Groupon Inc (GRPN): Digital Coupons Could Be The Next Leg Of Growth

Groupon Inc. (NASDAQ: GRPN) has begun experimenting with the online coupon business and this could prove to be an incremental opportunity in long-term.

Groupon launched Freebies, a new category on its online deals marketplace that offers digital coupons, promotion codes, giveaways and samples. The latest move from Groupon is a big shift in its business model and offers an alternative to RetailMeNot, Inc. (NASDAQ: SALE), a leader in the online coupon sector.

Groupon unveiled more than 25,000 coupons from over 5,500 brands and retailers in North America, including Target, Best Buy, Nordstrom and Macy's. Next year, Groupon hopes to expand the business internationally and add in-store coupons. This compares to the roughly 60,000 retail stores and brands featured on RetailMeNot.com in 2012.

[Related -Groupon Inc (GRPN): How Q3 Earnings Will Fare?]

Under its traditional business, Groupon issues daily deal vouchers that give shopper heavy discounts on products and services from local merchants. Groupon collects the money upfront from sales of these vouchers.

In the case of Groupon Freebies, shoppers buy digital coupons that can be claimed for free as they are directed to the retailer's website and the discount is automatically applied when they complete the purchase. For its services, Groupon would get a commission form retailers based on the amount of the transaction.

[Related -No Taper: 7 Top Momentum Stocks To Cash In On S&P 500 Above 1,700]

Freebies has a collection of brands offering discounts such as $25 off any $100 order, or free shipping on an order of $49 or higher, etc. Brands include Macy's, Nordstrom, Best Buy and American Eagle.

While the online coupon marketplace alone is not that large (estimated total addressable market (TAM) of less than $4 billion, when the potential for in-store coupons is included the TAM increases to $28 billion, according to industry estimates.

"If we assume that GRPN could achieve over time 1% to 2% market sh! are of the overall coupon business (on line and off line) and generate margins similar to Retailmenot, this could result in incremental EBITDA of more than $100M," Sterne Agee analyst Arvind Bhatia wrote in a note to clients.

"If this business were to be afforded an EV to EBITDA multiple of 15 times, it would equate to incremental enterprise value of more than $1.5 billion or more than $2.00 per share," he added.

Moreover, the coupon business offers several upsides (especially on the margin front) for Groupon as they are not labor intensive. Though the digital coupons may generate lower cash flows, they could make it up by yielding high margins and that bodes well for Groupon.

If Groupon focuses more on digital coupons, it has a decent chance to trump RetailMeNot due to Groupon's scale and resources.

Despite relatively smaller than Groupon, RetailMeNot is expected to generate more than $200 million revenue this year with strong EBITDA margin of about 40 percent. Comparatively, Groupon's EBITDA margins have been hovering around 12 percent, and the Freebies business could boost its margins over time.

RetailMeNot is expected to generate more than $250 million revenue in 2014 on EPS of $1.01. The consensus estimate represents earnings growth of 13.5 percent and sales increase of 26 percent.

If RetailMeNot can achieve this level of top and bottom-line growth, then why can't Groupon?

There is no doubt that Groupon is in the early stages of developing the digital coupon business. GPRN could leverage its mobile penetration, user base, technology, merchant relationships, and strong brand to its advantage if it seriously pursues this incremental opportunity.

The Nine Best Deals on Black Friday

Black Friday, the biggest shopping day of the year, looms, and once again retailers are offering holiday deals in an attempt to get more shoppers into their stores. Several of the biggest retailers are extending their opening hours even more than in previous years to try to one-up their competition.

The deals listed by retailers are as big as ever. Home Depot, Target, Wal-Mart, and Best Buy, among others, are selling popular items at discounts of 30% or more off their regular price. Retailers plan to sell laptops, HDTVs, and other products at several hundred dollars off. Consulting with several groups that compile Black Friday deals, 24/7 Wall St. identified some of the products with the biggest markdowns.

Retailers usually offer the best deals on already established products. For example, several big box stores offer considerable rollbacks on the 50" HDTVs because they have been on the market for several years. Fatwallet.com's Brent Shelton explained, "A couple of years ago, the bigger screens with the lighter technology were still new. But last year, prices really came down as they became less of a novel item."

Many other products offered with significant markdowns are either being phased out and replaced with a new product type or improved versions of the same model. This is the case with laptops, for example. "With laptops, particularly the medium-level laptops, retailers discount them because people are turning to tablets as their general surf-communication device," Shelton said. Laptops can therefore be very good deals for students who don't care about having a tablet, he added.

Despite the many holiday deals, it’s probably not the best time to buy some products. Holiday decorations and winter clothing tend to be more expensive now than any time of year because most stores have just put them in stock. There are also products that tend to have better deals during other holidays. For example, the biggest deals for tools tend to be during Father's Day. That being said, during Black Friday you can find products at considerable markdowns in nearly every area.

24/7 Wall St. consulted shopping experts at Fatwallet.com, GottaDeal.com, and BFAD.com to identify the Black Friday deals with the biggest discounts compared to the product's MSRP or pre-sale price.

These are the nine best deals on Black Friday.

Why Owens Corning Shares Slipped

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Owens Corning (NYSE: OC  ) slipped 2% today after Bank of America downgraded the building materials company from buy to neutral.

So what: Along with the downgrade, analyst George Staphos lowered his price target to $40 (from $43), representing about 6% worth of upside to yesterday's close. While contrarian investors might be attracted to Owens' steady slide in 2013, Staphos believes the appreciation potential remains limited given the somewhat optimistic profit estimates still built into the valuation.

Now what: B of A believes Owens' risks and rewards are pretty balanced at this point. "[Our] estimates are reduced once again which causes us to lower our normalized free cash flow (FCF) estimate (to $500mn from $600mn) and our targeted midcycle multiples by 1x," said the bank. "Ultimately, we believe OC should have leverage to a recovering housing sector." Of course, when you couple the beaten-down share price with its heavy debt load, Owens might have far more housing-fueled upside than B of A gives it credit for. 

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The Most Popular Video Sites in America

Online video has radically changed the way Americans consume media. People want to watch when it is convenient for them, not when network programmers want them to. The industry's term for it is "video everywhere" — from the largest plasma screens to the smallest smartphones. And while online video is ubiquitous, only a small number of companies dominate this new world.

Google Inc. (NASDAQ: GOOG) sites, led by YouTube, accounted for nearly 88% of the 189 million unique U.S. viewers registered by video sites in September. The video behemoth was more than twice as large as Facebook Inc. (NASDAQ: FB), the second largest site. YouTube, in effect, defines the entire industry.

Click here to see what video sites have the most viewers

YouTube has such a vast audience partly because it was among the first to offer a comprehensive platform for online video posting, viewing and sharing. Those early (and largely amateur) videos have been joined by polished, professional ones that have attracted a much wider audience, both to YouTube and a growing number of online video sites. The content that these consumers view ranges from short clips to full-length movies available to rent or own. Amazon.com Inc. (NASDAQ: AMZN) and Hulu are examples of the full-length video option.

YouTube's model will be nearly impossible for any competitor to duplicate. The company owns its own advertising network and has begun its own paid video subscription service. The site is also the leading music video publisher as a result of its VEVO channel. The site is also well positioned in the video everywhere world. According to the company, mobile makes up nearly 40% of YouTube's total number of video streams.

Portal companies like Yahoo! Inc. (NASDAQ: YHOO), AOL Inc. (NYSE: AOL) and Microsoft Corp. (NASDAQ: MSFT) are trying to overcome collapsing revenues for display advertising. Their latest business model aims to appeal to marketers who use video ads. These video ads can command 10 times more revenue than display ads. Online publishers and advertisers both benefit from the fact that commercials frequently already have been created for broadcast and cable TV.

24/7 Wall St. examined the top 10 video sites in America based on comScore's September 2013 report, "September 2013 U.S. Online Video Rankings." According to comScore, a video is defined as "any streamed segment of audiovisual content, including both progressive downloads and live streams." For long-form content (e.g., television episodes with ad pods in the middle), each segment is counted as a distinct video stream. Video views include both user-initiated and auto-played videos that are viewed for longer than three seconds.

These are the most popular video sites in America.

U.S. Stock-Index Futures Are Little Changed

U.S. stocks rose, with the Dow Jones Industrial Average capping its best week since January, as disappointing economic data fueled bets that any Federal Reserve stimulus cuts this month would be moderate.

Safeway Inc. (SWY) advanced 6.1 percent after Credit Suisse Group AG raised its recommendation for the shares. Intel Corp. gained 3.6 percent after Jefferies Group LLC upgraded the stock. GameStop Corp. surged 6.1 percent as U.S. video-game sales saw the first monthly rise 2011, a research group said. Peabody Energy Corp. dropped 3.2 percent as the Environmental Protection Agency revises proposed rules for new power plants.

The Standard & Poor's 500 Index rose 0.3 percent to 1,687.99 at 4 p.m. in New York. The gauge climbed 2 percent in the past five days, its best week in two months. The Dow jumped 0.5 percent to 15,376.06. It advanced 3 percent this week, the most since Jan. 4. About 5 billion shares changed hands on U.S. exchanges, 16 percent below the three-month average.

"The view is that we're recovering and continue to do it in a slow pace," Channing Smith, who helps oversee about $1.2 billion at Capital Advisors Inc. in Tulsa, Oklahoma, said in a phone interview. "The Fed will begin to taper but will be on a magnitude of $10 billion, which shouldn't have an impact."

Investors, who have been scrutinizing economic data to determine whether growth is robust enough for the Fed to slow stimulus following its Sept. 17-18 meeting, will see a reduction next week as no big deal, according to a Bloomberg Global Poll of investors.

Taper Forecasts

Fifty-seven percent of those surveyed say they don't expect a sudden change in the markets because investors already anticipate tapering action.

A Commerce Department report today showed retail sales in the U.S. rose 0.2 percent, the smallest increase in four months and below the 0.5 percent advance seen in Bloomberg survey. Wholesale prices in the U.S. rose more than forecast in August, addin! g 0.3 percent on higher costs for food and some fuels.

A separate report showed inventories at companies increased more than forecast in July, trailing a gain in sales that signals a pickup in factory orders. The Thomson Reuters/University of Michigan preliminary September index of consumer sentiment fell to 76.8 from 82.1 last month, which was the lowest since April.

The Fed will taper its $85 billion in monthly bond-buying by $10 billion to $75 billion after next week's meeting, according to the median forecast of economists in a Bloomberg News survey. Fed stimulus helped push the S&P 500 more than 150 higher from its March 2009 low, as better-than-estimated corporate earnings also fueled gains.

Syrian Uncertainty

The S&P 500 fell 0.3 percent yesterday, halting a seven-day win streak, amid concern that the U.S. has not ruled out military action against Syria. The threat of a U.S. strike roiled markets in August, dropping the S&P 500 to its worst performance since May 2012. The gauge has rallied 3.4 percent so far in September.

Secretary of State John Kerry reported a "constructive" start to talks with his Russian counterpart over bringing Syria's chemical weapons under international oversight, while giving no sign of a breakthrough. Kerry told Syrian opposition figures yesterday that the option of a U.S. military strike remains on the table.

"Syria had a negative impact on markets in August, and now the negative impact is coming off," Randy Warren, chief investment officer at Warren Financial Service, said in a phone interview. His firm oversees $100 million.

Watching Congress

Investors are also watching renewed political wrangling over the approaching limit on federal spending. Government funding expires Oct. 1 and the Treasury is expected to exhaust its ability to borrow funds in mid-October, when it will hit the statutory debt limit.

U.S. House members left Washington for the weekend yesterday after leaders shifted st! rategies ! in an effort to win over dissenting Republicans willing to risk a financial crisis to sidetrack President Barack Obama's health-care law. Republicans said they will try to use the spending-bill talks to delay the health-care law instead of defunding it.

The CBOE Volatility Index (VIX), the gauge of S&P 500 options prices known as the VIX, fell 0.9 percent to 14.16, capping an 11 percent five-day drop, its biggest weekly slide since July 5. The equity volatility gauge has tumbled 17 percent in September after rallying 26 percent in August, the biggest monthly gain since May 2012.

Broad Gains

All 10 main industries in the S&P 500 advanced today, with producers of consumer staples and utility stocks rising at least 0.8 percent. Procter & Gamble Co. added 1 percent to $79.05 and NRG Energy Inc. jumped 3 percent to $27.14.

Intel climbed 3.6 percent, the most since June, to $23.44 for the biggest gain in the Dow. Jefferies boosted its recommendation on the world's largest chipmaker to buy from hold.

Safeway surged 6.1 percent to $28.20. Credit Suisse upgraded the second-largest U.S. supermarket chain to outperform, similar to buy, from underperform.

GameStop rose the most in the benchmark index, adding 6.1 percent to $52.45. U.S. sales of video-game products rose 1 percent last month to $521 million, the first four-week gain in almost two years, driven by new titles including Walt Disney Co.'s "Infinity," featuring collectible characters. GameStop is the largest retailer in the market.

Ulta Salon, Cosmetics & Fragrance Inc. surged 17 percent to a record $117.53 after reporting second-quarter earnings of 70 cents a share, beating the 67-cent average projection by analysts in a Bloomberg survey.

Environmental Regulation

Peabody Energy dropped 3.2 percent to $17.98. The stock has fallen three straight days after reports that the Obama administration would ban new coal plants without strict emission controls. The environmental rul! es are ex! pected to be released next week. Cliffs Natural Resources Inc. lost 1.6 percent to $22.07.

Apple Inc. dropped 1.7 percent to $464.90. The world's most valuable technology company lost 6.7 percent this week as the price of its new lower-cost iPhone disappointed analysts.

Twitter Inc. disclosed it had filed to go public in one of its 140-character postings yesterday, giving no other financial figures or details on when it will actually list. Twitter's market debut will be led by Goldman Sachs Group Inc. and is likely to be the most anticipated initial public offering since Facebook Inc. listed last year.

'Healthy' Valuations

"What Twitter management and Goldman are doing is observing that valuations are at healthy levels and that it's a good time to attempt an IPO of this scale," Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., which oversees about $364 billion, said in a phone interview.

The S&P 500 trades at 16.2 times reported earnings, above the average multiple of 15.3 over the past five years, data compiled by Bloomberg show. The gauge has advanced 18 percent this year.

Vanguard: Why Do-It-Yourselfers Pick ETFs Over Mutual Funds

With so many investors flocking to exchange traded funds, Vanguard has asked its researchers to find out what’s driving that behavior. The answer, in a nutshell, is that for ETF investors, familiarity breeds contentment.

“Our analysis finds that the decision to buy the ETF share class is largely driven by a set of factors we have dubbed the ‘FACTS’: familiarity, access, costs, trading flexibility and stocks. Foremost among them is familiarity,” wrote Vanguard authors Joel Dickson, Stephen Weber, David Kwon and John Ameriks in a white paper released on Wednesday.

Released on Wednesday, the paper, “Buying on the FACTS: Investors’ choices between ETFs and mutual funds,” notes that investors who have purchased ETFs before are much more likely to do so again the next time they face a decision between a mutual fund and an ETF. (On the same day, Vanguard published a second ETF research paper, “Understanding Synthetic ETFs,” which explains their potential benefits and risks and discusses best practices for synthetic ETF collateral management and disclosures.)

For ETF investors, access is also a key determinant, “as investors must have a brokerage account to buy an ETF, and the lack of one appears to be a significant barrier to entry,” according to the authors, who used client transaction data gathered by Vanguard’s Client Insight team.

Analyzing purchase decisions made by self-directed investors when buying a new investment, Vanguard’s researchers looked at investors who could have chosen either an ETF or a mutual fund to achieve the same exposure, and then examined why a particular choice was made.

Along with familiarity and access, costs play an important role because investors are more likely to choose an ETF over a mutual fund if no commission is charged, if the mutual fund has a purchase fee, or if the ETF offers a lower expense ratio. Trading flexibility in ETFs appeals to investors who prefer a more hands-on approach, says the white paper, and investors are more likely to buy ETFs in a stock fund than in a fixed-income fund.

“Furthermore, active traders as well as equity investors are more inclined to choose ETFs,” the authors write. “Taken as a whole, this framework can be useful for understanding the growth of ETFs among retail investors and suggests that such growth may continue as ETF adoption begets ETF adoption.”

ETFs’ rapid growth relative to traditional funds is “somewhat surprising considering the similarities between the two products,” the Vanguard authors add. “Although traditional mutual funds remain the dominant form of pooled investing in the United States, ETFs have grown rapidly and become the investment of choice for many investors.”

They point to data showing that assets in U.S.-listed ETFs grew to $1.3 trillion in 2012 from $102 billion in 2002, for a compound annual growth rate of roughly 30%. This compares with roughly 12% annual growth for traditional mutual funds. U.S. mutual funds excluding money-market funds held $9.3 trillion in assets as of Dec. 31, 2012, according to Morningstar.

Read a debate on ETFs between Vanguard founder John Bogle and ETFGuide.com’s RonDeLegge with DeLegge’s Why Bogle Is Dead Wrong on ETFs and Bogle to DeLegge on ETFs: ‘It Is You Who Are Dead Wrong’ at AdvisorOne.

For direct insights on the role of ETFs in client portfolios from multiple experts—including Rick Ferri, Ron DeLegge, Skip Schweiss and more—we invite you to register for AdvisorOne’s premiere advisorcentric Virtual ETF Summit, which starts July 23 (and get multiple hours of CFP Board CE).

Dow Fluctuates While Banks Deposit Some Good News

The Dow Jones Industrial Average's (DJINDICES: ^DJI  ) ride this morning has been something of a mild roller coaster -- though it hasn't spanned more than 40 points, the ups and downs have been staccato in fashion. But thanks to new earnings reports, at least one sector is climbing higher and bringing the Dow along with it. As of 11:30 a.m. EDT, the index is up modestly with an 8-point gain.

First, some economic news 
The Consumer Sentiment index fell in July to 83.9 from June's reading of 84.1. The drop was largely due to a decline in expectations for the future of the economy, with consumers believing that the higher mortgage interest rates and gasoline prices are a bad sign for the economy over the next six months.

Sentiment remains high regardless of the unexpected decline this month. May's reading of 84.5 was a six-year high, so this month's figure is still close to that measure. By contrast, sentiment during the recession averaged in the high 60s. Investors shouldn't be concerned that the recent slip is the beginning of another downturn for consumer sentiment; it's only a slight adjustment from the prior months' highs and should remain at these levels as the year progresses and we see further improvements in the labor and housing markets.

Banks reporting for duty 
This morning Dow component JPMorgan (NYSE: JPM  ) and outsider Wells Fargo (NYSE: WFC  ) reported second-quarter earnings that beat analyst expectations on both the top and bottom lines. The two juggernauts set the tone for the financial sector's earnings season, with Bank of America (NYSE: BAC  ) reporting next Wednesday and Citigroup (NYSE: C  ) reporting on Monday.

The big headlines from this morning's reports were focused on mortgage origination and interest rate margins. Though JPMorgan reported increased mortgage origination compared to last year, the higher interest rates lately have really cut into the quarter's production compared to the last three-month period. Wells reported higher mortgage activity even on a sequential basis but noted that the loan pipeline for mortgages fell $9 billion compared to last quarter.

Net interest margins, a measure of how profitable the banks' loans are, slipped once again for both banks as the low-interest-rate environment continues to put pressure on them. Though the change to a higher-rate environment would cause a transition period marked with volatility and declines in some segments of the banks' operations, it would provide a much-needed boost to revenue generation for new loans.

Bank of America and Citigroup have a lot to live up to next week, but this morning's reports give investors some clue as to how the market will react to the various key measures. The mortgage origination data will be of special importance for B of A, as the bank has repeatedly stated its goal for commanding a larger slice of the mortgage market. Citigroup won't have the same types of pressures since it is not focused on the U.S. mortgage market. But look out for new signs of pressure on emerging markets and international growth for Citi.

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

Diagnosing Today's Dow Performance

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) has been having a difficult time this morning deciding whether or not it wants to be up or down. This may stem from the continued confusion on behalf of investors as they try to decipher new economic data as a means to predict the Fed's stance on its current stimulus policy. Though the index dropped and rebounded a few times so far in trading, it's currently sitting at a 33-point gain just before 11:45 a.m. EDT.

Economic news
This morning investors were given mixed economic data regarding income and spending and consumer confidence. Both personal income and consumer spending were down 0.1% in April, which disappointed analysts and investors alike. Expectations were set for a 0.1% increase for income and flat spending for the month. Coupled with this morning's consumer confidence data, which is now back to pre-recession highs, the mixed data signals a disconnect in the economic recovery. Though confidence in the recovery may be high, the improvements have not yet reached the average household's billfold.

This mix of data provides just one more piece to the puzzle as investors try to find signs that the Fed will begin paring back its current stimulus plan. This week alone, investors have gotten news that unemployment figures are up, housing prices are rising, pending home sales are up, and now personal income and spending are down. This seemingly conflicting data leaves investors with little confidence as to how they should proceed in the markets.

Inside the Dow
Health-related component stocks are putting a drag on the Dow's forward momentum, with Merck (NYSE: MRK  ) being the only exception. Up 0.93% this morning, the drugmaker is enjoying the boost from its recently announced third-quarter dividend. Matching its previous payouts, the company will distribute $0.43 per share on July 8.

Procter & Gamble (NYSE: PG  ) is down 1.55% in trading, despite a resounding endorsement from activist investor Bill Ackman, who recently stated that P&G is one of the best companies in the world. Ackman's comments may have seemed like a backhanded compliment to some investors. He noted that the company is under-earning compared to its abilities, with a prediction that earnings per share will rise from $4 to $6 -- an encouraging upside. The return of A.G. Lafley to the role of CEO was initially well recieved, but investors may now be rethinking the return of a former CEO, bringing questions to light about his previous tenure and what it means for him to return.

Pfizer (NYSE: PFE  ) is down 0.91% this morning. The drug manufacturer is making more moves to clean up its operations with a sale of its Bristol, Tenn., manufacturing plant to Baltimore-based UPM Pharmaceuticals. Earlier this week, Pfizer issued $4 billion in new bonds to pay off other debts, a move not taken by the company since 2009.

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Why These Folks Still Love Apple

Despite all of the recent problems for both the stock and the company, Apple (NASDAQ: AAPL  ) developers managed to buy out this year's Worldwide Developers Conference in record time. The event underscores the penetration Apple has into the mobile app space relative to Google (NASDAQ: GOOG  ) and Microsoft (NASDAQ: MSFT  ) . The profit model that Apple enjoys in other areas seems to apply to mobile apps as well it does to other critical areas.

In the video below, Fool.com contributor Doug Ehrman discusses the importance of the event, why this is such a hot ticket, and what it represents for the industry going forward.

There's a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

A Good Off-the-Radar Ebola Bet (LAKE, TKMR, PSID)

Did you miss the initial Ebola rally, led by Tekmira Pharmaceuticals Corporation (NASDAQ:TKMR) and Lakeland Industries, Inc. (NASDAQ:LAKE)? Don't sweat it - you're not alone. And if you were thinking about diving into either of those names now, forget about it. Both LAKE and TKMR are overbought, and are guaranteed to be volatile (read "unpredictable") in the future. It's not too late to get in on Ebola-mania, however.

Ever heard of PositiveID Corp. (OTCMKTS:PSID)? Most people haven't, so don't worry if it's an unfamiliar name. What's surprising is that PSID is still a little unfamiliar to the masses at this stage of the Ebola game. It's not just a worry that we only have to worry about domestically. It's now spreading within the United States, which is a whole different ball game than preventing it from getting to the United States. This presents a real risk of pandemic spreading within our borders. PositiveID can help.

As for what PositiveID Corp. does, it's not even comparable to Tekmira Pharmaceuticals or Lakeland Industries. LAKE makes surgical masks and gowns worn by those treating at-risk patients, while TKMR makes drugs, and holds the honor of being the first to produce a pharmacological treatment that successfully treated someone who had contracted Ebola this particular time around. PSID manufactures handheld equipment that can detect the presence of several viruses, including Ebola.

The need for such a device was clear before October, when the contagion quickened. It just wasn't appreciated. Almost needless to say now, a handheld Ebola detector is worth its weight in gold to the workers who may be exposed to it in a field setting. Although PositiveID Corp. hasn't even hinted at increased interest in its wares, one has to assume interest is growing, and funding is being secured.

Be that as it may, the real story here - right now - isn't the underlying technology. It's the stock, and more specifically, the shape of the PSID chart. It suggests a long-brewing breakout is being unleashed.

The underlying theme here is, "second wind." PositiveID shares started a breakout a week ago with a thrust above all of its key moving averages and above a long-standing resistance line. That effort faded about as quickly as it started, however, and sent shares almost back to where they started. The bulls weren't done with PSID yet, though, and pushed up and off a couple of key short-term moving average lines to renew the effort. And this time, the pace seems to be more sustainable.

To really appreciate how well this chart broke out of a bearish groove and moves into a bullish groove, though, one has to take a step back and look at the weekly chart. It's in this timeframe we can see how big of a deal the break past a major resistance line is; there's nothing else to get in its way from here.

None of this is to say Tekmira Pharmaceuticals Corporation or Lakeland Industries, Inc. would be poor trades from here. It's just to say that, from where all three stocks sit, TKMR and LAKE are coin tosses. PSID at least has a calculable, compelling risk/reward ratio. 

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AIG Advisor Group CEO: ‘Comfortable With Parent Company’

Led by Erica McGinnis, the AIG Advisor Group is hosting its annual Women’s Conference in Miami this week.

According to McGinnis, former-Advisor Group CEO Larry Roth and his new boss at RCS Capital (RCAP), Nicholas Schorsch, aren’t expected to attend, though the rumors that Schorsch and RCS are eying Roth’s former employer for their next deal continue.

“We have enjoyed a long, rich history with AIG. We are comfortable with our parent company and just put AIG back into the Advisor Group name a few weeks ago,” McGinnis said in an interview before the event. “Employees recognize that we are part of AIG and are really proud of our parent company.”

The AIG Advisor Group includes close to 6,200 affilated reps. Some 1,250 are with FSC Securities, 1,900 with Royal Alliance, 1,830 with SagePoint Financial and 1,200 with Woodbury Financial.

“We are off to a great start in 2014,” said McGinnis. “One broker-dealer, FSC, is off the charts in about every metric and category, especially recruiting. Jerry Murphy [who is president and CEO] is doing a great job recruiting this year, and the other broker-dealers are chugging along, doing great and feeling positive about meeting their recruiting targets – which are for 9-10% year-over-year growth.”

Couch’s Role

Allison Couch, recently tapped as the AIG Advisor Group’s executive vice president of national sales, is attending this week’s event. (Couch was with Royal Alliance and FSC before moving to LPL Financial and later Cetera Financial Group.)

“She has an incredible background … and we’re glad she’s coming home,” McGinnis said.

Couch’s role as head of sales means that she’ll work with the group’s internal wholesalers. “We’ll put them [under] common leadership, and she will focus on cross-disciplinary work and organic growth, or same-store sales, of advisors.”

“One metric we are watching is average GDC [or fees and commissions] per rep, which we have seen go up by 7% this year, and that is without trying, in my opinion,” the AIG Advisor Group president and CEO explained. “We are excited to have Allison figure out who needs help and how to do more … to help people grow their bottom lines. If can succeed here, then our recruiting team will have a winning strategy.”

Kevin Beard was just named the group’s executive vice president of recruiting and acquisition strategy, a role he played previously for Royal Alliance.

“The aim is to get all the independent broker-dealer teams to do well and have the right support,” said McGinnis. Beard will support this effort by looking at teams that have about $5 million and up in yearly production and could be good acquisition targets.

“We want to move beyond just recruiting one advisor or team at a time, though that is critical. We also want to see what acquisitions make strategic sense,” she added. 

“Not everyone is looking at big broker-dealers like Nicholas Schorsch,” McGinnis joked. “The business is becoming harder in their regulatory environment, and there are great [smaller] deals out there.”

Event Focus

This week’s event includes female advisors affiliated with the group’s four broker-dealers – FSC Securities, Royal Alliance, SagePoint Financial and Woodbury Financial – as well as those with VALIC, the Variable Annuity Life Insurance Co., a unit of AIG focusing on tax-qualified retirement plans, and agents affiliated with AIG Financial Network.

This week’s gathering is the first time female financial-sales professionals from across AIG Life and Retirement have come together for such an event, the company says.

“About 100 female reps from VALIC will be joining us for the first time,” said McGinnis. “It’s really beneficial for the sister firms to all be together under one room.”

Attendance this week should hit 650, including both men and women with sponsoring organizations. “This is our eighth year and our biggest conference so far.”

The 2014 Women’s Conference features remarks from former-Merrill Lynch wealth head Sallie Krawcheck, along with AIG Life and Retirement President and CEO Jay Wintrob. The conference also will highlight Generation i, the AIG Advisor Group’s network that aims to bring more women into the advice industry.

The Generation i effort has invited 20 female high school students from Junior Achievement of Miami to the event, so they can learn more about financial service. Donations to Junior Achievement from the AIG Advisor Group, AIG Life and Retirement and sponsors, which will be shared this week, have reached close to $30,000.

“We are keenly focused on recruiting more women to the financial services industry,” McGinnis said. “Attracting more women and talented young adults to this profession is imperative to our success, not just as a company, but as an industry.”

Rising food prices boost wholesale inflation

Wholesale prices rose sharply last month, driven up partly by higher prices for meat and other foods.

The producer price index, which measures changes in the prices of goods and services that companies buy, increased 0.6% in April, the Labor Department said Wednesday.

Although inflation remains low, wholesale prices last month were up 2.1% on an annual basis. That's the biggest 12-month increase in more than two years and close to the Federal Reserve's 2% annual inflation rate target.

"Inflation is back and this can only mean one thing. Slack in the economy is evaporating more quickly now as the economy gets closer to full employment," said economist Chris Rupkey, of Bank of Tokyo-Mitsubishi in an email to clients. "Bet on it. Inflation isn't dead. We found some in today's PPI report."

Economists had expected Wednesday's report to show a 0.2% increase from March, according to Action Economics survey's median forecast. Wholesale prices rose 0.5% in March and fell 0.1% in February.

Higher profit margins for wholesalers and retailers were behind two-thirds of last month's jump in prices. Margins shrank during the winter due to heavy discounting.

An 8.4% increase in meat prices in April accounted for more than a third of the jump in producer prices, the Labor Department said.

Drought, unusually cold winter weather, a shrunken cattle herd and a virus in the hog population have all contributed to higher wholesale food prices in recent months, which have been flowing through to consumers. Prices for processed poultry and eggs have also risen.

But increases in food prices this year follow declines in much of 2013.

Other contributors to higher wholesale prices last month were gasoline, light trucks, residential electric power, processed poultry and dairy products. Prices fell for residential natural gas, passenger cars and soft drinks.

Energy prices rose just 0.1% last month. Excluding food and energy costs, which can be volatile, so-called core pric! es increased 0.3% in April.

Core goods prices — excluding food, energy and services costs — have risen 0.3% or more in three of the past five months, Rupkey notes.

What this trend means for consumer prices remains to be seen. Consumer prices in March were up 0.2% from February and 1.5% year over year.

April's consumer price index comes out Thursday. The median forecast in Action Economics' survey is for a 0.3% increase.

General Electric: No More Buybacks If Alstom Bid Succeeds?

Last night news broke that General Electric (GE) had made a formal bid for Alstom’s (ALSMY) thermal, renewable, and grid businesses. Of course, Siemens (SI) has a month to make a bid of its own, but General Electric is currently sitting right where it wants to be.

Agence France-Presse/Getty Images

Nomura’s Shannon O’Callaghan and team asses the impact of General Electric’s bid for Alstom:

The $13.5B enterprise value represents 7.9x standalone EBITDA and 4.6x after $1.2B of synergies that GE expects (~6% of sales). Alstom's companion announcement and conference call indicates that GE will absorb EUR 0.9B of net liabilities, including EUR 1.2B of pension liabilities, and will also take on potential FCFA litigation payments. If we assume EUR 1B for litigation liability and include the pension and other net liability, we estimate the implied EV/EBITDA multiples would be 9.4x pre-synergies and 5.5x post synergies. We estimate the post synergy ROIC's at 12% before these liabilities and 10% after (assuming 35% tax rate although GE will likely achieve a better rate). The $1.2B synergy target is to be realized by year 5 and strikes us as achievable. GE indicated that this transaction effectively completes their M&A for 2014 and 2015, as well as noted that, aside from the buyback/share exchange related to the Retail Finance transaction, additional buyback will only be in an amount required to offset employee plan dilution.

Shares of General Electric have gained 0.3% to $26.83 at 11:18 a.m. today, while Alstom’s ADR has risen 2.8% to $4.04 and Siemens has advanced 2.1% to $131.60.

SEC Weighs Requiring Brokers to Tell Where Trades Are Sent

Brokers could be required to tell investors exactly where they sent a stock order to be filled under a measure the U.S. Securities and Exchange Commission is weighing to address complaints that the decisions sometimes aren’t in clients’ best interests.

The proposal could give investors more insight into whether they are getting the best price when they buy and sell large numbers of shares, according to three people familiar with the matter. Brokers entrusted with orders in the U.S. stock market can choose from dozens of exchanges and private venues. Some money managers such as T. Rowe Price Group Inc. have told regulators that incentives offered by exchanges for attracting orders can put a broker’s financial interest at odds with the customer’s.

The SEC faces pressure to overhaul trading after Michael Lewis’s “Flash Boys” book made the claim that high-frequency traders hurt other investors by learning which shares investors plan to buy, purchasing them and selling them back at a higher price. The SEC has said it’s reviewing every aspect of how stocks are traded, and regulators are trying to identify changes that could be implemented quickly, the people said.

“We’ve actually started this conversation about what can we do right now,” SEC Commissioner Kara M. Stein said in an interview. “All five commissioners are very focused on these issues and are committed to making sure the market is fair and efficient and promoting capital formation.”

‘Low-Hanging Fruit’

There is a lot of “low-hanging fruit” that should be considered, said Stein, who declined to discuss specific steps. Commissioners expect the SEC’s staff to present them potential policy options “in the near term,” Commissioner Luis A. Aguilar said in an interview.Florence Harmon, an SEC spokeswoman, declined to comment.

Brokers can face a conflict of interest as they select where to send customer orders. Brokers can either capture a rebate or pay a fee to an exchange depending on the type of order used, while private venues known as dark pools charge lower fees but don’t have to disclose how they treat customers.

Requiring brokers to report every step they took to fill a customer’s order could help investors defend against the predatory traders described by Lewis, said Andy Brooks, head of U.S. equity trading at Baltimore-based T. Rowe Price. While large investors can demand such reporting, regulators could require “a very detailed and comprehensive template” that would allow investors to compare the brokers they use, he said.

No Execution

“It’s where you went and didn’t get an execution that begs the question of why did you go there?” Brooks said in an interview. “Why is a broker sending an order to a venue where you get no execution?”

More disclosure of where orders are sent probably isn’t going to change the “nature of the way things take place,” said Keith Ross, CEO of Glenview, Illinois-based PDQ ATS Inc., a dark pool that has marketed itself as a haven from high- frequency traders. Institutional money managers should know how their orders are being handled by brokers, Ross said in a phone interview.

“I would argue that is why they get paid their exorbitant fees for managing money, which is greater than the fractions of pennies we are talking about here for the high-frequency folks,” Ross said.

Greater transparency is one idea being weighed by the SEC’s Division of Trading and Markets, the people said. Regulators could decide to publicly encourage more uniform order-routing notices instead of imposing a new requirement on brokers, the people said.

Economic Incentives

While improved disclosure is helpful, the SEC should experiment with altering the economic incentives that affect how orders are handled, Brooks said. T. Rowe has joined the New York Stock Exchange, Royal Bank of Canada and IEX Group Inc. in lobbying regulators to ban the “maker-taker” system, which pays rebates to large brokers to attract trades.

Brokerages often put their own self-interest in front of their clients’ under maker-taker, according to a study by Robert Battalio and Shane Corwin of the University of Notre Dame and Robert Jennings of Indiana University.

“Simply saying to brokers, ‘give us more disclosure’” isn’t enough, Brooks said. “The effort needs to be more robust than that if we are really going to go after this,” he said.

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Check out SEC Launches Cybersecurity Exams of BDs, Advisors on ThinkAdvisor.

9 revelations from GM's recall chronology

Correction: An earlier version of this story had an incorrect number of crashes linked to the recall, It is 31.

The chronology of events leading to General Motors' massive ignition switch recall revealed a number of points over more than 10 years at which there were opportunities to prevent subsequent crashes and deaths if more effort had been made to connect the dots and better decisions had been made.

The toll now is 31 crashes and 13 deaths linked to the recall of 1.37 million vehicles in the U.S., plus an additional 253,519 in Canada and Mexico.

DEATHS DOUBLE: GM widens faulty ignition recall

GM RESPONSE: Automaker takes lesson from Toyota's recall nightmare

The company admitted as much on Tuesday in a statement from GM North America President Alan Batey: "The chronology shows that the process employed to examine this phenomenon was not as robust as it should have been. Today's GM is committed to doing business differently and better. We will take an unflinching look at what happened and apply lessons learned here to improve going forward."

"We are deeply sorry and we are working to address this issue as quickly as we can."

Here are nine missed chances to act sooner revealed in the chronology:

• 2004, GM could have fixed this before it sold a single Cobalt: GM concedes it knew in 2004, before launching the 2005 Chevrolet Cobalt, that the ignition switch might inadvertently move from "run" to "accessory," stalling the engine and cutting power to safety systems. A company engineer had the problem testing the soon-to-be-launched car and engineers proposed several solutions, but because of "lead time required, cost, and effectiveness of each" solution, none was adopted and the car went on sale with the faulty switch.

• 2005, a partial fix was proposed -- but not adopted. Engineers suggested a simple change in the key from a slot to a round hole to ease stress on the switch -- a solution GM later adopted – but initial approval later was canceled! . It did send dealers a bulletin telling them to modify existing keys with an insert and to tell owners to take extra items off their keychains -- but only if customers came in complaining of stalling problem on the Cobalt. Only 474 owners got the inserts, GM warranty data showed.

• 2005, GM knew it wasn't just the Cobalt with the risk. Later that year, an updated bulletin was sent to dealers, expanding the models and years of vehicles involved – including all built with the same switch. Those are now the vehicles and models years recalled in the past two weeks.

• 2006, GM OK'd a better switch, but didn't make it so mechanics could identify it. The engineer in charge of the ignition switch approved a new design by supplier Delphi, but the new design continued to use the same part number as the one it replaced. That means it wouldn't have been obvious to the company or to a dealer or repair shop whether a switch was the older design or the, presumably safer, newer configuration.

• 2007, new switch goes in new cars? GM believes -- but says in the chronology that it is not sure when -- that during this vehicle model year the improved switch finally was being used on the assembly line for new cars.

• 2007, GM gets first report of fatal crash. Federal safety officials tell GM that a 2005 fatal Cobalt crash involved a switch that malfunctioned and airbags that failed to deploy. GM said it didn't know about the crash until informed by the officials. And only then does GM assign an engineer to track Cobalt crashes where the airbags fails.

• 2009, GM finally adopts new key design from 2005. Keys now are made in the way first proposed in 2005 -- with a hole and not a slot.

• 2013, GM determines the original switch wasn't made right. GM determines, now years after the fact, that the switches made before the 2006 modifications failed to meets its design specifications.

• 2014, at last a recall -- and then another. On Feb. 13 GM recalls the Cobalt and nearly! identica! l Pontiac G5 -- less than half the cars using the potentially faulty ignition switch. On Feb. 25, it adds the rest of the vehicles with the part -- all those mentioned back in the years-earlier heads-up to dealers. All 1.62 million throughout North America will get a new ignition switch to make sure the car doesn't stall and lose its airbags.