Don’t Overlook the Retirement Savers’ Tax Credit

You mentioned the retirement savers' tax credit in your article about President Obama's MyRA plan. How does this credit work, and who is eligible?

SEE ALSO: The Most-Overlooked Tax Deductions

The credit is 10%, 20% or 50% of your contribution to a retirement account, depending on your income, up to a maximum of $1,000 per person or $2,000 per couple. You can qualify for the retirement savers' tax credit if your adjusted gross income in 2014 is $60,000 or less if married filing jointly, $45,000 or less if filing as head of household, or $30,000 or less if you're a single filer. To qualify, you must contribute to a traditional or Roth IRA (MyRA's count), 401(k), 457, 403(b) or other retirement-savings plan.

If you are married filing jointly, for example, the credit can be worth 50% of your contribution (a $2,000 credit for a $4,000 contribution) if your joint income in 2014 is $36,000 or less. The credit is worth 20% of your contribution if you earn $36,001 to $39,000 and 10% if you earn $39,001 to $60,000. Married couples can't qualify for the credit if they earn more than $60,000. See the IRS factsheet for a table showing the income cutoffs for each level of the credit for joint filers, heads of household and singles for both 2013 and 2014 returns (the income numbers are slightly lower for 2013).

To qualify for the credit, you must be at least 18 years old and not a full-time student, and no one else (such as your parents) can claim an exemption for you on their tax return. You can qualify for this credit even if you make pretax contributions to an employer's retirement plan or nondeductible contributions to a traditional or Roth IRA, or if you get other tax breaks for your retirement-savings contributions -- such as a tax deduction for a traditional IRA contribution.

Keep in mind that this is a credit, not a deduction, so it lowers your income tax dollar for dollar. It is a nonrefundable tax credit, however, which means it cannot reduce your tax liability below zero. See IRS Publication 4703 for more information about the credit.

Complete IRS Form 8880 to determine the rate and amount of the credit, and file it with your income tax return. If you realize that you would have qualified for the credit in previous years but didn't claim it, you can file an amended return (Form 1040X) as far back as 2010 and still get the money. A 2010 amended return is due by April 15, 2014; a 2011 amended return is due by April 15, 2015; and a 2012 amended return is due by April 15, 2016. See Instructions for Form 1040X for more information about filing an amended return.

You still have until April 15, 2014, to contribute to an IRA for 2013 and qualify for the credit for 2013. See Often Overlooked Opportunities to Save in a Roth IRA for more information about Roth contributions if you're a nonworking spouse, retiree or freelance worker.

Got a question? Ask Kim at askkim@kiplinger.com.

Stocks End Holiday-Shortened Trading Session Ho-Ho-Higher

Stan Honda, AFP/Getty ImagesPassersby in front of the New York Stock Exchange on Tuesday, Christmas Eve. NEW YORK -- Stocks rose in a holiday-shortened trading day Tuesday, helped by a report that showed American companies were investing in their businesses at the fastest pace since January. Markets were open for just half a day ahead of the Christmas holiday, and trading volume was extremely light. Roughly 1.3 billion shares changed hands on the New York Stock Exchange, a third of what is traded on a regular day. It was the slowest day of the year. Materials and industrial stocks rose more than the rest of the market after the government reported that orders for long-lasting manufactured products rose 3.5 percent in November, more than economists expected. Core capital goods, a category that tracks business investment, jumped 4.5 percent, the biggest gain since January. DuPont (DD) rose $1.09, or 2 percent, to $63.83 and construction equipment maker Caterpillar (CAT) gained 95 cents, or 1 percent, to $90.91. The Dow Jones industrial average (^DJI) rose 62.94 points, or 0.4 percent, to 16,357.55. The Standard & Poor's 500 index (^GPSC) rose 5.33 points, or 0.3 percent, to 1,833.32 and the Nasdaq composite (^IXIC) rose 6.51 points, or 0.2 percent, to 4,155.42. Stocks have been rising steadily since last Wednesday, when the Federal Reserve surprised investors by announcing it was cutting back its bond-buying program, citing an improving economy. The Fed said it will reduce its bond purchases to $75 billion a month beginning in January, down from $85 billion. The last five days of gains have added to what has been a historic year for stock market investors. The S&P 500 index is up 28.6 percent for 2013, or 30.9 when dividends are included, its best year since 1997. With four trading days left in the year, many traders expect stocks to continue higher until New Year's Eve. "Nothing has derailed this market this year, even with all the bad headlines of 2013," said Jonathan Corpina, a New York Stock Exchange floor trader with Meridian Equity Partners. "We still have end-of-the-year cash coming in." Few investors expect stocks to continue to rise at this pace through 2014. On average, market strategists with the major investment banks expect the S&P 500 to rise to 1,900 by the end of 2014, barely above where the index is trading at now. "It's basically been a straight line up for the last couple years and, as the saying goes, the bigger they are the harder they fall," said Uri Landesman, president of the hedge fund Platinum Partners. Landesman said he also expects 2014 to more volatile for the stock market. Homebuilder stocks rose after the government reported that new home sales rose at a faster pace than analysts were expecting last month. Beazer Homes (BZH) rose 62 cents, or 3 percent, to $24.03 and D.R. Horton (DHI) rose 16 cents, or 0.8 percent, to $21.29. Bond prices fell on the latest positive news on the U.S. economy. The yield on the 10-year Treasury note, a benchmark for many kinds of loans including home mortgages, rose to 2.99 percent from 2.93 percent the day before. In other corporate news, Tesla Motors (TSLA) jumped $7.70, or 5 percent, to $151.25. The National Highway Traffic Safety Administration kept its 5-star safety rating on the company's Model S sedan, despite recent reports of battery-related fires. There have been no reported injuries or deaths related to any Tesla car fires.

Today’s After Hours Earnings: Metlife Inc, The Allstate Corporation, Hanesbrands Inc., More (ALL, MET, MAR, More)

After the closing bell on Wednesday, many big name dividend-paying companies announced their quarterly earnings. Below, we break down all of the earnings information that dividend investors need to know.

Allstate Insurance Beats EPS Views, Misses on Revenue

Allstate (ALL) announced Q3 consolidated revenues of $8.47 billion, which were up 4.1% from last year’s Q3 revenues. The company posted net income for the quarter of $713 million, or $1.53 per share, compared to last year’s Q3 net income of $717 million, or $1.46 per share. Allstate beat analysts’ $1.44 EPS

aRia Reveals Path to Elite RIA Status for Savant and Beacon Pointe

Call it an opportunity to grow like the best.

The Alliance for Registered Investment Advisors (aRIA), a think tank comprising six elite RIA firms which includes such notable names as Ron Carson and John Furey, principal of the advisor consulting firm Advisor Growth Strategies, on Tuesday released the first two case studies of a six-part series on their member RIA firms.

(aRIA was named to Investment Advisor's IA 25 this year; see the firm's extended profile here.)

Titled “How to Grow Bionically vs. Organically With an M&A Strategy” and “How to Identify and Invest in High-Upside Individuals,” the first two case studies detail the experiences and strategies of aRIA member firms Savant Capital Management and Beacon Pointe, which manage $3.3 billion and $5.6 billion in assets, respectively. Collectively, aRia members manage $20 billion in client assets.

In the Savant case study, CEO Brent Brodeski discusses the merger with The Monitor Group (TMG), “taking the reader behind the deal curtain to reveal challenges and specifics about the deal not previously released,” according to the group. The study analyzes Savant’s transition from being solely organic-growth focused to incorporating what it terms “bionic” growth through the merger of TMG, a $500 million AUM RIA based in McLean, Va.

Four key takeaways from the Savant case study include:

The Beacon Pointe case study, by President Matt Cooper, details the creation of the firm's successful financial planning practice with a focus on hiring well.

As with the each case study in the series, it looks at what went right and what went wrong, examining the early errors alongside the eventual successes.  This particular study demonstrates how Beacon Pointe was not only able to hire top talent, but also knew when the timing was right to so, which is crucial to any RIA’s growth. Three key takeaways include:

“With this six-part case study series, we hope we are able to share our member firms’ secrets to success with our advisor colleagues, and these first two are indicative of the quality of thought leadership they are able to put forth,” Furey, aRIA's founder and a former executive at Schwab Advisor Services, said in a statement. “We founded aRIA in the hopes of creating an elite advisor think tank that would benefit our entire industry and our members continue to express willingness to bare all for the sake of helping the RIA community in general. I learn from them every day and I hope others in the industry benefit from their experience as well.”

The remaining case studies will focus on the following aRIA member firms: Carson Wealth Management, Exencial Wealth Advisors, Highline Wealth Management, and Stratos Wealth Partners.

Schwab to face auction-rate suit

Charles Schwab Corp. must face a lawsuit in which New York state accused it of falsely describing auction-rate securities as liquid investments without disclosing the risks, an appeals court ruled.

The San Francisco-based brokerage was sued by Andrew Cuomo in August 2009 when he was attorney general. A trial judge in Manhattan, Justice O. Peter Sherwood of state Supreme Court, granted Schwab's motion to dismiss the case in 2011.

A four-judge appeals court panel today reinstated two of the four claims in the case, securities fraud allegations based on the state's Martin Act law, saying the attorney general's office presented enough evidence for a trial.

“We find the Martin Act causes of action to be sufficiently pleaded given the fact that the statute is remedial and should be broadly construed in order to attain its beneficial purpose,” Justice Richard Andrias wrote. “Under the statute, the word 'fraud' is broadly defined so as to embrace even acts which 'tend to deceive the purchasing public.' Based on this standard, the complaint sets forth actionable Martin Act claims notwithstanding the absence of a specific allegation that Schwab represented ARS to be liquid at times when they were illiquid.”

Auction-rate securities are municipal bonds, corporate bonds and preferred stocks whose rates of return are periodically reset through auctions. The attorney general's office sued on behalf of investors who bought the securities through Schwab.State's Accusation

The company was accused of engaging in “fraudulent and deceptive conduct” and failing to disclose the risks involved in the investments.

Schwab argued that the complaint didn't allege statements that were false when made or identify who made the misstatements, when and where they were made or how they were misleading, according to Sherwood's order.

Sherwood said the complaint is “devoid of any allegation of misrepresentations made that were untrue when made,” noting that the attorney general's office spent more than a year investigating before filing the suit.

The appeals court said Sherwood based its conclusion on a finding that there had been no failures in the auctions in the 20 years preceding August 2007 and erroneously evaluated the merits of the claims.

(Bloomberg News)Company Response

The company said it intends to fully defend its position and is confident the court will rule in its favor. About 98 percent of the auction-rate securities held by Schwab clients have been redeemed at par value,

Banks Foresee Endless Profits Five Years After Crisis

NEW YORK (TheStreet) -- Five years after the collapse of Lehman Brothers, the nation's largest banks disclosed in a series of self-administered stress tests on Monday that they expect to be profitable during the next financial crisis.What a difference five years makes.It wasn't so long ago that all of the largest lenders in the U.S. were either in search of life saving financial support or on the verge of accepting billions in buffer capital that the government shoved into bank coffers as part of its Troubled Asset Relief Program. Now, banks expect that they will be able to maintain minimum capital ratios generally in excess of 9%, in the event of another market crash and severe recession over the next two years. Many even expect to remain profitable.Stress test results released by large lenders on September 15 indicate a double-edged sword. There is no denying that firms such as Morgan Stanley (MS) have transformed their business and are in a far healthier state after barely surviving the 2008 financial crisis. However, as expectations continue to rise for the banking industry's performance during a next bout of economic tumult, investors and C-Suites may be returning to the state of collective overconfidence that plagued the industry five years ago.Morgan Stanley, US Bancorp (USB) and PNC Financial (PNC) now expect to report a profit in the next crisis. Last year Morgan Stanley forecast a stressed loss of $12.6 billion, however, those projections were before the firm took control of brokerage Morgan Stanley Smith Barney. JPMorgan (JPM) expects to report a minimal $300,000.00 loss in the next crisis while Bank of America (BAC) and Citigroup (C) have both dramatically reduced their stressed loss forecasts.Optimism isn't uniform across the banking sector.Goldman Sachs  (GS) expects to report large losses in a time of crisis, a contrast to its more wealth-management oriented competitor Morgan Stanley. Wells Fargo, meanwhile, increased its expected loss to $3.8 billion as a! result of lower pre-provision net revenue. The nation's largest mortgage lender still expects loan losses on its mortgage and commercial lending operations to be far lower than those projected by the Fed in its 2013 Comprehensive Capital Analysis and Review (CCAR). Indeed, it is troubling that there is a large divergence between expected losses in banks' internal stress tests versus those made by the Federal Reserve in its annual CCAR. Consider that while JPMorgan expects minimal losses in a stressed environment, the Fed's last CCAR projected $32.2 billion in losses. It forecast far higher losses on the bank's loans and activity. The same holds true at Bank of America and, to a lesser extent, Citigroup.Overall, the Fed projects that the nation's four largest banks would lose nearly $140 billion in a time of crisis, while internal estimates released by those banks on Monday only forecast about $50 billion in losses. Analysts generally believe the next round of stress tests from the Fed in March of 2014 will move closer to banking industry estimates, instead of vice versa."While capital standards lack uniform harmonization and will likely increase over the foreseeable future, we believe that today's relatively punitive capital levels will likely subside over time as the industry continues to build capital and the associated risks and economic landscape continue to change," Todd Hagerman, a Sterne Agee banking analyst wrote in a Tuesday client note. 

Analysts see rising forecasts of banking sector net income during a stressed environment as reinforcing expectations that firms will be able to increase their dividend and share buybacks in coming years. "Our two main observations are that capital ratios now appear even higher than previously estimated. And second that several banks, in particular BAC, C, PNC and MS, now estimate their net income during a stressed scenario will be stronger," Richard Staite, a banking analyst at Atlantic Equities, wrote in a Tuesday client note. 

-- Written by Antoine Gara in New York

Gates Works to Save Legacy, Adds Activist Investor

Microsoft Corp. (NASDAQ: MSFT) did something it did not have to do (something that no public company would want to do), so why did it do it? The huge software company said it would add a director from a tiny activist law firm–not one anyone has ever heard of. The announcement come just after the one which said CEO Steve Ballmer would resign. Why would Microsoft panic? (Or, perhaps founder CEO has something secret on his mind)

The company issued a release:

Microsoft Corp. today announced that it has signed a cooperation agreement with ValueAct Capital, a San Francisco-based investment firm with $12 billion in assets under management that beneficially owns approximately 0.8 percent of the outstanding shares of Microsoft common stock and is one of the company's largest shareholders.

The cooperation agreement provides for regular meetings between Mason Morfit, president of ValueAct Capital, and selected Microsoft directors and management to discuss a range of significant business issues. The agreement also gives ValueAct Capital the option of having Morfit join the Microsoft board of directors beginning at the first quarterly board meeting after the 2013 annual shareholders meeting.

"Our board and management team are committed to enhancing growth and value for Microsoft shareholders, and we look forward to ValueAct Capital's input," said Steve Ballmer, Microsoft chief executive officer.

That is not 8%, it is 0.8%. Gates owns 5.47%. Ballmer owned 3.95%. And Gates is as close to a controlling shareholder as a company (without owning a majority of the stock, or voting control) could have because of his role as founder. Gates, in other words, must have signed off on the deal.

And, it must be Gates’ deal completely. Probably, he has decided that an outside director with an aggressive temperament will roil a board which has acted as minions to Gates and Ballmer. In essence, Gates has the equivalent of a new board to go with a new CEO — which he will undoubtedly pick as well.

Gates, not willing to come back as CEO himself, is doing what he can to shake Microsoft from its slumber — and revive his own legacy in the process.

Twitter may fly on first day, ‘gray market’ shows

Twitter may fly on its first day of trading.

Twitter is scheduled to set a final price for its initial public offering late Wednesday and debut Thursday. The company may end the day with a market value of $25 billion, according IG, which runs a gray market that lets investors bet on such outcomes.

A $25 billion market capitalization implies a share price of about $46 at the end of the first day. That compares to Twitter's current price range for the IPO of $23 to $25 a share, which implies a valuation of about $17 billion.

"It looks exceptionally positive at the moment," said Brenda Kelly, senior market strategist at IG in London.

Twitter is the most anticipated technology IPO since Facebook's troubled market debut last year. The micro-blogging service has become a media phenomenon, used by presidents, celebrities and kids alike. The company needs to make the platform easier to use and big profits have yet to materialize, but Wall Street is still keen to get involved.

"Twitter is likely to become a core holding for many growth portfolios," said Brad Gastwirth, CEO of ABR Investment Strategy, an independent research firm focused on tech and healthcare.

Twitter raised its IPO price range Monday, suggesting Goldman Sachs and the other banks underwriting the offering are seeing strong demand from investors.

"I would love to invest, but getting stock from Goldman is virtually impossible," said Thomas Wyman, chief investment officer of The Global Internet Fund.

He estimated that the offering is at least ten times over-subscribed, which means that investors have placed orders totaling at least ten times the number of shares that will be sold.

"Even though Facebook's IPO was a disaster at first, this one is set up to perform a lot better," Wyman added.

Facebook priced its IPO at $38 and the stock ended its first day just above that level, then slumped in the weeks following.

IG's gray market initially called for Facebook shares to end their first ! day of trading at about $30. However, on the last day before the market debut exuberance got the better of IG clients as they bet that the stock would surge to $45 or even $48, according to Kelly.

The opposite has happened with Twitter's IPO. About a month ago, IG clients were betting that Twitter would be valued at about $29 billion at the end of the first day of trading. That dropped to roughly $24 billion about a week ago, Kelly noted.

Gross, Gundlach, Faber Batter Bernanke as Stocks Tumble

Tough stuff from leading prognosticators in response to comments on Wednesday from Federal Reserve Chairman Ben Bernanke.

Granted, most aren’t known for their sunny optimism; but even for them it went beyond the pale. Jeffrey Gundlach doesn’t like bond alternatives; Bill Gross doesn’t like the Fed; Marc Faber doesn’t like Obama and Peter Schiff doesn’t like anybody. Judging from Wednesday’s and Thursday’s stock sell-off, they might be on to something.

The Dow Jones industrial average plunged 353 points, or 2.3%, to 14,758 points. The Dow has lost 560 points in the past two days, wiping out its gains from May and June. The Standard & Poor's 500 dropped 40 points, or 2.5%, and the Nasdaq fell 78 points, or 2.3%.

The lifeblood of America’s ailing economy—the Fed's emergency monetary infusion via quantitative easing—may be “anemic, oxygen-starved, or even leukemic,” bond king Bill Gross warned in his June missive to PIMCO shareholders. Things haven’t gotten any better since.

Gross (left) told Bloomberg on Wednesday he thought Bernanke "might be driving in a fog" and said of Vice Chairman Janet Yellin, “I think she is a Siamese twin in terms of policy."

Schiff, the outspoken president of Euro Pacific Capital, was asked by the Breakout website what Bernanke could have done that would please the legendary bomb thrower.   

“He could have resigned,” Schiff (right) shot back. “He’s basing his forecast of an improving economy on a housing market that was only rising because the Fed was able to blow more air back into the bubble.”

Bernanke didn’t specifically mention tapering in Wednesday’s comments because he can’t, according to Schiff.

“He knows he can’t do it. If the Fed does not start buying more than $85 billion a month of mortgages, we could have mortgage rates back above 5% by the end of this year. This whole new mini-housing boom could then be a brand new bust.”

Dr. Doom himself, Faber, editor and publisher of the aptly named "Gloom, Boom & Doom Report," recently predicted the sell-off in Japanese equities. Now he has a warning for all investors about the U.S. markets, the Fed and the rest of the world, according to Talking Numbers.

“[The Fed] will talk without giving any precise answers,” Faber (left) said. “I think the bond market has already weakened significantly from the July 2012 lows, in terms of yield. If the Fed indicated that it would begin tapering, equities would be more vulnerable than bonds.”

When asked about riots in emerging markets recently, and whether that made U.S. securities safe, Faber offered a glimpse of the positive before reverting to his usual pessimism.

“Yes, I would not be overly negative about U.S. bonds,” he conceded, “but it’s a more complicated question for equities.

“If someone says Mr. Bernanke has stayed to long, my view is that Mr. Obama has done the same,” Faber added with flourish.

As for specific investment moves, DoubleLine Capital founder Gundlach (left) had harsh words for bond investors (recognizing he has a dog in the hunt).

"The basic viewpoint is that the financial markets, and certainly bond alternatives, are all balancing, somewhat precariously, on a very narrow base, which is zero interest rate policy,” he told CNBC. “Everybody is trying to find ways of getting yield and trying to find ways of avoiding a lousy asset class. They’re wrong, bonds are not a lousy asset class.”

The flight to bond alternatives—like dividend-paying stocks, mortgage REITs and master limited partnerships—“is going from the frying pan into the fire.”

“It’s really a fundamental mistake that investors are making,” Gundlach asserted. “They say ‘hey, I don’t want to own bonds because yields are too low, and that means that they must rise soon.’ But while bond have had modestly negative returns, these bond alternatives have had horrible returns. If the low interest rate premise is incorrect, these things will fall more than bonds.”

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Check out these related stories on AdvisorOne:

Microsoft Narrows Shortlist for Next CEO

Carlos Osorio/APFord CEO Alan Mulally NEW YORK -- Microsoft has narrowed its list of external candidates to replace Chief Executive Officer Steve Ballmer to about five people, including Ford Motor chief Alan Mulally and former Nokia CEO Stephen Elop, according to sources familiar with the matter. The world's largest software maker also has at least three internal candidates on its shortlist, including former Skype CEO Tony Bates, who is now responsible for Microsoft's business development, and Satya Nadella, the company's cloud and enterprise chief, the sources said. Despite the narrower list -- the company started with about 40 names -- the process could take a few more months, the sources said. In August, Ballmer said he would retire within 12 months. The names of other candidates couldn't be learned, but the search committee is interviewing executives from a wide range of sectors, including life sciences and consumer, the sources said. Microsoft (MSFT) declined to comment on the process and on behalf of the internal candidates. A Nokia (NOK) representatives couldn't be reached immediately for comment late Tuesday. Ford (F) spokesman Jay Cooney said: "There is no change from what we announced last November. Alan remains fully focused on continuing to make progress on our One Ford plan. We do not engage in speculation." Investors have pushed Microsoft's board in recent months to look for a turnaround expert, such as Mulally or Computer Sciences (CSC) CEO Mike Lawrie, to succeed Ballmer. Some investors have also suggested to the board that co-founder Bill Gates should step down from his role as chairman, saying he stands in the way of radical reform at Microsoft. Microsoft remains highly profitable and last month beat Wall Street's quarterly profit and revenue forecasts. But it has lost ground to Apple (AAPL) and Google (GOOG) in mobile computing. Ballmer has focused on making devices, such as the Surface tablet and Xbox gaming console, and turning key software into services provided over the Internet. Some investors say that a new chief should not be bound by that strategy. They are concerned that, with both Gates and Ballmer up for re-election to Microsoft's board, they will retain their influence over the company. Gates has focused his day-to-day efforts on philanthropy since 2008 when he vacated his office on campus. People close to him say he is not considering a return to the CEO position. Members of the CEO search committee have been speaking with dissenting shareholders, according to sources familiar with the conversations. Activist shareholder ValueAct Capital Management was offered a board seat by Microsoft in August. Several sources said the investor will also be given the same access as the board to the final five candidates. CEO Candidates Mulally, 68, is credited with inspiring a cultural change that helped Ford reverse its losses and avert a federal bailout in 2009. It remains unclear when Mulally will leave Ford, which he has led since 2006. He has repeatedly said he plans to adhere to his agreement to stay with Ford until the end of 2014. But people familiar with the matter have previously said that Mulally is open to other opportunities and may leave Ford earlier if another job presents itself. Elop ran Microsoft's business software division before jumping ship to Nokia in 2010. Although he is seen as an external candidate for the Microsoft CEO job, he is set to return to his former employer after the closure of its 5.44 billion euro acquisition of Nokia's handset business. The Nokia deal, which came soon after Ballmer's surprise decision to retire, was widely seen as putting Elop among the list of successors. Meanwhile, the two known internal candidates have been gaining prominence within Microsoft. Bates came to Microsoft two years ago as CEO of the acquired Skype and was recently elevated to lead the technology giant's business development and overall strategy. Nadella's group is coming to the fore as the company struggles to catch up in online and mobile computing. -.

Source: Microsoft, investments Age: 57 Residence: Medina, Wash. Self-made

Could Renewable Energy Lead to a 51st State?

North Dakota, South Dakota. North Carolina, South Carolina. For heaven's sake -- the North and the South. Americans sure do seem to like splitting up their states, and out in Colorado, some folks are talking about doing it again.

The reason some Coloradans want to split up their state is as old as America itself -- a distant government coming up with grand plans that it thinks are pretty keen, and telling the locals to pay for them.

According to news reports, there are at least three big reasons some residents of Colorado's Weld, Morgan, Logan, Sedgwick, Phillips, Washington, Yuma, and Kit Carson counties are considering leaving the fold. Some complain of new laws that would regulate how farmers raise their livestock. Others cite tightened state gun-control requirements in the wake of last year's Aurora shooting. But the one thing that really seems to be putting a burr under folks' saddles is a law just passed, that requires rural electric cooperatives in the state (the would-be seceders are predominantly rural communities) to get 20% of their power from "renewable resources" by 2020.

Dubbed the "Setting Renewable Energy Standards for Rural Colorado" law, this would double the previous target for renewables. According to local Weld County paper The Greely Tribune, it could cost consumers in the affected counties as much as $3 billion in higher electric bills.

Schadenfreude's in season
Not everyone's opposed to the law, necessarily. For example, Xcel Energy (NYSE: XEL  ) is already working to expand its portfolio of wind-generated power in the state, and two years ago, it put into operation a 19-megawatt solar farm in cooperation with SunPower (NASDAQ: SPWR  ) . As a so-called "investor-owned utility," Xcel is already subject to a target of 30% renewables use by 2020 -- so a law making its rural rivals hit a 20% target probably didn't upset Xcel all that much.

But Republican lawmakers in the state beg to differ. State Sen. Greg Brophy, for example, called the law "callous" and criticized it for imposing as much as a 2% annual increase in electricity rates upon rural taxpayers. "Utility bills will now increase on the very people who can least afford it," said the senator.

Republican Rep. Cory Gardner of Yuma, Colo., echoed the sentiment: "The people of rural Colorado are mad, and they have every right to be. ... I don't blame people one bit for feeling attacked and unrepresented by the leaders in our state."

"The stupidest thing I've seen in a long time."
But isn't talk of secession a bit of an overreaction? Especially when you consider that by capping electric rate increases at 2%, the law's basically saying rate payers can expect their average monthly electric bill to rise from $68.32 all the way up to ... $69.69? Larimer County Commissioner Steve Johnson isn't convinced. (Actually, his exact words were: "This is the stupidest thing I've seen in a long time. ... It's hard to believe that this isn't the dumbest thing I've heard of, certainly for this year.")

In at least one sense, he seems right. Getting permission to secede from a state isn't the easiest thing in the world to accomplish. First, county officials would have to get voter support to put the matter on the November ballot. Then, even if the voters of one or more counties agreed they'd like to secede, Colorado's legislature -- those are the folks who passed the laws everyone in the north is complaining about -- would have to approve secession. Then the U.S. Congress would have to agree to let them go as well, because according to Article 4 of the U.S. Constitution, creation of a new state, which would be America's 51st, requires "the Consent of the Legislatures of the States concerned as well as of the Congress."

In short, smart or stupid, forming a new state of North Colorado will be a thing easier said than done.

One home-run investing opportunity has been slipping under Wall Street's radar for months. But it won't stay hidden much longer. Forward-thinking energy players such as General Electric and Ford have already plowed sizable amounts of research capital into this little-known stock… because they know it holds the key to the explosive profit power of the coming "no choice fuel revolution." Luckily, there's still time for you to get on board if you act quickly. All the details are inside an exclusive report from The Motley Fool. Click here for the full story!

Will RealD's Earnings Finally Catch Up With Its Stock?

On Thursday, RealD (NYSE: RLD  ) will release its latest quarterly results. With its stock having jumped sharply throughout the past year or so, investors should look closely to make sure its fundamentals are keeping up with its share price.

RealD has benefited from the rise of 3-D technology at movie theaters, with an increased willingness and demand for 3-D content not only for niche offerings but for blockbuster releases. Yet the company also has to face competition from a large and growing rival. Let's take an early look at what's been happening with RealD over the past quarter and what we're likely to see in its report.

Stats on RealD

Analyst EPS Estimate	($0.19)
Year-Ago EPS	$0.10
Revenue Estimate	$42.97 million
Change From Year-Ago Revenue	(14.1%)
Earnings Beats in Past 4 Quarters	2

Source: Yahoo! Finance.

How will RealD's earnings fare this quarter?
Analysts have gotten a lot more optimistic in recent months about RealD's earnings prospects, narrowing their March-quarter loss estimates by $0.06 per share and now anticipating a modest profit for the fiscal 2014 year. The stock has already gotten a head start on the turnaround celebration, jumping almost 30% since the end of February.

From RealD's recent performance, investors who are new to the stock might be perplexed by the company's weak revenue and earnings. When you look back to the company's 2010 IPO, you'll notice that the stock has actually come down quite a bit, as huge revenue growth in the company's fiscal 2010 and 2011 years gave way to stagnant sales in 2012 and revenue declines this year. Given the rise of blockbuster action franchises that have brought in billions in box-office receipts for major movie companies, that trend is troubling for RealD. The decision from Sony (NYSE: SNE  ) to stop subsidizing the 3-D glasses that viewers need to watch RealD versions of films as of a year ago was also a big contributor to RealD's decline, as it put another barrier in front of would-be 3-D patrons. It also marked a big loss of confidence for RealD, as Sony had formed a partnership with RealD years before RealD went public to develop 3-D projection equipment, and therefore Sony had a vested interest in seeing RealD succeed as well.

The main rival that RealD faces is IMAX (NYSE: IMAX  ) , and the biggest challenge IMAX poses for RealD is that IMAX and its huge-screen theaters give viewers an impressive experience even with 2-D films. That flexibility has been a key component driving IMAX's growth, with a global footprint extending to hundreds of theaters in more than 50 countries worldwide. RealD has tried to match that with its precision white-screen technology, but RealD can't make theater-operators install the huge screens to match up to IMAX.

Still, with a share of box-office receipts for movies that studios show in 3-D format, RealD hopes to turn things around with the coming release of Man of Steel later this month. Moreover, with the blockbuster Iron Man 3 not having been released until early May, none of that movie's impact will be in RealD's March numbers.

In RealD's report, therefore, the more important information will come from any guidance the company gives for its June quarter. If RealD can't make solid strides toward sustainable profitability with such an impressive lineup of blockbuster movies, then investors need to take a second look at their entire premise for owning the stock.

There's another 3-D revolution going on that you need to know about. Find out how U.S. domestic manufacturing is poised to once again become the investment driver of the world, and all because of one disruptive technology. You can uncover the three companies that will become the American Steel of tomorrow in The Motley Fool's new free report, "The Future Is Made in America." Just click here to read more.

Click here to add RealD to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Will Microsoft Repeat Vista's Mistake?

Steve Ballmer learned a painful lesson with Vista the hard way. Is Microsoft (NASDAQ: MSFT  ) about to repeat that mistake with the Xbox One?

Microsoft's disappointing Vista operating system was an easy target for Apple attack ads several years ago, but the clunky platform was doomed even before Justin Long and John Hodgman began trading zingers about it.

Customers weren't happy.

"Application compatibility in Vista was not as high as many of our customers would have liked," CEO Steve Ballmer conceded five years ago, more than a year before it was relieved by Windows 7.

"What we have learned is that maybe our customers care a little bit more about compatibility and a little bit less about security," he concluded, believing that customers would eventually come around.

They didn't. Compatibility was too important. Apple was able to take plenty of shots with its attack ads, but Vista's demise was self-inflicted. It was an island.

This brings us to the Xbox One's lack of compatibility with earlier gaming consoles.

Despite packing plenty of bar-raising features, the one thing that could keep buyers back initially is the inability to play Xbox and Xbox 360 games. Sure, there are often obscure titles that don't make the upgrade cut, but by switching to a brand-new Advanced Micro Devices (NYSE: AMD  ) chip architecture we're talking about Xbox and Xbox 360 discs being worthless on the Xbox One. The Wii U and the upcoming PlayStation 4 will all be powered by AMD now.

For now, the big loser here is GameStop (NYSE: GME  ) . The shares tumbled 19% last week, weighed down by the Xbox One news and a ho-hum quarterly report. The video game retailer score juicy margins in its resale business, and Xbox One owners won't be buying a lot of older secondhand games anymore. They will probably be selling their discs, and that will create an inventory glut at your local GameStop that will likely drive prices lower.

However, the lack of backward compatibility will naturally also sting Microsoft -- just as it did with Vista. Microsoft argued that time would heal the dissent. Developers would upgrade their applications for Vista, but customers don't usually crave the hassle or additional costs to make something that used to work just fine work again on a new operating system.

To be fair, the Xbox One is considerably cooler than Vista. It better be. Asking gamers to come in with clean slates isn't going to be an easy sell.

Are we ready for the "I'm an Xbox One, I'm a Wii U" attack ads?

Prepare for battle
It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.

Nucor Q3 Earnings: Strong Results in a Tough Environment

Steel-intensive, nonresidential construction projects like this one remain near historic lows. Source: Nucor.

Another quarter, another strong performance by steelmaker extraordinaire Nucor  (NYSE: NUE  ) . Revenue for the quarter came in at $5.7 billion, 8% above last year's quarter and well above the market's expectation of $5.37 billion. Earnings also came in strong, with EPS of $0.76 coming in above both Nucor's guidance and analyst estimates.

However, there are still a number of headwinds in the steel industry, so despite the improved results even Nucor has a lot of work ahead of it. Let's take a deeper look at the earnings release. 

Operational improvements and product mix behind profit growth

Steelmakers have high fixed costs than can be tough to lower in periods of declining demand. Because of these high costs, even a small reduction in output can have an outsize impact on earnings and cash flow. Nucor has long been an industry leader at managing its fixed costs and responding to the market environment. 

DRI produced in Louisiana. Source: Nucor.

Much of this profit growth can be summed up in one key metric: utilization rates.

So far this year, the company's utilization rate is significantly improved compared to last year, increasing from 74% in 2013 to 78% so far in 2014. This is one big driver of improved profits in 2014 versus last year. 

The company also pointed to improved profitability in its fabricated construction products business versus the second quarter of this year, due to improvements in the nonresidential construction market. While total revenues increased 15% over last year, total tons shipped increased only 10%, meaning that Nucor was able to command higher prices. This was driven both by higher-price products and by some cost increases it was able to pass along. 

Headwinds remain 

While Nucor has been able to raise its prices modestly, imports continue to put pricing pressure on the steel market. However, the tariffs implemented earlier this year do seem to be having some impact on improving conditions for domestic steelmakers. 

However, tariffs won't do anything to improve the demand picture. While there has been strength in supplying manufacturing goods for the automotive market and the energy industry, the building industry -- both residential and especially nonresidential -- remain at historically low levels of production. Until the demand cycle turns, Nucor and the rest of the industry will continue competing for a smaller pie. 

Looking forward 

Nucor completed its acquisition of Gallatin Steel in the quarter, which will expand its capacity of flat-rolled steel -- used for pipe and tube steel -- by about 10%, and in the Midwest, where demand is the highest. This facility will be able to use direct-reduced iron from Nucor's Louisiana DRI plant, a further benefit of this facility and its scale. 

Nucor continues doing what it does best: making smart acquisitions that fit within its operational strategy, investing in growth, and keeping its costs low, while positioning the company to remain profitable in bad markets as well as good ones.

It's tough to say when the steel demand cycle will fully rebound. However, Nucor will clearly be ready when it happens. Until then, it remains the most operationally sound steelmaker in the industry, and its management team keeps investing in growth and stability -- a hard thing to do in a tough industry. 

If you're looking for a consistent dividend, Nucor and its 3% yield will be steady. However, I wouldn't count on any significant payment increases before the steel market recovers.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend-paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here.

The 5 Best Cities for Early Retirement

You've run the numbers, and have done your early retirement planning, but something just isn't adding up. Costs seem to be out of control. Though you've read that your combination of 401(k) and IRA savings makes you eligible for early retirement, you just can't figure out how other people do it.

Most of the time, there's one key factor at play: sky-high cost-of-living expenses. I know the feeling: when my wife and I lived in Washington, DC, our cramped 600 square-foot apartment ran $1,550. Now we live in a rural Wisconsin community where our 1,100 square-foot quarters cost just $700 per month.

A move like that makes a big difference. But if you're ready for early retirement, the question becomes: where do I even start? Of course the cost of living matters, but so does the opportunity to connect with others, have access to the outdoors, and participate in a vibrant community.

While every situation is different—especially when it comes to the location of your close family and friends—some of the hard work has already been done for us by the writers at Kiplinger's.

The organization published a list in 2013 of the top cities for early retirees. Here are the top five, with a quick explanation as to how they earned their stripes.

No. 5: Sioux Falls, SD

Source: Seabear70, Wikimedia Commons 

I went to college in rural Iowa, so I'm familiar with the automatic shudder that accompanies the suggestion of living in an under-populated Great Plains state. But as the picture of the city's Falls Park shows, this part of the country is more than just desolate wasteland.

As you might expect, cost of living expenses are low: 15% lower than Chicago, and a whopping 55% lower than New York City , according to CNN's Cost of Living Calculator. The city has a population of 154,000, 24% of whom are between the ages of 45 and 64. And according to Kiplinger's, your Social Security and other retirement benefits are untaxed as well.

Of course, there are trade-offs. The closest major metropolitan area is Omaha, which is a three-hour drive. And be prepared for cold and snowy winters. Average highs from December through February are below freezing, and about 44 inches of snow falls per year.

No. 4: Sandy Springs, GA

Source: Glen Edelson, Wikimedia Commons 

For those in search of a warmer climate for early retirement, Sandy Springs is worth investigating. The city, located just north of Atlanta, has a balmy average high of 50 degrees in January. That means you can enjoy the 20 miles of Chattahoochee River (pictured above) frontage year-round. And let's not forget the year-round entertainment provided by Atlanta's college and professional sports teams. Residents can expect tax breaks--up to a certain level--as well.

On the flip side of living near a big city is dealing with traffic. Though you likely won't have to worry too much about a morning commute, a 2010 study by the Texas Transportation Institute said Atlanta had the 8th worst traffic in the country, with the average driver spending 44 hours in traffic each year. And summers can be hot, with average highs in the upper 80s and heat indexes that will probably force you to run the AC continuously.

No. 3: Alexandria, VA

Source: Zach Rudisin, Wikimedia Commons 

I'll admit right off the bat: we're a little biased about this one. Alexandria is home to The Motley Fool headquarters, so we think it should really be number one on this list.

There's a lot to like about the city. Located right on the Potomac River, historic Old Town Alexandria is full of cute shops and places to whet your whistle. If exercise is important to you, a biking/running path runs along the river and right past Reagan National Airport. And when you're in the mood for larger events, a short ride on Washington, DC's metro line lands you smack dab in the middle of our nation's capital. 

As with Sandy Springs, however, both traffic and an inordinately muggy summer will be on your menu in Alexandria. The city also has a relatively higher cost of living as well: over 40% higher than the previous two cities on the list. Federal and military pensions are also taxed, according to Kiplinger's.

No. 2: Cary, NC

Dancing in the streets in Cary, NC. Source: Town of Cary .

Never heard of Cary? It's the city of 150,000 located smack dab in the middle of North Carolina's Research Triangle.

Obviously, quick access to cultural and sporting events at the University of North Carolina, North Carolina State, and Duke University are a big draw. In Cary you'll find warm weather and lots of compatriots: over a quarter of residents are between the ages of 45 and 64. And it's hard to beat the cost of living: about 20% lower than Chicago, and over 50% cheaper than Manhattan.

While Social Security is not taxed in the state and some forms of North Carolina state and local pensions are given favorable breaks, retirees will have to contribute somewhat to public coffers. Any pensions that originate outside of North Carolina, and personal IRAs will can be taxed--though deductions are included as well. 

No. 1: Naperville, IL

Aerial view of Naperville. Source: City of Naperville .

Number one on Kiplinger's list goes to this city of 140,000 residents living 30 miles southwest of Chicago. Naperville has won many accolades, including Money magazine's 2nd-best place to live in 2006, and the wealthiest city in the Midwest with a population over 75,000. Naperville is close enough to Chicago that a quick Metra ride lands you right in the middle of the nation's third-largest city and one of the biggest cultural melting pots between the coasts.

The biggest drawback to retiring in Naperville is cost-of-living. Housing is 41% higher than the national average, and overall expenses are about 13% more than you'd have in an average community.

Take advantage of this little-known tax "loophole" to help you retire earlier
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In our brand-new special report "The IRS Is Daring You to Make This Investment Now!," you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Edelman Names Personal Finance Guru David Bach Vice Chairman

Edelman Financial Services announced Thursday that personal finance author, educator and former advisor David Bach has become vice chairman of the advisory firm.

Ric Edelman, who will continue as CEO and chairman, says Bach will serve alongside him to boost the firm’s educational activities, which already include weekly radio and television programs, media interviews, seminars, newsletters, blogs and personal finance books.

The duo also plans to recruit “hundreds of advisors” from around the country to join the firm’s 35 current offices or manage new ones that the firm plans to open, which Edelman says is “all part of the firm’s goal of serving 1 million Americans.”

Edelman says Bach joins the firm as it continues “remarkable growth.” The firm has more than 24,000 clients nationwide, with more than $12.75 billion in assets under management, has added 4,500 clients last year and “is on pace to do the same in 2014.”

Edelman has written written eight books and is a No. 1 New York Times bestselling author, while Bach is the author of twelve consecutive national bestsellers, including the No. 1 New York Times bestsellers, The Automatic Millionaire and Start Late, Finish Rich. Bach also appeared numerous times and was a regular contributor to NBC’s The Today Show.

“I’ve dedicated the past 20 years of my life – first as a financial advisor and now as a financial educator – to providing objective financial advice to millions of Americans via my books, seminars and media appearances,” Bach said in a statement. “Teaming with Ric now is a professional thrill as it allows me to leverage my experience and financial education platform to reach more people and connect them nationwide to this premier advisory firm.”

Edelman and Bach will also deliver practice management training and consulting services for advisors to help them improve their practices and the services they provide to their clients.

---

Related on ThinkAdvisor:

5 Rocket Stocks Ready for Blastoff

BALTIMORE (Stockpickr) -- 2014's stock market performance so far has been a bit, well, uninspiring. Since the calendar flipped to January, the big S&P 500 index has climbed a whopping 1.6%. And drilling down to individual names yields some even less impressive returns.

>>Must-See Charts: 5 Big Stocks to Trade for Gains This Summer

But the statistics still favor more upside this year, following 2013's huge run higher. Since 1975, there have been only 11 years when the S&P 500 has returned more than 20% in a single calendar year. And in those years, average gains for the following year have come in at a hefty 12.8%.

That means that Mr. Market could still have a lot of catching up to do in the latter half of this year. To take full advantage of the trend, we're turning to a fresh set of "Rocket Stocks" for this week.

For the uninitiated, "Rocket Stocks" are our list of companies with short-term gain catalysts and longer-term growth potential. To find them, I run a weekly quantitative screen that seeks out stocks with a combination of analyst upgrades and positive earnings surprises to identify rising analyst expectations, a bullish signal for stocks in any market. After all, where analysts' expectations are increasing, institutional cash often follows. In the last 249 weeks, our weekly list of five plays has outperformed the S&P 500 by 76.85%.

>>Sell These 5 Toxic Stocks Before It's Too Late

Without further ado, here's a look at this week's Rocket Stocks.

Apple

First up is Apple (AAPL), a name that's been serving up some market-beating performance in the last few months. In the trailing six months, shares of the technology giant are up more than 15%. And there's good reason for investors to expect more of the same for the next six months.

>>5 Stocks Ready to Break Out

Apple owns some of the most popular consumer electronic devices on the market today. The firm's physical offerings range from its iPhone and iPad to the Macintosh line of computers. But Apple is also one of the largest sellers of digital content through its iTunes store, a venture that makes Apple the biggest music and video store on the planet. Despite hugely competitive markets for smartphones and tablets, AAPL claims the leading market share of the industry's profits, a fact that gives the firm a deep moat.

Those huge profits have added up to an equally deep war chest for Apple over the last several years. Today, the firm boasts approximately $134 billion in net cash and investments, a cushion that covers approximately 25% of the firm's current market capitalization. Ex-cash, Apple's P/E ratio currently stands at just 10.5, a paltry valuation for the most profitable firm in the business.

This Rocket Stock has more room to run in 2014.

Walt Disney

Shareholders of Walt Disney (DIS) have been laughing all the way to the bank for the last year, outperforming the broad market over that stretch by more than double as Mickey Mouse and friends generated gains of more than 20.7% since last summer. Disney's huge collection of valuable assets gives it advantages that can't be replicated by rivals.

>>Hedge Funds Hate These 5 Stocks -- Should You?

Even though Mickey, Donald and Goofy are the first names that spring to mind when most people say the Disney name, those classic characters represent a small chunk of Disney's overall empire today. Disney earned around half of its profits through television networks such as ABC, A&E and the Disney Channel. ESPN, though, is the star of the show: It is the most valuable network in the world, capturing a bigger piece of your cable bill than any other network out there. Smart acquisitions such as Pixar and Marvel give Disney an even bigger collection of IP -- and more important, talent -- that should help produce blockbusters for years to come.

Meanwhile, Disney's theme parks are starting to enjoy the other side of the cyclical downdraft that hindered them during the Great Recession. Because Disney is highly integrated, it's able to take popular characters from a film and move them into TV, theme parks and merchandise, multiplying the value of its efforts and trimming costs. There's a lot to like about Disney's business in 2014.

Allstate

$25 billion insurance name Allstate (ALL) tips the scales as the second-largest U.S. personal lines and property-casualty insurer. The firm sells automotive, homeowners and life insurance as well as other financial products through a network of approximately 10,000 Allstate agents as well as a network of banks and independent agents. In the insurance business, size comes with some serious advantages, and Allstate is riding those advantages to profit; with a huge customer base, the firm is able to cross-sell multiple policies to its existing customer Rolodex.

>>5 Stocks Under $10 Set to Soar

That network effect is effectively the only advantage there is in the insurance business these days. Let's face it: the insurance business has become largely commoditized these days. That's why ALL's ability to spread risk across a larger pool of subscribers is crucial to keeping costs low -- and crucial to winning and keeping customers. Allstate's reputation and customer service give the firm the ability to be a bit more risk-conscious than many of its rivals, but ultimately ALL needs to remain competitive on price first and foremost.

The firm's decision to trim its homeowner's insurance portfolio has been a step in that same direction. It cuts catastrophic risk in favor of more auto insurance, which is much more quantifiable (and less subject to one-time catastrophes). Look out for earnings on July 28 as a potential rally catalyst.

SanDisk

SanDisk (SNDK) has trounced the broad market in 2014 -- there's just no other way to way it. Since the beginning of January, shares of the $20 billion computer storage stock have climbed 29%. And that momentum isn't showing any signs of waning in May.

>>5 Stocks Insiders Love Right Now

SanDisk is one of the tech sector's biggest suppliers of NAND flash memory, a business that gives the firm exposure to a hot market that's been supply-constrained for the last several years. SNDK's memory is used in all sorts of electronic devices today, and quick replacement cycles in mobile devices and rising demand from enterprise users are helping to propel demand (and margins) for the firm. Better still, a robust patent portfolio means that the firm benefits from the overall growth of the NAND flash memory market, regardless of who's manufacturing the memory.

Despite its huge run this year, SNDK isn't looking particularly expensive at current levels. The firm currently sports more than $4.2 billion in net cash and investments on its balance sheet, enough dry powder to pay for more than 20% of the firm's current market capitalization today. That's a lot of risk reduction for a name that's been rallying hard for quite a while now. With rising analyst sentiment in shares this week, we're betting on shares of this Rocket Stock.

Keurig Green Mountain

Vermont-based Keurig Green Mountain (GMCR) is another name that's posted huge momentum performance in 2014 -- the coffee company has rallied more than 50% this year alone. And while that momentum put a big target on GMCR's back a couple of months ago, as former momentum winner began to roll over, shares have been recovering hard in May.

GMCR's Keurig brand of coffee brewers and single-serve K-Cup pods have been a phenomenon -- and they're not showing any signs of slowing. With the biggest installed base in the single-serve space, Keurig has some huge advantages over its rivals right now, especially as the firm gets ready to launch its second-generation pod offerings. GMCR operates under the razor/blade model: by giving customers a deal on its brewing machines, Keurig stands to make substantial profits by selling coffee pods on an ongoing basis. Despite the competition in this space, other brands have failed to replicate Keurig's scale...

Make no mistake, Keurig isn't cheap right now. But that hefty price tag comes from a big growth assumption and the potential for transformative new products like the Keurig Cold, which got a big nod from beverage behemoth Coca-Cola (KO) with a huge stake in GMCR earlier this year. The volatility isn't likely over in this name yet, but then again, the gains aren't either.

To see all of this week's Rocket Stocks in action, check out the Rocket Stocks portfolio at Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.

RELATED LINKS:

>>4 Stocks Spiking on Big Volume

>>3 Stocks Under $10 Making Big Moves

>>This Beaten-Down Stock Is Ready to Rebound

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author was long AAPL.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to

TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

Follow Jonas on Twitter @JonasElmerraji

How Low Interest Rates Lead to Pitfalls for the Equity Investor - Don Yacktman

Over the last 100 years inflation has averaged 3%. Over the last 50 years inflation has averaged 4%.

Investors today are very dangerously projecting extremely low inflation far out into the future.

The result is that investors are using Treasury bonds at 3% as a hurdle rate which is half of where they historically have been, and these low hurdle rates are driving equity valuations higher. Those higher valuations are likely to be temporary.

Also check out: Donald Yacktman Undervalued Stocks Donald Yacktman Top Growth Companies Donald Yacktman High Yield stocks, and Stocks that Donald Yacktman keeps buying
About the author:Canadian Valuehttp://valueinvestorcanada.blogspot.com/

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Livestock Futures Close Mixed

Lean Hogs closed sharply lower on Monday. Trading was active and choppy. February Lean Hogs settled at 76.65, down 2.37. April Hogs settled at 77.70, down 2.35. June Hogs were 1.70 lower at 87.50.

Cattle Futures settled mixed, with February Cattle settling the day at 160.45, down 0.15. April Live Cattle settled at 1.5927, down 0.07. March Feeder Cattle ended the session higher at 213.30, up 0.975.

Posted-In: Futures Commodities Markets

© 2015 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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Shadow Recruit: Markets Still Await Their Reboot

In Jack Ryan: Shadow Recruit, the box office has its first reboot of 2014. The film, which inserts Chris Pine into the title role once played by Alec Baldwin, Harrison Ford and Ben Affleck, centers on an evil Russian intent on destroying America, financially and otherwise. Whether this reboot is more successful than the Sum of All Fears, which made $31 million in its opening weekend but failed to rekindle the franchise, remains to be seen: It’s expected to make just $22.4 million over the long weekend.

Anatoliy Vorobev

Investors are also hoping for a successful reboot, but it’s a reboot of the bull market that made 2013 so wildly successful. So far, however, the markets have produced some big swings but haven’t really gone anywhere. The Dow Jones Industrial Average rose 0.1% this week to 16,458.56, but is still off 0.7% in January. The S&P 500 dropped 0.2% this week to 1,838.70, but remains down 0.5% so far this year.

The muted returns in the major indexes belie the big moves in some individual stocks, which were flying around like, well, Jack Ryan chasing down a Russian terrorist who had–spoiler alert–kidnapped his wife. On the downside, Nu Skin (NUS) plunged 42% this week on reports that the Chinese government would investigate it for being a pyramid scheme. Best Buy (BBY), meanwhile, plunged 35% after it unwrapped holiday sales that were explosively bad. But it was also the week that saw Alcoa (AA) jumped 12% after closing it announced that it would shutter two potlines at its Massena East smelter, while Beam (BEAM) jumped 24% after the bourbon distiller agreed to be purchased by Japan’s Suntory. Tesla Motors (TSLA) gained 17% after saying it would deliver more cars in December than it had forecast.

Corporate earnings could be the factor that determines whether the market does pull off a successful reboot or the current stagnation is a prelude to something more ominous. JPMorgan’s Thomas Lee, for one, believes it will be the former. In a note released today, he writes:

We believe investors will get a much needed "confidence boost" from the upcoming 4Q13 earnings season. Among the overall takeaways, we see: (i) profit margins that are still expanding, with bottom-line profits expected to grow 650bp faster than top-line (ex-Financials top-line growth is 1.6%); (ii) overall beat is anticipated to be at least 2%, leading to 4Q13E/FY13E EPS of $28.50/$110; (iii) profit growth continues to accelerate gradually (up 6%) and supportive of 9% overall growth in 2014.

Societ Generale’s Andrew Lapthorne and team aren’t nearly as optimistic. They not that while pro-forma earnings growth rose as much as 7% last year, reported earnings, which include fewer manipulations, barely grew at all. Capital spending as a percentage of revenue is also elevated, even if capital spending is not, while net debt, that is, not accounting for corporate cash, is 15% higher than it was in 2008-2009. In case his point wasn’t obvious, Lapthorne sums it all up:

…2013 was a year of weakening cash flow growth, lower profit growth, deteriorating earnings quality, and corporates piling on the debt – again! Well at least equities were up strongly last year, otherwise you might be feeling rather bearish.

Beauty, as they say, is in the eye of the beholder.

3 Attractive Stocks for Your Portfolio

Popular Posts: GRPN – Has Groupon Gotten Ahead Of Itself Again?One Hot New IPO and One For My Wish List Recent Posts: 3 Attractive Stocks for Your Portfolio F5 Networks a Buy on Growth and Profits GRPN – Has Groupon Gotten Ahead Of Itself Again? View All Posts

I have three fresh names for you that are especially attractive opportunities from our Buy List that I’d like to share with you. If you are just joining us or have more money to invest, I recommend you give strong consideration to these stocks.

Let’s have a look:

AutoNation (AN) continues to show solid sales growth, and its latest quarterly report (see here for more detail)  further proved that the trend toward replacing aging vehicles – especially in the United States – remains quite strong.

Industry-wide sales of new vehicles this year would have been on the higher end of the 15-16 million range had it not been for the government shutdown. In fact, management said U.S. new vehicle sales will likely be more than 16 million units next year, which would be a big number considering that number was around a paltry 10 million units in the depths of the recession. With long-term catalysts and a solid growth record in place, the stock is well positioned for further upside ahead.

Cree (CREE) has been regaining some ground from the panic selling that occurred after its most recent earnings report. Management’s top-line guidance was in line with expectations, but the earnings numbers were a bit light, owing to the continued investment in sales needed to drive consumer awareness of its push into the LED retail market.

As I’ve said before, this is an important strategy and I believe CREE is doing exactly what it should be: spending money to make money. That means that every dollar spent today in advertising, sales and marketing should pay dividends in the future, especially as its bulbs were just awarded the Energy Star designation.

Though there has been some speculation in the press about Wal-Mart’s (WMT) own retail push to efficient lighting, Cree has been well received in the marketplace, and its solid relationship with Home Depot (HD) is nothing to take lightly. I firmly believe that Cree is one of the best ways to play the phase out of incandescent bulbs.

EMC’s (EMC) post-earnings drop earlier this month is giving us a good buying opportunity, and I want us to take advantage as the stock works to regain its footing. The company reported solid growth in its third-quarter report, but fell short of estimates as it reflected a slowdown in federal IT spending.

However, this was largely due to the political brinksmanship that took place at the end of summer, so I’m not surprised by the spending delay and believe it’s only a temporary blip.

The stock still has upside ahead, especially as it continues to see growth in its storage business. We could also see some pent up demand make up for the reset in September.

And That's Why You Don't "Invest" in Lawsuits (PRKR, VRNG)

I hate to be the one to say I told you so, but, I told you so. It's Vringo, Inc. (NASDAQ:VRNG) all over again. What's that? The euphoria - the certainty - that drove ParkerVision, Inc. (NASDAQ:PRKR)  shares from a price of $2.46 to a high of $7.78 in just seven trading days, only to see it all come crashing down on the 8th day. PRKR plunged to a close of $2.90 on the 8th day (yesterday) when the gamble didn't pan out for speculators who were sure it would. Score another one for not picking stocks like you were tossing a coin.

The prompt for the pullback from ParkerVision was a rather disappointing settlement award from yet-another patent-infringement lawsuit. The hopeful were talking about amounts anywhere from $400 million to as much as $1.3 billion. What PRKR got from the judge-n-jury was less then $200 million. Ouch. Of course, ParkerVision, Inc. technically 'won' the case, so what the judgment lack in substance is made up for by the fact that it's a moral victory, right?

If the story seems familiar, it may be because it's the same one that unfurled for Vringo about a year ago in its patent suit against Google; VRNG 'won' the case, in as far a the jury decided Google had infringed on a key patent owned by Vringo, which meant Google owed VRNG some cash. But, dreams of half a billion to billion dollar settlement were dashed when the total award (so far anyway, but that's a long story) only came in at $30 million. The chatter of VRNG becoming a $10 stock was immediately quelled. Shares now stand valued at $2.73, and are acting as if they're looking for a reason to go lower...

....even though there's a shred of hope that total could be increased in November as part of the follow-up evidentiary proceedings. It's not looking encouraging though. Traders were willing to bid Vringo up to $5.73 right before the trial's official end. The company officially won the case - a very good legal position to be in when it comes time to hammer out the final tally - yet the market's lack of interest in buying this stock now suggests traders have little confidence in anything significant above and beyond that $30 million.

Lesson learned: Traders, gurus, and pundits love to hypothesize big numbers, but when all is said and done, juries don't like to hand out big awards unless the reason for doing so is crystal clear. In the case of ParkerVision and Vringo, while the infringement was technically evident, the intent (from all angles) was a gray area.

I don't come here to gloat about my call on PRKR, however, nor the similar call I made about VRNG about a year ago (though I'll confess the Vringo bulls put up a heckuva fight). I come here to suggest ParkerVision is a buy at this depressed price.

Yes, you read that right - I'm advocating you try and catch this falling knife.

It's still a speculative trade, and not intended to be a long-term one. Like Vringo, ParkerVision, Inc. doesn't actually make anything; its business model is patent infringement suits, and it doesn't even seem to do that as well as Vringo has and can. But, with a fund-raising on way, PRKR has something planned. Though we don't know what it is, we do know it's ready and willing to fight it out in court, and that alone is enough to draw a crowd of buyers to bid the stock up again. Just don't get married to the stock - this is all just a chess match against the rest of the market's speculators.

If you'd like to receive more trading ideas and insights like this one, you want to subscribe to the free daily SmallCap Network e-newsletter.

Taken: Stocks Drop in Year’s First Full Week of Trading

This is not what anyone expected. Taken 3 was supposed to follow a simple formula. Bad guys kidnap someone Liam Neeson cares about, shuffle her (and it’s always a her) off to a some exotic locale, and then Neeson kicks butt to get her back. Not this time around. There is no kidnapping. The movie is set in Los Angeles. The only thing that remains is Neeson kicking butt. And that doesn’t seem to be enough for most critics. The Los Angeles Times’ Betsy Sharkey calls Taken 3 “unintentionally hilarious,” Vulture.com’s Bilge Ebiri says “the concept is lame,” and Rolling Stones’ Peter Travers simply warns: “This thing sucks!” Still, BoxOfficeMojo predicts Taken 3 will take in about $28 million, good enough to top the box office.

After last year’s 11% rise in the S&P 500, which followed 2013′s 32% return, investors might have been expecting a solid start to the year. Now quite. The S&P 500 dropped 0.7% to 2,044.81 this week, with no single-day move smaller than 0.8%. The Dow Jones Industrial Average, meanwhile, fell 0.5% to 17,737.37, the Nasdaq Composite declined 0.5% to 4,704.07, and the small-company Russell 2000 finished off 1.1% at 1,185.68.

About what you would expect from a week that saw the eurozone sink into deflation, the Federal Reserve turn a blind eye towards the lack of inflation in the U.S., and a jobs report that was strong across the board except for the lack of wage growth. Oh, and oil dropped below $50. Cirrus Research’s Satya Pradhuman and Mitchell Hew consider the impact of falling oil prices on the market:

The fallout in crude, while generally positive, indirectly pressures Europe as the Russian economy and the Rubble contracts. A more direct impact of the decline in crude relates to a fallout in demand for energy related projects and capital. A closer look at the High Yield market indicates that quality spreads (the difference between High Yield market and the corresponding Treasury level) have widened out in the past six months. This is partly due to the rally in the Treasury market as global investors have flocked to the US. Importantly, Energy related funding has slowed to a trickle as credit spreads have doubled, from 346 to 753 basis points, between June and December. Ultimately, a tightening of investment capital limits growth and eventually caps valuation levels. Until we can witness a stabilization of the recent back-up in quality spreads, the focus on higher quality will likely be beneficial.

Credit Suisse strategists Lori Calvasina and think stocks look increasingly risky:

Although small caps no longer look overvalued vs. large cap, the two size segments have something very important in common. Both, as well as mid-caps, look extremely expensive in absolute terms. While expensive valuations up and down the market cap spectrum are no guarantee that US equities will fall in the year ahead, the extreme readings that we see on our absolute valuation models do indicate to us that downside risks in all size segments of US equities have risen, and that US stocks have become much more vulnerable to negative catalysts.

Sounds like a bad sequel.

Our 401(k)s Show We're Not Taking Investor Confidence Seriously

NEW YORK (BankingMyWay) -- U.S. investors are bullish on the stock market, but not enough are putting the cash into their 401(k) accounts to show it -- and to gain full advantage.

That's a shame, as even a 1% hike in your monthly 401(k) savings plan can add up to $330 per month in your retiree "paycheck" down the road.

This figures come from Fidelity Investments, which is chiding Americans these days about not saving enough for retirement even though eight out of 10 investors believe the Standard & Poor's 500 Index will rise by more than 100 points by the end of the year. [Read: Wall Streets' Great Recession Cost Us All $30 Trillion ]

There is some progress for Americans with their retirement savings. According to Fidelity, 401(k) plan balances rose 11% from the third quarter or 2012 to the third quarter of this year to a nationwide average of $80,600. And if you have been working for a company that offered 401(k) plans for the past 10 years, that average balance number leaps to $211,800 -- up 19% from a year ago. But in the latest in a series of quarterly reports from Fidelity on U.S. workers and their 401(k) plans, company analysts say Americans are costing themselves income in retirement by being stingy on their retirement plan contributions now. "While it's a good sign that some workers are increasing their savings for retirement, many younger workers -- especially Millennials -- aren't saving at the recommended 10% to 15% of their income," says James MacDonald, president of workplace investing at Fidelity. "It is critical young workers realize that even the smallest increase to their monthly savings today or just 1% -- whether in a 401(k) or an IRA -- could have a meaningful impact on their retirement paycheck down the road." Here is how that translates into real dollars: [Read: 3 Money Basics That Will Help You Sleep Better ] Say you're 25 and have a salary of $40,000, and you added just $33 per month to your 401(k), with an assumed average annual rate of return of 7%. Fidelity says you could add $330 (in pretax income) to your monthly paycheck in retirement by doing so. Even if you scaled back to an average annual rate of return of 5.5%, a 1% uptick in savings translates into an extra $200 every month in retirement. If you're 35 and make $60,000 annually, and you add $50 to your monthly 401(k) contribution, an average 7% annual rate of return will yield an additional $270 every month after you turn 65, or an extra $180 at a 5.5% annual rate of return. Those are real dollars, and they really add up during your golden years. But that only holds true if you play the game right and start contributing that extra 1% every month, Fidelity says.

Oracle Is Too Cheap to Ignore Any Longer

Within the world of investing exists a dichotomy that has often befuddled us. On the one hand, we have investors that are interested in becoming owners of some of the most profitable and rapidly growing businesses on the planet. And, on the other hand, we have the trader mentality where the sole focus is on the erratic nature of short-term stock price movement. But what is most confusing of all is how even though the interests of these two groups are the polar opposites of each other, the irony of all ironies is that they need each other. The businesses need the traders to provide the liquidity and capital they need to function. While the traders need the businesses in order to have something to trade upon.

But the main point proposed from the above diatribe is how these polar opposites functioning together can create anomalies that can be exploited. We believe that one such anomaly that currently exists is how the market is currently undervaluing the technology sector. This sector contains some of our fastest growing and most powerful companies with records of profitable growth that is unequaled in the annals of business history. But even more importantly, the odds are extremely high that the technology sector sits at the forefront of the next leg of what might be the greatest transformation in the history of business. Yet somehow, Mr. Market, the short-term trader is currently seeing fit to price our best technology companies at some of the lowest valuations ever.

If you examine most of our greatest technology names, you discover that as a sector they are trading at below market valuations. Yet, as a sector, they have produced the strongest historical growth and are expected to produce some of the strongest future growth as well. Today we find Microsoft (MSFT) trading at a PE ratio of 11, Oracle (ORCL) at a PE ratio of 12.9, and Hewlett-Packard (HPQ) can be bought at a PE of only 7. Even the mighty Apple (AAPL) computer only trades at a PE ratio of 15. These appear to be extremely low! valuations when you consider both the importance and the promise of the technology sector's contribution to our future.

The Possibility of Abundance: Abundance — The Future Is Better Than You Think.

There is a new book soon to be published that we had the privilege to be on the advance list of purchasers. With all the pessimism and fear of the future so prevalent today, we highly encourage every investor to get a copy of this important work. We believe you will find that it is not Pollyanna but full of facts and logical hypotheses supporting the case for optimism. The book is titled "Abundance — The Future Is Better Than You Think."

The book is written by Peter H. Diamandis and Steven Kotler, who are both renowned visionaries.

"Dr. Peter H. Diamandis, is Singularity University Cofounder and X PRIZE Foundation Chairman. The X PRIZE Foundation, leads the world in designing and launching large incentive prizes to drive radical breakthroughs for the benefit of humanity. Best known for the $10 million Ansari X PRIZE for private spaceflight and the $10 million Progressive Automotive X PRIZE for 100 mile-per-gallon equivalent cars, the Foundation is now launching prizes in Exploration, Life Sciences, Energy and Education.

Steven Kotler, is a science journalist. His articles have appeared in over 60 publications, including: New York Times Magazine, Wired, Discover, Popular Science, Outside, GQ, and National Geographic. He writes "The Playing Field," a blog about the science of sport and culture for PsychologyToday.com. Steven Kotler is also the co-founder and director of research at the Flow Genome Project, an international organization devoted to putting flow state research on a hard science footing."

What follows are a few excerpts from part one of their book, Perspective:

"Technology is a resource- liberating mechanism. It can make the once scarce the now abundant."

"Of course, the make more pies approach is nothing new, but there are ! a few key! differences this time around. These differences will comprise the bulk of this book, but the short version is that for the first time in history, our capabilities have begun to catch up to our ambitions. Humanity is now entering a period of radical transformation in which technology has the potential to significantly raise the basic standards of living for every man, woman, and child on the planet. Within a generation, we will be able to provide goods and services, once reserved for the wealthy few, to any and all who need them. Or desire them. Abundance for all is actually within our grasp."

"In this modern age of cynicism, many of us bridle in the face of such proclamation, but elements of this transformation are already underway. Over the past 20 years, wireless technologies and the Internet have become ubiquitous, affordable, and available to almost everyone. Africa has skipped the technological generation, by-passing the land lines that stripe our Western skies for the wireless way. Mobile phone penetration is growing exponentially, from 2% in 2000, to 28% in 2009, to an expected 70% in 2013. Already folks with no education and little to eat have gained access to cellular connectivity unheard of just 30 years ago. Right now a Masai warrior with a cell phone has better mobile phone capabilities than the present United States did 25 years ago. And if he's on a smart phone with access to Google, then he has better access to information the president did just 15 years ago. By the end of 2013, the vast majority of humanity will be caught in the same World Wide Web of instantaneous, low-cost communications and information. In other words, we are now living in a world of information and communication abundance."

Oracle: A Paragon of Consistent Above-average Growth

Oracle (ORCL) is a world leader in the database software industry, and after acquiring Sun in 2010, is now the world leader in complete, open, integrated hardware and software systems. According to their website:

!

"Wit! h more than 380,000 customers — including 100 of the Fortune 100 — and with deployments across a wide variety of industries in more than 145 countries around the globe, Oracle offers an optimized and fully integrated stack of business hardware and software systems that helps organizations overcome complexity and unleash innovation."

The following graph plots Oracle's earnings-per-share growth since 1998, which averaged 20.8% per annum. Notice that the company initiated its first dividend in calendar year 2008 as depicted by the light blue shaded area on the graph.

Although Oracle (ORCL) is a leader in software innovation with a strong commitment to R&D, the company has primarily achieved its growth through acquisitions. Since calendar year 2005, the company has spent approximately $36 billion acquiring and integrating over 80 acquisitions.

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At Oracle's current price of approximately $28 per share, it is a $140 billion market cap technology titan. We would estimate fair value at approximately $49 per share (see earnings and price correlating graph below), which would give Oracle a market cap of over $246 billion. Consequently, we believe that Oracle, at its current valuation, represents an opportunity to build a position at a price that is almost 50% below its intrinsic value. The orange line with white triangles represents a PEG ratio fair valuation of 20.8. Therefore, the reader should note that any time the stock price is touching the orange line, it is trading at a PE ratio of 20.8.

But more importantly notice how the stock price has tracked the orange earnings line over time. With the exception of the irrationally exuberant period spanning 1999 to 2001, it is clear that the market has generally capitalized Oracle shares in line with its earnings growth. And, perhaps even more importantly, it is clear that every time the stock pric! e falls b! elow the orange earnings line, as it now does, it quickly comes back to value. Consequently, we believe the below graph paints a clear picture that based on historically normal valuation, Oracle is currently undervalued.

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When we calculate performance associated with the above graph, we discover that Oracle has significantly outperformed the S&P 500 even considering the 50% undervalued case we made above. Moreover, the 15.3% capital appreciation (closing annualized ROR) correlates to earnings growth adjusted by low valuation.

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With our next graph we overlay free cash flow (the orange shaded area marked with an F) in addition to price and earnings. Here we're provided a clear picture of Oracle's solid financial condition which supports their ability to continue making future acquisitions to support future growth.

On February 9, 2012 Oracle announced it is acquiring Taleo for $1.9 billion or $46 a share. The Taleo acquisition follows their recent acquisition of RightNow Technologies., a leading provider of cloud-based customer service. RightNow's Customer Service Cloud helps organizations deliver exceptional customer experiences across call centers, the web and social networks. We believe that both of these acquisitions indicate that Oracle is not willing to rest on its laurels and past successes, and continues to assess the future of technology.

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Our next earnings and price correlated graph calculates Oracle's earnings growth since 2003. This is offered to illustrate remarkable consistency of Oracle's growth. Our first graph covered the 15-year period (14 years plus the year w! ere curre! ntly in) which averaged earnings growth of 20.8%. When calculating the shorter time frame since calendar year 2003, we discover that Oracle's earnings growth of 20.2% is virtually identical to the longer time period.

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In order to continue with our analysis of Oracle's growth, we shorten our time frame even further from 2008, the year of the great recession, to current. Here we continue to discover the remarkable consistency of Oracle's operating results. Once again we find that since 2008 Oracle has continued to grow earnings in excess of 20% per annum. Therefore, with each example we provided continuing evidence that Oracle is currently undervalued. Each time it has been undervalued in the past we see the stock price rather quickly moves back to the orange earnings justified valuation line.

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Oracle's Future

A careful examination of the above historical graphs will reveal that they do include forecasts for this fiscal year ending May 31, 2012 and a forecast for fiscal year ending May 31, 2013. Perhaps, the forecast of only 10% growth in fiscal 2013 might partially explain Oracle's current historically low valuation. Furthermore, the consensus of 24 analysts reporting to Capital IQ forecast Oracle's five-year average earnings growth rate to be 13% per annum. However, this is less than the 14.4% estimated growth by 19 analysts reporting to Zacks. Consequently, we are comfortable estimating a range of future growth of 12% to 17%.

Additionally, the reader should consider that there is at least a possibility of pessimism built into analysts' current thinking. Although Oracle's last quarterly earnings report was solid, it nevertheless disappointed analysts by missing by approximately 3 cents a share. However! , if you ! study the annual rates of change of earnings growth at the bottom of the above historical earnings and price correlated graphs (orange shaded area), you'll see that this is not the first time that Oracle had a soft quarter. The reaction in their stock price acted like Oracle was going out of business, and not that they still produced a very profitable quarter.

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Thesis for Oracle's Continued Growth

There are several reasons why we believe that Oracle is capable of continuing to grow its business at above-average rates far into the foreseeable future. We believe that corporate spending on software and services will continue to be in demand. Furthermore, we believe that Oracle is poised to offer many innovative products that are not currently factored into anybody's expectations.

Also, the company's financial condition remains excellent with a solid cash position and the continuing ability to generate free cash flow. Since we cannot know what acquisitions might be on the horizon, we have to rely on their track record as a guide. And as we have illustrated in this article, their track record is superb. More importantly, so is the track record of their management team. Management does not let any grass grow underneath them, and continues to innovate. We for one don't feel it's wise to bet against them.

The future for technology is certainly an unknown. However, one thing that prospective investors should realize is that technology does not grow in a linear fashion. Instead, both the history and we believe the future of technology experiences exponential growth. No other industry understands or participates in the power of compounding more than technology has, and we believe will continue to do. However, based on what we already know about technology, it is clear that the developing world will be, and already is, participating in the techn! ology rev! olution.

For example, according to the book "Abundance — The Future Is Better Than You Think," referenced above, the information/communication revolution that is now underway is rapidly spreading across the planet:

"Over the next eight years, 3 billion new individuals will be coming online, joining the global conversation, and contributing to the global economy. Their ideas -ideas we've never had access to-will result in new discoveries products and inventions that will benefit us all."

Although it's hard to imagine what those ideas will mean, and how much growth they will provide, we believe it's a safe bet that Oracle Corp. will be an active participant.

Summary and Conclusions

We believe that Oracle Corp., as we mentioned in our opening remarks, is just one of many technology titans that we believe the market is mispricing. Furthermore, we believe part of that stems from the general level of pessimism that has created the so-called flight to safety out of equities. Pessimism thrives on uncertainty; and one of the main attributes of technology is uncertainty. Any time a long-term investor takes a position in a technology company (business), they must do it with the realization that it's more likely than not, that any future profits they are expecting will come from products and/or services that don't even exist today.

Investing in technology is never without risk. However, the above-average growth and above-average returns that technology stocks have traditionally generated support the taking of the extra risk. During more normal and benign market environments, technology stocks usually command above-average price earnings ratios, which add even more to the risk of investing in them.

However, as we previously indicated, many of our best technology stocks are trading at historically low valuations today. Not only are today's valuations lower than the norm for technology stocks, in many cases they are below the valuations of the average! company ! as measured by the S&P 500. Therefore, we believe that investors seeking maximum capital appreciation at reasonable levels of risk might do well to take a hard look at not only Oracle, but the technology sector in general.

Disclosure: Long ORCL, HPQ, AAPL, MSFT at the time of writing.

Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment adviser as to the suitability of such investments for his specific situation.