleased with its turnaround initiatives and anticipates positive same-store sales trends through the rest of the year. Shares fell following a 15% decline Wednesday.

Hertz lowered its full-year guidance, citing weaker-than-expected volume generated by its namesake brand in the U.S. airport car-rental market. “Weaker volume impacts not only revenues, but also generates related fleet issues, including lower utilization and the inability of the used-car market to absorb our excess vehicles at current market prices,” said Chairman and Chief Executive Mark Frissora. Shares dropped.

Eli Lilly said its experimental cancer drug ramucirumab failed to meet its target in a large late-stage trial of breast-cancer patients, a setback in the company’s hopes that the agent will be effective against a wide range of tumors. But in a separate late-stage study, the company said the drug successfully met its goal of demonstrating an improvement in overall survival in patients with stomach cancer. Shares slipped.

Jabil Circuit Inc.’s fiscal fourth-quarter earnings rose 53%, but the contract electronics manufacturer projected fiscal first-quarter results below expectations. Also, Jabil estimated that it will record roughly $35 million to $85 million in charges during the new fiscal year stemming from its exposure to BlackBerry Ltd., Jabil’s second-largest customer in the past fiscal year. Jabil shares fell.

Bed Bath & Beyond Inc.’s fiscal second-quarter earnings rose 11% as the home-furnishings retailer recorded a jump in sales. Shares rose as the company raised the lower end of its full-year earnings estimate.

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Progress Software Corp.’s fiscal third-quarter profit more than quadrupled as the business software provider posted a gain on the divestiture of its Apama product line as well as lower input costs. The results were slightly better than Wall Street expectations. Shares rose as the company’s fiscal fourth-quarter guidance topped expectations.

Private equity firm American Industrial Partners has agreed to buy industrial-waterjet maker Flow International Corp. for $200 million. American Industrial said it would pay $4.05 a share in cash for Flow, an 8.6% premium over Flow’s closing price Wednesday. Shares rose.

Fibrocell Science Inc. said it intends to sell an unspecified number of shares in a public offering. The company recently had 27.5 million shares outstanding, according to FactSet. Shares fell.

The Fed Gives The OK To Load Up On Emerging Markets

After being one of the stock market's darlings for the last decade or so, emerging market nations took a break over the last few weeks as investors prepared themselves for the eventual end of Federal Reserve easing programs. With Fed Chairman Ben Bernake's recent decision not to taper bond purchases as early as expected, a fire has once again been lit under emerging markets. Investors may want to plow back in.

No Taper Yet

Here's why:

First, as the Fed has lowered economic growth forecasts for the U.S., the various bond buying programs could last well into 2014. That fact is certainly intensified by the prediction that "dovish" Janet Yellen is almost guaranteed the next Fed chairman spot after Bernanke. Her background suggests that easing programs could be on the table for quite a while until unemployment drops further and economic growth accelerates.

In addition, aside from the obvious "cheap money" that will continue to push up emerging market equities and bonds higher, emerging markets still look good on a number of fronts. The recent declines have pushed valuations into the bargain territory. Looking at P/E ratios, the sector is currently trading at a 35% discount to developed markets. This is significantly lower than the historical norm. That discount also extends to other metrics like price-to-book and price-to-cash flows.

Despite this cheapness, much of the emerging market growth story remains valid. Rising middle class populations, commodity wealth along with fiscal discipline are still hallmarks of the developing world.

Upping Exposure

Broad sector measures such as iShares MSCI Emerging Markets (NYSE:EEM) or the Vanguard FTSE Emerging Markets ETF (NYSE:VWO) are still the easiest and broadest routes gain exposure.

The PowerShares DWA Emerging Markets Technical Leaders ETF (NYSE:PIE) could be one of the best ways to get the most bang for your Fed buck in the sector. This ETF ranks its components based on relative strength traits. That means it bets on faster moving emerging market companies like Companhia de Bebidas Das Americas (NYSE:ABV) and HDFC Bank (NYSE:HDB). Top nations include Indonesia, Thailand and Turkey. The fund jumped nearly 5% on the day Bernanke announced that he wasn't going to taper. PIE's expenses run 0.90%.

A recent research paper by the Federal Reserve Bank of New York showed that large-scale asset purchases have the effect of pushing investors into emerging market debt. That means both the iShares JPMorgan USD Emerging Markets Bond (NYSE:EMB) and WisdomTree Emerging Markets Local Debt (NYSE:ELD) could be big buys as the Fed continues to stimulate. Both make direct bets on emerging market bonds with dollar and local currency exposure, respectively.

Finally, perhaps the biggest discount in the emerging world can be found in the BRICs. Brazil, Russia, India and China have been hit especially hard as many investors abandoned their growth stories. The SPDR S&P BRIC 40 (NYSE:BIK) tracks 40 of the largest companies in these nations and can be used to gain extra exposure to the titans.

The Bottom Line

The emerging market nations have been hit hard this year as tapering concerns have caused investors to flee risky assets. However, with the Fed signaling that quantitative easing is still very much on the table, the sector should continue to rally into the New Year. For investors, making a play in the developing world could be a big portfolio win. The previous picks- along with the Schwab Emerging Markets Equity ETF (NASDAQ:SCHE) –make ideal selections.

Disclosure: At the time of writing, the author owned shares of VWO

Morning Movers: Walgreen Gains on Morgan Stanley Upgrade; Michael Kors Falls on Jefferies Cut

Stocks have ticked lower this morning following last week’s Fed-induced turbulence.

EPA/JUSTIN LANE

Dow Jones Industrials Average futures have dropped 22 points, while S&P 500 futures have fallen 3.9 points. Nasdaq 100 futures have declined 4.25 points.

The New York Post reported that Carl Icahn can’t sell his stake  Herbalife (HLF) until Feb 28 unless the stock trades above $73 for five consecutive days. Last week, it traded that high for three straight days before dropping 5.1% on Friday.

Sealed Air (SEE) has fallen 0.7% to $28.35 after the food-safety company was downgraded to Equal Weight from Overweight at Barclays.

Towers Watson (TW) has dropped 0.5% to $102.49 after it was cut to Neutral from Overweight at JPMorgan. It was also upgraded to Buy from Hold at Deutsche Bank.

Top 10 Value Stocks To Invest In Right Now

Michael Kors Holdings (KORS) has fallen 1.3% to $75.01 after it was downgraded to Hold from Buy at Jefferies.

Walgreen (WAG) has gained 1.2% to $56.20 after the drug store was upgraded to Overweight from Equal Weight at Morgan Stanley.

Morning Briefing: 10 Things You Should Know

NEW YORK (TheStreet) -- Here are 10 things you should know for Monday, Sept. 16:

1. -- U.S. stock futures were pointing to gains on Wall Street Monday following Lawrence Summer's withdrawal as a candidate to head the Federal Reserve.

European and Asian stocks rose as it looked increasingly likely that the new chairman of the Fed would keep monetary policy looser for longer. Summers' retreat leaves Federal Reserve Vice Chair Janet Yellen, who is perceived to be more dovish than Summers, in pole position for the job.

2. -- The economic calendar in the U.S. Monday includes the Empire State Manufacturing Index for September at 8:30 a.m. EDT, and industrial production and capacity utilization data for August at 9:15 a.m. 3. -- U.S. stocks on Friday gained as a raft of soft U.S. economic data eased investor concerns the Fed will scale back its stimulus program. The S&P 500 gained 0.27% to close at 1,687.99. The Dow Jones Industrial Average finished the regular trading day higher by 0.49%, to 15,376.06. The Nasdaq added 0.17% to close at 3,722.18. The Fed is scheduled to begin its two-day policy meeting on Tuesday. 4. -- Lawrence Summers, who was considered the leading candidate to succeed Ben Bernanke as Fed chairman, withdrew his name from consideration, the White House said. Summers' withdrawal followed growing resistance from critics, including some members of the Senate committee that would need to back his nomination. His exit could open the door for his chief rival, Janet Yellen, the Fed's vice chair. If chosen by President Obama and confirmed by the Senate, Yellen would become the first woman to lead the Fed. 5. -- President Obama is marking the fifth anniversary of the collapse of Lehman Brothers by trying to lay claim to an economic turnaround and warning Republicans against moves that he contends would risk a backslide. Obama's message to the GOP: Don't oppose raising the nation's debt limit, don't threaten to close down the government in a budget fight, and don't push to delay the health care law or starve it of federal money. Obama plans to make a speech Monday at 11:40 a.m. in the White House's Rose Garden. 6. -- Ford (F) said Monday a new workplace charging network would be being installed at nearly every Ford facility in the U.S. and Canada, allowing workers to refill their electric vehicle batteries at work. Ford, the second-largest U.S, automaker, said it plans to install electric vehicle charging stations at more than 50 of its offices, product development campuses and manufacturing plants. Installation will begin later this year and roll out across Ford facilities throughout 2014. 7. -- Chrysler is planning to file documents for its initial public offering this week after majority owner Fiat and the health care trust that owns the rest of the automaker failed to agree a market price in a long-running dispute, The Financial Times reported. "All the work, all the preparation, drafts has gone through . . . we should be ready to file [IPO documents] within the third week of this month," Sergio Marchionne, CEO of both Fiat and Chrysler, told the FT in an interview.

8. -- Top decision makers in South Korea's 8.3 trillion won ($7.64 billion) fighter jet tender have briefed the president on the outcome of an assessment process and told her that Boeing's (BA) F-15 Silent Eagle was the sole eligible bid, a source with knowledge of the process told Reuters.

9. -- In the showcase game of the NFL's Week 2, the Seattle Seahawks beat the San Francisco 49ers, 29-3, on Sunday night. 10. -- Insidious: Chapter 2, the haunted-house horror sequel, led the box office over the weekend by taking in $41 million, more than tripling the opening take of the 2010 original. -- Written by Joseph Woelfel >To contact the writer of this article, click here: Joseph Woelfel >To submit a news tip, send an email to: tips@thestreet.com.

Wells Fargo Upgrades Allstate to “Outperform” (ALL)

Wells Fargo analysts see a number of upside catalysts for The Allstate Corporation (ALL), plus a positive trend for automobile insurers as a whole. As such, the analysts upgraded the insurance provider on Thursday.

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The analysts upgraded ALL from “Market Perform” to “Outperform” and boosted its valuation range from $48-$52 to $58-$62. This new valuation range suggests a 16% to 24% upside to the stock’s Wednesday closing price of $50.11.

“We are upgrading the shares of Allstate to Outperform from Market Perform on the basis of several fundamental reasons unique to the company as well as several positive, emerging structural trends for auto insurers in general,” Wells Fargo analyst John Hall stated. “We do not believe that the market has yet paid for potential unit growth within Allstate’s branded standard book of auto insurance, something we envision occurring over the next 6-12 months.”

As for some of the positive personal auto insurance sector trends, Hall noted, “These would include shifting demographics toward a safer driving population mix (more old drivers and fewer young drivers), changing driving habits particularly among millennials, a safer U.S. personal auto fleet, rising car sales pointing to positive symbol shift as well as industry conditions encouraging market share consolidation.”

Wells Fargo boosted Allstate’s 2013 EPS estimates from $4.62 to $4.85 and 2014 EPS estimates from $4.85 to $5.20.

Allstate shares were mostly flat during pre-market trading on Thursday. The stock is up 24.74% year-to-date.

How To Benefit When CEOs Step Down

10 Best Penny Stocks To Own For 2014

Microsoft (Nasdaq:MSFT)

The 8.6% surge in Microsoft's stock the day last month that CEO Steve Ballmer announced he planned to retire is a reminder changes in the C-suite can often affect investors' perception of the company's value, for better or for worse.

Sometimes a change is necessary, pushing a stock higher in anticipation of better times around the corner. In other situations investors assume the worst, sending a stock spiraling lower.

With that in mind we've picked five examples of CEO retirements in the last five years that caused an unusually large move, up or down, in the price of the company's stock. By the end you'll have a better understanding of how C-suite changes move the market and why.

Hewlett-Packard (NYSE:HPQ)

A little more than three years ago, Mark Hurd, then CEO, was forced to resign after the executive filed falsified expense reports in order to hide an inappropriate relationship with a female contractor. Although Hurd was found not to have broken the company's sexual harassment policy, the board felt he had violated its standards of business conduct leaving it with no choice but to remove him as CEO. On the day of the resignation Hewlett-Packard's stock lost 10% of its value or more than $10.6 billion. Meanwhile, Hurd's severance was upwards of $40 million and one month later he was hired as Larry Ellison's second-in-command at Oracle (NYSE:ORCL). For Hewlett-Packard shareholders, its stock hasn't got anywhere close to where it was trading before Hurd's resignation while the former CEO hasn't suffered one bit from his indiscretions.

Moral of the story: When the CEO resigns for reasons unrelated to the business, especially unseemly ones, you can expect some serious financial hurt.

Lululemon (Nasdaq:LULU)

When Christine Day took the reins of one of North America's most successful apparel brands on June 30, 2008, investors were hopeful her 20 years of experience at Starbucks (Nasdaq:SBUX) would come in handy. Over the next five years Day and her team grew its brand in the U.S. like no other Canadian apparel manufacturer had ever done before. Its fiscal 2012 revenues were $1.4 billion, a compound annual growth rate of 38% over the past five years with Day as CEO. You can't do much better than that.

Then things began to unravel. Competitors started to nip at the company's heels; quality control began to suffer. However, more than anything, the 18-hour days began to take a toll on the 51-year-old. She told the board she was tired of putting in the hours and didn't want to do the travel required for its expansion outside North America. If she was getting burned out, Lululemon's results didn't seem to suffer. From her first day as CEO through her departure announcement June 10, 2013, Lululemon's stock gained 466%. In the two weeks following her surprise announcement the company's stock's lost 28% of its value.

Moral of the story: Don't pin your future on a rock star CEO; they too can burn out.

Open Table (Nasdaq:OPEN)

If you live in a major North American city and dine out with any frequency, you've likely heard of its online reservation system. It went public in May 2009 at $20 per share; two years later it found itself in nosebleed country trading as high as $115, up 475%.

Then the proverbial wheels fell off. Although growing at a decent clip, investors came to the conclusion that it was much too expensive given the increased competition for dinner reservations. Its stock began to drop at a slow rate until then-CEO Jeff Jordan announced May 4, 2011 that he was stepping down as the top dog to be replaced by long-time CFO Matthew Roberts. Although Jordan remained with the company as executive chairman for another seven months, investors pummeled the former IPO star. On the day Jordan stepped down the company lost 15% of its value. By late 2011 shares were trading at barely above $30 each. Those who bought at the peak—on paper—lost 75% of their investment in the span of seven months.

Moral of the story: It's only a loss if you sell. In the 21 months since Jeff Jordan left Open Table for good, the company's shares have regained 38% of their value since their $115 high. Don't get caught up in all the noise that occurs when a CEO steps aside. Often, it really doesn't mean much.

Facebook (Nasdaq:FB)

I know what you're thinking—Mark Zuckerberg hasn't quit as CEO of the world's biggest social media site. True enough. But what if he had? Many were calling for his head after its botched IPO was immediately followed by less than stellar second-quarter earnings results. Big-time investors felt an experienced CEO was needed to guide it higher; not a college drop-out with a penchant for hoodies.

Fast forward to September 2013 and Facebook's stock is trading 12.3% above its IPO price of $38. Anyone who actually listened to Zuckerberg and COO Sheryl Sandberg during the Q2 2012 conference call should have realized it was only in the early stages of monetizing its website. Since then its business—and profits—have picked up in a big way. Analysts such as Baird Research have upped the 12-month price target to $50. Momentum is clearly on its side.

Moral of the story: Be careful what you wish for—you just might get it. Mark Zuckerberg stepping down as CEO of Facebook would have been a colossal mistake rendering the company rudderless at an absolutely critical point in its growth. Sometimes what doesn't happen is more important than what does.

Chesapeake Energy (NYSE:CHK)

Founders often make good CEOs. In the case of Aubrey McClendon this was true for many of the 23 years he spent running the company he founded in 1989. Over the past 15 years the company's stock achieved an annualized total return of 21%, 400 basis points greater than Chesapeake's peers in the oil & gas exploration and production industry.

Unfortunately, McClendon's big bet on natural gas took a toll on the company in the three years leading up to his resignation. While directors found no wrongdoing, It didn't help that the board investigated the former CEO for improper financing arrangements regarding personal stakes he took in company wells. When he announced he was stepping down as CEO on January 29, the company's stock gained 6% on the next day of trading. More gains came after May 20 when Chesapeake hired Doug Lawler as its new CEO. Lawler, an engineer by training, came to Chesapeake with 20-plus years of energy experience, most recently as senior vice president of Anadarko Petroleum (APC). Most importantly, Lawler brought to the table a far less flamboyant, much more methodical approach to running a company. Investors so far seem to like the move.

Moral of the story: "Boring" can be better.

The Bottom Line

CEOs step down for all kinds of reasons. Investors, rightly or wrongly, seem to want to figure out what that means for the future. When a CEO steps down it's best to take some time before deciding what to do with your stock. Most times it's neither good nor bad—it just is. Much like life in general.

Disclosure - At the time of writing, the author did not own shares of any company mentioned in this article.

Can Chipotle Mexican Grill See Higher Prices?

With shares of Chipotle Mexican Grill (NYSE:CMG) trading around $378, is CMG 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

Chipotle Mexican Grill operates restaurants throughout the United States, as well as two restaurants in Toronto, Canada and two in London, England. The company's restaurants serve a menu of burritos, tacos, burrito bowls, and salads. Chipotle Mexican Grill manages its operations and restaurants based on six regions that all report into a single segment. It prides itself in serving the best possible ingredients during a time when consumers are more keen to this detail. The company is well-positioned to see rising profits as consumers become more health conscious and opt for Chipotle Mexican Grill’s food items.

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T = Technicals on the Stock Chart are Strong

Chipotle Mexican Grill stock has formed an explosive move higher over the last several years. Currently, the stock is trading at highs for the year and looks like it wants to test all-time high prices. 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, Chipotle Mexican Grill is trading above its rising key averages which signal neutral to bullish price action in the near-term.

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(Source: Thinkorswim)

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

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Chipotle Mexican Grill Options	23.16%	3%	0%

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

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

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

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

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Chipotle Mexican Grill’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Chipotle Mexican Grill 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)	24.37%	7.75%	19.47%	61.01%
Revenue Growth (Y-O-Y)	13.45%	17.16%	18.36%	20.89%
Earnings Reaction	11.53%	5.72%	-15.01%	-21.51%

Chipotle Mexican Grill has seen increasing earnings and revenue figures over the last four quarters. From these figures, the markets have been pleased with Chipotle Mexican Grill’s recent earnings announcements.

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P = Excellent Relative Performance Versus Peers and Sector

How has Chipotle Mexican Grill stock done relative to its peers, Panera Bread Company (NASDAQ:PNRA), McDonald’s (NYSE:MCD), Jack In The Box (NASDAQ:JACK), and sector?

	Chipotle Mexican Grill	Panera Bread Company	McDonald’s	Jack In The Box	Sector
Year-to-Date Return	26.93%	19.96%	15.13%	27.62%	18.34%

Chipotle Mexican Grill has been a relative performance leader, year-to-date.

Conclusion

Chipotle Mexican Grill provide quick, easy, tasteful, and socially aware food items to consumers worldwide. The stock has seen an excellent run over the last few months and looks like it wants to test all-time high prices. Earnings and revenue figures have been increasing over the last four quarters which has kept investors upbeat. Relative to its peers and sector, Chipotle Mexican Grill has been a year-to-date performance leader. Look for Chipotle Mexican Grill to OUTPERFORM.

Will Recent News Affect HSBC?

With shares of HSBC (NYSE:HBC) trading around $52, is HBC 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

HSBC is a global banking and financial services organization that provides various banking and financial products and services. The company operates in four businesses: Retail Banking and Wealth Management, Commercial Banking, Global Banking and Markets, and Global Private Banking. Financial businesses have a significant influence on economies around the world. HSBC provides the banking and financial services that help fuel many of the day-to-day processes of most companies.

Recently, a $1.92 billion settlement with U.S. authorities over charges that the bank illegally carried out financial transactions for Mexican and Colombian drug cartels and other criminals has been approved by a U.S. district judge in New York. The settlement has been heavily criticized since it allows the bank, which essentially became a go-to institution for foreign money launderers through various oversights and errors within the company, to escape criminal charges. HSBC may struggle a bit after this news but watch and see how markets react.

T = Technicals on the Stock Chart are Mixed

HSBC stock has gained ground since hitting lows during the 2008 Financial Crisis. The stock is now trading near multi-year highs so it may struggle here a bit. 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, HSBC is trading slightly below its key averages which signal neutral price action in the near-term.

Top High Tech Stocks To Invest In Right Now

(Source: Thinkorswim)

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

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
HSBC Options	29.23%	83%	80%

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

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

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

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

E = Earnings Are 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 HSBC’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for HSBC 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)	153.80%	23.08%	-53.57%	14.29%
Revenue Growth (Y-O-Y)	7.48%	0.68%	-14.23%	5.00%
Earnings Reaction	2.15%	-1.60%	-0.76%	1.45%

HSBC has seen mostly increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have had mixed feelings about HSBC’s recent earnings announcements.

P = Weak Relative Performance Versus Peers and Sector

How has HSBC stock done relative to its peers, Barclays (NYSE:BCS), Citigroup (NYSE:C), UBS (NYSE:UBS), and sector?

	HSBC	Barclays	Citigroup	UBS	Sector
Year-to-Date Return	-1.60%	-0.58%	20.48%	7.88%	6.51%

HSBC has been a weak relative performer, year-to-date.

Conclusion

HSBC is a banking and financial services company that provides service to consumers and companies across the globe. The stock has made modest progress in recent years but is now near price levels that may see some selling pressure, specially with news of a settlement. Over the last four quarters, earnings and revenue figures have been mostly increasing; however, the markets have had mixed feelings about the company’s recent earnings reports. Relative to its peers and sector, HSBC has been a weak  year-to-date performer. WAIT AND SEE what HSBC does in coming quarters.

Airline Shares Take Off on Delta Addition to S&P 500

It’s been a bumpy few weeks for airline stocks after the Department of Justice challenged AMR Corp.’s (AAMRQ) merger with U.S. Airways (LCC), calling into question not just the consolidation thesis that had boosted airlines recently but also AMR’s future.

for The Wall Street Journal (Kevin Hagen for The Wall Street Journal)

Today, however, the airline industry got some good news that had nothing to do with that litigation: Delta Air Lines (DAL) is set to join the Standard & Poor’s 500-stock index. Now, we all know that an addition to the index is not meant to be a recommendation, but with index funds and index huggers, alike, being forced to buy its shares, Delta’s stock has surged today.

Delta is up 6.9% to $21.26 today–and giving the rest of the industry a boost. U.S. Airways has climbed 3% to $17.30, United Airlines Continental (UAL) has risen 3% to $30.62 and Alaska Air (ALK) has advanced 1.5% to $58.26.

Shares of the Atlanta-based airline will replace those of BMC Software, which is being purchased by Bain Capital.

 

Is Tivo Heading In the Right Direction?

With shares of Tivo (NASDAQ:TIVO) trading at around $13.09, is TIVO an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock's Movement

Tivo recently beat Q1 expectations. EPS came in at -$0.09 on $82.6 million in revenue. Analysts expected -$0.14 on $78.3 million in revenue. On a year-over-year basis, the loss narrowed and revenue increased. Tivo saw the largest MSO subscription increase in over seven years. It signed a distribution deal with Atlantic Broadband (twelfth largest U.S. MSO), it launched a "What to What" feature on Apple Inc.'s (NASDAQ:AAPL) iPad Mini, and it announced that its patent trial with Motorola is set to begin on June 10.

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Tom Rogers, President and CEO of TiVo, said, “The solid financial results this quarter were the outcome of strong operational execution across our business. Our advanced television innovation is helping to drive the global adoption of TiVo as we increased our MSO subscription base by 277,000 subscriptions, our strongest quarter of MSO subscription additions in seven years. We delivered 13 percent year-over-year service and technology revenue growth and reported an Adjusted EBITDA profit, which significantly exceeded our guidance. As a result, we continue to believe that we should be Adjusted EBITDA profitable, even when including litigation spend, for Fiscal 2014.”

Top Growth Companies For 2014

That's the good news. The bad news is that Tivo consistently loses money. Promises are often made, but where are the actual results, as in profits? Is management the problem? According to Glassdoor.com, employees have rated their employer a 3.0 of 5, which is average. The concerning stats are that only 50 percent of employees would recommend the company to a friend and that only 42 percent of employees approve of CEO Tom Rogers.

The following are two quotes from employees on Glassdoor.com:

April 1: "Good company going down."

May 19: "Good time on a slowly sinking ship."

Ouch!

Below is a chart comparing fundamentals for Tivo, Dish Network Corp. (NASDAQ:DISH), and Comcast Corporation (NASDAQ:CMCSA).

	TIVO	DISH	CMCSA
Trailing P/E	N/A	36.02	17.71
Forward P/E	N/A	17.37	15.11
Profit Margin	-1.73%	3.46%	10.18%
ROE	-1.61%	360.32%	14.21%
Operating Cash Flow	47.29M	1.84B	14.83B
Dividend Yield	N/A	N/A	1.80%
Short Position	10.80%	2.10%	1.10%

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

T = Technicals Are Strong

Tivo has underperformed its peers over a three-year time frame, but the past month has been strong.

	1 Month	Year-To-Date	1 Year	3 Year
TIVO	19.80%	6.66%	41.49%	48.53%
DISH	0.82%	8.02%	41.89%	110.7%
CMCSA	3.57%	12.97%	51.41%	165.3%

At $13.09, Tivo is trading well above its averages.

50-Day SMA	11.75
200-Day SMA	12.00

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E = Equity to Debt Ratio is Strong

The debt-to-equity ratio for Tivo is stronger than the industry average of 2.60.

	Debt-To-Equity	Cash	Long-Term Debt
TIVO	0.51	627.24M	172.50M
DISH	0.03	7.10B	11.88B
CMCSA	0.95	4.68B	47.23B

E = Earnings Have Been Inconsistent

Tivo is simply unable to deliver consistent profits. Revenue provides at least some reason for hope.

Fiscal Year	2009	2010	2011	2012	2013
Revenue ($) in millions	250	238	220	238	304
Diluted EPS ($)	1.01	-0.23	-0.74	0.80	-0.04

When we look at the last quarter on a year-over-year basis, we see an increase in revenue and a narrowed loss. However, it’s still a loss.

Quarter	Apr. 30, 2012	Jul. 31, 2012	Oct. 31, 2012	Jan. 31, 2013
Revenue ($) in millions	67.77	65.26	82.03	88.86
Diluted EPS ($)	-0.17	-0.23	0.44	-0.13

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

Conclusion

Analysts like the stock: 15 Buy, 1 Hold, 0 Sell. However, when profits are scarce and employees aren't confident in the direction of the company or their leader, there is significant cause for concern. Patent settlements have helped Tivo, but experienced investors want organic growth and consistent profits.

European Stocks Rise as ECB Holds Benchmark Rate at Low

Simon Dawson/Bloomberg

Dixons Retail Plc, the largest U.K. electronics retailer, jumped the most in nearly five years after receiving an offer from Mutares AG to buy its Pixmania stores.

European stocks climbed as European Central Bank President Mario Draghi reiterated that interest rates will stay low for an extended period, while the Federal Reserve said it saw a modest to moderate U.S. economic recovery.

PSA Peugeot (UG) Citroen added 5.4 percent as its chief executive officer predicted a market-share increase in an interview with Le Parisien. Telecom Italia SpA rose 8.4 percent after a report that Egyptian billionaire Naguib Sawiris may buy a stake in Italy's biggest phone company. TeliaSonera AB slid 1.9 percent as Finland cut its holding in the network operator.

The Stoxx Europe 600 Index added 0.7 percent to 304.55 at the close of trading. The benchmark gauge lost 2.4 percent last week on concern the U.S. and its allies would take military action against Syria after chemical-weapon attacks that President Barack Obama's administration said killed more than 1,400 people.

"Draghi's comments reinforce the view that the central bankers are in no mood to rush any rate rise and in no mood to spook the markets," said Justin Urquhart Stewart, who helps oversee about $6.8 billion at Seven Investment Management in London. "He wants to put recent good economic news into context -- from a flat dull position we at last can see the first shafts of light."

The ECB today kept its benchmark interest rate unchanged at a record low after the 17-nation euro area returned to growth in the second quarter.

Euro Growth

The euro-area economy expanded 0.3 percent in the three months through June. Recent economic indicators point to a further recovery in the second half as an index of services and factory output climbed to the highest level since June 2011 and economic confidence soared to a two-year high.

Still, "the risks surrounding the outlook for the euro area continue to be on the downside," Draghi said at a press conference in Frankfurt. "The Governing Council confirms it expects the key rate to remain at the current l! evel or below for an extended period."

Bank of England officials left their bond-buying program unchanged today at 375 billion pounds ($586 billion), as forecast by all 38 economists in a Bloomberg News survey. They also kept the key interest rate at a record low 0.5 percent.

In the U.S., increased spending on cars and housing helped the economy maintain a "modest to moderate" pace of expansion from early July through late August, even as borrowing costs increased, the Fed said yesterday in its Beige Book business survey of economic conditions.

Syria Vote

The Senate Foreign Relations Committee voted to authorize Obama to conduct a limited U.S. military operation in Syria, the first step toward congressional endorsement of the effort. The full Senate will begin discussing military action from Sept. 9.

The volume of shares changing hands in Stoxx 600 companies was 35 percent higher than the 30-day average, according to data compiled by Bloomberg.

National benchmark indexes advanced in 16 of the 18 western European markets today. France's CAC 40 gained 0.7 percent, while Germany's DAX added 0.5 percent. The U.K.'s FTSE 100 climbed 0.9 percent.

Peugeot, Europe's second-biggest automaker, rose 5.4 percent to 11.24 euros. CEO Philippe Varin forecast an increase in market share in the third quarter, according to an interview with Le Parisien.

Carmakers Advance

A gauge of auto-related companies posted the largest gain of the 19 industry groups on the Stoxx 600. Bayerische Motoren Werke AG, the biggest maker of luxury cars, added 6 percent to 76.97 euros, its highest price since at least 1992. Volkswagen AG, Europe's largest automaker, climbed 1.2 percent to 172 euros. Renault SA advanced 5.8 percent to 56.50 euros.

Telecom Italia (TIT) jumped 8.4 percent to 60.7 euro cents. La Repubblica reported that Sawiris may buy a stake in the phone company. The newspaper didn't cite anyone.

Dixons Retail Plc jumped 5.9 percent to 4! 6.88 penc! e, its highest price in nearly five years. The U.K.'s largest electronics retailer said it's close to exiting its online unit Pixmania after getting an irrevocable offer from Germany's Mutares AG. It has also agreed to sell its Turkish operations in transactions that will rid it of unprofitable businesses and enable it to focus on U.K. growth.

ICAP Plc advanced 6.7 percent to 400 pence. Morgan Stanley raised the world's largest broker of transactions between banks to overweight, similar to a buy rating, from underweight. The brokerage also increased its target price on the stock to 418 pence, citing greater clarity over U.S. rules governing swap-execution facilities and an increasingly attractive risk-reward profile as regulatory risks diminish.

TeliaSonera Stake

TeliaSonera (TLSN) slid 1.9 percent to 47.56 Swedish kronor. Solidium Oy, Finland's equity-asset manager, sold 1.6 percent of shares in the Stockholm-based company in an accelerated book building to institutional investors, it said in a statement.

Aker Solutions ASA slipped 1.6 percent to 91.50 Norwegian kroner. Nomura Holdings Inc. downgraded the oil services group controlled by billionaire Kjell Inge Roekke to reduce, similar to a sell rating, from buy.

"We lower our margins for 2014 and 2015 as the company faces underutilisation at its yards outside Norway owing to competition from Korean companies," the brokerage's note said. Nomura set a target price of 85 kroner on the shares.

Emerging Stocks Sink Most in Eight Weeks on Syria Concern

Emerging-market stocks posted the biggest drop in eight weeks on concern a conflict between the U.S. and Syria will intensify. Dubai's DFM General Index sank the most in the world, while Turkey's lira fell to a record.

The MSCI Emerging Markets Index slid 1.8 percent to 916.48 at 12:55 p.m. in New York. The DFM tumbled 7 percent, the most among 94 gauges tracked by Bloomberg. The Borsa Istanbul National 100 Index slipped 4.7 percent as central bank Governor Erdem Basci ruled out raising the overnight lending rate and the lira dropped past 2 per dollar for the first time. Thai (SET)'s SET Index entered a bear market amid concern foreign outflows will accelerate, while India's rupee plunged the most since 1996.

Stocks in developing nations joined a global selloff after U.S. Secretary of State John Kerry said yesterday that President Barack Obama believes there must be accountability for the "moral obscenity" of using chemical weapons in Syria. Oil surged to a five-week high as Foreign Minister Walid al-Muallem said today Syria's defenses will "surprise" the world should the U.S. and its allies decide on military strikes.

"Concerns about Syria are definitely front and center," Paul Zemsky, the New York-based head of asset allocation for ING Investment Management which oversees $180 billion, said by phone. "We had a weak environment to begin with and the geopolitical situation is just one more nail in the coffin to cause additional uncertainty."

Global funds have withdrawn about $44 billion from emerging-market stock and bond funds since the end of May through last week, according to data provider EPFR Global, a Cambridge, Massachusetts-based firm that tracks fund flows.

Biggest Losses

All 10 groups in the MSCI Emerging Markets Index fell today by at least 0.7 percent, led by health-care and consumer-staple shares. The gauge of developing nations extended this year's plunge to 13 percent, compared with an 11 percent advance for a measure of developed markets.

The iShares MSCI Emerging Markets Index exchange-traded fund dropped 2 percent to $37.46. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, jumped 11 percent to 28.02.

Brazil's Ibovespa (IBOV) slid 1.6 percent as PDG Realty SA led declines in homebuilders amid mounting speculation that Brazilian policy makers will extend a cycle of interest-rate increases to tame inflation. The real fell 0.7 percent.

Russian stocks dropped for a third day as the country's biggest companies, including OAO Sberbank and OAO Magnit, fell on concern slowing economic growth will crimp profits. Bank of America Corp. cut Russia's GDP growth outlook today to 2.5 percent, citing weak second-quarter data.

Turkey, India

The Borsa Istanbul National 100 Index sank the most since June 20, led by banks. Basci said he won't increase interest rates to fight a deepening slump in the lira, and instead promised to use "surprise" tools to reverse the trend. The lira declined 1.9 percent.

India's rupee plunged to a record low on concern the nation's current-account deficit will worsen, extending this year's tumble to 17 percent. The S&P BSE Sensex (SENSEX) sank 3.2 percent as HDFC Bank Ltd. (HDFCB) plunged the most in more than four years, dragging a measure of 13 lenders to a 19-month low.

China's stocks rose to a two-week high as profit growth for industrial companies accelerated. PetroChina Co. was suspended from Shanghai and Hong Kong trading pending an announcement. The nation's biggest energy producer said three senior managers resigned amid a government probe, as China's new leaders step up their campaign against corruption.

Thai stocks retreated for a ninth day, sending the benchmark index down more than 20 percent from this year's high. The Philippine Stock Exchange Index lost 4 percent to the lowest level since June 25. The Jakarta Composite (JCI) index fell below the 4,000 level for the first time in a year.

The premium investors demand to own emerging-market debt over U.S. Treasuries rose 0.06 percentage point to 352 basis points, according to JPMorgan Chase & Co.

Best Small Cap Stocks To Invest In Right Now

Stocks rallied this week after Federal Reserve Chairman Ben Bernanke quelled fears of the Fed scaling back its massive bond-buying program, reassuring that the economy still needs ��ighly accommodative monetary policy for the foreseeable future.��With earnings season just underway and analyst expectations still low, this rally may not last long, but two ETF issuers decided to take advantage of the post holiday market euphoria�.



Market veteran State Street,�introduced a new way to gain exposure to Small Caps:

SPDR Russell 2000 ETF :�Building it�� own portfolio based on the Russell 2000, State Street released this new fund just after Independence day and already TWOK is making a dent in the existing Russell funds; IWM and VTWO�.iShares has once again expanded it�� already extensive lineup, focusing on global corporate bonds with a range of expiration dates�:

Best Small Cap Stocks To Invest In Right Now: Petroquest Energy Inc(PQ)

PetroQuest Energy, Inc. operates as an independent oil and gas company. It engages in the acquisition, exploration, development, and operation of oil and gas properties in Oklahoma, Arkansas, and Texas, as well as onshore and in the shallow waters offshore the Gulf Coast Basin. As of December 31, 2009, the company had estimated proved reserves of 1,931 thousand barrels of oil and 167,361 million cubic feet equivalent of natural gas. It owned working interests in 9 net producing oil wells and 277 net producing gas wells. PetroQuest Energy was founded in 1983 and is headquartered in Lafayette, Louisiana.

Advisors' Opinion:

• [By SmallCap Investor]

  Shares traded sharply higher after the oil and gas explorer issued an operational update that revealed details of a discovery at its La Cantera site in Louisiana. Raymond James analysts bumped the stock rating to market perform based on the new findings and an improving balance sheet.

Best Small Cap Stocks To Invest In Right Now: OCZ Technology Group Inc(OCZ)

OCZ Technology Group, Inc. designs, develops, manufactures, and distributes computer components for computing devices and systems worldwide. It primarily offers solid state drives, flash memory storage, memory modules, thermal management solutions, AC/DC switching power supply units, and computer gaming solutions. The company?s products are used in industrial equipment and computer systems; computer and computer gaming solutions; mission critical servers and high end workstations; personal computer (PC) upgrades to extend the useable life of existing PCs; high performance computing and scientific computing; video and music editing; home theatre PCs and digital home convergence products; and digital photography and digital image manipulation computers. OCZ Technology Group, Inc. offers its products to retailers, on-line retailers, original equipment manufacturers, systems integrators, and distributors. The company was founded in 2002 and is headquartered in San Jose, Califo rnia.

Advisors' Opinion:

• [By Wyatt Research]

  The maker of solid state drives for computers reported revenue more than doubled and posted adjusted net income of 1 cent per share. It predicted a full-year revenue rise of at least 65 percent. The share price has jumped 210 percent in the past year.

Top Stocks To Watch For 2014: Achillion Pharmaceuticals Inc.(ACHN)

Achillion Pharmaceuticals, Inc., a biopharmaceutical company, engages in the discovery, development, and commercialization of treatments for infectious diseases. The company focuses on the development of antivirals for the treatment of chronic hepatitis C; and the development of antibacterials for the treatment of resistant bacterial infections. Its drug candidates for the treatment of chronic HCV include ACH-1625, a protease inhibitor, which is in phase IIa clinical trial for the treatment of chronic HCV; ACH-2684, a pangenotypic protease inhibitor, which is in phase I clinical trial for the treatment of chronic HCV infection; and NS5A inhibitors for the treatment of chronic HCV infection, including ACH-2928, which is to enter a phase I clinical trial, as well as various additional NS5A inhibitors in preclinical development. Its pipeline of product candidates also includes ACH-702 and ACH-2881 for drug resistant bacterial infections; elvucitabine for HIV infection; and AC H-1095 for HCV infection. The company was founded in 1998 and is based in New Haven, Connecticut.

Advisors' Opinion:

• [By Brian Nichols]

  Achillion is an odd play because it has both the most upside and the most downside of any stock on this list. The company's developing and testing its hepatitis C treating drug, ACH-1625, which is currently in phase II. The results of initial testing have consisted of ups and downs, but after many years and a long process, ACH-1625, appears to be on the right track for an FDA approval.

  The upside in shares of ACHN comes from two places: encouraging data from trials and its likelihood of being acquired. In my opinion, ACHN has a very high chance of being acquired in the next 6 months. Both Pharmasset (VRUS) and Inhibitex (INHX) were acquired over the last 5 months with insanely large premiums. VRUS was purchased at a 81% premium and INHX for a 182% premium. ACHN is perhaps the most speculative, but it could also be purchased the cheapest.

  The stock's recently pulled back after a downgrade and is trading much lower over the last couple weeks. The stock's trend reminds me so much of INHX; the month following the VRUS acquisition when INHX traded higher by nearly 300%. But then after the one-month gain, INHX lost its momentum and traded lower by 40% before being acquired with a 182% premium. INHX traded higher after the VRUS purchase because investors thought it would also be acquired, because of its hepatitis C candidate. ACHN is following the same trend, from November 12 till January 13 the stock more than doubled, but has since retraced.

  At $10 I think ACHN is a buy, it does have a good HCV candidate, and I believe that big pharma will bid to acquire ACHN in the near future. However, the risk in ACHN is if the company's not acquired, then it could have significant loss over the next year. But in a competitive biotechnology industry I believe the reward is worth the risk, and that a large pharma company will take the chance and purchase ACHN in an attempt to stay competitive and capitalize on the trend of investors being bullish on HCV treating drugs.

Best Small Cap Stocks To Invest In Right Now: Rackspace Hosting Inc(RAX)

Rackspace Hosting, Inc. operates in the hosting and cloud computing industry. It provides information technology (IT) as a service, managing Web-based IT systems for small and medium-sized businesses, as well as large enterprises worldwide. The company?s service suite includes dedicated hosting comprising customer management portal and other management tools that manage data center, network, hardware devices, and operating system software; and cloud computing that enables customers to provide and manage a pool of computing resources, as well as delivery of computing resources to business when they need them. It offers cloud servers, cloud files, and cloud sites, as well as cloud applications, such as email, collaboration, and file back-ups; and hybrid hosting that provides a combination of dedicated hosting and cloud computing services. The company also offers customer support services. It sells its service suite through direct sales teams, third-party channel partners, an d online ordering. The company was formerly known as Rackspace.com, Inc. and changed its name to Rackspace Hosting, Inc. in June 2008. Rackspace Hosting, Inc. was founded in 1998 and is headquartered in San Antonio, Texas.

Advisors' Opinion:

• [By Sherry Jim]  

  This computing specialist that provides web-based IT systems has soared 60%+ in the past year.  With a P/S above 3 and Price to Cash of 10 this stock is poised to continue to soar and outperform it’s peers. $25 in a year is a realistic bet.

Best Small Cap Stocks To Invest In Right Now: Hot Topic Inc.(HOTT)

Hot Topic, Inc., together with its subsidiaries, operates as a mall- and Web-based specialty retailer in the United States. The company operates Hot Topic and Torrid store concepts, as well as an e-space music discovery concept, ShockHound. Its Hot Topic stores sell music/pop culture-licensed merchandise, including tee shirts, hats, posters, stickers, patches, postcards, books, novelty accessories, CDs, and DVDs; and music/pop culture-influenced merchandise comprising women?s and men?s apparel and accessories, such as woven and knit tops, skirts, pants, shorts, jackets, shoes, costume jewelry, body jewelry, sunglasses, cosmetics, leather accessories, and gift items for young men and women primarily between the ages of 12 and 22. The company?s Torrid stores sells casual and dressy jeans and pants, fashion and novelty tops, sweaters, skirts, jackets, dresses, hosiery, shoes, intimate apparel, and fashion accessories for various lifestyles for plus-size females primarily betw een the ages of 15 and 29. As of July 30, 2011, it operated 636 Hot Topic stores in 50 states, Puerto Rico, and Canada; 145 Torrid stores; and Internet stores, hottopic.com and torrid.com. The company was founded in 1988 and is headquartered in City of Industry, California.

Advisors' Opinion:

• [By Wyatt Research]

  The teen retailer reported its same-store sales rose 0.4 percent, with same-store sales at its Torrid chain for overweight teens rising 7 percent. Analysts were expecting a decline.

Best Small Cap Stocks To Invest In Right Now: Panera Bread Company(PNRA)

Panera Bread Company, together with its subsidiaries, owns, operates, and franchises retail bakery-cafes in the United States and Canada. Its bakery-cafes offer fresh baked goods, sandwiches, soups, salads, custom roasted coffees, and other complementary products, as well as provide catering services. The company also manufactures and supplies dough and other products to company-owned and franchise-operated bakery-cafes. As of March 29, 2011, it owned and franchised 1,467 bakery-cafes under the Panera Bread, Saint Louis Bread Co., and Paradise Bakery & Cafe names. The company was founded in 1981 and is based in St. Louis, Missouri.

Advisors' Opinion:

• [By Roberto Pedone]

  One casual dining player that insiders are active in here is Panera Bread (PNRA), which is a national bakery-cafe concept with 1,652 company-owned and franchise-operated bakery-cafe locations in 44 states, the District of Columbia and Ontario, Canada. Insiders are buying this stock into modest strength, since shares are up 5.2% so far in 2013.

  Panera Bread has a market cap of $4.8 billion and an enterprise value of $4.5 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 26.28 and a forward price-to-earnings of 21.32. Its estimated growth rate for this year is 15.8%, and for next year it's pegged at 15.1%. This is a cash-rich company, since the total cash position on its balance sheet is $341.06 million and its total debt is zero.

  The CFO just bought 1,500 shares, or about $252,000 worth of stock, at $168.58 per share.

  From a technical perspective, PNRA is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently gapped down big from $187.50 to its low of $165.55 a share with heavy downside volume. That move has now pushed shares of PNRA into oversold territory, since its current relative strength index reading is 25.59. Oversold can always get more oversold, but it's also an area where a stock can experience a powerful rebound higher from.

  If you're bullish on PNRA, then look for long-biased trades as long as this stock is trending above some key near-term support at $165.55, and then once it breaks out above some near-term overhead resistance levels at its 200-day of $171.33 a share to more resistance at $172.50 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average volume of 439,019 shares. If that breakout triggers soon, then PNRA will set up to re-fill some of its previous gap down zone that started at $187.50 a share. Some possible upside targets if PNRA gets into that gap with volume are $175 to $180 a share.

• [By Fabian]  

  Most of you have probably eaten at one of these franchise bakery-cafes. If not I highly recommend it, as for the company itself they are exceptional. Profit soared 50% in the first quarter, operating margins rose several percentage points, and Panera is sitting on $300+ million of cash. Right now it’s at a 30% discount to its peer averages and the stock is very cheap when valued against future earnings. Strong buy expect it to rise to $105.

RIAs Call Social Media Policies Their Top Compliance Goal

Advisors are honing their social-media savvy, with nearly 83% of firms adopting formal social media policies this year—up from 64% in 2011 and nearly double the 43% of advisors who had such policies in 2010, according to a just-released compliance survey by the Investment Adviser Association, ACA Compliance Group and Old Mutual Asset Management.

The online survey of 462 registered investment advisors, conducted from April 18 to May 17, also found that fewer firms (49%) are prohibiting the use of social media sites for business purposes, down from 54% in 2012. Forty-three percent reported that their social media testing has increased in the past year.

Since last year’s survey, compliance testing has increased the most in the areas of advertising and marketing, personal trading, disaster recovery planning, and political contributions/pay to play, with 79% of firms indicating that they have not decreased compliance testing in any area.

Best Stocks To Own For 2014

The survey found that while 8% of firms reported detecting material compliance issues, 22% said they found none. The most common material issues were in the areas of advertising and marketing, personal trading, client guidelines and custody.

Laura Grossman, IAA’s assistant general counsel, said in a statement that the survey “confirms that investment advisory compliance professionals continue to adapt their firms’ compliance programs to address the progressively complex regulatory environment.”

Compliance professionals, she said, “are increasing testing, using more automated compliance systems, and implementing policies and procedures to respond to new challenges. For example, the percentage of firms that have adopted formal written social media policies has risen dramatically over a short period of time.”

As to the chief compliance officer role, 99% of firms reported that they do not outsource the CCO role, while 63% said their CCO is wearing two or more hats. Thirty-two percent of the firms polled reported having only one person in a full-time legal/compliance role, while 68% of firms reported that their CCO is a senior executive in the firm.

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